Rent affordability is better in cities with higher minimum wages, even in expensive markets
- It would take the incomes of almost four full-time workers earning the federal minimum wage to reasonably afford the typical two-bedroom rental.
- Affordability is better in cities that have set their own minimum wages, even in more expensive markets.
- Building more homes is a clear path to improving affordability. Measures that allow for more density, including allowing new accessory dwelling units, duplexes or triplexes in residential neighborhoods, are supported by a strong majority of homeowners and renters.
Seattle, WA – Jan. 31, 2023 (PRNewswire) Only in 10 of the 50 largest U.S. cities can two full-time workers earning minimum wage comfortably afford a typical two-bedroom rental. Nationally, four minimum-wage workers would have to double up in both bedrooms to not stretch their budgets, finds a new Zillow® analysis shining a light on the impact of the country’s housing shortage.
In cities where there are higher-than-average rents – but the minimum wage is also higher – workers tend to fare better. It takes 2.5 full-time workers on average spending 30% of their income to pay two-bedroom rent in cities with minimum wage set beyond the federal level.
“This is perhaps the only context in which San Francisco is more affordable than San Antonio,” said Zillow senior economist Nicole Bachaud. “Renters have been squeezed by record-fast rent growth while incomes haven’t kept up. That’s true for those making minimum wage, but especially so where the minimum wage hasn’t budged for more than a decade. Clearing the path for more construction, especially at entry-level prices, is needed to make housing more affordable across the board.”
Of the 10 cities where two full-time workers earning minimum wage could afford a typical two-bedroom rental, all have a minimum wage of at least $10 an hour. That includes cities with relatively inexpensive rent prices, such as Cleveland and Albuquerque, and also cities where a two-bedroom rental costs more than the national average, including Sacramento, Chicago and Minneapolis.
There are six cities where at least four full-time minimum-wage incomes would be needed to reasonably afford a two-bedroom rental: Austin, Atlanta, Charlotte, Nashville, Dallas and Raleigh. All use the federal minimum wage of $7.25 an hour and have been among the hottest housing markets in the country in recent years. Charlotte, Dallas, Nashville and Atlanta are also among Zillow’s hottest markets for 2023, making it likely that affordability will become even tighter in those markets.
A higher minimum wage on its own is not a solution to the affordability challenges facing low-income renters. Fourteen of the cities analyzed have minimum wages of at least $15 an hour — more than twice the federal minimum. Even in these cities, a single full-time worker earning minimum wage cannot reasonably afford a typical one-bedroom rental, and the minimum wage would need to at least double for that to be the case in eight of those cities. In San Francisco, which has the highest one-bedroom rents in the country, an income of $49.01 an hour is needed to reasonably afford such a rental.
Simple supply and demand is the primary driver of growing housing costs, so one clear path to improving affordability is building more homes. Zillow research has shown that even modest densification measures — such as allowing two units of housing on a fraction of single-family lots in large metros — could add 3.3 million homes and meaningfully slow housing price growth over the long term. A large majority (77%) of homeowners and renters surveyed by Zillow last year were supportive of either new accessory dwelling units, duplexes or triplexes in residential neighborhoods.
Renters shopping for an affordable home can use Zillow’s rent affordability calculator to help determine their price range, and Zillow’s rental market trends tool for an up-to-date look at price trends in the city or cities where they are searching.
Application fees can also add up during a rental search. More than half (57%) of renters submit at least two applications, with the typical application fee coming in between $40 and $59. For a flat fee of $29, renters can use Zillow’s rental application to apply online for an unlimited number of participating properties for 30 days, which gives them the ability to control costs and add flexibility to their search.
| City* | Minimum Wage | Typical Rent for a One-Bedroom Rental | Full-Time Minimum Wage Jobs Needed to Comfortably Afford a One- Bedroom Rental | Typical Rent for a Two-Bedroom Rental | Full-Time Minimum Wage Jobs Needed to Comfortably Afford a Two- Bedroom Rental |
| United States | $7.25 | $1,163 | 3.3 | $1,325 | 3.8 |
| New York | $15.00 | $1,756 | 2.4 | $1,977 | 2.7 |
| Los Angeles | $16.04 | $1,652 | 2.1 | $2,115 | 2.7 |
| Houston | $7.25 | $1,050 | 3.0 | $1,265 | 3.6 |
| Chicago | $15.40 | $1,139 | 1.5 | $1,435 | 1.9 |
| San Antonio | $7.25 | $1,063 | 3.1 | $1,332 | 3.8 |
| Philadelphia | $7.25 | $1,038 | 3.0 | $1,259 | 3.6 |
| Phoenix | $13.85 | $1,177 | 1.8 | $1,307 | 2.0 |
| Las Vegas | $10.50 | $1,079 | 2.1 | $1,305 | 2.6 |
| San Diego | $16.30 | $1,962 | 2.5 | $2,468 | 3.2 |
| Dallas | $7.25 | $1,145 | 3.3 | $1,412 | 4.1 |
| Austin | $7.25 | $1,399 | 4.0 | $1,764 | 5.1 |
| San Jose | $17.00 | $2,067 | 2.5 | $2,774 | 3.4 |
| Jacksonville | $11.00 | $1,083 | 2.1 | $1,295 | 2.5 |
| Indianapolis | $7.25 | $915 | 2.6 | $1,156 | 3.3 |
| San Francisco | $16.99 | $2,352 | 2.9 | $2,619 | 3.2 |
| Charlotte | $7.25 | $1,319 | 3.8 | $1,552 | 4.5 |
| Fort Worth | $7.25 | $1,087 | 3.1 | $1,315 | 3.8 |
| Tucson | $13.85 | $878 | 1.3 | $1,165 | 1.8 |
| Columbus | $10.10 | $936 | 1.9 | $1,141 | 2.4 |
| Louisville | $7.25 | $992 | 2.9 | $1,160 | 3.3 |
| Orlando | $11.00 | $1,412 | 2.7 | $1,678 | 3.2 |
| El Paso | $7.25 | $885 | 2.5 | $1,099 | 3.2 |
| Detroit | $10.10 | $747 | 1.5 | $1,028 | 2.1 |
| Denver | $17.29 | $1,448 | 1.7 | $1,855 | 2.2 |
| Seattle | $18.69 | $1,800 | 2.0 | $2,374 | 2.6 |
| Memphis | $7.25 | $791 | 2.3 | $1,068 | 3.1 |
| Boston | $13.50 | $1,924 | 3.0 | $2,163 | 3.3 |
| Washington, DC | $16.10 | $1,917 | 2.5 | $2,405 | 3.1 |
| Portland | $14.75 | $1,367 | 1.9 | $1,677 | 2.4 |
| Nashville | $7.25 | $1,298 | 3.7 | $1,477 | 4.2 |
| Sacramento | $15.50 | $1,165 | 1.6 | $1,458 | 2.0 |
| Baltimore | $13.25 | $1,039 | 1.6 | $1,253 | 2.0 |
| Milwaukee | $7.25 | $796 | 2.3 | $1,001 | 2.9 |
| Fresno | $15.50 | $1,006 | 1.4 | $1,168 | 1.6 |
| Omaha | $7.25 | $974 | 2.8 | $1,183 | 3.4 |
| Albuquerque | $12.00 | $932 | 1.6 | $1,133 | 2.0 |
| Oklahoma City | $7.25 | $832 | 2.4 | $1,041 | 3.0 |
| Raleigh | $7.25 | $1,260 | 3.6 | $1,392 | 4.0 |
| Mesa | $13.85 | $1,130 | 1.7 | $1,256 | 1.9 |
| Miami | $11.00 | $1,541 | 2.9 | $2,073 | 3.9 |
| Atlanta | $7.25 | $1,501 | 4.3 | $1,664 | 4.8 |
| Kansas City | $12.00 | $969 | 1.7 | $1,205 | 2.1 |
| Colorado Springs | $13.65 | $1,226 | 1.9 | $1,351 | 2.1 |
| Long Beach | $15.50 | $1,510 | 2.0 | $2,021 | 2.7 |
| Virginia Beach | $12.00 | $1,310 | 2.3 | $1,503 | 2.6 |
| Oakland | $15.97 | $1,491 | 1.9 | $1,912 | 2.5 |
| Tulsa | $7.25 | $794 | 2.3 | $1,042 | 3.0 |
| Minneapolis | $15.19 | $1,010 | 1.4 | $1,394 | 1.9 |
| Honolulu | $12.00 | $1,540 | 2.7 | $2,114 | 3.7 |
| Cleveland | $10.10 | $731 | 1.5 | $932 | 1.9 |
| * | Table ordered by market size |
About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting, or financing with transparency and ease.
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SOURCE Zillow
