Three Roommates or Four Jobs Needed to Afford a Two-Bedroom Rental on Minimum Wage
- Nationally, it takes nearly four full-time minimum wage workers to reasonably afford a two-bedroom rental.
- Affordability for minimum wage workers is tightest in Austin. There would need to be over five full-time minimum wage workers to afford a two-bedroom rental in Austin.
- In cities with a $7.25 an hour minimum wage, an average of over 3.5 full-time workers are needed to make the typical two-bedroom rental affordable.In cities with minimum wages set higher than that, an average of 2.5 full-time minimum wage workers are needed to make the typical two-bedroom rental affordable, despite many of these cities having higher-than-average rents.
Based on the federal minimum wage of $7.25 an hour, it would take nearly four full-time minimum wage workers to afford the typical national two-bedroom rental, spending a maximum of 30% of household wages on their rent payments. Renters have been squeezed by record-fast rent growth while incomes haven’t kept up and the country’s housing shortage has taken a toll.
Zillow analyzed the 50 largest cities in the U.S. looking at the local minimum wage compared to rent price increases and found workers in cities that have set higher minimum wages fare better, even where rent is more expensive than the national average. Of all the cities analyzed that have a minimum wage higher than $7.25 an hour, a two-bedroom rental would require an average of 2.5 full-time workers to be affordable. In cities with the federal minimum wage of $7.25 an hour, 3.5 full-time minimum wage workers are required on average to afford rent in a typical two-bedroom rental — even though typical rents are less expensive.
Ten cities in this analysis would require two or fewer full-time minimum wage workers to afford a typical two-bedroom rental. All 10 have minimum wages greater than $10 an hour, ranging from $10.10 in relatively inexpensive Cleveland to $15.50 in the far more expensive Sacramento and Fresno. These higher minimum wages help workers in these cities to more easily afford rent and stay afloat.
Based on HUD occupancy guidelines, two people per bedroom is the standard guidance for occupancy rules. However, in cities like Atlanta and Austin, both cities that are set to the federal minimum wage, the typical rent on a one-bedroom rental requires four full-time minimum wage workers — twice the HUD occupancy guidance for a rental of that size. Overall, 11 cities in this analysis require three or more full-time minimum wage workers to afford the typical one-bedroom rental. All but one of those cities are set to the federal minimum wage.
A higher minimum wage on its own does not guarantee workers will be so easily able to afford rent. In San Francisco, despite minimum wage sitting at $16.99 an hour, far higher than most of the country, an individual worker would need to make nearly three times that — $49.01 — in order to afford a one-bedroom rental on their own.
In the cities with the highest minimum wages among those Zillow analyzed, Seattle and Denver, roughly 2.5 full-time minimum wage workers are needed for a two-bedroom rental. Though comfortably better than the national average, that is still more than one person per room, or more than one job per person.
Basic supply and demand is the primary driver of growing housing costs, so one clear path to improving affordability is building more homes. 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 last year expressed support for either new accessory dwelling units, duplexes or triplexes in residential neighborhoods. Providing more opportunities for housing access will help affordability improve across the market.
Methodology:
Using minimum wage data from the Economic Policy Institute, Zillow analyzed how many full-time minimum wage jobs would be required to afford the typical rent in the 50 largest U.S. cities, and in the U.S. overall. Full-time is considered 40 hours a week and four weeks per month at the minimum wage. Rent data is from the 2021 5-year American Community Survey from the U.S. Census Bureau for one-bedroom, two-bedroom, and overall rentals and chained forward using monthly changes from the Zillow Observed Rent Index. For a rental to be considered affordable, no more than 30% of the total household monthly income can be spent on rent payments each month.