Minnesota is one of the most difficult places in the Midwest to afford rental housing, despite an increase in the state’s minimum wage.
Someone making the $8 hourly minimum would have to work 68 hours a week to afford a one-bedroom apartment with the fair market rent of $707, according to an annual report released Tuesday by the National Low Income Housing Coalition.
The federal government considers a home affordable when renters do not have to spend more than 30 percent of their income on housing. For someone working 40 hours a week and earning $8 an hour an affordable monthly rent would be $416.
“It’s very sobering to think that a minimum wage worker would have to work something basically superhuman to be able to afford a one-bedroom apartment,” said Leigh Rosenberg, research and communications director at the Minnesota Housing Partnership.
The numbers in the report did not surprise local housing experts. Many advocates said they have long been concerned about wages not keeping up with housing costs, and how that impacts individuals.
“Unstable housing has a tremendous, well-documented effect on health and on school achievement and on job performance,” said Warren Hanson, president and CEO of the Greater Minnesota Housing Fund. “If you’re worried about your housing or it’s unsafe or unstable, that does affect how you live your life.”
Of 12 Midwestern states, only Illinois residents have less affordable housing than Minnesota. Someone making the minimum wage in Illinois would have to work 75 hours a week to stay in a one-bedroom place, according to the national report, titled “Out of Reach.”
Minnesotans previously fared the worst of any state in the Midwest, National Low Income Housing Coalition data shows.
The state’s previous minimum wage for large employers was $6.15, one of the lowest in the country — though most workers received the federal minimum wage of $7.25. Last year, someone making the federal minimum would have had to work 72 hours a week to afford a one-bedroom apartment in Minnesota.
A new Minnesota law raised the state minimum wage to $8 last August. That will jump to $9 this summer and top out at $9.50 in 2016, though small businesses can pay less.
“Moving the minimum wage is a step in the right direction,” said Mary Tingerthal, commissioner of the Minnesota Housing Finance Agency. “We’re glad to see the movement and it will certainly begin to close the gap.”
But more needs to be done, she said.
No ‘silver bullet’
Cities have to preserve the existing affordable places, housing advocates said, and more local, state and federal funding is needed to build additional affordable rental housing.
Homeownership is down across the country and an increased demand for rental housing has driven apartment costs up, said Megan Bolton, research director at the National Low Income Housing Coalition.
“In both big and small rental markets, we see a real tightening,” Bolton said.
In outstate Minnesota, the shortage of affordable housing is most apparent in cities with large food processing industries, like Willmar and Worthington, or big hospitality industries, like Rochester, said Hanson of the Greater Minnesota Housing Fund.
Around the Twin Cities, investors are building a lot of high-end rental housing but few are willing to fund affordable housing, Rosenberg said.
“There’s a mismatch between how much it costs to produce rental housing and what rents can command,” Rosenberg said. “There’s no sort of silver bullet. It’s going to take a range of different approaches, and a lot of public investment in the end.”