A quarter of Twin Cities middle-class families can’t afford the necessities

No major U.S. metro is affordable enough for the middle class, but the Twin Cities is one of the most accessible options.

According to a report this month from the Brookings Institution, more than 75% of middle-class households in the Twin Cities are able to afford necessities such as housing, food, transportation, child care and health care.

That means roughly a quarter of middle-class families in Minnesota’s most populated area can’t afford those essentials.

This fits economists’ notion of the nation’s post-COVID “K-shaped economy”: A small upper class is at the top, accumulating wealth and driving spending, while everyone else is at the bottom and facing a widening gap. The cost of living has outpaced the traditional definition of a middle-class life, at least by income, in the Twin Cities and across the country.

Economists typically define the middle class as the middle 60% of earners. In the Twin Cities, that was an annual household income between $31,000 and $158,102 in 2023, the year the report covers.

It’s a wide range, with the bottom end just above the poverty line.

“For a lot of our history, you could afford basic necessities — at least in terms of food, housing, child care — within that distribution,” said Brookings Senior Fellow Andre Perry, who co-authored the report.

“What was once an assumption, and a good one, that people in the middle income distribution could afford basic goods — now that’s not the case,” Perry said.

The pain is particularly acute for households of color. Less than 60% of middle-class households of color in the Twin Cities can afford basic necessities, compared to nearly 80% of white households.

Nationally, affordability ranges from about 50% for Latino households to about 73% for white households.

The report analyzed affordability in 160 major metro areas using cost estimates from the Economic Policy Institute (EPI) and U.S. Census demographic data.

Washington, D.C.; Dayton, Ohio; Pittsburgh; and Scranton, Pa., were the other metro areas besides the Twin Cities that had the most middle-class households able to afford basic necessities.

The Twin Cities’ Area Median Income (AMI) was about $30,000 less than that in 2024, according to a September report from the U.S. Census Bureau. At nearly $98,000, the AMI was essentially unchanged from the year before, while local inflation rose about 2.6%.

National inflation has fallen from its 2022 peak after the Federal Reserve raised interest rates to slow spending and cool the economy. The central bank raises rates when inflation is high and lowers them when unemployment is high.

But President Donald Trump’s tariffs this year have pushed goods prices up, Fed Chair Jerome Powell said earlier this month. Inflation is at about 3%, higher than the Fed’s 2% target.

A divided Federal Open Market Committee (FOMC), the central bank leadership body that sets monetary policy, opted at its Dec. 9-10 meeting to lower interest rates slightly. But Powell cautioned the economy is in “a challenging situation,” with risks of both high inflation and high unemployment.

The combination of high prices and high borrowing costs — not to mention a tough job market — hits middle- and lower-income consumers the hardest.

Without some relief, Perry said, “there’s a level of despair that will likely kick in if people are working, doing everything they are asked to do, but are struggling to put food on the table.