Minimum wage earners cannot afford to buy a house anywhere in the United States. But they also can’t afford to rent an apartment, according to a new study from LendingTree.
While renting is certainly cheaper than buying, it remains unaffordable for minimum wage workers in all states, the study found. Even in Arkansas, which has turned out to be the most affordable place to rent, people earning the mandatory minimum of $ 11 an hour are missing out on $ 170 trying to pay the median rent of $ 742.
Across the 50 states, the average difference between a monthly affordable housing payment and the median gross rent is $ 533, according to the study.
Interest groups have long emphasized the disparity between market rents and income. But, the mortgage research website seems to have nothing to do with the minimum wage debate.
Senior economic analyst Jacon Channel says supporters of a higher minimum “are right.” Rents aren’t just unaffordable, he says, they have been for over two decades.
As in other studies, LendingTree calculated the total earnings of minimum wage earners assuming they work 40 hours per week for 52 weeks at the minimum wage required by their state. For states without a legal minimum, the federal minimum has been used. Federal sources were also used to determine monthly rents.
Channel says affording rental accommodation is likely more difficult for minimum wage earners than its findings suggest. Because part-time employees are more likely to be paid minimum than full-time employees, he explains, they probably have even less money to put a roof over their heads.
The study found that after Arkansas, Maine and West Virginia were the most affordable. But the gap between affordable monthly payments and median gross rent was larger in those two states.
In Maine, where the state’s minimum hourly wage is $ 12.15, the monthly payment for affordable housing is $ 632 but the median gross monthly rent is $ 870, a difference of $ 238. And in West Virginia, the difference is $ 272. There the minimum wage is $ 8.75, affordable rent is $ 455, but the median rent is $ 727.
The gap is much wider in the three least affordable states to rent: Hawaii, California and Maryland.
The state-imposed hourly wage in Hawaii is $ 10.10, which is enough to pay $ 525 per month in rent. But the median gross rent is $ 1,651, a difference of $ 1,126. It’s not as wide in California and Maryland, at $ 938 and $ 572, respectively. But it is still a difficult situation to overcome.
The 10 worst in LendingTree are Florida, New Hampshire, Virginia, New Jersey, Colorado, Utah, and Texas.
To remedy the situation, President Biden called for a minimum wage of $ 15 an hour. But even that, a full-time minimum-wage worker could afford to spend $ 780 per month on an apartment. However, the report notes that this would be enough to pay the median rent in just five states: West Virginia, Arkansas, South Dakota, Kentucky and Mississippi.
Yet if the minimum wage were increased, Channel says, housing “would be much more affordable than it is now.”
For what it’s worth, LendingTree also looked at where it’s most affordable to own a home while earning minimum wage, and Arkansas is at the top of the list again. West Virginia moved up to second, followed by New Mexico.
Unsurprisingly, Hawaii was once again the least affordable state to own, this time followed by New Jersey and then California.