The Implications of Renting on Minimum Wage in a Major City

The following post is by Jennifer Riner of Zillow

Budgeting for an apartment on minimum wage isn’t easy, especially with rents continuing to rise in major U.S. cities. In fact, in most large metros, renters need to earn at least $24 per hour to afford a median-priced rental. So how do low-income leaseholders afford to live in the city?

First, many lower-income individuals spend far more than 30 percent of their incomes on rent. With extremely tight funds, living expenses like rent inherently consume large portions of total earnings. Further, the median rent price in any given city encompasses all neighborhoods, unit sizes and types of homes, with extreme variables manipulating general figures. Housing below the median rent price allows minimum-wage earners to rent – although options are often sparse.

Low-income individuals moving to major metros might be curious to know the percentage of income they must spend to afford the median rent. To calculate, assume single-income households work 2,000 hours per year and dual-income households work 4,000 per year based on a 40-hour work week and 50 weeks paid per year. Sometimes, median rent supersedes monthly income, in which case individual(s) must wait for new listings or look outside of city limits.


The minimum wage in Chicago is $8.25, not far off from the federal rate of $7.25. With $8.25 per hour, a single-earning household makes about $16,500 per year or $1,375 per month. Assume a single-earner takes care of elderly relatives or young children and would therefore prefer a single-family home with easy wheelchair access or outdoor space for the kids. Given the median rent on a single-family home in Chicago is a whopping $1,700 per month, single-earning minimum wage households would have to budget 124 percent of their income toward rent – a clear impossibility.

While the city may price out single-earners, the suburbs welcome a wider range of budgets. Oak Lawn is a small community just southwest of Chicago. A 1-bed, 1-bath single-family property in Oak Lawn runs for $925 per month, costing a single-earner 67 percent of their monthly income. Although the portion of income spent on housing is still high, Oak Lawn has quality school options for children. Sward Elementary School, for example, is ranked 9 out of 10 by GreatSchools. Low-income families can afford rent without sacrificing their kids’ education.

Alternatively, dual-earner minimum wage households in Chicago make about $33,000 per year combined, or $2,750 per month. A young couple with this income searching for apartments in Chicago would be advised to only spend 30 percent, or $825 per month, on rent. Since the median rental price for 2-bedroom units is $1,550, minimum wage earners must spend 56 percent of their income on rent in the city, not allowing much room for lifestyle costs. While housing options for $825 per month exist, tenants should expect to sacrifice location and size at lower price points.


Although less populated than Chicago, the minimum wage in Denver is fairly comparable at $8.23 per hour. Using the same calculations as above and assuming an individual works about 2,000 hours per year, their total income equates to $16,460 per year, or $1,371.67 per month. Following the 30 percent rule, Denver singles should allocate $411.50 per month toward rent. Consider again a single-earner renting a single-family home. Similarly to Chicago, minimum wage workers in Denver cannot afford the median rent for a detached home in Denver – in fact, at $1,900 per month, the median rent for a detached house costs almost 140 percent of their total income. And although less expensive options within city limits aren’t impossible to find, school ratings tend to drop correspondingly.

A young couple looking to rent in Denver making a combined income of $2,743.34 per month should keep their rent budget around or below $820 per month. However, the median 2-bedroom price in Denver is $1,850, which would take up 68 percent of their total income, a larger portion than renters in Chicago with similar lifestyles and the same housing needs face.


Philly offers the highest minimum wage out of the three cities on this list. At $12 per hour, minimum wage earners can expect to accumulate $24,000 per year, or $2,000 per month. Single-earners seeking rentals in Philadelphia with extra space can rent single-family properties for $1,300 per month (median), which compromises about 65 percent of one minimum wage paycheck. Although rent still consumes the majority of income at this level, individuals in Philly at least have the option to rent single-family homes on one paycheck, unlike in Chicago and Denver.

Dual-earners in Philly are even better off while renting. Somewhat surprisingly, median rent prices for 2-bedroom units are equivalent to single-family homes. Dual-earner households earning $4,000 per month and spending $1,300 on rent use about 33 percent of their income on rent – the lowest portion spent out of each scenario in all three cities. Philadelphians in this situation have the ability to allocate funds toward lifestyle needs and future savings – a financially responsible move potentially leading to home ownership down the road.

Out of the aforementioned cities, Philadelphia is the most affordable for minimum wage earners, given the median price points of varying rentals and the mandated pay rate.