Austin is the least affordable major city in the U.S. for minimum wage earners.
That's according to a recent study by Magnify Money for Lending Tree, which analyzed the median rent as a percentage of take-home pay for minimum-wage workers in 34 of the largest U.S. cities. In the top 16 cities analyzed, the median rent claims all or more of a minimum wage worker’s monthly take-home pay.
Since 2011, rent prices have increased nationwide between 2 and 4 percent according to CoreLogic, which regularly provides insight into housing economies and property markets.
“While gains in federal and state minimum wage rules have somewhat mitigated the bite for lower-wage earners in certain areas, it’s often not enough to compete with the rising cost of housing,” Lauren Perez, personal finance writer at Magnify Money, said. “Meanwhile, the population of renters has increased, forcing renters to compete for a finite supply of rental housing, which is already pricing out some people.”
Austin’s median rent is equal to 143 percent of minimum wage monthly take-home pay. The median rent in Austin is $1,220 per month, while the city’s minimum wage is $7.25 an hour.
Austin workers earning minimum wage would need to work roughly 200 hours a month to be able to afford the median rent of $1,220, Magnify Money calculates.
Compared to high-taxed Chicago, Magnify Money found that the Windy City is the most affordable large city, having a minimum wage of $13 an hour. But even with this increased wage, the median monthly rent of $1,050 claims 69 percent of a minimum wage worker’s take-home pay.
Compared to Austin, Chicagoan minimum wage earners would need to work over 96 hours to make enough to pay the median rent of $1,050.
Of the top ten cities listed, four of the most expensive places to live are in Texas: Austin, Dallas, Houston and San Antonio. Rent as a percentage of income for minimum wage earners is 143 percent in Austin, 125 percent in Dallas, 121 percent in Houston and 111 percent in San Antonio.
In 12 of the 16 cities where the minimum wage to median rent ratio is the highest, minimum wage is less than $10 per hour; half earn at the federal minimum wage of $7.25 an hour.
“But a higher minimum wage doesn’t necessarily translate to a lower percentage spent on rent,” Perez notes. “In San Francisco, for example, the high minimum wage of $15.59 is overwhelmed by the high median monthly rent of $1,860.”
MagnifyMoney calculated the minimum wage of workers in cities with a population of 300,000 or more in 2018 to determine the relative affordability of rental housing. Its findings are based on data from the Joint Center of Housing Studies for median rent and the Economic Policy Institute for minimum wages. To find estimated take-home pay after payroll tax, it assumed 16 percent withholding in Social Security, Federal Insurance Contributions Act (FICA), Medicare and federal income tax.