A Bogus Study Says You Can’t Afford Rent on Minimum Wage in Any State

Authored by: Matt Palumbo

A new study is out that, if taken at face value, would imply that many of those reading this should be homeless.

Every year the National Low Income Housing Coalition (NLIHC), a think tank devoted to preserving federal housing assistance and expanding the supply of low income housing, releases a study on the affordability of housing in America. The media always eats it up, usually running a story with some variant of the headline “Study Finds That In No State Can a Minimum Wage Worker Afford a Two-Bedroom Apartment.” Some of the more shameless publications report it as “apartment” instead of “two-bedroom apartment.”

Below is a table from the study claiming to show the hourly wage needed to afford a two-bedroom in various U.S. States. In many States that wage is higher than the median wage in that State:

While they don’t mention the minimum wage as a policy issue on their website, it’s the “Fight for Fifteen” types that have latched onto NLIHC’s research. For example, below is a video released by Sen. Bernie Sanders office, in which the study is summarized:

Oh, where to begin?

To start with the obvious, we’re left to parse why a single minimum wage worker would purchase a two-bedroom apartment. It feels almost condescending to point out that right off the bat, every single estimate here could be cut in half with the addition of something known as a “room mate.”

And as obvious as that error is, it’s not even the biggest flaw in the study. The study itself it’s not measuring rent, it’s measuring fair market rent. When you hear the headline “minimum wage workers can’t afford a two-bedroom apartment in any State,” it gives the impression that’s because a two-bedroom costs more than a minimum wage worker can expect to earn in a month. Read the fine print, and that’s not what the study is saying.

“Fair market rent” is rent that consumes less than 30% of a renters income. In other words, what the study is saying that in no State can you afford a two-bedroom apartment as a single individual, and still have 70 percent of your income left over afterwards. So a minimum wage worker earning $1,160 a month could pay $500 a month in rent, and it would still be considered “unaffordable” because they’re not earning $1,666. While no one is denying that life is difficult on minimum wage, it wouldn’t be the end of the world if someone spent 31 percent of their income on rent. And as mentioned earlier, the wages that the NLIHC claims a worker would need to afford a two bedroom apartment in many States exceeds the median wage in many of those States, and it goes without saying that half of the population is not homeless in those States.

To further illustrate how much of a pointless exercise this study is, it doesn’t acknowledge that someone that’s earning minimum wage and fits the “working poor” description would be receiving the majority of their income as non-cash income in the form of various government benefits. That’s how it’s possible for the average poor person to spend $2.30 for every dollar of earned income they have, according to the Heritage Foundation.

It’s also a bit off that the NLIHC, which exists to preserve federal housing assistance, didn’t account for the fact that a minimum wage worker that’s renting would qualify for that assistance. It seems like they rigged the study to produce whatever conclusion the authors wanted, doesn’t it?

On that note, I guess we’ll have to just stay tuned till next year, when this bogus study is updated, and makes its way unquestioned throughout every major media outlet.

 

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