How Much Rent Can Americans Afford on Minimum Wage?

The minimum wage is the lowest legal wage that businesses can pay their employees. The current U.S. federal minimum wage is $7.25 per hour. Congress established the minimum wage in 1938 to stop employers from exploiting workers.

The U.S. Bureau of Labor Statistics (BLS) found that 1.1 million workers were paid the federal minimum wage or less in 2020. They are more likely to be young, female, part-time workers, and in the service industries.

Many argue that the minimum wage should provide a living wage that pays for a decent level of food, clothing, and shelter. If it had been indexed to the consumer price index since 1968, the minimum wage would have been $10.15 per hour in 2018. If it had kept pace with executive-level pay increases, it would have been $23 per hour.

A general rule of thumb is that you should spend around 30% of your income on housing. If that's the case, how much housing can you afford if you're earning minimum wage? The answer depends on which state you live in.

Minimum Wage and Housing

There are 16 states that use the federal minimum wage. These states are:

• Georgia
• Idaho
• Indiana
• Iowa
• Kansas
• Kentucky
• New Hampshire
• North Carolina
• North Dakota
• Oklahoma
• Pennsylvania
• Texas
• Utah
• Virginia
• Wisconsin
• Wyoming

Five more states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—have no minimum wage. They default to the federal minimum wage.

If you live in one of those 21 states, someone who earns $7.25 an hour, working 40 hours a week, for 52 weeks of the year, would make about $15,080 per year for a full-time job. This works out to more than the federal poverty level for a single person, so you are not eligible for federal benefits.

It is also likely not enough to pay your rent without exceeding 30% of your income. 30% of $15,080 is $4,524. Dividing that by 12, to find your monthly budget, you would have only $377 per month for housing.

Where Could You Live on the U.S. Minimum Wage?

If you can pay only $377 a month, you may be able to find studio apartments in rural small towns, older areas in some cities, college towns, and states with a low cost of living.

Some cities still have low-cost options in older parts of town. These may be more likely to be in areas with a lower standard of living.

College towns in smaller cities often offer affordable student housing. Most student housing options operate like hostels: You rent a bedroom in a three- or four-bedroom apartment.

You may also be able to find apartments in your price range in the four least expensive states: Arkansas, Mississippi, Kentucky, or West Virginia. Some of these states have the lowest incomes in the U.S. But even there, the average studio apartment will likely cost you more than 30% of your income.

You won't find these options in expensive states like California or Virginia. You'd most likely have to sublet an apartment or townhome in those areas. In those states, even if you could find such an arrangement, you likely wouldn't be near a major city.

States With Higher Minimum Wages

There are 29 states, along with the District of Columbia, that have minimum wage rates above the federal level as of 2021. In those states, you can likely afford more expensive rent. Unfortunately, the cost of living is also higher in many of those places. You may not be able to afford even a small studio apartment.

Multiplying each state's minimum wage by 40 hours per week and 52 weeks per year—then finding 30% and dividing it by 12 months—find out which states have housing options that are closest to meeting the budget.

* Average studio rent prices from National Low Income Coalition (2020).

** Nevada only pays $8.00 per hour for those with health insurance.

*** Florida will increase the minimum wage to $10 an hour on Sept. 30, 2021, with annual $1-per-hour increases to $15 by Sept. 30, 2026.