How Much Rent Can Americans Afford on Minimum Wage?

The minimum wage is the lowest legal wage that businesses can pay their employees. The U.S. current national 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 1.6 million workers were paid the federal minimum wage or less. They are more likely to be young, female, part-time, and working in 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 now be $10.15 per hour. If it had kept pace with executive-level pay increases, it would be $23 per hour.

The 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 get if you're earning minimum wage? It turns out that it depends on which state you live in.

Minimum Wage and Housing

There are 17 states that use the federal minimum wage. 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 22 states, the minimum wage equates to $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 also is not enough to pay your rent without exceeding 30% of your income.

A housing budget of 30% of the annual minimum wage is $4,524 per year. That just gives you just $377 a 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.

An informal search on Apartments.com revealed that some cities still have low-cost options in older parts of town. These tend to be in areas with a low 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. Most of these states have the lowest income in the country. But even there, the average studio apartment will cost you more than 30% of your income.

You won't find even 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 wouldn't be near a major city.

States with Higher Minimum Wages

Twenty-nine states and D.C. had minimum wage rates that are above the federal level as of 2020. In those states, you can afford a higher rent. Unfortunately, the cost of living is also higher there. You could not afford even a small studio apartment. The states that come closest are Arkansas and Minnesota. Those who earn a minimum wage in those states could afford rents of $520 and $502, respectively. The average studio rent for those states only around $20 a month higher.

Here's a chart showing the minimum wage, what you could afford at 30% of monthly income, and what the average studio apartment would cost in each state.

• 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, and with annual $1-per-hour increases to $15 by Sept. 30, 2026.