Report: Charlotte’s low-income earners need 4+ jobs to afford rent

CHARLOTTE, N.C. (WBTV) - How much does it cost to live? It’s a question that varies from person to person and city to city but according to a new report from Zillow, working 40 hours a week might not be enough to afford rent.

In Charlotte the current rent for a two-bedroom property is $1,552 and the minimum wage is $7.25 an hour making it the third most expensive market in the country when comparing minimum wage to the cost of rent, according to Zillow’s report. Only Austin, TX, and Atlanta, GA, are less affordable for minimum-wage workers.

That means for many people they’re going to need a roommate --- or three.

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Related: ‘I just want some help:’ The struggle to find affordable housing in the Charlotte region

There are several contributing factors to the rising cost of living, but the benchmark used by Zillow is the federal minimum wage of $7.25 an hour. Zillow analyzed the 50 largest cities in the country and compared minimum wages to the cost of rent and rent increases.

“Based on the federal minimum wage of $7.25 an hour, it would take nearly four full-time minimum wage workers to afford the typical national two-bedroom rental, spending a maximum of 30% of household wages on their rent payments. Renters have been squeezed by record-fast rent growth while incomes haven’t kept up and the country’s housing shortage has taken a toll,” according to the report.

The 30% target number is the Department of Housing and Urban Development’s definition of affordable housing. That means if the cost of rent plus utilities exceeds 30% of someone’s annual income they are considered cost burdened.

So, for those making double minimum wage or $14.50 an hour, or even triple at $21.75, an hour affording a rental property on their own is still going to stretch monthly budgets thin.

The federal minimum wage has remained stagnant since 2009 at $7.25 an hour but according to the Bureau of Labor Statistics CPI inflation calculator the buying power of $7.25 in 2009 has the same buying power of $10.33 in February of 2023.

The Zillow report examined the differences of minimum wages based on each city and found that while cities with higher minimum wages might have higher rents than average, workers still came out ahead.

“Of all the cities analyzed that have a minimum wage higher than $7.25 an hour, a two-bedroom rental would require an average of 2.5 full-time workers to be affordable. In cities with the federal minimum wage of $7.25 an hour, 3.5 full-time minimum wage workers are required on average to afford rent in a typical two-bedroom rental — even though typical rents are less expensive,” according to the report.

Of the 50 cities studied just 10 of them would require two or fewer full-time jobs to afford a typical two-bedroom rental and 11 cities would require three full-time jobs.

Higher minimum wages do play a role in affordability for many, but it’s not a sure thing.

“In San Francisco, despite minimum wage sitting at $16.99 an hour, far higher than most of the country, an individual worker would need to make nearly three times that — $49.01 — in order to afford a one-bedroom rental on their own,” according to Zillow.

More money, less space

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Rents are rising but living spaces are shrinking, according to Rent Café. In Charlotte the average size of new apartments is 929-square-feet while the average size of all apartments is 938-square-feet; it’s a trend occurring across the country.

“The average size of new apartments in 2022 was 887 square feet — a 54 square-foot drop since 10 years ago. It was also the largest year-over-year decrease, down 30 square feet,” according to Rent Café.

There are several contributing to the shrinking sizes including what type of apartments developers are constructing.

“More studios and one-bedroom apartments were finished in 2022 than ever before. In fact, the share of smaller units reached a historic high of 57% in 2022 — a significant change compared to 10 years ago, when they represented exactly half of apartments built,” according to the report.

In the past 10 years Charlotte apartment sizes shrank by 1% or 9-square-feet. In comparison, Silver Spring, MD, saw a shrinkage of 15% in the same time period.

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Increasing density could alleviate the squeeze

The free market will typically guide the cost of living but there are things that can be done by the government to help alleviate some of the problems --- like allowing denser development.

“Basic supply and demand is the primary driver of growing housing costs, so one clear path to improving affordability is building more homes. Even modest densification measures — such as allowing two units of housing on a fraction of single-family lots in large metros — could add 3.3 million homes and meaningfully slow housing price growth over the long term,” according to the report.

Increasing density can be a dividing topic for neighbors but according to Zillow, the majority of people seemingly support the idea.

“A large majority (77%) of homeowners and renters surveyed last year expressed support for either new accessory dwelling units, duplexes or triplexes in residential neighborhoods. Providing more opportunities for housing access will help affordability improve across the market,” according to Zillow.

Housing supply and the lack thereof

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Housing supply is also a challenge for renters and would-be homebuyers. HUD data shows the months’ supply of housing stock for existing homes fell while the months’ supply of new construction remained the same month-over-month in Jan. 2023.

“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly,” according to the National Association of Realtors.

In Charlotte the demand for affordable housing continues to climb as more people move to the city and already the lack of affordable units is in the thousands.

“Our city needs an additional 32,000 units of affordable housing to meet the current need, which means more than 55,000 Charlotteans don’t currently have an affordable place to live. That’s three quarters of the Panthers stadium,” according to the City of Charlotte.

The “2022 State of Housing in Charlotte Report,” released by UNC Charlotte’s Childress Klein Center for Real Estate reveals housing prices continue to climb and the

“According to the report, only 3.8% of the houses sold in the region are under $150,000 and only about 25% of the houses sold are under $300,000. The report also found a rapid acceleration in rental prices. Over the last three years, average effective rent has increased by $320, or 27% per unit,” the Belk College of Business reports.

Zillow’s Methodology: “Using minimum wage data from the Economic Policy Institute, Zillow analyzed how many full-time minimum wage jobs would be required to afford the typical rent in the 50 largest U.S. cities, and in the U.S. overall. Full-time is considered 40 hours a week and four weeks per month at the minimum wage. Rent data is from the 2021 5-year American Community Survey from the U.S. Census Bureau for one-bedroom, two-bedroom, and overall rentals and chained forward using monthly changes from the Zillow Observed Rent Index. For a rental to be considered affordable, no more than 30% of the total household monthly income can be spent on rent payments each month.”

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