Mismatch between minimum wage and income required to rent average apartment: report

No one earning minimum wage was able to rent out an average apartment last year without spending more than one-third of their income on housing, a recent report has found.

The Canadian Centre for Policy Alternatives released a study on July 18 that says the rental wage – defined as the hourly wage needed so tenants spend no more than 30 per cent of their pre-tax earnings on rent while working a standard 40-hour week – was “considerably” higher than the minimum wage in each province as of October 2022.

The analysis included one- and two-bedroom rentals, which make up 33 and 50 per cent of all units, respectively, the report says.

The study’s authors, senior economist David Macdonald and political economist Ricardo Tranjan, write that even in provinces with the highest minimum wages — B.C., Ontario and Alberta — this has not translated into better living conditions because “landlords capture a larger share of those wages through high rents.”

“The wage increases that people fought so hard for should improve the material conditions of working families, not go back into the pockets of the property-owning class,” the report says.

The study says minimum-wage earners in most Canadian cities “are likely spending too much on rent, living in units that are too small, or, in many cases, both.”

The largest gaps between the minimum wage and rental wage required for an average one-bedroom apartment were found in Vancouver and Toronto.

In those two cities, the one-bedroom rental wage was twice the minimum wage set at the time. The rental wage for an average two-bedroom unit also was more than twice the minimum wage.

On June 1, the minimum wage in B.C. increased to $16.75 an hour from $15.65. In Ontario, the minimum wage is set to rise to $16.55 an hour on Oct. 1 from $15.50.

The only cities where the one-bedroom rental wage was lower than the minimum wage were Sherbrooke, Trois-Rivieres and Saguenay, Que.

“Even there, rental affordability is on the decline,” the study says. “Every other CMA in Canada has average rents that far exceed what workers earn on the minimum wage.”

In Sherbrooke, for example, the report says the 2018 minimum wage exceeded the one-bedroom rental wage by 18 per cent, compared to nine per cent in 2022.

For most cities, the number of minimum wage hours required to pay rent for a two-bedroom unit also increased between 2018 and 2022.

“In sum, a larger share of the hard-worked-for earnings of working-class families is now flowing from bosses to landlords, making the wealthy wealthier and leaving tenants poorer,” the report says.

“The so-called housing crisis is often presented as a mismatch between supply and demand, while the obvious transfer of income and wealth from low- to high-income earners is repeatedly overlooked.”

The authors point to at least three factors that they say are making rents too high for low-wage earners, including wage suppression policies, low supply of rental housing and poorly regulated rental markets.

“In other words, the mess in which we find ourselves is due to bosses keeping wages down with help from provincial governments that set the minimum wage and federal governments that control monetary policy,” they say.

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