At the time in their lives when most of our parents were getting ready to purchase their first home, we millennials are still living with multiple roommates, scrounging up rent money, and even working multiple jobs in efforts to live in a major metropolitan area.
This is due, in large part, to the nature of the current housing market, of course. But it also has a lot to do with the gap that exists between the average hourly wage and the necessary housing wage needed to rent a home. According to a recent study conducted by the National Low Income Housing Coalition, there is an alarming discrepancy between the money needed to afford a modest one or two-bedroom home, versus the average hourly salary.
At the current national rate of $7.25 an hour, a full-time worker would need to work around 122 hours per week for all 52 weeks of the year—the equivalent of about three full-time jobs—in order to afford a two-bedroom rental at a fair market rate. At the normal 40 hours a week, one would have to earn an hourly wage of $22.10 to afford a two-bedroom rental at the national fair market price of $1,149. Meanwhile, $17.90 per hour is needed for a modest one-bedroom rental home.
Yet, in no state is this hourly rate the norm, making it impossible for full-time minimum wage workers to reasonably afford rent. And by reasonable, we’re talking about the (potentially outdated) adage that you shouldn't put more than 30 percent of your income toward rent. While it has already been reported that Americans are spending significantly more on rent since the housing bubble burst, currently, the median US rental requires 29.1 percent of the median monthly income, proving that housing averages are dangerously inching upwards.
But while these statistics are definitely disheartening—especially to recent grads trying to move out of their parents’ home—renting doesn’t always mean you’re throwing away your money. In fact, if you’re working on an hourly salary, renting may be the best option, since you don't necessarily have the funds to save up for things like a down payment or owning property. Plus, a rental means you don’t have to enter the cycle of maintenance and upkeep costs that comes when you own your own place. If you’re one of the many who still has to have a roommate and rent a property, you can also calculate rent cost based on room size and other factors, which can sometimes make the cost more comparable when it comes to your salary breakdown.
If you live in a major city but are making significantly less than is advised for rent, you might also want to consider relocating to a state that promises higher pay and a more reasonable cost of living, by comparison.
While there is no easy solution, this problem is not just affecting major metropolitan areas—it's truly spreading to a national level. Below, the five metropolitan areas with the highest two-bedroom housing wages:
1. Stamford-Norwalk, CT - $38.19
2, Honolulu, HI - $39.06
3. Oakland-Fremont, CA -$44.79
4. San Jose-Sunnyvale-Santa Clara, CA - $48.50
5. San Francisco, CA - $60.02
We get it: These numbers aren’t particularly encouraging. At the end of the day, the major wage inequality with regard to housing costs, the highest and the lowest paid workers, and the average median hourly salary makes it even more difficult to feel like you’ve “made it.” But if you still live with a roommate, it's good to know you’re definitely not alone.
See more millennial home buying news:
Millennials, Move to These States to Make More Money
The Biggest Millennial Homebuying Misconception, Explained
Can You Guess Why Millennials Aren’t Buying Homes?
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