Illustration depicting the division of benefits from a minimum wage increase, with gains flowing to landlords rather than low-wage workers.

Are Minimum Wage Hikes Raising Your Rent? Unveiling the Hidden Impacts on Housing Markets

Theo Raines in Business & Economy August 2025 • 5 min read.

"Explore how local minimum wage policies impact urban housing costs, potentially affecting renters where they least expect it."

The push for higher minimum wages has gained momentum across the United States, with many cities and states implementing wage floors above the federal minimum. While these policies aim to improve the lives of low-wage workers, the economic effects are complex and far-reaching. One area of particular concern is the potential impact on local housing markets, especially for renters in urban areas. A groundbreaking research paper digs deep into this issue, revealing some surprising connections.

The study uncovers how "workplace" minimum wages—the wage levels where residents of a particular area work—can influence rental prices in their residential ZIP codes. This spillover effect, driven by commuting patterns, challenges the conventional wisdom that minimum wage impacts are confined to the locality where the policy is enacted.

This article examines the study's key findings, exploring how commuting patterns transmit minimum wage impacts across regions, potentially affecting the affordability of housing for those the policy intends to help. Are landlords pocketing the gains from minimum wage hikes, and how does this incidence vary across different locations? Read on to discover what this research reveals about the hidden dynamics of local housing markets.

The Commuting Connection: How Workplace Wages Affect Your Rent

Illustration depicting the division of benefits from a minimum wage increase, with gains flowing to landlords rather than low-wage workers.

The core of the research focuses on the idea that minimum wage policies don't exist in a vacuum. People live in one location but often work in another, creating a web of economic interdependencies between different areas. The researchers constructed a novel "workplace" minimum wage measure for each ZIP code, based on where its residents are employed. This allowed them to analyze how changes in minimum wages in these work locations affect rental costs back in the residents' home ZIP codes.

To isolate the effect of workplace minimum wages on rents, the study employs a clever identification strategy. This approach leverages the precise timing of minimum wage changes across different ZIP codes that share the same "residence" minimum wage (the minimum wage in the ZIP code where people live). By comparing areas with similar residential wage policies but different workplace policies, the researchers could hone in on the specific impact of the workplace wage on rents.

Data Granularity Matters: The study utilizes detailed, ZIP code-level data on rental markets from Zillow, allowing for a fine-grained analysis of rent variations.
Commuting is Key: By focusing on the workplace minimum wage and its relationship to commuting patterns, the research highlights the importance of considering regional economic linkages when evaluating minimum wage policies.
Spillover Effects: The findings indicate that a 10% increase in the workplace minimum wage can lead to a 0.69% increase in rents in the residential ZIP code. This suggests a significant spillover effect that policymakers often overlook.

The researchers go further by simulating the impact of both federal and city-level minimum wage policies, revealing that landlords may capture approximately 10 cents of each dollar generated by the minimum wage across affected areas. This highlights a potential unintended consequence: that some of the intended benefits for low-wage workers are offset by higher housing costs. However, the incidence on landlords also varies across space with the share pocketed usually being larger in locations that experience an increase in the workplace MW but not in the residence MW.

Policy Implications: A Need for Comprehensive Solutions

This research underscores the complex and often unexpected consequences of minimum wage policies. While intended to boost the earnings of low-wage workers, these policies can also impact housing affordability, potentially benefiting landlords more than their intended recipients. To ensure that minimum wage increases truly improve the lives of low-wage workers, policymakers may need to consider implementing complementary policies, such as rent control or housing subsidies, to mitigate the spillover effects on local housing markets.

About this Article -

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Everything You Need To Know

How do 'workplace' minimum wages affect rental prices, and why is this important to understand?

Workplace minimum wages, which represent the wage levels in areas where residents work, can influence rental prices in their residential ZIP codes. This is due to commuting patterns that create economic interdependencies between different areas. Understanding this relationship is crucial because it reveals that minimum wage impacts aren't confined to the locality where the policy is enacted but can spill over, affecting the affordability of housing for those the policy intends to help. This spillover effect highlights the interconnectedness of regional economies and the potential for unintended consequences.

What is the key finding regarding the relationship between workplace minimum wage increases and rent increases?

The core finding is that a 10% increase in the workplace minimum wage can lead to approximately a 0.69% increase in rents in the residential ZIP code. This suggests a significant spillover effect, where the benefits of the minimum wage increase are partially offset by higher housing costs. This effect can vary across different locations, depending on whether the area experiences an increase in the workplace minimum wage but not in the residence minimum wage. This dynamic reveals that landlords may capture a portion of the wage gains, reducing the intended benefits for low-wage workers.

How do commuting patterns play a role in the impact of minimum wage policies on housing costs?

Commuting patterns are central to understanding how minimum wage policies affect housing costs. The research considers that people often live in one area but work in another, creating a web of economic interdependencies. By analyzing the "workplace" minimum wage measure for each ZIP code (based on where its residents are employed), the study shows how changes in minimum wages in these work locations affect rental costs back in the residents' home ZIP codes. This commuting connection highlights that regional economic linkages are essential when evaluating minimum wage policies, as the impact isn't solely limited to the area where the policy is implemented.

What data was used to determine the effects of minimum wage hikes on rent?

The study leverages detailed, ZIP code-level data on rental markets obtained from Zillow. This fine-grained data allows for a precise analysis of rent variations, providing a comprehensive view of the relationship between workplace minimum wages and residential rents. The granularity of the data is critical for capturing the nuanced effects of minimum wage policies across different geographic areas, enabling researchers to isolate the specific impact of workplace wages on rents while accounting for other factors that may influence housing costs.

What potential complementary policies could help ensure minimum wage increases truly improve the lives of low-wage workers, given the potential for landlords to capture some of the gains?

To counteract the potential for landlords to capture some of the benefits from minimum wage increases, policymakers may need to consider implementing complementary policies. These could include rent control measures to limit the extent to which landlords can raise rents in response to wage increases, as well as housing subsidies to help low-wage workers afford housing in areas with higher costs. By combining minimum wage policies with interventions that directly address housing affordability, it's possible to mitigate the unintended consequences and ensure that low-wage workers experience a more substantial improvement in their overall financial well-being. The implementation of complementary policies would acknowledge that the effects are not isolated to wages alone.