As rising rents outstrip Minnesotans’ incomes, affordability policies are under threat

March 13, 2018

A full-time worker needs to earn $18.60 an hour to afford a modest two-bedroom apartment in Minnesota. That’s up from $17.76 in 2016, and is nearly twice the state minimum wage for large employers. The gap between Minnesotans’ wages and prices in the rental market underscore the importance of policies to increase the number of renters that can afford their basic necessities without sacrificing housing stability.

The National Low Income Housing Coalition’s annual Out of Reach report details how much a full-time worker needs to earn in each state in order to spend less than 30 percent of their income on a modest one- or two-bedroom apartment. The Minnesota Housing Partnership takes a deeper dive into the data at the state level, finding that a full-time minimum-wage earner can’t afford a modest one-bedroom apartment in any county in the state.

Minnesota takes a multi-pronged approach to addressing the high cost of rental housing, and in the budget passed last session, policymakers invested an additional $77 million in affordable housing. These reports — along with data showing that about 45 percent of Minnesota renters pay roughly one-third or more of their incomes on rent — demonstrate that we still have a ways to go before every Minnesotan can afford to put a roof over their heads.

The mismatch between earnings and housing costs is found across the state. Over the past decade, the wage a full-time worker needs to earn to make a typical two-bedroom apartment reasonably affordable has increased 20 percent in rural areas of Minnesota. To fit rent comfortably in their budget, a Minnesotan living in a rural area and earning the minimum wage would typically need to work about 58 hours per week. In the Twin Cities metro area, a minimum-wage earner would need to work 88 hours per week to spend less than 30 percent of their rent for a two-bedroom apartment.

Unfortunately and perhaps surprisingly, some important tools to ensure more Minnesotans can afford housing are under threat because of the recent federal tax bill. You may already have heard how the tax bill’s deep cuts in corporate taxes makes the Low-Income Housing Tax Credit less effective and will likely result in a loss of affordable housing.

Minnesota’s renters could be facing another squeeze. The federal tax bill could punch a hole in a tax refund that puts a limit on how much Minnesotans pay in property taxes (one important component of housing costs). The state’s Property Tax Refund is also commonly known as the Circuit Breaker (for homeowners) and the Renters’ Credit. The Renters’ Credit refunds a portion of the property taxes that renters have paid through their rents.

About 328,000 low- and moderate-income Minnesota households across the state received the Renters’ Credit in 2015, all of whom had property taxes considered high for their income level.

But the federal tax bill could cut Property Tax Refunds for renters by $34 million and for homeowners by $50 million per year. That’s because the Property Tax Refund formula allows an exemption for seniors, people with disabilities, and families with dependents that is calculated based on a provision in federal law that has essentially been repealed. Minnesota needs to restore these exemption amounts in our state law to avoid deep cuts in the Property Tax Refund.

The Renters’ Credit remains as important as ever as rental prices increase more quickly than renters’ wages. As Minnesota policymakers think about how to address the state’s affordable housing challenges in 2018, they should support this time-tested tax policy.

-Ben Horowitz and Nan Madden

 

About Minnesota Budget Project

Minnesota Budget Project
The Minnesota Budget Project is a research and advocacy organization that pursues policy solutions so that all Minnesotans can thrive, regardless of who they are or where they live. Established more than 25 years ago, the Minnesota Budget Project is a nonpartisan project of the Minnesota Council of Nonprofits.

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