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How Rent Rates Are Affected By Minimum Wage?

Updated: Jun 9, 2022

Minimum wages can have an effect on the rents property owners charge from them. So, if the wage increases it is usually good for the property owners. One of the top advantages is that tenants are very likely to pay the rent on time. This increase not only brings in more monetary security for the renters but also for the landlord.

As the renters can afford to pay more rent, it gives you the chance to raise the rent amount. In the following article we will learn how the rent rate is overall affected by the minimum wage.

U.S. minimum wage summary

Some reports say that, in 2022, 26 states in the U.S shall increase the minimum wage. If we take the example of Colorado, on 1st January, the minimum salary increased by $0.22 per hour. However, in last September the rise was $1.44 per hour in Florida.

Below is an itemization of minimum salary in the U.S:

The rate of minimum wage can definitely affect the economy. The generally accepted rate by most people is $15 an hour. Till now, only California has been able to set this rate state-wise. Nevertheless, it is the most costly state when it comes to rent rates.

Higher minimum salary enables timely rent payment

As stated earlier that increase in minimum salary increases the ability of renters to make rent payments. A research in the Journal of Urban Economics evaluated data from 2000 to 2009 of rent from 14 states. The results showed that if the minimum salary was increased, the tenants would be more likely to pay their rent on time. It was found that after increasing salaries, the defaults decreased by 10.6% as compared to states where the salaries were not increased.

Nonetheless, it was also found that increase in minimum salaries also caused an increase in the rent. On average, it took landlords three months to raise rent. Though rents payments were still not missed even after the rise of rent rates.

The study showed that, the increase in the salaries of renters did cover the increase in rent. For landlords, rental business remained profitable due to the rise in average rent rates, even with a change in economy.

How to increase the rent when the minimum salary rises

As a property owner, you would want to make the most of your rental property if the rental market is doing well. However, if you want to increase, it can become a bit challenging to communicate to your renter.

If you want to have a profitable rental business, you must keep the rent competitive with the market. But, you need to keep the state laws in mind before raising rent. For example, you can mention the period with fixed rent in the lease agreement. In some cases, rent can only be increased annually. Also, there can be a limit on how much rent you can increase annually in some areas.

Similarly, rent rates can’t be increased in some cases, although the utility and maintenance costs may increase. Rent can’t be increased in the following cases:

• If you are looking to raise rent before end of lease

• A formal notice was not given about the rent increase

• Laws on the control of rent put a limit on the rise in rent

• The increase in rent is not permitted in the agreement

• The raise in rent can be termed as reactive or biased, which is illegal

In case you can raise rent, you need to know how to do it. Firstly, it’s important to talk to the renter, explaining why you are increasing the rent and clarify that the rate is still reasonable. Generally, landlords should keep stable rents, competitive with the area.

Lastly, if a policy related to rent increase is included in the lease, you can easily increase your property’s rent. The process of raising the rent can be started by sending a notice for rent increase to your tenants.

Notice letter for rent increase

A rent increase notice is a letter or text in which a renter is informed by property owner related to an intended rent alteration. This notice must be sent minimum 30 days in prior in case of a monthly tenancy or even if there is permission in a fixed-term lease.

You should take advice from a lawyer prior to sending the notice letter of rent increase, so that the notice is in accordance with state laws and terms of your lease. Usually rent increase notices must be sent according to state laws.

The notice should be a written document, and you should get a receive receipt from the tenant. So, the notice should be sent through certified mail. Some states do require the notice to be delivered through a sheriff. The notice must have a polite and well-mannered language.

The letter should have some customary information like: address, name, and date. Some more information like the date for rent increase, the existing rent rate, and the raised rent amount should also be included in the notice for rent increase.

The time given to renters before raising rent is dependent upon local rules as well as the rental agreement. The notice must be given at least 30 days prior to the rent raise.

Nevertheless, in some cases, rent rate can’t be increased before the end of lease time period.


Minimum salary is expected to rise in the United States in the coming years. This increase will surely affect the rental rates; however it is still too early to say what exact changes it will bring to the rental market. What can be done is that landlords can keep a track of the market and device a strategy for raising the rent in compliance with the rental market.

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