How Does Minimum Wage Affect Rent Prices?

Before diving into the topic, you should know about minimum wage, the lowest wage below which a worker’s efficiency is expected to suffer. Besides meeting all the basic requirements, a worker’s wage also plays a crucial factor in his/her productivity. The worker’s wage should be enough to provide proper education, medical facilities, and minimum comfort to the worker and their family members. In this article, we’ll read about How Does Minimum Wage Affect Rent Prices?

How Does Minimum Wage Affect Rent Prices?

The current economic news is that government should increase the minimum wage as it has a significant influence on people’s life. Inflation, downfall in economic growth, job losses, etc., have affected the property rental sector. Landlords and property managers have increased the rent, and many tenants are unable to pay rent for their shelter due to various reasons. Compare mortgages rates here.

The minimum wage for a long time has been a hot topic for discussion. The rent prices are directly proportional to the minimum wage.

To make a profit, landlords and property managers tend to increase the rent of their properties, but tenants may fail to pay this amount if their minimum wages are not increased.

If you are a landlord and you would like to maximize the property’s potential so you may like to increase the rent of your property. But, negotiating with the tenant about increasing rent can be stressful and tricky. Landlords have to negotiate tactfully with their tenants if they want to increase the rent when minimum wages for workers are increased.

How would the capacity to pay the rent to be impacted by a higher minimum wage?

The beneficial part of a higher minimum wage is that tenants get a greater ability to afford housing costs. Researchers found from the “ Journal of Urban Economics” is that in 14 states from 2000 to 2009, both tenants and renters benefited from the increase in the minimum wage. Renters are less likely to fall behind on their regular rent payments, which is a notable advantage. More financial security for both renters and tenants results from this.

It implies that a rise in the minimum wage is equivalent to a rise in rent. A rise in the median rent price suggests that despite the economy’s changes, rental properties are still a wise investment.

The procedure of raising the rent when there is an increase in the minimum wage

You need to be updated about your rental market. If it is in the trend of rising prices you would also like to walk with that trend. But the collection of revenue is tricky enough and at the same time, it is very stressful because you have to make conversation with the tenant and very strategically and smartly make them understand why it is necessary to increase the rent. On the other hand, you have to make sure that the tenant will stay if you increase the rental price.

Thus in this competitive rental business, it is very critical to stay on track. Rising rent does not fully depend on you. It depends on state laws. The laws can only dictate when you can increase the rent and how much.

To make you understand more deeply, just look at the example.

When you are making the lease agreement, in that agreement paper you can specify a fixed rent price for the decided time period of renting your house.

Also, you can increase your rent price annually if you give rent to section 8 tenants. But keep in mind that you cannot increase it by your own choice because there is a cap of law.

In some cases, you cannot raise the rent prices though you do all kinds of good maintenance.

Reasons are given below about the impossibility of increasing rent

You cannot increase your rent before the ending period of the lease agreement.

Local rent control laws do not allow you to increase the rent.

If you do not give proper notice that you are going to increase the rent then there will be a difficulty in the increase.

If there is no allowance in the lease for raising the rent as per your choice of time period, you cannot do without that permission.

The increase can be seen as retaliatory or discriminatory, making it an unlawful rent increase.

Now let’s discuss that there is a necessity in your life to increase the rent and what you can do.

The process you should opt for

First, you need that lease agreement where there is mentioned the lease agreement policy. If you make this agreement before renting the property, then it would be easy for you to increase the rent.

After having the agreement papers, you can start the rent-increasing process by sending your tenant a rent-increasing notice letter.

Other than that, if you do not want all this courtly procedure, you can have a direct open conversation with your tenant and explain why it is important to increase the rental price.

Make them understand the competitive edge of rental prices in the local area and set a reasonable price according to the market.

Now you might all be thinking about what is rent increase notice letter is and brainstorming everywhere.

A rent increase notice letter is a written letter or document used by a landlord to notify tenants of impending rent increases. If your contract papers allow you can submit the notice 30 days in advance. Consult with a real estate lawyer before creating and delivering the rent increase notification letter to ensure that it complies with all applicable laws and the condition of your rental agreement.

Write the letter in a very friendly and courteous manner. You have to mention all the information in the legal document, like your name, address, and date. Also, you have to mention the amount of the increased rate, the current rent, and the date on which you are increasing the amount.

The type of local agreement and local legislation will determine how much notice must be given to the tenants before a rent increase. You must at least give official notification 30 days before the increase. However, in other circumstances, you have to wait until the end of the term to talk to the tenant about raising the rent.

Highlighting the United States minimum wage

According to the report in 2022, in an uneven manner, 26 states increase the minimum wage.

For instance, on January 1st, the minimum hourly pay in Colorado increased by just $0.22 to $12.56. More significantly, in Florida, the minimum wage increased in September from $8.56 to $10.00 per hour.

The minimum wage is $15 per hour as a benchmark. Only one state California has established a $15 minimum wage across the board and it also happens to be one of the most expensive places to rent.

Debate among economist

The result supports both sides of the minimum wage issue by showing how markets respond to and impact prices, including wages and rent and suggest that raising the minimum wage may help individuals afford essential cost like housing.

The researchers draw attention to changes in those states’ minimum wage regulations over the same time period. The number of tenants who missed rent payments was then compared to the establishment of a higher minimum wage.

Hope this information is helpful. It draws your attention in the right way.