High rents in big cities put people who make minimum wage at risk of becoming homeless, says a report
Sylvana Orellana, who lives in Toronto and makes minimum wage, says that she and her two-year-old son often have to skip some bills in order to pay others.
That’s because her rent, which is just over $1,700 a month, takes up a big chunk of her income, and she says she often needs help from family and friends.
“It’s sad to say, but I don’t even look at the numbers or how much they’re paying me anymore,” said Orellana, 23. “It’s not going to pay my bills.””I almost ended up in the hospital because of all this stress.”
A new report from the Canadian Centre for Policy Alternatives in Ottawa, which came out on Tuesday, suggests that Orellana is not alone.
The report’s authors, economists David Macdonald and Ricardo Tranjan, found that even though minimum wages have gone up since the centre’s last report in 2018, they aren’t going up as fast as rent prices.
Macdonald says this means that many workers spend too much on rent, while Trajan says that the high cost of rent can put people who make minimum wage at risk of becoming homeless.
“Minimum wages are supposed to make life better for people who are poor or close to it,” Macdonald said. “But most of the money from those increases in the minimum wage went to paying higher rent.”
Tranjan said, “I worry about people who work for minimum wage and the dangerous situations they must put themselves in.”
Their analysis looked at 776 neighborhoods in more than 30 of the country’s biggest cities. They figured out how much people have to earn in a 40-hour work week to spend no more than 30% of their income on housing. They call this amount the “rental wage.”
The Canada Mortgage and Housing Corporation says that paying more than that is “unaffordable” for housing.
The gap between the minimum wage and what’s needed to pay rent was caused by three main things, according to the researchers: wage suppression policies, like using temporary foreign workers to fill vacancies instead of raising wages to attract domestic workers; a low supply of rent-controlled housing; and poor regulation of the housing market that puts “profit-making over housing security.”
Macdonald says things are getting worse quickly because of rising interest rates and the high cost of construction. Tranjan, on the other hand, says that provincial laws are making things worse, such as Ontario’s plan to end rent control for new units and Quebec’s plan to stop lease transfers.
Rents in Canada are higher than minimum wages
The co-authors say that not having enough affordable housing isn’t just an issue in big cities. Using provincial and federal data from 2022, they found that the rent for a one-bedroom unit is higher than the minimum wage in most of the country’s major cities.
Using the rental calculation, the report also found that minimum wage workers could only afford one-bedroom apartments in three cities in Quebec.Even there, where rents are cheaper than in other parts of the country, researchers say the trend is “worrisome” because workers still need to make more than minimum wage to rent an affordable unit.
In Toronto and Vancouver, the report says that even two full-time minimum wage workers can’t afford a one-bedroom apartment without spending more than 30% of their income. A two-bedroom apartment is even more expensive.In British Columbia, the rent for a two-bedroom apartment is more than twice the minimum wage, while in Ontario, it’s just under double the minimum wage.
The report didn’t look at people on social assistance and disability supports in great detail, but it did find that their subsidies were even less than the provincial minimum wage. Tranjan says that the results would have been even worse if they had looked more closely.
“We don’t have enough social housing in the country for all the people who get social assistance right now,” he said. “A large and growing number of people who get social assistance rent from private landlords.”
“They have to compete with people making minimum wage and everyone else.”
WATCH | Since last year, the average price in Canada has gone up by 10%:
Raising wages 
The federal government says that in the past, governments set minimum wages to protect non-unionized workers, reduce the number of low-paying jobs, and reduce poverty, among other possible benefits.
Roslyn Kunin, who runs an economic consulting firm in Vancouver, B.C., said that the market is now a big part of what determines wages. She says that wages are mostly based on how productive and skilled workers are, while rents are based on how many housing units are available and how many people want to live in them.
Kunin said, “Someone has to be willing to work for that wage, and someone has to be able to pay that wage for that kind of work.”
By comparing federal and provincial data from 2021, Tranjan and Macdonald estimate that about 828,000 people across the country were making the minimum wage or less. About 1.1 million Canadians lived in homes where two or more people earned the same amount or less as two full-time minimum wage jobs.
Kunin says that if wages were raised to match rental rates, the cost of everyday goods would go up and many businesses and jobs would probably go away.
“We would all be hurt if goods and services were taken away.”
Short and long-term solution
Kunin said that the best thing for an individual to do is to get as much education, experience, and training as possible so that they can work for a higher wage. He also said that getting more education is “easier than it has ever been” because of the rise of online learning.
But Brenda Spotton Visano, a public policy and economics professor at York University in Toronto, says that many of these workers are stuck in a “catch-22” situation because they don’t have the time or money to improve their skills, which might be needed for higher-paying jobs.
She says it might be a good idea to look into more creative ways to set the minimum wage, like tying how much the lowest-paid workers get paid to how much a company makes in profit or how much its CEO gets paid, or tying the minimum wage to how much it costs to live in a certain area.
“But in the short term, we will have to help the people who are suffering by raising the minimum wage,” said Visano.
The researchers say that governments should focus on financing, building, and buying purpose-built and non-market housing. They also say that the rental market should be regulated with rent controls, and above-guideline rent increases should be banned.
Macdonald said, “That doesn’t mean we shouldn’t try to raise the minimum wage, but the real problem here is that there aren’t enough affordable rental homes.”
“This situation is not going to get better. Unless something big is done, it’s going to get much worse.”