By Yai Davila and Marisol Sanchez
Homes in Belmont Cragin, where rent is more affordable than other neighborhoods. (Photo/Marisol Sanchez)
Sandra Aparicio, a 31-year-old mother of two, is one of an estimated 400,000 Chicagoans earning a minimum wage of $15 an hour while working at a retail store in the Northwest side.
She and her husband, Gerardo, can afford housing through spending plans. But it hasn’t been easy.
“It is enough but sometimes me and my husband have to set a budget to pay any bills, food, essentials and transportation,” she said.
With rent costs rising 8.6% in Chicago in recent years, many minimum wage workers have found the cost of living to be a challenge solely relying on the earnings from their jobs. It has become increasingly difficult for minimum wage workers to purchase homes.
Although certain neighborhoods offer housing at a lower cost than others, the rent increase can be observed throughout the entire city. The ABC7 Chicago Data Team reported that the average rent for a one-bedroom apartment in Chicago is 10% higher than the national average. Data from Zillow found that rent was the highest in The Loop, University Village, River North and Old Town.
To find a home and afford rent under the current housing market, the minimum wage workforce often has to turn to other options to alleviate financial worries. A second job or the help of family is a contributing factor for some.
“Before moving to my current place, I was living with my mother-in-law, the same house but different floor, she helped us a lot by letting us rent a small place at an affordable price but our family grew so we needed our bigger space,” Aparicio said. “My mom just recently bought a house so she let us rent a floor at her place, and I mean it’s higher the rent but it’s manageable.”
Programs have been created to assist those who are struggling with paying for housing. The Illinois Housing Development Authority announced it would reopen applications for Chicago’s rental assistance program in July.
Due to the high cost of living in Chicago, moving outside of the city is a possibility that some have considered. For those who live with multiple family members like Aparicio, houses in Illinois suburbs are ideal because of the amount of room they provide.
“Me and my husband have talked about moving into the suburbs,” she said. “From what I heard from my family who live in the suburbs, they say they have more space at an economical price compared to buying one here in Chicago”.
Realtor Michelle Flores works with many first-time home buyers who are in or just above the minimum-wage bracket.
“They’re the ones that are seeking financial assistance for their down payment,” she said. “Or even grant programs, or if they are making minimum wage they are making it in two or three jobs and that’s how they’ve been able to afford their cost of living.”
According to the Official Chicago website, the minimum wage is $15 an hour. When it comes to affording rent and housing, tenants must take into consideration their bills, children, and other necessities that are not included in the rent.
“If you work 40 hours a week, you’re making $600 a week,” Flores said. “Let’s just say you work 80 hours in two weeks, you’re making $1,200 in two weeks. So that means in a month you’re making $2,400, the two-bed, one-bath rentals start as low as $850 a month depending on the area you want to live.
“That’s gross income. That’s not your take-home. So $2,400, let’s say you pay 30% in taxes out of what you make a month, that’s $720 taken out so $2,400 [to] $720 leaves you with $1,680 a month that’s your take-home in a month. And if you need to rent an apartment the cheapest apartment is $850 for a two bed, one bath.”
But when it comes to rent, tenants must calculate the extra costs of their bills such as utilities, car payments, phone plans, groceries and other basic expenses.
“The issue with minimum wage and the rental market is the real estate side, the landlords out there want people that can afford their rent,” Flores said.
“So if I’m only making $1,680 a month and about more than half is already going into my rent alone, that’s not including my light, my gas, my groceries. If I have kids, whatever they need. If I have a car, my car insurance, my gas to and from work, if I have a cell phone.
“Most people have a car and cell phone and even if they don’t have a car they have to pay to commute somehow whether it’s Uber, Lyft, or public transportation. I have $830 a month to handle all of the above, minimum wage is not going to cut it.”
All these numbers can make the housing market in Chicago seem a bit overwhelming to first-time renters, buyers and sellers.
Flores mentions there are financial assistance and grant programs that can make things easier for first-time buyers and renters and minimum-wage workers.
Flores offered some useful tips for people who are on the hunt for an apartment or buying/selling homes:
Work Directly With the Landlord
“Sometimes working directly with the landlord helps potential tenants,” she said. “I love to work with my clients no matter if they’re renting or buying but I’ve seen push back from landlords when tenants have agent representatives because they have to pay us.”
Get Educated, Work With a Realtor
“But what I would say is get educated, work with a realtor to start you off and then if it doesn’t work out then do your own thing,” she said. “Don’t apply for every property that you see because it’s a hard pull on your credit”.
See the Unit First
“Go see the unit first and no one should be asking for application processing prior to showing you a unit,” she said. “I actually had that experience recently even identifying myself as a realtor, the potential landlord was like have your clients submit the application.”
Watch out for Scams
“Don’t send any money, don’t apply for anything that you have not seen thoroughly in-person and spoken to somebody in person at that unit,” she said. “There’s a lot of scammers out there and I’ve caught a few and reported them but be careful with that on the rental side.”
Save Your Money
“Have your first month’s rent, you know, your security deposit ready so that when landlords ask for your assets they can see okay they’re ready to purchase,” she said. “They have their first month’s rent ready to go.”
Be Ready to Sign a Lease
“I mean a lot of people are looking for one to two year leases,” she said. “Be ready to negotiate. Sometimes you can negotiate a little bit lower of a lease payment. If you’re going to stay longer, like if you know that you’re going to stay in a rental unit for two years, maybe you can negotiate $100 less because you’re going to guarantee them that extra year.”
Keep Your Credit Above 600
“Better if it’s about 650 and pretty much the same thing on the sales side if you’re going to buy a house,” she said. “Look at your credit, your debt to income, it should be less than 30%. You can go up to 45% to income ratio but I don’t recommend it because it affects how much you get qualified for.
“And debt to income is literally what you hear me saying. it’s how much debt do you have that shows up on your credit versus how much money are you making per month so car notes credit cards things like that keep them paid off and at minimum balances and paid on time”
Have “Cushion” Money
“Save your money,” she said. “If you’re like me looking for houses online, my dream house just sold last year sadly for $2.4 million, but if you’re looking for houses online always keep in mind that even if you qualify for an FHA loan, you still have to come up with money on your own.
“So 3.5% of any purchase price that you’re looking at, if you’re falling in love with a $450,000 home, you should automatically be saving three and a half percent of that for your down payment and an additional 3% to cover your closing costs so save money even if you’re getting grant program assistance.
“Even if the sellers are giving you credit for closing, save money. Because what’s going to happen is that first year that you do have that house, things happen. you’re not buying a house that’s never going to have issues. Every house, even new construction has issues. So saving that money ahead of time is going to then be there within that first year if something comes up.”
Stay Consistent at Work
“Even if you’re a renter, consistent work history is a big plus for purchasing,” she said. “It’s needed for purchasing because you have to have a two year work history for renters. When they see that somebody’s been consistently working, especially at the same job, you look solid, you look like somebody that is reliable, loyal, trustworthy.”
Free Consultations with a Realtor
“Have a free consultation with myself or maybe there’s another realtor out there that does them,” Flores said.
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