My partners and I own and operate almost 1,000 units of affordable housing in Minneapolis. We are proud of our company’s long-standing commitment to quality, affordable housing, and we believe strongly in providing options for residents of all incomes to have a reliable roof over their heads. Our company is committed to fair wages, and we hire locally when we develop.
Much of the discussion around the proposed $15 minimum wage in Minneapolis has centered on restaurant employees and whether the proposal should include a “tip credit,” which would allow tips to count toward the minimum wage. Housing is actually another industry where the long-term consequences of a drastic increase to the minimum wage could have unintended consequences.
A $15-an-hour minimum wage will very likely hinder future affordable-housing developments in Minneapolis. Why? Affordable-housing rents are on a fixed schedule that is determined by the U.S. Department of Housing and Urban Development (HUD). I cannot raise the rents to cover increased costs, and I don’t get to pass on higher utility costs to my tenants, either. We have a contract, and we honor it.
After taxes, our second-highest operating cost is payroll. There is no denying that increasing the minimum wage to $15 an hour will have a major financial affect on businesses; some may have the ability to pass on higher costs to their customers, if needed. That’s not an option most business owners I know want to be forced to use, but the option exists for them. Affordable-housing landlords do not have the same option. We will have to consider cutting services if a $15 minimum wage is enacted as currently proposed.
Many property owners offer rent credit for residents performing caretaker duties. Some permit residents to earn rent credit or wages as “maintenance assistants,” helping with repairs or around the grounds. Often these are residents who have minimal or no skills and are hoping to learn a trade. If the current proposal for a minimum wage is enacted, we would not be able to afford to pay these residents $15 an hour. Instead, contractors or skilled maintenance staff would be used. At the higher rates, we would likely have to provide less-frequent cleaning and maintenance and would lose the ability to help residents learn valuable skills for their future.
I also think about our leasing agents, who make a combination of base pay and commission for the number of units leased. Without allowances for commission under the $15 minimum-wage proposal, these employees may actually see a net pay cut just as restaurant owners are cautioning about the tip credit.
I cannot urge this enough: One size does not fit all when it comes to considering a higher minimum wage in Minneapolis. I want all Minneapolis residents to have the opportunity to thrive. Most small-business owners like us compensate their employees fairly. Total compensation is not always a fixed wage. The current proposal for a $15-an-hour minimum wage is far too constricting and has the potential to seriously damage small-business growth in our beloved city — from the hottest new restaurants to established affordable-housing developers like me.
Businesses of all sizes need some flexibility if the City Council insists on moving forward with a $15-an-hour minimum wage. This flexibility must include: a permanent training wage; a small-business differentiator wage; and adjustments for tipping and/or commission. Without these options, $15 an hour is simply picking winners and losers, and some of those losers are the very people with the fewest skills and alternatives. Businesses will be forced to make payroll decisions from reductions of hours to limitations on unskilled hiring.
Hardworking people deserve to be compensated fairly. I believe that, and I know other business owners like me all across our city do, too. Let’s make sure we do it right, and give businesses some options. If we don’t, the results will not be nearly as visionary as we all know the city of Minneapolis can be.
Steve Minn is vice president and chief finance officer for Lupe Development Partners. He was a member of the Minneapolis City Council from 1994 to 1999.