The American city of Santa Fe, long celebrated for its unique cultural blend, is pioneering a radical new policy to combat its affordability crisis. It has become the first city in the United States to directly link its minimum wage to the cost of housing, a move designed to prevent residents from being priced out of their homes.
A Groundbreaking Ordinance
Under this new law, Santa Fe's minimum wage is set to rise to $17.50 by 2027. Historically, annual increases were tied solely to the Consumer Price Index (CPI). However, the city is now implementing a novel, blended formula. From now on, half of the annual wage adjustment will be calculated using the CPI, while the other half will be determined by fair market rent data.
To protect against economic volatility, the ordinance includes a 5% cap on increases should costs skyrocket. Crucially, the policy also guarantees that the minimum wage will not be reduced in years where consumer prices or rents fall.
Mayor Alan Webber described the delicate balancing act of crafting the ordinance, stating the goal was to support workers without placing an undue burden on the small, independent businesses that form the backbone of the local economy.
Addressing a National Crisis
Santa Fe's struggle is far from unique. Rising rents and housing costs are squeezing households across the nation, leaving many with less disposable income for other essentials. Experts confirm that the financial pressure on renters has intensified compared to pre-pandemic conditions.
The new policy is expected to directly benefit approximately 9,000 workers, which represents about 20% of the city's workforce. For people like Diego Ortiz, a 42-year-old construction worker and lifelong Santa Fe resident, the change cannot come soon enough.
"Choosing between paying rent, buying groceries and helping my children is a constant worry," Ortiz explained. He hopes that economic stability from a fair wage will allow his family to pay their bills reliably and even consider homeownership.
However, researchers like Dan Emmanuel of the National Low Income Housing Coalition caution that while raising the minimum wage helps workers, it does not solve affordability for seniors or people with disabilities who are out of the workforce but constitute a large share of low-income renters.
A Multi-Pronged Attack on Unaffordability
Officials in Santa Fe acknowledge that a wage increase alone will not resolve the underlying shortage of housing, a key driver of high prices identified by economists like Issi Romem from UC Berkeley.
Consequently, the city is pursuing a multi-faceted strategy. There has been a significant uptick in permits for new homes and apartment complexes, with construction visible on the edges of the city. Mayor Webber reports this is already having a positive effect, with rental price growth slowing to just 0.5% this year.
Additionally, Santa Fe is using revenue from a 'mansion tax' on home sales exceeding $1 million to fuel a trust fund dedicated to affordable housing projects. For the mayor, the mission is critical to the city's future identity. He poses the fundamental question: "Can the people who work here afford to live here? Can we keep Santa Fe diverse? Can we continue to be 'The City Different' in spite of the economic pressures that are at work?"
