Santa Fe tackles rental rates with first-in-US minimum wage approach

Santa Fe has long prided itself on being “The City Different,” a moniker reflecting its unique cultural blend developed over centuries. Now, the New Mexico capital is pioneering a different approach to economic policy that could reshape how cities nationwide address housing affordability crises.

In a first-of-its-kind move in the United States, Santa Fe has implemented an ordinance directly linking minimum wage increases to housing costs. The innovative policy ties wage growth to both consumer prices and fair market rental rates, creating a mechanism designed to help workers keep pace with the city’s escalating cost of living.

“The purpose is to make a serious difference in assuring that people who work here can live here,” Mayor Alan Webber explained. “Santa Fe’s history and culture is really reflected in the diversity of our people. It’s that diversity that we’re trying to preserve.”

The ordinance establishes a minimum wage of $17.50 starting in 2027, with future annual increases calculated using a blended formula. Half of the adjustment will be based on the Consumer Price Index and half on fair market rent data. The policy includes a 5% annual cap to protect businesses from extreme increases, while ensuring wages won’t decrease even if costs temporarily decline.

Santa Fe’s housing crisis mirrors challenges facing communities nationwide, where rising housing costs have increasingly strained household budgets, leaving families with diminishing resources for other necessities. The post-pandemic era has seen housing pressures intensify across most American markets.

University of New Mexico finance professor Reilly White, who provided city officials with 25 years of economic data, identified a troubling trend: minimum wage earners were falling increasingly behind as housing costs surged.

“It became clear that any index that was made had to be duly weighted in favor of some of this real estate side and some of the cost of living side,” White noted.

The policy required delicate balancing, according to Mayor Webber, who emphasized the importance of benefiting workers without overburdening the small businesses that form the backbone of Santa Fe’s economy.

When implemented, approximately 9,000 workers—roughly 20% of Santa Fe’s workforce—will see wage increases. Among them is Diego Ortiz, a 42-year-old construction worker who has called Santa Fe home for nearly three decades.

Ortiz described the constant struggle of choosing between paying rent, buying groceries, and supporting his children’s education. His son has already had to delay school to work and save money.

“If there’s economic stability where we can get a good wage with the sweat of our brow, then we’re going to be able to pay our rent, pay our bills, or get a house,” Ortiz said. “Our families will be better and that will be a big change.”

The National Low Income Housing Coalition points out that housing affordability disproportionately impacts Black, Native American, and Latino communities. Dan Emmanuel, a senior researcher with the coalition, supports Santa Fe’s approach but cautions that wage increases alone won’t address affordability challenges for those outside the workforce, such as seniors and people with disabilities who comprise a significant portion of low-income renters.

Issi Romem, an economist and fellow at the Terner Center for Housing Innovation at the University of California-Berkeley, adds that boosting incomes for a portion of the population won’t necessarily resolve the underlying housing shortage driving price increases across the market.

Recognizing these limitations, Santa Fe is deploying additional tools to address the housing crisis comprehensively. The city has streamlined permitting processes for new residential construction, with multiple apartment complexes currently under development on the city’s outskirts. Mayor Webber credits these efforts with already moderating rental growth, which increased by just 0.5% this year.

The city has also implemented what locals call a “mansion tax” on home sales exceeding $1 million, with revenue directed to an affordable housing trust fund to finance new projects.

For Webber, these multifaceted efforts represent an existential fight for Santa Fe’s identity.

“Can the people who work here afford to live here?” the mayor asked. “Can we keep Santa Fe diverse? Can we continue to be ‘The City Different’ in spite of the economic pressures that are at work?”

As other cities grapple with similar affordability challenges, Santa Fe’s innovative approach could provide a template for communities nationwide seeking to preserve their cultural fabric while adapting to economic realities.