Santa Fe Ties Minimum Wage to Rents in U.S. First to Fight Displacement

Santa Fe, N.M., long known as “The City Different,” has approved a first-of-its-kind ordinance that directly links the city’s minimum wage to both consumer prices and local rental market data. City leaders say the move is designed to blunt rising rents and help preserve the cultural and economic diversity of long-time residents.

How the new wage formula works

The minimum wage will be set at $17.50 beginning in 2027. After that, annual adjustments will be determined by a blended formula: 50% based on the Consumer Price Index (CPI) and 50% based on fair market rent figures. In any single year, increases are capped at 5%, and the city will not reduce the minimum wage if inflation or rents decline.

Background and rationale

Santa Fe first adopted a living-wage policy in 2002 and has expanded it over time. City officials commissioned a 25-year analysis from University of New Mexico finance professor Reilly White showing that minimum-wage earners were falling behind local housing costs. White told city leaders that any index needed to balance both real estate pressures and broader cost-of-living measures.

“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,” said Reilly White.

Who stands to benefit

About 9,000 workers—roughly 20% of Santa Fe’s workforce—are expected to see higher pay once the ordinance takes effect. Diego Ortiz, a 42-year-old construction worker and nearly three-decade resident, says higher wages could mean the difference between struggling to cover basics and attaining stability for his family.

“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.”

Limitations and complementary strategies

Advocates and researchers welcome the wage boost but caution it won’t solve the broader affordability crisis on its own. The National Low Income Housing Coalition notes the lowest-income renters are disproportionately Black, Native American and Latino—groups that stand to benefit from higher wages—while Dan Emmanuel, a senior researcher at the coalition, warns that non-working low-income groups such as many seniors and people with disabilities won’t benefit directly from a wage increase.

Housing experts emphasize supply-side solutions. Issi Romem, an economist at the Terner Center for Housing Innovation (UC Berkeley), said higher wages for some workers won’t by themselves resolve the shortage of housing that pushes prices up across the market.

To pair income supports with increased supply, Santa Fe officials say permitting has accelerated on the city’s outskirts, where new apartment construction is underway. The city also plans to use revenue from a proposed “mansion tax” on home sales over $1 million to seed a trust fund for affordable housing projects. Mayor Alan Webber noted early signs that these measures may be helping: rental prices rose by just 0.5% this year.

City leaders’ goals

Mayor Webber framed the ordinance as both a workers’ measure and a preservation effort: “The purpose is to make a serious difference in assuring that people who work here can live here,” he said, adding that preserving Santa Fe’s diverse population is central to maintaining the city’s character.

Officials caution the policy is not a silver bullet but part of a multi-pronged strategy to reduce displacement: indexing wages to housing costs, expanding housing supply, and using targeted revenue to finance affordable units. The success of the approach will hinge on how well these elements are implemented together.