Can you pay an on-site apartment manager with a free unit instead of wages?
Partly. Federal wage law lets an employer count the reasonable cost of lodging toward wages, but never at a profit, and California caps the credit for an apartment at two thirds of its ordinary rental value, up to $954.43 a month in 2026, with a voluntary written agreement. The rest of the manager's minimum wage for every hour worked must still be paid in money.
When the law requires someone on site
Most states leave it to you whether anyone lives on site. California is a well-known exception. Its housing regulations require a manager, janitor, housekeeper or other responsible person to live on the premises and have charge of every apartment house with 16 or more apartments when the owner does not live there. One caretaker covers all buildings under one ownership on one contiguous parcel. For buildings with more than four and fewer than 16 units, no caretaker is required, but the owner's or agent's name and address must be posted in a conspicuous place on the premises (25 CCR 42).
Other states and cities have their own rules; check yours before you assume no one is needed.
The federal rule: cost, not rent
Under the Fair Labor Standards Act, lodging can count toward wages only at its reasonable cost, which is not more than the employer's actual cost and does not include a profit (29 CFR 531.3). That cost is operation and maintenance, including depreciation, plus a limited allowance for interest on the capital invested; if that comes to more than fair rental value, fair rental value is the cap.
So the number you would charge a tenant is not the number you can credit. A unit that rents for $1,800 might cost you far less to provide, and the credit is the lower figure.
California's 2026 lodging credits
California's minimum wage order for 2026 sets the state minimum wage at $16.90 an hour and limits what can be credited for lodging. A credit may be taken only under a voluntary written agreement between employer and employee (DIR, MW-2026).
| Lodging (effective January 1, 2026) | Most that can be credited |
|---|---|
| Room occupied alone | $79.46 a week |
| Room shared | $65.59 a week |
| Apartment | Two thirds of the ordinary rental value, and no more than $954.43 a month |
| Apartment, when a couple are both employed by the employer | Two thirds of the ordinary rental value, and no more than $1,411.85 a month |
Some California cities set a higher local minimum wage. Check your city and talk to an employment attorney or payroll provider before you set pay.
A worked month
Example a made-up 18 unit building in a California city with no local minimum wage hires a resident manager for 20 hours a week. Hours per month: 20 x 52 / 12 = 86.67. Minimum wages owed: 86.67 x $16.90 = $1,464.67. The manager's unit would rent for $1,800, and two thirds of that is $1,200, but the 2026 cap is $954.43, so the credit is $954.43. Cash wages must be at least $1,464.67 - $954.43 = $510.24 for the month, more if the manager works more hours.
Two things undo this math in practice: hours that are not tracked (answering the door at night is often work time) and treating the manager as a contractor. A resident manager who works on your schedule, at your building, is usually an employee, with payroll taxes and workers' compensation that go with it.
Is the free unit taxable income to the manager?
The IRS lets an employer exclude lodging from an employee's wages only when all three tests are met: it is furnished on your business premises, for your convenience, and as a condition of employment, meaning the employee must live there to do the job (IRS Publication 15-B). If the employee can choose cash instead of the unit, the lodging is not excludable when chosen, and a cash housing allowance is not excludable either.
Wage credit and tax exclusion are separate questions. Ask your payroll provider or tax preparer how both apply to your agreement.
What to put in the written agreement
- The unit, its ordinary rental value, and the lodging credit you will take each pay period.
- Hourly rate, expected hours, and how hours are recorded, including calls after hours.
- Duties: showings, rent questions, letting vendors in, emergencies.
- That living on site is required to do the job, if it is.
- What happens to the unit when the job ends, written to match your state's rules.
- Signatures from both of you, with a copy to the manager.
How DoorKeeping helps an on-site manager
DoorKeeping keeps each property's books separate, so the manager's wages and the unit's lost rent show up on that building's profit and loss. Work orders and vendor job links give a manager one place to track repairs, while anything involving money still waits for your one-tap approval. It costs $2 per unit per month; payroll stays with your payroll provider.
Sources
- California Code of Regulations, title 25, section 42, Caretaker, read Oct 30, 2026
- 29 CFR 531.3, General determinations of reasonable cost, read Oct 30, 2026
- California Department of Industrial Relations, Minimum Wage Order MW-2026, read Oct 30, 2026
- IRS, Publication 15-B, Employer's Tax Guide to Fringe Benefits, read Oct 30, 2026
Questions
- Does California require an on-site manager?
- For an apartment house with 16 or more units when the owner does not live there, yes: a responsible person must live on site under 25 CCR 42. Buildings of 5 to 15 units instead must post the owner's or agent's name and address.
- How much can a free apartment count toward minimum wage in California?
- In 2026, two thirds of the unit's ordinary rental value, and no more than $954.43 a month, or $1,411.85 when a couple both work for you. A voluntary written agreement is required.
- Can I count full market rent as the manager's pay?
- Not under federal wage law. Lodging counts only at its reasonable cost to you, with no profit, and states such as California set lower caps.