I'm going through this right now actually as my company is reorganizing.
#1 Give them options
Nobody wants to be told what to do, especially your employer, so making a demand of X amount of dollars, however nicely phrases could come off as selfish. Instead, I suggest giving them options. By all means ask for more money, but be flexible and understand they are running a business and have expenses to maintain and may not actually be able to give you more money. In that case ask for more paid time off, better health benefits or retirement services, especially stock options if available.
#2 Be ready to walk away
This is the single most powerful play you can make in any negotiating situation. Whether its buying a new car or asking for a raise, having the ability and confidence to walk away from the negotiating table in order to seek your goals elsewhere is huge. In order to do this, I would recommend having another job lined up prior to starting negotiations. If you can tell your boss you've been given a job offer at company Y for a few dollars more than your current rate, they may try to match it in order to keep a valued employee. If they don't, congrats on the new job!
#3 Be Prepared for nothing to happen
In addition to the above just know that you may not get what you want. You may not get anything at all. Companies no longer have an attitude of bending over backwards in order to keep valued employees here in the US. "Be thankful you have a job" is far too prevalent in our society, despite the recession being nearly 7 years ago. As such, more and more people are being asked to do more work for the same pay. Be prepared for this outcome and try to be congenial about it.
Bonus tip: Never attribute to malice what can be blamed on stupidity
Your boss is probably not a malevolent genius hell bent on maximizing profits at the expense of your living situation. Based on my experience, they are probably just really incompetent and in over their heads. Thinking they are denying the raise out of spite is not productive. Thinking they are denying the raise out of ignorance gives you options to combat the denial.
Good luck.