How Much Should You Spend on Big-City Rent?
Apartments in New York, D.C. and San Francisco are notoriously expensive. Here's how to determine what's affordable for you.
Finding a roommate or cutting unnecessary expenses can help you afford a place in your preferred neighborhood.(Getty Images)
The average one-bedroom apartment in the U.S. rents for $1,183 per month, according to rental information company Zumper’s September 2017 National Rent Report. At a slight increase over the previous month – 0.6 percent – the monthly cost reflects both the high demand for rental housing since the Great Recession and an uptick in demand during the summer months, the optimal time for many to move. If you live in a major city, however, expect to pay a lot more than the national average to reside where everything is at your fingertips.
In San Francisco, which ranked most expensive for a one-bedroom apartment in the monthly Zumper report, the median one-bedroom apartment rents for $3,390 per month.
For recent graduates in particular, finding a place to lease in a market such as New York, the District of Columbia or San Francisco that fits with your first-job salary might seem like an impossible feat. But when your job or career of choice takes you to some of the priciest places in the U.S., how do you know what you can afford?
There’s no perfect number that applies to every renter’s needs. But landlords in many pricey parts of the country establish a threshold based on income in the lease application process.
“In New York, it’s pretty common that a landlord will require your annual income be 40 times your rent and generally above a 650 credit score,” says Taylor Glass-Moore, chief operating officer of Zumper. “In a market like San Francisco, generally they want your rent to be a third of your income [or less].”
The Zumper report notes New York’s median one-bedroom rent is $2,850 per month – which means, under the 40-times rule, you’d have to make $114,000 per year before taxes to qualify for the place on your own.
Of course, you have options to help you find housing within your budget. Roommates, a co-signer on the lease and an examination of your must-haves for a home can help you pinpoint an apartment that you can afford without living hand to mouth.
Find Your Ideal Rent
Relocating from a smaller city or renting on your own dime for the first time will likely give you sticker shock just about anywhere, but the best course of action is to sit down and review all your costs, goals and housing must-haves to determine the amount you can afford.
Raleigh Werner, co-founder of Jumpshell, a rental brokerage that works in major cities such as Boston, Miami and the District of Columbia, explains that Jumpshell agents establish a detailed portrait of a renter’s needs and expectations before the apartment hunt begins.
For the most part, Werner says, clients hope to be able to put at least a little into savings on a regular basis. “Making sure they establish those financial goals first sets the table for what their apartment search is going to look like,” Werner says.
From there, the conversation turns to the typical cost of living in the area, mixed with other expenses the individual has, like student loans.
“That way, you have these goals, you have these expenses and you see what you have left over in terms of what you can pay for rent,” Werner says.
But before you take off looking for apartments in that price range, consider what you personally need out of a living situation. “Some people know that if they have longer than a 30-minute commute each way to work, it’s really, really going to be a drain on them, their lifestyle and their quality of life,” Werner says.
You may have to rework your budget a bit as you account for nonnegotiables, like a lengthy walk to public transportation, and ultimately sacrifice other costs. A luxury gym membership might not make the cut, for example, at least while you establish more savings.
Is the Renting Trend Turning Around?
Find Right-Price Housing
Once you’ve determined the best rent for you, it’s time to find an apartment within those parameters. Still, a mixture of major-city prices and entry-level pay will naturally require some additional work.
If you locate an apartment that meets your budget demands but you don’t quite qualify for the salary or credit requirements from the landlord, you could find someone to co-sign the lease. A co-signer, having proven his or her own qualifications, vows to take on the rent should you be no longer able or willing to pay.
Another option is to seek a company that serves as a guarantor. Insurent Agency Corporation, based in New York City, has a lease guarantor program that serves as the co-signer for renters who prove financially stable but don’t necessarily meet a landlord’s salary threshold.
Insurent’s program serves multiple states, primarily on the East Coast, and requires a fee of roughly one month’s rent and typically covers between 75 and 90 percent of an individual renter’s lease, according to the company's website. Rather than having to make 40 times the rent, renters can qualify for the guaranty program with an income that’s 27.5 times the monthly rent, among other qualifications. The program also only works in Insurent-certified buildings, where landlords have agreed to participate.
Of course, the go-to option many renters turn to is to find roommates. Combined salaries double the budget for an apartment, and a two-bedroom apartment doesn’t cost double that of a one-bedroom in the same building, so you'll have more rental options to choose from.
“If you had a friend who was also moving to New York, and suddenly you each pool your money together and now you’re looking for a $4,000-a-month two-bed,” which is much more likely to include additional amenities than a low-end studio, Glass-Moore says.
In Boston, a top-five priciest city for rent per the monthly Zumper report, a one-bedroom apartment costs $2,200 per month, but the median for a two-bedroom was just $2,600 – which becomes far more affordable when split between two people.
Here are five approaches to consider to reduce your rent and help you build savings while renting in the priciest markets:
Move less. It may seem strategic to hunt for a cheaper apartment every year, but when combined with the cost of moving, it isn’t going to save you any money. Plus, even with rental rate growth slowing in some places, you probably won’t see a significant price reduction anywhere. “If you’re in a rent-controlled apartment and you’re perfectly happy there, you’re getting a deal,” Glass-Moore says.
Bring in roommates. You’re more likely to be able to afford your ideal location if you have others to split the rent with. You may even be able to disperse costs more by converting a sunroom in a large apartment to an additional bedroom for another roommate.
Location changes everything. If your preferred neighborhood happens to be where the world’s wealthiest people are known to stay, you might have to keep that in your future. Expand your horizons and scour the neighborhoods for a spot that gives you a similar feeling, but is maybe farther from downtown and thus more affordable.
Find someone to co-sign. Because of the financial responsibility involved, don’t have someone serve as your lease guarantor if you think you wouldn’t truly be able to afford it – leaving your co-signer with six months’ rent for the apartment you live in could ruin the strongest of friendships.
Inquire with professionals. Especially if you’re relocating to a new city, getting insight from a pro can be a big help. Talk to a fewcouple agents and see if it’s a match professionally. If it’s not, you’ve hopefully been able to discuss the basics to help you establish a budget. “I always recommend getting in touch with agents even if you don’t plan on using one,” Werner says.