Photo: Andrea Puggioni/Flickr
Economists and housing experts have recommended that a household’s housing costs should not exceed 30 percent of its income. However, according to a new analysis by the online search portal RENTCafe, renters in many of the largest US cities are “rent burdened” — or having to pay above 30 percent of their income to afford their city’s median rent.
RENTCafe conducted two separate studies examining the rent burden in the 100 largest US cities. The first study determined the city’s “rent burden,” or the income to rent ratio. The second study sought to determine how much a household actually needed to earn beyond the median yearly income in order to afford market price rents in a particular city.
For the first analysis, RENTCafe used data from the US Census Bureau to compare the median rent in 100 of the largest US cities with the median income of renters’ households to determine a city’s “rent burden” and how much of their annual income was left over after paying housing costs.
Hialeah, FL, the sixth largest city in Florida and part of the Miami metro-area, was the most “rent burdened” city in the study — having the worst income to rent ratio. Renters in Hialeah paid a staggering 57 percent of their median annual income on housing costs. The median annual income in Hialeah was $22,357, leaving only $9,649 left over for other expenses, like medical bills, education and food, after paying housing costs.
Meanwhile in Brooklyn, where the median annual income was $40,666, renters spent 38 percent of their income on housing. This left $25,270 for other expenses.
Across the Hudson, the rent burden in Manhattan was 31 percent, but renters earned the higher annual median income of $61,910. After housing, Manhattan renters had $42,578 left over for other expenses — or 1.7 times more than those renters living in nearby Brooklyn.
On the flipside, renters in Irving, TX — the least rent burdened city in the study — paid only 25 percent of their annual income toward housing costs. With a recorded annual median salary of $46,029, renters in Irving held onto $34,305 of their income after paying housing costs.
The second analysis, to determine the actual yearly salary needed to afford market rate housing, used median rents from Yardi Matrix instead of Census data, and removed “any communities that are part of a regulated affording program or benefit from government subsidies.” This would be the “hypothetical income” required in order for the median rent to be exactly 30 percent of income, and the difference between it and the real world median figures.
In this study, the median annual income of $61,910 in Manhattan made up only 41 percent of the income needed for renters to not be rent burdened. In this scenario, Manhattan renters need to actually earn $150,000 yearly to afford the median rent in the borough. This is a $89,090 difference in the actual income required to not be rent burdened compared to the annual median Manhattan rent.
The numbers aren’t much better in Brooklyn where renters need to actually earn $110,000 yearly to live in the borough and not be rent burdened. The median annual income made up 37 percent of the needed income to afford the market priced rents. Renters need to earn an additional $70,334 to afford market priced rentals in Brooklyn.
Click here to read the entire RENTCafe data.