I’m pretty sure the “Rent is Too Damn High” guy lives in my neighborhood. I often spot his fully branded “rent is too damn high mobile” parked along the streets of alphabet city, and in the spring and summer, I’ll pass by the man himself taking a leisurely stroll along St. Marks Place.

For those of you unfamiliar with the “Rent is Too Damn High” guy, Jimmy McMillan, he’s the founder of the Rent is Too Damn High political party (yes, that’s the actual name) and star of the best political campaign videos EVER.

Like most New Yorkers, Jimmy’s “Rent is Too Damn High” message has certainly resonated with me and just about everyone I encounter in this fine city. According to Citi Habitats, the average rent in Manhattan is now $3,438/month. With Manhattan’s median household income at $66,739, that means housing costs are occupying 62% of the average New Yorker’s gross pay. (So much for living off of half your income.)

The Trouble with Affordable Housing Alternatives

I know some people are advocates of the “move” argument- suggesting that the dreamers and go-getters who struggle to get by in this city relocate to affordable-town USA. And while that alternative certainly has its merits, most people come to (and stay in) New York for a reason- because it offers them something that nowhere else does.

Being one such person myself (the bright lights of Broadway just won’t let me go), I’ve opted for the “trade off” technique– living with multiple roommates and in significantly cheaper neighborhoods throughout the past ten years. But I have to admit, it’s taken its toll. There are only so many more times I can wake up to another empty roll of toilet paper in the bathroom or the pounding of the bass coming through my wall at midnight.

While I know I can’t afford anything remotely near $3,438/month, I’ve started to wonder exactly how much I can afford.

How Much Of My Income Should I Spend On Housing?

Having heard various recommendations of what proportion of income should be dedicated to housing costs (and knowing the 61% New Yorker’s are allocating just isn’t going to work for me) I took to my friend Google to do some research.

It turns out that the common suggestion of spending no more than 25 to 30 percent of your income on housing has its origins in Congress. The Brooke Amendment, introduced in 1969, capped rent on public housing at 25 percent of a residents’ income. Facing a budget crunch in 1982, congress raised the rent ceiling to 30 percent, where it’s remained ever since. 

Some further Googling found that this recommended rental ratio however, has been largely abandoned (at least for Americans outside of public housing). According to Zillow, there are 90 cities where the median rent is more than 30 percent of the median gross income. While inflation is running at a little over 1 percent each year, rents are rising at an average of 2-4 percent annually- and goodness knows interest rates and wages aren’t keeping up with that growth. As such, housing costs have become an increasingly large portion of household income, leaving little left over to pay for other necessities- let alone plan for a financial future.

So if 30 percent is unrealistic and 60 percent is unsustainable, what’s the answer? How much of my income should I spend on housing?

Here are some ways I’ve been thinking about it…

A Total Expense Approach. To consider how much home you can afford without considering your other fixed expense obligations seems a little short sighted to me. For example, if you have an $800 student loan payment to make each month, that’s obviously going to reduce how much you have available to spend on housing. That’s not to say that if you don’t have that spending obligation or something similar you should spend it all on housing, but you certainly have a lot more flexibility. Setting aside at least 20% of your take home pay for savings goals leaves a solid 80% left to work with- and if housing is a priority, trade offs can (hopefully) be found elsewhere in the budget.

A Transportation Approach. While New Yorkers may have to deal with sky-high rents, they don’t have to deal with the other major money sucker- auto costs. AAA estimates the average cost of driving in the US is now $9,122/ year. That’s another $750/ month available to roll into the budget. Even subtracting the cost of a monthly metro card, it’s an additional $600 plus towards housing costs (or whatever other costs you care to prioritize).

MAKE MORE MONEY! This is the approach that’s winning out for me. If your income is in the six figures, you can afford to put 40, even 60 percent of your pay towards housing and still have money left over to pay the bills (not that you should, but you can probably afford it). But if your income is only $20k/ year, it’s going to be a lot tougher to get by on half or even 70 percent of your yearly salary.

So what am I going to do? Probably a combination of all of the above. I think adhering to a strict ratio for housing costs is a little bit a LOT a bit unrealistic- especially when you’re talking cities like NYC, San Fran, Miami, etc. But I’m also not too fond of the idea of blowing all my money on housing and sacrificing other savings goals to fund a fancier roof over my head. I’ll consider the buffer I get from not having to deal with the exorbitant expense of a car, but for the most part, I’m just going to keep finding ways to make more money. The breaking broke mission continues, with daydreams of a clean, convenient apartment complete with garbage disposal and (dare I say it) washer/dryer in the unit fueling the fire.