Iām pretty sure the āRent is Too Damn Highā guy lives in my neighborhood. I often spot his fully branded ārent is too damn high mobileā parked along the streets of alphabet city, and in the spring and summer, Iāll pass by the man himself taking a leisurely stroll along St. Marks Place.
For those of you unfamiliar with the āRent is Too Damn Highā guy, Jimmy McMillan, heās the founder of the Rent is Too Damn High political party (yes, thatās the actual name) and star of the best political campaign videos EVER.
Like most New Yorkers, Jimmyās āRent is Too Damn Highā 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 Manhattanās median household income at $66,739, that means housing costs are occupying 62% of the average New Yorkerās 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 āmoveā 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 wonāt let me go), Iāve opted for the ātrade offā technique– living with multiple roommates and in significantly cheaper neighborhoods throughout the past ten years. But I have to admit, itās 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 canāt afford anything remotely near $3,438/month, Iāve 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 Yorkerās are allocating just isnāt 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 residentsā income. Facing a budget crunch in 1982, congress raised the rent ceiling to 30 percent, where itās remained ever since.Ā
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 arenāt 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, whatās the answer? How much of my income should I spend on housing?
Here are some ways Iāve been thinking about itā¦
AĀ 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, thatās obviously going to reduce how much you have available to spend on housing. Thatās not to say that if you donāt 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.
AĀ Transportation Approach. While New Yorkers may have to deal with sky-high rents, they donāt 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. Thatās another $750/ month available to roll into the budget. Even subtracting the cost of a monthly metro card, itās an additional $600 plus towards housing costs (or whatever other costs you care to prioritize).
MAKE MORE MONEY! This is the approach thatās 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, itās 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 youāre talking cities like NYC, San Fran, Miami, etc. But Iām 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. Iāll consider the buffer I get from not having to deal with the exorbitant expense of a car, but for the most part, Iām 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.

February 9th, 2015 at 7:55 am
I’m sure not having a car helps, Stephanie! I think it’s smart of you to get an apartment further out and live with roommates to save some cash. I can’t imagine paying in the 3K range for rent! What?
February 9th, 2015 at 7:57 am
I don’t think I’d ever pay much more than 1k. Jersey was the best. Big three bedroom with two roomies, 1600 between the three of us.
February 9th, 2015 at 8:56 am
It looks like you have a good approach in mind with the combination mindset. I couldn’t imagine paying that much for rent, but I think shows again that it’s relative to a certain extent – especially when you start throwing in things like the opportunities you can derive from the location. The transportation savings alone have to be a big way to save – I know it was for me when I lived in Chicago.
February 9th, 2015 at 9:31 am
I’ve never owned a car so looking up the numbers of average yearly expenses was actually pretty shocking to me. Those are some major savings to put towards housing.
February 9th, 2015 at 9:11 am
I have total PTSD when it comes to New York housing. The problem for me became the huge trade-off in convenience vs. niceness; I had a beautiful studio in the Bronx for a while for about $750 a month, which was very doable, and close to where I worked, but it was a 90-minute commute to see my friends in Brooklyn — end result, I never saw my friends in Brooklyn. Also, the walls were super thin and after three years I couldn’t take my upstairs neighbor the DJ anymore. (seriously, he really was a professional DJ and he practiced at home. Of course.) So I moved to Brooklyn and spent $$$$$$$$ on sharing a couple of places for the next few years. I don’t know. There’s just no magic bullet, which is why I’m really glad I don’t live there anymore š
February 9th, 2015 at 9:33 am
That’s the trouble with NYC housing, you either pay out the ass or make some serious quality of life trade offs. I think you can probably find some more middle ground if you’re willing to share a bedroom- like with a significant other. Otherwise, it’s tough.
February 9th, 2015 at 9:13 am
This is a tough question. Housing is obviously a necessity and should always be a top priority. With that being said, there are a lot of “bare minimum” living situations that are cheap but do not provide a high quality of life. I think your total expense approach is best. My wife and I have a lot of student loans that we have to factor into our finances, so simply saying “30% of your gross income” as a guide is a bit misleading. I think it’s more accurate to say 30% of our income after one-offs like student loans makes sense.
February 9th, 2015 at 9:37 am
I think it’s important to realize how quality of life considerations evolve over time too. While I’ve been okay putting up with a lot in the past, I’m ready to pay for the pleasure of not having to deal with some things like long commutes or multiple roomies anymore.
February 9th, 2015 at 9:29 am
I totally get this of course living in a high rent area. Butā¦so many other costs are really low for me, like utilities, transportation (since I don’t have a commute), clothing (since I can pretty much wear the same thing year round), etc. I do think if the shit ever does hit the fan, I may be forced to move, but for now I do everything I can to stay.
February 9th, 2015 at 9:38 am
Cutting out all my other costs is really what’s kept NYC an option for me. I pay very little for other expenses, like transit, that would be higher elsewhere.
February 9th, 2015 at 9:40 am
I honestly can’t apply any formulas or percentages where housing is concerned to my clients in NY. It really is a unique living situation in general. What I do is help my clients prioritize what is important to them and build their housing allowance around that to make it work. I have a handful who have 60%+ of their income going to housing; however, it’s important for them to live in the neighborhood where they live (because of work, mass transit, etc) and they make all of their other expenses work, for example, they know they can’t spend much on clothes, entertainment and food, but they are okay with that because their living space comes first. I have others who would rather enjoy what NY has to offer and spend as little time as possible in their home and their rent numbers are significantly less. It’s an individual decision in NY as far as I am concerned because I have seen all sorts of financial combinations work.
February 9th, 2015 at 11:06 am
Yeah, I think looking at housing in the context of all fixed expenses is a must in this area. I have found plenty of other ways to save so that I can prioritize living here.
February 9th, 2015 at 9:50 am
I feel like the 30 percent rule just doesn’t apply here like the rest of the country…NYC is one of the places where nobody is FORCED to live, we’re all here because the struggle is real but so worth it in many other ways beyond housing…so I think if we just look at it as keeping a lot less stuff in a much smaller place (and maybe having a roomie or two), it doesn’t seem all that bad. Midwest may have bigger and cheaper houses but we have Broadway!;-)
February 9th, 2015 at 11:07 am
Haha, exactly! I’m with you!
February 9th, 2015 at 10:39 am
It’s not completely scalable. I’ve never looked at % of income. I guess I’m at 18% […]
Ick on Jersey […]
February 9th, 2015 at 11:07 am
18% is great!
February 9th, 2015 at 10:42 am
When I got my first apartment in NYC, I was paying more than 30% of my income and it hurt. I definitely agree with taking a total expense approach. It’s necessary to back in other areas to afford rent. Luckily, most NYers don’t have to worry about car payments.
February 9th, 2015 at 11:07 am
Not having a car payment is huge!
February 9th, 2015 at 1:38 pm
That’s an actual political party?! My mind is blown. That’s hilarious. Unfortunately, the economics behind lowering rent are super, duper complicated (unless eleven million new condos are built and flood the market, heh).
I wish you all the best figuring out what works for you.. it’s such a trade off equation, like you’ve mentioned.
I can warn you that sometimes the toilet paper will be empty if you live with a significant other… that problem seems to plague humanity.
February 10th, 2015 at 7:35 am
I think they had to slash the “damn” on the ballot come election day, but yes, it is totally a real political party, haha.
February 9th, 2015 at 3:39 pm
That campaign was pretty awesome!
Housing in my city is pretty reasonable, so the standard rates sort of still apply.
I would think your combo method would work. Figure out what oyu make, what your other expenses are, what your other goals are and what’s left can go to rent.
February 10th, 2015 at 7:34 am
Yeah, the rent is too damn high guy is pretty hilarious š
February 9th, 2015 at 5:19 pm
I think the best percentage is whatever you can do comfortably without sacrificing your mid- and long-term financial goals. Getting caught in a 12-month lease or, heaven forbid, 30-year mortgage that puts a squeeze on you only exacerbates all your other financial problems.
February 10th, 2015 at 7:34 am
That’s why I can never see myself buying in NYC (unless I strike it real rich of course š )
February 9th, 2015 at 8:50 pm
I am very fortunate that my home mortgage is super low. I just purchased a quirky property and it worked out. Cities like: NYC, San Francisco, London, Sydney, etc. have so much to offer but the housing component can tire you out. I think the key is to think creatively and to be realistic about how living in a high rent area affects your other choices.
February 10th, 2015 at 7:33 am
I’ve been fortunate enough to find very low rent options , but the trade offs definitely tire me out. Luckily, none of my other expenses are particularly high so I have a lot of flexibility in the budget.
February 9th, 2015 at 11:52 pm
Those are some crazy rent amounts. When I bought my first house outside of Salt Lake City UT at age 19 in 1978 my mortgage+insurance+taxes was 50% of my take home income and it took a long time for that to improve to the 30%. Then I had to relocate in 1995 to Colorado and was back at 50% again for several years. What you have in NYC is a tough problem to easily solve. Trade offs aren’t as appealing so making more income is the best answer. My hope for you is that whatever you do to make more money may it be something that you enjoy doing so your life doesn’t feel like you are enslaved by your labor to make the NYC rent costs.
February 10th, 2015 at 7:32 am
That’s my goal. I’ve already made the trade offs for so long. I need to boost the income, and slowly but surely, I am.
February 10th, 2015 at 3:03 am
I’ve been thinking a lot about this myself. I’ve been living with 2 other roommates for 8 years now and I’m getting old enough that I’m really just getting tired of having to deal with other people all the time… I mean, I can’t even go pants-less after work, and what kind of life is a life where you can’t go pants-less?
But rent here (San Francisco) is basically just as insane as over there. Technically I’m in a different situation though, I own my home and have 2 tenants living with me. Over the last 8 years (unfortunately I bought at the absolute worst time 2007) my portion has gone from painfully too high to pretty cheap comparatively these days. But I still don’t want to live with other people. My options seem to be 1) rent out my whole house and find a new place, but the amount that I’m paying now triples… but I live on my own. 2) kick out the roommates and live on my own and my monthly amount probably triples… and I have 2 empty bedrooms which seems like a waste of free income. 3) try to downsize to a smaller house and my monthly payments probably increase 2.5 times….
I just don’t know if seeing my monthly payments go up to probably 40% of my income is something I’m willing to sacrifice for having my own bathroom/kitchen/refrigerator… But then I think of walking around pants-less and then maybe that 40% isn’t as bad as I once thought.
I just know the longer I sacrifice now the better off I will be financially. If I really want to retire early this is the shortest path that keeps me in the city I’m in. But there’s quality of life questions along the way that I know I will need to address at some point anyways. (I’m NOT living with roommates the rest of my life, I doubt I have another 5 years in me to be honest).
February 10th, 2015 at 7:29 am
I honestly don’t think I’ll ever be able to afford to live alone. I think getting to the point of moving in with a significant other is the only way to make the cost bearable without tearing my hair out- AND you can go pantslesss in that situation š
February 10th, 2015 at 7:29 am
Jumping in here with a suggestion: if you own the house, could you consider living with nine- or ten-month tenants (say, graduate students — if they could afford it? I don’t know) or other short-term people? If you furnish the rooms, you might be able to sign up with an agency that will hook you up with short-term tenants in town for business or whatever. You might find that a couple of “free” months a year would be enough for you in terms of giving you a break from other people.
February 10th, 2015 at 8:11 am
It’s a good start if you are considering all these factors before purchasing a home. So many people blindly get approved for a 30 years mortgage, without looking at he overall % of their income.
February 10th, 2015 at 9:58 am
I used to pay 33% of my income in rent, but then my now fiancee and I moved in together and I cut it down to about 17%. I wish it was lower than that, but that means I have to make more money… better get to it.
February 14th, 2015 at 8:48 am
If you can share a bedroom you can really cut down costs. But for singles who are willing to share but still want their own room, the price jumps so much.
February 10th, 2015 at 1:19 pm
I completely agree with your analysis. People ought to look at more than portion going to housing. If you’re in a bigger city like NYC, you don’t need to worry about the costs associated with a car, maintenance, insurance, etc. Those are some major savings, which can be placed into rent. Ideally, there would be greater affordable housing options for more diverse income groups, but that’s not the city you have there. :/
February 10th, 2015 at 6:01 pm
My sister rents in NYC and I thought she was joking when I saw the apartment and she showed me the rent. But you’re right it is the place to be for many people. I’ve read a range of 25-40% of your take home income should be devoted to housing, but it all varies depending on debt, utilities etc.
February 14th, 2015 at 8:46 am
Yeah, for people who’ve never lived here, there’s definitely a little rental “shock”- haha.
February 10th, 2015 at 11:08 pm
I totally get it. Housing in LA and NYC and other cities is expensive. But I’m a big city girl, now living in an “affordable” (at least comparatively speaking) area and I can’t wait to move back to LA and NYC. I do enjoy my lower rent now, especially that I’m self-employed, but I truly miss the happiness factor I had in both big cities. It will be rough to move back, but it’s worth it to me.
February 14th, 2015 at 8:45 am
All about the trade offs. Ah, I want it all though š
February 11th, 2015 at 6:24 am
Personally I allot 25% of my income. Housing is really vital nowadays and this is to prepare me for marriage life. What is good for me is that I even reach to 30% just to boost my savings for housing.
February 11th, 2015 at 11:12 am
Great post Stephanie.
Man. It’s one of the toughest things about being an artist. You’re not making a ton, but you have to be in major urban centres, because that’s where the work is. UGH.
Until that ‘make-more-money’ train moves in, I guess I’m stuck with delightful roommates, and a landlord who doesn’t seem to mind when I practise.
February 14th, 2015 at 8:44 am
If only the centers of the arts worlds were somewhere more affordable š
February 13th, 2015 at 7:25 am
[…] How Much Of My Income Should I Spend On Housing? from The Broke And Beautiful Life […]
February 14th, 2015 at 7:46 am
[…] How Much Of My Income Should I Spend On Housing?Ā byĀ Stefanie O’Connell Stefanie introduces to one of the oldest personal finance rules: keep housing costs to around 1/4 to 1/3 of your monthly budget. That means that if you make $1500, you shouldn’t spend more than $500 per month on rent. But something different happens in big cities. You can begin to save in other areas, as the rent escalates. Stefanie does a fantastic job outlining why you need to look beyond basic rent costs. […]
February 14th, 2015 at 8:36 am
Stephanie, This is a great article. I was surprised to hear about the national car spending. WOW, that is a lot of money. In New York, that saving can go towards housing. But what does a family of five do, buy a car or 5 subway passes. It seems that this saving is worthwhile only if you are single?
February 14th, 2015 at 8:43 am
Ah good point. I can’t imagine everyone in that family of five would need an unlimited subway pass however. I buy a pay per ride and use my bike, so my transit spending is far less than the $112/month.
February 18th, 2015 at 8:00 pm
I live in Upstate, NY. I’m only 2.5 hours away from NYC and go there often. The rent is A LOT cheaper. The further downstate you go, the more expensive it is. I like the fact that I can go to NYC anytime I want, and not pay the high rent to live there. This is from a person who wanted to live in NYC with a PASSION! I just couldn’t make the dollars work. I currently have a one bedroom apartment that is over 900 sq ft, with H/W floors, and my rent is $835.00 per month. My neighbor is from Harlem and said living in Upstate was the best move she made from a cost of living standpoint. You could NEVER get the deal I have in NYC.
February 18th, 2015 at 8:05 pm
I think being upstate is definitely on the someday list for me. That would be a long commute for every day though.
April 20th, 2015 at 7:01 am
[…] our combined $2,000 monthly budget I couldnāt find much more than a tiny studio walk-up facing a brick wall. I pushed the search […]
June 1st, 2015 at 7:00 am
[…] reflecting on housing ārules of thumbā for example, I quickly found myself rejecting traditional recommendations of keeping housing costs […]