If you pay rent or own a home, you’ve no doubt been advised that you shouldn’t spend more than 30 percent of your pretax income on it. Oh yeah, and if you rent, that’s supposed to include your utilities, too. But how important is that rule, exactly?
Plenty of people pay far more, and plenty of people pay far less. People who spend less than 30 percent on housing are exactly who you’d think: people with more money. But nationally, over half of us pay more than 30 percent. On average, we pay about about 38.6 percent of our income. That’s not just fancy city rents, either: Rural renters are in the same boat, with 47 percent spending over a third of income to snag an apartment.
Why is this? Are we just too bad with money to make a responsible budget? Are we blowing all our cash on avocado toast? The reality is much different. Yes, younger people are happy to spend disposable income on Ubers, lattes, drinks and random succulents, but the real situation is far darker and more complex than just lack of a solid budget.
Guess who’s most screwed over? It’s women, low-income earners and people of color, and low-income earning women of color suffer the most. People who earn the median income nationally can only afford some 42 percent of the available rental listings, and if you’re black, it’s more like 16 percent. Latino? About 27 percent of those listings are on the table for you.
As for why? It’s actually a toxic combination of factors involving rising rent, student loan debt, wages that won’t budge and landlords with a hankering to evict at a higher rate. Some of us have never even known what it’s like to pay only 30 percent of income to rent.
It’s a generational issue, too: Last year, real estate website RentCafe spliced Census Bureau data to discover that millennials drop about 45 percent of their income on rent, compared with Gen-Xers, who spend 41, and Baby Boomers, who spend about 36 percent.
Here are a few other reasons rent is eating up our incomes.
Student Loan Debt
One of the top reasons millennials rent, and rent beyond their means, is because they can’t snag a mortgage because they’re the demographic saddled with the most student loan debt.
Rising Rents, Dwindling Supply
Many people pay more in rent because rent costs more. Some 60 percent of people feel that rent costs are a huge issue in their town, and supply is its lowest in three decades. In general, people in their 20s and 30s have to spend about $10,000 more on rent between the age of 20 and 30 than Gen-Xers spent in their 20s. This is how you get stories of adults making almost $60,000 who cannot find anything better than a “run-down” triple-decker in Boston without splitting it three ways with two other professionals.
Do the math: If you’re an editorial assistant making $38,800 in New York, you’d be expected to spend a “responsible” $970 a month on rent, including utilities. But here, the average two-bedroom is $3,662 ($2,662 in Brooklyn). Splitting cheaper Brooklyn rent with a roommate will still cost you 40 percent of your income. If you can find a $3,000 three-bedroom in Brooklyn, you’ll pay a more reasonable $1,000 a month — but often more if you want a decent commute.
Sociologist Matthew Desmond recently released Evicted, a study of eight families in Milwaukee living in poverty and barely scraping by even with assistance. In a review of the book by Katha Pollitt, she notes that some of the families pay 70 percent in rent costs alone:
After he paid Sherrena his $550 rent out of his welfare cheque, Lamar had only $2.19 a day for the month. When he is forced to repay a welfare cheque he has been sent in error and falls behind on rent, he sells his food stamps for half their face value and volunteers to paint an upstairs apartment, but it is not enough.
Single Parent Status
Online, a woman told me anonymously that she was excited to finally only pay about half her income to rent, because she’d been paying around 80 percent:
I’m a single mom, making too much for most assistance, making more than most in my position, and barely scraping by. My rent just got raised $150 a month, and I got real lucky that a friend of mine happens to be moving out of the apartment she owns and is renting it to me for way below market. Last year I made a little over $17,000. I paid about $14,000 in rent.
When I asked her how she manages to get by on this, she said it’s pretty simple: constantly working, leaning on her mom to help out.
I’ve just put my head down and run my ass off for years. This last year has been particularly terrible, but thankfully my mom filled in the gaps and helped me out when she could.
Another man confided anonymously to me that he’d worked for a bit as a journalist, but joined a political campaign that was better paying. After the candidate lost, he was out of a job, and print journalism had begun its great migration toward the sky. He turned to unemployment, but things were touch and go for years, and got dire when unemployment ran out:
I made 800 a month and paid 325 per month for rent, just over 40 percent. It was horrible. I liked the neighborhood and always felt safe. The place was small. It was 500 square feet. I had a roommate who slept in the living room. I took the bedroom. I ate plenty of beans — black and pinto were my favorites. I remember walking through the supermarket and having to think twice about buying Ruffles.
Sometimes the reason is having to pay whatever it takes to live in a safer neighborhood with greater protections. That was the case for a woman who says she gladly upped her rent to over 50 percent of her income for the short term to escape an abusive ex:
I got divorced in 2016 because my ex husband was abusive. When I left him, I moved in with my parents for seven-ish months about 20–30 mins from where he and I lived. He moved to be in an apartment as close as he could. When I found a new job (I had to quit my previous job because I was scared to go to work since he knew where that was), I had an income and could leave my parents’ home.
I felt like I couldn’t move to an apartment that wasn’t fully gated with a code pad or gate system to enter. I knew my ex would find out where I was and I couldn’t guarantee he wouldn’t try to come find me since I was living alone. He did try to break into my apartment one night after I was denied an order of protection against him. The police came but he was gone by then. I paid roughly 50 percent of my income to rent, but it was the cheapest apartment complex in my city that was fully gated & gave me some semblance of safety.
Sometimes, it’s a combination of factors that lead to a perfect storm of shitty rent costs, like being young, just out of school, inexperienced on the job market, living in an expensive city. But add chronic illness to that mix, and you’re going to find yourself rooming with eight people and still spitting out over half your income to rent. Valerie, a 24-year-old in San Francisco, relays this story:
I’m a 24-year-old writer and receptionist living in the San Francisco Bay Area and I usually spend close to 50 percent of my monthly income on rent. A myriad of factors led me to this point, including chronic illness, the choice to pursue a freelancing career, my status as a first-generation college graduate, and of course, the infamously high rent costs in this area of California.
I grew up in a small town in Washington state that didn’t afford me many opportunities outside of blue-collar labor. My hard-working parents did not attend college and were for the most part unable to contribute financially to my education. At 18 I moved to California and worked my way through college with a combination of significant scholarships, federal loans, and several part-time jobs. After graduation, I briefly worked full-time for a salary, but soon realized that I wanted to pursue a different lifestyle. I wanted to write, so I switched to part-time, hourly employment at my day job.
Once I had established some freelance income, health issues including endometriosis and migraines made it difficult to go back to full-time work even if I wanted to. Going back to my hometown is also not a healthy option, but if I employ a tight budget, I don’t have to leave these cities I’ve fallen in love with. I currently share a bedroom in a condo which has eight other residents, though I’ll soon be moving to a comparably priced space that will allow me to have my own room and fewer roommates.
The 30 Percent Rule Is Outdated
All this talk about 30 percent, and all these accounts of the increasing inability to follow this rule raises the question of why, exactly, that’s the magic number. Here’s the origin: It’s because of the United States National Housing Act of 1937, which was devised to determine public housing affordability. At first, that yardstick was based on income, and anyone who earned more than five times the rent was ineligible. Families who paid out more than this just on shelter were considered too “cost-burdened” to pay for the other costs of living or have discretionary income.
Then, the metric gradually shifted to rent costs, not income limits, and by 1940, rent was not allowed to surpass 20 percent of the family’s income to grab public housing. By the 1960s, families could not attain public housing if the rent ate up more than 25 percent of their income. By 1981, it became the 30 percent we know and loathe today, and somewhere along the way in the 1990s, this started being the same rule applied to mortgages, including principal, interest and mortgage insurance costs.
But the current state of things strongly suggests that our problems are twofold: It’s not just just that rent is way too high, it’s also high time to ask whether the 30 percent rule has overstayed its welcome.
Of course, telling everyone to spend 40 percent of their income on rent now won’t change anyone’s living situation so long as there’s low supply, stagnant wages and rising costs. But if nothing else, maybe it’s time to declare most of us cost-burdened, if for no other reason than accuracy’s sake, and stop spouting a number that’s about as realistic as a great, affordable apartment.