6 Cities Where Rent Will Likely Eat More Than Half Your Paycheck
Budgeting experts recommend spending no more than 30% of your take-home pay on rent. That's practical advice in most cities. But what about the cities with the worst rent-to-income ratios in the U.S.?
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Watch out for these six budget-busting cities, where rents can eat up 50% or more of your income.
1. Santa Barbara, California
Nestled between the mountains and the beach with year-round pleasant weather, Santa Barbara is stunningly gorgeous. It doesn’t hurt that it’s surrounded by world-class wineries, either. Because of this, you’ll pay a pretty penny for the privilege of living there.
Rents average $4,495 according to Zillow, and $3,484 for a two-bedroom apartment according to Apartments.com. Meanwhile, the Census Bureau pegs the median household income at $106,182.
To calculate the median household take-home pay, subtract 14.5% (the average effective tax rate according to the Tax Foundation), for a local average of $90,786. Depending on which rent estimate you use, rents take up to 59% of take-home pay.
2. Boston
Sure, Boston boasts plenty of famous colleges, but the weather is nothing to write home about, and neither is the rent affordability.
Zillow estimates the average rent at $3,500, and Apartments.com puts it at $4,446 for a two-bedroom. With gross household incomes averaging $97,344 ($83,229 after taxes), tenants pay up to 64% of their take-home pay on rents.
3. Miami
Year-round warm weather and abundant pastel colors entice plenty of residents, but you should watch out for the rents.
The Census Bureau reports a median household income of $62,462, significantly lower than the national average of $83,730. Yet Miamians pay higher-than average rents: $3,100 according to Zillow, and $2,821 according to Apartments.com.
Those numbers suggest the median Miamian pays up to 70% of their take-home pay on rent. While the reality probably looks more like four adults sharing a two-bedroom apartment, it’s not good news for renters regardless.
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4. New York City
The Big Apple was always going to appear on this list. While the median New York household earns $85,974, rents average $3,639 per Zillow or $5,676 for a two-bedroom per Apartments.com. As a percentage of take-home pay, the numbers get laughable at up to 93%.
Obviously, the averages on paper aren’t realistic for a human being. But even using the (much) lower Zillow number, that still comes to 59% of after-tax pay. Yikes.
5. Jersey City, New Jersey
The rent-to-income ratios across the Hudson River in New Jersey don’t look much better. In Jersey City, the median household earns $97,710 before taxes. But they pay a lot of that in rents, which average $2,500 according to Zillow and $4,404 according to Apartments.com.
As a percentage of after-tax income, that means paying up to 63%.
6. Los Angeles
The second-largest city in the US also suffers from notoriously high rents. Even so, the averages still come to less than 50% of take-home pay — if barely.
The Census Bureau estimates the median household income at $90,112 in the City of Angels. Meanwhile, Zillow reports the average rent at $2,692 while Apartments.com puts it at $3,007 for two-bedroom units. That means the average Angeleno pays up to 47% of their after-tax income in rent.
Take all these numbers with a grain of salt. Rent averages bounce around month-to-month, and of course the real world often looks different than averages on paper. Even so, these six cities eat up notoriously high percentages of income for rents, so think twice before moving there if you want to actually save money, invest and build wealth.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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