Recent reports from the Joint Center for Housing Studies at Harvard University state that more than half of those who live in the highest-cost metro areas actually put more than 30 percent of their income towards rent. Nationwide, it is estimated that nearly half of renters also spend more than 30 percent of their pay on housing. Roughly a quarter pay more than 50 percent of their income on rent. This high expense can make it very difficult for renters to find affordable housing.
With rising rent prices, including 14.9 percent in some areas, what is “affordable”? Affordable rent will look different to everyone depending on their unique priorities and circumstances. Many financial planning institutions, including the Financial Planning Association (FPA), insist that renters pay no more than 30 percent of their annual income on rent. However, determining affordable rent for an individual is more complicated than simply spending 30 percent of his or her income. Here are some tips for better determining what “affordable” rent will look like for you:
- Consider Your Financial Goals – Keep in mind that every dollar you put towards rent is a dollar you are not putting towards your financial goals, such as traveling, buying a home or even retirement. Though it can be difficult, try to quantify how much you actually value living in a specific area, what your ideal commute time would be and any other priorities you may have in your rental search. You may have to compromise on less important priorities, like the rental unit’s finishes, to save on rent.
- Look Beyond the Advertised Rent Price – When you are looking at rental property, keep in mind that the advertised price is not the final total for your monthly living expenses. FPA recommends keeping the monthly rent price below 25 percent of your income so you have room for other living costs like utilities, parking and insurance.
- Consider Your Other Expenses – If you have debt that part of your income must go towards each month, be sure to calculate this in when determining how much you can actually pay on rent each month. Experts say that no more than 28-30 percent of gross salary should be spent on housing and no more than 36 percent on your debt. If you have a large amount of student load debt, for example, you may not be able to spend 30 percent of your income on rent. You can attempt to lower costs by living in a less desirable area, having roommates or just living in a smaller unit.
When determining how much you can afford to pay, be sure to consider all of the above tips. The team at CheckPoint understands that finding the right rental unit at the right price is difficult. When you find the right one, you must act quickly. We can offer a range of services including background and credit checks that can help you show how good of a tenant you are and help you get the affordable unit you want.