Is your rent too high?
In areas of the country where income has fallen, it often is.
Is your rent too high?
Super-long-shot New York state gubernatorial candidate Jimmy McMillan, of the Rent Is Too Damn High Party, was the topic du jour after stealing the show at Monday night's debate. McMillan is such a tireless advocate for the renter that, during a cell phone conversation with Wall Street Journal reporter Erica Orden, he stopped a man on the street to ask if his rent was too high.
The question got us thinking.
Many personal-finance experts say you should spend no more than 35% of gross income on rent (not including renters insurance) whether you live in a high- or low-cost area. Of course, this amount can mean the difference between living in a studio on the outskirts of an expensive city or living large in a condo overlooking the beach in a low-cost area.
Rents in New York, Los Angeles and Washington, D.C., average $2,090 and are among the highest in the nation, running as much as 218% higher than in other major metro areas, according to Movoto.com, which tracks sales and rental prices in the 40 largest U.S. cities.
Now compare these rents with incomes; in most metro areas, income dropped from 2008 to 2009, according to the U.S. Commerce Department. In the New York metro area, for example, income fell 4.6% to $52,375. You'd be hard-pressed to find that kind of deal on a studio in Manhattan or a two-bedroom in Brooklyn.
And in an unexpected twist, many cities are seeing rent prices rising because of the housing downturn. This includes areas that didn't experience a construction boom, but where a large number of people have lost their homes to foreclosure and now have no option but to rent.
In Austin, Texas, a new two-bedroom, two-bath condo runs about $1,800, but cost $1,200 before the downturn, says Jack McCabe, CEO of McCabe Research & Consulting, which tracks the housing industry. In Austin, income fell 4.9% to $35,522, making that 35%-of-income threshold a meager $1,036 rent payment.
However, there are many cities where being a renter means you're probably saving a lot of money right now, particularly where overbuilding contributed to the housing bust.
For example, renting a brand new two-bedroom, two-bath condo in the heart of Miami's financial district overlooking Biscayne Bay will set you back about $1,500 a month, compared with the $2,200 it cost before the housing bust. But at least that's closer to the ballpark for how much a renter should spend. In Miami, income fell 3.9% to $41,352 in 2009; 35% of that is $1,206.
Jimmy McMillan talks about how the rent is too damn high.... What about insurance?
www dot insurance is too damn high dot com
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