Take This Apartment And Shove It

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Key Takeaways:

• The Juice looks at the hourly wage necessary to afford a two-bedroom apartment across the US. 
• You need to make well over $100,000 in San Francisco.
• Whether you’re on the market for an apartment or looking to buy a real estate stock, it comes down to location. 

With pandemic protections easing or altogether lifting, renters in some markets are facing rent increases. 

For example, in Los Angeles, landlords who own units not governed by local rent control ordinances, can increase rent by as much as 10%, effective August 1st. That’s the maximum annual increase allowed in the State of California, based on a calculation that takes inflation into account. With inflation high, things look good for landlords and not so great for renters. 

Sounds bad – and it is – but imagine living in a city or state without many, if any protections for renters whatsoever. 

Source: NLIHC

The map shows the hourly wage required to afford rent on a two-bedroom apartment in each state. However, these numbers look at the entire state.

Nationally, it takes $25.82 an hour to be able to afford a two-bedroom apartment and $21.25 for a one-bedroom. 

This simply doesn’t cut it for many hourly workers, particularly those at the bottom of the spectrum. Not with the federal minimum wage at $7.25 an hour and the highest local minimum wages in the nation topping out at less than $18. 

When you zero in on certain cities and metro areas, things get really crazy. 

You can check your zip code here, but let’s run through a few to illustrate the gravity – and nuances – of the situation. 

Consider San Francisco: 

To afford a two-bedroom in San Francisco, you need to earn anywhere from $61-and-change per hour, up to $90-plus. 

Let’s split the difference on the back of an envelope and call it $70/hour citywide. People earning $70/hour take in $134,400 annually, based on a 40-hour work week. 

You need a $134,400 salary to afford the typical two-bedroom in San Francisco. 

Let that sink in while we look at the core of (relatively) more affordable urban Los Angeles: 

The 90028 zip code covers pretty much the heart of Hollywood. 

You need to make $48.27 an hour, or $92,678 a year, to keep the typical two-bedroom apartment within a responsible budget. 

Then there’s Manhattan with a glimpse in neighboring New Jersey and Brooklyn:

Things get interesting when you look at mid-range cities and check price disparities by neighborhood. 

For example, Austin, Texas:

There’s quite a difference between Downtown Austin ($41.92) and just east of the core ($27.50). 

And how about the West Side of Buffalo, New York? The Juice recently showed how buying a home might be out of reach for many in Buffalo’s hottest neighborhood – Elmwood Village. However, the neighborhood literally right next door clearly doesn’t price as many people out. 

How’s it look for renters?

Not quite the same disparity. 

First of all, it’s decidedly less expensive to rent in Buffalo, even in a top neighborhood. And, within the city, the difference between renting in Elmwood Village or in the neighborhood right next door isn’t quite as stark as the cost difference homeowners face. 

The Bottom Line: If you’re looking to rent, get past the headlines and drill down into local conditions. Remember, almost all of these numbers stem from median housing prices. Median means middle. This means about half the rents in a given location fall below what you see listed as the median. 

Small consolation for many, but at least it’s something. 

If you’re an investor, keep perspective. 

While things look bad out there – and they are – high earners still live and even thrive in those expensive cities so many people are relocating from. This is one reason why The Juice continues to suggest looking at the big property owners in cities with a large presence of well-paid tech workers.

In all areas of life, particularly with money, look beyond the headlines. Teasing out the nuance of a situation tends to generate clear headed, if not flat out more favorable results.

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