We’re All Paying Insane Amounts for Rent, but This Generation Has it Worst
It doesn’t matter if you’re 18 or 68 — if you are a renter, there is a good chance you are spending a greater percentage of your monthly income on rent than recommended, a new study by apartment search company Abodo found.
The study analyzed how people afford to rent across generations using data from the 2015 American Community Survey conducted by the U.S. Census Bureau.
Although baby boomers, who fall between ages 51 and 69, are more likely to own their homes, the 49% of all boomers who do rent are cost burdened, meaning they spend more than 30% of their incomes on housing costs.
That’s in comparison to millennials, who are more likely to rent: About 46% of renters between 18 and 34 spend more than 30% of their pay on monthly housing costs. Generation Xers, who fall between boomers and millennials, are the least likely to be cost burdened by rent, but they are only slightly better off: About 44% of those who rent overspend.
Depending on where you rent, those percentages can rise well above average, the study found.
For millennials living in Honolulu, the problem is more extreme than average, with 68.9% of renters paying more for rent than they should. Generation Xers and baby boomers living in South Florida are most likely to overspend than their counterparts in other parts of the country.
So, How Much Should You Be Spending on Rent?
For decades, pretty much everyone you asked for advice, from government officials to financial experts, would say it was unwise to spend beyond the 30% income threshold for rent.
Even your landlord probably wanted you to prove you made at least three times the cost of your home before letting you sign a lease.
But more recently, the debate has become more nuanced, taking into account how much money the renter makes and where the renter lives.
For example, those living in cities like New York and San Francisco, where housing costs tend to be higher, will likely spend more than the recommended amount because of a scarcity of affordable options.
On the same note, a high earner could spend a greater percentage of their income and still have more than enough to live comfortably. A minimum wage worker who spent 30% of their income on rent, however, would probably be stretched too thin to cover an emergency expense later in the month.
While the 30% rule might not be perfect in every situation, it’s still a solid starting point to help you figure out if you can afford to live alone in that newly built downtown apartment or if you should start scouring Craigslist for the least creepy roommate you can find.
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.