Housing for only for the rich?
There is no shortage of comments aghast at the cost of the new urban-core apartments. They are even referred to as housing for the "supra-rich". These apartments tend to start at $800 for a studio, $1,000 for a one-bedroom unit, and $1,200 and up for a two-bedroom unit.
But lets break down the numbers. Ball-park estimates of what percentage of net income someone should spend on housing varies between 25% and 40%. The mortgage agencies Fannie Mae (FNMA) and Freddie Mac (FMCC) use a 28% of income cut-off.
Aside: More than 40 million U.S. households pay more than 30% of thier income for housing. Karen Weise of Bloomberg Business refers to this benchmark as "almost meaningless".
Steps in our break down include required net income at 25% for the fiscally conservative, at 28% in order to compare to FNMA & FMCC, 30% for a middle of the road number, and 40% for someone comfortable with a higher number. Then, as this is housing in an urban corridor, lets also include information for transportation. We will have a value for the carless household - assuming a transportation budget of $75/month. That is $40 for a monthly transit pass, $10 for car-share membership, and $25 for usage fees. A low number, but possible. Then a column for the household owning one car, we are assuming an expense of $9,000 year. And then a column for the household owning two cars - $18,000 year. The average cost of owning a car is between $9,000 and $16,000 annually, so we are low-balling that number as well. The question here is "What is affordable?".
| Rent | Utilities | Annual | Percentage | Minimum Net Income | 0 car | 1 car | 2 car |
|---|---|---|---|---|---|---|---|
| $800 | $150 | $11,400 | 25% | $45,600 | 2.63%\$33,300 | 26.32%\$25,200 | 52.63%\$16,200 |
| $800 | $150 | $11,400 | 28% | $40,714 | 3.07%\$28,414 | 30.70%\$20,314 | 61.40%\$11,314 |
| $800 | $150 | $11,400 | 30% | $38,000 | 3.38%\$25,700 | 33.83%\$17,600 | 67.67%\$8,600 |
| $800 | $150 | $11,400 | 40% | $28,500 | 5.26%\$16,200 | 52.63%\$8,100 | 105.26%-$900 |
| $1,000 | $200 | $14,400 | 25% | $57,600 | 2.08%\$42,300 | 20.83%\$34,200 | 41.67%\$25,200 |
| $1,000 | $200 | $14,400 | 28% | $51,429 | 2.43%\$36,129 | 24.31%\$28,029 | 48.61%\$19,029 |
| $1,000 | $200 | $14,400 | 30% | $48,000 | 2.68%\$32,700 | 26.79%\$24,600 | 53.57%\$15,600 |
| $1,000 | $200 | $14,400 | 40% | $36,000 | 4.17%\$20,700 | 41.67%\$12,600 | 83.33%\$3,600 |
| $1,200 | $250 | $17,400 | 25% | $69,600 | 1.72%\$51,300 | 17.24%\$43,200 | 34.48%\$34,200 |
| $1,200 | $250 | $17,400 | 28% | $62,143 | 2.01%\$43,843 | 20.11%\$35,743 | 40.23%\$26,743 |
| $1,200 | $250 | $17,400 | 30% | $58,000 | 2.22%\$39,700 | 22.17%\$31,600 | 44.33%\$22,600 |
| $1,200 | $250 | $17,400 | 40% | $43,500 | 3.45%\$25,200 | 34.48%\$17,100 | 68.97%\$8,100 |
The 0-car, 1-car, 2-car columns contain the percentage of after rent net income consumed by transportation and the amount of net income remaining.
The highest number on this chart is a net income of $69,600 with a consertive 25% of income spent on housing. Owning one car this household would still have $43,200 of net income available. This, at the high-end of our chart, is still a solidly middle-class income.
The one-bedroom apartment, for someone willing to spend 28% of their income on housing, is affordable for someone with a net-income of $51,429 - very middle class.
The studio apartment, at the 28% share, is affordable to someone earning less than the median income for a 25-year old with a bachelor's degree; by the numbers that 25 year old will also be able to own a car - they will still have $1,690 a month remaining for other expenses.
Aside: Median income levels are a sad thing to consider. The disparity between males and femaies is pronounced. Having an adam's apple is worth at least $10,000 a year. I am not sure what the adam's apple does which is worth so much.