What is a good rent-to-income ratio in NYC

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August 4, 2020

You’ve probably heard of the one-third rule, but there are lots of other factors to take into consideration when finding your ideal rent-to-income ratio.

What does the rent-to-income ratio mean
How much of your income should you spend on rent
What minimum salary do you need to live in New York City?
4 tips to help you afford to rent in NYC

What does rent-to-income ratio mean

Simply put, a rent-to-income ratio refers to the percent of your monthly income which goes to paying your rent. For example, if your monthly income is $6,000 and your rent is $1,500, your rent-to-income ratio would be 25%. The Rent-to-Income ratio is an important figure in your apartment search since it not only determines what apartments you can qualify for but can also help you better manage your personal budget.

The 30% rule for rent-to-income ratio

In NYC, most landlords require that the tenant’s annual salary be greater than 40 times the monthly rent. This means that a tenant eyeing a $1,500 a month apartment would have to gross $60,000 a year in order to qualify, resulting in a maximum rent-to-income ratio of 30%. Beyond meeting the landlord’s requirements, the 30% rule is a good idea for tenants looking to live within their means in one of the world’s most expensive cities, since it guarantees you can pay your rent each month while still having enough left over to meet your basic needs.

It’s important to point out that the rent-to-income ratio refers to a tenant’s gross income, meaning all the money a tenant makes before taxes and deductions. Your net income reflects the money you actually receive in your checking account each month, which is often significantly lower.

How much of your income should you spend on rent

30% is a good rule of thumb when you’re planning your budget, however it’s always a good idea to aim for a lower ratio. The Federal Government defines anyone paying more than 30% of their income on rent as being rent-burdened, since these people are unable to set aside enough savings to cover any unforeseen expenses. Aiming for a ratio below 30% can be challenging in NYC, but it allows you to set aside enough money to plan for the future and to better manage life’s unexpected emergencies. Here are some tips for calculating the ratio that’s right for you.

Calculating your rent-to-income ratio

To calculate your rent-to-income ratio , simply divide your rent by your monthly salary: Monthly Rent ÷ (Gross Annual Income ÷ 12) = Rent-to-Income Ratio

In a case where you are making $74,000 a year and paying $1,800 a month in rent, your calculation would be: $1,800 ÷ ($74,000 ÷ 12) = 0.29. This tenant’s ratio is 29%, meaning that it’s under the recommended limit of 30%.

You can also use this same calculation to calculate your maximum monthly rent: (Gross Annual Income ÷ 12) X .3 = Maximum monthly rental income. For example, an applicant who makes $60,000 could, under this standard, spend up to $1,500 per month on rent: ($60,000 ÷ 12) X 0.3 = $1,500

Check the table below to see the range of maximum monthly rental prices for different incomes:

Annual Income30% Rent-Income-Ratio (Maximum)25% Rent-Income Ratio (Ideal)
$40,000.00$1,000.00$833.33
$50,000.00$1,250.00$1,041.67
$60,000.00$1,500.00$1,250.00
$70,000.00$1,750.00$1,458.33
$80,000.00$2,000.00$1,666.67
$90,000.00$2,250.00$1,875.00
$100,000.00$2,500.00$2,083.33
$120,000.00$3,000.00$2,500.00
$150,000.00$3,750.00$3,125.00

The 50/30/20 rule

The 50/30/20 Rule refers to the conventional belief that the ideal breakdown of monthly is expenses should first address your needs (rent, bills), then your wants (hobbies and entertainment) and finally your savings as follows:

Guide for rent-to-income ratio in NYC

This is seen as the ideal ratio that allows you to live comfortably, splurge on your hobbies and interest, and still set aside enough for the future. In this case, when you’re planning your budget along the 50/30/20 rule it’s important to take your net income into account rather than your gross, or you could considerably overestimate the amount you have to splurge on that big vacation.

To calculate how much you have available each month for each category, you’d want to take your net monthly income and multiply it as follows:
NEEDS = (Net Monthly Income) x 0.5
WANTS = (Net Monthly Income) x 0.3
SAVINGS = (Net Monthly Income) x 0.2

If your net monthly income is $3,000, this means your allocations would be as follows:
NEEDS = $3,000  x 0.5 = $1,500
WANTS = $3,000 x 0.3 = $900
SAVINGS = $3,000 x 0.2 = $600

The table below shows a rough estimate of how this could break down across different income tiers, keeping in mind that your actual take home amount will vary depending on your tax bracket and deducted expenses such as health insurance and retirement contributions.

Annual IncomeEst. Net Monthly Take-Home Income*NEEDS (50%)WANTS (30%)SAVINGS (20%)
$40,000.00$2,633.33$1,316.67$790.00$526.67
$50,000.00$3,208.33$1,604.17$962.50$641.67
$60,000.00$3,750.00$1,875.00$1,125.00$750.00
$70,000.00$4,316.67$2,158.33$1,295.00$863.33
$80,000.00$4,800.00$2,400.00$1,440.00$960.00
$90,000.00$5,325.00$2,662.50$1,597.50$1,065.00
$100,000.00$5,875.00$2,937.50$1,762.50$1,175.00
$120,000.00$6,900.00$3,450.00$2,070.00$1,380.00
$150,000.00$8,375.00$4,187.50$2,512.50$1,675.00
*Rough estimate only – actual amount will vary

Aiming below the 30% rent-to-income ratio

Putting 30% of your income towards rent is still a lot when you consider that your take home pay is much lower than your net pay, meaning that almost half of the cash you receive each month will go straight into your landlord’s pocket. A ratio of 25% can be challenging when you’re just starting out in NYC, but will allow you to put that much more aside in savings towards a house, graduate school, or just a nice nest egg for a rainy day. The decision is ultimately personal and depends on your priorities, but keep in mind that just because you can pay 30% doesn’t mean you should.

What minimum salary do you need to live in New York City?

Now that you have an idea of how you can budget your new life, you’re ready to decide on where you can afford to live. Rents in NYC are notoriously high, but they can vary widely depending on your distance to midtown Manhattan, proximity to a subway station, school districts, and overall neighborhood desirability.

Which NYC neighborhood can you afford?

If you’re looking to rent a 1-bedroom apartment, there are several great neighborhoods for all income levels. Below you’ll find an overview of the minimum income requirements you’ll need to afford a 1-bedroom apartment in some of NYC’s most popular neighborhoods.

NeighborhoodMedian Rent (1 Bedroom)Minimum Annual Income
Tribeca, Manhattan$5,679.00$227,160.00
Midtown, Manhattan$4,100.00$164,000.00
Chelsea, Manhattan$3,975.00$159,000.00
West Village, Manhattan$3,900.00$156,000.00
Hell’s Kitchen, Manhattan$3,470.00$138,800.00
Williamsburg, Brooklyn$3,250.00$130,000.00
Upper West Side, Manhattan$3,250.00$130,000.00
East Village, Manhattan$3,100.00$124,000.00
Park Slope, Brooklyn$2,700.00$108,000.00
Harlem, Manhattan$2,346.00$93,840.00
Bedford-Stuyvesant, Brooklyn$2,200.00$88,000.00
Astoria, Queens$2,200.00$88,000.00
Crown Heights, Brooklyn$2,100.00$84,000.00
Washington Heights, Manhattan$1,975.00$79,000.00
Inwood, Manhattan$1,800.00$72,000.00

Keep in mind that while you may pay more to live in some neighborhoods than others, you may want to consider other factors in your decision, such as proximity to work, social circle, parks and anything else that you visit frequently. Studios tend to be a bit cheaper than 1-bedroom apartments, just as 2-bedroom apartments tend to be considerably more expensive.

How much salary to rent in NYC

4 tips to help you afford to rent in NYC

Renting in NYC can be tough, but you can save money by following any one of these four easy steps.

  1. Find a Rent-Stabilized Apartment. Rent controlled apartments are very rare, whereas rent-stabilized apartments comprise half of all NYC rentals. Rent-stabilized apartments are usually located in older buildings with over 6 units, and landlords can only raise up to 3% each year.  Not sure if your building is covered? Reach out to the  New York State Homes and Community Renewal by emailing entinfo@nyshcr.org or calling the help line at (718) 739-6400.
  2. Enter the Affordable Housing Lottery. New York City lets would-be renters enter the affordable housing lottery through NYC Connect. If your income is below the threshold needed to comfortably afford an apartment there’s a high chance you might qualify for one of these units, however, be forewarned that competition is fierce – in 2018, the chances of winning a spot were 1 in 592.
  3. Factor in Hidden Costs. Is your apartment near the subway? Is there an affordable grocery store nearby? Does your building have a gym?  Will you end up spending hundreds of dollars on Uber rides to visit your friends in another borough? These are important questions to ask when you’re trying to factor in the hidden costs of a certain apartment. It’s best to take a good hard look at your daily habits and determine whether or not your new home can support them without incurring extra costs.
  4. Consider Roommates For many young people, roommates are a quintessential part of life in NYC.  According to a 2017 housing poll, more than 40% of adults in NYC live with roommates, meaning that you’ll have no trouble finding like-minded people to live with.  Check the table below to see how much you’d pay for a room in a 2-bedroom apartment in some of the city’s most popular neighborhoods.
NeighborhoodMedian Rent 2-BedroomPer Roommate
Tribeca, Manhattan$10,000.00$5,000.00
Midtown, Manhattan$7,184.00$3,592.00
Chelsea, Manhattan$6,400.00$3,200.00
West Village, Manhattan$5,500.00$2,750.00
Hell’s Kitchen, Manhattan$4,707.00$2,353.50
Williamsburg, Brooklyn$3,550.00$1,775.00
Upper West Side, Manhattan$5,500.00$2,750.00
East Village, Manhattan$3,995.00$1,997.50
Park Slope, Brooklyn$3,400.00$1,700.00
Harlem, Manhattan$2,800.00$1,400.00
Bedford-Stuyvesant, Brooklyn$2,500.00$1,250.00
Astoria, Queens$2,500.00$1,250.00
Crown Heights, Brooklyn$2,450.00$1,225.00
Washington Heights, Manhattan$2,450.00$1,225.00
Inwood, Manhattan$2,316.00$1,158.00
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