Income Needed to Pay Rent in the Largest U.S. Cities – 2021 Edition

2021 SmartAsset Study: Income Needed to Pay Rent in the Largest U.S. Cities
2021 SmartAsset Study: Income Needed to Pay Rent in the Largest U.S. Cities

Housing insecurity and lack of protection from evictions have become even more pressing due to the COVID-19 pandemic. According to a March 2021 report from the Consumer Financial Protection Bureau (CFPB), an estimated 8.8 million renter households were behind on their rental payments as of December 2020. Staying ahead of and completing rental payments can be particularly difficult in areas where the rent-to-income ratio is high.

The U.S. Department of Housing and Urban Development (HUD) recommends a rent-to-income ratio of less than 30% and considers households who spend more than 30% of their pre-tax income on housing to be housing cost-burdened. Using HUD’s guidelines, SmartAsset examined the income needed to pay rent in America’s largest cities in this study.

Specifically, we set a 28% rent-to-income ratio and calculated the income renters would need to afford the average one- and two-bedroom apartment rent in the 25 largest U.S. cities. Though we calculated income needed for both a one- and two-bedroom apartment, cities are ranked on the latter figure. For details on our data sources and analysis, check out our Data and Methodology section below.

This is SmartAsset’s seventh study on the income needed to pay rent in America’s largest cities. Read the 2020 version here.

Key Findings

  • Income needed varies by more than a factor of four. In the city with most expensive two-bedroom apartment rent – San Francisco, California – the income needed to cover rent ($157,218) is about 4.3 times more than the income needed to cover rent in the city with the least expensive two-bedroom rent – El Paso, Texas ($36,550).

  • Median income falls short for a two-bedroom apartment in about 50% of cities. In 12 of the 25 big cities we analyzed, the median household income is not enough to cover the average annual rent for a two-bedroom apartment assuming a 28% rent-to-income ratio.

1. San Francisco, CA

Zumper data shows that the average monthly rent for a two-bedroom apartment in San Francisco, California is $3,668 (more than $44,000 per year). Assuming a maximum rent-to-income ratio of 28%, renters in San Francisco will need to earn $157,218 per year to avoid being burdened by housing costs. By comparison, the median household income in San Francisco is less than $124,000.

2. Washington, DC

The income needed for a two-bedroom apartment in Washington, D.C. is $120,457. Average monthly rent in this city for a two-bedroom apartment is $2,811, which amounts to $33,728 per year. While the median household income in the city ($92,266) is not enough to cover this amount, it is enough to afford the income needed for a one-bedroom apartment ($87,893).

3. New York, NY

For a one- or two-bedroom apartment in New York City, households would need a yearly income of $108,789 or $119, 189, respectively. The average monthly rent for a one-bedroom apartment is $2,538, or $30,461 per year. Meanwhile, the average monthly rent for a two-bedroom apartment is $2,781, or $33,373 per year.

4. Los Angeles, CA

In Los Angeles, California, the average monthly rent for a one-bedroom apartment is $1,990 and for a two-bedroom apartment, $2,746. In order to afford a two-bedroom apartment without being burdened by rental costs, a household would need an annual income of $117,686, or more than $9,800 per month.

5. San Jose, CA

According to Census Bureau data, the median household income in San Jose, California is $115,893. This is just about $200 more than the income needed for a two-bedroom apartment, $115,668 (assuming rental costs do not exceed 28% of income). The average monthly rent for a two-bedroom apartment in San Jose is $2,699, or $32,387 per year.

6. Boston, MA

In Boston, Massachusetts, the average two-bedroom monthly rent is $2,648. By comparison, the average monthly one-bedroom rent is $2,179. This means potential renters might save almost $900 per month if they seek out a two-bedroom and live with a roommate. In order to avoid being housing cost-burdened and still be able to pay the $31,781 in rent for a two-bedroom apartment, a household in Boston would need to earn $113,504 per year.

7. San Diego, CA

In San Diego, California, the average two-bedroom rent is $2,394 per month, or $28,723 per year. A household in the city would need $102,582 in order to afford this amount. By comparison, the median household income in San Diego is roughly $85,500, or about 17% percent lower.

8. Seattle, WA

Seattle, Washington is the first city on our list that requires less than a six-figure income to afford the annual rent for the average two-bedroom apartment. Annual rent for the average two-bedroom apartment in the city is $24,858, meaning that households need to earn about $88,800 per year.

9. Denver, CO

The average monthly rent for a two-bedroom apartment in Denver, Colorado is $1,919. This amounts to $23,027 over one year. The household income needed to afford this apartment and avoid being housing cost-burdened is $82,239. The median household income in Denver is about 8% lower, at $75,646.

10. Chicago, IL

In Chicago, Illinois, a household would need $1,797 per month (or $21,568 per year) to cover rent for a two-bedroom apartment. Assuming no more than 28% of income goes to housing costs, a household would need $77,029 to pay rent for a year. This figure exceeds Chicago’s median household income, $61,811.

Data and Methodology

To find the income needed to pay rent in America’s largest cities, SmartAsset looked at data for the 25 largest cities in America. We estimated the household income renters would need to afford the average one- and two-bedroom apartment while paying no more than 28% of their total pre-tax income on rent.

To find these figures, we divided both the average annual cost of a one-bedroom and two-bedroom apartment by 0.28. The resulting numbers are the annual income needed for a rent costs to be equal to 28% of household income. We ranked the cities from highest to lowest based on the income needed to pay rent for a two-bedroom apartment.

Average one-bedroom and two-bedroom rent is from Zumper and for July 2020 through June 2021.

Tips for Maintaining Healthy Housing Costs

  • Consider sharing a space with a roommate. Average two-bedroom apartment rents tend to be less than twice the cost of average one-bedroom apartment rents. This means that having a roommate can often pay off. If you are interested in where sharing a space may make the most difference, check out our study on what a roommate saves you in the 50 largest U.S. cities.

  • Reassess your budget if possible. One of the best ways to save more is through budgeting. Our budget calculator can help with this. Beyond letting you see how much of your monthly and annual income goes towards housing costs, you can see how cutting back on discretionary expenses can increase your savings rate.

  • Consider speaking to an expert advisor. Your budget for housing costs is likely affected by how you’re managing your money in the other areas of your life – like education planning, travel spending and retirement. Why not get some support in taking a holistic look at your finances? Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool can match you with up to three financial advisors in just five minutes. If you’re ready to connect with advisors and achieve your financial goals, get started now.

Questions about our study? Contact press@smartasset.com.

Photo credit: iStock.com/Spondylolithesis

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