No, New Yorkers Are Not Spending 65% of Their Salaries on Rent

Photo by Salem Eames

BROOKLYN, NEW YORK — A recent report issued by the real-estate listing service StreetEasy came to a striking conclusion: that "the typical household in New York City is expected to spend 65.2 percent of its total income on market-rate rent in 2016" — a more than 5 percent jump from the year prior.

And in Brooklyn, StreetEasy found that the typical Brooklyn household will spend 65.4 percent of its income on median market rent this year.

StreetEasy's central point — that rent is burdensome for the typical New Yorker — is correct. But it's important to understand just how burdensome, and for whom.

Last week, Alan Lightfeldt, the StreetEasy data scientists behind the report, walked Patch through his process. Here's what we learned.

That 65 percent figure? It's a ratio, not an actual chunk of cash.

The typical household in New York City is not, in fact, dedicating 65 percent of its income to rent.

To arrive at its findings, StreetEasy compared two things:

1. The median pre-tax household income in neighborhoods, in boroughs and in greater NYC, based on 2014 census data and some added projections from StreetEasy.

2. The median asking price for rental units listed in StreetEasy's database, which it claims is the city's most comprehensive (and thus most representative of the rental market).

(If you need a refresher on what "median" means, here's a helpful explainer with soothing colors and fonts. Math is fun!)

When these two numbers are compared, StreetEasy found that the city-wide median asking rental price was 65.2 percent of the city's median household income. And the median asking rental price in Brooklyn was 65.4 percent of Brooklyn's median household income.

But there are a few things to keep in mind about this approach.

First, all of the rental units considered by the study are "free-market," meaning city-subsidized housing is excluded.

There's also the roommate question. Many New Yorkers split the costs of apartments by sharing them, complicating the definition of a "household." But when StreetEasy calculated the average rental price of a free-market apartment in NYC, it categorized all sizes of apartments — from studios to three-bedrooms and beyond — as single households, without factoring in any kind of roommate variable.

Finally, when StreetEasy calculated New Yorkers' median income for its report, it was looking at the median income of everyone — including residents who own their home and those living in public housing (in other words, it wasn't just looking at the median income of renting households).

What the study offers, therefore, is a calculation of what the median household in a particular neighborhood, borough, or the city itself would have to pay if that household was renting a free-market unit, and if we weren't factoring roommates into the equation.

Other studies have used different methods to come to different conclusions about rent affordability.

NYU's Furman Center, a leader in the field of urban policy analysis, has closely examined the question of rent affordability.

In its most recent report, the Furman Center evaluated 2013 Census surveys of renting households themselves. The Center found that 54 percent of all renting households in NYC were "rent burdened" — meaning family providers were paying 30 percent or more of their collective income for rent.

In Brooklyn, the median household dedicated 32.7 percent of its income to rent in 2013, according to the NYU report.

Another report on rent affordability was issued in November 2015 by the nonpartisan, independent analysts at the NYC Citizens Budget Commission (CBC).

The CBC report used Census surveys of renting households collected in 2014. And when calculating median incomes, CBC researchers factored in in all forms of public assistance renters might be receiving, including food stamps.

Using that approach, the organization found that of NYC's 2.1 million renting households, around 42 percent spent 30 percent or more of their income on rent.

Critically, both reports linked income levels to rent burden.

According to the CBC, around 22 percent of New Yorkers were paying at least 50 percent of their income on rent, qualifying them as "severely rent-burdened" — and more than half of those households made $40,000 per year or less.

Similarly, according to the NYU study, 42 percent of very low-income households (those making between 30 and 50 percent of their area's median income) had to spend at least half of their income on rent.

Despite these discrepancies, StreetEasy was trying to prove a point that NYU and the CBC agree with.

So why would StreetEasy calculate a rent-to-income ratio that doesn't represent what people are actually paying for rent?

Lightfeldt explained that the StreetEasy numbers reveal a dire reality in the city — that there's a "growing gap between what New Yorkers can afford and what they're going to find in the private rental market."

Many New Yorkers receive rental subsidies. Lightfeldt said the StreetEasy report shows that "if those subsidizes didn't exist, [this] is the reality [the typical resident] would face in the present marketplace."

When city officials write housing policy, he said, they must be aware of "what we're subsidizing against and what the stakes are."

Furthermore, Lightfeldt emphasized the role of income in that conversation.

"Slowing income growth" is "chiefly responsible for how unaffordable our city has become," he wrote in his report.

"Policies aimed at increasing wages and incomes of New Yorkers through training and education should work in concert with increased affordable housing production," Lightfeldt wrote.

The Furman Center and the CBC came to similar conclusions.

Furman noted that between 2005 and 2013, New York's median rent price "increased by nearly 12 percent while the median income of renter households increased by only 2.3 percent." In short, Furman wrote, "Over the past nine years, rent increases have far surpassed income growth."

And the CBC report stated succinctly that, "The housing affordability problem is in large part an income problem."

Editor's Note: This post has been updated for clarity.