How Much Money You Need To Make To Move To Your Dream US City

Despite the fact that they're ridiculously expensive, cities such as New York, Los Angeles and San Francisco are also hugely populated and growing. They're great cities with a lot to offer, sure -- but how much should you earn if you want to make the move?

Photo by Jörg Schubert.

The 30 Per Cent Rule Of Thumb

Many personal finance experts suggest that housing shouldn't be more than 30 per cent of your take-home income (the money you earn after taxes). They're not just pulling this percentage out of the air. If you spend more than 30 per cent of your income on rent, the US Department of Housing and Urban Development considers you "rent burdened". This is a simplistic rule of thumb, though, because it doesn't take other basic living expenses into account. As one economist puts it over at Bloomberg, "if your income is $20,000 a year, it will be hard to make ends meet if you're paying 30 per cent of your income on rent."

Simple as it may be, the 30 Per Cent Rule does give you a general idea of how much you should earn to afford an apartment in any given city, whether it's in the US or abroad.

How Much You Need in Five Major US Cities

With this in mind, MEL Magazine crunched some numbers to look at rent versus income in 20 of the biggest cities in the States. They looked at data from the Bureau of Labour Statistics and Zillow to compare the mean take-home pay to the median rent for a one-bedroom and studio apartment in those cities.

Their results show that most people who live in major cities are technically rent burdened. You can check out their data here. We've crunched our own numbers to show you what you would need to earn every year to follow the 30 Per cent Rule in five popular cities:

New York City

Median rent for one-bedroom: $US2400 ($3206)

Take-home salary needed: $US93,000 ($124,236)

Median rent for studio: $US2200 ($2939)

Take-home salary needed: $US88,000 ($117,557)

Los Angeles

Median rent for one-bedroom: $US2095 ($2799)

Take-home salary needed: $US83,800 ($111,946)

Median rent for studio:$US1725 ($2304)

Take-home salary needed: $US69,000 ($92,175)

Chicago

Median rent for one-bedroom: $US1495 ($1997)

Take-home salary needed: $US59,000 ($78,817)

Median rent for studio: $US1150 ($1536)

Take-home salary needed: $US46,000 ($61,450)

San Francisco

Median rent for one-bedroom: $US3285 ($4388)

Take-home salary needed: $US131,000 ($174,999)

Median rent for studio: $US2424 ($3238)

Take-home salary needed: $US96,960 ($129,526)

Austin

Median rent for one-bedroom: $US1110 ($1483)

Take-home salary needed: $US44,400 ($59,313)

Median rent for studio: $US937 ($1252)

Take-home salary needed: $US37,480 ($50,069)

At this point, many New Yorkers, Los Angelenos and San Franciscans will probably argue that the numbers are unrealistic. "Pfft I earn way less than this and manage to get by," they might be thinking.

The Problem With The 30-Per Cent Rule

There's truth to this -- again, the 30 Per Cent Rule is just a ballpark, so it isn't always what reality looks like. It doesn't consider other expenses you can cut back on to afford rent in an expensive city. It doesn't consider finding a roommate, either.

Here's how personal finance expert (and New Yorker) Stefanie O'Connell puts it:

After living in NYC for over ten years, I've come to learn that New York City is as expensive as you want it to be.

Sure, I'd love if it were cheaper to live in New York City, but by the same token, there are more than enough resources available in the Big Apple to reduce expenses, and even cut out entire expense categories -- bye, bye car payments.... You won't find fine dining or the trappings of luxe living in these numbers, but you may find that living in New York City doesn't cost nearly as much as ill-informed speculators and the media frenzy would have you believe.

All of this said, MEL's numbers may point to the larger issue of housing affordability in the United States. Even with some of the cheaper cities on their list, like Houston, Dallas and Denver, rent still makes up a large portion of mean income. This suggests that even in lower cost of living cities, residents are still rent burdened. To check out the numbers for yourself, head to the link below.

Is it Worth Moving to Your Dream City, Financially? [MEL Magazine]


Comments

    Trick question!

    There is, under Trump, a huge wall around the USA and nobody can get in.

    You'd have to pay me to live in the US...

    And holy sh*t San Francisco...

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