Figuring out how much rent you can afford isn't actually as complicated of an equation as you might expect. It's recommended that you don't spend more than 30 percent of your income on rent.
More complicated than figuring out what you can pay is finding the right apartment. The one with enough space in the right neighborhood, that's also an affordable price. The median gross rent between 2013-2017 was $982 according to the U.S. Census. This means there's a decent percentage of apartments that cost more, in addition to some costing less.
Looking at your current salary, could you afford an apartment in the middle of the rent scale? Could you afford something more? Is what you can rent in a good part of town? Does it have enough space?
The questions keep coming as you assemble the puzzle that gets you into the right apartment. When cost, location and size don't add up to the ideal part of town, it's worthwhile to look into alternative options for affordable housing.
Rent-controlled apartments and those that are rent-stabilized are two possible options to explore. While not exactly the same, the regulations that govern both are pretty similar. It's important to understand what they both are and know how to find available units.
Rent control is a government regulation limiting the price a property owner can charge a tenant to live in a specific apartment. There are typically regulations on how much rent can increase each year, leading up to a maximum amount. Once you reach the limit, rent cannot go any higher no matter how long the tenant lives in the unit. The intent of rent control has always been to help keep living costs affordable for lower-income residents.
The first local rent-control laws in the U.S. went into effect in the 1920s, with a secondary boost in popularity in the 1970s. Today, rent control still exists, but laws vary by city or municipality. Very few states support statewide regulations. This leaves tenants to deal with different regulations within the same state if they move to a different city.
Most states don't have any rent control laws, and some prohibit rent control altogether. The discussion over whether rent control is a good or bad thing has strong proponents on each side.
The largest cities where you can find rent-controlled units are New York City, Los Angeles, San Francisco and Oakland, and New Jersey has the most cities with rent-controlled apartments. The majority of the remaining states prohibit rent control altogether.
Oregon recently enacted a more modern form of rent control that limits rent increases each year. This is the first state to have a statewide rent control law, uniform across all cities and municipalities. The law passed in response to an emerging problem.
Long-time tenants were facing eviction with minimal notice and no specific rationale. Rent control laws in Oregon banned the practice of no-cause evictions and added in rent stability. Now, property owners can't raise the rent more than 7 percent plus inflation each year, which comes out to about 10 percent.
Steeped in history, you may wonder what rent control means today? It has definitely evolved into something different for new tenants. “Although early local rent-control policies imposed strict price ceilings, most local regulations today are rent-stabilization efforts, which target specific property types within a city and allow for periodic rent increases," says the Urban Institute.
Using properties in New York City as an example helps explain the difference between rent control and rent stabilization. Rent control, according to Emily Nonko from Curbed New York, is only for tenants living continuously in their apartment since July 1, 1971, in a building constructed before 1947.
The rent caps established for these specific renters equates to what the average person was paying in the 1970s to live in New York City. Once a rent-controlled apartment becomes vacant, it may either transfer to today's rent stabilization policies or become free of any regulation.
Rent stabilization is the more modern way to secure below-market rent in places like New York. It generally only applies to buildings with six or more units built before 1974. Property managers of rent-stabilized units have a legal limit each year that they can increase rent.
The Rent Guidelines Board establishes these percentages, which are currently at 1.5 percent for one-year lease renewals and 2.5 percent for two-year lease renewals. A maximum rent is set for each apartment based on the unique history of each unit.
Because rental prices in the U.S. are rising faster than people with moderate income jobs can afford, alternate leasing options remain important. According to Will Kenton from Investopedia:
“Rent control enables moderate-income families and elderly people on fixed incomes to live decently and without fear of a personally catastrophic rent hike."
The stability of an affordable home keeps residents in the same place longer, which has a positive impact on the community. The longer tenants stay, the safer and more stable the neighborhood often becomes.
Rent control can become a harmful situation for property owners. If they have too many units with rent below market value, they may become unable to afford proper maintenance or pay property taxes and fees. This, in turn, may cause rent-controlled buildings to fall into disrepair because the owner can't afford to maintain the building. Tenants, unable to afford to move out into a full-priced apartment, then get stuck living in disrepair.
Rent-controlled apartments can also reduce the supply of decent housing. Because it's not an appealing way to manage a property, owners may decide to convert affordable housing into a more lucrative option. This can mean transforming a rent-controlled building into high-priced condos. Property owners can also adapt the space for commercial use to turn a profit.
It's difficult to get into a rent-controlled apartment today if you don't already live in one. When rent-controlled units become vacant now, lease terms are often updated to align with today's legal housing rules. This may allow the property manager to charge market value or above. Even if the unit remains rent-controlled, base rents get raised to accommodate inflation.
It's not impossible to continue paying the same low price as the original tenant. To do this, you have to plan ahead. The original tenant must be a relative and you must already live in the apartment when they vacate. Meeting these two conditions, you will most likely get to take over ownership when the original tenant moves out. This transfer won't work if you're a roommate.
For those without a connection looking to take advantage of rent-controlled or rent-subsidized properties, they're getting harder to find. Because these practices aren't a favorite with property owners, it's important to research available units.
If you're looking in New York City, make sure a rent stabilization rider is part of your lease. In any city, discuss the rental laws with your property manager before signing a lease. You want to make sure they're managing the unit according to the local laws.
Take some time to understand what's legally allowed for rental charges and rent increases, and what constitutes a base rent that's too high. It's up to you to do the due diligence necessary to keep your property manager in check.
It's never easy to find the perfect apartment. You most likely give up a few of your must-haves to get the right price, location or size. With rent control, you don't have to sacrifice size or location for an affordable unit. You have the safety net of knowing you're getting an apartment with a rent that will never get too high.
Be sure to understand the laws associated with rent control in your area, and feel confident your property manager will take good care of the building before signing a lease.