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Based on Average Price and Percent of Income Spent on Housing, Manhattanites Make $268,000 June 26, 2006

According to The Real Deal, New Yorkers are spending more than 30% of their income on housing, and in many cases, more than 50%. That doesn’t even include other debt as I mentioned in a previous article.

By 2006, New Yorkers were spending more than 30 percent of their gross incomes on rent, surpassing what’s commonly cited as the maximum threshold households should spend on renting. The median share of income spent on rent by renters in the city rose from 28.6 percent in 2002 to 31.2 percent in 2005, according to a new report from New York University. Decreasing real income and increasing real rents were the main culprits for inching over the 30 percent threshold.
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For unsubsidized, low-income renters in the city, the situation was even worse over the three-year period from 2002 through 2005. The median share of income spent on rent increased to more than 50 percent last year, up from the already dire 43.9 percent in 2002.

By borough, median rent in 2005, according to the NYU report,

If the average rental for a studio in Manhattan is over $2000, it’s very difficult to keep up with expenses and save up if you have to spend 30% of income on rent.

Put another way, if the average price of a Manhattan apartment is $1,260,000, the mortgage of $1,008,000 is about $6,700 per month (assuming 20% down and 7% interest rate). That would mean that if that mortgage is 30% of income, one would be making $22,333 per month (or $268,000 per year) for the debt-to-income ratio to be at 30%.

Of course these numbers are in theory. A lot iof people may put a bigger down payment or have lower interest rates. Either way, I don’t know about you, but I don’t know many friends who make that much at this point. I have several friends who are forced to change their spending habits or have to get a roommate, just like me, but how many more people can afford Manhattan anymore?

Source:
City rents claiming greater income slices; New Yorkers now spend more than 30 percent of incomes on rent, The Real Deal

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