"Affordable" Housing

[Magelet]

I was reading Nickle and Dimed and in a footnote, she mentioned that housing is considered affordable when it is 30% or less of your income. I was SHOCKED!!! We pay... at least 66% of DP and my combined income for our one bedroom studio apartment. We are looking for someplace less expensive, however, that seems crazy. The idea of making enough money around here to only spend 30 percent on our housing... we'd have to make at LEAST 2x as much money as we do.

So, I'm curious to know who else pays a huge portion of their income for housing, and if it is way above that "affordable" point. How do you do it? We manage by keeping expenses low, and because my parents pay for my health insurance, my car insurance and maintence, and DP doesn't have health insurance. We basically pay our rent, electicity, internet (dad gave me a year of voip for my b-day), food, and gas. and the occasional tiny fun expenditure. We live totally paycheck to paycheck and don't quite pay for everything. It makes me sad and a little scared. How can we decrease our expenses and earn more money so that we can settle down and have a family soon? Yes we could move to a lower COL area, but the truth is, our income potential would drop drastically.

[FillingMyQuiver]

Wow, I don't know how you manage. I don't think I could imagine paying such a large portion of DH's income to just housing.

We live in a somewhat HCOL area, DH works in Northern VA, but we live farther out than the concentrated area of NoVA.

We purposely moved farther out, even though that means DH's commute can be L-O-N-G (for instance, his morning commute today was over 2hrs b/c of a horrid accident)

By living farther out, our PITI is about 25% of our take home pay.

[BetsyS]

We pay right at 37%, and we consider ourselves in over our heads. As another factor, we have large student loan debt, and our debt adds another 21%. Which means that 58% of our (take home) is accounted for in those two things. We are barely keeping our heads above water every month because of it.

[goobergrl6]

Our housing is less then 30% of our take home pay. We know people who make less and bought houses that cost more but we wanted to keep it low. However we live in a nice home because DH makes a nice salary. When we went for our mortage they told us we could get a bigger one but this is what we were comfortable with. We live in Southern MD so it is not DC but we do know people who live here and communte there.

[JamieCatheryn]

That's why DH left California, and why we're begging his mom to leave there too. A studio apt here in KY costs $400 monthly.

[Drummer's Wife]

Ours is under 30%, but I can see how it could be possible to spend a bigger percent depending on your overal bills and how high of an income we are talking. I mean, 70% left over after housing with an annual salary of $200K is a lot more than what one would have left over paying the same percent of a $50K income. And if you have no other debt, it would obviously help in either scenario.

I do think under 30% is what most people tend to shoot for, though.

ETA: I don't know how people make it in high COL areas without a high income. My bro lives in the village in Manhattan, and he pays 3 times what we do for a tiny apt. Luckily, he does make a lot, but I can't imagine living in SF or NYC or similar w/o $$$. If we lived there on DH's income, we could maybe afford a cardboard box! (as opposed to a huge house here in the desert.)

I hope you figure out a way to get ahead and make it work. I bet it's super nice to live there.

[Hannah32]

We're at about 42% of take-home pay for housing, but I thought it was always calculated off the gross? No more than 30% of your gross for housing. Honestly, my rent is pretty affordable around here. It's just what it costs. We still save 20% of my salary take-home too.

[Nitenites]

We live in the Indianapolis area, which is VERY affordable. Our mortgage payment for a 1300 sq ft house, 3 bedroom, 1 bath, (not including unfinished basement), is $845/month. I find it just mind-blowing that people pay $400k + for the same thing on the West Coast.

Back to the OP, you said that if you moved to a lower COL area, your income potential would drop dramatically. But the other side of that is that you wouldn't NEED that much income in a lower COL area. We can live quite comfortably (family of 6) on about $42k/year.

[Denvergirlie]

Basically I think you have to adjust those numbers when you live in such a high COL location.

I just moved from Denver, city center, where my percentage was 18% of net take home. I could have lowered that some more, had I been willing to live in an apartment instead of a house. But I liked my slightly run down 3 BR rental house with yard and basement, and was willing to pay a bit more for that space over an apartment.

Can you look for cheaper housing? Your percentages plus the fact that others pay some of your bills, would make me have a hard time sleeping at night.
What happens if one of you gets sick or hurt for 2 weeks and miss a ton of work, will you survive that potenital loss of income?

You say you can't move out of that area... have you really looked? Sure income might go down, but your expenses can be lowered a lot in turn.

[SunshineJ]

My stepsister lives in California somewhere near Hollywood if I recall correctly. We were discussing salaries and she told me that they are only about 20% higher in CA. After spending some time on CareerBuilder and looking at the jobs in my field out there, what I'm seeing is that most either pay the same or up to just about 20% more for the same positions I see here and back home. Yet here in WI we can get a really nice house with 1500+ sq ft for under $200k. If we want to move out 10 min, we can get the same house with up to 5 acres for under $250k. I don't think the salaries are really that significantly higher in CA from what I can find (though I'm sure there's a variance in there of course!).

When we lived back in KC, we bought a cute little ranch, 40 yrs old with about 1300 sqft + basement in the city on 1/2 acres for $112k. Our payment was $885/mth. We went off of DH's salary at the time we bought it and nothing else, and as he was making $35k a year, that was right at 30-31%.

Where we used to live in KC is known as a pretty low cost of living area. Yet when we moved up here, the COL turned out to be even lower overall. Housing is about the same. But the utilities, cost of food, things like that are lower to where we're saving probably $300 a month or so more than we'd planned by living here. Yet on the flip side, gasoline is higher as is beef, and yeah, last week was a high of 4 degrees F on many days. I really think a lot of perception is based on location. Here in the midwest I honestly don't know anyone who has 66% of their income eaten up by housing costs. No lender I know of, even during the bubble, would approve that rate for a mortgage. But in some areas that's the way it is, the way it's been for some time, and since it's what people are accustomed to it's not a huge shock for them.

[Sarah W]

You do live in a high COL area. However, 60% is way more than I would feel comfortable paying. We're at about 40% and that is for two houses.

[Chamomile Girl]

66% is excessive even for the Bay Area. My DH and I have never paid over 50%, even when we were starving grad school students. Of course that is because we can't afford to because of all our other debt!

Seriously though, I think that you guys might be doing something wrong. Are you in San Francisco proper? 'Cause location really matters there. DH and I found a two bedroom house in the Outer Richmond for $1800 a month when we lived there...and rental prices have gone down in the last year. I'll bet you can find somthing cheaper.

Other rentals we have had in the area:
$1400 for a two bedroom duplex in Napa
$900 for a one bedroom cottage in Petaluma
$1500 for a two bedroom house in Santa Clara

You can find great deals if you look!

[Smocked]

When we bought our house were pushing it with about 40% of our income and then dh took a paycut and it brought us to about 60% of our income. We were still doing fine because we live frugally and made cutbacks in possible areas, but when dh lost his job we were completely screwed honestly. His unemployment covered our mortgage with 2 dollars to spare. Thank goodness for an emergency fund!

I was constantly stressing out during that time and I can't even imagine how I would fare if it had not been so temporary.

[bobandjess99]

You do live in a crazy high COL area, but 66% is just crazy. I agree with drummers wife, that once you hit a certain level of income, you can afford to pay much more, because, even though you only have 33% of your income to pay non-rent expenses, 33% of say...$150K is still a LOT of money, whereas 33% of $30K is less than you generally need for utilities, food, gas, clothes, health, etc.

I think you might take a look at what the difference in COL is versus income. You might be surprised at how much more affordable life would be somewhere else. For example....I have no idea what you do or how much you get paid for it, but let's say you would have to take a huge paycut to live where i live. Let's say 50%. So, let's assume you make $80k per year there, andthat would translate to $40k here. Sounds like a huge decrease, right? BUT..you can get a really nice 1500 sq ft 3 bedroom house for like $100k here, mortgage payment including taxes of maybe $7-800/month. That's less than $10k you have to pay for housing per year, leaving $30K of your $40k salary for other stuff. Whereas with your $80k income there, if you are paying 66% for housing, that is about $56K in housing, leaving about $26k left over to pay other stuff, which is LESS thanteh $30k you'd have left over in the other scenario.
Those are just made up numbers, but it maybe shows you what I'm talking about.
I will say that here, in the midwest, it is completely possible to support (in a comfortable middle-class way) a family on 1 standard income, such as teacher, factory worker,accountant,counselor, electrician/hvac, or nurse, etc.

[sunnysandiegan]

The Bay Area is outrageously high priced. I haven't lived there in a long time, but when I did I had to rent a room in other people's homes in order to make it financially.

Even here in San Diego, that is the way I survived financially for many years. The salaries are lower here and the costs are not much lower.

Looking at non-traditional housing can really help the budget. My dad scrimped and saved and finally bought a house (in Silicon Valley) after us kids had moved away. He rented out every space available in order to make the mortgage. A good friend searched and searched until he found a small apartment complex (in Pacifica) where the owner wasn't gouging his tenants. [As a side note: In return, that owner has very loyal tenants and an extremely low turnover rate, which ultimately saves him a lot of expenses.] A co-worker of mine years ago lived in the heart of San Francisco (near the famous Catholic church) in a house where everyone doubled up in rooms, dormitory style. Six people lived in the three-bedroom and they made it work. They all LOVED the city and really wanted to be there!

Unfortunately, I have other friends in the Bay Area who purchased homes at the maximum end of their comfort zones (before the loose lending policies and lenders were fine with these loans) and they are really struggling these days. REALLY STRUGGLING.

Best wishes!

[Sharlla]

It really just all depends on where you live and what type of place you want. WHen I lived in WA I was paying $1100 for a 3 bed house but when we moved over the the next town I was able to get a decent sized 2 bed duplex for $550.

When I moved here to MO there was a lot of 2 bedroom houses for $350-$400, but at the same time there are also $800 houses too.

My husband just moved from SF fall of 2008 and he and his ex were renting a 3 bed house over there for $3500 a month, I could not believe it. We just bought our house for $50k and with the 13K down payment our mortgage is only $272 a month.

[jentilla]

That's extremely high. I mean that's 33% for EACH of you! Our last house cheap. We bought it for 106k and sold it for 125k. We bought our current house for 152k and the mortgage is 13% of our gross.

[mran]

We pay less than 25%. I wouldn't say it's a high cost of living area, but we spent almost $135 per sq foot. General living is cheap, but in this area, it seems you can't pay less than $150k for even a 1500 sq ft house that practically needs to be completely gutted.

[Kiernan]

I'm in a very high COL area (Boston) and my mortgage plus condo fees is about 25% of take home. I bought more than 10 years ago before real estate prices skyrocketed, and I've resisted the urge to trade up to a bigger place (it's only 900 sq ft, but then again, there are only two of us, and one of us is only three feet tall). I have many friends whose home expenses are closer to 50% of take home.

[Chicky2]

We are in a relatively lcol area. We pay roughly 25% of dh's takehome income. We have a 2700 sq ft home on almost 5 acres.