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When the Rent Gets Too Damn High, Apartments Get Smaller

The salary of a young college graduate buys a lot less apartment than it used to. So a lot of young grads are seeking out small apartments.

Lindsay Larsen at home in her convertible apartment—a cross between a studio and one-bedroom—in Flair Tower in 2010.   Photo: Shauna Bittle/Chicago Tribune

Recently Chicagoans have been talking about transit-oriented development a lot—and in particular, small but well-appointed apartments not far from the city center in desirable neighborhoods that are reminiscent of the studios and efficiencies that long-ago generations of young Chicagoans flocked to as the city grew.

Some of these places are seemingly quite small for the price, targeted towards young singles who plan on spending a lot of time at work or elsewhere and who don’t need much more than a place to lay their heads—or are at least willing to skimp on that to live alone in the city.

There are a lot of reasons for this: 20- and 30-somethings are delaying marriage and kids; they’re driving less and moving closer to the city. And then there’s the fact that a middle-class job buys a lot less apartment than it used to.

Recently the University of Chicago’s Jens Ludwig co-authored a paper, with Robert Collinson and Ingrid Gould Ellen of NYU, on low-income housing policy. It’s a broad overview with a lot of good stuff, but one of the most interesting findings touches on the whole spectrum of income, and how much of that income goes to rent. In short, the answer is a lot more, especially for the poor but with a substantial increase for the middle-class as well.

Here’s a look at rent as a percentage of income for each income quintile of American society over the past 50 years. It’s always been high for the poorest of the poor (the first quintile of households, in 2012, had a mean income of $11,490 and a max of $20,599).

But 50 years ago, the difference between the second quintile (2012 mean: $29,696) and the fifth quintile ($181,905) was not all that great: 13 percentage points, from 10 to 23 percent. That gap, like so many others, has widened. Today it’s 20 percentage points, from 13 to 33 percent. The rich are paying more; the working-class are paying a lot more, and on average, they’re paying slightly above the 30-percent level that’s usually used to indicate whether one is rent-burdened.

And here’s the percent of each quintile which, by that standard, is rent-burdened. In 1960, virtually none of the middle-class is rent-burdened. In 2012, it’s twenty-five percent. And that’s still a good salary: in 2012, a mean of $51,179 and a max of $64,582. For the second quintile (with a 2012 max of $39,764, a respectable starting salary for a young, college-educated professional), it almost triples, from 21 percent to 59 percent.

As Mark Hinshaw and Brianna Holan write in “Rooming House Redux: There’s a Market for Small, Simple Housing for Young Singles,” “the median income of people ages 24-29 is barely $31,000 before taxes. This translates to being able to pay, at most, a monthly rent of $850, which is virtually impossible to find in most larger American cities where jobs are located.”

For college graduates 25-34, it’s higher, but not by a lot, and has fallen from above $50,000 in 2000 to below $50,000 in 2012. That’s the quintile for which a quarter of households are now rent-burdened. They could move; they could take on a roommate. But if they want city life, one option is to shrink their living space to the (nice) necessities and get out of the apartment to experience the city life they’ve chosen.

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