If you’ve been in the market for a one-or two-bedroom apartment recently, you know you’re digging deeper and deeper into your wallet every year to find a place to live.
Rent affordability – the percentage of income spent on monthly leases – has soared close to 30% since 2010. By comparison, Americans spent 25% of their income on rent before 2000.
Why Is Rent so Expensive?
On the other hand, mortgage affordability, the percentage of income spent on a mortgage, has only been about 15% since 2010. This means Americans are spending a higher percentage of their incomes to rent homes than to buy them, which may sound a little backward.
What’s happened is that the cost of renting has exploded, while wages have stagnated.
Much of that has to do with demand, which shot up dramatically when the housing market crashed at the end of 2008. Unfortunately, the rental market wasn’t ready. The economy was reeling, and construction of new apartments couldn’t keep up with the demand.
According to the Department of Housing and Urban Development (HUD), rental affordability is currently down 22% from its peak at the beginning of 2001 but up 7% from its low point in the third quarter of 2018.
Time will tell where the numbers go but pay attention to rental rates in your area. Know what the market value of your apartment is before you re-sign that lease and use these tips to save on rent in the meantime.
How to Save on Rent
- Get a roommate: This one is pretty obvious, and it will save by far the most money. The average cost of a one-bedroom apartment in 2020 is $964. The average cost of a two-bedroom apartment in 2020 is $1,192. Divide that second number by two and it’s $396 cheaper per month and $4,416 cheaper per year to share costs with a roommate than live alone. And that doesn’t include shared expenses like utilities, kitchen supplies, toiletries and groceries.
- Negotiate when you re-sign a lease: Landlords want to keep good tenants. It costs them money to move you out and bring someone else in. That means you have a little bit of leverage. Research similar apartments in your area and come in with a number in mind. If the landlord won’t budge, tell them you’re going to look elsewhere. If you’ve been a good tenant, they’ll want to keep you. Word of caution: Know who you are dealing with. Independent landlords have a lot more wiggle room than property management companies. Maybe they have multiple renters in the complex and aren’t willing to make concessions, so try to sweeten the deal by offering something in return.
- Pay upfront: Offer to pay the entire lease or at least a few months upfront for a discount if you can afford it. The landlord may cut a deal to have cash in hand, but it’s only an option if you have enough savings to cover and then some. You don’t want to rack up credit card debt because you emptied your bank account to save a few dollars on rent. The savings would be lost to credit card interest. And if you do pay upfront, make sure you pay the money back into your savings each month.
- Sign an extended lease: What a landlord wants is stability. You can give it to them by signing for a year-and-a-half or two years instead of six months or a year. The longer the lease, the lower the landlord should be willing to go.
- Give up your parking space: If you don’t have a car, you won’t need a parking space. Offer to give it up in exchange for discounted rent. The landlord would be able to sell the space to another tenant, who might need extra parking.
- Look for apartments in the winter months: Landlords have a tough time finding renters in winter. It’s cold outside and people aren’t willing to leave their cozy homes. Vacancies can go on for months, and with each month landlords are losing money and getting more desperate. Prices get expensive in the summer months. Some of that has to do with the weather, and a lot of it has to do with the school schedule. College graduates flood the market during this time of year, and high school graduates enter the market in college towns. Families with children in elementary school will wait until the school year is over to make a move to ease their children’s transition to a new school. All that makes for an increase in demand which equals higher prices in the summer. Look for apartments in the winter and offer to sign an extended lease that ends in the summer. That ensures the apartment hits the market at a good time for the landlord when you move out, and the landlord gets some stability in the meantime. They’ll be willing to work with you for those tradeoffs.
- Private Rentals: A private rental is a property owned by an individual or family as opposed to a corporation, as is the case with most large apartment complexes. A private rental could be a house, apartment, or even a guest house separate from the main property. Private landlords may be laxer when it comes to application fees or deposits. They don’t have strict corporate guidelines to adhere to. This means they may be more willing to negotiate rent amounts or overlook past evictions that could bar you from renting elsewhere. However, every landlord will be different. Some may go as far as to complete background checks out of pocket. Be upfront about your situation and expectations to avoid any inconvenient surprises down the line.
- Consider a new location: This can be one of the most cost-effective ways to save money on rent. Big cities like New York and Los Angeles are the most coveted to live in and by far the most expensive. However, you don’t have to sacrifice city life to save money. Consider emerging cities like Oklahoma City and El Paso where rents average $783 and $789 a month, respectively.
- Offer to work for the landlord: If you know your way around appliances or plumbing, you can offer repairs to your landlord in exchange for a discount on rent. Each time something breaks down, your landlord has to pay someone to fix it, so he or she may be willing to work with you instead if it saves them time or money. Don’t be discouraged if you’re not particularly handy, you don’t need any special skills to mow a lawn or trim hedges.
- Referral fees: Ask your landlord if they offer tenant referral fees. Some landlords will offer you money in exchange for referring a new tenet. This is more likely to work with the larger apartment companies since they would need to have an excess of vacancies before offering you money to help fill them. A private lender with one or two properties probably won’t offer you much or anything for a referral, but it never hurts to ask.
How to Save Money While Renting
If you’re having trouble securing a low rent, or obligations are keeping you tied down in an expensive city, consider some of these cost-effective strategies to trim down on your monthly expenses and save money.
- Saving on utilities: According to the Department of Energy (DOE), Americans spend an average of $2,200 a year on utilities. That’s $183 a month, and half of that goes to heating and cooling our homes. A lot of this energy is wasted by inefficient appliances along with drafty windows and doors that make it harder for your home to maintain a comfortable temperature. Wasted energy equals wasted money. You can save money on utilities by upgrading old appliances or making some repairs around the house. However, you should talk to your landlord before making any drastic changes to make sure he or she is on the same page.
- Switching cable providers: If you have cable, consider switching providers or downgrading your package. Sometimes, cable options are limited based on your location. The most affordable option may not service where you live. It’s still worth negotiating with your current provider for a lower rate. If you threaten to switch providers or ditch the service completely, they may be more open to negotiations.
- Cutting cable completely: More and more Americans are cutting the cord entirely. According to eMarketer, a digital marketing firm specializing in consumer behavior, 19.9% of households are going without cable or satellite in 2020.It predicts the number will reach 27% by 2023. Instead of cable, consider switching to one of the major streaming services. Most of these cost between $10-$20 a month for a basic package. You can even split the cost among friends or family.
- Cooking at home: You don’t have to cook three meals a day every day, but eating out constantly will drain your funds, forcing you to tighten your budget elsewhere. Most people won’t go broke from eating out once a week, but if you try to eat out every meal you will end up spending more on food than rent. Consider learning a few easy recipes that you can knock out after work when you’re tired and most tempted to call it in and order take out.
Don’t Use Credit Cards for Rent
Watch out for advice to pay rent with a credit card so you can cash in on mileage rewards or cashback from credit card companies. Property managers typically hit you with a service charge that will exceed any sort of cash-back, plus you’re risking overloading your credit card.
It will hurt your credit score, and the last thing you want to do, while trying to save money, is to add credit card debt.
You don’t need to follow every tip we discussed to save a good chunk on rent. Analyze your situation and decide what makes the most sense for you. Moving halfway across the country to save on rent may or may not be worth it if you’re leaving behind people you care about, or your dream job.
It won’t be an easy decision, but if you take time to assess your options you can go forward with confidence that you made the right one.
- N.A. (2020 March) HUD PD&R National Housing Market Summary. Retrieved from https://www.huduser.gov/portal/sites/default/files/pdf/NationalSummary_4Q19.pdf
- N.A. (ND) How much is the average household utility bill? Retrieved from https://www.nationwide.com/lc/resources/personal-finance/articles/average-cost-of-utilities
- N.A. (2020, April 28) Data. Retrieved from https://www.apartmentlist.com/rentonomics/rental-price-data/
- Clark, D. (2019, August 6) Cable Operators’ Shift to Profit Mode Accelerates Cord-Cutting. Retrieved from https://www.emarketer.com/newsroom/index.php/cable-operators-shift-to-profit-mode-accelerates-cord-cutting/