A recent report from Business Insider calculates how much households should be spending on rent based on their income. The report uses the 30 percent of income threshold — the same threshold recommended by the Department of Housing and Urban Development (HUD) and used to determine eligibility for affordable housing.
According to the report, most American households spend most of their monthly budget on housing, transportation and food. According to U.S. Census data, the typical renter in the United States spends roughly 30 percent of their gross monthly income on rent.
The report suggests, however, that for real wealth-building, renters should aim to spend 30 percent or less of after-tax income on housing costs, rather than pre-tax income as suggested by HUD. The report defines housing costs as rent plus utilities and maintenance.
What does this mean for Texas renters? According to U.S. Census Data, the real median household income in Texas was $70,136 in 2017 (2018 numbers will be released in September 2019). Using the analysis by Business Insider, Texans earning the median household income should be spending less than $1,242 per month in housing costs. The calculation assumes at least one federal tax withholding and a 10 percent contribution to a pre-tax retirement savings contribution. For those who only need a 2-bedroom apartment might find themselves in a good position with the median cost of a 2-bedroom apartment in Texas renting for $1,049 (according to Apartmentlists.com’s 2018 report).
However, dive into the Apartmentlist.com data for some Texas’ largest cities and the numbers become more alarming. In Austin, for example, the median rent jumps to $1,420 for a two-bedroom apartment; requiring an annual salary of $81,422. The median rent in Dallas and San Antonio is $1,110 and $1,060 in San Antonio respectively.
For those households earning 60 percent or less of median income (or $42,081 per year), the situation becomes more concerning. According to Apartmentlist.com’s data, these households could not even afford the $844 per month median rent for a 1-bedroom apartment in Texas.