Image by Jean van der Meulen from Pixabay
I listened in on a recent online discussion where a multitude of commenters complained about the rising and unaffordable levels of rent in their cities. A $450 rent that had become $950 in just a few years. Thirteen-hundred-dollar apartments. Twenty-four hundred-dollar apartments. When someone mentioned that they had a rent of $600 a month, it was received like the Holy Grail. Where on earth could such rent be found? Surely, it couldn’t really exist. What was clear is that it’s not only the renters in America’s largest cities who can barely afford their local housing. That pain seems to be spread all over the country. So, how are Cleveland renters faring?
Cleveland compared to other U.S. cities
I’ll start with the good news. Cleveland rents are significantly lower than other large cities in the country and have a ranking of 77.1 (with 100 representing an average rent for the country.) Of course, we knew it was a bargain compared to San Francisco, Los Angeles, and New York. But it also has a major cost of living edge over housing in a lot of other popular cities: a $1,341 center city apartment in Cleveland would cost $1,564 in Atlanta, $1,706 in Denver, $1,766 in Austin, and $1,888 in Chicago.
Cleveland versus Ohio cities
I will say I was pretty surprised to see that Cleveland rents are a bit pricey for the state of Ohio. Cleveland’s average rent of $1,147 is higher than Columbus’s $1,007, and Cincinnati’s $1,022.
The 30% rule and why it’s so important
This is the general spending recommendation of personal finance specialists – aim to spend no more than 30% of your gross (pre-tax) income on rent. It’s a guideline that a large number of renters across the country just aren’t able to stick with. Many are paying up to 50% of their income on rent. I’ll illustrate the problem with that using my last fifteen years living in Los Angeles.
I lucked out (and wasn’t very picky)
Somehow, I found a family house that had been divided into three apartments. I got the smallest studio, which had once been the bedroom for the teenager of the house, and a small sort-of-eat-in kitchen. It was $450, utilities included. I lived there for fifteen years and by the time I left, the rent was up to $625. Not bad – almost like rent control. Oh, it had no central heating – just a space heater from the landlady. I confess, on cold winter evenings, I would open the oven and crank it up for an hour and a half, and then turn it off and climb into bed.
My salary at the time had maxed at $16.50 an hour (after working for three years) and I was able to enjoy that higher salary for two or three years. Just as importantly, I got a ton of overtime. I worked six days a week for almost a year and a half straight, plus overtime hours throughout the week, plus got double time for holidays. I went for about five years without having a Christmas, Thanksgiving, or New Year’s Day, and I was happy to make the tradeoff.
Money that didn’t have to go toward rent
In six years’ time, I was able to pay off over $30,000 of debt and take three trips to Europe – one for a full month for a fiftieth birthday gift to myself. None of that would have been possible without limiting my rent expenditures. If I paid a more typical $1,000 to $1,200 for a decent one-bedroom in a modest neighborhood ($1,800 in the seaside neighborhoods that I dreamed about), then, in all probability, I would have left Los Angeles at least $20,000 in debt, and my vacations would have been restricted to a few trips to Disneyland. A high rent would have obliterated other opportunities.
So, the problem of high rent is that the opportunity costs have to be factored in. What’s leftover for savings, investments, travel, car expenses, paying off debt, starting a side business, sports and music hobbies, and saving for a down payment? It’s a question best considered sooner rather than later. Because ten or twenty years into a steep rent, you may have a long laundry list of financial goals that you were never able to accomplish.
What is the average Cleveland income – is there a problem?
I’ve seen a figure for the average Cleveland salary – often cited at around $59,776 a year, that left me scratching my head. Why wasn’t I ever able to find one of those swell jobs? But then, I managed to remember that average and median are two very different things. The average salary takes the salaries of judges ($102,523), pharmacists ($132,514), bartenders ($27,379), and minimum wage workers, and arrives at a statistical average that very few people are actually taking home.
Better to look at Cleveland’s median income, which asks the question, what level of salary is the largest number of people taking home, or what is a true “middle” salary for this city? Cleveland’s median salary is $20,407. That’s for an individual. It’s $30,907 per household, as typically more than one person will be drawing an income.
Image by Ferenc Keresi from Pixabay
Can we stick to the 30% rule?
It’s not impossible. That’s about $612 a month for the single individual and $927 for the larger household. What will that get you in Cleveland? You’ll have options, but clearly not at the high end.
Of course, location is everything. The University neighborhood is Cleveland’s priciest, with an average monthly rent of $1,599, Downtown Cleveland is $1,475, and Ohio City is $1,414. Surprised? These neighborhoods are even more expensive than Shaker Heights at $1,348, Cleveland Heights, at $1,221. On the brighter side, Buckeye-Shaker, which is a neighborhood I always had on my list of favorites, comes in at a comparatively reasonable $764.
If all of these rents are sounding alarmingly high, remember what I just discussed about average incomes, which are so often higher and not representative of what most people are earning. So, these averages of currently available rental units aren’t a good estimate of how much Clevelanders across the city are actually paying.
Thirty-three percent of Cleveland renters pay from $701 a month to $1,000 a month. Another 19% pay from $501 to $700. And 25% pay between $1,001 to $1,500. Whether or not that is a strain on their budgets will be dependent on the household income. So that $600 rent that so many disgruntled renters around the country were salivating over – I suppose it’s possible to find in Cleveland, but it won’t be easy.
Unless you’re happy with a studio. The average Cleveland studio rents for $539. The average one-bedroom is renting at $634. Two bedrooms - $794. And three bedrooms - $1047. The larger the family you have to accommodate, the more problematic the rents can become.
A lot of people would point out that it’s cheaper to have a mortgage than to pay some of these higher rental prices. That’s often correct. But saving the down payment for that home while paying a high percentage of one’s income on current rent could be frustratingly incompatible goals.
So, does Cleveland have a rent problem?
Yes, and no. But mostly yes. No, Cleveland doesn’t have the $2,200 rents of Los Angeles or the $3,000 rents of San Francisco and New York City. Certainly, Cleveland doesn’t have as extreme a rent problem as many larger cities. But its median income, both for single residents and households, doesn’t allow for a lot of wiggle room.
You may be able to afford a one-bedroom. But not in your favorite neighborhood. Or your second favorite. Or your third favorite. You may have steep debts. Or car payments. Most people do. Student loans. Medical bills. A nonexistent retirement fund. A desire for homeownership. A desire to live alone in a safe neighborhood. For a lot of renters, many of these priorities will clash. And in Cleveland, as elsewhere, navigating an affordable rent will be one of the most vital strategies toward a lifetime of financial security.