By at least one metric, Lower Manhattan ranks among the most affordable communities to live anywhere in New York City. This was the conclusion of a recent report by the RentHop web site and search engine, which analyzed both asking prices for two-bedroom rental apartments and median household income for 139 neighborhoods throughout the five boroughs.
Measured only by asking rents, Lower Manhattan is among the most expensive areas of New York, with the median monthly rent for a two-bedroom apartment of $4,553 in the combined Battery Park City/Financial District area, and $4,400 in the combined communities of Tribeca, Little Italy, and Soho.
But RentHop weighed these costs against median incomes for both communities, which are $125,434 for Battery Park City/FiDi, and $118,931 for Tribeca/Little Italy/Soho. Then, the firm’s data crunchers compared these proportions to the ideal ratio between rent and income.
Financial advisors usually counsel clients that they should earn a gross annual income of at least 40 times their monthly rent, in order to budget realistically for other expenses. For example, if an apartment costs $2,000 per month, it is preferable to earn at least $80,000 per year. (This is known as the “40x Rule.) And in many areas of New York, this is not simply desirable: landlords often require prospective tenants to document income that meets with the 40x Rule standard. (Another mathematical way of reaching the same conclusion is to allocate 30 percent of your gross monthly income to rent: In the same hypothetical, $80,000 per year translates into $6,666 per month, and $2000 is 30 percent of that monthly paycheck.)
Judged by this yardstick, Battery Park City is the seventh most affordable of the 28 Manhattan communities that RentHop analyzed, with a resident seeking to rent a two-bedroom unit costing $4,553 earning approximately 28 times his or her monthly rent (rather than the multiple of 40 described above), and spending 43.6 percent of his or her income, rather than 30 percent.
The combined neighborhoods of Tribeca/Little Italy/Soho come in eighth among all Manhattan communities. In this area, a resident signing a lease for a two-bedroom apartment costing $4,400 will be taking home 27 times the monthly rent (rather than 40x), and spending 44.3 percent of the monthly household gross income, instead of 30 percent.
To adhere strictly to the 40x Rule, residents of Battery Park City/FiDi would need to earn $182,100 (a jump of 45 percent), while those in Tribeca/Little Italy/Soho would need to boost their incomes to $118,931, which would mean a raise of 47 percent. All of which means that residents of Lower Manhattan fortunate enough to be described by these numbers are struggling, but only slightly.
This algorithm yields deeply counterintuitive results elsewhere in Manhattan. RentHop’s approach deems the most affordable community in the borough to be Carnegie Hill on the Upper East Side, where the median rent for a two-bedroom apartment (at $3,550) is lower than Downtown, but median household income is the highest anywhere in the City (at $155,213). This means that the hypothetical resident of the East 80s described here is spending just 27 percent of monthly income on rent, and could theoretically take a pay cut of eight percent (to $142,000) and still comfortably comply with the 40x Rule.
On the other end of the demographic scale, the least affordable communities in Manhattan (at least relative to the earnings of their residents) are some of the most economically disadvantaged. On the Lower East Side, for example, the median asking rent for a two-bedroom apartment is just a shade lower than in Carnegie Hill (at $3,495), but the local median income is about one-fifth of that found on the Upper Easy Side (at only $31,273). This means that the imaginary Lower East Side resident described here would need to spend 134 percent of his or her annual income to cover the rent, and would have to increase household income to 347 percent of current levels to comply with the 40x Rule.
All of which means that people who live in communities like the Lower East Side, where gentrification is playing havoc with the cost of keeping a roof over your head, are struggling in a way that residents of Battery Park City, the Financial District, and Tribeca can scarcely imagine.
These findings echo those of a 2015 study by the City’s Department of Health, which publishes “Community Health Profiles” for all 59 community districts, across the City’s five boroughs. This report concluded that Lower Manhattan has the lowest “rent burden” anywhere in New York City. This is defined as the percentage of residents who spend more than one-third of their gross monthly income on rent, a threshold met by just 37 percent of the local population. Although apartment rents are climbing ever higher in Lower Manhattan, this statistic appears to be a function an unusually high household income, combined with a large number of dwellings owned by their occupants. (Condominium apartments are excluded from rent surveys.) As in the RentHop analysis, the “rent burden” appeared much higher in economically distressed neighborhoods, where rents tend to be significantly lower, but household incomes are even more depressed.
To read the RentHop study on which this story is based, please browse:
www.renthop.com/studies/nyc/can-you-afford-to-live-in-new-york