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articles about “Rentals

Cutting Housing Costs When Financial Hardship Strikes

If forced to spend less on housing, people would rather change where they live than whom they live with. Downsizing is the #1 way people would reduce their housing costs. Furthermore, renters are significantly more willing to move or get a roommate than homeowners are.

In good economic times as well as in bad, financial hardship can always strike. And when it does, people might have to cut back on housing, which is typically the largest household expense. However, cutting housing costs involves hard tradeoffs: moving can be expensive and a hassle, and living with family, friends, or strangers can be a challenge. To understand how people might make these tradeoffs, we asked 2,048 Americans in late March and early April 2014 the following question:

“If you experienced a major financial hardship (e.g., lost your job, unexpected medical bills), and you needed to cut back significantly on your housing costs, which of the following would you most likely do? Please select all that apply.”

Here’s what they told us.

Everyone’s Top Cost-Cutting Strategy: Downsizing
Facing financial hardship that required cutting back on housing, nearly 2 in 5 people (38%) would move to a smaller home — more than any other option by a wide margin. In fact, twice as many people would prefer downsizing than the next most popular actions of (1) renting out part of their home to a roommate or housemate or (2) moving to a more affordable neighborhood. Far fewer people would take the more radical actions of living in their car or not paying the rent or mortgage.

How Would You Cut Your Housing Costs If Hit With A Major Financial Hardship? Share
Move to a smaller home/apartment 38%
Rent out part of my home to a roommate/housemate 19%
Move to a more affordable neighborhood in the same city, metro area, or region 19%
Move to a more affordable city, metro area, or region 16%
Move into my parents’ home 14%
Move into my children’s (or other relative’s) home 8%
Rent out part of my home to vacationers/visitors 6%
Live in my car, office, or another place that’s not intended as housing 5%
Move into a non-relative’s home 4%
I would stay in my current home but stop paying the rent or mortgage 4%

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The Rental Discount for Shacking Up

Nationally, renting a 2-bedroom apartment is 35% cheaper than two 1-bedroom apartments. Even a 3-bedroom apartment is 12% cheaper than two 1-bedroom apartments. But the discount for shacking up is smallest in New York and Dallas.

Jed Kolko, Chief Economist
February 10, 2014

It’s Valentine’s Day. Picture a romantic restaurant. Main course is finished. Lights are low. Your sweetheart leans over the table, and with a quiet voice, starts to speak. You prepare yourself for any possible conversation, playing each one out in your head. And then the question comes: “How much do you think we’ll save if we move in together?”

That might not be the romantic discussion you expected. But it’s an important one. Housing costs and economics affect whether people get roommates, live with their parents, or – yes – move in with their sweetheart. In general, living together saves money – but that depends on how many bedrooms you upgrade to and where you live.

To find out exactly what the cost tradeoffs are, we used rental listings on Trulia to calculate how much you’d save if you and your sweetheart traded in your separate 1-bedroom apartments and moved into a 2-bed or even a 3-bed unit. For this analysis, we did not simply compare median rents for 1-bed, 2-bed, and 3-bed apartments, because that would not be an apples-to-apples comparison: apartments with more bedrooms might be in different neighborhoods, have more amenities, or be in better-maintained buildings. Instead, we compared units in the same apartment building, calculating the average price difference by number of bedrooms for apartments within a building (see note below).

Trulia_HowLoveSavesMoney_Infographic

Love Can Save You 35% on Rent
Nationally, a 2-bedroom apartment rents for 30% more, on average, than a 1-bedroom in the same building. A bit of math reveals that trading in two 1-bedroom apartments for a 2-bedroom would save you 35% on rent. That makes sense: Renting a 2-bedroom should be less than renting two 1-bedrooms since the total number of bedrooms stays the same but you merge into one kitchen and maybe even one bathroom.

What’s more surprising is that you’d even save on housing costs by trading in two 1-bedroom apartments for a 3-bedroom. Nationally, a 3-bedroom apartment rents for 75% more, on average, than a 1-bedroom in the same building. That means if you traded in two 1-bedroom apartments for a 3-bedroom, you’d still save 12% on housing – and you and your sweetie would have a bedroom to share and a spare room each.

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