Where are the not so high rent apartments (San Francisco, Concord: transplants, real estate market)

[pseudogrunt]

My understanding is that salaries in San Francisco are about the same as salaries in New York City. I figure that the amount one ought to spend on rent is around 30% of after tax income. According to Wikipedia, the median family income in San Francisco is $82,000. Which, after taxes, is something like $45,000. This in turns leads to a rent of $1,250/month for an entire family. On craigslist, typical rent in on the order of $3,000/month, well above what most people can afford. I think there is an error somewhere in my estimate, but I can't figure out where it is.

[Wry_Martini]

It's not unusual for folks here to spend more than 30%... Pre-tax income.

[EclecticEars]

Originally Posted by Wry_Martini

It's not unusual for folks here to spend more than 30%... Pre-tax income.

Where to find not-so-highly priced apartments...

No-go zones like much of West, South and East Oakland, East Palo Alto, Fair Oaks (east side of Redwood City), parts of East San Jose, Vallejo, and Richmond.

Otherwise, you're looking to live in nice but far-flung middle-class suburbs like Morgan Hill, Gilroy, Solano County (sans Vallejo), Concord, or Tracy.

Or you'll just luck out after spending two weeks tireless combing Craigslist and be very fortunate to find a steal, which is what I had to do.

[pch1013]

Originally Posted by pseudogrunt

$82,000. Which, after taxes, is something like $45,000.

I think you have an exaggerated idea of how high taxes are here. No one in that salary range pays 45% of their income in taxes.

[jrb724]

Originally Posted by pseudogrunt

My understanding is that salaries in San Francisco are about the same as salaries in New York City. I figure that the amount one ought to spend on rent is around 30% of after tax income. According to Wikipedia, the median family income in San Francisco is $82,000. Which, after taxes, is something like $45,000. This in turns leads to a rent of $1,250/month for an entire family. On craigslist, typical rent in on the order of $3,000/month, well above what most people can afford. I think there is an error somewhere in my estimate, but I can't figure out where it is.

A few reasons come to mind:

-Rent controlled units, housing subsidies such as Section 8

-Some landlords don't raise the rent to market rate if you have lived there a long time. New tenants pay the market rate.

-Homeowners that purchased a long time ago so they have low fixed housing payments or no mortgage - this would include retired people who's income is below the median but have their homes paid off.

-People with a lot of assets or a big nest egg but minimal income - they can draw from savings to pay for housing.

-Multigenerational households & roommates

-Underground economy income that is not included in the median

-People often spend well beyond 30% of income on housing

You will just pull your hair out trying to rationalize median income to median rents or housing prices. A median income person will not be able to afford a median rent or median home unless they have a huge down payment, especially in San Francisco.

Cheaper housing is in the distant suburbs and areas with higher crime rates and/or lower school scores. Your $ will go farthest in the East Bay if you are looking to be near SF. There are plenty of good areas and some ones to avoid.

[beb0p]

Originally Posted by pseudogrunt

My understanding is that salaries in San Francisco are about the same as salaries in New York City. I figure that the amount one ought to spend on rent is around 30% of after tax income. According to Wikipedia, the median family income in San Francisco is $82,000. Which, after taxes, is something like $45,000. This in turns leads to a rent of $1,250/month for an entire family. On craigslist, typical rent in on the order of $3,000/month, well above what most people can afford. I think there is an error somewhere in my estimate, but I can't figure out where it is.

First of all, SF's median income is $86k according SF Planning's own study, after tax, that $86k is more like $65k. Factoring in 40% of that as rent money comes out to $2,150. You can definitely find a 3-bedroom for that price somewhere in the East Bay. Won't be the best neighborhood but still. Remember, a $86k family income is actually quite poor by Bay Area standard.

Second of all, the median family income is meaningless in a city where the income inequality is so high. The MFI in Chinatown is $22k, Tenderloin $30k, Marina $150k, Sea Cliff $200k, etc. You get the drift. There are a lot of people at both ends of the spectrum (compare to other cities) and actual family who makes $86k is very small (in comparison).

Third, those at the lower end of the curve are protected by rent control, put into a SRO, project housing, affordable housing, etc, etc; or live in neighborhoods that you'd never ever want to live in; if you remove these people and only focus on those who are competing with you for a rental unit, the median family income is likely over $100k.

Fourth, SF is a city with a lot of singles living together as roommates, so if you're thinking the demographic for that 2-bedroom apartment is a family on a budget you're most likely wrong. Think three singles (boyfriend and girlfriend in one bedroom plus a third person in the second bedroom) each making $60+k for a total of $180+k household. You want to know how someone can afford to pay $3,500 for a two-bedroom? Answer: it's not shouldered by one person, but by splitting between multiple people.

[ssmaster]

Originally Posted by pseudogrunt

My understanding is that salaries in San Francisco are about the same as salaries in New York City. I figure that the amount one ought to spend on rent is around 30% of after tax income. According to Wikipedia, the median family income in San Francisco is $82,000. Which, after taxes, is something like $45,000. This in turns leads to a rent of $1,250/month for an entire family. On craigslist, typical rent in on the order of $3,000/month, well above what most people can afford. I think there is an error somewhere in my estimate, but I can't figure out where it is.

most people would use 30% of the gross income .

[HockeyMac18]

Originally Posted by jrb724

A few reasons come to mind:

-Rent controlled units, housing subsidies such as Section 8

-Some landlords don't raise the rent to market rate if you have lived there a long time. New tenants pay the market rate.

-Homeowners that purchased a long time ago so they have low fixed housing payments or no mortgage - this would include retired people who's income is below the median but have their homes paid off.

-People with a lot of assets or a big nest egg but minimal income - they can draw from savings to pay for housing.

-Multigenerational households & roommates

-Underground economy income that is not included in the median

-People often spend well beyond 30% of income on housing

You will just pull your hair out trying to rationalize median income to median rents or housing prices. A median income person will not be able to afford a median rent or median home unless they have a huge down payment, especially in San Francisco.

Cheaper housing is in the distant suburbs and areas with higher crime rates and/or lower school scores. Your $ will go farthest in the East Bay if you are looking to be near SF. There are plenty of good areas and some ones to avoid.

Originally Posted by beb0p

First of all, SF's median income is $86k according SF Planning's own study, after tax, that $86k is more like $65k. Factoring in 40% of that as rent money comes out to $2,150. You can definitely find a 3-bedroom for that price somewhere in the East Bay. Won't be the best neighborhood but still. Remember, a $86k family income is actually quite poor by Bay Area standard.

Second of all, the median family income is meaningless in a city where the income inequality is so high. The MFI in Chinatown is $22k, Tenderloin $30k, Marina $150k, Sea Cliff $200k, etc. You get the drift. There are a lot of people at both ends of the spectrum (compare to other cities) and actual family who makes $86k is very small (in comparison).

Third, those at the lower end of the curve are protected by rent control, put into a SRO, project housing, affordable housing, etc, etc; or live in neighborhoods that you'd never ever want to live in; if you remove these people and only focus on those who are competing with you for a rental unit, the median family income is likely over $100k.

Fourth, SF is a city with a lot of singles living together as roommates, so if you're thinking the demographic for that 2-bedroom apartment is a family on a budget you're most likely wrong. Think three singles (boyfriend and girlfriend in one bedroom plus a third person in the second bedroom) each making $60+k for a total of $180+k household. You want to know how someone can afford to pay $3,500 for a two-bedroom? Answer: it's not shouldered by one person, but by splitting between multiple people.

These two messages pretty much sum it up.

In my age group (late 20's/early 30's), I find most people fall into the following categories:
1) "spending more than 30% of their salary"
2) "live with roommates"
3) "make a crapton of money and can spend whatever they want" (and when you combine two of them, together...watch out)

Most of my friends are in categories 1 and 2 (sadly...too many of them are in category 1, spending close to 50% of their income sometimes...).

I know some in category 3, but not too many. But that's more a reflection of my social circle. I just don't have a ton of people in the tech/start up world as friends...

But, I can assure you there are a lot of category 3's running around SF. And they are definitely having a very large impact on the market.

[Tor_Nado]

As nice a city as San Fran is, not sure throwing away 30-50% of your annual income on rent is such a good idea.

That said, many landlords require tenants to earn at least 50x the monthly rent. For a $3,000 per month apartment, that means the tenant should earn a minimum of $150K per year. Since there are very few vacancies in San Francisco, my guess is a large majority of tenants earn well over that.

[HockeyMac18]

Originally Posted by Tor_Nado

As nice a city as San Fran is, not sure throwing away 30-50% of your annual income on rent is such a good idea.

That said, many landlords require tenants to earn at least 50x the monthly rent. For a $3,000 per month apartment, that means the tenant should earn a minimum of $150K per year. Since there are very few vacancies in San Francisco, my guess is a large majority of tenants earn well over that.

The typical monthly rent being paid by tenants in SF isn't 3,000 per month, though. Apartments going on the market right now are very high (possibly close to your 3,000 a month figure), but because of rent control (and other factors, such as the ones outlined above), most people currently living in SF are paying far less. The apartment I split time in with my girlfriend in SF is well below market rate. Most people in SF, I can assure you, do not make over $150K per year.

See jrb724's and beb0p's post for more details on that.