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Just out of curiosity, is it the norm in the US to be able to exceed a third of your income in rents ? In my country, in theory, you cannot have more than 33%

by pjerem 5y ago

Just out of curiosity, is it the norm in the US to be able to exceed a third of your income in rents ? In my country, in theory, you cannot have more than 33% of your income used to pay rent. Well, it’s not forbidden, the bank can be flexible, but they surely are double checking because they take the risk for the debt to be cleared if you became insolvent because of them.

xvedejas 5y ago
There isn't any debt involved in paying rent (are you thinking of mortgage?) and the bank isn't taking any risk, isn't guaranteeing any rent payments. I'm not even sure that a bank strictly needs to be involved in someone paying rent, they could pay in cash for instance. Where are you that a bank guarantees rent payments?
- dymk 5y ago
  Not sure why the bank has come up in this discussion about rent and risk. This is a landlord/tenant concern. Renting to somebody who has a high chance of not being able to pay their rent 3 months from now is indeed a risk, and one that landlords go to great lengths to avoid. Prospective renters may not be in debt yet, but nonpaying renters are hard to get rid of.
  - pjerem 5y ago
    My bad, as a non English speaker, I just inverted rent and mortgage payment.
mostlystatic 5y ago
It's the same in the UK, everything over 33% is called "unaffordable" and you'll fail the affordability checks during referencing. I don't think it's a legal requirement though, just safer for the landlords. Personally, I've never had a stable income in the UK, so for the last two places I rented I had to pay 12 months upfront. I'm quite skeptical the 33% threshold makes much sense (though it may be a decent heuristic in most cases). Compare these two scenarios: 1) Affordable rent: £18k/yr income, £500/mo rent, £823/mo left after tax 2) Unaffordable rent: £30k/yr income, £1000/mo rent, £1005/mo left after tax #2 is better off financially than #1, assuming costs other than housing are similar [1]. But the 33% affordability threshold will make it harder for #2 to rent than #1. [1] I think that's broadly the case, but will vary based on circumstances. E.g. childcare is more expensive in London, or you might need a car in a rural area.
simplestats 5y ago
> Just out of curiosity, is it the norm in the US to be able to exceed a third of your income in rents ? Landlords usually want proof of income, and the most typical cutoff stated is gross income must be 3x rent. Though it may be a somewhat higher fraction of your net (after tax) income. In Manhattan, and perhaps other extreme markets, the factors are even higher. It can get very expensive for the landlord if a tenant can't pay. Plus for larger firms such as apartment complexes and rental agencies, they may be forbidden from making subjective judgements of tenants due to laws against dicrimination. Meaning they use one-size-fits-all rules like income cutoff.

by pjerem 5y ago

xvedejas 5y ago

There isn't any debt involved in paying rent (are you thinking of mortgage?) and the bank isn't taking any risk, isn't guaranteeing any rent payments. I'm not even sure that a bank strictly needs to be involved in someone paying rent, they could pay in cash for instance. Where are you that a bank guarantees rent payments?

dymk 5y ago
Not sure why the bank has come up in this discussion about rent and risk. This is a landlord/tenant concern. Renting to somebody who has a high chance of not being able to pay their rent 3 months from now is indeed a risk, and one that landlords go to great lengths to avoid. Prospective renters may not be in debt yet, but nonpaying renters are hard to get rid of.
- pjerem 5y ago
  My bad, as a non English speaker, I just inverted rent and mortgage payment.

mostlystatic 5y ago

It's the same in the UK, everything over 33% is called "unaffordable" and you'll fail the affordability checks during referencing. I don't think it's a legal requirement though, just safer for the landlords. Personally, I've never had a stable income in the UK, so for the last two places I rented I had to pay 12 months upfront. I'm quite skeptical the 33% threshold makes much sense (though it may be a decent heuristic in most cases). Compare these two scenarios: 1) Affordable rent: £18k/yr income, £500/mo rent, £823/mo left after tax 2) Unaffordable rent: £30k/yr income, £1000/mo rent, £1005/mo left after tax #2 is better off financially than #1, assuming costs other than housing are similar [1]. But the 33% affordability threshold will make it harder for #2 to rent than #1. [1] I think that's broadly the case, but will vary based on circumstances. E.g. childcare is more expensive in London, or you might need a car in a rural area.

simplestats 5y ago

> Just out of curiosity, is it the norm in the US to be able to exceed a third of your income in rents ? Landlords usually want proof of income, and the most typical cutoff stated is gross income must be 3x rent. Though it may be a somewhat higher fraction of your net (after tax) income. In Manhattan, and perhaps other extreme markets, the factors are even higher. It can get very expensive for the landlord if a tenant can't pay. Plus for larger firms such as apartment complexes and rental agencies, they may be forbidden from making subjective judgements of tenants due to laws against dicrimination. Meaning they use one-size-fits-all rules like income cutoff.