California Renters Pay More Than Buyers
It’s expensive to rent–really expensive. More than you think.
With spring coming and a number of staffers at the Movoto Headquarters soliciting for help schlepping cardboard boxes and floppy futons into new apartments and homes, we started thinking about what it would cost to do away with paper-thin walls and inattentive landlords.
What we found was in 8 of California’s 11 most prominent metro areas, renters on average spend $480 more per month for their units than homeowners in similar homes.
To come up with the number we examined the estimated monthly cost of owning a 3-bedroom, single-family residence compared to the average monthly rent of apartment units in an area.
We found that versus buying a home:
- Alameda County renters pay an additional $332/month;
- Contra Costa County renters pay an additional $905;
- El Dorado County renters pay an additional $330;
- Los Angeles County renters pay an additional $174;
- Riverside County renters pay an additional $867;
- San Bernardino County renters pay an additional $507;
- San Mateo County renters pay an additional $479; and
- Yuba County renters pay an additional $248.
Everything being equal, if the average we came up with holds steady, in five years you’re looking at an estimated $28,800 difference.
When we said rent is expensive, we meant it.
Even so this doesn’t factor in one of the most non-monetary setbacks: The ill will that comes from corralling co-workers up three flights of stairs, year after year.
For Math Enthusiasts Only
To complete the cost analysis, we compared the average monthly mortgage cost and associated taxes of a 3-bedroom, single-family residence to the average monthly cost of renting an apartment. Information on the average monthly rent cost was provided by real estate data and analytic firm Altos Research, which offers the largest housing and apartment rental database in the United States.
The analysis assumed a 35 percent marginal income tax rate, a 1.5 percent property tax rate, a 20% down payment and a mortgage interest rate of 4%. The analysis only compared the current cost of renting to the current monthly cost of buying and does not include the benefit of avoiding future rent increases or gaining property appreciation over the ownership period.
Who is Movoto Real Estate, you might ask? Movoto is a national online real estate brokerage. Our blog has been recognized for its unique approach to city-based research by major news organizations around the world such as Forbes, CBS News, and The New York Times.