QUESTION

OMG. We’ve been living in the same apartment forever, and now we’re being price gouged by our landlord for the lease renewal. Should we stay or should we go?

ANSWER

Last week, I was less than five minutes into delivering a financial plan when my clients interrupted to tell me their landlord was increasing their rent by 75% (!!!) at the end of their lease. Of course, they were upset, and their immediate next thought was to begin preparing for a move next summer. But is moving always the best solution when your rent balloons higher? 

First, know that you’re allowed to be pissed off when market forces start working against you. It might even feel personal, if you’ve been living there a long time and thought you had a relationship with your landlord. But also, like a corporate job, renting is a business arrangement and should be approached like one. 

For example, when Heather and I were living in New York City, we wanted to move into a bigger unit in our building after getting pregnant with our first daughter. But our landlord was in the process of converting all the one bedrooms with dining rooms into faux-two-bedroom apartments so they could charge two-bedroom prices. It didn’t matter that we had been perfect tenants for five years–they had zero loyalty to us. Why would they? Our relationship was strictly business, and they saw the opportunity to make more money. If we wanted to stay in our building and get more space, we had to pay the price or someone else would. After some heated exchanges with our landlord that went absolutely nowhere, our next step was to dig deep into our finances to see if it made sense for us to stay or leave.

The first thing we did was look at our cash flow to see how much more money in rent we could afford to pay. At the time, almost doubling our rent wasn’t something our budget could handle without making uncomfortable changes to our lifestyle. With a baby on the way, we were already nervous about what new costs would appear. On top of that, we had yet to lock in childcare, which we knew would be a dramatic hit to our cash flow.

We then looked at our savings to understand how much cash we would need to move to a larger but still affordable apartment. We had to factor in: (1) The higher rent payments; (2) moving costs; (3) security deposits; and (4) broker’s fees, as well as the time we’d need to take off from work to make it all happen. After adding everything up, we could see it would still make more financial sense to move across town than stay in our current apartment.

Interestingly, for the clients I had mentioned earlier, the opposite turned out to be true. Despite the dramatic increase in rent, moving their family of four to a new apartment doesn’t break out any better than if they stay where they are, because market rates for a new place are still slightly higher than their new monthly rent. 

And of course, the cost of rent and moving aren’t the only factors to consider. You also need to think about whether your commuting costs will increase–and whether your commute will become a bigger headache! Keep in mind the convenience factor: your nearest grocery stores, service providers, shopping centers, etc. When Heather and I moved apartments, we ended up a stone’s throw away from one of those combo buybuy Baby and Bed Bath & Beyonds (RIP), which was pretty clutch at the time. 

For parents, childcare might be the most important consideration. Enrolling kids into new daycare programs and schools doesn’t just happen everywhere. It depends where you are. Getting placed on a waitlist somewhere could put your family in a serious logistical bind and carry an expense of unpredictability that’s just too much to bear. That certainty carries a premium. For families considering whether or not moving makes sense, this one factor could ultimately be the whole ballgame.

I do understand the frustration that comes with getting priced out of your current living situation, but you can’t let that prevent you from carefully examining all the hard and soft costs of moving to someplace new. The hard costs alone don’t always paint a full picture when soft costs can easily outweigh them. Consider both, keep your cool, and do what makes the most sense all around.

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