The Splitting the Rent Formula

by Shilpi Paul

image
Courtesy of New York magazine.

This article originally ran in February 2013.

When sharing an apartment or group house, it only seems fair that those in bigger rooms should pay a higher share of the rent. But, how do you factor in features like more windows, a fireplace, or a bigger closet?

Miller Samuel’s Jonathan Miller (who used to do an amazing job analyzing the DC market) takes a stab at how to calculate a fair rent split in an article for New York magazine.

For the article, Miller looks at a two-bedroom apartment with a rent of $3,200 a month.

Miller advocates for dividing the rent by square footage as proportionally as possible. In the example given, room A is 225 square feet, while room B is 175 square feet; this breaks down to a 9/7 ratio. By our calculations, that comes to $1,800 for roommate A and $1,400 for roommate B. (Roommate A is responsible for 56.25 percent of the rent, and roommate B for 43.75 percent.)

If one bedroom has an attached bathroom, said Miller, that should be worth about 2 percent of the monthly rent, or $64 in the example. In the article, room B has a bathroom, so the divide changes: roommate A pays $1,736, and roommate B pays $1,464.

From there, other square-footage adding amenities, like a bigger closet or a terrace, need to be factored in. Miller offers a few equations to help crunch the numbers in a fair manner. After that, various life-enhancing amenities may warrant slight adjustments. For example, a fireplace might with worth about $25 dollars more a month.

While this approach may require you breaking out the TI-82, the fairness of the final result may ultimately mitigate tensions among roommates. Readers, how do you go about dividing up the rent?

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This article originally published at http://dc.urbanturf.com/articles/blog/first_timer_primer_splitting_the_rent/6702

9 Comments

  1. Katy said at 4:44 pm on Monday February 25, 2013:

    Calculations are useful ways to figure out the rent, but you almost need “weights” for the varying importance of factors to different people. For example, roommate B may value a walk-in closet and thus may be willing to pay much more, but roommate A values the terrace and could care less about closets (thus would be unwilling to pay more for a closet). It adds more complexity to the formula though.

  1. Ellen said at 4:51 pm on Monday February 25, 2013:

    This would’ve come in handy when I moved into my place two months ago. I live in a two-bedroom where both bedrooms are about the same size, but my roommate has a private balcony. We arbitrarily agreed she would pay $50 more a month, but now that seems too low a premium.

  1. David said at 5:40 pm on Monday February 25, 2013:

    I like the sq method, but I would tweak the formula to include the entire apartment square footage – not just the bedrooms.
    Hypothetical -
    2000 per month rent.  Bedroom 1 (9x11) – 99 sqft.  Bedroom 2 (14x16) – 224 sq ft.  Both bedrooms share a bath. 
    While Bedroom 2 was obviously a bigger room, it creates a 31-69 ratio meaning Bedroom 2 pays 1380 per month while Bedroom 1 only pays 620 per month.  Even if someone wanted the bigger room, no one would ever think that a 760 per month difference would be fair. 
    A better way would be to calculate the ratio using the square footage of the entire apartment, not just the bedrooms.  If the apartment was 1000 sq ft – Bedroom 1 has access to 776 sq ft, Bedroom 2 has access to 901 sq ft.  This creates a 46-54 ratio.  Bedroom 1 pays 920.  Bedroom 2 pays 1080.

  1. xmal said at 12:03 pm on Tuesday February 26, 2013:

    Agree with David—-I’ve always split the total rent into two and divided the first half equally (equal access to common amenities) and the second half by square footage of individual spaces.

    Any more complicated and you can’t get anyone to agree on the weights of the different amenities.

  1. Janel said at 10:58 am on Wednesday February 27, 2013:

    The private bathroom seems highly undervalued (in general). Granted, in this example, there’s only two roommates and one private bathroom, which implies that there is a second bathroom to which the other roommate would have full access, which kinda implies they each have their own bathroom. But let’s say the rental unit is a four-bedroom house with one of the bedrooms being the master with an ensuite bathroom. The private bathroom is clearly a significant premium since the other roommates would have to share the remaining (and less convenient since they’re not attached to the bedrooms) bathrooms.

  1. Jake said at 3:43 pm on Tuesday December 3, 2013:

    Don’t need a TI -there’s an app for that:

    http://splitwise.com/calculators/rent

  1. Jeremy said at 9:25 pm on Tuesday December 3, 2013:

    As many previous commenters have said, the problem with a formula like this is it doesn’t factor in the different preferences and priorities of different people. A formula is probably the only reasonable answer if you expect the roommates to change over time. But if entering the arrangement with a static set of roommates, I think it’s the wrong solution.

    The goal should be to set prices for rooms so everyone is happy with his or her room. If anyone wants to switch, the pricing is wrong. This could occur when using a formula, e.g., Janel’s bathroom situation or David’s differing room sizes. 

    When the roommates are static, I’ve always adopted a second-price auction as the mechanism for setting room prices.  Consider for example a 2-bedroom at $3200. (It’s a bit more complicated for larger groups.) If the roommates prefer different rooms, then the rent should be split evenly at $1600 each. Otherwise, both roommates should bid on the room the maximum amount they are willing to pay. Suppose roommate 1 is willing to pay $1800 and roommate 2 is willing to pay $2500.  Then roommate 2 gets the room at $1801/mo.  The point is that at this price, neither party should want to switch.

  1. Matt said at 10:33 am on Thursday December 5, 2013:

    @David @xmal +1

  1. FrugalCalc said at 11:51 am on Saturday December 7, 2013:

    I like starting with the proportions of rent based on living space sqft breakdown.  From there, I think the sqft of a bathroom should be doubled or trippled due to its convenience.

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