The Rental Discount for Shacking Up

The Rental Discount for Shacking Up
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It's Valentine's Day. Picture a romantic restaurant. Main course is finished. Lights are low. Your sweetheart leans over the table, and with a quiet voice, starts to speak. You prepare yourself for any possible conversation, playing each one out in your head. And then the question comes: "How much do you think we'll save if we move in together?"

That might not be the romantic discussion you expected. But it's an important one. Housing costs and economics affect whether people get roommates, live with their parents, or - yes - move in with their sweetheart. In general, living together saves money - but that depends on how many bedrooms you upgrade to and where you live.

To find out exactly what the cost tradeoffs are, we used
to calculate how much you'd save if you and your sweetheart traded in your separate 1-bedroom apartments and moved into a 2-bed or even a 3-bed unit. For this analysis, we did not simply compare median rents for 1-bed, 2-bed, and 3-bed apartments, because that would not be an apples-to-apples comparison: apartments with more bedrooms might be in different neighborhoods, have more amenities, or be in better-maintained buildings. Instead, we compared units in the
same
apartment building, calculating the average price difference by number of bedrooms for apartments within a building (see note below).

Love Can Save You 35% on Rent
Nationally, a 2-bedroom apartment rents for 30% more, on average, than a 1-bedroom in the same building. A bit of math reveals that trading in two 1-bedroom apartments for a 2-bedroom would save you 35% on rent. That makes sense: Renting a 2-bedroom should be less than renting two 1-bedrooms since the total number of bedrooms stays the same but you merge into one kitchen and maybe even one bathroom.

What's more surprising is that you'd even save on housing costs by trading in two 1-bedroom apartments for a 3-bedroom. Nationally, a 3-bedroom apartment rents for 75% more, on average, than a 1-bedroom in the same building. That means if you traded in two 1-bedroom apartments for a 3-bedroom, you'd still save 12% on housing - and you and your sweetie would have a bedroom to share and a spare room each.

Where Shacking Up Saves You the Least: New York and Dallas
These shacking-up savings are national averages. Local markets differ, especially if you're looking to upgrade to that 3-bedroom together. The biggest discount for living together is in Sacramento, where a 2-bedroom costs, on average, 40% less than two 1-bedroom units in the same building. And the savings would be 50% if you traded two 1-bedrooms in for one 1-bedroom, but what you save in dollars you might end up paying for in stress. By comparison, a 2-bedroom looks like a pretty good deal. The discount is smallest in New York, at 28%, but even that will more than cover many years of overpriced Valentine's Day restaurant dinners.

But if you each really need your own spare bedroom to use for your home office, meditation practice, drum set, or whatever, the decision gets harder in some metros. In 23 of the 25 largest rental markets, a 3-bedroom is cheaper, on average, than two 1-bedrooms. The discount is largest in Las Vegas, Miami, and Baltimore. However, there's no discount in New York or Dallas: in those markets, a 3-bedroom is slightly more expensive than two 1-bedrooms - which is the same as saying a 3-bedroom is a little more than twice the rent of a 1-bedroom. And in Chicago, it's a wash. In general, the shacking-up discount is slimmer in metros where overall rents are higher.

After crunching the numbers, we're not so cold-hearted as to suggest that you should make your relationship fit your rental budget. It's just that we're in the business of giving advice on housing, not love, so we're sticking to what we know. But if you're the one leaning across the table on Valentine's Day, planning to make the case for why you and your sweetheart should move in together, you can thank us for making the proposal a little more compelling.

Note: this analysis is based on an apartment-unit-level regression of log-rents on dummy variables for 1, 2, and 3 bedrooms, with building-level fixed effects. This is based on units listed for rent on Trulia on January 9, 2014.

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