High-tech jobs have become one of the strongest job growth areas, especially in locations with many technology companies such as Seattle, San Diego, and Salt Lake City. Frequently, a skilled candidate will have job offers in these cities. Human resource and mobility professionals are often asked to understand and assess cost-of-living differentials for both management and employees. The data below reveals some key differences between renting and owning.
Using ERI Economic Research Institute’s Relocation Assessor, we explore the data compared to the U.S. national average lifestyle for both a renter and a home owner with annual earnings of $100,000.
Note, the U.S. national average estimated home value for a 2,200 square foot home is $237,713, while the monthly rent for a 1,200 square foot apartment is $1,099. A family size of four is assumed in both home ownership and apartment renter analyses. The expenditure categories of consumables (calculated from the relative costs of a market basket of commonly purchased goods and services), transportation, and health services are the same in the rental verses ownership comparison because the same family size is used. Annual housing cost estimates and income and payroll tax estimates yield interesting cost-of-living differentials.
Both Seattle and San Diego have a higher cost of living than the national average. Seattle comes in at 118.2% under the home-ownership option, with an estimated home value of $537,083. In San Diego, it costs 21.4% more than the average, with the estimated home value at $581,429. Salt Lake City comes in very close to the national average for both renters and home owners, although the estimated home price of $334,703 is higher than that of the U.S. national average. Remember, these are differential estimates for one year, and the home mortgage payments are spread out over 30 years.
There is the potential for tax saving under the home-ownership scenarios in locations with higher home prices due to the mortgage interest and property tax deductions included in the Relocation Assessor data. In San Diego, the difference is a savings of $4,417 between renting and owning. The tax savings is more modest in Salt Lake City ($1,980) because the estimated home price (thus, the mortgage interest amount) is lower. Washington has no state income tax, yet owning still results in a tax savings of $2,477.
Assuming a national average salary of $150,000, expected annual salaries in Seattle would be 14.9% higher; in San Diego, 11.7% higher; and in Salt Lake City, 0.6% higher.