How do most people split the rent?

by on February 18, 2011 at 7:02 am in Data Source, Economics | Permalink

I receive this question from readers fairly often, but I don't usually have much of an answer, or for that matter much experience (when I roomed with Daniel Klein, he and I split the rent evenly).  Now there is an interesting study.  There are 42 datapoints and definitely some selection bias, but it's better than anything else I've seen.  It examines for instance whether people first pick rooms and then set the prices, or first set the prices and then pick the rooms, or draw from a hat.  It measures which factors most affect the rent splitting, with "No door" and "Private shower" coming in first and second respectively.  The factor of importance for an apartment with the biggest standard deviation is size of the common area.  In the survey, personal space is what people are willing to pay the most extra for.  Opinions about the importance of windows have a high variance.

Here is their rent calculator, based on the above study.

1 LaraFab@Israel February 18, 2011 at 3:57 am

I still think that the rent should be shared equally. Still you're going to share the kitchen and the bathroom.

2 Christian February 18, 2011 at 5:19 am

My roommates and I employed this strategy a few times:

First, determine which room is the master bedroom (either private bathroom, sq ft, etc). Then, everyone silently bids on what they would pay in rent for the master bedroom. The highest bid gets the room and pays what he/she bid. Repeat this process for other rooms, moving from larger to smaller. The final room pays the difference between the total rent and all previous bids.

Not perfect, but worked every time we tried.

3 Doug February 18, 2011 at 5:42 am

We decided that half the value of a place is in the common area, so half the cost is split equally. The adjustment for bedroom sizes for the other half of the rent was then negotiated. We partly came up with this structure because if a couple is sharing a bedroom, they shouldn't be paying the same rent as an individual in an identitical bedroom because they're using more shared resources.

4 Alex Godofsky February 18, 2011 at 6:00 am

A friend and I are moving into an apartment soon and we plan to do what I call a thieves' auction (I have no idea if this has any official name): one of us will divide the rent between the two bedrooms, and the other chooses one.

5 Michael Lugo February 18, 2011 at 6:28 am

I actually do know some people who did an auction to solve this problem when they were in college. Not surprisingly, at least one of them was an economist. He was the one who proposed the solution; he ended up with the smallest room, but paid a very low amount of rent and believed this perfectly reasonable.

6 Khoth February 18, 2011 at 7:20 am

Alex: Do you also have a method of deciding who gets to divide the rent between the rooms? The outcome could be different depending on who does it.

7 Master of None February 18, 2011 at 8:02 am

I've always done an informal auction process.

If there is a big room and a small room, I'll start by offering to pay 55% of the rent if I can have the big room.

My roommate might say that he, too, would pay 55% for the big room, so I will raise my offer to 60%, or call his bluff.

Etc.

8 Norman Pfyster February 18, 2011 at 8:21 am

No one factors in furniture or other household goods?

9 Doug February 18, 2011 at 9:02 am

Mark A:

That's pretty funny that we came to the same conclusion. It always helps when your house is pretty math oriented as ours was with an econ major, a math major, and a computer science major.

10 Alex Godofsky February 18, 2011 at 9:09 am

PS: I am a compsci major and my (future) roomate is an econ major.

11 C February 18, 2011 at 11:35 am

I've tried this with great success:

For a two bedroom flat, both roommates bid on the better room. Each bidder naturally bids so that he will be indifferent between the two rooms (don't try to cheat, you will get screwed). The high bidder wins, but he pays half way between the two bids. That way, he gets a surplus. The low bidder pays the total rent less the high bidder's rent and he ends up with the same surplus as the high bidder! That's because the amount that the high bidder pays that is above the low bidder's indifference price lowers the low bidder's rent on the crappier room by that amount.

12 Nemo Semret February 19, 2011 at 5:23 am

I did another type of auction with me and 3 other roommates. Each submits bids on all 4 rooms, but for each person the bids must add up to the total rent. Then the highest bidder wins each room and pays the average bid price for that room.

13 10th Degree February 28, 2011 at 9:19 am

In the past I have always been lucky enough to make enough $ to have my own apartment; thinks like splitting or sharing anything never even crossed my mind. With my current roommates, I answered an ad and I think the rent amount they gave out was a random number they just decided upon with no rhyme or reason. Joe Lie; Most people don't care at all about direct sunlight facing their rooms. That's pretty funny.

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