The Most Expensive City for Renters Will Surprise You - Fortune

The Most Expensive City for Renters Will Surprise You

Lucinda Shen

Apr 21, 2016

It's not London, New York, or even the reigning champion over the world's most expensive housing market, Hong Kong.

No—the city with the least affordable rent is Beijing, where rent costs eats up roughly 123% the average salary. Smog included. Although Beijing's nominal monthly rent is $789 on average, the ordinary worker cannot afford to live in typical housing alone, according to the study from U.K.-based nonprofit organization, Global Cities Business Alliance, since rent costs exceed their salary.

The second and third most expensive cities to live in are Abu Dhabi and Hong Kong, where rent is 70% and 64% of earnings respectively. T he organization analyzed rent and income data from 15 major cities.

Why SoftBank Made a Record-Breaking $1.1 Billion Bet on This Biotech Firm

“Big cities like Beijing are victims of their own success: Rapid growth has magnetized workers, but they now need to deliver enough houses so that workers enjoy living there,” said Lesley Saville, CEO of the Global Cities Business Alliance in a statement. "Beijing is trying to address the problem with measures such as building new underground lines to unlock housing and by directly funding development, which will help."

In comparison, rent in New York and San Francisco, two cities known for high housing prices, average around 63% or 51% of earnings respectively.

Examining San Francisco’s Fall in Home Prices

Redfin’s chief economist looked at the lower end of the market.

The rising housing costs have pushed workers in Beijing further into surrounding areas. According to the Alliance, the average Beijing worker commutes 104 minutes, round trip, for their job—making it the city with the second longest commute time behind Mexico City, where employees travel 113 minutes, in the world.

But some citizens have taken less conventional ways to deal with surging housing costs in Beijing. Some have started living in the small windowless basements of apartment buildings, or in one case, the sewers, Reuters reported.

And it's not unwarranted. Housing prices have risen 18% in the 12 months ending March. But there are other problematic implications to the high cost of rent in Beijing. While consumers are spending the majority of their paychecks on rent, they also have far less money to spend on other goods and services, which can't be good for a country trying to stimulate growth and transition to a consumer-based economy.