29 October 2005

Size matters, but that's not all

I am considering moving in with 3 to 5 Brazilians next semester. If all 5 and I decide to live in a 4 bedroom house, that means 4 people will be sharing 2 rooms and 2 people will have their own. Let us say all the rooms are of equal size. How do you split up the costs?

A simple answer may be to have each room cost 1/4 of the rent. In this scheme, a room splitter pays 1/8 of the rent, while a single pays 1/4. (For a $1500 house this is $187.50 for a splitter and $375 for a single).

But a house is not only rooms. There is the kitchen, living room, bathrooms, storage space, lawn, etc. So the question is, how much is all that stuff worth? If we decide that 50% of the value of the house is in the rooms, then the rest is valued at 50% of the total rent. Example:

We go in on a $1500/month house. Let us give value of rooms to value of rest of house a 50/50 ratio. Now each inhabitant pays ($1500*50%)/6 people = $125, solely to live in the house. But of course you want to live in a room right!? Well the marginal (or extra) value of adding a room is ($1500*50%)/4 rooms = $187.50 per room. Under this scheme a room splitter pays $218 and a non-splitter pays $312.50.

The driving metric is the ratio of the value of the rooms to the value of the rest of the house! A room splitter argues that the rooms are very valueable and should not have to pay much for just living in the house. Whereas a single roomer, which I will be, argues that rooms aren't that important and it is really the whole house that we are splitting.

Perhaps it seems interesting that the people deciding to have a roommate think (or at least say!) that room space is so important, while those having their own room think that room space doesn't matter so much; they should switch! The falacy here is that all room space is equally important. If I have a big room to myself and you take away one square foot, I might not even notice. Do the same thing in a small room I am sharing with some one else and I will surely notice! I value the square foot much more when I have only a few to start.

1 comment:

Alex Rixey said...

I agree with your thorough analysis of the personal room/"public" amenities division of the house, but I think you're missing one of the key attributes of the splitter/single decision. There is a discrete difference between having an individual room and sharing with someone else! It may even be logical in most cases to be willing to accept a smaller room as an individual than a larger "half-room" as a splitter. (This is also shown in real estate in general: a lot of useful space could be gained by knocking down those pesky interior walls, but people derive significant value from privacy and division between rooms).

Having your own room confers certain other benefits which need to be evaluated: a) Privacy, which becomes significantly more valuable when you have a significant other (do bachelors have more economic power because of their decreased opportunity cost of privacy?) b) Control, which comes in handy when you think it seems reasonable to bring home 2 extra couches you picked up off the street and your roommate disagrees with your artistic vision for the room. c) Environmental "externalities," like the week-old pizza you find under your roommate's desk after the smell finally drives you insane, or the creeping boundary of his amorphous stuff-pile that slowly threatens to strangle you out of the room.

Depending on your preferences, however, there may be benefits to sharing a room as opposed to just having apartment mates. Certainly you have the opportunity (are forced?) to develop a stronger social bond with your roommate than you otherwise would, and it gives you an excuse not to feel like quite as much of a recluse when you spend all day blogging on the internet ("Hey, at least my roommate was there too").

OK, although there are even more considerations, that's way more than my two-cents' worth...