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- A general rule of thumb is that you should aim to spend no more than 30% of your gross income on rent.
- But a better way to find out how much rent you can afford is to look at your overall budget and your individual needs.
- Getting a roommate or moving to a different neighborhood can help if you're struggling to afford rent.
The typical household spends a hefty chunk of their earnings on three things: housing, transportation, and food.
The median US renter spends about 30% of their gross income on rent, according to recent data from the US Census Bureau. But almost half of renters spend more than this.
What's the magic number when it comes to calculating rent affordability? Here's how to determine how much rent you can afford each month.
How much rent can I afford? The 30% rule
When you spend more than 30% of your income on rent, the Department of Housing and Urban Development considers you to be cost-burdened. If you spend more than 50%, you're severely cost-burdened. Being cost-burdened makes it much harder for individuals to afford other necessities.
Experts often recommend that renters use 30% as a benchmark for how much they should spend on rent. But like any financial rule of thumb, it's not always right for every person's individual budget.
For example, many renters live in high-cost areas where spending 30% or less of their monthly income on rent is nearly impossible without an unusually high income.
Take New York City, where the median monthly rent is $1,714, and the median income for an individual is $48,066, according to the US Census. This income equates to $4,006 a month. To meet the 30% threshold, this person would need to spend around $1,202 or less on rent — but instead, they're spending almost 43% on rent.
As we can see, the 30% rule isn't always helpful for people in high-cost areas. Or, if you have a larger income or live in a low-cost area, it might not be wise to spend the full 30% on rent.
Still, the 30% rule can be a good starting point to give you an idea of what a reasonable amount to spend on rent might look like. Here's how to calculate that.
Using the 30% rule to determine your rent payment capacity: A step-by-step guide
Determining affordable rent for your budget requires a bit of math.
1. Find your gross monthly pay
First, you'll need to figure out what you earn each month before taxes. You can look at your paystubs to see what your gross pay is, or you can calculate it yourself.
If you're paid a salary, take your annual salary and divide it by 12. If you're paid hourly, multiply your hourly rate by the number of hours you work each month.
2. Multiply your gross monthly pay by 30%
Take the amount you earn before taxes each month and multiply it by 0.30. This is the maximum amount you should spend on rent each month, according to the 30% rule. This includes both the rent you pay each month as well as any utilities.
3. See how this fits into your overall budget
Everybody has different needs, wants, and savings goals. These three things make up your budget, and because they're so individual, it's up to you to determine how to allocate your money.
If the 30% rule isn't suitable for you because rent is expensive in your city, you're likely going to need to pare back in other areas of your budget to make room. Or, if you're saving aggressively for retirement, for example, you might want to look for cheaper rental units so you can spend less of your income on housing.
If you're having trouble figuring out how much you should spend overall each month, a budgeting app might make the process a bit easier.
Determining affordable rent for your budget
Many experts recommend using the 50/30/20 rule to help you set your budget, and this rule could help you with estimating suitable rent for your income level.
With this budgeting rule, you'll aim to spend 50% of your income on things you need, 30% on things you want, and 20% on debt payments and savings. This rule utilizes after-tax income, or your take-home pay, rather than your pre-tax income.
The "needs" bucket includes housing costs as well as other things you need to survive, including food and transportation to get to work. To figure out how much of this category should be spent on rent, you'll need to look at all of your necessary costs and see how much room you have for a monthly rent payment on top of those costs.
Rent budgeting tips
If you're having trouble affording your rent, here are some things that might help:
- Track your spending habits. The first step to finding more money in your budget is understanding where all your hard-earned money is going. You might find that you're paying for a subscription you no longer want, or that your occasional online shopping purchases are actually costing you more than you think.
- Split rent with a roommate. Especially in high-cost areas, living with a roommate can substantially lower your rent burden and free up space in your budget for other things.
- Move to a more affordable area. Average rent prices can vary a lot from one town to the next, or even one neighborhood to the next. If you're able to, moving to a more affordable area can be a good way to save on rent.
- Find ways to cut back on other costs. Giving up your weekly bakery treat probably isn't going to make a huge difference in how much money you have left over each month, but looking at larger, regular costs can. Shopping at a less expensive grocery store, for example, or using a gym with a cheaper membership could give you a bit more breathing room in your monthly budget.
- Increase your income. Obviously, this is easier said than done. Ways to increase your income include finding a higher-paying job, asking for a raise, or taking on a side hustle.
- Consider renting vs. buying. Though renting is often more affordable than owning a home, there are situations where buying could make more sense. A mortgage calculator can help you determine whether homeownership is affordable for you.
How much rent can I afford FAQs
Is 30% of income too much for rent? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.Spending no more than 30% of your income on rent is a popular rule of thumb, but whether this makes sense for you depends on your unique financial situation. And depending on where you live, it may be difficult to keep your costs below 30%.
Is 50% of your income too much for rent? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.Spending 50% of your income on rent is generally considered to be too much, though it can be hard to avoid, especially if you're a low earner in a high-cost area. Living with a roommate can help you spend less on rent and avoid financial strain.
How much rent can I afford based on net income? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.Experts typically recommend not spending more than 30% of your gross income on rent. Gross income is what you earn before taxes are taken out. But it may be more helpful to look at your net income (what you earn after taxes) and determine what amount of rent fits comfortably into your after-tax budget.
How much rent can I afford if I make $70,000 a year? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.You should aim to spend no more than $1,750 per month on rent if you earn $70,000 a year, according to the 30% rule. But the healthy number for your budget might be different, depending on your individual circumstances.
Molly Grace Mortgage Reporter Molly Grace is a mortgage reporter for Business Insider with over six years of experience writing about mortgages and homeownership. ExperienceIn addition to her daily mortgage rate coverage, Molly also writes mortgage lender reviews and educational articles on homebuying and analyzes data and economic trends to give readers actionable and up-to-date information about the housing market.She also tracks affordable mortgage and down payment assistance programs offered throughout the country to keep her readers informed of homebuyer programs available to them. Before Business Insider, Molly was a blog writer for Rocket Companies and helped to create Rocket Mortgage’s Shorty Award-winning podcast Home. Made.Molly is passionate about covering personal finance topics with empathy. Her goal is to make homebuying knowledge more accessible, especially for groups that may think homeownership is out of reach. ExpertiseMolly is an expert in the following topics:- Mortgages and mortgage lenders
- Home equity
- The housing market
- The economy and the forces that impact mortgage rates
- Budgeting and saving
- Credit
- Insurance
- Retirement savings
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