30% Rent Rule

The 30% rule is the most widely cited housing affordability guideline: spend no more than 30% of your gross income on rent (or mortgage + housing costs). It originated from HUD policy in 1981 and remains the standard used by lenders, financial advisors, and landlords.

The Formula:

Maximum Rent = Gross Monthly Income × 30%

Real-World Examples:

$60,000/year salary:

• Gross monthly income: $5,000
• Max rent (30%): $1,500
• Comfortable rent (25%): $1,250

$80,000/year salary:

• Gross monthly income: $6,667
• Max rent (30%): $2,000
• Comfortable rent (25%): $1,667

$120,000/year salary:

• Gross monthly income: $10,000
• Max rent (30%): $3,000
• Comfortable rent (25%): $2,500

Why 30%?

Historical Context:

• Before 1981: No official standard
• 1981: HUD set 30% as "affordable housing" threshold
• Logic: Leave 70% for all other expenses (food, transport, savings, debt, entertainment)

When to Go Higher (30-40%):

• ✅ No debt (no car loan, credit cards, student loans)
• ✅ Stable, recession-proof job
• ✅ High income (easier to save even at 35%)
• ✅ Utilities included in rent
• ✅ Walking distance to work (no car needed)

When to Go Lower (20-25%):

• ⚠️ High debt-to-income ratio
• ⚠️ Unstable income (freelance, seasonal)
• ⚠️ Saving for major goal (house down payment)
• ⚠️ Single income supporting family

The Bottom Line: The 30% rule is a guideline, not a law. In HCOL cities, 35-40% may be unavoidable temporarily. The real question: After housing, do you have enough left for debt, savings, and life?