It’s a piece of financial advice that’s been around for generations: When searching for a place to live, don’t spend more than 30% of your income on rent. But with housing costs driving inflation today, is that guideline still realistic?
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By one measure, nearly two-thirds of working-age renters were cost-burdened in 2023, the Joint Center for Housing Studies at Harvard found.
For “most everyday people,” the guideline remains useful, said Daryl Fairweather, chief economist at Redfin. However the rule comes with a number of caveats, experts tell PBS News.
Here’s what to know about the 30% rule’s history, its relevance in today’s housing market and what strategies might make more sense for renters now.
Origins of the 30% rule
In the late 19th or early 20th century, a rule of thumb that called for “a week’s wages for a month’s rent” came from studies about typical budgets for working class families, said Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies. Reformers used that guideline through the Great Depression to determine the number of families who could not afford rent without spending more than 20% to 25% of their income.
That standard — 25% of income — was codified into various federal housing assistance programs in the 1960s, Herbert said, and remained that way until the early 1980s. Then, Congress began looking for ways to cut back on housing program funding. By raising the minimum people needed to contribute to 30%, the federal government saved money.
Today, 30% is still what people who receive housing vouchers pay from their own income, and is the rent apportioning system for public housing as well as legacy, “project-based programs,” Herbert said.
Does it still make sense for renters in 2025?
Herbert said that the Joint Center for Housing Studies has found that, for people with modest incomes – around 50% of an area’s median income – the rule “wasn’t bad.” But on either side of the income curve, for very poor or very wealthy people, the rule becomes much less useful.
“If I’m Jeff Bezos, I could probably spend 99.9% of my income on housing and still have enough left over for everything else,” Herbert said.
“If I’m Jeff Bezos, I could probably spend 99.9% of my income on housing and still have enough left over for everything else.”
“If I’m very poor and I’m making [a] very little amount of money, then spending 30% of my income on housing might mean I don’t have enough left over for food, or everything else,” he added.
A 2018 report analyzed the mean monthly household incomes, costs and rents for three types of households in Cleveland, Phoenix and Los Angeles. In only two of the nine scenarios did families’ incomes cover their housing costs after all other bills: They were both two-adult households with no kids earning between 50% and 80% of the average income.
In every other scenario — including single people earning between 30% and 50% of average area income and two adults with two children earning between 50% and 100% of average area income — the households’ projected costs outweighed their ability to pay, in some cases by hundreds of dollars per month.
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People who live in cities where the average cost of rent is high, like New York, San Francisco, or Washington, D.C., also might find it tough to spend less than a third of their income on housing, said Kimberly Palmer, personal finance expert at NerdWallet.
Other groups who might find the 30% rule hard to follow? Young people, new college graduates and people just entering the workforce, Fairweather said. Job opportunities can often be concentrated in those high-cost-of-living cities, meaning they need to make a trade-off.
“Getting your career on the right track as a young person is really important, because it will set you up for your lifetime earnings, which will impact your ability to pay rent for the rest of your life,” Fairweather said.
Is there a better way to figure out how much money you should spend on rent?
All three experts agreed the best way to figure out how much you can spend on rent is to create a budget.
“The thing that I would recommend to anyone is to go through their actual budget and figure out how much they’re currently spending on their necessities: groceries, transportation costs, health care costs, making sure they have enough money for emergency savings and retirement savings,” Fairweather said. “Then whatever money is left over is essentially how much you can spend on housing.”
She also suggested creating some wiggle room in the rent budget, given that housing costs tend to rise over time.
Another guideline is the 50-30-20 method, Palmer said: Try to spend 50% of your income on needs and 30% on wants, while putting 20% toward savings and debt payments. Rent would fit in the “needs” bucket, along with food and transportation, she said.
For some people, especially young adults, there are ways to save money if your rent is approaching or topping 30% of your income. Fairweather recommends finding roommates, staying with parents or other family, or living near public transportation to go without a car, if possible.
But Palmer also noted that younger people are less likely to have large financial responsibilities — like an expensive car, or a child — and can therefore be a little more flexible with rent.
“You don’t want to overcommit your budget to rent, if you can help it. But if you’re a young person living in a high-cost city, it’s really hard to keep it below 30%,” she said. “It’s certainly not something you should feel guilty about.”
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