Housing Hurdles: Is the 30% Income Rule for Rent Still Realistic in 2024?
Written by
Cynthia Measom
Edited by
Rebekah Evans
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In the past, many financial experts were in agreement that a good rule of thumb for your personal finances was to not spend more than 30% of your gross income on rent. However, in today’s economy, more than half of American renters spend more than that, and not by choice, according to research from The Joint Center for Housing Studies at Harvard University. Unfortunately, limiting the amount you spend on rent to only 30% of your total income is unrealistic in many cases.
“The 30% income rule, where you spend no more than 30% of your income on rent, has been a long-standing guideline in the renting world,” said real estate investor Cam Dowski, CEO and founder at We Buy Houses Chicago. “But in 2024, things can be different. Rental prices, income levels and housing markets can change, making it harder to stick to the 30% rule.”
“In some places, especially where rent is high or rapidly increasing, following the rule might be tough. However, it’s still a helpful way to gauge affordability and financial health when considering renting.”
Factors That Can Make the 30% Rule Unrealistic
Various factors exist that make paying no more than 30% of your earnings toward your rent an unrealistic goal.
Local Housing Markets
“Many factors come into play when deciding if the 30% rule is realistic,” Dowski said. “The local housing market is a big one. Prices can vary depending on supply and demand, population growth and the local economy. In cities with high demand and limited supply, rents may grow faster than incomes, making it harder to stay within the 30% limit.”
High demand and limited supply is nothing new. In a recent interview with PBS News Hour, Whitney Airgood-Obrycki with the Harvard Joint Center for Housing Studies said that record-high rent growth started at the end of 2021. She explained that during that time, there was a demand for rental vacancies that was much higher than the supply, which pushed rents up and made it harder for people to afford housing. And that trend is still happening today.
Personal Income
Dowski said that your income level is also important.
“If you earn more, it might be easier to stick to the rule,” he said. “But if you have lower income or other financial obligations, it can be challenging to meet the 30% threshold without sacrificing other essential expenses.”
For example, someone who earns over three times the average salary in the U.S., such as $200,000 a year, and spends 35% of that income — or $70,000 a year — on rent might be more likely to afford it than someone who earns $50,000 a year and spends $17,500 annually on rent.
Lifestyle Choices and Financial Goals
“Your lifestyle choices and financial priorities matter too,” Dowski said. “If you prioritize living in a fancy neighborhood or a bigger apartment, you might be willing to spend more on rent. On the other hand, if you’re saving for things like buying a home or retirement, you might want to keep your housing costs lower.”
Unfortunately, many people have to give up spending on things they enjoy, like entertainment, just to afford their basic needs. And even then, that’s not enough for some who have to utilize community food pantries just so their families have enough to eat.
Final Thoughts
In response to the question, “Is the 30% income rule for rent still realistic in 2024?”, there’s no one-size-fits-all answer.
“The 30% rule is a good starting point,” Dowski said, “but it’s important to consider your specific circumstances and make choices that work best for you.”
Unfortunately, for many Americans, 30% takes way too big of a bite out of their paychecks, leaving them struggling for the rest of the month.
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