If you’re like most Americans, the largest expense in your monthly budget is housing, whether it’s in the form of rent or a mortgage payment. According to the Bureau of Labor Statistics, housing expenses accounted for 32.9% of annual household budgets in 2023, the latest period for which statistics are available. But many renters pay much more.
If you’re a renter, how much should you spend on rent without busting your budget? Can you afford that killer apartment that’s walkable to restaurants, bars and boutiques — or should you be more conservative and stay well below your budget at a price point that’s easily affordable?
[Read: Is It Better to Rent or Buy a House?]
The 30% Rule
“When trying to figure out how much of your monthly income should go toward rent, there are a few ways of calculating what renters should spend,” says Van French, director of rentals for Gibson Sotheby’s International Realty in Boston. “There’s no one-size-fits-all answer, but a general rule of thumb many renters use is the 30% rule.”
That rule states that renters should not spend more than 30% of their gross monthly income on rent. So, if you gross $6,000 per month, you should spend no more than $1,800 per month on rent.
With the typical asking rent in the U.S. reaching $2,005 per month in March, according to Zillow, and the annual income needed to comfortably afford a typical rental rising to $80,204, spending your housing dollars wisely is more important than ever to avoid becoming house poor.
[Related:4 Common Landlord-Tenant Issues and How to Solve Them]
How Much Income a Landlord Requires
Many landlords also use a rule of thumb to decide if a prospective tenant is qualified financially. Michael H. Zaransky, founder and managing principal of MZ Capital Partners in Northbrook, Illinois, says he and many other landlords look for renters whose gross monthly income is at least three times the rent, although prospects who don’t meet the income level can qualify in other ways if they pass background and credit checks, he says.
But landlords in some pricey markets look for even more income. Sydney Blumstein, an associate broker with The Corcoran Group in New York City, says that New York landlords typically require that a prospective renter have annual earnings of 40 times the monthly rent, so someone would have to earn $120,000 per year to afford a $3,000 apartment.
Renters often need more than just a substantial income, though. In many markets, they need to have sufficient liquidity to post the first month’s rent, last month’s rent, security deposit and, possibly, a brokerage commission, depending on the market.
That means that while the 30% rule is a good starting point for thinking about what you can afford, prospective renters need to be prepared to spend more when necessary, depending on their own personal needs and wants.
“Rules of thumb are great, but they are a rough guideline, and you should consider your own personal financial situation and how you prioritize spending and saving to figure out whether it’s a good guide for you,” says Danielle Hale, chief economist of Realtor.com.
Hale says that while spending more than 30% of your budget on rent “isn’t ideal,” renters who need to live in a certain area for career opportunities or education — or just because that’s where they want to be — may have to spend more.
In fact, according to a survey of Generation Z adults conducted by Bank of America in April and May 2024, 64% of those surveyed reported that they spend over 30% of their monthly paycheck toward housing, and 23% said that a whopping 51% or more goes toward housing costs.
[READ: How to Ask for and Write a Landlord Reference Letter]
How to Pay Rent Without Busting the Budget
So, how can you get that to-die-for apartment without crimping your budget too much?
Find a roommate. Splitting the rent is a great way to lower your housing costs while allowing you to live in the location you prefer. Blumstein says that in New York City, a popular strategy is for roommates to share a less-expensive, one-bedroom apartment by adding a temporary wall to create a second private sleeping place.
Consider a place further from work or your preferred neighborhood. Consider extending your commute to a neighborhood that’s less expensive than the city center you may be craving to live in. “A willingness to relocate can be your friend,” says Realtor.com’s Hale. “If your rent dollars are really important, you can move to a different location to get some savings.”
Negotiate with the landlord. Consider negotiating the rent with your landlord or asking for a free month or two. Nearly four in 10 (39.8%) rentals on Zillow offered concessions in March, so it can’t hurt to ask for free rent, a reduced security deposit, waived fees or updated appliances, particularly if you’re in a rental market where landlords face stiff competition to lease up apartments.
Downsize. Do you really need that second bedroom, or can you find a nook in a one-bedroom apartment to use as your home office? Consider renting the smallest place you’re comfortable in.
Tap the bank of mom and dad. Ask your parents to guarantee your lease, which can help you qualify for a more expensive place — or contribute to your monthly rent outright as a gift. Of course, parents who guarantee or co-sign leases are at risk themselves if you were to default on your lease.
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How Much of Your Income Should Go to Rent? originally appeared on usnews.com
