How Much of My Income Should I Spend on Rent?

When looking for a new apartment, the first question you ask is, “How much should I spend on rent?” Here are the tips and tricks to find the magic number.

Searching for a new apartment is exciting — until have to think about rent.

Figuring out exactly how much you should spend on rent is complicated. There’s no one-size-fits-all formula. It’s a personal equation shaped by your income, local cost of living, and long-term financial goals.

Whether you’re moving across town or out of state, understanding what you can truly afford requires a deeper look into your finances. Let’s explore how to balance your budget, lifestyle needs, and future aspirations to find a rent-to-income ratio that fits you perfectly.

What Percent of My Income Should Go to Rent?

Traditional advice suggests spending 30 percent of your income on rent. But relying solely on the 30 percent rule can lead to oversimplification and potentially unrealistic budgeting, especially in high-cost areas. Someone earning $60,000 in New York City or Los Angeles will need to budget more tightly than someone who makes the same salary in an affordable city like Durham. That’s because other costs, like groceries and entertainment, are more expensive, too.

That doesn’t mean you should throw out old rules. Instead, use them as a starting point for analyzing your overall financial picture. Your income, cost of living, and financial goals should all play a role in determining how much you should spend on housing — not just one number.

Here are two common equations that might be helpful when learning how to budget for rent:

30 Percent Rule

The 30 percent rule is considered the “golden rule” of affordable housing. It’s a recommendation created by the Department of Housing and Urban Development (HUD) in 1981. According to the HUD, spending more than 30% is a cost burden that negatively impacts your ability to cover other living costs and meet broader financial goals.

Following the 30% rule, your monthly gross income to rent ratio should look something like this:

• You must make $10,000 per month to afford a $3,000 monthly rent
• You must make $6,667 per month to afford a $2,000 monthly rent
• You must make $5,000 per month to afford a $1,500 monthly rent
• You must make $3,500 per month to afford a $1,050 monthly rent

According to RentCafe, the average rent in the United States is $1,713, with significant variations by city and state. And in April 2024, the average monthly income in the U.S. was $4,768, which also varies enormously based on occupation and location. If you do the math, the average person can’t cover rent prices using the 30% rule.

50-30-20 Percent rule

For many people, the 50-30-20 percent rule is a more flexible approach to budgeting monthly rent. Using this rule, you break down your after-tax, monthly income like this:

• 50% goes towards needs
• 30% goes towards wants
• 20% goes toward debt payments and savings

What are “needs” exactly? They include:

• Rent costs
• Essential utility costs, such as water, electricity, and gas
• Renters’ insurance
• Health insurance
• Transport expenses like monthly car payments, gas, or a public transportation pass
• Food
• Minimum credit card and debt payments

Things that go into the “want” category include:

• Meals out and takeout
• Home decor
• Streaming and magazine subscriptions
• Concerts, movies, and sporting events
• Travel

In the debt and savings category, include:

• Retirement savings
• Emergency fund savings
• Debt payments over the minimum due, including student loan payments, personal loans, and credit card debt

Using the 50-30-20 budget, you can make adjustments as needed and see how much you can afford for rent compared to other expenses. You can also examine your rent more broadly. For example, if you move to a walkable city, transportation costs can be delegated to rent. Likewise, paying extra for a building with in-unit laundry, an on-site gym, and other amenities offsets costs in the “needs” and “wants” categories.

3 Other Rental Costs to Consider

When you rent an apartment, your lease isn’t the only expense to consider. Here are all the housing costs you should budget for:

1. Landlord Fees

Under most leases, you’re responsible for paying a security deposit, which typically equals one month’s rent. Plus, some landlords require the first and last month’s rent plus the first two to three months’ rent upfront. Other fine print expenses could stress your budget, like application fees, credit score fees, and pet deposits.

2. Moving Costs

When you move into an unfurnished apartment, you need to hire movers or rent a moving truck to transport your belongings. These expenses grow exponentially if you’re traveling a long distance, transporting a pet, or moving valuables that require insurance.

3. New Furnishings

If you’re upgrading to a larger apartment or moving to your first place, you need to add new furniture and appliances to your housing costs. And even if your new digs are furnished, surprise costs like soundproofing a loud apartment or adding your own flair for decoration add up. Fortunately, many of these expenses can go into the “wants” category in your monthly budget instead of adding them to rent. You can purchase new items over time by important to lessen the blow.

How Much Rent Can I Afford? 8 Tips to Reduce Rental Costs

For most people, housing costs are the most significant monthly expenses. If you can’t make the numbers work, there are several strategies to align your budget with rental costs:

1. Cut Out Unnecessary Expenses

If you prioritize your dream apartment above all else, cut non-essential expenses. Getting rid of monthly subscription services, cooking all your meals, or replacing expensive recreation with free activities are just a few ways to trim your budget and give yourself more rent money. And if you don’t already track your monthly expenses (from new shoes to health insurance), it’s a good time to start.

2. Consider Apartments With Included Amenities

Don’t get sticker shock when searching through apartment listings. Some include extras like free WiFi, parking, and utilities in the rent cost. This not only provides convenience but can lead to potential savings, even if rent seems expensive. Compare the cost of these amenities to what you would pay separately and you might find that the number’s lower.

Apartments with amenities can also have hidden savings. By bundling these costs into the rent, you avoid surprise price hikes or fluctuations in utility costs, giving you a more predictable monthly budget.

3. Find a Roommate

Splitting living expenses with a roommate can significantly lower your monthly housing costs, making it more affordable to secure your dream apartment or upgrade to a home. But sharing a space isn’t for everyone, and money isn’t the only thing to consider. To avoid an uncomfortable living situation, discuss your housing needs, lifestyle habits, and living preferences with potential roommates to ensure compatibility.

4. Look for Apartments Without Fees

Read through contracts with a fine-toothed comb to understand all the upfront costs — especially non-refundable ones like application and move-in fees. Every landlord has different policies regarding these costs, so make sure you’re clear on what to expect. Although it requires extra due diligence, there are plenty of landlords with low fees or no security deposits to help save you money.

5. Increase Your Income

Rather than looking for cheaper rent, negotiate a raise or explore better job opportunities to increase your budget and meet your living costs. Likewise, remote or hybrid work arrangements open up the possibility of living in far-flung neighborhoods, more affordable suburbs, or even different cities where housing costs may be lower. This can significantly impact your overall budget and financial stability.

6. Sublease An Apartment

By taking over an existing lease from a current tenant, you skip costly expenses, like the security deposit or application fees. This approach can also offer rent negotiation opportunities if the current tenant is eager to find someone. Just review the sublease agreement carefully to understand your responsibility to the current tenant and landlord.

While subletting is a potentially short-term living arrangement, it buys you time for stress-free searching for your next move. You can also sign a new lease with the same landlord later without costly move-in fees.

7. Check For Local Housing Lotteries

Depending on your annual income, you may qualify for public housing. Public housing lotteries offer affordable rent options that include amenities like free utilities, community facilities, or rent stabilization — even if your gross monthly income increases. Each city has its own set of criteria and application process, so check with your local housing department.

8. Rent During Low Season

In many cities, the rental market has ebbs and flows based on basic supply and demand principles. This is especially true in college towns or cities with cold winter temperatures. Students move out before and after the school year, and colder areas avoid winter moves. That means landlords looking to rent might offer lower prices in the off-season.

In most areas, October through March is the best time to rent an apartment — and you might even be able to find listings with a free month’s rent or waived expenses. You won’t have the same huge selection as peak rental months, so be sure the savings don’t require big lifestyle sacrifices.

Reduce Your Rent Costs With Landing

Budgeting for a new apartment is a pain. You have to pay your landlord extra fees and rent upfront, plan for moving services and supplies, and buy new furniture for the space — not to mention all the unexpected expenses that crop up.

But moving doesn’t have to be stressful, or even expensive. If you want an affordable option, Landing has a wide network of apartments with no application fees or security deposits. Plus, Landing’s flexible leases give you the freedom to move where you want, when you want, without paying cancellation fees or extra rent. And since all apartments are fully furnished, you can scratch a moving company from your budget. Become a Landing member today.