It’s an old piece of advice: don’t spend more than 30% of your income on rent. But with rising housing costs, is that still a realistic guideline?
According to the Joint Center for Housing Studies at Harvard, nearly two-thirds of renters were considered “cost-burdened” in 2023. This means they spend more than 30% of their income on housing. Daryl Fairweather, chief economist at Redfin, believes this rule is still helpful for most people, but it has its limits.
### A Brief History of the 30% Rule
The 30% guideline has deep roots. It originated in the late 19th century as part of discussions about family budgets. At that time, reformers looked at how much working-class families could afford. Their research suggested that spending a week’s wages on a month’s rent was a fair benchmark.
In the 1960s, this evolved into a formal standard used in federal housing programs, which allowed families to spend up to 30% of their income on rent. This limit became a cost-saving measure for the government when budgets were cut in the early 1980s.
### Is the 30% Rule Enough in 2025?
Experts warn that the 30% rule is not always applicable. Chris Herbert from Harvard’s Joint Center notes that for people with moderate incomes, this rule works. However, those earning much less or much more might find it inadequate. For example, if you’re earning a small paycheck, spending 30% on rent could leave you with little for essentials like food or healthcare.
A report from 2018 showed that in just two of nine scenarios in cities like Cleveland and Los Angeles, families could afford their housing costs after paying bills. For other households, expenses outweighed their incomes by hundreds of dollars.
Young professionals, especially in high-cost cities, may find it tough to stick to the 30% rule. Kimberly Palmer, a personal finance expert, points out that many entry-level jobs are in cities where rent is high. Many young people need to prioritize their careers, even if it means spending a higher percentage on housing.
### Finding a Better Rent Strategy
Experts agree: creating a personal budget is crucial. Fairweather recommends reviewing your actual expenses to see how much you can realistically allocate to rent. Factor in necessities like food, transportation, and savings. Whatever is left can go toward housing.
Another approach is the 50-30-20 rule. This suggests spending 50% of your income on needs, 30% on wants, and 20% on savings or paying down debt. Rent falls into the “needs” category.
If housing costs are over 30% of your income, consider options like getting a roommate, living with family, or choosing a location near public transport to cut commute costs. Young adults often have fewer financial commitments, making it easier to adapt to rising rents.
While sticking to the 30% rule is challenging in many areas, it’s essential to avoid guilt. In today’s market, flexibility is key. If you’re struggling with housing costs, remember you’re not alone, and being proactive about budgeting can help ease the burden.
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