It\u2019s a piece of financial advice that\u2019s been around for generations: When searching for a place to live, don\u2019t spend more than 30% of your income on rent. But with housing costs driving inflation today, is that guideline still realistic?<\/p>\n
READ MORE: The economy is giving mixed signals. Here\u2019s what experts say they mean<\/a><\/p>\n By one measure, nearly two-thirds of working-age renters were cost-burdened in 2023, the Joint Center for Housing Studies at Harvard found<\/a>.<\/p>\n For \u201cmost everyday people,\u201d the guideline remains useful, said Daryl Fairweather, chief economist at Redfin. However the rule comes with a number of caveats, experts tell PBS News.<\/p>\n Here\u2019s what to know about the 30% rule\u2019s history, its relevance in today\u2019s housing market and what strategies might make more sense for renters now.<\/p>\n Origins of the 30% rule<\/p>\n In the late 19th or early 20th century, a rule of thumb that called for \u201ca week\u2019s wages for a month\u2019s rent\u201d came from studies about typical budgets for working class families, said Chris Herbert, managing director of Harvard\u2019s 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.<\/p>\n That standard \u2014 25% of income \u2014 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.<\/p>\n 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, \u201cproject-based programs,\u201d Herbert said.<\/p>\n Does it still make sense for renters in 2025?<\/p>\n Herbert said that the Joint Center for Housing Studies has found that, for people with modest incomes \u2013 around 50% of an area\u2019s median income \u2013 the rule \u201cwasn\u2019t bad.\u201d But on either side of the income curve, for very poor or very wealthy people, the rule becomes much less useful.<\/p>\n \u201cIf I\u2019m Jeff Bezos, I could probably spend 99.9% of my income on housing and still have enough left over for everything else,\u201d Herbert said.<\/p>\n \u201cIf I\u2019m Jeff Bezos, I could probably spend 99.9% of my income on housing and still have enough left over for everything else.\u201d<\/p>\n \u201cIf I\u2019m very poor and I\u2019m making [a] very little amount of money, then spending 30% of my income on housing might mean I don\u2019t have enough left over for food, or everything else,\u201d he added.<\/p>\n A 2018 report<\/a> 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\u2019 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.<\/p>\n In every other scenario \u2014 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 \u2014 the households\u2019 projected costs outweighed their ability to pay, in some cases by hundreds of dollars per month.<\/p>\n