How Much Should I Spend on Rent?

You should not spend more than 30% of your pre-tax income on rent, so you can have funds to pay your other living expenses. However, the latest data from the U.S. Census Bureau shows that more than 50% of renters are cost-burdened, meaning they spend more than 30% of their income on housing.

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How to Calculate How Much Rent You Can Afford

To calculate the amount you can afford to spend on rent, multiply your gross monthly income (the amount of your paycheck before taxes are taken out) by 0.3 (to calculate 30% of your income). For example, if you make $4,000 a month, the math will break down like this:

Monthly income: $4,000

$4,000 x 0.3: $1,200

In the example above, you may be able to afford to spend up to $1,200 on rent each month with your $4,000 monthly income, though that amount may be lower if you have a lot of other expenses. When calculating how much you can afford to pay for rent, take into consideration things like your other living expenses, debts, and future financial goals, along with your income.

• Living expenses: The more you have to pay for things like food, transportation, health care, and child care, the less money you will have to pay for rent.
• Debt: Using your income to pay credit card, student loan, and car loan bills, for example, will leave less money to go to rent.
• Financial goals: If you are planning to buy a house, you may decide to spend less on rent so you can put more money toward a down payment on a house.
• Location: Your location can play a major role in how much of your income you can spend on rent. For instance, people in an area with a high cost of living may be more likely to spend more than 30% of their income on rent. In that case, a strategy like the 50/30/20 rule may be more realistic. With the 50/30/20 rule, 50% of your income goes to necessary expenses like rent, 30% goes to items you want but don’t need, and the remaining 20% goes to savings.

How to Use the 50/30/20 Rule to Determine How Much Rent You Can Afford

1. Calculate 50% of your monthly income. Take your monthly income before taxes and multiply it by 0.5. For example, if your monthly salary is $4,000, 50% of that would be $2,000. This is the amount you should allocate to necessary expenses.
2. Add up all your necessary expenses. List how much you have to pay for necessary things like groceries, utilities, insurance, and transportation. Also add in the minimum required payments on any loans and credit cards.
3. Subtract your necessary expenses from 50% of your monthly income. If 50% of your monthly income is $2,000 and your other necessary expenses add up to $500 per month, you can spend $1,500 or less on rent. In this example, you would be spending about 38% of your monthly income on rent instead of 30%.

If you need to allocate a larger percentage of your income to rent, you can use the 70/20/10 rule, where you assign 70% of your income to necessary expenses, 20% to savings, and 10% to debt repayments and donations.

Additional Rental Costs to Budget For

What you pay to your landlord every month is not the only thing to consider when deciding how much you can afford for rent. You should also consider things like moving costs, your security deposit, the application fee, and utilities.

Application Fee

The application fee typically costs $20 to $75, and you pay it when you submit your application. The landlord asks for this payment to cover the background and credit screening they do for potential renters.

Security Deposit

The security deposit usually equals one to two months’ worth of rent and must be paid up front before you move in. This is usually in addition to your first month’s rent, which you must also pay before you move in. Plus, the landlord may require a pet deposit for any cats or dogs that will be living in the apartment with you. You could get your security deposit back when you move out.

Moving Costs

You need to consider the amount you will spend on moving from your current place to the new apartment. This can include hiring movers, renting a moving van, buying new furniture and more. It typically costs around $80 - $100 an hour to hire local movers.

Renters Insurance

Some landlords may require you to have renters insurance. Renters insurance costs about $15 to $21 per month, depending on factors such as the deductible and coverage you choose, crime rates in your area, and how common natural disasters are in your location.

Utility Costs

If utilities like electric and water are not included in your rent, you will have to pay for these services separately. You may even have to pay a deposit or installation fee before the utility company turns on your service.

Median Rent Price by City

Where you live plays a big role in how much you pay for rent. In expensive cities, such as Los Angeles and New York, the high cost of living can force you to allocate more money to rent, surpassing the 25% experts recommend. The table below lists the median rent price for the largest cities in the U.S.

>> For more cities check out our report on the Most & Least Rent Affordable Cities
*Note: The median rent listed refers to the median monthly gross rent, which includes the monthly rent agreed or contracted for plus the estimated monthly cost of utilities and fuels.
*Source: U.S. Census Bureau

Rent Affordability by Year

The percentage of cost-burdened households, or households that spend more than 30% of their income on rent, has not changed much in the past 10 years. In addition, cost-burdened households may not find relief as rent prices increased by 18% from 2013 to 2023. Over the past 10 years, rent typically represented 30% - 31% of a household’s income nationally.

*Note: Due to the Covid-19 pandemic and data collection issues, no data is available for 2020.

How to Save Money on Rent

Get a roommate. You can lower your share of the rent by getting a roommate or multiple roommates. It will also allow you to share the cost of utilities.

Sign a lease for longer. Being able to sign a longer lease offers landlords some stability since they can count on having the unit rented for a long period of time. Because of this, some landlords may offer a discount if you sign a two-year lease instead of a six-month or one-year lease.

Negotiate lease renewal. When your lease is up for renewal, your landlord may want to increase your rent. If you’ve been a good tenant who has always paid rent on time and hasn’t caused a lot of problems, they may be willing to lower the rent to keep you around.

Compare prices in different neighborhoods. Rents on one side of town may be far lower than in other areas. Check out different neighborhoods in your area that may have apartments similar to your current one for a better rate.

Search for an apartment during winter. The summer is a busy time for people moving, as families wait until the school year is over to move and college kids search for a place to live before the fall semester starts. People are less likely to move during the winter months, so landlords may have vacancies that they are not able to fill for a while. As a result, landlords may offer lower rates to get people to move in during the winter.