How much to spend on rent

Edited by: David Heiling
• Updated •5 min read
Close up of a mother and daughter playing in their new home with moving boxes behind themImage: Close up of a mother and daughter playing in their new home with moving boxes behind them

In a Nutshell

According to the U.S. Department of Housing and Urban Development, budgeting for 30% of your income towards rent is standard. However, other factors, like location, can affect affordability.
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Moving to a new apartment or other living situation can often feel exciting. However, it also comes with budgeting for living expenses and ensuring you can afford your new unit. So how much should you spend on rent?

What does rent-to-income ratio mean?

Find your fixed income-to-rent ratio when deciding how much you should spend on rent. This ratio compares your gross annual or monthly income to what your rent costs. It’s used to calculate how much you can afford to pay towards rent.

A high rent-to-income ratio means that a significant amount of your monthly income goes straight to rent. On the other hand, a low rent-to-income ratio means that only a small chunk of your monthly income goes toward paying rent.

What’s the ideal rent-to-income ratio for a tenant?

According to the U.S. Department of Housing and Urban Development, budgeting 30% of your income for rent is the recommended maximum. When you spend more than 30% of your income on rent, you may find yourself limited when spending on other expenses and putting away money into your savings.

Many landlords require tenants to demonstrate that their monthly income is at least three times the rent. But this isn’t always the case — in cities with high living costs, like San Diego, it isn’t unusual for tenants to spend more than 30% of their income on rent.

How do you calculate rent-to-income ratio?

When figuring out your rent-to-income ratio, you can use the following equation:

rent-to-income-ratioImage: rent-to-income-ratio

Let’s look at an example of calculating a rent-to-income ratio to further illustrate how it works. For this example, we’ll say you have a gross monthly income of $4,000 and are considering moving into an apartment with a monthly rent of $1,500.

[1,500] / [4,000] = 0.375 x 100 = 37.5%

In this scenario, your rent-to-income ratio would equal 37.5% — which is more than the standard maximum. You may want to consider renting a less expensive apartment or consider ways to lower your other expenses.

How much should I spend on rent?

The exact number will vary depending on your income, the area you’re living in and other expenses in your life. Here are some factors to consider when figuring out your living expenses.

30% threshold

Generally, allocating 30% of your net income towards rent is a good place to start.

When calculating your income-to-rent ratio, remember to use your total household income. If you live with a roommate or partner, factor in their income to ensure you find a rent range appropriate for your situation.

50/30/20 rule

After you’ve set a fixed income-to-rent ratio, consider the 50/30/20 rule to round out your budget.

According to this budgeting rule, 50% of your income goes to essentials, 30% to nonessential personal expenses, like clothes or memberships, and the remaining 20% to savings, debt or investments. In this case, rent falls under “essentials.” This category also includes necessary expenses, such as utilities, food, healthcare and transportation.

Let’s consider a hypothetical situation where you make $4,000 per month. Under the 50/30/20 rule, you would have $2,000 (50%) per month to spend on essential living expenses and groceries, $1,200 (30%) to spend on non-essential living expenses — such as going out to eat or entertainment — and $800 per month to put towards your savings account, retirement accounts and other investments.

Stretch your monthly budget

If your desired apartment seems slightly out of budget, you may be able to make it work by cutting unnecessary costs elsewhere. Look for ways to cut down on utilities or insurance if it makes sense for you.

Utilities — You may be able to cut TV and mobile services that don’t serve you and your budget anymore. Consider swapping out your light bulbs for eco-friendly and energy-efficient ones to reduce your electric bill.

Insurance — Instead of paying monthly renters insurance rates, you may get a discount by paying your yearly premium in full. If you have a roommate, ask to share a policy.

If you’re curious about how the rental market is looking, according to Apartment List’s National Rent Report as of January 2025, year-over-year growth has been down by 0.5% with the national median monthly rent being $1,370. The national median rent is now below the August 2022 peak by 5%. 

Of the cities with over a million residents, Austin, Texas has seen the greatest rent decline with rent being down 7.3% year-over-year. Other Sun Belt cities like Raleigh, North Carolina and Dallas, Texas are also declining in rent. Cleveland, Ohio has seen the highest rent increase at 5.3% year-over-year. Other Midwest cities like Grand Rapids, Michigan and Kansas City, Missouri are also experiencing rent increases. 

Tips and resources for finding a good deal on rent

As the cost of rent spikes throughout much of the country, it may seem impossible to find a good deal on a rental. But there are a few ways to save. Here are some tips to help you slash the amount you pay.

  • Get a roommate (or two). Splitting the cost of your rental will allow you to keep more of your hard-earned money.
  • Improve your credit. Lenders aren’t the only businesses that check your credit. Landlords do, too, and having poor credit may limit your rental options.
  • Sign a long-term lease. Typically, when your lease is up, your landlord has the right to raise your rent. Locking in a lengthier lease could help prevent frequent price increases.
  • Stick to the essentials. An on-site gym, pool and clubhouse may be nice, but they can drive rents up.

There’s no way to know for sure when or if rents will decrease. And since rates can vary significantly based on location, different areas may experience different pricing trends. But there are two key factors that are likely to affect how much renters will continue to pay.

  1. Supply and demand. In general, rents tend to be higher in areas where demand is high and lower in places where demand is low.
  2. Mortgage rates. Rising mortgage rates may price would-be homebuyers out of the market, creating even more demand for rentals. If that happens, rental rates may continue to increase.

Rent vs. buy calculator

Find out if it makes more financial sense for you to buy a home or rent one with our rent vs. buy calculator.

What’s next: Improve your credit by paying rent on time

Finding a place to rent that costs a maximum of 30% of your monthly gross income can help you find an affordable living space without sacrificing other parts of your daily expenses.

Conversely, paying rent on time may help you build your credit. While rent doesn’t typically appear on credit reports, some services can help you report your rent payments to credit bureaus so you can reap the benefits.