A good rent-to-income ratio is 30% or less, meaning that you should not spend more than 30% of your income on rent. Choosing an apartment that costs less than 30% of your income keeps your rent-to-income ratio under this threshold and shows potential landlords that you are financially stable and can afford their rent.
What Is the Rent-to-Income Ratio?
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The rent-to-income ratio is the percentage of your gross income (income before taxes) that you use for rent. It can help you determine whether you can afford a particular apartment and still have funds to pay for your other necessary expenses, such as utilities, groceries, and gas. Landlords also use this ratio to determine whether it will be risky to rent an apartment to you.
How to Calculate Your Rent-to-Income Ratio
You can calculate your rent-to-income ratio by dividing your gross income by the rent amount, then multiplying that number by 100. For example, if your income is $4,000 per month and you are looking at an apartment that costs $1,100 per month, the math would break down like this:
Monthly income: $4,000
Rent amount: $1,100
Formula: (Rent/monthly income) x 100 = rent-to-income ratio
Rent-to-income ratio: (1100/4000) x 100 = 27.5%
In the example above, your rent-to-income ratio is a little below the 30% threshold, so in theory, the landlord should believe that you can afford the rent on that apartment.
Other Ways to Calculate Rent Affordability Multiply By a Fixed Percentage
Since the recommended rent-to-income ratio is 30% or less, you can multiply your monthly income by 0.3 to find the maximum amount of rent you can afford to pay. The example below is based on a $4,000 monthly salary.
Formula: Income x 0.3 = maximum rent
$4,000 x 0.3 = $1,200
The maximum amount of rent you can afford is $1,200 per month, with the example above.
Use a Ratio Multiplier
A common ratio multiplier is 3. This means your monthly income should be at least three times the rent amount. Below, you can see the minimum amount you will need to make to afford an apartment that costs $1,100 per month.
Formula: Monthly rent x 3 = minimum monthly income
$1,100 x 3 = $3,300
The example above shows that you will need to make at least $3,300 per month to afford the apartment.
Average Rent-to-Income Ratio Over the Years
| Year | Median Rent-to-Income Ratio |
|---|---|
| 2023 | 31.0% |
| 2022 | 31.0% |
| 2021 | 30.6% |
| 2019 | 29.3% |
| 2018 | 29.9% |
| 2017 | 29.8% |
| 2016 | 29.9% |
| 2015 | 30.3% |
| 2014 | 31.0% |
Source: U.S. Census Bureau
Note: Due to the Covid-19 pandemic, no data is available for 2020.
The median rent-to-income ratio in the U.S. is 31%, according to the Census Bureau. That means many renters are spending more than the recommended 30% of their income on rent.
Spending more than 30% of your income on housing leaves less money for other necessary expenses and your future goals. However, there are things you can do to spend less of your income on rent. We will run down some tips below.
How to Lower Your Rent-to Income Ratio Look for a cheaper apartment.
Consider getting an apartment with less square footage or fewer amenities than you currently have or were thinking of getting to reduce how much you pay for rent. You may also want to consider checking out apartments in a cheaper neighborhood.
Increase your income.
By increasing your income, you can reduce your rent-to-income ratio since you will be using less of your total income for rent. It is important to note that this only works if you keep your rent the same as you increase your income. Your rent-to-income ratio may not decrease if you look for a more expensive apartment as your income increases.
Sign a longer lease.
You may be able to negotiate lower rent with a potential landlord if you sign a longer lease, lowering the share of your income that you would pay for rent. A longer lease offers landlords some stability since they can count on receiving rent from your lease for a long period of time. That is why some landlords may offer a discount if you sign a two-year or 18-month lease instead of a 6-month or year lease.
Have a co-signer.
If your income is not enough to meet the recommended rent-to-income ratio for an apartment in your area, you can consider getting a co-signer who can help you get approved for the apartment. The co-signer will have to meet the landlord’s income requirement. The co-signer will also be financially responsible for paying the rent if you are unable to pay it.
Get a roommate.
Splitting the rent with a roommate or two can lower your rent-to-income ratio. It can also help you pay less for utilities, since you will be sharing the cost of those bills with your roommates too.
