How Much Rent Can You Afford?

A common benchmark is to keep rent plus utilities at or below 30 percent of your gross (before-tax) monthly income, the line HUD uses to count a household as cost-burdened. On a $60,000 salary, that is $1,500 a month for rent and utilities combined, or $1,300 in rent if utilities run $200. Landlords run a separate income test; under a rule requiring income of 3 times the rent, the same earner qualifies for rent up to $1,666. Aim lower if debt payments or high utility bills take a large share of your pay, and save the cash to move in, which can be two months of rent or more.

Start with 30 percent of gross income

The U.S. Department of Housing and Urban Development (HUD) counts a household as cost-burdened when monthly housing costs, including utilities, exceed 30 percent of monthly income, and as severely cost-burdened above 50 percent. The Census survey data behind that measure compares gross rent, meaning rent plus the utilities and fuels the renter pays, with household income before taxes.

To find your number, divide your yearly gross income by 12, multiply by 0.30, and subtract the utilities you expect to pay:

The last column is higher than the 30 percent column in every row, because a 3x rule allows one-third of income and counts rent alone, not utilities. A landlord can approve you for a rent that, once utilities are added, puts you past HUD's 30 percent line.

In public housing and the Housing Choice Voucher program, a federal formula sets the starting point for your share. That amount, the total tenant payment, is generally the highest of 30 percent of your adjusted monthly income (income after the deductions HUD allows), 10 percent of your gross monthly income, or the program's minimum rent. Our guide to rent assistance programs covers how the programs work and how to apply.

How landlords' income rules work

Landlords that screen on income set their own minimum. When the rule is written as a multiple of the rent, such as the policy of income at least 3 times the rent in a California Civil Rights Department guidance example, it translates like this:

• Monthly income of 3 times the rent lets rent reach one-third of your gross monthly income, before utilities. A $1,800 rent needs $5,400 a month, or $64,800 a year.
• Yearly income of 40 times the monthly rent works out to 30 percent of gross income. A $1,800 rent needs $72,000 a year, and $60,000 a year qualifies you for up to $1,500.

Ask for the landlord's written screening criteria before you pay an application fee. Oregon requires landlords to give you their screening criteria in writing before charging a screening fee, and Washington requires them in writing or posted before the landlord screens you.

Two situations change the math in California:

• Roommates and couples. A landlord must count the total income of everyone who will live together the same way it would count a married couple's combined income. Elsewhere, ask whether the landlord combines co-applicants' income. How to split rent with roommates covers dividing the bill once you qualify together.
• Housing vouchers. If a subsidy such as a Housing Choice Voucher pays part of the rent, the income rule can apply only to your share. On a $2,500 unit where your share is $500, a 3x rule means $1,500 a month of income, not $7,500.

If a credit or tenant screening report leads a landlord to deny you, or to demand a co-signer or a larger deposit, tenant screening rights explains the notice you should get and how to dispute errors.

How debts and utilities change the answer

The 30 percent benchmark ignores car loans, student loans, and credit cards. To check it against your actual budget, start from take-home pay and subtract fixed costs. Example: say your take-home pay is $3,900 a month on a $60,000 salary.

1. Subtract debt payments: a $450 car loan, a $300 student loan, and a $150 card minimum leave $3,000.
2. Subtract other monthly costs, such as food, transportation, insurance, and phone, of $1,400. That leaves $1,600.
3. Subtract $300 for savings. That leaves $1,300 for rent and utilities.
4. Subtract $200 of utilities. Your rent ceiling is $1,100, which is $200 below the $1,300 the 30 percent benchmark gave.

Use the lower of your budget figure and the 30 percent figure.

Utilities decide which listing is cheaper. A $1,400 unit with utilities included costs $70 a month less than a $1,250 unit where you pay $220 in utilities. Ask the landlord or utility company for the unit's past 12 months of bills. For a second estimate, ask your local public housing agency for its utility allowance schedule: federal rules require each agency that runs a voucher program to keep one, based on the typical utility costs of energy-conserving households in similar homes in the area, and to review it every year.

Plan for move-in costs

Before your first month, you may need to pay the first month's rent, a security deposit, application fees, moving costs, utility deposits or connection fees, and renters insurance. Example for a $1,500 unit: $1,500 first month, $1,500 deposit, and a $50 application fee come to $3,050 before moving costs.

Some states cap the upfront charges:

• California generally limits a security deposit to one month's rent on top of the first month's rent. A landlord that is a person, or an LLC owned only by people, and that owns no more than two rental properties with no more than four units for rent can ask for two months, except from a service member.
• New York limits the deposit to one month's rent, so a landlord cannot ask for both last month's rent and a deposit, and caps the charge for a credit and background check at $20.

Move-in fees vs. security deposits explains which charges are refundable. If a unit is a little over your ceiling, negotiating the rent before you sign may bring it within reach, and rent payment rules for tenants covers due dates and late fees once you move in.