What Percentage of Income Should Go to Housing? A Realistic Guide for Today’s Market

Determining what percentage of income should go to housing can feel like chasing a moving target. The old rules say 30%, but today's market doesn't always follow the script. Whether you're renting your first apartment or trying to buy a home, rising costs, tighter budgets, and inconsistent advice make it hard to know what's "right." This guide breaks down the standard guidelines, challenges them with real-world trends, and helps you find a path that works with your financial life, not against it.

You're Not Alone: Why This Question Matters Right Now

The pressure to get housing decisions right is absolute. A misstep can strain your entire budget. And with the cost of living rising faster than incomes in many places, the old 30% rule might not cut it anymore. Still, millions of people are navigating this decision, asking the same question: What percentage of income should go to housing in today's economy?

Let's walk through the history, what experts say now, and how to move forward even if you're not starting from the perfect financial spot.

The 30% Rule Isn't Dead- But It's Not Universal.

For decades, the 30% rule has been the standard. Spend no more than 30% of your gross income on housing, and you're considered financially balanced. That's according to HUD, which defines anyone spending more as "cost-burdened." But the truth is, this one-size-fits-all approach doesn't consider where you live, how much debt you're carrying, or what your other expenses look like.

In high-cost states like California or New York, it's not unusual for people to spend 40% or more just to keep a roof over their heads. It's not always poor planning- it's often survival.

What the Market Tells Us About Housing Costs

Let's talk numbers. The national median home price as of April 2025 is $431,250. To afford that with a 20% down payment and a 30-year fixed-rate mortgage, you'd need to earn at least $114,000 a year. If you're a renter, the gap is growing, too. Homebuyers now need to earn $50,000 more than renters to cover the difference in monthly costs. In metro areas like Dallas-Fort Worth, that difference climbs over $63,000.

What does this mean? It means the old 30% guideline doesn't hold up everywhere, especially if you're trying to buy. That's why knowing what percentage of income should go to housing depends on your situation, and why flexible strategies are more useful than fixed rules.

More Innovative Ways to Budget for Housing

Instead of clinging to outdated rules, you can try budgeting frameworks that reflect your whole life, just your rent or mortgage.

The 50/30/20 Rule

Split your monthly income into three buckets:

• 50% for needs (housing, food, utilities)
• 30% for wants (fun stuff, subscriptions, etc.)
• 20% for saving or debt payoff

This method lets you account for housing as part of your overall "needs" category, giving you more freedom to make choices that match your reality.

The 28/36 Rule

This one comes from lenders. It says:

• Keep housing under 28% of gross income
• Keep total debt (including housing, car loans, and credit cards) under 36%

Lenders use it to assess risk. It's also helpful if you're trying to gauge whether a new place will stretch your budget too thin.

Real-World Ways to Keep Housing Costs Manageable

You're not stuck if housing costs rise more than you'd like. You have options, even if they're not all easy. Consider relocating to a less expensive city or neighborhood, where the percentage of your income going to housing will naturally shrink. Negotiating with your landlord or mortgage lender might also help, but you'd be surprised how many overlook this. Some choose to split rent by bringing in a roommate or exploring co-living options. There are also public and nonprofit programs offering housing support if you qualify. And finally, budgeting tools can help track every dollar so you can cut where it hurts least and keep a closer eye on your actual housing spend.

Want Better Housing Options? Start With Your Credit

Here's a truth most people don't learn until they're in a lease negotiation or mortgage pre-approval: strong credit gives you leverage. It opens the door to better rates, options, and negotiating power.

Cheers Credit Builder is designed for precisely this. It reports your monthly loan payments to all three major credit bureaus, helping you build a positive credit history while your money grows in an FDIC-insured account. Whether you're looking to rent or buy down the road, building your credit now puts you in a stronger position, so housing takes up less of your future income.

So, What Percentage of Income Should Go to Housing?

The answer is that it depends. The 30% rule can work as a starting point, but it's not a hard limit. Where you live, how much debt you carry, and your lifestyle choices all play a role. What matters most is finding a plan that helps you stay financially stable, without sacrificing the kind of life you want to live.