How much rent can you afford
Three rules are quoted constantly and they disagree. The 30% rule is HUD’s definition of a cost burden, the 40× rule is what landlords screen on, and the residual method is what housing counsellors use. This computes all three and tells you which one is actually holding you back.
| Rule | Monthly rent | What it measures |
|---|---|---|
| 30% of gross | $2,250 | HUD cost-burden threshold, not a budget rule |
| 40× annual income | $2,250 | the screen most landlords apply |
| Residual income | $2,840 | what survives after everything else |
| Binding constraint | $2,250 | 30% rule |
| Housing share at that rent | 30.0% | Affordable |
| Annual rent | $27,000 | twelve months at the recommended figure |
The 30% rule is a definition, not advice: HUD calls housing above 30% of gross a cost burden and above 50% severe. The residual method is what a housing counsellor uses when income is irregular, because it starts from what the household actually has rather than what it earns.
rent ≤ 0.30 × gross monthly · HUD cost-burden threshold.
rent ≤ gross annual / 40 · Landlord screening convention.
rent ≤ net × (1 − savings) − essentials − debt · Housing-counselling method.
rent = min(30%, 40×, residual) · The binding rule is the smallest.
A clear path from inputs to results.
Three rules get quoted constantly and they disagree. The 30% rule is HUD’s definition of a cost burden, the 40× rule is what landlords screen on, and the residual method is what housing counsellors use when income is irregular. The answer is the smallest of the three, and which one binds tells you what to fix.
How to use
- Enter gross annual income and monthly take-home.
- Add non-housing essentials and existing debt payments.
- Choose the savings rate you will not give up.
- Read the recommended rent and the rule that set it.
The formula
Reference: HUD defines housing above 30% of gross income as a cost burden and above 50% as severe; the 40× rule is the standard landlord screen.
Worked example
$90,000 gross, $5,600 take-home
- Gross income $90,000, take-home $5,600 a month.
- Essentials $1,800, debt payments $400.
- Savings rate 10%.
- 1
The 30% rule gives $2,250 a month.
- 2
The 40× rule gives $2,250 as well, because it is the same arithmetic from an annual figure.
- 3
The residual is $5,600 × 0.9 − $1,800 − $400 = $3,200.
- 4
The smallest is $2,250, so the 30% rule binds.
- 5
That is exactly 30% of gross, which is the boundary of affordable rather than cost-burdened.
$2,250 a month · 30% of gross · affordable.
Interpreting the result
The 30% rule and the 40× rule agree only when gross income is exactly 40× 30% of monthly gross, which is to say they always agree — 0.30 × G/12 and G/40 are the same number. The two rules are the same arithmetic wearing different clothes. The residual method is the one that can disagree, because it starts from take-home pay and subtracts real obligations.
Assumptions & limitations
- The 30% threshold is HUD’s affordability definition, not a budget rule.
- The residual method uses take-home pay, so it already accounts for income tax.
- Essentials exclude rent but include utilities, food, transport and childcare.
- The 40× rule is a screening convention, not a legal requirement.
Frequently asked questions
Why do the 30% and 40× rules give the same answer?
Because 30% of monthly gross is gross/12 × 0.30 = gross/40. They are the same rule expressed annually and monthly, which is why quoting both as if they were independent checks is misleading.
When should I use the residual method?
When income is irregular, when there are large fixed obligations such as childcare or medical costs, or when a lender is underwriting a self-employed borrower.
What counts as severe cost burden?
More than 50% of gross income on housing. HUD reports that separately because it correlates with housing instability far more strongly than the 30% line.
Is 30% still realistic?
In expensive metros, no — the 40× screen is often the binding constraint and households routinely spend 40% or more. HUD calls that cost-burdened, which is a statistical category rather than advice.
Does the calculator include utilities?
Only if you put them in the essentials line. Many landlords require utilities to be under 10% of income on top of rent, which is worth adding explicitly.
Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.