How Much of Income Should Be Spent on Rent and Utilities

Low-income families may have trouble finding affordable housing.

If you spend more on rent for an apartment or house than you can easily afford, you may not have enough money to meet your other needs, such as food, transportation and medical care. Needs often vary from month to month, so it's difficult to know how much of your income to set aside for purposes other than rent. However, government agencies and financial experts do offer some general guidelines in determining how much of you monthly income should be spent on rent and utilities.

Ideal Ratios

According to the U.S. Census Bureau, a family should spend no more than 30 percent of its monthly income on housing costs, which include rent and utilities, such as electricity, gas and water. The U.S. Census Bureau considers families who spend between 30 percent and 49.9 percent of their monthly income on housing to have a moderate housing burden, and it considers families who spend more than 50 percent of their monthly income on housing have a severe housing burden.

Housing Assistance

Government-sponsored housing programs, such as Section 8, suggest that renters should pay no more than 30 percent of their monthly income toward rent and utilities. However, families who receive Section 8 vouchers may pay up to 40 percent of their rent and utilities expenses, depending on the housing units they choose. The Section 8 program pays the remainder of the expenses.

Consequences

If you spend too much on rent each month, you may not have enough money for your other expenses, such as food, medical care, clothing and transportation. According to the U.S. Census Bureau, families with moderate to severe housing burdens don't enjoy the same quality of life as families who pay less than 30 percent of their monthly income toward housing costs. Because most families with severe housing burdens also have lower incomes, it puts them at risk for becoming homeless or incurring large amounts of debt.

Considerations

Most financial experts agree that you shouldn't spend more than 30 percent of your monthly income on housing expenses. Metropolitan Life Insurance Co. makes a more conservative recommendation of allocating 25 percent of your income for rent in an article published on Move.com. However, you should also consider the other expenses you may incur based on your location. For example, if you rent a less-expensive unit that is far away from your place of employment, your transportation expenses may exceed the amount of money you save in housing costs.

References

• U.S. Census Bureau; Who Can Afford To Live in a Home?: A Look at data From the 2006 American Community Survey; Mary Schwartz, et al.
• Move.com; How Much Rent Is Too Much Rent?; Courtney Ronan
• Massachusetts Executive Office of Housing and Economic Development: How to Obtain Housing Assistance