Rents have gone up 17% nationwide year over year, with February marking the seventh consecutive month of double-digit price growth for studio to two-bedroom apartments, according to a recent report from Realtor.com.
The median rent for an apartment reached $1,792 in the 50 largest US metro areas -- increasing four times as fast as prepandemic rent prices, according to the report. Overall, rent prices are growing faster than incomes, leading to affordability issues for renters across the country. Other economic factors, like skyrocketing, are also putting pressure on across the country, and wages aren't keeping up with rising costs.
The national median family income was $79,900 in 2021, according to the US Department of Housing and Urban Development. That's an increase of less than 2% from the national median family income of $78,500 in 2020, but inflation rose by 4.7% in 2021 -- and has increased a whopping 7.9% since February of 2021 to February 2022, the highest rate in four decades.
Financial experts typically recommend spending no more than 30% of your monthly income on rent. But rapid increases in consumer prices combined with rising rents can make that a challenge for the average American. However, it's still a good rule of thumb to keep in mind as you plan your monthly budget. If manageable, following the 30% rule can help you maintain overall financial stability and avoid unnecessary financial stress.
"The reason for the 30% rule is that, for the average consumer, it helps prevent overspending," said Tess Zigo, a financial advisor at LPL Financial, an investment and wealth management firm. "The more you spend on housing, the less money you have to allocate towards other goals and dreams."
Why you should aim to spend 30% or less of your salary on rent
Spending too much of your income on rent may make it more difficult to cover other financial priorities, like utility bills, grocery bills, student loan debt and other essential expenses.
Sticking to the 30% rule also enables you to continue saving for other financial goals likewithout stretching your budget and compromising your current standard of living, said Howard Pressman, a financial planner and partner at Egan, Berger & Weiner, LLC, a retirement planning and investment management firm.
But following the 30% rule can be challenging when rents are going up in almost every major city. For renters in Sun Belt cities -- which includes major metropolises like Atlanta, Dallas, Los Angeles, New Orleans and Phoenix -- sticking to the 30% guideline might prove difficult, as these areas saw the largest increases in rent in February, with an average growth rate of 22.5% over the last year, according to the Realtor.com report. This rule may also prove to be unrealistic in especially expensive areas like San Francisco and New York, said Zigo, but it's still a good financial goal to aim for. It may also be difficult for renters with lower incomes to secure housing for under 30% of their monthly income.
That said, it's ultimately up to you to decide what your financial priorities are. For instance, if you know you have a raise coming at work, you may be comfortable increasing your housingif you don't have other high-interest debt like , or you've paid off your car or other loans.
The bottom line is that youris a zero-sum game -- if you're spending more than 30% of your income on rent, that extra money has to come from somewhere else in your budget, said Matthew Benson, owner and certified financial planner at Sonmore Financial, a financial planning and investment management firm.