The “30% rule” is a commonly cited housing affordability guideline suggesting that housing costs (mortgage principal and interest, property taxes, insurance, and in some uses utilities) should be roughly no more than 30% of gross monthly income. It’s a quick filter for renters and buyers, useful for initial searches and for flagging when housing may crowd out other financial priorities. The rule has roots in housing policy and long-standing consumer guidance and persists because of its simplicity: home hunters can use it quickly without complex calculations. In practical budgeting, the rule helps households avoid overcommitting to housing payments that leave insufficient room for essentials and savings.

However, the 30% rule is a heuristic, not a one-size-fits-all law. Real affordability depends on local costs (commuting, childcare, taxes), gross vs. net pay considerations, household size, and existing debt burdens. In high-cost urban areas, households often exceed 30% while still managing other priorities due to higher wages or trade-offs elsewhere; conversely, in lower-cost regions, 30% may be over-conservative. A more nuanced approach is to calculate housing as part of a full budget: determine essential non-housing spending and savings goals first, then see what housing payment fits without sacrificing those priorities. For mortgage shoppers, lenders use debt-to-income ratios (DTI) and consider total monthly obligations, which can be a complementary metric alongside the 30% rule.