What is a rent-to-income ratio?
A rent-to-income ratio is used to test housing affordability. The ratio is computed by taking your monthly rent and dividing it by your monthly income. For rental housing to be affordable, your rent-to-income ratio should not exceed 30%, meaning your monthly rent and utilities should not exceed 30% of your monthly gross income and wages. These numbers may need adjusting; in some markets, you may exceed this affordability ratio because of the relatively high cost of housing.