What percentage of income should go to housing?

Q: What percentage of income should go to housing?

Financial guidelines suggest no more than 28–30% of gross monthly income on housing costs. HUD defines "cost-burdened" as spending more than 30% of income on housing; "severely cost-burdened" is above 50%.

Q: How many Americans are cost-burdened today?

With median existing-home prices at $408,000 in 2024 and 30-year mortgage rates averaging 6.84% , a buyer putting 10% down faces a monthly payment of roughly $2,690 in principal and interest alone — before taxes, insurance, or HOA. That payment requires a gross household income of approximately $115,000 to stay under the 28% threshold. U.S. median household income in 2024 was approximately $80,000, which means the median home is unaffordable under conventional guidelines for the median earner at current rates.

Question

Short answer. Financial guidelines suggest no more than 28–30% of gross monthly income on housing costs. HUD defines "cost-burdened" as spending more than 30% of income on housing; "severely cost-burdened" is above 50%.

How much of income goes to housing by year (NAR / Freddie Mac / Census)
Year	Median Existing Price	30-Yr Rate	Monthly P&I (20% dn)	% of Median Income
2000	$139,000	8.05%	~$820	~23%
2012	$176,600	3.66%	~$650	~15%
2019	$272,500	3.94%	~$1,035	~18%
2021	$350,300	2.96%	~$1,180	~20%
2024	$407,500	6.84%	~$2,150	~32%

The 28% rule is the oldest and most widely cited benchmark: conventional mortgage underwriting has traditionally limited housing costs (principal + interest + taxes + insurance) to 28% of gross monthly income. Combined with all other debt, the ceiling was 36% — the so-called 28/36 rule.

Where the 30% threshold comes from

The U.S. Department of Housing and Urban Development (HUD) adopted 30% of gross income as the federal standard for "affordable" housing in the 1980s, replacing an earlier 25% guideline. A household spending more than 30% is considered cost-burdened; one spending more than 50% is severely cost-burdened.

How many Americans are cost-burdened today?

With median existing-home prices at $408,000 in 2024 and 30-year mortgage rates averaging 6.84%, a buyer putting 10% down faces a monthly payment of roughly $2,690 in principal and interest alone — before taxes, insurance, or HOA. That payment requires a gross household income of approximately $115,000 to stay under the 28% threshold. U.S. median household income in 2024 was approximately $80,000, which means the median home is unaffordable under conventional guidelines for the median earner at current rates.

Historical context

In 1985, when the median existing-home price was $75,500 and mortgage rates were 12.43%, the monthly payment on a 10%-down loan was about $780. Median household income was roughly $24,000, putting the payment at about 39% of income — paradoxically, also strained. The difference is that the 1985 affordability crisis was rate-driven; the current one is price-driven. When rates fell in the early 1990s, payments dropped quickly. When prices are elevated, relief requires either price corrections or income growth, both of which are slower.

Renter vs. owner guidelines

The 30% rule applies to both renters and owners. For renters, it means total rent plus utilities. For owners, it includes PITI (principal, interest, taxes, insurance) and sometimes HOA fees. Lenders applying the qualified mortgage (QM) rule under Dodd-Frank cap total debt-to-income at 43%, giving some flexibility above the 28% housing sub-limit if other debts are low.

Sources

U.S. Department of Housing and Urban Development (HUD) Affordable Housing guidelines; Consumer Financial Protection Bureau Qualified Mortgage rule; U.S. Census Bureau American Community Survey; National Association of Realtors Existing Home Sales.