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Where does the idea that you should spend 30% of your money on rent come from? I see it everywhere. Not that I'm questioning it in general, but does it ever cha

Where does the idea that you should spend 30% of your money on rent come from? I see it everywhere. Not that I'm questioning it in general, but does it ever change?

tomkinstinch 10y ago
The notion one "should" spend some fraction must come the real estate industry. The rule should be "spend as little as you can on housing to achieve the quality you want (or can tolerate), but never exceed 30% (or other arbitrary percentage) of net income, lest you risk being unable to save for large future expenses and emergencies."
cableshaft 10y ago
I see 25% a little more often than I see 30%, but it's not that much different of a percentage.
ArkyBeagle 10y ago
Ten to fifteen percent is vastly better. It's doable but it's not that easy. You need a middling-good job in flyover country. That's the part that's not that easy - it's harder to justify a gig in flyover country by sheer ability. Companies on the downward slide towards Schumpeterian irrelevance just don't care and so don't bother them with the facts... IMO, this was what my ( Silent Generation ) parents used as a heuristic. But people saw rising home prices and began the "stretch", and then "stretching" became the standard. Because of this, I've become somewhat of the Geotaxer fan - if the rent is too damn high, then tax land rents, not income per se. Geotaxes have the aspect that they cannot be passed on to the renter by the rentier.
- auxym 10y ago
  FWIW, my (half of) rent (split with SO) in Montreal is less than 15% of my net income. And I'm not even in software. People see the low engineer salaries around here and are generally reluctant to come, but I find the quality of life to be high and rent to be low. Of course, there are other aspects to cost-of-living than rent, and quality of life is somewhat subjective. EDIT: For anyone curious, here is a nifty heat map of rents in the city: http://ici.radio-canada.ca/special/cartes/15-06_annonces-logements-kijiji.html http://ici.radio-canada.ca/special/cartes/15-06_annonces-log...
  - deleted 10y ago
    [deleted]
  - ArkyBeagle 10y ago
    I had a shot at moving to Montreal in the early '00s. It would have been interesting. Those winters, however..
- eru 10y ago
  Funny enough, if tax burdens are shifted from labour and capital to land, land rents will actually increase. (But that's because people will have more net income left to bid up land rents.)
  - ArkyBeagle 10y ago
    I believe that right now, people perceive that land rents are (relatively) subsidized. So people chase that subsidy.
    - eru 10y ago
      Land rents are depressed by taxes on capital and labour. (Without those taxes, people have more money to bid up land.) However land rents are not taxed (very much) by themselves, so fall squarely to the owner of the land. So in that sense they are definitely worth chasing today.
- nmcfarl 10y ago
  Some reason I found it hard to Google GeoTax - eventually I found this paper which has a description under the name georent- https://econjwatch.org/file_download/66/2005-04-foldvary-tyranny-statquo.pdf https://econjwatch.org/file_download/66/2005-04-foldvary-tyr...
  - eru 10y ago
    Look for Georgism and land value tax. Those names are more common.
dilemma 10y ago
I spend 7% of take home on rent. Used to be about 17%, but now I've moved further out to a nicer area.

Where does the idea that you should spend 30% of your money on rent come from? I see it everywhere. Not that I'm questioning it in general, but does it ever change?

tomkinstinch 10y ago

The notion one "should" spend some fraction must come the real estate industry. The rule should be "spend as little as you can on housing to achieve the quality you want (or can tolerate), but never exceed 30% (or other arbitrary percentage) of net income, lest you risk being unable to save for large future expenses and emergencies."

cableshaft 10y ago

I see 25% a little more often than I see 30%, but it's not that much different of a percentage.

ArkyBeagle 10y ago

Ten to fifteen percent is vastly better. It's doable but it's not that easy. You need a middling-good job in flyover country. That's the part that's not that easy - it's harder to justify a gig in flyover country by sheer ability. Companies on the downward slide towards Schumpeterian irrelevance just don't care and so don't bother them with the facts... IMO, this was what my ( Silent Generation ) parents used as a heuristic. But people saw rising home prices and began the "stretch", and then "stretching" became the standard. Because of this, I've become somewhat of the Geotaxer fan - if the rent is too damn high, then tax land rents, not income per se. Geotaxes have the aspect that they cannot be passed on to the renter by the rentier.

auxym 10y ago
FWIW, my (half of) rent (split with SO) in Montreal is less than 15% of my net income. And I'm not even in software. People see the low engineer salaries around here and are generally reluctant to come, but I find the quality of life to be high and rent to be low. Of course, there are other aspects to cost-of-living than rent, and quality of life is somewhat subjective. EDIT: For anyone curious, here is a nifty heat map of rents in the city: http://ici.radio-canada.ca/special/cartes/15-06_annonces-logements-kijiji.html http://ici.radio-canada.ca/special/cartes/15-06_annonces-log...
- deleted 10y ago
  [deleted]
- ArkyBeagle 10y ago
  I had a shot at moving to Montreal in the early '00s. It would have been interesting. Those winters, however..
eru 10y ago
Funny enough, if tax burdens are shifted from labour and capital to land, land rents will actually increase. (But that's because people will have more net income left to bid up land rents.)
- ArkyBeagle 10y ago
  I believe that right now, people perceive that land rents are (relatively) subsidized. So people chase that subsidy.
  - eru 10y ago
    Land rents are depressed by taxes on capital and labour. (Without those taxes, people have more money to bid up land.) However land rents are not taxed (very much) by themselves, so fall squarely to the owner of the land. So in that sense they are definitely worth chasing today.
nmcfarl 10y ago
Some reason I found it hard to Google GeoTax - eventually I found this paper which has a description under the name georent- https://econjwatch.org/file_download/66/2005-04-foldvary-tyranny-statquo.pdf https://econjwatch.org/file_download/66/2005-04-foldvary-tyr...
- eru 10y ago
  Look for Georgism and land value tax. Those names are more common.

dilemma 10y ago

I spend 7% of take home on rent. Used to be about 17%, but now I've moved further out to a nicer area.