How much should you spend on rent?

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on January 05, 2022
How much should you spend on rent?

For most of us, renting is a rite of passage when you move out of home. On one hand, you're stoked to be a fully-fledged adult with the freedom of your own place. On the other hand, you feel like crying when you see the amount of money being drained from your bank account every week.

This feeling has a name. It's called 'rental stress' and the Australian Bureau of Statistics (ABS) defines rental stress when you're spending more than one-third or 30% of your gross income on rent.

In this article, we’ll discuss:

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            How much should you spend on rent?

            The first step in deciding how much you should spend on rent is deciding how much rent you can actually afford. You can do this by finding a fixed income-to-rent ratio. In other words, the percentage of your net income (after tax) that's budgeted towards your rent. 

            While there's no hard and fast rule on how much you should spend on rent (the less the better - without sacrificing your health and safety), the sweet spot is generally 25% of your income, and ideally no more than 30%. Spending any more than 30% of your income on rent is widely considered an indication of housing stress. 

            No matter which way you cut it, rent is going to be one of your biggest expenses. Sydney and Melbourne generally remain front of mind when it comes to largest rental expenses across Australian capitals, yet research published by National Shelter, SGS Economics & Planning, the Brotherhood of St Laurence, and Beyond Bank Australia found Hobart to be the most unaffordable city for renters in Australia.

            The average full-time weekly income in NSW is $1,764.30 (or $91,743.60 a year) while the average dwelling rental is $580, according to property research from Domain. That means rent consumes 32% of the average Sydney renter's gross income. In Victoria, with average full-time weekly incomes of $1,750.70 according to ABS data ($91,036.40 a year) and average rental of $430 a week, rent takes up 24% of the average renter's gross income.

   calculated the percentage of income spent on rent for majority of Australian capital cities using most recent quarterly data from the ABS and Domain.


            Average weekly earnings

            Average weekly rent

            Average income spent on rent

































            Average Australian




            Of course, averages don't really tell us anything about the types of properties people choose to rent, or anything about their rental arrangements - each person is unique.

            How much money to spend on rent depends on whether you're sharing a rental property with flatmates, the type of property and its location. Renting a one-bedroom apartment in an exclusive inner-city suburb is obviously going to cost a lot more than renting somewhere say a short 20 minute drive out of town.

            Rental stress

            Before my housemate moved out and left me in the lurch, I was only spending $200 a week on rent. While I look for a new housemate, my rental expenses have ballooned and I'm now spending more than double that amount per week in rentThat's not to mention the money I've had to spend furnishing the house and starting from scratch because pretty much everything belonged to her. But I'm definitely not bitter about it...

            In June 2021, ME Bank surveyed 1,500 Australian households with over two-thirds (68%) of renters reporting rent stress, higher than that measured in December 2019 prior to the COVID-19 pandemic.

            Rent Stress ME Bank.jpg

            Source: ME Bank

            We all know rent can be expensive, but for most of us, housing costs are just a necessary evil of life – unless you plan on living at home with your parents rent-free forever. 

            But that doesn’t mean you have to throw away exorbitant amounts of money on rent every week. So how much should you be spending and how can you save money on rent?

            Getting the most out of the 30% income-to-rent rule of thumb

            We all know rent can be expensive, but for most of us, housing costs are just a necessary evil of life - unless you plan on living at home with your parents paying minimal board forever. 

            But that doesn't mean you have to spend exorbitant amounts of money on rent every week. So how much should you be spending and how can you save money on rent?

            If you're renting with your partner, use your combined net incomes as a guide to find an appropriate rent range. If you're renting with flatmates in a sharehouse, you would only apply the 25% rule to your portion of the rent. That way, you'll always be able to get to the target amount of 20% to 25% much easier than you would if you were renting on your own.

            Of course, the 25% to 30% rule won't always work for everyone. If you're on a low income, it may not be possible to find rental accommodation that is below 30% of your income. For example, say you're a university student with a weekly income of $358 ($18,634 a year) which is actually the mean income for undergraduate students, according to a Universities Australia survey. If you aimed to spend 25% of your income on rent, that's $89.50 weekly rent. Finding a rental that cheap is near impossible in most capital cities given the growth of the property market. Even if you upped it to 30% of your income, you'd still be looking at rentals going for $107.40 a week. According to accomodation website, the average rental price for student accommodation in Australia is $147 - there was nothing below $110. In this case, it would be extremely difficult to spend below 30% of your income on rent.

            How to calculate your rent

            This is very simple. Just take the amount that goes into your bank account each pay as net income and plug those numbers into a calculator as follows:

            Weekly pay x 0.25 = target weekly rent


            $1,000 x 0.25 = $250 per week 

            So someone earning $1,000 a week might aim to spend around $250 a week on rent because this amount is 25% of their income. 

            There is also the option of performing this calculation in reverse. If you're earning $1,000 per week and paying $450 per week in rent, you would calculate it as:

            $450 / $1,000 = 0.45

            So someone earning $1000 a week and paying $450 a week in rent would be spending 45% of their income on rent. Ouch.

            The 50/30/20 guideline

            There are a few other considerations you need to factor into your rental budget other than the rent itself. The cost of utilities, including gas, water, electricity, and internet all need to be factored in as well. If utilities are included in your rent, you may be able to justify a slightly higher rent.

            The 50/30/20 budgeting model can be helpful if you're trying to work out how much to spend on rent while factoring in all the other costs of living. Under this budget, 50% of your income goes towards needs and necessities (rent, bills, transportation, groceries, insurance, etc), 30% goes towards wants like entertainment, eating out, travel and shopping and 20% goes towards savings or debt payments.

            No more than 50% of your income should go towards essential expenses, which are the expenses you need to maintain the fundamentals of your life (your Netflix subscription doesn't count). How much of the 50% is divided up between the essentials will depend on your lifestyle - you might pay a higher rent but save money on electricity, transport, groceries and vice versa.

            Case Study: Alexa 

            Alexa is 24 and working full time in her first job since graduating university. Her take-home pay per week (after tax) is $1000.

            Fixed costs (50%) $500

            • Rent: $300 a week - Alexa shares an apartment with a flatmate in the inner city)

            • Transport: $50 a week - Alexa catches the bus to and from work every day and gets the occasional Uber)

            • Bills: $20 a week 

            • Groceries: $130 a week

            Total: $500 or 50% of her take-home pay

            Wants (30%)

            This leaves Alexa with $300 to spend on whatever she likes (usually plants for her apartment and wine and cheese). 

            Financial goals (20%) 

            Alexa puts $200 aside every week into her savings account as she's saving up for a trip to Japan next year. 

            How to save money on rent

            If like me, you think you are spending too much of your income on rent, there are a number of ways you can save money to lower your rental expense.

            Get flatmates

            Living alone definitely has its perks but it ain't cheap. Whether you enjoy living in a share house or not, doing so can save you a lot of money. According to data from and renters can save up to $16,000 a year simply by getting a flatmate. 

            Renting in an established share house can save you as much as $500 a week in some suburbs, and between $100 to $200 in most cases. Those savings can get even higher when you factor in things like bills, which are often equally split in share houses. Lower rent and living expenses can also mean you're able to live in an area you wouldn't have otherwise been able to afford.

            Just make sure you thoroughly vet potential housemates so you don’t wind up living with an axe-wielding murderer.


            You can always live in a ritzy place once you can afford to, but if you're saving for the great Australian dream of owning your own home, you may need to compromise in the short term. A house a little older, a daggy bathroom straight from the 70's or a home further away from where you would rather live - the reality is it's only temporary to get you to where you want to be. 

            Negotiate for lower rent

            If you find an area or particular property you really like and can see yourself living there for a while, it may be worth negotiating a longer lease with the landlord in return for a reduction in rent. Finding good tenants can be a painful process for landlords - it takes time and costs money as vacancies mean they're losing rent. Committing to a longer lease may encourage them to knock a few dollars off the weekly rent. 

            Rent out your car spot

            If you've got a car spot going unused, consider renting it out. If you live in an apartment, it's wise to check with the body corporate first, as there may be restrictions. For example, the car spot that comes with my apartment isn't being used at the moment as I don't have a car, but because it's a secure underground car park that requires a swipe pass, only residents are allowed access. By renting out your car spot, you can potentially earn a few extra dollars every week to put towards your rent expense.

            Take advantage of any extras

            If you're comparing apartments, make sure to factor in any building amenities as well. You could save money on your gym membership if your apartment complex has a gym for example, or on parking permits if your apartment comes with a car space.

  's two cents

            With the cost of living rising and wages stagnating, it's becoming increasingly common for people to spend more of their incomes on rent. While spending between 25% to 30% of your income on rent is generally regarded as being the ideal amount, there's also no hard and fast rule. Figuring out how much to spend on rent really depends on your personal financial situation and budget.

            Unlike a mortgage repayment, rent money is a pure cost without any 'forced savings' component. Spending any more than 30% of your income on rent can make it extremely hard to save for a house deposit. If you're struggling to pay your rent, it's time to review your budget and work out areas where you can save.

            If renting is only a temporary step before you buy your first home, keeping your rental cost as low as possible should be your key priority.

            Article updated January 5, 2022. 

            Image by klublu via Adobe Stock

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            Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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