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Comment by denzil_correa | Hacker News Reader

I have been kind of struggling with this question lately. As a rule of thumb, what percentage of your income would/should be spend on rent? I can totally understand there are many variables but I'm assuming the cost of buying a new house could be one on that list.

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In theory it should be between 1/5 and 1/4 of your net income, to be increased to a maximum of 1/3, as DaiPlusPlus stated, in "high density" or "high value" cities or areas.

These "rules of the thumb" have been accurate for decades, lately the numbers "went crazy", partially because of the increase of costs for new houses, partially because of the lowering (or stagnating) of income, partially because of increases in taxation (either on personal income or house related taxation).

The phenomenon is not restricted to the UK, or to the London metropolitan area, here is a data point about Italy (the article is in Italian but the leading graphic is clear enough):

https://www.idealista.it/news/immobiliare/residenziale/2017/...

which is not that bad in Google translate.

The three bars are respectively employees (dipendenti), independent professionals (autonomi) and retired people (pensionati) which represent roughly three different levels of income, average, high and low.

The rule of thumb is 1/4 of gross income before tax, 1/3rd of net income after tax - reasoning that 25% of your income is lost to taxes.

Another approach is to take your salary, max out your pre-tax retirement contributions, find out what dollar amount you need to maintain your current lifestyle in non-accommodation costs, set aside at least a few hundred $ monthly buffer, then whatever's left will be your budget for housing.

I've found it useful to consider transportation + housing in aggregate. It can cost the same to have a centrally located apartment vs. a suburban apartment + car. Also, your commute time and sanity (avoiding transit, avoiding rommmates) may be worth some sacrifices to lifestyle/entertainment expenses.

From a landlord's perspective, they prefer if you do not spend more than 1/3 of your income on rent.

Keep it affordable for people to live in, but too expensive for the tenants to save-up to buy their own place. Devilish.

Renting is an ultra-competitive market -- landlords aren't personally deciding what your rent should be.

Pretty much. Hilariously the rate of house price increases in London is almost outpacing the rate I can save for a home.

So even if you can save up, you still can't buy a house.

1/3 max

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