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Affordable Housing
Definition
Affordable housing refers to housing costs that do not exceed 30% of a household's gross income, a standard used by lenders and government agencies.
Explanation
The 30% rule is a standard for housing affordability: spend no more than 30% of gross income on housing (rent or mortgage payment including taxes and insurance). Spending above 30% is considered cost-burdened. Housing costs above 50% are severely cost-burdened.
Housing affordability varies by location. In high-cost cities, many households spend 50% or more on housing, making saving for other goals difficult.
Example
A household earning $80,000 per year should spend no more than $24,000 annually ($2,000 per month) on housing to meet the affordability standard.