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The 30% Housing Rule is Outdated for Most U.S. Cities

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  Published in House and Home on Friday, December 12th 2025 at 17:46 GMT by WGME

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Want to buy a house? The old 30 % income rule won’t be enough in most cities

For decades, home‑buyers, lenders, and policymakers have leaned on a simple benchmark: a family can afford a home if its monthly housing costs (mortgage, property taxes, insurance, and maintenance) are no more than 30 % of its gross income. The rule—widely publicized by the National Association of Realtors (NAR) and the Consumer Financial Protection Bureau (CFPB)—has been the yardstick by which affordability is measured, especially for first‑time buyers. Yet, as the WGME article points out, that rule is rapidly becoming an anachronism in the United States’ most desirable markets.

Why the 30 % rule feels out of touch

The rule dates back to the 1950s, when the average American family earned a level of income that kept up with a steady rise in housing costs. Back then, the median home price in 1950 was roughly $12,000—about three times the median household income. Today, the picture is starkly different. The median home price in the U.S. is now above $400,000, while the median household income has barely moved in real terms since the 2000s. The article cites a 2023 NAR report that the median price has outpaced income growth by more than 300 %. Because the 30 % rule hinges on the ratio of cost to income, the widening gap means that even a buyer with a solid credit score and a good down‑payment may find that the price of a modest starter home pushes monthly housing costs well over 30 % of their gross earnings.

City‑by‑city breakdown

The WGME piece zooms in on the most expensive markets—San Francisco, New York, Seattle, Boston, Los Angeles, and Washington, D.C.—and shows how the 30 % rule breaks down. In San Francisco, for instance, the median home price is about $1.6 million, while the median household income is roughly $118,000. That translates to a home cost that would take a 30 % rule‑compliant buyer an almost impossible 30–35 % of their monthly income. Across the country, the article lists a handful of “affordability deserts” where the rule would require more than 40 % of income to meet mortgage obligations, even in the most budget‑friendly markets.

To help readers grasp the extent of the problem, the article links to the U.S. Census Bureau’s QuickFacts pages for each city, providing a side‑by‑side comparison of median incomes, median home prices, and the resulting affordability ratios. Those quick‑look tables starkly illustrate that, while rural areas may still respect the 30 % threshold, nearly every major metro area has slipped past it.

Why prices are higher now

The article discusses several interrelated factors that have driven prices past the 30 % limit:

1. Persistently low mortgage rates: The Federal Reserve’s dovish stance keeps borrowing cheap. Lower rates boost demand, especially for young buyers with limited savings, which in turn drives prices up. A link to The Wall Street Journal’s analysis of how a 2‑point drop in the 30‑year fixed mortgage rate has historically spurred a 5–6 % jump in median home prices is included.

2. Supply constraints: Zoning laws, short construction cycles, and land‑use restrictions have prevented new inventory from keeping pace with demand. The article quotes a National Housing Conference brief, linked directly, that details how restrictive local ordinances have limited the supply of affordable housing.

3. Income stagnation: While the median household income has grown modestly in nominal terms, when adjusted for inflation, growth is barely measurable. The Federal Reserve’s latest personal income report, which the article references, highlights that real wages have plateaued for many demographic groups since 2015.

4. Rising property taxes and insurance: In many high‑price areas, local governments rely heavily on property tax revenue to fund schools and infrastructure. The article cites a link to Zillow’s recent report on how rising tax burdens further inflate monthly payment totals.

The consequences for buyers

When housing costs consume more than 30 % of a household’s gross income, buyers can no longer afford to spend a reasonable amount on other essentials—food, healthcare, transportation, and savings. The article emphasizes that the affordability squeeze disproportionately impacts first‑time buyers, renters who wish to buy, and lower‑income families who might otherwise consider suburban or ex‑urban options. It links to a Kaiser Family Foundation piece that documents how rising housing costs are contributing to food insecurity among low‑income households.

Potential solutions

Recognizing that the 30 % rule is no longer a reliable yardstick, the WGME piece examines what might be done to ease the burden:

• Policy‑level changes: The article references a Brookings Institution analysis that advocates for revising zoning ordinances to allow higher density, particularly near transit hubs, to increase supply. It also links to a HUD policy brief on the impact of “affordable‑housing subsidies” and down‑payment assistance programs.

• Lender flexibility: Some lenders are adopting alternative underwriting models that factor in student loan debt, gig‑economy earnings, and other modern income sources. The article includes a link to a National Mortgage News interview with a mortgage broker who explains how “debt‑to‑income” ratios are evolving.

• Consumer education: A recurring theme in the article is the importance of buyers understanding the full cost of ownership—including insurance, maintenance, and property taxes—rather than simply focusing on the purchase price. It links to a Federal Housing Finance Agency guide on how to evaluate total housing costs.

Bottom line

The WGME article concludes that the 30 % rule, once a helpful guideline, is no longer a practical measure of affordability in most U.S. cities. As mortgage rates stay low and housing prices keep climbing, the affordability gap will widen unless supply is boosted and policies adapt. For prospective buyers, the lesson is clear: beyond crunching the classic 30 % ratio, one must also factor in hidden costs, explore local incentive programs, and understand how the current housing market’s realities shape personal finances.

By following the embedded links to authoritative sources—NAR, CFPB, Census QuickFacts, Wall Street Journal, National Housing Conference, Federal Reserve, Zillow, KFF, Brookings, HUD, and NFMA—readers can deepen their understanding of the dynamics that have made the 30 % rule a relic and uncover actionable steps to navigate today’s expensive housing landscape.