How Much of My Income Should Go Towards Rent?

Across the country, median weekly rents range from $400 on the West Coast, to over $750 in the Queenstown-Lakes District, which beats even Auckland and Wellington, where they are around $650.

Of course, rents vary considerably, depending on the rental home and its location, but if you are renting, how much of your salary should you expend in rent? Canstar guides you through how much you should spend on rent, and some tips to keep costs down.

How much of your income should go towards rent?

Thirty per cent is the golden number when it comes to rent affordability. The 30% rule specifies that no more than 30% of your gross income (income before tax, KiwiSaver, student loan deductions, etc.) should go towards rent. And, overall, it’s good advice.

But the full picture isn’t quite that simple.

How much you should spend on rent, and how much you can afford to spend, are two separate amounts. If it’s feasible, 20%-25% of your gross income is probably a better figure. This will ensure you still have room in your budget for other expenses, entertainment and leisure and, of course, savings and investments.

But again, it depends on your financial situation. Based on your financial goals, you may opt for a place that only equates to 15% of your gross income. Just because you can afford to spend more, doesn’t necessarily mean you should. If you’re planning to buy your first home, for example, you could try to spend as little as possible on rent.

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Work out a budget

For a clearer picture of what you should spend on rent, it’s helpful to create a personalised budget.

Calculate how much you need for expenses, savings and investments. Allow a reasonable sum for entertainment, leisure and non-essential purchases. And once you know how much is left, you can decide how much to expend on rent.

If you’re not sure where to start, one popular budgeting method is the 50/30/20 rule. Using this method:

• 50% of your income is put towards necessities, like housing and food
• 30% goes towards things such as going out and entertainment
• 20% is used for savings or to pay down debt

But again, this is only one budgeting method. It may not suit your own goals or needs.

Searching for the Cheapest Personal Loan?

If you’re looking for the cheapest personal loan, Canstar’s personal loan comparison tables can help. The table below displays the sponsored unsecured personal loan products available on Canstar’s database for a three-year loan of $10,000 in Auckland, with links to lenders’ websites. Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals.

What if your rent is over 30% of your income?

If you’re spending over 30% of your income on rent, it’s not necessarily the end of the world. This figure, while widely quoted, is only a general rule. However, it may be worthwhile to assess why your rent is above 30% of your income.

If you’re paying for a place that’s more lavish, or larger, than necessary, you might want to consider moving.

However, there are many reasons why your rent may be over 30% of your income, including:

Rent in your region is less affordable

Rents vary widely, and renting in certain suburbs and areas means spending a greater proportion of your income on rent.

For example, if you’re paying the median Auckland rent of $650 per week, you’ll need a household income of over $110,000 to keep below the 30% threshold.

Paying more rent saves on other expenses

Paying more in rent can save on other expenses. For example, if you work in the city, renting in an outer suburb will probably be cheaper then renting in a popular inner-city area. However, you must then factor in transport costs. Would it be cheaper to forego car ownership and opt for city living closer to work?

You’re a student

Because universities tend to be in the big centres, students can face higher accommodation costs in relation to income.

Your income is high enough to justify it

If you earn enough money to pay a third of your income on rent and still lead a lavish lifestyle, then the 30% rule will be less of a concern.

How to pay less rent?

Tips that can help lower your rent, include:

• Check the market rent in your area here. You could be overpaying.
• Move to a less expensive area.
• Downsize your home to cheaper accommodation.
• Get flatmates and spread the cost of your rent.
• If you don’t drive, and have a desirable parking space, see if you can rent it out.

Where can you get financial help?

If you need help managing rental payments or housing costs, check this government website for more advice. 

If you need help managing your finances, consider contacting a financial counsellor. MoneyTalks is a free financial helpline that offers advice and support from trained financial mentors in your community.

Compare home and contents insurance with Canstar

If you’re renting, you don’t need to worry about home insurance, but what about your possessions? Many insurance providers offer great deals for renters and here, at Canstar, we take a lot of the hard work out of comparing contents insurance providers.

Our annual insurance awards highlight the best insurance providers in the market – those that offer the best insurance products, value and customer service. To learn more, just click on the button below.

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About the author of this page

Bruce Pitchers is Canstar NZ’s Content Manager. An experienced finance reporter, he has three decades’ experience as a journalist and has worked for major media companies in Australia, the UK and NZ, including ACP, Are Media, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. As a freelancer, he has worked for The Australian Financial Review, the NZ Financial Markets Authority and major banks and investment companies on both sides of the Tasman.
In his role at Canstar, he has been a regular commentator in the NZ media, including on the Driven, Stuff and One Roof websites, the NZ Herald, Radio NZ, and Newstalk ZB.
Away from Canstar, Bruce creates puzzles for magazines and newspapers, including Woman’s Day and New Idea. He is also the co-author of the murder-mystery book 5 Minute Murder.