By Paul Feeney, Founder and Chief Executive Officer, Otivo
Housing is the giant at the top of almost everyone's budget, and because it's so large, getting it even slightly wrong ripples through everything else. There's a well-worn rule, keep it to 30% of your income, that offers a useful anchor. But it's a rule under real strain in today's markets, and the honest picture is more nuanced. Here's how to think about what you can afford to spend on a roof.
A common guideline is to keep housing costs to around 30% of your gross income, whether rent or mortgage repayments. Spending much more than that, sometimes called housing stress, leaves less room for other essentials and savings. As at July 2026, the 30% figure is a guide rather than a rule, and many households spend more, particularly in higher-cost areas.
What's the 30% rule for housing?
The guideline suggests keeping your housing costs, rent or mortgage repayments, to around 30% of your gross income. The logic is that housing is such a large, fixed commitment that letting it climb too high squeezes everything else, leaving too little for other essentials, saving and the occasional enjoyment. It's a rough benchmark rather than a precise threshold, but it gives you a sense of when housing is taking a manageable share of your income versus an overwhelming one.
Why does housing cost so much matter?
Because it's the biggest single line in most budgets, and it's largely fixed. You can trim groceries or skip a dinner out, but rent or a mortgage repayment lands in full every month regardless. That means the housing decision sets the boundaries for your entire budget, get it right and there's room to breathe, get it wrong and every other category is squeezed to compensate. Its size and rigidity are exactly why it deserves the most careful thought.
What is housing stress?
Housing stress is the term often used when a household spends more than around 30% of its income on housing, particularly lower-income households. Beyond that level, the large fixed cost starts crowding out other essentials, making it harder to cover bills, build savings or absorb a financial shock. It's not a precise cliff, but the further above the guide you go, the tighter everything else becomes, which is what makes housing costs worth watching closely.
What if you can't keep housing to 30%?
You're far from alone, since in many markets keeping housing to 30% has become difficult or impossible. If your housing costs run higher, it means budgeting more tightly elsewhere, being deliberate about other spending, and looking hard at the levers you can control, since housing itself is hard to change quickly. It also makes the case for reviewing the decision when you can, at the next lease, a refinance, or a move, since housing is where the largest budget shifts are found.
How do you factor housing into a budget?
Build the rest of your budget around it, and count its true cost. Housing isn't just rent or the mortgage repayment, it includes rates, insurance, utilities and maintenance, which together give the real figure. Starting from that full housing cost and working out what's left for everything else gives a truer picture than looking at the headline repayment alone. Because it anchors the whole budget, getting an honest number for housing is where sound budgeting begins.
Frequently asked questions
How much of my income should go to housing?
Around 30% of gross income is a common guide for rent or mortgage repayments. Many households spend more, especially in higher-cost areas, so treat it as a benchmark rather than a strict rule.
What is housing stress?
It generally refers to spending more than about 30% of income on housing, particularly for lower-income households, which crowds out other essentials and savings. The further above the guide, the tighter the rest of the budget.
What if my rent is more than 30% of my income?
It's increasingly common. It means budgeting tightly elsewhere and looking at the levers you can control, and reviewing the housing decision when you can, since housing is where the biggest budget changes are found.
Where to from here
Get the giant right and the rest of the budget has room to work. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a debt advice module that works with your household income and expenses to find effective ways to manage money and pay down debt. It helps you build a budget around your biggest cost.
Sources
- ASIC MoneySmart — housing costs and budgeting — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.