Wages in America Are Too Low for the 30% Rule to Work for Renters Anymore

Original Article ↗ Hacker News Discussion ↗

Rents and home prices in the U.S. and other rich countries have risen far faster than incomes, making traditional rules of thumb like “spend no more than 30% of income on housing” increasingly unworkable, especially for single renters and younger households. Commenters argue over causes — from constrained housing supply, zoning and NIMBY politics, construction costs, financialization and algorithmic rent-setting, to stagnant or uneven wage growth and tax burdens — but broadly agree that both high housing costs and weak purchasing power are to blame. Proposed remedies range from building vastly more and denser housing (often via zoning reform and land-value taxes) to stronger tenant protections and rethinking how real estate and landlords are taxed and regulated.

Scope of the Problem: Wages, Rents, and the 30% Rule

  • Many argue the core issue is high housing costs, not just low wages; others say both are broken.
  • The “30% of gross income on rent” rule is seen as outdated: taxes, healthcare, and other essentials now consume much more, so people can be under 30% and still broke.
  • Some prefer the 50/30/20 budgeting framework but note it only works if housing and essentials are realistically priced.

Historical and Regional Comparisons

  • Multiple posts compare 1970s–1990s rents and incomes (after inflation) and conclude housing has roughly doubled relative to wages in the US.
  • Counterarguments: households now buy more and higher-quality housing, and in some regions prices remain reasonable.
  • Examples from NYC, New England, Midwest, Sunbelt, Germany, Norway, Croatia, Canada, and Poland show rent commonly hitting 40–60% of income in big cities.
  • Sunbelt metros (e.g., Texas) are cited as partial exceptions where new supply and concessions are softening rents.

Supply, Zoning, and Construction Costs

  • Strong consensus that constrained supply (zoning, NIMBYs, long permitting, building codes, lost SROs) is central.
  • Some emphasize high construction costs and materials; others say regulation and process overhead are a large hidden component.
  • Examples show big rent drops when lots of new units are built; skeptics cite places like Australia where housing stock grew faster than population but prices still rose.

Landlords, Speculation, and Land Value

  • Intense debate over whether landlords are “unproductive rentiers” or providers of necessary risk-bearing and management.
  • Distinction repeatedly made between landowners, developers, and property managers; many argue only the latter two add real value.
  • Georgist ideas (land value taxes, public land ownership with long leases) are popular in the thread as ways to kill land speculation while preserving incentives to build.
  • Concerns raised about algorithmic rent-setting (RealPage) and institutional/PE ownership, though some say their total share is still small.

Realtors and Market Structure

  • Realtors are criticized as extracting large percentage commissions and having incentives for high prices; several point to recent antitrust cases.
  • Others note they provide market expertise and coordination, especially in weak markets, but concede AI and flat-fee models could replace much of their role.

Social and Cultural Factors

  • Decline of rooming houses/SROs and co-living, larger modern homes, and aging owners staying in big houses all reduce effective supply.
  • Remote work, immigration, investor demand, school-funding via property taxes, and treating homes as primary wealth vehicles all reinforce scarcity and political resistance to falling prices.

Proposed Remedies (Often Contested)

  • “Build more” (especially denser, smaller, cheaper units) is the dominant prescription.
  • Other ideas: land value taxes, loosening zoning and codes, strengthening tenant movements, more public/social housing, rent control (with mixed views), and right-of-first-refusal for tenants when buildings sell.