renttoincome

Rent-to-income (RTI) is a metric used to assess the affordability of housing by comparing the amount of income available for rent with the actual rent price. It is commonly used by landlords, property managers, lenders, and prospective tenants to gauge whether housing costs are sustainable relative to income.

Calculation of RTI is straightforward: RTI = monthly rent divided by gross monthly income. For example, paying $1,500 in rent on a $5,000 gross monthly income yields an RTI of 0.30, or 30%. Some analyses use net income or include utilities and other housing costs, but the standard measure typically uses gross income.

Usage of RTI varies by context. For tenants, RTI helps tenants judge whether a housing option fits their budget. For landlords and property managers, RTI can inform rental pricing and tenant screening decisions, with many landlords aiming for a target RTI threshold when evaluating applicants. For lenders and underwriters, RTI is one of several affordability indicators used to assess debt service capacity, especially in loan underwriting for rental properties or personal loans tied to housing.

Common guidelines suggest front-end affordability thresholds around 30% of gross income, though acceptable RTI levels can range from the high 20s to 40% depending on local norms, income level, and other debts. The metric has limitations: it does not account for other essential expenses, irregular or non-wage income, taxes, insurance, utilities, debt obligations, or regional cost-of-living differences. As a result, RTI is best used alongside a broader financial assessment rather than as a sole decision criterion.

See also: housing affordability, debt-to-income ratio, underwriting.