Underwriting & credit
3x Rent Rule: Definition & Example
Also called: Three times rent rule, 40x rent rule
What Is the 3x Rent Rule?
The 3x rent rule is a common landlord guideline requiring an applicant’s gross monthly income to be at least three times the monthly rent.
What does 3x Rent Rule mean?
Under the 3x rule, a $1,500 apartment requires $4,500 in gross monthly income, or $54,000 per year. That keeps rent at or below about 33% of gross income, which lines up with the widely used guideline that housing should not exceed 30% of income.
Some markets express it annually. In New York City, the "40x rule" means annual income of 40 times monthly rent, which is equivalent to 3.33 times. Guarantors often face an 80x standard.
The rule is a rule of thumb, not a law. Landlords may use 2.5x or 2x in tight or affordable markets, count combined co-applicant income, or accept a guarantor or liquid assets instead. Where source-of-income laws apply, voucher holders are often measured only on their share of rent.
3x Rent Rule example
Rent is $1,800. Under the 3x rule, the applicant needs $5,400 in gross monthly income. She earns $68,000 per year, or $5,667 per month, so she clears the requirement at a ratio of 3.15x.
Related terms
- Rent-to-Income RatioRent-to-income ratio compares monthly rent with gross monthly income, usually shown as a percentage (rent ÷ income) or as a multiple (income ÷ rent).
- Gross Monthly IncomeGross monthly income is the total amount a person earns in a month before taxes, retirement contributions, insurance premiums, or other deductions are taken out.
- Rental CriteriaRental criteria are the written standards a landlord uses to evaluate every applicant, such as minimum income, rental history, credit, and background requirements.
- GuarantorA guarantor is a person who signs an agreement promising to pay a tenant’s or borrower’s obligations, such as rent, if the tenant or borrower does not pay.
- Co-ApplicantA co-applicant is a second person who applies alongside the main applicant and will share legal responsibility for the lease or loan if it is approved.
3x Rent Rule FAQ
- How much do I need to make for a $2,000 apartment?
- Under the 3x rule, $6,000 per month in gross income, or $72,000 per year.
- Is the 3x rent rule a law?
- No. It is a common landlord guideline, though local laws may limit how income requirements are applied, such as for voucher holders.
