The Most and Least Affordable Housing in America

A new report blames land use restrictions for driving up prices, but there's much more to it than that

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Reuters

A house in Cleveland might run you $115,000. A similar home in San Diego would cost you three times that, probably more. Different locations have different housing values, which won't be news to anyone. Whether the people who live in those metro areas can truly afford to buy them is another matter altogether.

Compiled by Wendell Cox and Hugh Pavletich, the 8th Annual Demographia International Housing Affordability Survey [PDF] bases its affordability measure on the “median multiple,” which is found by dividing the median home price by the gross annual median household income before taxes. Metro areas where the housing price is more than three times the income level are deemed unaffordable.

Of the 81 major markets, those with populations over 1 million, 51 are located in the U.S. Of those, 24 markets are rated as being affordable by the report (those with a median multiple of 3.0 or below), and the remaining 27 are either “moderately unaffordable” (3.1-4.0), “seriously unaffordable” (4.1-5.0) or “severely unaffordable” (5.1 and above) unaffordable. Below are the top 10 most and least affordable in the U.S.

Most Affordable Housing Markets in the U.S.

Market Median Housing Price Median Income Median Multiple
Detroit $66,500 $48,700 1.4
Atlanta $101,900 $53,800 1.9
Phoenix $113,700 $50,900 2.2
Cincinnati $126,800 $52,100 2.4
Cleveland $113,600 $46,700 2.4
Las Vegas $122,700 $52,000 2.4
Rochester $123,400 $50,800 2.4
Columbus $131,500 $51,600 2.5
Kansas City $135,900 $54,500 2.5
Minneapolis-St. Paul $160,300 $63,100 2.5

 

Least Affordable Housing Markets in the U.S.

Market Median Housing Price Median Income Median Multiple
San Jose $587,500 $84,900 6.9
San Francisco-Oakland $491,900 $73,800 6.7
New York $389,600 $62,600 6.2
San Diego $369,800 $60,600 6.1
Los Angeles $324,800 $57,300 5.7
Boston $367,700 $68,800 5.3
Seattle $286,200 $63,800 4.5
Richmond $177,900 $41,300 4.3
Providence $224,900 $52,500 4.3
Portland, Ore. $223,200 $53,700 4.2

 

The report also includes housing prices from indexes in Australia, Canada, Hong Kong, Ireland, New Zealand, and the United Kingdom, covering a total of 325 metropolitan markets of various sizes. Of these, only 128 are deemed affordable by the survey, and 117 of them are in the U.S. The UK and Australia, respectively, have 20 and 25 markets that are rated as “severely unaffordable.”

The authors argue that the main cause of unaffordable housing is the use of strict policies that control how land is developed.

“The causes of massively deteriorating housing affordability are not a mystery. They inevitably result from more restrictive land use regulations adopted by governments with insufficient attention to economic fundamentals. This occurs even as virtually all governments profess housing affordability as an important public objective. Where land is rationed (by more restrictive land use regulation), house prices will rise. Thus, where house prices have increased substantially, they have been preceded by more restrictive land use regulation.”

The authors specifically call out new construction that is significantly controlled by comprehensive plans or through more restrictive land use regulations “referred to as ‘compact development,’ ‘urban consolidation,’ ‘growth management’ and ‘smart growth.’” The thesis is that these places create housing that is unaffordable. And conversely, the places ranked as affordable – Phoenix, Atlanta, Las Vegas – tend to be areas associated with sprawl development.

These two authors are known for their market-based preferences for land use and housing development, so their argument is no surprise. And though there is certainly a case to be made that restrictive land use policies can limit supply and drive up costs, these aren’t the only factors in play. That New York City is less affordable than its upstate neighbor Rochester has more to do with the fact that it is a much more vibrant and attractive city, and that people are willing to pay more to live that lifestyle than people who prefer Rochester living. Taking this and other factors into account would expand the understanding of why some places are less affordable than others. And while the picture painted by Cox and Pavletich is not wrong, per se, its limited scope offers a less-than-comprehensive analysis that could benefit from more context.

Top image credit: Fred Prouser / Reuters

About the Author

  • Nate Berg is a freelance reporter and a former staff writer for CityLab. He lives in Los Angeles.