Money

The Best Metropolitan Areas for Affordable Housing

Data & Guides Money The Best Metropolitan Areas for Affordable Housing

Homeownership is the ultimate aspirational dream for millions of Americans. A 2023 Lending Tree survey found that 84% of Americans aspired to own a home. [1] LendingTree: 94% of Americans Say Owning a Home Is Part of the American Dream, but 51% Who Don’t Own Fear They Never Will https://www.lendingtree.com/home/mortgage/homeownership-dreams-survey/ While ownership rates have steadily recovered from the recession-induced lows of the early 2010s, not everyone is able to get on the property ladder.

According to the Federal Reserve [2] St Louis Federal Reserve: Homeownership Rate in the United States, 1980-2024 https://fred.stlouisfed.org/series/RSAHORUSQ156S, around two-thirds of Americans are homeowners, but millennials have struggled to buy homes as consistently as previous generations. This may be exacerbated by the fact that there has been a 42% surge in new house prices over the last five years. [3] Investopedia: Millennial Homeownership Still Lagging Behind Previous Generations https://www.investopedia.com/millennial-homeownership-still-lagging-behind-previous-generations-7510642

Affordable housing is a major policy challenge for both state and federal government, to bridge the generation gap and create better-value communities for years to come. But which cities in 2024 have the most affordable homes?

To find out, researchers on behalf of Self Financial analyzed Zillow average house prices from both June 2023 and January 2024, ranking each metropolitan area based on the percentage of properties that can be considered affordable based on the average city salary.

Key findings

• Just 16 of the 100 largest cities in the U.S. have more than 50% of housing stock classed as affordable.
• Rochester, NY has the most affordable housing market in the U.S., with 81.7% of homes for sale affordable for 30% of the city’s median income.
• San Diego and Los Angeles are the most unaffordable cities in the U.S., with just 1.1% of stock classed as affordable in the Southern California metros.
• Affordable housing in America’s 100 largest cities dropped by 7.8% between June 2023 and January 2024.

What is affordable housing?

According to The National Association of REALTORS®, median house prices hit record numbers in 2023, with the average home costing $389,800. [4] National Association of Realtors: Existing-Home Sales Slid 1.0% in December https://www.nar.realtor/newsroom/existing-home-sales-slid-1-0-in-december For many Americans however, getting on the housing ladder at this cost is out of reach. While a record 40% of U.S. homes are mortgage-free, mortgage prices are at 20-year highs; compounding the problem further. [5] Business Insider: ‘Will mortgage rates go down in 2024?’ https://www.businessinsider.com/personal-finance/will-mortgage-rates-go-down-in-2024?r=US&IR=T

But what is an affordable home? The U.S. Department of Housing defines it as a property that costs no more than 30% of household income, and they state that this is “intended to ensure that households have enough money to pay for other non-discretionary costs”, including taxes, medical costs and groceries. [6] U.S. Department of Housing: Defining housing Affordability https://www.huduser.gov/portal/pdredge/pdr-edge-featd-article-081417.html

Metropolitan areas with the most affordable housing

If you’re looking for the most affordable housing market, it seems that buyers should consider living in one of the Great Lakes states. Overall, just 11 of the 100 largest metropolitan areas in the U.S. have an affordable housing majority, and the 10 highest proportions can be found in cities in New York, Pennsylvania, Ohio, Michigan and Wisconsin.

Rochester, New York, has the largest share of homes that can be bought for 30% of the city’s median income or less, with 81.7% of liveable properties on a budget of $1,985 per month — around 30% of the city’s median income level. This means it has a high chance of being the best affordable housing market in the U.S.; with Cleveland, Ohio in second, which came out on top in a separate study, as measured by cost-per-square-foot, on home affordability in 2023. [7] Cleveland.com: Ohio city is most affordable housing market in U.S., report says https://www.cleveland.com/news/2023/09/ohio-city-is-most-affordable-housing-market-in-us-report-says.html

Nestled on the shores of Lake Ontario, Rochester is one of three cities upstate New York, including Syracuse (76.9%) and Buffalo (58.4%) that offer value for money in the market. In 2022, state Governor Kathy Hochul announced a $25 billion pledge to tackle the state’s affordable housing crisis. [8] Democrat & Chronicle: Rochester has made massive progress on affordable housing. There's more to do https://www.democratandchronicle.com/story/opinion/2022/10/10/rochester-ny-affordable-housing-more-to-do/69552507007/ State funding for Rochester specifically has included $72.7 million for affordable housing in October 2023, [9] WHEC News 10, ‘State will provide over $70M for affordable apartments in downtown Rochester’ https://www.whec.com/top-news/state-will-provide-over-70m-for-affordable-apartments-in-downtown-rochester/ with other initiatives continuing to be announced.

Metropolitan areas with the least affordable housing

While lakefront cities were among America’s most affordable, it appears that coastal communities are among the most priciest to live. Seven of the 10 most expensive metropolitan areas face either the Atlantic or Pacific Ocean.

House prices in Southern California consistently defied national trends in recent years despite borrowing highs, with the average SoCal home costing $831,080 in October 2023 [10] Los Angeles Times: Southern California home values near record despite the high cost of borrowing https://www.latimes.com/california/story/2023-11-16/southern-california-home-values-near-record-despite-the-high-cost-of-borrowing — more than double the median price for the U.S. overall.

This research shows that just 1.1% of housing stock is considered to meet the 30% affordability threshold in the San Diego and Los Angeles metropolitan areas. Despite a median household income of $98,000 among San Diego residents in 2022, [11] United States Census Bureau: QuickFacts: San Diego, California https://www.census.gov/quickfacts/fact/table/sandiegocitycalifornia/INC110222 the area is approximately 97,000 homes short of its 108,000 requirement to meet the state’s state Regional Housing Needs Allocation covering April 2021 through April 2029. A city council report also acknowledged that housebuilding will need to triple if it is to meet national targets. [12] San Diego Union Tribbune: Just how far behind is San Diego on building new housing? Just 62 middle-income homes were permitted citywide in 2 years https://www.sandiegouniontribune.com/news/politics/story/2023-11-30/just-how-far-behind-is-san-diego-on-building-new-housing-just-62-middle-income-homes-were-permitted-citywide-in-2-years

Top 100 metropolitan areas and their affordable housing

Since the 2008 financial crisis, the supply of housing stock has failed to keep pace with demand. Most states have adapted their city planning and zoning laws to encourage housebuilding. [13] NPR: The U.S. needs more affordable housing — where to put it is a bigger battle https://www.npr.org/2023/02/11/1155094278/states-cities-end-single-family-zoning-housing-affordable

This research analyzed house prices across the country at two separate points — June 2023 and January 2024. In this period, the data saw a 7.8% drop in the quantity of affordable housing stock. This is, however, a snapshot of two months and may not be indicative of trends in 2024 moving forward.

Two central Florida cities - Deltona (28%) and Lakeland (23%) saw the sharpest reduction in affordable housing, according to these figures. The Orlando area has seen prices surge by 200% between 2012 and 2023 — among the highest rates in the country. [14] Habitat for Humanity Greater Orlando and Osceola County: The Housing Crisis https://www.habitatorlando.org/face-the-housing-crisis/the-housing-crisis/

While more than three-quarters of the country’s 100 largest cities saw an increase in affordable housing stock between June 2023 and January 2024, just 16 of those metropolitan areas had a majority of homes available for 30% of the U.S. median salary.

To make matters worse, two cities — Riverside and Bakersfield in California had no affordable homes available at all as of January 2024. While the data shows that prices fluctuate daily based on supply and demand; it does highlight a nationwide shortage that is of genuine concern for policymakers.

Methodology

This study took the top 100 metropolitan areas by population [15] United States Census Bureau, ‘Metropolitan and Micropolitan Statistical Areas Population Totals: 2020-2022’ https://www.census.gov/data/tables/time-series/demo/popest/2020s-total-metro-and-micro-statistical-areas.html and reviewed their respective housing stock on Zillow in January 2024 and June 2023, taking an average from both of these snapshots. [16] Zillow, ‘Real Estate & Homes For Sale’ (various cities) https://www.zillow.com/homes/ Researchers scraped available housing for sale in each area while removing vacant lots and land from the results.

Housing with a list price of $50,000 or less was ignored as this typically referred to housing that needed lots of renovation, which may be affordable, but not liveable. Manual analysis was performed to confirm this.

‘Affordable housing’ is classified by the U.S. Department of Housing as homes that cost no more than 30% of household income. Taking that definition,the study compared the number and percentage of homes listed that could be purchased with 30% or under of the local median household income to determine which metros have the most affordable properties available as a percentage

The following amortized mortgage formula was used to calculate affordability ((P = a / {[(1 + r) ^ n] - 1} / [r * (1 + r) ^ n])) where P: monthly payment, a: total loan amount, r: annual rate divided by annual payment periods, n: total number of payment periods.

This calculation uses a 660 credit score as it is a likely credit score for people looking to purchase affordable housing, not in the lowest brackets nor the highest. This would put the buyer in the prime category. [17] Consumer Financial Protection Bureau, ‘Borrower risk profiles’ https://www.consumerfinance.gov/data-research/consumer-credit-trends/student-loans/borrower-risk-profiles/ The data assumes a 30-year mortgage term as that is the most common. [18] Rocket, ‘The Average Mortgage Length In The U.S.’ https://www.rocketmortgage.com/learn/average-mortgage-length

Household income data refers to 25-44 year olds (the age range likely to purchase affordable housing) in each metropolitan area from the U.S. Census Bureau inflated to December 2023 (the latest available at the time of calculating via CPI Inflation Calculator).

Sources

• ^[1] LendingTree: 94% of Americans Say Owning a Home Is Part of the American Dream, but 51% Who Don’t Own Fear They Never Will https://www.lendingtree.com/home/mortgage/homeownership-dreams-survey/
• ^[2] St Louis Federal Reserve: Homeownership Rate in the United States, 1980-2024 https://fred.stlouisfed.org/series/RSAHORUSQ156S
• ^[3] Investopedia: Millennial Homeownership Still Lagging Behind Previous Generations https://www.investopedia.com/millennial-homeownership-still-lagging-behind-previous-generations-7510642
• ^[4] National Association of Realtors: Existing-Home Sales Slid 1.0% in December https://www.nar.realtor/newsroom/existing-home-sales-slid-1-0-in-december
• ^[5] Business Insider: ‘Will mortgage rates go down in 2024?’ https://www.businessinsider.com/personal-finance/will-mortgage-rates-go-down-in-2024?r=US&IR=T
• ^[6] U.S. Department of Housing: Defining housing Affordability https://www.huduser.gov/portal/pdredge/pdr-edge-featd-article-081417.html
• ^[7] Cleveland.com: Ohio city is most affordable housing market in U.S., report says https://www.cleveland.com/news/2023/09/ohio-city-is-most-affordable-housing-market-in-us-report-says.html
• ^[8] Democrat & Chronicle: Rochester has made massive progress on affordable housing. There's more to do https://www.democratandchronicle.com/story/opinion/2022/10/10/rochester-ny-affordable-housing-more-to-do/69552507007/
• ^[9] WHEC News 10, ‘State will provide over $70M for affordable apartments in downtown Rochester’ https://www.whec.com/top-news/state-will-provide-over-70m-for-affordable-apartments-in-downtown-rochester/
• ^[10] Los Angeles Times: Southern California home values near record despite the high cost of borrowing https://www.latimes.com/california/story/2023-11-16/southern-california-home-values-near-record-despite-the-high-cost-of-borrowing
• ^[11] United States Census Bureau: QuickFacts: San Diego, California https://www.census.gov/quickfacts/fact/table/sandiegocitycalifornia/INC110222
• ^[12] San Diego Union Tribbune: Just how far behind is San Diego on building new housing? Just 62 middle-income homes were permitted citywide in 2 years https://www.sandiegouniontribune.com/news/politics/story/2023-11-30/just-how-far-behind-is-san-diego-on-building-new-housing-just-62-middle-income-homes-were-permitted-citywide-in-2-years
• ^[13] NPR: The U.S. needs more affordable housing — where to put it is a bigger battle https://www.npr.org/2023/02/11/1155094278/states-cities-end-single-family-zoning-housing-affordable
• ^[14] Habitat for Humanity Greater Orlando and Osceola County: The Housing Crisis https://www.habitatorlando.org/face-the-housing-crisis/the-housing-crisis/
• ^[15] United States Census Bureau, ‘Metropolitan and Micropolitan Statistical Areas Population Totals: 2020-2022’ https://www.census.gov/data/tables/time-series/demo/popest/2020s-total-metro-and-micro-statistical-areas.html
• ^[16] Zillow, ‘Real Estate & Homes For Sale’ (various cities) https://www.zillow.com/homes/
• ^[17] Consumer Financial Protection Bureau, ‘Borrower risk profiles’ https://www.consumerfinance.gov/data-research/consumer-credit-trends/student-loans/borrower-risk-profiles/
• ^[18] Rocket, ‘The Average Mortgage Length In The U.S.’ https://www.rocketmortgage.com/learn/average-mortgage-length