The number of extremely unaffordable housing markets in the United States has nearly doubled during the pandemic, from 14 in 2019 to 27 in 2021, according to the latest edition of Demographics International Housing Affordability from the Urban Reform Institute and the Frontier Center for Public Policy.
The study assesses housing affordability for middle incomes in 92 housing markets in the United States, Australia, Canada, China, Ireland, New Zealand, Singapore and the United Kingdom.
Demographia International Housing Affordability uses the “median multiple” to assess housing affordability for middle-income people. This is a price/income ratio, which is the median house price divided by the median gross household income (before tax).
The researchers assess the affordability of middle-income housing in four categories:
- Affordable: median multiple, 3.0 and below
- Moderately unaffordable: 3.1 to 4.0
- Seriously unaffordable: 4.1 to 5.0
- Very unaffordable: 5.1 and above
According to the report, housing markets are both metropolitan areas and labor markets. He notes that in a well-functioning market, the median-priced home should be affordable for a large portion of middle-income households, which was mostly the case a few decades ago.
Demographia International Housing Affordability found that housing affordability around the world in 2021 has deteriorated significantly: median multiples of 10.0 or more are up five times from a decade ago.
Hong Kong is the least affordable market, with a median nosebleed multiple of 23.2. By comparison, the most affordable market has a median multiple of 2.7.
The pandemic demand shock has led to an unprecedented deterioration in housing affordability, the report said. The number of extremely unaffordable markets increased by 60% in 2021 compared to 2019, the last pre-pandemic year.
Declining housing affordability in turn drives up the cost of living. In the United States, more than 85% of the cost-of-living differences between high-cost and mid-cost metropolitan areas are due to housing costs, according to the report, citing French economist Thomas Piketty.
The study looked at 56 markets in the United States, which had a median financial inaccessibility rating of 5.0, the lowest in the world.
See the gallery for the 12 Least Affordable Markets in the US