Where is housing least affordable in the United States?
The most-cited measure has been the National Association of Realtors’ affordability index, which tracks whether median-income families can qualify for mortgages on median-priced homes. According to that, the least-affordable market as of 2016 was San Jose-Sunnyvale-Santa Clara (aka Silicon Valley) in Northern California, followed by Anaheim-Santa Ana-Irvine in Southern California (aka Orange County) and San Francisco-Oakland-Hayward just to Silicon Valley’s north.
Hey, but what about renters! In some metropolitan areas, they make up more than 40 percent of households, including Los Angeles, Miami, New York and San Francisco, among others.
Renters tend to be poorer than homeowners are. The median income of renter households was an estimated $38,944 last year. For homeowner households, it was $75,876. The people for whom housing affordability is the most-pressing issue would thus seem to be renters, not owners.
For this argument I’m going to go with the Census Bureau’s median gross rent as a percentage of household income. This offers an interestingly different perspective.
Of the four large U.S. metropolitan areas with the lowest median household incomes, in fact, three (New Orleans, Tucson, Ariz., and Tampa, Fla.) made it onto a chart of the least-affordable places to live. Miami and Orlando, Fla., are also in the bottom 10 for income out of the 53 metropolitan areas with 1 million people or more. Rochester, N.Y., is 12th from the bottom.
Noticeably absent from this list are the San Jose and San Francisco metropolitan areas. They have the country’s highest median gross rents, but because of very high median household incomes, they make it onto the list of the 15 most-affordable large metros. Washington, D.C., just misses that list at No. 17.
Perhaps more significant, these are also the only three metropolitan areas where renter households made more than the $60,336 national median for all households.
To be sure, rental housing is even more affordable in places with low rents and moderately growing economies such as metro Louisville, Ky., and metro Cincinnati, and those making significantly less than $100,000 a year in the Bay Area often find it impossible to get by. A study released in October by BuildZoom and the Terner Center for Housing Innovation at the University of California at Berkeley found that people with household incomes of less than $50,000 were fleeing the region, usually for cheaper nearby locations such as the Sacramento metropolitan area (Sacramento is on the least-affordable list).
While media attention often focuses on those few places that are witnessing an economic transformation, there are two more potent and less-mentioned storylines. The first is the persistence of chronic poverty. Three-quarters of 1970 high-poverty urban neighborhoods in the U.S. are still poor today. The second is the spread of concentrated poverty: Three times as many urban neighborhoods have poverty rates exceeding 30 percent, as was true in 1970, and the number of poor people living in these neighborhoods has doubled.
Life is extremely complicated and expensive in places such as San Jose, San Francisco and Seattle. For renters, though, it’s even less-affordable in unexpected places. n
Justin Fox is a Bloomberg Opinion columnist covering business.