The number of severely unaffordable housing markets in the U.S. nearly doubled during the pandemic, jumping from 14 in 2019 to 27 in 2021, according to the latest edition of Demographia International Housing Affordability from the Urban Reform Institute and the Frontier Centre for Public Policy.
The study rates middle-income housing affordability in 92 housing markets in the U.S., Australia, Canada, China, Ireland, New Zealand, Singapore and the U.K.
Demographia International Housing Affordability uses the “median multiple” to rate middle-income housing affordability. This is a price-to-income ratio, which is the median house price divided by the gross median household income (pre-tax).
Researchers rate middle-income housing affordability in four categories:
- Affordable: median multiple, 3.0 and under
- Moderately unaffordable: 3.1 to 4.0
- Seriously unaffordable: 4.1 to 5.0
- Severely unaffordable: 5.1 and over
According to the report, housing markets are both metropolitan areas and labor markets. It notes that in a well-functioning market, the median priced house should be affordable to a large portion of middle-income households, overwhelmingly the case a few decades ago.
Demographia International Housing Affordability found that housing affordability across the world in 2021 grew considerably worse: Median multiples of 10.0 or more increased by a factor of five from a decade ago.
Hong Kong is the least affordable market, with a nosebleed-inducing median multiple of 23.2. By comparison, the most affordable market has a median multiple of 2.7.
The pandemic demand shock resulted in an unprecedented deterioration in housing affordability, according to the report. The number of severely unaffordable markets rose by 60% in 2021 compared with 2019, the last pre-pandemic year.
Declining housing affordability, in turn, is driving higher costs of living. In the U.S., more than 85% of cost-of-living differences between high- and average-cost metropolitan areas are due to housing costs, the report said, citing French economist Thomas Piketty.
The study examined 56 markets in the U.S., which had a median unaffordability rating of 5.0, the lowest in the world.
See the gallery for the 12 least affordable markets in the U.S.