A study by Chapman University and the Frontier Centre for Public Policy delves into the affordable cities for housing across 94 major metropolitan areas in eight countries using the price-to-income ratio to provide a clear picture of the housing crisis.
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Over the past two decades, housing markets in many countries have seen price increases, driven by factors such as increased demand and restrictive land use policies.
The COVID-19 pandemic intensified the demand for homes those with outdoor spaces, leading to price surges.
Investors have increasingly turned to real estate as a profitable venture, exacerbating the price hikes and making it harder for average buyers to afford homes.
The Affordable Cities report uses a price-to-income ratio to evaluate affordability, comparing median house prices to gross median household incomes.
The study covered 94 major markets across eight countries, providing an overview of global housing affordability.
Topping the list, Hong Kong is known for its exorbitant housing costs and tiny living spaces. It has the lowest home ownership rate among surveyed cities at 51%.
Australian cities are known for their high housing prices with Sydney consistently ranked among the least affordable globally.
San Jose, Los Angeles, San Francisco and San Diego in California are highlighted for their steep housing costs driven by tech industry demand and limited land for development.
As a major city in Hawaii, Honolulu faces affordability challenges due to its desirable location and limited land availability.
Vancouver and Toronto have also been flagged for their high cost of living driven by restrictive land policies and investor demand.
The Affordable Cities report highlights New Zealand’s “Going for Housing Growth” policy, which mandates local authorities to zone for 30 years of housing growth, as a model for increasing housing supply and reducing prices.
To combat rising prices, experts recommend easing land-use restrictions to allow for more residential development and meet the growing housing demand.
Policymakers are urged to consider measures that limit the impact of investors on housing markets to make homes more accessible to average buyers.
The Affordable Cities report also identifies more affordable cities such as Pittsburgh, Rochester and St. Louis in the U.S., where housing prices are more in line with incomes.
Cities like Edmonton and Calgary in Canada, as well as Blackpool and Glasgow in the UK, are noted for their relative affordability.
The primary metric used in the study is the price-to-income ratio, which measures housing affordability by dividing the median home price by the median household income in a given area. Cities are classified into different categories based on this ratio:
- Affordable: 3.0 and under
- Moderately Unaffordable: 3.1 to 4.0
- Seriously Unaffordable: 4.1 to 5.0
- Severely Unaffordable: 5.1 to 8.9
- Impossibly Unaffordable: 9.0 and over
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The Most Affordable Cities:
- Pittsburgh, Pennsylvania (U.S.) (Affordability Score: 3.1)
- Rochester, New York (U.S.) (Affordability Score: 3.4)
- St. Louis, Missouri (U.S.) (Affordability Score: 3.4)
- Cleveland, Ohio (U.S.) Affordability Score: (Low)
- Edmonton, Alberta (Canada) Affordability Score: (Low)
- Buffalo, New York (U.S.) Affordability Score: (Low)
- Detroit, Michigan (U.S.) Affordability Score: (Low)
- Oklahoma City, Oklahoma (U.S.) Affordability Score: (Low)
- Cincinnati, Ohio (U.S.) Affordability Score: (Low)
- Louisville, Kentucky (U.S.) Affordability Score: (Low)
The Least Affordable Cities:
- Hong Kong (China) Affordability Score: 16.7
- Sydney, New South Wales (Australia) Affordability Score: 13.3
- Vancouver, British Columbia (Canada) Affordability Score: 12.3
- San Jose, California (U.S.) Affordability Score: 11.9
- Los Angeles, California (U.S.) Affordability Score: 10.9
- Honolulu, Hawaii (U.S.) Affordability Score: 10.5
- Melbourne, Victoria (Australia) Affordability Score: 9.8
- San Francisco, California (U.S.) Affordability Score: 9.7
- Adelaide, South Australia (Australia) Affordability Score: 9.7
- San Diego, California (U.S.) Affordability Score: 9.5
The rise of remote work during the COVID-19 pandemic led to increased demand for housing in suburban and rural areas.
This surge in demand pushed house prices higher as people sought more space for living and remote work.
The gap between income growth and housing price inflation has widened, making homeownership unattainable for many.
High-income individuals and sectors continue to drive up demand, pushing prices beyond the reach of average earners.
Cities like Hong Kong and Honolulu face natural land constraints that limit expansion and drive up prices.
In cities like Pittsburgh, an aging population downsizing from larger homes could drive up prices for smaller, more affordable homes.
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