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Family Housing Affordability in U.S. Cities

November 2015

Many families with children are attracted to cities and all the urban amenities they offer. Whether the typical family can find a home with both adequate space and an affordable price tag, however, depends largely on where they live. In some urban centers, families are faced with few housing options, forcing them to look elsewhere.

To gauge the availability and affordability of family-sized housing, Governing compiled the latest housing data for the 25 largest U.S. cities. Data presented here compares the availability of homes for middle-income families and the cost burden for those who are renting. An accompanying story in the November issue of the magazine examines some of the challenges cities are contending with as they seek to assist families.

City Home Listings Data

Home values were calculated representing the maximum home purchase families could afford by spending no more than the standard limit of 30 percent of income on housing. Housing expenses assumed a 20-percent down payment and considered monthly mortgage payments for a 30-year fixed-rate mortgage, property taxes, utilities and property insurance costs. Two home values were calculated: One for the U.S. Department of Housing and Urban Development’s definition of the area median family income, and another for 75 percent of median family income. (See numbers used for cost calculations.)

Trulia provided real estate data to Governing compiled from multiple listing services, brokers and agents. Statistics, current as of September, reflect more than 5,500 home listings per city.

Home listings shown below represent shares of cities’ total home listings that are affordable for a household earning the median family income, with maximum home values they can afford shown in parenthesis.

It should be noted that these figures assume families are willing to spend the maximum 30 percent of income on housing. In addition, many of the more affordable properties in cities are located in less desirable neighborhoods where they might not want to live.

Furthermore, a large segment of families -- particularly young couples just starting out -- aren’t quite earning the median income. To approximate lower middle-income families typically not receiving public assistance, a second test measured the availability of homes affordable to households earning 75 percent of the area median family income. The housing market for these families is far bleaker. They can afford less than half of homes with two or more bedrooms in the majority of reviewed cities, and fewer than one in five homes in nine of the 25 cities. In Austin, for example, 40 percent of home listings have two or more bedrooms and are affordable to median income families, while the same is true of only 10 percent of listings for families earning 75 percent of the median income.

Home values that families earning 75 percent of median family income can afford are shown in parenthesis for each city:

Housing Affordability Cost Calculation

The following data were used to calculate home values families could afford in each city.

Area Median Family Income: 2015 HUD definition.
Mortgage Allowance: Assumed a 20-percent down payment and a 30-year fixed-rate mortgage at an annual rate of 4.08 percent, based on the Bankrate.com national average as of September 3, 2015. The allowance is based on 30 percent of a family’s monthly income after homeownership costs are subtracted.
Homeowner Costs (excluding mortgage): Includes metro area owner-occupied unit median costs for electricity, gas, water and property insurance as reported in the Census Bureau’s 2013 American Housing Survey, along with city median real estate taxes from the Census Bureau’s 2013 American Community Survey (Table B25103). National estimates were used for areas without data.

City Rental Data

Families opting to rent are also seeing costs climb, particularly in booming cities.

One measure of the rental cost burden is the percentage of income households spend on gross rent, published by the Census Bureau’s American Community Survey. These estimates are a function of not only rent prices, but also wages and the strength of local economies. Consider Detroit, where rent is relatively inexpensive compared to other large cities, but nearly two-thirds of renters pay more than 30 percent of income on housing. On average, more than half (52 percent) of all rental households spend more than 30 percent of income on housing in the top 25 cities.

Figures are shown for gross rent costs, which include monthly utility and fuel costs paid by the renter.
SOURCE: Governing calculations of 2014 U.S. Census Bureau American Community Survey data (Table B25070)

Regardless of cost, families with children wanting to rent in cities often can’t find units large enough to accommodate them. Many newer developments are without larger units, instead having predominately one-bedroom units and studios along with a limited number of two-bedroom units.

To assess the availability of larger rental units, real estate analysis firm Axiometrics provided Governing with data based on its survey of property owners.

SOURCE: Data provided by Axiometrics, current as of September 2015. Most property owners surveyed manage larger units; figures do not include affordable housing, rent-controlled units or properties undergoing renovation. Population density data obtained from Census Bureau.

 

Related Readings

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In many urban centers, families are finding themselves priced out of the market for housing large enough to accommodate them. Some cities are trying to fix the problem, but it’s not easy.