USA National Rental Housing Affordability – 2014

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At the beginning of the year we wrote about 2014’s most and least expensive metropolitan areas in the USA, explaining how Williston, ND had the most expensive rent in the country. From the media (as well as our data) we’ve long known the usual suspects when it comes to the priciest cities. However, we also knew anecdotally that median salaries tend to be higher in cities with higher costs of living. So while NYC and San Francisco rents are very expensive relative to most of the country, is it possible that when compared to the median income there the cities would not be such outliers? Which expensive cities are surprisingly affordable? Conversely, are there cheap cities with low enough median incomes that they are actually fairly unaffordable for their inhabitants? For this investigation, we pulled the data for 362 metropolitan areas (those with at least 2,000 observed rental listings), and used inflation-adjusted 2008-2013 ACS 5-year data for median household income.

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For a full list of all of the MSAs used, see this link for all of the data used in this article and more:
Google docs data

Not surprisingly, one can see a moderately positive correlation between the median household income in a metropolitan statistical area (MSA) and the median rent per square foot (exponential trendline with an R-squared value of .547). Creating this chart allows us to see that while median income and rent are correlated, there are some outlier MSAs in both directions: those with particularly low rent given their median incomes, and those with outsized rent relative to their median incomes.

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For example, looking at income vs. rent for the 15 most expensive and 15 least expensive MSAs, one can see that DC and LA have similar rents, but median income is much higher in DC. Additionally, although Key West, FL is in the top 15 most expensive MSAs, its median income isn’t that different from Branson, MO, which is in the list of the 15 cheapest MSAs.

Noticing these outliers, we wondered how many “expensive” MSAs might actually be affordable, and how many “cheap” MSAs might actually be quite unaffordable. To explore this idea, we set out to formalize the affordability of an MSA by creating an “affordability index” which is just the median income divided by the median price per square foot for an MSA. We then sorted all of the MSAs by this measure and compared their affordability relative to the median MSA (“the median MSA”, as it turns out, is actually roughly 12 MSAs with comparable income/rent ratios including Spokane, WA, Knoxville, TN, and Roanoke, VA.)

Least Affordable MSAs Multiple more expensive relative to the median MSA
1 Williston, ND 2.46
2 New York-Northern New Jersey-Long Island, NY-NJ-PA 2.46
3 Key West, FL 2.43
4 Santa Cruz-Watsonville, CA 2.02
5 San Francisco-Oakland-Fremont, CA 2.02
6 Honolulu, HI 1.96
7 Kahului-Wailuku, HI 1.95
8 Los Angeles-Long Beach-Santa Ana, CA 1.92
9 Boston-Cambridge-Quincy, MA-NH 1.87
10 Santa Barbara-Santa Maria-Goleta, CA 1.86
11 San Jose-Sunnyvale-Santa Clara, CA 1.79
12 Odessa, TX 1.74
13 Miami-Fort Lauderdale-Pompano Beach, FL 1.69
14 San Diego-Carlsbad-San Marcos, CA 1.68
15 Pullman, WA 1.65

How then should the multiplier in the right column of the chart above be interpreted? Take the San Francisco area as an example. It has an affordability multiplier of 2.02, meaning that it is 2.02 times as expensive as the median metro area. What does this mean? Given the median income in the SF area, and the median rent there, one could only purchase (1 / 2.02) times = 49.5% as much apartment space as someone in, say, Spokane, WA (a median MSA) making the median wage.

As it turns out, the list of the top 15 least affordable MSAs is very similar to the list of the top 15 most expensive MSAs. Pullman, WA, however, shows up as an outlier–while rent in Pullman is only $.90/sqft, the median household income in Pullman is roughly $37,000, making it curiously unaffordable for many residents. Additionally, the Washington D.C. area did not make the list of least affordable MSAs. Although it had a median rent of $1.84/sqft, it also has a median household income of nearly $98k, making it actually fairly affordable: DC’s affordability multiplier of .78 (78% as expensive as the median metro) is the same as Pittsburgh, PA.

Most Affordable MSAs Multiple cheaper relative to the median MSA
1 Appleton, WI 0.68
2 Warner Robins, GA 0.71
3 Idaho Falls, ID 0.73
4 Wausau, WI 0.74
5 Huntsville, AL 0.75
6 Lexington Park, MD 0.77
7 Green Bay, WI 0.79
8 Oshkosh-Neenah, WI 0.79
9 Enterprise-Ozark, AL 0.81
10 Bloomington-Normal, IL 0.81
11 Fort Wayne, IN 0.82
12 Gainesville, GA 0.82
13 Ogden-Clearfield, UT 0.82
14 Bay City, MI 0.83
15 Killeen-Temple-Fort Hood, TX 0.83

The most affordable MSAs, however, are much more different from the list of least expensive MSAs. They are much more Midwestern (and less Southern), with almost a third (4/15) in Wisconsin alone. Nearly all of them have median incomes of roughly $50k-$70k, with one exception: Lexington Park, MD, median income–$93k. Although Lexington Park, MD has a very high median income, median rent is only $1.05, making it one of the most affordable places in the USA.

There’s more to affordability than rent and income, but the above provides a rough sketch of which parts of the country are more or less affordable, at least from a rental perspective. With so much national data, expect us to continue to surface insights on different facets of the rental market both locally and on a national scale.

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4 thoughts on “USA National Rental Housing Affordability – 2014

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