WASHINGTON, DC–The Urban Institute recently developed the housing affordability for renters index (HARI), a measure that examines the 20 most-populous US metropolitan statistical areas. HARI, which the Urban Institute developed in response to what it felt was a critical flaw in housing affordability measurements, found a few surprises about some of these cities, write Laurie Goodman and June Zhu in a blog post.
Namely: San Francisco, Seattle and Washington, DC, are more affordable for local renters than other measures indicate. The index also shows that, nationwide, more than one in four renters have incomes that put homeownership within reach.
The flaw HARI tries to address is the focus by current measures on median incomes and median home prices, “both of which fail to provide information about the distribution of the incomes and area home prices,” they wrote. The HARI index focuses only on renters' ability to become homeowners, comparing renters in each income decile with recent homebuyers in the same decile.
The index found that while the Washington, DC, metropolitan area is considered unaffordable by at least one traditional measure, 30% of local renters can afford homes in the area, nearly double the 17% of national renters with incomes similar to those of DC homebuyers. “Renters moving to the area might find it difficult to afford a home there, but one-third of renters in the area have the necessary incomes,” they write.
Likewise for San Francisco and Seattle. In San Francisco, only 9% of national renters could afford to buy a home in San Francisco, but nearly one in four local renters have incomes that match those of recent local homebuyers. In Seattle, one in four local renters can afford homes, while only 18% of national renters can match or exceed the incomes of recent homebuyers.
HARI also determined, though, that migrating renters would have the hardest time in San Francisco, where only 9% of current national renters have incomes at or above the incomes of recent local homebuyers.
And best chance for homeownership for a migrating renter? That would be St. Louis, where 31% of current national renters have incomes that match or exceed that of recent local homebuyers.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
