A recent study by Chapman University Center for Demographics and Policy paints an alarming picture of housing affordability both here and around the world. The report identifies a total of twelve housing markets as “impossibly unaffordable,” with an overwhelming majority located in the U.S. Topping the ranking is Hong Kong, which has an eye-watering median house price of . It’s even more than 14 times the yearly median income of a worker in the city.
Today, the divide between income and housing prices in Hong Kong has led to one of the world’s worst price-to-income ratios at 14.4. This number highlights the competitive landscape local residents must navigate when looking for affordable housing. Next in line, though not by very much, is Sydney, Australia at 13.8 price-to-income. These cities are representative of the increasing trend of unaffordable housing markets that wreak havoc on their surrounding residents.
The report additionally uncovers the fact that many of California’s biggest cities are struggling with the same challenges. San Jose is third highest in the world with 12.1, and just behind them is Vancouver, Canada with 11.8. Other California cities aren’t just “impossibly unaffordable” either. By comparison, Los Angeles has an index of 11.2 and San Diego has an index of 9.5. Notably, four major metropolitan areas in California—San Jose, Los Angeles, San Francisco, and San Diego—are classified under this troubling designation.
Adelaide and Melbourne Australia now have price-to-income ratios of 10.9 and 9.7, respectively. At the same time, Honolulu and San Francisco aren’t far behind, with ratios of 10.8 and 10 respectively. In the Chapman report, that was one of the major findings—none of these markets that we looked at were affordable. This designation requires that a median home price be no more than three times an area’s median annual income.
Housing experts point to a perfect storm of factors to explain these sky-high prices. Joel Kotkin calls out the fact that high prices result primarily from policies designed to stop growth at the urban fringe. This holistic and coordinated approach sharply contrasts with the typical practice of indirect or direct urban sprawl. This sentiment is part of a long-standing, dangerous trend in smart growth urban planning to limit housing production in the name of land preservation.
California is currently working to address these challenges by promoting higher-density housing development while conserving natural land. Wendell Cox, author of the Chapman report, cautions that simply increasing housing density may not resolve the affordability crisis.
Andrew Herzog, a housing advisor, suggests a more cautious approach for potential homebuyers: “More often than not, I’ve simply advised people to prolong their search while still saving for an emergency fund and retirement.” This recommendation is a testament to just how much uncertainty there continues to be around the housing market.
As he makes clear, this crisis is indeed grave. HIU director Nick Kachiroubas, the author of a new report from Heartland Alliance, which is causing all that pain, Kachiroubas asserts.