Special Report

Cities Where the Middle Class Can No Longer Afford a Home

Source: Thinkstock

5. Urban Honolulu, HI
> Cost-burdened middle-class households: 51.9%
> Median single-family home value: N/A
> Median household income: $80,513
> Homeownership rate: 54.1%

Urban Honolulu is one of seven metro areas nationwide where over half of all middle-income households are housing-cost burdened. Despite a high share of housing cost burdened middle-class families, home prices are climbing slower than average in the city. The median monthly mortgage payment in Honolulu was $4,946 in in 2017, up just 20.9% from half a decade ago. Nationwide, the median monthly mortgage payment was 41.4% higher in 2017 than it was five years ago.

The high housing cost burden rate in Honolulu is driven in large part by the city’s rental market, which heavily targets high-income renters. The city has among the highest vacancy rates among Class A rentals, which include new and high quality rentals, of any American city. Additionally, 53.4% of renters in the metro area were cost burdened in 2016 — the majority of whom spent over half of their incomes on rent.

Source: Thinkstock

4. San Diego-Carlsbad, CA
> Cost-burdened middle-class households: 52.2%
> Median single-family home value: $570,533
> Median household income: $70,824
> Homeownership rate: 52.1%

Like much of the California coast, the supply of housing in San Diego is far below the demand for housing. The shortage likely contributes to rising home prices in the metro that force many middle class families to purchase a home outside of their budget range. The median home value in San Diego rose by 62.8% from $350,390 in 2000 to $570,533 in 2017, the second largest increase and now the fifth highest median home value of the 100 largest metro areas. Some 52.2% of households earning between $45,000 and $74,999 a year in San Diego spend at least 30% of their incomes on housing, nearly the largest share of cost burdened middle-class households of any metro area.

Source: Thinkstock

3. Oxnard-Thousand Oaks-Ventura, CA
> Cost-burdened middle-class households: 53.5%
> Median single-family home value: $578,148
> Median household income: $80,135
> Homeownership rate: 62.1%

Middle-income households are more likely to be burdened by housing costs in Oxnard-Thousand Oaks-Ventura than in nearly every other metro area in the country. Part of the reason is the limited supply of modestly priced homes. The majority of single-family houses in the metro area are worth over half a million dollars. Of all middle-income homes in the area, 41.2% spend between 30% and 50% of their incomes on housing, and 12.3% spend over half of their incomes on housing — each more than double the corresponding national shares of 18.1% and 3.9%.

Housing costs are are so high in the area that even higher earners are cost burdened. Nearly 16% of households earning at least $75,000 a year are cost burdened, more than double the 6.2% share of households nationwide in the same income range.

Source: Thinkstock

2. San Jose-Sunnyvale-Santa Clara, CA
> Cost-burdened middle-class households: 54.7%
> Median single-family home value: $1.2 million
> Median household income: $110,040
> Homeownership rate: 56.6%

Rapid income growth among tech sector elites in Silicon Valley has pushed home prices in the San Jose metro higher, forcing lower- and middle-income households to relocate or buy or rent housing far beyond their budget range. The median home value in San Jose rose from $778,356 in 2000 to $1.2 million in 2017, the eighth largest increase and now the highest median home price of the 100 largest U.S. metro areas. Some 54.7% of households earning between $45,000 and $74,999 a year spend at least 30% of their incomes on housing, more than double the 22.0% national share of cost-burdened middle class households and the second largest share of any metro area in the country, after only San Francisco.

Source: Thinkstock

1. San Francisco-Oakland-Hayward, CA
> Cost-burdened middle-class households: 55.9%
> Median single-family home value: $909,836
> Median household income: $96,677
> Homeownership rate: 53.6%

Two factors contributing to soaring home prices in San Francisco are the slow pace of new home construction and the scarcity of land available for new housing. The average time to issue a building permit in San Francisco is longer than a year, compared to four and a half months in the typical U.S. metro area. New home construction in San Francisco from the period 1980 to 2010 was slower than the new home construction in the U.S. as a whole. As a result, the supply of housing in San Francisco is outstripped by demand. This has led to high home values and has priced many of the city’s middle class residents out of the market. The typical home in the San Francisco metro area costs $909,836, the second highest median home value of any major metro area. Some 55.9% of households earning between $45,000 and $74,999 spend at least 30% of their incomes on housing, the largest share nationwide.