Most affordable cities in America: DC, Minneapolis, Boston, Philadelphia, San Francisco.
The DC Metro Area Is The Most Affordable In America (Sort Of)
A blog about business and economics.
Oct. 19 2012 3:46 PM



The Center for Neighborhood Technology has been trying for a while to get people to consider commute-related transportation costs as part of the housing affordability mix, so it's great to see them team up with the Center for Housing Policy to evaluate the affordability of the 25 largest metro areas in the country in these terms. But is the DC metro area really the most affordable in America? Isn't it pretty expensive? And San Francisco? Really?

As Aaron Weiner explains, they turn out to be measuring affordability relative to local average incomes, so not really. There are huge compositional differences between these cities. The median person in the DC, Boston, or San Francisco metro areas is much better-educated and higher-earning than the median American. Housing isn't affordable in those cities—it's actually extremely expensive—it's just that the residents are rich. Conversely, the least-affordable cities turn out to be warm-weather coastal areas where people are paying a penalty for beach amenities.


To get a sense of the problem here, consider the question of "car affordability." Common sense says the most affordable cars are the cheap ones, and thus that BMWs are not very affordable. But if you look at car brands in terms of share of the owners' income, you'll find that since only rich people buy BMWs the BMWs are very affordable.

By the same token, measuring affordability in H+T terms is a great idea, but presenting it in income share terms is misleading. In general, a person can increase his earnings power by leaving a poorer place for a richer one. That's why people move from Pakistan to England or Mexico to the United States. And since you don't even need to overcome a language barrier to move from Kentucky to San Jose or from Buffalo to Boston, there are potentially large gains for native born Americans to be made by relocating to more prosperous places. But it turns out that for many Americans the productivity and wage gains involved in moving to a rich city end up being clawed back by a lack of affordable housing. So the tendency is only for the most educated people—the ones with the least objective need—to be able to take advantage of the migration possibilities. This is a huge social problem that contributes to stagnating living standards, and it's totally obscured by saying that the DC area is affordable because it's full of rich people.


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