Report Reveals World's Most Unaffordable Cities for Housing: U.S. Metros Dominate Top Spots

Potential buyers are acutely aware of the difficulty in finding affordable homes, a problem that extends far beyond the United States. A new report ranks the global cities where housing affordability is the most challenging, including the top five most "impossibly unaffordable" U.S. metros.

The annual Demographia International Housing Affordability report, which has analyzed housing costs for two decades, highlights both the top 10 most unaffordable and the most affordable housing markets worldwide.

Survey Methodology

The rankings are based on survey results from 94 major markets across eight countries (Australia, Canada, China, Ireland, New Zealand, Singapore, the U.K., and the U.S.) in the third quarter of 2023. The report measures housing affordability using the "median multiple," a price-to-income ratio that divides the median house price by the median household income.

Affordability Categories

Markets are categorized based on their median multiple into five groups:

• Affordable (3.0 and under)

• Moderately Unaffordable (3.1 to 4.0)

• Seriously Unaffordable (4.1 to 5.0)

• Severely Unaffordable (5.1 to 8.9)

• Impossibly Unaffordable (9.0 and over)

Most Affordable North American Cities

In the U.S., Pittsburgh, Pennsylvania, was named the most affordable housing market with a median multiple of 3.1. The top 10 most affordable cities in North America according to the report are:

1. Pittsburgh, Pennsylvania (3.1)

2. Rochester, New York (3.4)

3. St. Louis, Missouri (3.4)

4. Cleveland, Ohio (3.5)

5. Edmonton, Canada (3.6)

6. Buffalo, New York (3.6)

7. Detroit, Michigan (3.6)

8. Oklahoma City, Oklahoma (3.6)

9. Cincinnati, Ohio (3.7)

10. Louisville, Kentucky (3.7)

Top 10 'Impossibly Unaffordable' Cities Worldwide

Hong Kong ranks as the least affordable market in the English-speaking world. In the U.S., five cities made the list, primarily on the West Coast. The top 10 most unaffordable cities globally are:

1. Hong Kong (16.7)

2. Sydney, Australia (13.3)

3. Vancouver, Canada (12.3)

4. San Jose, California (11.9)

5. Los Angeles, California (10.9)

6. Honolulu, Hawaii (10.5)

7. Melbourne, Australia (9.8)

8. San Francisco, California (9.7)

9. Adelaide, Australia (9.7)

10. San Diego, California (9.5)

11. Toronto, Canada (9.3)

Factors Contributing to Unaffordability

The report attributes the housing affordability crisis to several factors:

Increased Demand Due to Remote Work

The pandemic spurred a demand for housing in suburban, exurban, and even more remote areas as people sought more space for living and working from home. This demand shock drove house prices up substantially, as households moved to obtain more space within houses and in yards or gardens.

Urban Containment Policies

Urban containment policies, designed to limit urban sprawl and increase density, often result in limited land availability for housing. While well-intentioned, these policies can severely constrict the land available for new housing, leading to higher land values and dramatically higher house prices in constrained markets.

Specific Challenges in Unaffordable Cities

Hong Kong

Hong Kong remains the most unaffordable city, with a median multiple of 16.7. Limited land, a dense population, and high demand for housing contribute to its extreme unaffordability.

Sydney and Melbourne, Australia

Sydney (13.3) and Melbourne (9.8) face similar issues, with high demand for housing in desirable locations, limited space for expansion, and stringent urban planning regulations driving up prices.

Vancouver and Toronto, Canada

Vancouver (12.3) and Toronto (9.3) struggle with high demand, limited supply, and policies that restrict new housing developments, making these cities some of the most expensive in North America.

U.S. Cities

San Jose (11.9), Los Angeles (10.9), Honolulu (10.5), San Francisco (9.7), and San Diego (9.5) are among the most unaffordable cities in the U.S., primarily due to high demand, limited land for new housing, and expensive living costs. These cities, especially those in California, also face significant regulatory hurdles that slow down the construction of new housing units.

Economic and Social Impacts

The high cost of housing in these unaffordable cities can have broad economic and social impacts, including:

• Reduced Homeownership Rates: High prices make it difficult for first-time buyers to enter the market, leading to lower homeownership rates.

• Increased Commuting Times: People may be forced to live further from work, increasing commuting times and contributing to traffic congestion and pollution.

• Economic Inequality: Housing affordability issues can exacerbate economic inequality, as lower-income households struggle to afford housing in desirable areas.

• Impact on Businesses: High housing costs can make it challenging for businesses to attract and retain employees, particularly in lower-wage sectors.

Strategies for Improving Affordability

To address the housing affordability crisis, policymakers and planners need to consider a range of strategies, including:

• Increasing Housing Supply: Encouraging the construction of new housing units, particularly in high-demand areas, can help alleviate supply constraints.

• Reforming Zoning Laws: Modifying zoning regulations to allow for higher-density housing and mixed-use developments can increase the availability of affordable housing.

• Providing Financial Assistance: Offering subsidies or financial assistance to first-time buyers and low-income households can help them afford housing in expensive markets.

• Promoting Sustainable Development: Implementing policies that promote sustainable, energy-efficient housing can help reduce long-term costs for homeowners and renters.

Conclusion

The Demographia International Housing Affordability report underscores the global nature of the housing affordability crisis. With remote work reshaping housing demands and urban containment policies constraining available land, finding affordable housing remains a significant challenge in many major cities worldwide. Addressing these issues requires coordinated efforts from governments, developers, and communities to create more equitable and sustainable housing markets.