These Cities Are Now Deemed ‘Outrageously Unaffordable’
Anyone who has glanced at the housing market over the past two decades is all too aware of the immense difficulty associated with purchasing a home, particularly in several major countries, including the United States.
The challenge has become so pronounced that a newly published report has encapsulated the frustrations of countless prospective homebuyers by introducing a category specifically identifying certain major cities as “impossibly unaffordable.”
In the United States, cities on the West Coast and Hawaii have particularly stood out, claiming five out of the ten top spots for the most unaffordable places to reside.
This information comes from the annual International Housing Affordability report by Demographic, which has been monitoring housing prices for the past 20 years.
Unsurprisingly, Californian cities have dominated this list, with San Jose, Los Angeles, San Francisco, and San Diego all securing positions in the top ten.
Honolulu, the capital of Hawaii, also received a notable mention, ranking sixth among the 94 major markets surveyed across eight countries.
Australia emerges as the only country, apart from the United States, to prominently feature in this “impossibly unaffordable” list.
Leading the charge are cities such as Sydney, along with Melbourne in Victoria, and Adelaide in South Australia.
However, the city that tops the global leaderboard is Hong Kong, renowned for its extremely compact apartments and exorbitant rent prices.
Notably, Hong Kong stands as the sole Chinese market included in the report.
Hong Kong, a frequent contender on “most expensive” city lists, is characterized by the lowest home ownership rate among all surveyed cities, with just 51%.
This figure stands in stark contrast to its Asian counterpart Singapore, where home ownership rates reach an impressive 89%, largely due to the government’s longstanding commitment to public housing.
While Hong Kong holds the title of the least affordable city worldwide, potential homebuyers might find solace in the fact that its unaffordability has slightly diminished.
Housing prices experienced a reduction during the pandemic in 2020, largely attributed to the government’s decision to close the city’s borders and implement a strict zero-Covid policy.
Additionally, new national security laws have exerted a significant chilling effect on the city’s housing market.
Why Are Prices So High?
The report assesses affordability with a price-to-income ratio, determined by dividing the median home price by the median household gross income.
This method sheds light on the disparity between housing costs and average earnings.
The report also links the shift towards working from home during the pandemic to a “demand shock” for houses located outside city centers, which often offer more outdoor space.
However, the soaring house prices are also attributed to certain land use policies, such as “urban containment,” a type of planning aimed at preventing urban sprawl.
According to the report, the middle class is bearing the brunt of escalating land costs, with land rationing efforts to curb urban sprawl resulting in a significant imbalance where demand far exceeds supply, thus driving prices up.
The situation is further exacerbated by investors entering the market with profit motives, pushing prices even higher.
Proposed Solutions
One potential solution, as highlighted by the report’s author, is to draw inspiration from New Zealand.
In an opinion piece for Canada’s Financial Post, Wendell Cox, a senior fellow at the Frontier Centre for Public Policy, suggested that Canada, specifically, should emulate New Zealand’s approach by freeing up more land for immediate development.
Both Vancouver and Toronto are listed among the cities classified as “impossibly unaffordable,” underscoring the urgent need for policy changes.
Cox points to a policy known as “Going for Housing Growth,” introduced by New Zealand’s coalition government, which mandates local authorities to zone for 30 years of housing growth immediately.
He argues that cities like Toronto and Vancouver illustrate the high cost of controlling expansion: inflated house prices, increased rents, and rising poverty levels for many people.
The Affordable Alternatives
For those unable to wait for policy reforms or a decrease in demand, the report also identifies the most affordable cities from the 94 surveyed worldwide.
These cities represent a stark contrast to their unaffordable counterparts and may provide more feasible options for potential homeowners.
In the United States, Pittsburgh, Rochester, and St. Louis stand out as the most affordable cities.
Canada also has its share of affordable markets, including Edmonton and Calgary.
Over in the United Kingdom, Blackpool in Lancashire and Glasgow are highlighted for their affordability.
Meanwhile, in Australia, Perth and Brisbane are noted as more attainable locales for homebuyers.
Concluding Insights
The report was meticulously compiled by researchers from the Center for Demographics and Policy at Chapman University in California, alongside the Frontier Centre for Public Policy, an independent public policy think tank based in Canada.
Their efforts have provided a comprehensive overview of the housing affordability crisis that grips many major cities around the world.
By shedding light on the most outrageously unaffordable and relatively affordable cities, the report not only informs readers but also stimulates a broader discussion about the need for effective land use policies and housing market interventions.
The hope is that by addressing these systemic issues, future prospective homebuyers might find more achievable pathways to homeownership, regardless of their geographical location.
“Impossibly Unaffordable” Cities, Top 10
- Hong Kong
- Sydney
- Vancouver
- San Jose
- Los Angeles
- Honolulu
- Melbourne
- San Francisco/Adelaide
- San Diego
- Toronto
In conclusion, while the current housing market presents significant challenges, understanding the factors driving these trends and exploring successful policy models from other regions could be pivotal in creating more balanced, affordable opportunities for homeownership worldwide.
