Housing affordability and quality create stress for Heartland families

Editor's note:

This blogpost is adapted from a presentation at the 2019 Policy Summit sponsored by the Federal Reserve Banks of Cleveland, Chicago, Minneapolis, Philadelphia, and St. Louis. The analysis and conclusions set forth are those of the author and do not indicate concurrence by any staff in the Federal Reserve System. Learn more.

National conversations about housing affordability focus mostly on rising prices and too little new housing in hot markets and so-called superstar cities. While media reports abound of housing crises in New York, San Francisco, and Seattle, metropolitan areas between the coasts—and south of Washington, D.C.—are often overlooked. Yet housing affordability and related measures of stress can exist in markets where housing values are moderate by national standards and plenty of houses sit empty. Families earning very little income will have difficulty paying the rent on a decent quality home in a safe neighborhood in any metro, while still having enough remaining cash to pay for food, transportation, and other necessities.

In this article, I analyze local variations in housing affordability and related stresses for 10 metro areas that represent a range of metro sizes, housing price levels, and geographic areas. I examine three measures of housing stress among low- and moderate-income households: housing costs as a share of income, housing age, and commute times. For each measure, I compare poor and lower-middle-income households (defined here as the lowest two income quintiles within a metro area) to affluent households (the two highest income quintiles in that metro).

Poor and lower-middle-income families everywhere stretch to pay for housing.

The most commonly used measure of housing stress is the share of income spent on housing costs. HUD defines households spending more than 30% as “cost burdened”, and those spending more than 50% as “severely cost burdened.” For poor and lower-middle-income households in the 10 sample metro areas, housing costs consume well over 30% of income (Figure 1). Poor families spend more than 60% of their income on housing, while lower-middle-income families spend nearly 40%. Middle-income and affluent families spend well below HUD’s cost burden threshold.


Across the 10 metro areas studied, the share of income spent on housing is somewhat, but not perfectly, correlated with metro area housing values. Chicago and Philadelphia have the highest cost burdens and the highest median home values among the sample metros. However, Cleveland and Detroit rank in the top half on housing costs as income share, despite having lower housing values than metros such as Minneapolis and Fargo, N.D. Affluent households spend less than 20% of their income on housing in all metros.

Figure 2 

Historic architecture can be charming. Historic plumbing usually isn’t.

In some cities and neighborhoods, older homes–especially those built before 1940–are highly sought after for their distinctive architecture. But older houses have some downsides, notably requiring more time and money to maintain. Figure 3 compares the share of poor and lower-middle-income households living in homes older than 50 years, relative to affluent households. In each of the 10 metro areas studied, lower-income households are more likely to live in older housing units. Because affluent households can afford to choose their preferred homes and neighborhoods, the fact that they choose to live in newer homes strongly suggests that older housing in these metros is on average lower-quality and less desirable.


Affluent workers in most metros enjoy shorter commute times–with one exception.

Families on tight budgets often make tradeoffs between housing costs and transportation costs: housing is usually more expensive near job centers, while remote locations require higher time and money costs of commuting. Except Chicago and Philadelphia, the metros in this study are not well served by public transit, so families who can’t afford cars rely on slow or infrequent bus systems. In 9 of the 10 metros, poor and lower-middle-income families are more likely than affluent ones to experience very long commutes (more than one hour each way), although the differences are generally small (Figure 4).

The one notable exception is the Allentown-Bethlehem, Pa. metro area: about 13% of affluent households have very long commutes, compared to 7% of lower-income households. Allentown’s unusual pattern reflects its proximity to a metro with well-paid jobs but also sky-high housing costs: New York. Increasingly, highly paid people who work in New York are choosing to endure long commutes in order to afford larger, better quality housing in adjacent metros. According to Census Bureau data, about 20% of Allentown’s highest-income residents work in the New York metro area, compared to about 9% of low-earning Allentown residents.


The most effective policy solutions aren’t glitzy. Policymakers should do them anyway.

Housing affordability is not just a problem in coastal superstar cities, and it doesn’t just affect poor families. Even in metro areas with moderate housing prices, poor and lower-middle-income families are financially stretched to afford housing. Some of the strategies to reduce direct monthly housing costs–living in older homes farther from work–saddle families with additional costs, like higher home maintenance and longer commutes.

Because housing stresses vary across metropolitan areas, there is not one quick or easy policy solution. For the poorest families, direct subsidies will be needed to bridge the gap between incomes and monthly housing costs. For lower-middle-income families in metro areas like Cleveland and Pittsburgh, the affordability gap is often relatively small, around $100 per month. Lower-income homeowners living in older housing stock could benefit from small grants or low-interest loans to repair homes, including upgrades that would lower ongoing energy costs. Metropolitan areas contemplating whether and how to invest in transportation infrastructure should remember that poor households are most likely to depend on public transit, and therefore are most harmed when transit service is slow, infrequent, or unreliable. Small dollar home improvement loans and better bus service aren’t flashy or sexy policies, but they could make life better for millions of Americans.

Thanks to Caroline Corona for excellent research assistance.