Life is costly in the world’s major developed cities, with closely linked outlays on housing and transport occupying a prime place in consumer incomes. How affordable a city is reveals its potential for discretionary spending, level of diversity and income inequality, appeal to the middle-class and families, as well as future economic success. In light of the subject’s importance, the briefing studies in more detail the affordability of 10 key cities in the US.
Factors that impact absolute costs include demand and supply interaction, population density and city layout, and local policies. Household income is determined by labour productivity, the employment rate and household size.
In 2016, housing captured on average 22% of total annual disposable income in major developed cities globally. Despite higher incomes, leading cities in most developed countries feature higher housing shares of expenditure than smaller urban areas, due to expensive real estate in larger cities.
In 2016, transport commanded on average 10% of total annual disposable income in leading cities of the developed world. Major cities register lower transport shares than smaller ones in most developed countries, due to extensive mass transit in major cities.
Cities in the US emerge as the most affordable among a group of 60 metropolises, reflecting their much higher household incomes. However, the finding rests upon treating the limit of 45% of income on housing and transport combined as the common affordability threshold. This method is subject to criticism.
An alternative method looks at whether a household can afford to pay for housing after all other necessities are covered at an adequate level. By applying this framework to 10 key US cities, the briefing finds that urban centres such as New York struggle most with affordability, while Houston struggles least.
If you purchase a report that is updated in the next 60 days, we will send you the new edition and data extract FREE! Home Page