Housing Affordability in the United States: Income and Price Contributors

20 Pages Posted: 22 Jul 2007

Date Written: June 2007


This paper examines the housing affordability problem in the United States. It uses the widely accepted measure of housing cost burden (the ratio of housing costs and income) as the measure of housing affordability for its analysis. Based on published data of the Joint Center for Housing Studies, it examines annual trends in rents, owner costs of housing, home prices and incomes over the period 1975 to 2001. The changes in the affordability situation over time are analyzed separately for renters and for owners. The paper also presents a picture of housing affordability in selected U.S. metropolitan areas for employees in different occupation groups. The paper concludes that the housing affordability problem for renters has been largely income-driven; on the other hand, for owners, changes in affordability have been related to changes in mortgage costs. A counter-cyclical monetary policy is seen as alleviating owner cost burdens during times of recession. The paper recommends that housing policy aimed at rental housing adopt a counter-cyclical focus, which it currently seems to lack.

Keywords: housing affordability, housing prices, housing costs, user cost, rent, mortgage burden, housing cost burden, household income

JEL Classification: R21, R31

Suggested Citation

Kutty, Nandinee K., Housing Affordability in the United States: Income and Price Contributors (June 2007). Available at SSRN: https://ssrn.com/abstract=1002249 or http://dx.doi.org/10.2139/ssrn.1002249

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