This report presents a new approach to measuring affordable homeownership. Future changes in the homeownership rate will depend on the ability of today’s renters to become homeowners. Our proposed housing affordability for renters index (HARI) focuses on how affordable homeownership is for current renters. We compare the share of renters who reported the same or more income than those who recently purchased a home using a mortgage, in effect measuring how many renters have enough income to purchase a house. For each metropolitan statistical area (MSA), we construct a local area index that compares renters and borrowers in the same MSA and a national index that compares renters nationwide with homeowners in a specific MSA.

The new indexes reveal that slightly more than a quarter of current US renters have incomes higher than those who recently became homeowners using a mortgage. The indexes also reveal how housing affordability differs over time, by location, and across racial and ethnic groups. We demonstrate the value of our new indexes by showing that they are predictive of homeownership rates: MSAs that are deemed more affordable by our index have higher homeownership rates.