14th Annual Demographia International Housing Affordability Survey: 2018

The 14th Annual Demographia International Housing Affordability Survey (2018) assesses housing affordability across 293 housing markets in nine countries, including Australia, Canada, China (Hong Kong), Ireland, Japan, New Zealand, Singapore, the United Kingdom, and the United States. Data is collected for the third quarter of 2017, providing a comprehensive view of middle-income housing affordability using the Median Multiple—a measure of median house price divided by median household income.

Key Findings

1. Affordable Markets: Out of 92 major metropolitan markets (populations over 1 million), only 10 were affordable, all located in the United States. Rochester, New York, was the most affordable with a Median Multiple of 2.5, followed closely by cities like Cincinnati and Cleveland.
2. Severely Unaffordable Markets: A staggering 28 major markets were rated “severely unaffordable,” including all markets in Australia, New Zealand, and Hong Kong.
   • Hong Kong retained its position as the least affordable market globally, with a Median Multiple of 19.4.
   • Sydney, Australia, followed at 12.9, and Vancouver, Canada, at 12.6.
   • Major U.S. cities like San Jose (10.3), Los Angeles, and San Francisco also made the list.
3. Global Trends:
   • The United States had the most affordable markets overall, with a median value of 3.8, while housing markets in Australia (6.6), New Zealand (8.8), and China (19.4) faced significant affordability challenges.
   • Historically, housing markets with more liberal land-use policies remained far more affordable compared to those with restrictive “urban containment” policies, which limit land supply and inflate prices.

Factors Impacting Affordability

The report highlights urban containment policies as the primary driver of housing unaffordability. These policies—such as urban growth boundaries—artificially constrain land supply on city fringes, driving up land prices and overall housing costs. For example, California, which heavily regulates urban expansion, exhibits both high unaffordability and high poverty levels.

The report also notes that housing affordability directly impacts the standard of living. Where affordability declines, living costs rise, leading to increased poverty and reduced economic growth. The authors emphasize that competitive land markets are critical for maintaining affordability, as seen in markets with fewer restrictions.

Insights from Britain

The introduction, authored by economists from the London School of Economics, explores affordability in Britain, labeled the “cradle of housing unaffordability.” Their analysis reveals significant affordability gaps between wealthy and lower-income households, particularly in cities like London. Adjustments for house size and post-tax income only slightly alter affordability measures, reaffirming the robustness of the Median Multiple as a tool for comparison.

Conclusion

The report underscores the urgent need for regulatory reforms to restore housing affordability. Historical data shows that markets with liberal land-use policies consistently maintain Median Multiples under 3.0, reflecting a healthy balance between prices and incomes. Conversely, urban containment policies exacerbate inequality, reduce standards of living, and create significant economic and social challenges.

Ultimately, the survey calls for a people-centered approach to housing policy, prioritizing affordability over land-use constraints to ensure fair access to housing and sustainable urban growth.

Further reading:
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