We already found out earlier this year that New York City has the second highest cost of living in the entire world, and a new study from Point2 is showing us that on top of that NYC is the second most unaffordable city in the U.S. for renters looking to buy a starter home.
To conduct their study, Point2 took into consideration the median value of starter homes in all 50 cities included in the analysis along with property taxes and insurance costs. Renter household incomes in the 50 largest U.S. cities, based on population data from the U.S. Census Bureau, was then evaluated and compared.
In September, the median price of a starter home in NYC was $544,074 with a 20% downpayment of $108,815. The yearly income required to afford this home was $144,895 yet the median renter household income was only $52,724.
In October, renters in NY only earned 34% of the income they would need to buy a starter home, with Los Angeles being the only city in a worse position–their renters earning 30% of the required income.
The reason why the gap between the price of a starter home and the median renter income is so astronomical has to do with the disappearance of how starter homes used to be.
Once upon a time, nearly 70% of all new builds were starter homes — single-family houses with 1,400 square feet or less that started at $6,990. But that was in the 1940s. Fast forward to 1980 and that share fell to 40%. Then, in 2019, the U.S. Census Bureau reported that a mere 7% of all new homes were represented by the small, entry-level homes that are affordable for first-time buyers — and the prices aren’t even remotely similar.
While starter homes used to be small, super-affordable houses, they now just represent the cheapest homes available in the market, and demand for them has increased as first-time buyers, baby boomers, second-time homebuyers, and investors are on the prowl for them.
The increase of land cost alongside zoning restrictions and high costs for building materials also play into why these houses have seem to become more of an urban legend than something today’s renters can actually obtain, alongside rapidly rising prices and interest rates.
In fact, according to their data renters’ homeownership dreams don’t match the reality in almost any of the large U.S. housing markets. But the cities where renters could afford a starter home? Tulsa, Oklahoma, Detroit, Michigan, Memphis, Tennessee, and Oklahoma City, Oklahoma, according to the study.
So, while New York City is definitely expensive, it’s home to two of the most beautiful streets in the world, it’s one of the top best foodie cities in America, and it’s the fifth best big city in the U.S.–but, at the end of the day, its the number one best big city in our hearts!