Study: Half as Many Metro Areas Affordable to Low-Income Homebuyers in 2021 as in 2020

Over 13 million potential first-time homebuyers were priced out this year, putting homeownership out of reach for low-income households in most of the largest U.S. cities.

October 25, 2021, 8:00 AM PDT

By Diana Ionescu @aworkoffiction

First-Time Buyers

rSnapshotPhotos / Shutterstock

"As home prices continue to surge, low-income households already on the margins of home affordability are on the verge of being completely priced out of homeownership in most major US metro areas." Raheem Hanifa "examined what area median income level was needed to afford a modest-priced home in each of the top 100 metro areas in June of 2021 compared to June of 2020, and then how many renters aged 25-55 were in that group in each time period" for an estimate of "how many likely first-time homebuyers were priced out of homeownership."

Hanifa found that "[b]y June 2021, extremely-and -very low-income households with under 30 percent AMI, and between 30-50 percent AMI respectively, could not afford the median-priced home in any of the 100 largest US metro areas, and in only 20 metros were homes affordable for low-income households with incomes between 50-80 percent of AMI." This translates to 13.4 million potential first-time homebuyers who could not afford a median-priced home. "While households across all AMI levels are impacted by increasing home prices, low-income households with incomes between 50-80 percent of AMI are most at risk of being priced out of affordable homeownership."

"Further compounding these challenges is that even when low-to-moderate income buyers can afford to purchase a home, intense homebuying competition has locked many who rely on FHA and VA loans out of homeownership." The Biden administration, Hanifa writes, should support "policies that build more affordable housing and targeted downpayment assistance to Black households, who already have large homeownership gaps," and "consider employing the Equal Credit Opportunity Act (ECOA) and the exemptions provided through its Special Purpose Credit Program (SPCP), which allows lenders to favorably consider prohibited factors such as race or ethnicity in connection with a special purpose that may include initiatives for 'low-income borrowers of color.'"

Thursday, October 14, 2021 in Joint Center for Housing Studies of Harvard University

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