Why Chicago stayed affordable while other big cities didn’t

by Scott Klocksin

It’s often said by economists that housing costs have risen faster than wages in recent decades, but just how wide is the gulf between income growth and gains in property values? We now have a better sense of that, thanks to a recent study by Eylul Tekin, a researcher for home listing site Clever.

Across the country, after adjusting for inflation, the study found that, since 1960, median home prices have climbed by 121 percent, and household incomes rose less than one fourth as fast, registering just a 29 percent increase. And it’s not that homes were that cheap relative to income then, either; in the 1960s a typical home cost about double what a typical American earned in a year. That’s along with a 72 percent spike in median gross rent, which has made it much harder for many renters to save for a down payment to be able to buy their first homes. Nationally, the price-to-income ratio is 3.6 in 2019, meaning it takes about 3.6 years’ income for a typical household to be able to pay for a typical home. By 2017, it the earnings of 3.5 years to purchase a home. It hasn’t been since the 1990s, according to the study, that a ratio of income to the price of a home nationally was at 2.6, or what’s considered a healthy range.


Numbers provided by Clever help offer one way to tell the story of Chicago’s the price-to-income spread through the lens of ebbs and flows in the city’s population. Starting in 1960, a four-decade run of population loss cost the city over 800,000 residents. Over that period, the local price-to-income ratio saw no major spikes, and either declined or rose nominally, ending the 20th century at a still relatively healthy 2.9. Then, during the 1990s, the city’s population went up slightly, and by 2008, the local price-to-income ratio hit 4.4. Since the financial crisis, the ratio has come back down — along with the city’s population. While it’s still higher than normal, that number sits at 3.2 today — the same ratio Chicago had at the turn of the millennium.

Of course, there are places where this process has been even more dramatic than in Chicago, as this process hasn’t unfolded at exactly the same pace everywhere in the country. The Western U.S. has been hit especially hard, with home prices rising 7.5 times faster than incomes over the period studied. In San Francisco, home price growth was so aggressive that significant gains in inflation-adjusted income, to the tune of 91 percent, only seemed to fan the flames of rising unaffordability. Home prices have grown in the city by 531 percent since 1960.

At the other end of the spectrum, the Midwest held the line on affordability better than any other region. In three metro areas noted in the study — Des Moines, Cincinnati and St. Louis, which each still have a price-to-income ratio that’s considered healthy — household incomes grew faster than home prices for a period of time in the 1980s. This trend has since been reversed, but home values throughout the region have not seen the explosive growth found in other regions.

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