On Sunday, the New York Times wrote that “the next affordable city is already too expensive.” The article provided some important cautionary tales about housing supply constraints and tensions between old-timers and newcomers due to housing shortages. Spokane, Washington, “the next affordable city” has seen its home prices increase by 60% in the past two years, where the median home value is now $411K. With home values more than doubling since 2014, the percentage of residents who could afford to buy a home has fallen from 70% then to 15% today. In markets across the West, many believe home ownership has gone from a possibility to a lottery.
Since the median household income in Spokane, WA is approximately $55,000, the median household can afford a $178,000 home. Unfortunately, prices haven't been this low since 2014. This price-to-income ratio is how we often think about affordability. “Affordable” has historically been considered a ratio of 2.6 (although this can fluctuate depending on interest rates). And when we look across the country at the largest 50 MSAs, there were just six markets in 2021 where the price-to-earnings ratio was 2.6 or lower:
- Pittsburgh (2.2)
- Cleveland (2.4)
- Oklahoma City (2.5)
- St. Louis (2.5)
- Birmingham (2.5)
- Cincinnati (2.6)
Of the limited markets where housing is affordable for the median buyer, four are in the Midwest. So the question is, why aren't more people talking about affordable cities in the Midwest? Some ethnic peoples like it Richard Florida are certainly beginning to evangelize the resurrection of the Midwest, but the popular imagination turns to markets like Spokane, Boise, and Bozeman—college and capital cities that are the greatest ever, but still pale in comparison to the population and amenities from the largely rejected legacy cities of the Midwest.
Politics can play a role. On the expensive coasts where nearly every major city faces net domestic migration, the public perception of Midwestern cities is a decidedly conservative one. This is true and false. Government policy certainly affects cities. For example, Missouri's underfunded pass more than most – if not all – states in the Union. This undoubtedly affects life in St. Louis, a city that still has far superior transit compared to a place like Spokane. On the other hand, the city of St. Louis is a deep blue city, where cities like Spokane are conservative. I bring up politics not to create a political debate, but to try to present what the political landscape looks like in Midwestern cities.
Demographics likely play a role as well. The Midwest has the largest Black population outside of the South, and there are still studies to this day that show evidence of this White flight. Spokane is 85% white and I would guess that race has an impact on the preferences of wealthier coastal migrants. Still, St. Louis should lean much harder to embrace its Black culture and meet the needs of its Black residents.
Location should not be overlooked either. Spokane is a 4.5-hour drive from Seattle, a much cheaper and more convenient option for visiting family than flying from a Midwestern city like St. Louis. Plus, Spokane is close to the many outdoor activities that people in Seattle appreciate, like skiing/snowboarding and other mountain recreation – which isn't to say the Midwest doesn't always have valuable outdoor recreation in abundance, but it's a different beat.
Mesofacts may be the single most important distraction from the rise of Midwest cities. Pete Saunders, a designer in Chicago, writes that, “Mesofacts are facts that were once true but are no longer true.” The nickname “Rust Belt” may no longer apply, but many believe that jobs are hard to come by in the Midwest. In fact, St. Louis has eight Fortune 500 companies (Spokane has one Fortune 1000 company by comparison) and one of the fastest growing startup scenes in the country. The region seems to have realigned with the modern economy. The median household income in St. Louis is also 15% higher than Spokane. St. Louis is also seeing a steady $1 billion in growth in the city itself alone each year now, far from being a city without investment. These types of mesofacts, and there are many others that deal with social and cultural aspects, drive understanding of a place.
As the list of affordable cities dwindles, the national eye should turn to the Midwest and recognize the rise of affordable cities here. With their extensive existing infrastructure and some forward-looking policies (e.g., up-zoning, eliminating parking minimums, supporting current residents), Midwest cities are much better able to absorb the demand shock that other US cities have faced. cities.
