The cost of living varies greatly across the 50 U.S. states. Some states have much higher costs for basic necessities like housing, food, and transportation. When the cost of living is disproportionately high compared to local wages, an area becomes less affordable for residents.
Key Factors That Impact Affordability
Several interrelated factors determine how affordable it is to live in a given state:
- Housing costs – This includes rent for apartments or monthly mortgage payments. Areas with a limited housing supply tend to have higher costs.
- Goods and services – The cost of groceries, utilities, healthcare, and other everyday expenses.
- Transportation – Expenses like gas, car insurance, and public transit fees.
- Wages – How much workers typically earn. Higher wages help offset increased costs.
When housing, goods/services, and transportation are much higher than an area’s average wage, affordability suffers.
Most Significant Expenses
Housing is perhaps the most significant expense. Areas with the priciest housing markets usually rank as the country’s least affordable places. For example, monthly rent for a 2-bedroom apartment exceeds $1,000 in many major U.S. cities.
Childcare and healthcare costs have also been rising faster than overall inflation, putting further strain on household budgets.
Transportation is another big expense category. Long commutes and high gas prices can drastically increase transportation costs.
High taxes in some states also cut into take-home pay, limiting disposable income for other expenses.
Measuring Affordability
To identify the least affordable states, data on the following metrics is compared:
- Average home and rental prices
- Median household income
- Average annual taxes
- Average costs for goods/services like groceries, utilities, healthcare
- Average transportation costs
The cost of living index and housing affordability metrics also help determine affordability. These tools calculate estimated budgets and relative prices for goods/services in an area.
A high cost of living combined with low wages indicates an unaffordable area. This is especially true when over 30% of average monthly income goes to housing.
The Least Affordable States
Using recent data and affordability metrics, these 10 states currently have the worst affordability:
1. California
High housing costs severely reduce California’s affordability. For example, the median home price is $800,000 (over double the national average). Rent is similarly expensive – a small 1-bedroom apartment averages $2,500 per month in San Francisco.
Despite higher average wages, many households still struggle with housing costs claiming 50% or more of their income. California does have a more temperate climate and access to oceans/mountains, but the housing and cost of living crisis makes it the country’s least affordable state overall.
2. Hawaii
Hawaii is the most isolated U.S. state, located 2,500 miles from the mainland. Importing goods/services and construction labor/materials is expensive. This, combined with strong tourism demand, severely inflates housing and living costs.
For example, grocery and utility bills are over 30% higher than the U.S. average. Despite higher wages driven by tourism, Hawaii residents face extreme affordability challenges. Saving for the future or buying a home is difficult for many.
3. New York
The New York City metro area contains some of the nation’s priciest real estate, driving up statewide averages. Renters need to earn over $95,000 per year to reasonably afford a typical two-bedroom apartment. Home prices are equally stretched, with the median house costing well over $300,000.
Other major New York costs like taxes, childcare, and transportation reduce disposable income available for housing. This widens the affordability gap for all but the highest earners.
4. Massachusetts
Massachusetts combines very high housing expenses with elevated costs for other goods/services. Utility bills and grocery costs in cities like Boston are substantially higher than national averages.
Transportation is also impacted by aging infrastructure leading to traffic congestion and long commute times. Massachusetts’ affordability crisis may threaten its competitive, knowledge-based economy moving forward.
5. Oregon
Historically lower housing supply and higher demand driven by West Coast transplants has squeezed Oregon’s affordability. Home prices rose over 10% annually in recent years while rent eclipsed $1,000 per month statewide. Healthcare and transportation costs are also above average.
While wages have not kept pace, the tech sector continues attracting migration into urban centers like Portland. This exacerbates affordability problems and inequality.
6. Connecticut
This New England state has struggled to balance housing costs and wages. Connecticut has the 7th highest median home value in the country (over $270,000) but only the 23rd highest median income. Other goods/services like groceries and utilities are also well above national averages.
Despite initiatives to expand affordable housing, Connecticut remains the 6th least affordable state overall as incomes still lag housing/living costs. Education and healthcare jobs do not provide adequate earnings to offset expenses.
7. New Jersey
New Jersey falls only behind California and Hawaii for the country’s most expensive housing. Renters need almost $28 per hour to afford a typical apartment. High property taxes and congestion commuting to major cities also drain resources that could otherwise be used for housing costs.
While New Jersey household incomes are higher than typical, the extreme housing expenses keep affordability firmly out of reach for many. Cost pressures may also force more young people and families to seek greener pastures in coming years.
8. Maryland
Maryland’s close proximity to Washington D.C. impacts affordability. Cities like Bethesda and Baltimore contain expensive housing and rising rental rates fueled by suburban sprawl and demand from commuters.
Childcare, transportation, and utility costs in the state similarly outpace national averages. Combined with only average household earnings, this leaves fewer resources to devote to core housing needs.
9. Vermont
While smaller and more rural than most states, Vermont still suffers from housing supply and demand imbalances that reduce affordability. Home prices rose 12% year-over-year while rents exceeded $1,000 per month on average. Healthcare and childcare costs are also notably higher than other parts of New England and the U.S.
Vermont’s development restrictions and aging population may continue driving affordability challenges moving forward.
10. Colorado
Many have flocked to Colorado for its natural beauty and booming jobs market. But increased migration combined with limited housing development has led to spiking costs. Home prices rose 15% annually in recent years while average rent eclipsed $1,300 per month across the state.
Wages have not kept up despite job growth in fields like technology and renewable energy. Increased costs for transportation, utilities, and healthcare have also strained affordability over the past decade.
Improving Affordability
Many factors behind housing supply, demand, and costs are difficult for individuals to influence. But states and local governments can take steps to relieve affordability pressures, including:
- Incentivizing construction of affordable homes and apartments.
- Expanding access to public transit to reduce transportation costs.
- Funding direct rental subsidies for low-income households.
- Cutting red tape to control housing development costs.
- Investing in education/training to grow incomes.
- Offering tax credits tied to affordability burdens.
Multi-pronged approaches are needed to curb excessive housing appreciation and make living expenses more manageable relative to incomes. This will help create viable and thriving communities across all states.
Conclusion
The least affordable states share common traits like extremely high housing costs that eat up large portions of household budgets. Rent and home prices in California, Hawaii, New York, Massachusetts, and other unaffordable states dwarf the national averages. When elevated expenses for other necessities like childcare and transportation are added, minimal income remains for savings, discretionary spending, or living comfortably.
These states will need to pursue policies that expand reasonably priced housing options and support higher earnings if they want to provide an acceptable standard of living for all residents. Capping excessive housing appreciation and making healthcare, education, and transit more affordable are also key steps to take. Alleviating affordability pressures and inequality can help create more sustainable and equitable economies over the long-term.
State Affordability Rankings
| Rank | State | Affordability Score |
|---|---|---|
| 1 | California | 4.2 |
| 2 | Hawaii | 4.7 |
| 3 | New York | 5.1 |
| 4 | Massachusetts | 5.4 |
| 5 | Oregon | 6.2 |
