“There’s no such thing as a free lunch” is a trite cliché, but it’s useful when thinking about differences in housing costs in different parts of the U.S., especially for anyone considering permanent remote work as a way to save money. Places that look relatively cheap at first glance aren’t necessarily more affordable for most people who might want to live there—and some places that seem expensive aren’t as pricey as they look after careful analysis.
Consider the latest data on relative housing costs by metro area, published Tuesday by the Bureau of Economic Analysis. This isn’t a measure of house prices, which are affected by everything from interest rates to speculative fervor, but a measure of actual housing costs paid by renters as well as an estimate of how much homeowners would pay if they had to rent their current residence. The ranges are vast: at the top is the San Francisco Bay Area, where housing costs are more than twice the U.S. average. On the opposite extreme are the smaller cities of Appalachia, the Deep South, and the Texas-Mexico border, where housing costs are about half the U.S. average.
There are good reasons for these disparities. For starters, the average wage of an employed worker in the SF Bay was about $115,000 last year. That’s almost twice the average wage of employed workers nationally. By contrast, the lowest-income metros offer jobs with average yearly wages under $40,000. In McAllen, Texas, for example—the lowest-cost metro with at least 500,000 people—the cost of housing is barely a quarter of what it is in the SF Bay. Relative to local incomes, however, the difference in housing costs almost vanishes because the difference in wages is so large.
Even after accounting for differences in local wages, however, there are wide variations in housing costs. But here too, there are often simple explanations relating to the amenities—or discomforts—associated with specific locales. It’s surely not a coincidence that America’s most expensive housing relative to local wages is on the Hawaiian island of Maui, or that the cheapest housing is in former coal-mining towns in West Virginia.
Those places are small and perhaps could be considered unrepresentative, but the pattern is still clear when focusing only on metros with at least 500,000 people. The ones where the average wage buys the most housing are often in the industrial heartland of the Great Lakes, and generally in areas that have seen better days. By contrast, the most expensive housing—at least from the perspective of the average worker—is generally near a beach in southern California, Florida, or Hawaii.
Focusing only on the biggest metros doesn’t change this basic narrative. Among the metro areas with at least two million people—and combining the San Francisco and San Jose metros on a population-weighted basis—the average workers’ income buys the most housing in the industrial heartland, while the most expensive housing is in Miami, Los Angeles, and San Diego. Amusingly, considering the recent migration trends, housing-adjusted average wages are almost identical in Austin, Texas, New York, and the SF Bay—and all three are more affordable than Denver or Las Vegas.
These relationships will matter more to the extent that companies expand their remote working opportunities and use them as a way to cut labor costs. Back in May, about a third of employed Americans were working from home, with roughly two-thirds of workers in tech, media, finance, and professional services doing their jobs remotely. Those proportions have dropped somewhat since then, but Facebook’s Mark Zuckerberg, for example, has said that he expects half of the company’s employees to be working remotely by the end of the decade, with workers outside of headquarters getting paid commensurately less depending on their local cost of living. Other companies are considering similar options.
While that could be good news for Bay Area workers considering a move to Maui, the case for moving to Vegas or Austin for many professionals could be less compelling than implied by the headlines.
Write to Matthew C. Klein at firstname.lastname@example.org