This article covers the 20 Most Affordable Housing Markets in the US in 2023 and provides an in-depth insight into cities that offer the most affordable housing in the US in the current year. For a quick overview of the top 5, read our article, the 5 Most Affordable Housing Markets in the US in 2023.
The US housing market is highly volatile, experiencing rapid fluctuations in value. In February 2023, the market experienced a $2.3 trillion decline in value, the largest since 2008. A new report from real estate brokerage firm, Redfin, found that the total value of US homes fell from a record high of $47.7 trillion in June 2022 to $45.3 trillion at the end of the year, a decline of 4.9% or $2.3 trillion. This is the most significant percentage drop in home values since the 2008 financial crisis, when they plunged by 5.8% from June to December. Homebuyer demand plummeted in early 2023 as consumers faced the highest mortgage rates in years, further depressing home prices. In addition, the median price of a home sold in January was $383,249, down 11.5% from a peak of $433,133 in May.
However, the US housing market has recovered significantly in 2023, following a brief decline in late 2022 and early 2023. The total value of the US housing market has increased by more than $2.6 trillion over the past year, according to the Zillow Group.
Companies Aiming for Affordability
The US housing market has been highly volatile since the pandemic, with unprecedented highs and lows. As a result, the US government and various companies are stabilizing the market in light of rising inflation and economic turmoil.
For example, e-commerce giant Amazon (NASDAQ:AMZN) launched a $2 billion Housing Equity Fund in 2022 to preserve and develop more than 20,000 affordable housing units across three major hubs: Puget Sound, Washington; Nashville, Tennessee; and Arlington, Virginia.
Amazon (NASDAQ:AMZN)'s Housing Equity Fund was a shining example of how major corporations could collaborate with local governments to address the affordable housing crisis many communities still struggle with. In Arlington, the company funded about 18% of all multifamily affordable housing in the county.
Moreover, through its Housing Equity Fund, Amazon (NASDAQ:AMZN) provided a $42 million low-rate loan and grant to the Washington Housing Conservancy to acquire the Crystal House apartment community in Arlington. Through this investment, it hoped to help stabilize and lower rents for the 619 affordable units in the community.
In addition, Amazon (NASDAQ:AMZN) acquired a $40 million option right to undeveloped land on a 16-acre site, donated the land, and assigned the right to Arlington County to develop 550 new affordable homes.
Meanwhile, in 2023, BH Properties (NYSE:BH), a real estate investment firm, announced plans to invest $1 billion in affordable housing. This new initiative complemented its other business lines, including value-added acquisitions, bankruptcy solutions, and investment in real estate debt instruments across the capital stack.
The affordable housing initiative of BH Properties (NYSE:BH) will focus on low-income housing tax credits, Section 8 housing, and age-restricted housing across the country. Currently, the company manages more than 2,000 multifamily units and a 10 million square foot portfolio of commercial property assets.
Moreover, BH Properties' (NYSE:BH) affordable housing strategy is driven by the reliable income stream generated by professionally managed affordable housing assets. This is in contrast to the tax credit-based approach favored by most investors. The company targets properties with 100 or more units.
We compiled a list of the 20 most affordable housing markets in the US in 2023 by evaluating three primary metrics: the median effective property tax rate, the average cost of rent/month, and the homeownership rate.
We collected data on the relevant metrics from different websites. We got the median effective property tax and homeownership rates from the government census and the average cost of rent/month from Zip Atlas.
The median effective property tax rate measures the average amount of property tax that homeowners pay relative to the value of their homes. In contrast, the average cost of rent/month is the amount of money paid on a monthly basis for housing in that particular area.
The homeownership rate is the percentage of households that own their homes in the United States. It is calculated by dividing the number of owner-occupied housing units by the total number of occupied housing units.
We wanted to find the areas that scored the lowest on two indicators (property tax and rent) to ascertain which state had the most affordable and cheap housing. To reach accurate rankings, we assigned weights to each metric. For example, we assigned 0.4 to the median effective property tax rate and 0.3 to average cost of rent/month and the homeownership rate.
We then calculated a weighted average score for each area and ranked them with the lowest scores on these metrics. After the final evaluation of the composite results, the states were ranked from 1 to 20, with 1 indicating the state with the most affordable housing and 20 indicating the state with the least affordable housing.
Below is our complete list of the 20 most affordable housing markets in the US in 2023.
Most Affordable Housing Markets in the US in 2023
20. Hawaii
Median Effective Property Tax Rate: 0.286%
Average Cost of Rent/Month: $1,769
Homeownership Rate: 59.2%
Final Score: 16.6
Hawaii is known for its high cost of living due to housing, groceries, utilities, and transportation. This is why it ranks low among the most affordable housing markets in the US in 2023. Nevertheless, several affordable housing projects in Hawaii can help low-income households purchase a home. Some examples include the Capt Cook Elderly Hsg Project, Kona Krafts Group Home, and Lincoln Courtside.
19. Nevada
Median Effective Property Tax Rate: 0.550%
Average Cost of Rent/Month: $1,262
Homeownership Rate: 60.3%
Final Score: 15.7
The Nevada state government has launched Nevada 211 programs to provide rental housing to individuals and families at discounted rates. Subsidies are paid directly to property owners, who rent units to income-eligible individuals and families.
18. Oklahoma
Median Effective Property Tax Rate: 0.896%
Average Cost of Rent/Month: $855
Homeownership Rate: 68.5%
Final Score: 15.6
According to the National Low Income Housing Coalition, affordable housing is a severe issue in Oklahoma, where two out of five residents cannot afford a stable home working a single full-time job, and the state's two metro areas have some of the highest eviction rates in the nation.
Despite this, Oklahoma is spending $215 million to increase the supply of affordable housing.
17. Montana
Median Effective Property Tax Rate: 0.830%
Average Cost of Rent/Month: $923
Homeownership Rate: 68.3%
Final Score: 15.5
In 2020, Montana had over 23,000 housing units that supported housing affordability. These units were subsidized through several public finance programs in the state to further the affordable housing goal.
16. Arizona
Median Effective Property Tax Rate: 0.620%
Average Cost of Rent/Month: $1,147
Homeownership Rate: 68.1%
Final Score: 15
Housing subsidies are provided in Arizona to help low-income families afford decent and safe housing.
15. Tennessee
Median Effective Property Tax Rate: 0.656%
Average Cost of Rent/Month: $926
Homeownership Rate: 67.3%
Final Score: 14.9
To make housing affordable for all, the Tennessee Section 8 Housing program provides rental assistance to low-income families, the elderly, and people with disabilities. This federally funded program subsidizes a portion of rent payments for eligible individuals and families, helping them afford safe and decent housing.
14. Colorado
Median Effective Property Tax Rate: 0.507%
Average Cost of Rent/Month: $1,492
Homeownership Rate: 67.4%
Final Score: 13.8
The U.S. Forest Service, in 2023, is planning to build more affordable housing for its staff in Colorado. The agency manages millions of acres in the state's mountains, but its employees often need help to afford to live there. This housing project, located on land in resort communities of the Rockies, will also be open to teachers, firefighters, and other middle-income workers.
13. Indiana
Median Effective Property Tax Rate: 0.825%
Average Cost of Rent/Month: $909
Homeownership Rate: 72.6%
Final Score: 12.9
Amid the housing crisis, the City of Indianapolis is working to increase the supply of high-quality housing that is sustainable, accessible, and affordable for everyone, intending to preserve and enhance diverse neighborhoods.
In 2021, the Department of Metropolitan Development released the Anti-Displacement & Inclusive Growth Policy Agenda for Indianapolis to ensure equitable development and prevent displacement across Indianapolis neighborhoods.
12. Utah
Median Effective Property Tax Rate: 0.579%
Average Cost of Rent/Month: $1,288
Homeownership Rate: 71.2%
Final Score: 12.8
Utah is one of the most affordable states in the US, with a lower cost of living and a high standard of living. This is due to relatively low prices and high incomes, allowing residents to access the same amenities as larger cities at a fraction of the cost.
11. Kentucky
Median Effective Property Tax Rate: 0.851%
Average Cost of Rent/Month: $831
Homeownership Rate: 71.4%
Final Score: 12.7
In 2023, the Kentucky Housing Corporation (KHC) provided more than $12.5 million in Low-Income Housing Tax Credits (Housing Credits) and other program resources to communities throughout Kentucky, making more affordable housing options available.
10. Idaho
Median Effective Property Tax Rate: 0.631%
Average Cost of Rent/Month: $999
Homeownership Rate: 71.3%
Final Score: 12.7
In 2023, LEAP Housing, an Idaho-based nonprofit dedicated to affordable housing, broke ground on Falcons Landing, a new 136-unit affordable housing complex designed to address the growing need for affordable housing in Mountain Home.
9. New Mexico
Median Effective Property Tax Rate: 0.795%
Average Cost of Rent/Month: $859
Homeownership Rate: 71.1%
Final Score: 12.2
The New Mexico Mortgage Finance Authority (MFA) has launched the Restoring Our Communities program. The program aims to rehabilitate abandoned or vacant homes for potential homebuyers who meet or are below the area median income, which the MFA said in 2023 is approximately $32,000 annually.
8. Arkansas
Median Effective Property Tax Rate: 0.618%
Average Cost of Rent/Month: $770
Homeownership Rate: 66.8%
Final Score: 11.6
Skyrocketing interest rates, low housing supply, and rising single-family home prices are putting pressure on buyers nationwide in 2023. But home buying in Arkansas is still relatively affordable compared to the rest of the country.
7. Delaware
Median Effective Property Tax Rate: 0.582%
Average Cost of Rent/Month: $1,227
Homeownership Rate: 74.9%
Final Score: 9.7
The Delaware State Housing Authority (DSHA) successfully launched two new affordable housing development programs in 2023, funded by the American Rescue Plan Act (ARPA).
6. Wyoming
Median Effective Property Tax Rate: 0.606%
Average Cost of Rent/Month: $966
Homeownership Rate: 75.3%
Final Score: 8.8
In 2023, more than $4.6 million has been granted to hundreds of nonprofit and government organizations throughout Wyoming to support affordable housing and community development initiatives.
