As politicians debate affordability, here's how economists define it

Affordability is the name of the game for politicians of all stripes heading into this year’s midterm elections. As inflation is keeping prices of just about everything stubbornly high and now gas prices are spiking amid the war in Iran — politicians are promising to fix it – and criticize the other party for causing it.

President Trump has called the affordability crisis “a hoax” … but also signed a series of executive orders aimed at home affordability ahead of the midterms. Democrats are, for their part, are hoping to capitalize on Americans’ displeasure with rising costs.

But, what does affordability really mean? To get an answer, The Show spoke to Jennifer Pullen, executive director of the Economic and Business Research Center at the Eller College of Management at the University of Arizona. She said affordability, for economists, is pretty simple.

Full conversation

JENNIFER PULLEN: The idea of affordability has traditionally been thought of kind of as housing affordability, I think, from an economic standpoint. And that idea kind of dates back to the 1930s with the United States National Housing Act. And that's kind of served as the standard of housing affordability for almost the last 100 years.

And that's when households that spend more than 30% of their income on housing related expenses, including their utilities, they're considered cost burden. So they have a difficult time paying for other essential items like child care, health care, transportation, sometimes even food.

LAUREN GILGER: OK, so 30%, which seems pretty basic. It sounds like though that 30% number is getting harder and harder to achieve, even here in Arizona.

PULLEN: Yeah, that's true. I mean, I think that over the last decade, what we've seen is that in particular, if we're talking about home prices, they have increased rapidly. Year over year, Phoenix's home prices have increased by 14% between 2012 and 2022.

If we take wages and put that into perspective, wages have only increased by 2.7% year over year. So housing is becoming a much larger component of what we're spending our income on.

And then as other prices are increasing — transportation, the prices of cars have gone up, food, energy costs — that's making that affordability measure more difficult to obtain.

GILGER: Yeah, and Arizona for a long time, until recently it seems to me at least, we were always the place that was affordable, especially when it came to housing. People came here in droves for years because they could afford to live here and get a nice house and kind of meet that 30% threshold. Is that still the case?

PULLEN: Yeah, it still is the case, both in Phoenix and in Tucson, though they've caught up a little bit to other western metropolitan areas. But we can look at — the Federal Reserve Bank of Atlanta produces some data that shows different metropolitan areas and what share of income for someone earning the local median household income, what share of that income would need to go towards the median home price. So like what did home prices sell for in this year and how much of that share of income would you need to spend to afford that median in home price? ... And in Phoenix, that's 44.4% in 2025.

GILGER: Wow.

PULLEN: But there's other regions around the western U.S., like if we look at San Diego, we need 68.3%, someone in San Diego earning, right, the median income; 68.3% goes to that median home price. In Austin, Texas, it's over 50% at 50.6%.

... So Phoenix, you know, when we put it in perspective compared to other regions, we're still in good shape, though we are considered unaffordable for someone earning the median income because we're exceeding that 30% share.

GILGER: Right. So way over 30% here, but not nearly as expensive as some other places. It's great to put that into numbers. I think we kind of intuitively know that a place like San Diego costs a lot more to live or Austin, right? But the difference in that stat is wild.

Let me ask about where we are now in terms of housing, though. Like we are seeing home prices here start to kind of even out, even though they remain high. Could this even out and Phoenix get back to that really affordable, truly affordable level at some point?

PULLEN: Yeah, I mean, that is exactly what we're seeing. ... We've seen slowdown in home price growth over the last three years. We actually saw a slight correction in the Phoenix market in 2023, where prices came down about 3.5% and then grew about 3% in 2024. And then preliminary data for 2025 is showing us that Phoenix markets home prices only grew at 0.7%. And so this is similar to what we saw in 2009 when home prices corrected and came down and income started to grow. And we actually saw affordability rates below that 30%, both in Phoenix and Tucson.

And then those — that affordability started to tick up like the declining affordability in home prices started to tick up in 2021, but since about mid-2025, we started to see a little bit of softening in or a decline in that affordability in places are becoming a little bit more affordable. And income is increasing at a faster rate right now than home prices. So that's going to help with affordability. And it's projected to increase at a pretty, pretty good rate over the next couple of years. So we're hoping a little bit of softer home prices, a little increase in income will help to even out that affordability issue.

GILGER: OK. OK. So looking up in some ways. Let me ask you about who's most impacted here. Like, are we looking at a big difference in terms of affordability between people who rent and people who buy? Or, you know, is it seniors on a fixed income who end up in a really tough spot? Where is the biggest impact?

PULLEN: Yeah, the biggest impact we see is by tenure, so homeowners versus renters. We have 52.3% of renters are paying more than 30%. And that is a little bit of a demographics issue. Our renters tend to be single households. They tend to be younger or older individuals. And so when we look at housing affordability by age, we also see that our younger and our older-age cohorts have higher rates of housing cost burden than our prime working age.

GILGER: It's interesting. So it's the two ends of the spectrum there in terms of age. There's also ... it seems like a cultural piece to this. Like, people don't all think about what affordability means in the way that you do as an economist, but also in the way that other people do. Is that 30% shifting?

PULLEN: Yeah, I do think that, you know, you have to take into consideration what your household needs are, right? So what affordability looks like for you might be different than for me. I may have no children, so I have — I'm OK paying a little bit more of my income, right, towards my housing. Maybe I'm uncomfortable with 50% of my income going towards housing, but a household that has high transportation needs, child care needs, education needs, that is going to probably be unattainable for them.

So it really is kind of on an individual basis, what affordability means. And I think, you know, it's about whether your household can sustain its expenses without compromising its long-term stability, right? So are you stable paying 50% to 60% of your income towards your housing-related expenses? If you are, then that might be okay for you, while for others, it wouldn't be.

GILGER: Yeah, yeah. So as we watch kind of prices go up, like, home prices might tick down here and there a little bit or start going up by less. But I don't think we're ever going to see, you know, the average home price in the Valley go back to where it was 10 years ago. Does that affordability thing shift as we just see prices continue to rise, especially as we see prices of not just homes rise, but pretty much everything as inflation still is so high?

PULLEN: Right. I mean, I don't think the benchmark of affordability shifts. I think it's just our perception of how much of our income is going towards our housing and our other expenses, right? I just think the reality is getting harder to get there. There's been a lot of research that shows that once you go beyond that 30%, you're going to have difficulty paying for other expenses. So it's really about trade-offs, I think, is what are you willing to trade in order to have your higher amount of income going towards your housing?