The Affordability Scissors: How Flat Wages and Rising Housing Costs Squeezed Out the Middle Class
Since 1990, median home prices have risen 244% while real household income has grown just 28%.[1][2] The price-to-income ratio has risen from 4.1x to 5.3x - and hit 5.0x during the mid-2000s bubble. Affordability is not just a housing cost problem. It is a wage problem. And the two blades of the scissors have been moving in opposite directions for 35 years.
The Two Blades of the Scissors
The affordability crisis is often discussed as a housing cost problem. And it is - median home prices have risen from $123,900 in 1990 to $426,800 in 2024.[1] But the other blade of the scissors is just as important: wages have not kept pace. Real median household income - adjusted for inflation - rose from $65,440 to $83,730 over the same 34 years, a gain of just 28%.[2]
The result is a price-to-income ratio that has risen significantly. In 1990, the median home cost 4.1 times the median household income. By 2024, it cost 5.3 times - and during the mid-2000s bubble, it exceeded 5.0x. This single metric captures the structural deterioration: nominal prices surged while real wages barely moved.
Home Price-to-Income Ratio, 1990-2024
Ratio = nominal median home sales price / nominal median household income. Sources: FRED/Census (MSPUS)[1], Census Bureau[2]
| Year | Median Income (Nominal) | Median Home Price (Nominal) | Ratio |
|---|---|---|---|
| 1990 | $29,943 | $123,900 | 4.14x |
| 1995 | $34,076 | $130,000 | 3.82x |
| 2000 | $41,990 | $165,300 | 3.94x |
| 2005 | $46,326 | $232,500 | 5.02x |
| 2010 | $49,276 | $222,900 | 4.52x |
| 2015 | $56,516 | $289,200 | 5.12x |
| 2020 | $67,521 | $329,000 | 4.87x |
| 2024 | $80,610 | $426,800 | 5.3x |
Both income and home prices in nominal dollars. Home prices are Q1 each year (FRED MSPUS). Income from Census Bureau. Sources: FRED[1][2]
The Housing Wage Gap
The National Low Income Housing Coalition calculates the hourly wage a full-time worker must earn to afford a two-bedroom apartment at fair market rent without spending more than 30% of income. In 2025, this "Housing Wage" is $33.63 per hour - 4.6 times the $7.25 federal minimum wage.[3] The average renter earns $23.60 per hour - $10.03 less than what is required.[3]
| Year | Housing Wage (2-BR) | Federal Min. Wage | Gap |
|---|---|---|---|
| 2017 | $21.21 | $7.25 | $13.96 |
| 2018 | $22.10 | $7.25 | $14.85 |
| 2019 | $22.96 | $7.25 | $15.71 |
| 2020 | $23.96 | $7.25 | $16.71 |
| 2024 | $32.11 | $7.25 | $24.86 |
| 2025 | $33.63 | $7.25 | $26.38 |
| Change | +59% | 0% | +89% |
The gap between housing costs and the minimum wage has nearly doubled in 8 years. Source: NLIHC Out of Reach reports[3]
Key Finding
Almost half of all U.S. workers earn less than the hourly wage required to afford a modest one-bedroom rental home. In no state, metropolitan area, or county in the United States can a full-time minimum wage worker afford a two-bedroom apartment at fair market rent.[3]
Wage Growth in High-Immigration Sectors
The sectors with the highest shares of immigrant workers have experienced the weakest real wage growth. In construction, where immigrants comprise 25.5% of the workforce, real wages grew approximately 15% over 18 years - less than 1% per year. In agriculture, where immigrants are 36.4% of the workforce, real wage growth has been effectively zero.[4]
| Sector | Immigrant Share | Avg. Wage (2007) | Avg. Wage (2025) | Real Growth |
|---|---|---|---|---|
| Construction | 25.5% | $22.59 | $39.07 | ~15% |
| Leisure & Hospitality | 23.4% | $11.49 | $22.50 | ~26% |
| Agriculture | 36.4% | $11.80 | $18.45 | ~4% |
| Professional & Business Services | 18.1% | $26.79 | $42.26 | ~5% |
Real growth adjusted for CPI (~50% inflation 2007-2025). Sources: BLS Current Employment Statistics[4], NAHB/BLS immigrant share data[5]
The COVID Natural Experiment
The largest wage gains in leisure and hospitality came during 2020-2022, when pandemic-era immigration restrictions created labor shortages. Real wages in the sector jumped more in two years than in the previous thirteen combined. Australia saw a similar pattern: when borders closed during COVID, unemployment fell to decade lows and wage growth exceeded 3% annually - well above the long-run average of 2.4%.[6] When borders reopened and immigration resumed, wage growth began to moderate.
What the Research Shows
The relationship between immigration and wages is one of the most studied - and debated - questions in labor economics. The evidence points in a consistent direction, though economists disagree on the magnitude.
The Borjas Finding (Harvard, 2003)
George Borjas, Robert W. Scrivner Professor of Economics at Harvard Kennedy School, published the most influential study on immigration and wages in the Quarterly Journal of Economics. His core finding: a 10% increase in labor supply caused by immigration reduces wages for native workers by 3-4%.[7]
The effect falls hardest on the least educated: wages for workers without a high school diploma were reduced by approximately 7.4% in the short run.[8]
Borjas estimates that immigration generates approximately $35 billion in net economic benefit annually (about 0.2% of GDP) - but that this surplus comes from reducing wages of competing native workers by an estimated $402 billion per year, while increasing returns to employers and capital owners by $437 billion. Immigration, in this analysis, functions primarily as a redistribution from workers to employers.[8]
The Counterargument
Not all economists agree with Borjas's estimates. David Card (UC Berkeley, Nobel Prize 2021) and Giovanni Peri (UC Davis) argue that when capital adjusts over time, the average wage effect of immigration approaches zero. They contend that immigrants and native workers are often complements rather than substitutes - filling different roles in the economy rather than directly competing.[9]
The Congressional Budget Office takes a middle position. CBO's 2024 analysis of the immigration surge found that it "slows the growth of wages of people with 12 or fewer years of education" in the short term, but that this effect reverses in later years through higher productivity.[10]
Where the Debate Converges
Even economists who find small average effects agree on several points: (1) immigration has distributional consequences - it benefits some workers and harms others; (2) low-wage native workers bear the largest negative effects; (3) employers and capital owners capture the largest benefits; and (4) the pace of immigration matters - rapid increases in labor supply create larger short-term wage effects than gradual increases. The question is not whether immigration affects wages, but by how much and for whom.
Historical Precedent: The 1924-1965 Immigration Pause
From 1924 to 1965, the United States maintained significantly reduced immigration - averaging roughly 54,000 per year compared to over 1 million today. During this period, real family income doubled, homeownership expanded by 18 percentage points, and income inequality declined in what economists call the "Great Compression."[11][12]
| Metric | During Pause (1924-1965) | Source |
|---|---|---|
| Real family income | Doubled (1947-1973) | CBPP, PIIE |
| Homeownership rate | 45.6% to 61.9% (+16.3 pts) | Census Bureau |
| Income inequality | Declined (the 'Great Compression') | Goldin & Margo |
| Average immigration/year | ~54,000 (vs. 1M+ today) | DHS Yearbook |
Important Context
The middle-class expansion of 1924-1965 had multiple causes beyond immigration restriction: New Deal labor protections, the GI Bill, FHA/VA mortgage programs, strong union membership (peaking at 35%), massive federal infrastructure investment, and post-war economic dominance. Immigration restriction was one of several factors that contributed to a tighter labor market and rising wages. The correlation is clear; attributing causation solely to immigration policy would be an oversimplification. What the data does show is that reduced immigration coincided with - and contributed to - a period of broadly shared prosperity.[11]
The Policy Response
The affordability crisis has two causes: housing costs that are too high and wages that are too low. Addressing only one blade of the scissors is insufficient. The Affordability and Immigration Act of 2026 addresses both sides.
How the Act Closes the Scissors
Reducing Housing Costs
End Corporate Ownership of Single-Family Homes. Remove institutional investors who drive up prices and extract rent premiums, increasing housing availability for owner-occupants.
End Foreign Ownership of Residential Property. Remove the price floor set by foreign all-cash buyers competing with domestic families.
Increase Housing Construction. Expand supply through federal-local partnerships, streamlined permitting, and infrastructure investment.
Restoring Wage Growth
Reduce Immigration 90% for 10 Years. Tighten the labor market to restore wage leverage for domestic workers - particularly in construction, hospitality, and agriculture where real wage growth has been near zero. The 1924-1965 precedent demonstrates that reduced immigration coincides with broad-based wage growth.
End H-1B, Restore H-1. Stop the systematic underpayment of skilled workers. When 60% of H-1B positions are certified at wages below the median, the program functions as a wage suppression mechanism for professional and STEM occupations.
The scissors opened because policy choices over the past 35 years - tripling immigration, tolerating H-1B wage arbitrage, allowing corporate and foreign housing purchases, and blocking construction - simultaneously suppressed wages and inflated housing costs. Closing the scissors requires addressing both sides at once.
Sources & Methodology
Data Sources
- FRED / U.S. Census Bureau & HUD: Median Sales Price of Houses Sold (MSPUS) - Quarterly median home sales prices, not seasonally adjusted. Used Q1 figures for each year.
- FRED / U.S. Census Bureau: Real Median Household Income (MEHOINUSA672N) - Annual real median household income in 2024 CPI-adjusted dollars.
- National Low Income Housing Coalition: Out of Reach 2025 - Housing Wage data. The Housing Wage is the hourly wage a full-time worker must earn to afford fair market rent without spending more than 30% of income.
- FRED / BLS: Average Hourly Earnings by Industry (Current Employment Statistics) - Construction (CES2000000003), Leisure & Hospitality (CES7000000003), and other industry wage series. Real growth estimates adjusted using CPI-U.
- NAHB Eye on Housing / BLS: Immigrant Share in Construction Sets New Record (2024) - Immigrant workforce shares by industry and occupation.
- Reserve Bank of Australia: Developments in Wages Growth Across Pay-setting Methods (October 2024) - Australian wage growth data during and after COVID-era immigration restrictions. Wage Price Index data from the Australian Bureau of Statistics.
- Borjas, George J. "The Labor Demand Curve is Downward Sloping." Quarterly Journal of Economics, Vol. 118, No. 4, November 2003 - Finding that a 10% increase in labor supply from immigration reduces native wages by 3-4%. NBER Working Paper No. 9755.
- Borjas, George J. "Immigration and the American Worker." Center for Immigration Studies, 2013 - Estimates of immigration's redistributive effects: $402 billion reduction in native wages, $437 billion increase in returns to capital. Education-specific wage impacts.
- Card, David and Giovanni Peri. "Immigration Economics by George J. Borjas: A Review Essay." Journal of Economic Literature, 2016 - Counterargument that immigration's average wage effect approaches zero when capital adjusts; immigrants and natives are complements.
- Congressional Budget Office: Effects of the Immigration Surge on the Federal Budget and the Economy (July 2024) - CBO analysis finding short-term wage suppression for workers with 12 or fewer years of education, reversing in later years.
- Center on Budget and Policy Priorities: A Guide to Statistics on Historical Trends in Income Inequality - Real family income trends 1947-present; documentation of the "Great Compression" and post-1973 divergence.
- U.S. Census Bureau: Historical Census of Housing Tables - Homeownership - Homeownership rates by decade, 1890-2020.
- Department of Homeland Security: Yearbook of Immigration Statistics - Historical immigration data by fiscal year, including the 1924-1965 period.
Methodology Note
The price-to-income ratio is calculated by dividing the median home sales price (nominal, FRED series MSPUS, Q1 each year) by real median household income (FRED series MEHOINUSA672N, CPI-adjusted). This comparison uses nominal home prices against real income because the ratio represents the actual purchasing challenge faced by buyers: how many years of current income does a home cost? Real wage growth figures for industry sectors are estimated by deflating nominal BLS wage data by the CPI-U index.
The immigration-wage research is presented with both sides of the academic debate. Borjas's estimates (3-4% wage reduction per 10% labor supply increase) represent the upper bound of estimated effects; Card and Peri's estimates (approximately zero average effect) represent the lower bound. The CBO's position falls between these two. This article does not claim to resolve this debate but presents the evidence as it stands.
The 1924-1965 historical comparison is presented with the explicit caveat that immigration restriction was one of several factors driving middle-class expansion during this period. GI Bill benefits, New Deal protections, union strength, and post-war economic conditions all contributed significantly.
Read the Full Policy Framework
The Affordability and Immigration Act of 2026 addresses both blades of the scissors - reducing housing costs and restoring wage growth - through five enforceable reforms.