America's Best and Worst Cities for Families

Forbes

Metros where folks have enough money for everyday expenses, and spots where daily budgets eat up a sizable chunk of incomes.

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New York, N.Y.

If you've scaled back your summer vacation and swapped dining out for eating in, you're not alone. Americans everywhere are sweating their daily expenses.

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It's likely New Yorkers are cinching their belts. That's because New York is the least-affordable metro in the nation for families, according to our calculations. Families in the Big Apple struggle to keep their budgets balanced and likely worry about paying for expenses like food, health care and housing more than residents of virtually any other major city in the country.

Though New Yorkers' earnings are high compared with the rest of the country--their median income is the eighth-highest of our survey of the country's 40 largest cities--the cost of a family's most basic living expenses is nearly as high, accounting for a whopping 93% of annual pay.

If the typical family throws in an occasional trip to the movie theater, music lessons for the kids or membership at a club or gym, they will soon find themselves in the red. Folks in cities with more money leftover will have an easier time providing for their families. Education costs were not available and were not factored into our ranking.

Another notoriously high-rent city, San Jose, Calif., falls at the other end of the spectrum, emerging as the country's most affordable major city.

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That's because, although living in the area requires maintaining a relatively high $54,685 annual family budget, families residing in San Jose, including scores of Internet and technology professionals, earn a median $100,000 per year. This means the cost of providing the essentials for an average-sized family amounts to only 55% of what two San Jose parents bring in. The 45% that's left over offers an ample margin for summer vacations and videogames.

Behind the Numbers

In compiling our list, Forbes studied the 40 most populated metropolitan statistical areas (MSAs or metros), geographic entities defined by the U.S. Office of Management and Budget used by federal agencies in collecting, tabulating and publishing federal statistics, to determine which were most and least affordable for families. We used the Economic Policy Institute's Basic Family Budget Calculator to determine what families of various sizes around the country spend, based on the combined costs of essentials like housing, child care, food and taxes.

The estimations are for a no-frills budget; they cover only what a family needs to get by and exclude savings, splurges or minor luxuries like eating out. We calculated the budget for a two-parent, two-child family for each city on our list, then divided the results into the annual income for a two-parent family with minor children in that city, as reported in the 2007 annual American Community Survey by the U.S. Census Bureau. These numbers are the latest available and don't reflect the shock to many major cities from the ongoing financial crisis.

We found a few surprises.

San Francisco, a city well known for its pricey housing and steep cost of living, turns out to be one of the country's most affordable. The city may have high costs, but similarly flush wages soften the blow. The average budget only runs to 68% of a family's income.

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Courtesy of the Salt Lake Convention & Visitors Bureau/Eric Schramm

Salt Lake City, Utah

But some cities are unexpectedly hard for families to afford. Even though Cleveland residents spend less on housing and basics than those in most other cities, the median income in the struggling city is low enough that annual living costs amount to 85% of what a typical family earns.

In fact, residents in 15 of the 40 cities we looked at devote 80% or more of their annual incomes to paying for the bare essentials. And for the three cities where families spend 90% or more of their income on basics like food, clothing, shelter and transportation, little room remains to provide any degree of financial security.

"Basically, they're living paycheck to paycheck," says Heidi Shierholz, an economist at the Economic Policy Institute. "It doesn't allow for any kind of savings for education, retirement or a cushion in terms of losing a job or any kind of medical crisis."

Many New Yorkers have grown accustomed to living without that cushion. Even though the city's residents bring in a handsome $73,972 in median family income, monthly taxes are the highest in the country, in part because a higher median income raises the tax burden on those in the middle range of salaries, and high housing costs mean most city-dwellers make dramatic sacrifices to live there.

"You end up living in such a small number of square feet that friends who live elsewhere can't imagine it," says Lawrence J. White, a professor of economics at New York University's Stern School of Business. "You don't have a car, and you give up a lot of the creature comforts that would go along with living in Dallas or St. Louis and other perfectly good cities."

Trimming expenses is not the only way Americans have managed to live in unaffordable cities. For years, families have lived on credit to make ends meet. But that may change.

"For the last 20 years or so, we've seen this huge increase in credit cards and people taking out home equity loans," says Shierholz. "Those avenues are drying up."

Golden State Nuggets

Four California cities stood out on our lists, but for different reasons. Two, Los Angeles and San Diego, were the third and seventh on our list of least affordable cities, respectively. But San Francisco, in addition to San Jose, made an appearance on our most affordable list.

Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, says that costs are high in all of these desirable cities, but that Silicon Valley has a higher concentration of well-paid workers, which, according to calculations, makes it easier to pay for everyday expenses.

"What you have happening is what some economists call 'superstar cities.' The particular attributes of those places make them attractive," he says. "In the Silicon Valley area, there is a huge knowledge community fortified by universities and a critical mass of the right things to attract industries. It attracts highly skilled, highly compensated employees."

Both San Francisco and San Diego families spend significantly more on housing than those in most other cities, but a San Franciscan family, with its median annual income of $89,175, can better afford the cost than a San Diego family, which earns an average $67,743 per year.

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Cleveland, Ohio

The Tax Equation

Some cities landed near the top of the "least affordable" list not because of starkly high housing costs or dramatically lower incomes, but because their tax burden was higher than in other cities, inflating total costs of living.

State taxes weigh disproportionately on middle-income families in the Midwest, said Bob McIntyre, director of Citizens for Tax Justice, which provided the data that the EPI used to calculate taxes for families.

"If you have a tax system that's flattish, rates are higher in the middle range of families," he said, adding that the spread of income within a state affects the average taxes paid. "In some states, you might have a somewhat low-ish average income but a high-ish income for the middle. That's typically true in the Midwest, where the income distribution is more egalitarian."

That means that in Cleveland, where taxes are the 11th highest on our list, families making the median income pay more in taxes than comparable families in Los Angeles, Seattle or Miami. Thus, Cleveland is the sixth-least-affordable city on our list.

But while family taxes are closely tied to incomes, families in some states, including Texas and Washington, are assessed no state income tax. That helps those in Austin and Seattle, which are the second- and seventh-most-affordable cities on our list, respectively. State taxes are in favor of middle-class families in San Jose and San Francisco, because California "has a very progressive income tax system," says McIntyre. "Their income tax, except in a handful of very-high-income people, is very low."

Families across the country have been living beyond their means or taking extreme cuts to their budgets to sustain their cities' costs of living. But as layoffs increase and credit tightens, more and more families who have been scraping by on the essentials or using credit to supplement their incomes will find themselves squeezed. On the most basic of family budgets, families have no cash with which to foot emergency costs if and when they come up.

"You can live fine, if you're fine," Shierholz says of such families. "If you're not, you can't."

Most Family Friendly Cities

1. San Jose, Calif.

Median Annual Family Income: $100,027
Average Annual Family Budget: $54,685
Budget as Percent of Income: 55%

2. Salt Lake City, Utah

Median Annual Family Income: $64,436
Average Annual Family Budget: $43,499
Budget as Percent of Income: 68%

3. Baltimore, Md.

Median Annual Family Income: $78,097
Average Annual Family Budget: $52,812
Budget as Percent of Income: 68%

4. Detroit, Mich.

Median Annual Family Income: $64,908
Average Annual Family Budget: $43,993
Budget as Percent of Income: 68%

5. San Francisco, Calif.

Median Annual Family Income: $89,175
Average Annual Family Budget: $60,826
Budget as Percent of Income: 68%

Click here for the full list of the Best Cities for Families

Least Family Friendly Cities

1. Virginia Beach, Va.

Median Annual Family Income: $59,441
Average Annual Family Budget: $48,349
Budget as Percent of Income: 81%

2. Providence, R.I.

Median Annual Family Income: $67,983
Average Annual Family Budget: $55,632
Budget as Percent of Income: 82%

3. Las Vegas, Nev.

Median Annual Family Income: $58,672
Average Annual Family Budget: $48,058
Budget as Percent of Income: 82%

4. San Diego, Calif.

Median Annual Family Income: $67,743
Average Annual Family Budget: $55,945
Budget as Percent of Income: 83%

5. Cleveland, Ohio

Median Annual Family Income: $59,540
Average Annual Family Budget: $50,735
Budget as Percent of Income: 85%

Click here for the full list of the Worst Cities for Families

Sources: 2007 American Community Survey; Economic Policy Institute's Basic Family Budget Calculator.

In compiling our list, Forbes studied the 40 most populated metropolitan statistical areas (MSAs or metros), geographic entities defined by the U.S. Office of Management and Budget used by federal agencies in collecting, tabulating and publishing federal statistics, to determine which were most and least affordable for families. We used the Economic Policy Institute's Basic Family Budget Calculator to determine what families of various sizes around the country spend, based on the combined costs of essentials like housing, child care, food and taxes.

The estimations are for a no-frills budget; they cover only what a family needs to get by and exclude savings, splurges or minor luxuries like eating out. We calculated the budget for a two-parent, two-child family for each city on our list, then divided the results into the annual income for a two-parent family with minor children in that city, as reported in the 2007 annual American Community Survey by the U.S. Census Bureau. These numbers are the latest available and don't reflect the shock to many major cities from the ongoing financial crisis.
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