Affordability remains a significant issue, often politicized yet vaguely defined. It frequently signals financial strain caused by rising prices. Recent research from the Brookings Institution aims to clarify this by examining the gap between the costs of essentials and family incomes.
A Look at 2024
The report revealed that by 2024, 45.5% of U.S. households were unable to cover basic needs. An increase of $1,000 in living costs would push an additional 3 million households into financial stress. This situation partly stems from the imbalance between inflation and wage growth. In 2024, wages rose by only 1.3%, while inflation hit 2.9%, as reported by the Census Bureau.
“My main takeaway is that when we talk about affordability, we’ve been focusing on inflation. But there’s the income side of the story that we often do not talk about,” said Andre Perry, the director of Brookings’ Center for Community Uplift.
Discrepancies Across the U.S.
Brookings researchers analyzed household income data across counties and compared it with local costs of food, transportation, and other necessities. Housing, healthcare, and childcare emerged as major expenses beyond families’ control, highlighted by Hannah Stephens, a senior research assistant.
In New York, more than half of families struggled with their incomes in 2024. In contrast, over 60% of households in Washington, D.C., managed to afford essentials, although racial disparities existed. Black residents fared worse, while Hispanic households did marginally better than the district’s average.
Long-Standing Affordability Issues
From 2014 to 2024, over 40% of households consistently couldn’t afford necessities, except in 2021 and 2022. Those years were exceptions due to federal aid during the COVID-19 pandemic. However, as inflation surged in 2022 and federal support waned, households once again faced financial difficulties.
The report emphasized that an additional $1,000 in annual expenses was a critical threshold for many families. It did not include data from 2026, when further economic pressures might have already exacerbated the situation.
Recent Economic Trends
Gas prices soared by 50% after conflict with Iran began in late February. The Consumer Price Index increased by 3.8% in April compared to the previous year, beyond the Federal Reserve’s 2% target. A survey from the Federal Reserve Bank of New York showed rising food insecurity, reaching a level not seen since the peak of the pandemic in 2020.
Tax changes brought slightly higher refunds, supporting consumer spending. Bank of America Institute reported a 4% increase in spending, excluding gas, in April year-over-year. However, income growth between 2025 and 2026 favored higher-income families, with a 6% rise. Lower-income earners only saw a 1.5% increase, reflecting a “K-shaped economy” where wealth is more concentrated at the top.
The Future of Affordability
Brookings’ findings suggest that increasing wages by $10 per hour would help nearly 38 million households manage financially. Yet, achieving this in a nation with a stagnant federal minimum wage of $7.25 since 2009 is challenging. Perry expressed a realistic view: “It’s dramatic, in the sense that we’re not doing that. But can we do it? Yes.”