Soaring rents, mortgages and home prices: What new data shows about Anchorage’s housing crunch

Last year in Anchorage, housing reached its least affordable level in the last 21 years — worse even than during the Great Recession more than a decade ago, according to new data from the Alaska Department of Labor and Workforce Development.

State economists reported a similar statewide trend in May. In 2023, housing in Alaska was at the least affordable level since 2006.

The cost of home ownership in Alaska has more than doubled since 2018, according to data provided by Alaska Housing Finance Corp. The average mortgage payment — principal loan amount plus interest, but excluding property taxes, insurance and other costs — rose by 52% between 2018 and 2024.

Rents have soared in that same time period.

“The rental market has gone up by about 24% in terms of the pricing escalation across the state,” said Daniel Delfino, an economist and director of planning at Alaska Housing Finance Corp.

City officials have called the situation in Anchorage a housing crisis. They’ve pointed to a tangle of factors: the spike in housing costs, a low rental vacancy rate, a rising number of short-term vacation rentals, a decline in housing development, increasing building costs and a labor shortage, among others.

The new data sheds further light on the difficulties of renting or buying a home in Anchorage today.

It’s become a central issue in recent city policymaking and discourse. Mayor Suzanne LaFrance, sworn in on Monday, says housing is a top priority for her administration.

The Assembly has aimed to spur more housing development with a series of changes made to city code over the last two years. Late last month, the Assembly voted to essentially eliminate single-family zoning in the Anchorage Bowl, by allowing duplexes to be built in areas that were previously zoned only for houses.

To Assembly Vice Chair Meg Zaletel, one of the sponsors of last week’s measure, a housing crisis means that people across the economic spectrum “can’t achieve appropriate housing, attainable housing that’s suitable to their needs,” she said.

“That’s renters who are stuck at the top of the rental market who can’t move into home ownership. That’s people needing to double or triple up in order to afford rent. That means there just aren’t enough housing units for the market to respond to the various circumstances and needs,” she said.

More expensive, fewer homes for sale

The median rent in Anchorage increased by 7.8% since last year, rising from $1,275 to $1,375 in 2024, according to AHFC’s data. That doesn’t include the cost of utilities.

AHFC’s rental data comes from a yearly survey in March done by the state Department of Labor. It “runs the full gamut” of rental housing, from studios to four bedrooms and larger, and excludes rentals that have income restrictions, like those for affordable housing programs, Delfino said.

This year’s increase comes after Anchorage rents rose 14.2% in 2022 and jumped another 5% in 2023, according to state data.

The U.S. Department of Housing and Urban Development defines being “housing cost burdened” as spending more than 30% of a person or household’s monthly income on rent or mortgage payments and utilities.

Among economists, there isn’t a broadly used definition of a “housing crisis,” nor is there a defined level of ideal affordability, said Rob Kreiger, an economist with the Alaska Department of Labor and Workforce Development who authored the May report.

That’s because what may be affordable varies by the circumstances and income of an individual, he said.

But with Anchorage housing at its “least affordable level” in two decades, “I think right now, what we’re seeing is, it’s really prohibitive for first-time buyers to afford a home, and it’s really expensive to rent as well,” Kreiger said.

Statewide, “it’s more expensive, and there are fewer homes on the market,” Delfino said, adding that the reported number of homes sold and mortgage loans recorded has dropped “pretty significantly over the past couple of years.”

According to the National Association of Homebuilders’ chief economist, more than 86% of residents can’t afford the cost of a newly constructed home in Anchorage.

State economists measure home purchase affordability with the Alaska Affordability Index, a calculation that uses the average mortgage payment and average monthly wages to determine how much income it takes to afford a home.

An average index of 1 would mean that average monthly wages are just enough for one person to afford the average monthly mortgage payment for an average priced home.

The state and Anchorage saw the lowest indexes — the most affordable housing — in 2020 and 2021. Mortgage interest rates dropped significantly during that time as the federal government took actions to stabilize the economy during the pandemic, Kreiger said.

But by 2023, Anchorage’s affordability index jumped to 1.8. That means to afford the average Anchorage home, it takes about two people working full time at the average wage.

The Anchorage-specific data only dates back to 2002, and housing last year was at its least-affordable level in that timespan.

In 2023, Alaska’s overall affordability index was 1.66, the highest since 2006. That dataset dates back to 1992.

‘Alaska has a problem with keeping young people’

What the state data doesn’t show or quantify is how the rapid increases in housing costs are affecting everyday residents, Delfino and Kreiger said in separate interviews.

“Given that things have moved a lot, and so quickly recently, it’s that stuff underneath the data set that affects real people that I would say is probably really pressing when we talk about the affordability,” Delfino said.

Before passing the zoning measure, the Assembly last month heard an outpouring of testimony from Anchorage residents. Many described struggling to find homes to rent or buy, or told stories of loved ones moving away because housing here is scarce and expensive.

“Based on my experiences as a renter and as a young person in Anchorage, it is very difficult for young people to find adequate housing in Anchorage. If you have a pet — forget about it,” said Sean McDowell, a renter in South Addition. McDowell said he lost his previous housing because the owner turned it into an Airbnb for the summer.

“We all know that Alaska has a problem with keeping young people. If there’s nowhere to live for young people, if it’s difficult to find a long-term rental in Anchorage, young people are going to keep leaving,” McDowell said.

“To what extent is housing playing in people’s decision to leave or stay here? It’s hard to say,” Kreiger said.

As homeownership becomes more expensive, the point in a person’s life when they switch from renting to buying a home moves further out, Kreiger said in his May report.

“That gap is wider and wider, so it’s harder and harder to make that transition. So we see people that, six years ago, would have become homeowners, staying in an increasingly tight renter market,” Delfino said.

And then there’s wages.

For some Alaskans, raises and regular cost of living pay increases have helped to defray the pressure of rapidly rising housing costs.

But for many residents, it’s unlikely wages will increase quickly enough in the near term to make up the difference, Kreiger said.

“When we’re looking at inflation that’s as recent as it is, how quickly everyone’s salaries have caught up to the increased cost of living, I think, drives how acutely people feel the affordability pinch,” Delfino said.

A worker in Alaska, paid at the state’s minimum wage, $11.73 an hour, needs to work 75 hours a week in order to afford a modest, one-bedroom apartment at the statewide fair market rent, according to the National Low Income Housing Coalition’s annual report.

A full-time worker in Anchorage needs to make at least $27.96 per hour to afford a two-bedroom at the fair market rent of $1,454. A person making minimum wage would need to work 96 hours to afford the same apartment, according to the report.

Getting back to average

Another factor in increased housing costs is how rapidly mortgage interest rates have risen. Interest rates are a “critical component” making housing less and less affordable, Kreiger said.

When rates dropped during the pandemic, “it brought a lot of competition and buyers to the market that wouldn’t have otherwise been able to participate,” Kreiger said.

The average sales price for a single-family home in Anchorage rose 26% between 2019 and 2023, from $389,477 to $490,596, according to state data.

“Because you had that big rush of buyers and all that competition, and you have on top of that, this limited amount of homes for sale and limited construction ... that’s really what I think put prices up so high,” Krieger said.

Since then, the average interest rate for 30-year fixed-rate mortgages has seen an unprecedented rise, according to Kreiger’s May report.

The average rate in Alaska is 6.33% — the highest since 2006.

Not only is it more difficult for a first-time home buyer to purchase a place to live, but the high interest rates can keep people stuck in homes they’ve owned for a few years.

“When the costs go up, especially if you’re a person who locked in an interest rate at 2.5% and you’re looking at moving, it’s the question of, could you afford your own home if you had to buy it today?” Delfino said.

For many residents, the answer is likely no, he said.

It’s another impact that’s difficult to quantify.

“We know all these things are happening,” Kreiger said. “... We know that there’s people who are stuck, we just don’t know how many there are.”

Still, for many longer-term homeowners who’ve built up equity, the market has never been better, Kreiger said in his report.

Housing affordability is unlikely to change much in the near term, Kreiger said. Wages will rise over time, but not quickly. Home sales prices “may level off and may come down a bit,” but not significantly, he said.

Interest rates are the most realistic variable that could help drive the index back down, he said.

Barring another major event like the pandemic, the rate is “not going to come down to where it was,” Kreiger said. “And depending on how things go with inflation, it may not actually happen for quite some time, but eventually they will come back down and create more of a normal situation.”

Anchorage’s average affordability index between 2002 and 2023 is 1.47.

In order to get back to the average affordability, wages would need to increase 22.5%, or home sales prices would need to drop by 18.4% — or around $90,000.

If only the average interest rate for a mortgage changed, it would need to drop to 4.5%.