07/02/2024
Some Houston neighborhoods were hit hard by inflation while others flourished. Search our map.
Nearly half of Houston-area ZIPs have failed to keep up with the national cost of living. According to data from the Internal Revenue Service (IRS), average incomes in the Houston-area have not increased enough to keep up with the cost of living when comparing average incomes between 2013 and 2021, the most recent years available.
Every year, the IRS releases data on the tax returns filed in every ZIP code, reporting the number of total returns from both joint and single filers and the aggregate amount associated with each line item.
To understand average incomes within a single ZIP code, the Chronicle divided the total gross income for all filers in a ZIP code by the number of filings. Examining the data this way gives an average annual income per tax filer, rather than a median income, which is the number at which half of the filers earn more and half earn less. The average income can be skewed with the presence of a few high-earning filers, but in some ways this gives a more representative picture of earning than other income dataset, because the IRS data includes every person who filed a tax return.
Average income reported to the IRS by ZIP code
-10% or less
100% or more
While the original data uses ZIP codes, the map uses ZIP Code Tabulation Areas, the geographic units used by the census to represent ZIP code areas. Matches between the two may not be exact. Incomes from 2013 are adjusted to 2021 dollars.
Map: Janie Haseman • Source: IRS
Houston’s percentage is much greater than the percentage of ZIP codes that haven’t kept up in the rest of the U.S. and is higher than neighbor San Antonio. In Texas, 20% of ZIP codes had average incomes that did not keep up with the increases in the national cost of living. The increase in cost of living between 2013 and 2021 was estimated to be about 17%. This rate, which is calculated by looking at the increase in goods, services and housing-related costs from year to year, saw its biggest jump between 2020 and 2021 in the years analyzed.
The housing market is likely responsible for the bulk of increased living costs, said Bob Stein, political science professor at Rice University who studies urban politics.
In areas with lower real estate movement, the cost of housing tends to be lower, he said. Areas with residential growth or a higher number of rental properties will see a more aggressive increase in cost of living.
“When people own their homes, the cost of housing tends to be relatively fixed and built around things like mortgage rates,” Stein said. “In these areas on the map with higher living costs, you’re seeing things like more renter-occupied homes or property values going up way ahead of inflation rates.”
There are likely many places where income increases over the past three years weren’t enough to counteract the large cost of living increases during the pandemic. According to a Bankrate analysis, wage increases won’t match the cost of living until the end of 2024.
According to data from the U.S. Census Bureau, many of these ZIP codes where income fell behind cost of living experienced demographic changes that were not in line with state changes, meaning populations in those areas may look different than the state as a whole. It also means that those filing taxes may make up a very different population than in 2013.
In Harris County, the areas that saw smaller increases in average income tended to have larger increases in the number of Hispanic residents. These areas also saw larger increases in the number of adults with no more than a high school education.
Adults without a college degree or special trade tend to seek employment as wage earners, which can affect their ability to find employment with upward income.
Wage earners, or non-salaried employees, may struggle to keep up with the cost of living more than salaried employees, Stein said. Wage earners tend to have lower “wage-elasticity,” meaning their income is less likely to stretch with inflation
“Wage earners are not going to be able to keep up with inflation, where a salary worker might, in large part, because (salaried workers) can bid up the demand for their services,” Stein said. “Salary workers are often in high-demand industries, and if they’re college-educated or have advanced degrees, that counts towards their ability to bid up their demand.”
Previous reporting by the Chronicle found that Houston’s reputation for welcoming immigrants and refugees may play a part in the decreasing average income.
"Obviously Houston is a city of great wealth but it’s also a city of great income inequality," Bill Fulton, director of Rice University’s Kinder Institution for Urban Research said at the time. "Probably 30 to 40 percent of the households in this city are just barely scraping by...and really have no disposable income. They are not unemployed, but these are often people with lower educational attainment, sometimes immigrants who are working at low-wage jobs -- there’s a lot of low-wage service jobs in this city."
For example, filers in the 77530 ZIP code had an average of $49,000 in income per return in 2013 but averaged about $6,000 less in 2021. The area, which covers Channelview, also saw big demographic changes during these years. There are 1,000 more returns in 2021 than there were in 2013. Its share of Hispanic residents grew by 13 percentage points, and the proportion of people with no high school education grew by 1.5 percentage points.
While some places have struggled to maintain their average income in the face of increased costs of living, the wealthiest places have, on average, become more wealthy over time.
Travis County had the ZIP with the highest average income in Texas in 2021. The top Harris County ZIP was located in the 70024 ZIP in the Memorial Villages, and the Harris County ZIP with the largest increase was neighboring ZIP 77027. The average income in that ZIP doubled between 2013 and 2021.
A small strip of land off the coast of Miami has had the highest average income in the nation for all years analyzed: Fisher Island. From 2013 to 2021, Fisher Island’s approximately 250 filers had average incomes between $1.8 million and $6 million, as reported on their federal tax returns.
What makes the richest ZIP codes different from the average ZIP? Wages and salaries are not the primary income stream. Even high-earning workers have to compete with inflation rates, Stein said.
According to a study conducted by University of Pennsylvania professors, the “super-rich” attain that status by investing in risky assets, resulting in more capital gains and dividends income than labor income.
Residents of wealthier areas tend to have diverse income sources, many of which are ahead of inflation, Stein noted.
“When you’re drawing on income tied to the stock market, like pensions, 401K or investments- the market’s been doing fabulously and running way ahead of inflation,” Stein said. “If your income is tied to investments or retirement plans, you’re doing better than wage workers or even salary workers.”
Wage-related income made up a median of 35% of total income for the top 1% of ZIPs. For the bottom 99%, wages made up a median of 66% of a ZIP’s total income.
