Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own.

The American job market is undergoing a profound shift as many workers, whether by choice or circumstance, join the growing number of freelancers and independent contractors. Experts predict that growth to continue: A report by Intuit projected the number of so-called contingent workers in the U.S. will balloon past 40% of the workforce by 2020.

According to the U.S. Census Bureau’s American Community Survey, 12.3 million households in 2013 reported earning self-employment income (all income earned through freelance or independent contract work is classified as self-employment income), or 11% of all U.S. households. These households earned an average of $34,095 in self-employment income.

While freelance work or self-employment offers workers some benefits over regular employment — namely flexibility in schedules and projects — it also can come with less job security, higher health care costs and a volatile flow of income.

Where people choose to freelance can heavily influence their quality of life. NerdWallet analyzed the following factors in the 100 largest U.S. cities to find the best places for freelancers.

Freelancing environment. To gauge how conducive a city is for successful freelancing, we looked at the percentage of households earning self-employment income in each city. We also calculated the average self-employment income earned by those households.

Health care access and affordability. Health care costs can often be daunting for freelancers because they don’t have access to employer-based insurance. To factor this into our score, we looked at the percentage of the population with direct-purchase health insurance (as opposed to employer-based insurance) and their average monthly health insurance costs.

Cost of living. A city’s affordability is extremely important for freelancers, so we used the median cost of rent in each city as a proxy for the cost of living.

Best cities for freelancers

Key findings

Scottsdale earns the top spot. Scottsdale, Arizona, ranks as the best city for the self-employed thanks to its friendly environment for freelancers. The self-employment rate is above the national average, but what really sets the city apart is at an income of $66,309, it is home to the highest average freelance income of all cities we analyzed. Scottsdale also has the highest percentage of people with direct-purchase health insurance of all 100 cities, and the cost of that insurance is lower than average.

Freelancers thrive in Texas. Thanks to high rates of self-employment and income earned through freelancing as well as a relatively low cost of living, cities in Texas are some of the best in the nation for freelancers. Five Texas cities made our top 20, led by booming Austin at the No. 4 spot.

Growth exists in both low-wage and high-wage self-employment. Several low-wage positions, such as landscapers, groundskeepers, maids and housecleaners, have seen growth in self-employment rates in recent years. Meanwhile, some high-wage jobs have also made gains, especially in computer occupations — for example, since 2007, the number of self-employed web developers has increased 67%. At the other end, the occupations with the biggest drops in self-employment are in farming and construction.

Top 20 cities for freelance workers

Methodology

Here’s how we calculated the score for each of the 100 largest U.S. cities:

Percentage of households with self-employment income is 25% of the score. Data are from the U.S. Census Bureau’s 2013 American Community Survey. Self-employment income per household earning self-employment income is 25% of the score. Data are from the 2013 American Community Survey. Percentage of population with direct-purchase health insurance is 12.5% of the score. Data are from the 2013 American Community Survey. Monthly health insurance cost for 2014 is 12.5% of the score. Data are from HealthSherpa. Median rent is 25% of the score. Data are from the 2013 American Community Survey.

Scottsdale, Arizona, image via iStock.