Housing Affordability Measures Must Include Transportation Costs

Six years ago the Center for Housing Policy (CHP) and the Center for Neighborhood Technology (CNT) published a study, A Heavy Load:  The Combined Housing and Transportation Burdens of Working Families, which looked at the trade-offs that moderate-income households make between their housing and transportation costs and encouraged policymakers to consider both costs in decisions related to either.  The two organizations have now updated that report with a new one titled Losing Ground:  The Struggle of Moderate Income Households to Afford the Rising Costs of Housing and Transportation. The Institute of Transportation Studies at UC-Berkeley also participated in the study.

CHP is the research affiliate of the National Housing Conference and CNT is an award-winning innovations laboratory for urban sustainability.  Losing Ground was written by Robert Hickey and Jeffrey Lubell of CHP and Peter Haas and Stephanie Morse of CNT.

The study included renters and homeowners in households earning between 50 and 100 percent of each metropolitan area's median income.  Housing costs as defined for the study include rent and utilities for renters.  For homeowners costs include mortgage payments, property taxes, home insurance, utilities, and where applicable, home equity payments, condo fees, or mobile home costs.   Transportation costs include all trips made by the household in their daily routine including commuting and errands.   For transit riders it is the cost of the fare, for car owners it includes gas, insurance, car payments, insurance, and maintenance.

The authors found that six years after the original study it remained as important as ever to consider both housing and transportation costs in measuring an area's affordability.  The study cites the example of Houston where housing prices as a share of income put it in eighth place for affordability, but when transportation costs are added it drops to 17^th out of 25.  The opposite occurs when high housing costs in San Francisco, Boston, and New York are moderated by relatively lower costs of transportation.

The study found that the housing and transportation costs problem is getting worse.  Both rose faster than income during the 2000s, increasing the burden that the costs had already placed on households.  While the severity varied, costs outstripped income in all of the 25 largest metropolitan areas.  Even considering households without a mortgage, housing and transportation costs together consumed an average of 48 percent of household median income by the end of the decade.

The burden is borne disproportionately by moderate-income households.  For persons earning under the median, 59 percent of their income goes to housing and transportation costs and the growing costs of these categories are leaving little for other expenses such as food, education, healthcare, or saving for retirement.   It is even worse in areas like Miami and Los Angeles where the local prevailing wage is low even as costs are moderate as opposed to areas like Washington, DC where costs are high, but wages are also above average.   In areas like the former, costs burdens for moderate-income houses have average burdens ranging from 65 to 72 percent of household income.

In some metro areas where average cost burdens are relatively affordable the authors still found pockets where housing and transportation costs are very high.  Philadelphia was cited as an example where costs in some neighborhoods reach as high as 90 percent of income.

The study found that homeowners with moderate incomes have a heavier cost burden than renters.  Homeowners with mortgages face average costs equaling 72 percent of income while renters pay 55 percent.  Even so, in some metro areas moderate income renters are still having trouble making ends meet.  In Los Angeles, for example, housing and transportation costs consume 61 percent of income for renters.  This would suggest that such households are either cutting corners on essentials such as food and health care or are accruing debt.

The report points to several areas where changes in public policy could reduce the burden on moderate-income families.  

• Large investments in transit and other infrastructure can lead to increases in property values and property taxes, further threatening affordability. Instead, preservation of existing affordable homes in location efficient areas would avoid the need for new and expensive developments.
• Reforms to restrictive land-use regulations and drawn-out permitting processes would cut the costs of creating new housing in location efficient areas. Regulations now make it difficult to develop other than higher cost housing.
• Provide incentives or requirements to include affordable housing within new developments in location-efficient areas.
• Provide land acquisition assistance such as land acquisition funds through local agencies which can cooperate with developers who wish to develop affordable housing near transportation centers. Another option is land-banking which can acquire sites near proposed transportation centers before speculators drive up prices.
• Assure long-term affordability through mechanisms such a covenants, community land trusts, and shared-equity arrangements.
• Develop policies that capture a portion of the value generated by public investments in location efficiency to support affordable housing in those areas. The authors suggest linkage fees and tax increment financing.

The authors state that while these policy changes are state and local issues, the federal government could provide incentives to encourage the needed steps.  As an example, the Federal Transit Administration has proposed modifying its procedures for allocating the New Starts grants that help fund new and expanded public transit lines to create incentives.