Housing and driving costs outpace incomes

Despite the national housing recession, housing costs rose in the decade 2000-2010, and transportation costs rose by a third due to rising gas prices. As a result, the combined housing and transportation expenses for households in the largest metro areas rose 44 percent between 2000 and 2010 — about 1.75 times the growth of income over this time period.

The burden falls heaviest on those who make less than the median income. Households that make between 50 and 100 percent of median household income now spend about 59 percent of their income on combined housing and transportation costs, according to Losing Ground: The Struggle of Moderate-Income Households to afford the Rising Costs of Housing and Transportation.

The key to reversing this trend is policies and actions that provide affordable housing, and more housing, in location-efficient areas, the report says.

Many analyses focus only on housing costs, but transportation costs are the key to determining affordability in many places, says the report from the Center for Housing Policy and Center for Neighborhood Technology.

“Housing costs in the Houston region are comparatively affordable as a share of income, ranking eighth out of the 25 regions examined. When transportation costs are included, however, Houston drops into 17th place, as one of the less affordable regions for the combined costs of housing and transportation.

“In contrast, metro areas such as San Francisco, Boston, and New York are some of the least affordable regions for local moderate-income households when just housing is considered, but are among the most affordable when housing and transportation costs are considered together.”

It’s not the regions with the highest housing costs that place the greatest burdens on moderate-income households, the authors say. Rather, it is regions that combine high housing and transportation costs with relatively low median incomes.

“In some metro areas, such as Washington, DC, Boston, and San Francisco, high costs are matched by relatively high incomes, helping moderate-income households better afford their housing and transportation costs.

“But other regions, such as Riverside-San Bernardino, CA, Miami, and Los Angeles, have moderate or even high housing and transportation costs in spite of relatively low median incomes. In these metro areas, combined cost burdens for moderate-income households are very high, with average burdens ranging from 65 to 72 percent of household income.”

The cities with the least-cost burden for moderate-income households are all in the mid-Atlantic region: Washington, DC (where combined housing and transportations costs are 51 percent of income), Philadelphia (52 percent), and Baltimore (53 percent).

Other good performers are Boston (54 percent), Minneapolis (54 percent) and San Francisco (54 percent). Pittsburgh has the cheapest housing in the nation for moderate income households, but it has relatively high transportation costs for a combined burden of 56 percent. Yet a transit-served neighborhood in Pittsburgh would probably be very affordable for moderate-income households.

Within regions, there are wide variations in affordability. Philadelphia is the second most affordable for moderate-income families of the 25 metro areas studied overall. “But in some of the region’s neighborhoods, moderate-income households are faced with average housing and transportation costs exceeding 90 percent of their income, while in other neighborhoods, combined cost burdens are less than 25 percent of income.”

The report offers a series of policy recommendations to deal with this trend.

Key strategies:

• Preservation of existing affordable homes near job centers, public transit stations, and other places where transportation costs are low (“location-efficient areas”);

• Regulatory reforms that reduce the cost of creating new housing in location-efficient areas;

• Incentives or requirements to include affordable housing within new development in location-efficient areas;

• Land acquisition assistance to facilitate the development of affordable homes in location-efficient areas;

• Mechanisms for ensuring long-term affordability;

• Policies that capture a portion of the value generated by public investments in location-efficiency to support affordable homes in these areas;

• Improvements to transit service and walkability for compact areas where housing prices are already relatively affordable so residents can rely less on autos.