Affordability has never been just about housing costs. Researchers have long known that it’s the interaction between housing and transportation costs that provides a more meaningful measure of affordability. This is especially true now that transportation costs have increased to an average of 19 percent of household income -- up from 3 percent in the 1920s.
Transportation is now the second highest household expenditure after housing, and gas prices are expected to continue driving that cost up. Communities in Southern California are especially vulnerable as the foreclosure crisis indicates -- since residents drive so much.
The affordability index is a new tool to measure the true affordability of housing choices by combining housing and transportation costs (H+T) in a neighborhood or region and dividing that number by income. Interestingly, the index shows that H+T costs vary significantly: households living in neighborhoods that are relatively dense, walkable, and with good transit access, and a mix of uses including jobs spend significantly less than households living in bedroom communities that are less co pact, and where the average household owns two or more cars and the nearest employment centers are a long drive away.
We have calculated the affordability index for neighborhoods, cities, counties and the region of Southern California, and the numbers show that, as elsewhere in the nation where we have calculated these costs, H+T tends to be lowest in communities that are compact, mixed-use and transit-oriented. This data supports the Compass Blueprint 2 Percent Strategy because it shows that the neighborhoods that are most affordable are the same areas that have been identified in the 2 Percent Strategy as the best neighborhoods in which to accommodate regional growth.
This is especially significant now because polling shows that so-called “wallet issues” those that affect a household¹s economic security rank at the top of everyone¹s list of concerns. It¹s almost always difficult for communities to accept the idea of community change, especially when it includes increasing density and mixed-use, integrating affordable housing, and investing in transit instead of roadway improvements when traffic congestion remains a severe problem. But when it becomes clear that these changes also promote personal economic security, the idea of urbanizing along major transportation corridors becomes more palatable.
Part 1 of this report lays out the rationale and methodology of the affordability index, and samples the results for the Southern California region. Part 2 discusses six case studies in order to examine the ways in which local governments are using smart growth and transit-oriented development to keep H+T costs low. Part 3 provides a “toolbox” of “generic” planning, finance, policy and implementation tools at all scales including state/region, corridor, jurisdiction/city, neighborhood/site -- that have been used to promote affordability in regions around the U.S. Finally, we summarize the results and make 17 recommendations based on our findings.
In sum, building mixed-income mixed-use housing near transit is a key tool to meaningfully address the region¹s affordability crisis by tackling housing and transportation costs together, meantime expanding access to jobs, educational opportunities, and prosperity for all income groups. Mixed-income mixed-use housing near transit holds the potential to address the seemingly intractable problems of worsening traffic congestion and rising unaffordability as well as the growing gap between lower-income and higher-income households by offering: 1) affordable housing that¹s made even more affordable because transit and pedestrian access to destinations lowers household transportation costs; 2) a stable and reliable base of riders for transit, which can help justify further transit improvements; 3) broader access to opportunity for households across the income spectrum; 4) protection from displacement for lower-income residents.
Moreover, like the rule of thumb for housing affordability that housing costs should not exceed a third, or 28 percent, of household income the affordability index provides a measure of affordability for transportation costs. People make decisions about where to live all the time without understanding the trade-off they may be making lower housing costs in return for higher transportation costs. A staggering amount of risk results, which has been highlighted recently in news about the rising number of foreclosures especially in places where transportation costs are highest due to low densities, a jobs-housing imbalance, single-use neighborhoods and a lack of transportation options.
The rising cost of petroleum doesn¹t bode well for Southern California, and reducing exposure to continued high housing and transportation costs is critical to the economic health of individuals and the region. Making information tools like the affordability index readily available to help reduce the risk will also help support demand for housing in more location efficient communities. Aligning the results of the affordability index with the recommendations of the Compass Blueprint 2 Strategy will help reduce financial risk and build community support for difficult changes like increased density, and mixed-use, mixed-income development near transit.
- Affordability Index Toolkit and case studies (PDF, 11 MB)
- Affordability Index Toolkit (PDF, 1.8 MB)
- El Monte Case Study (PDF, 1.6 MB)
- Fullerton Case Study (PDF, 2.9 MB)
- Glendale Case Study (PDF, 2.5 MB)
- Koreatown Case Study (PDF, 1.3 MB)
- Platinum Triangle, Anaheim, Case Study (PDF, 2 MB)
- San Bernardino Case Study (PDF, 2.3 MB)