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Housing and transportation expenses outpace incomes, take a bigger bite from the household budget

by Robert Hickey, Center for Housing Policy

Policymakers increasingly understand that the true cost of a home is not just the mortgage (or rent) plus utilities. When you select a home, you also take on the transportation costs tied to that location. Where you live affects how much—or how little—you will need to spend traveling to work, getting to school, doing errands, and making all the other trips that are part of the weekly routine. It’s not truly “affordable,” then, if your rent or mortgage are low, but your location means you have to own one or more cars and drive so much that the cost of car ownership and gas negates these housing savings.

For this reason, researchers, governmental agencies and others increasingly look at a household’s combined housing and transportation expenses to fully understand and track America’s affordability challenges.

Today, we at the Center for Housing Policy, along with our partners at the Center for Neighborhood Technology, are proud to release Losing Ground: The Struggle of Moderate-Income Households to Afford the Rising Costs of Housing and Transportation. It is the first nationwide assessment of combined housing and transportation costs since 2006, when the Center and CNT released their seminal report, A Heavy Load: The Combined Housing and Transportation Burdens of Working Families.

Losing Ground finds that for households living in the nation’s 25 largest metropolitan areas, combined housing and transportation expenses rose 44 percent during the 2000s—1.75 times faster than income— leading to greater stress on already stretched household budgets.

Rising housing and transportation costs continue to disproportionately impact “moderate-income households,” defined in the report as those earning between 50 and 100 percent of median income in a given metro area. This broad segment of the economy includes families in which the primary earner is a teacher, a police officers or a nurse. Losing Ground calculates that moderate-income households spend an average of 59 percent of income on housing and transportation—11 percentage points higher than the combined cost burden of a median-income household.

Combined cost burdens vary by metro area, with the highest cost burdens not always falling where you might expect. For example, comparing costs to local incomes, Losing Ground finds Miami to be the least affordable metro area for local moderate-income households, with housing-plus-transportation costs consuming a stunning 72 percent of income. Combined costs are similarly out of sync with incomes in the next most burdened metro areas: Riverside-San Bernardino, CA, (69 percent of income on housing and transportation), Tampa (66 percent), and Los Angeles (65 percent).

High local incomes can also make up for high housing and transportation costs. In spite of its pricey housing, the Washington, D.C., metro area emerges as the most affordable for moderate-income households, due to very high local incomes. However, it should be noted that high local incomes do nothing to help low-income residents who often must still contend with inflated rental and homeownership markets skewed by the higher-median income.

While combined cost burdens vary by metro area, moderate-income households are paying more than half their income toward housing and transportation in each of the 25 metro areas studied.

But the report is not all bad news. Losing Ground outlines various steps that policymakers can take to reduce the combined cost of housing and transportation by addressing these expenses together. It identifies promising policy tools for increasing the availability of affordably-priced homes in places that are inexpensive to get around, and increasing low-cost transportation options in areas where home prices are already affordable and land-use patterns can support more alternatives to car use.

In light of the growing burden of housing and transportation costs nationwide, these tools are worth a closer look, as is the full report.

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