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Losing Ground: The Struggle Of Moderate-Income Households To Afford The Rising Costs Of Housing And Transportation

The combined costs of housing and transportation in the nation's largest 25 metro areas have swelled by 44 percent since 2000 while incomes have failed to keep pace.

Executive Summary

In 2006, the Center for housIng PolICy released A Heavy Load: The Combined Housing and Transportation Burdens of Working Families in partnership with the Center for Neighborhood Technology (CNT) and the Institute of Transportation Studies at UC-Berkeley. By documenting the trade-offs that moderate-income households make between their housing and transportation costs, A Heavy Load encouraged practitioners and policymakers to take a more comprehensive view of housing affordability. This broader approach adds the costs of travel to daily destinations to the traditional components of housing costs — rent or mortgage payments and utilities — to compute a combined cost that better reflects the full costs associated with selecting one housing unit, and its location, over another.

Six years later, the idea that housing and transportation costs need to be examined together has gained considerable traction. A growing number of localities and states are considering the combined costs in their planning decisions and the U.S. Department of Housing and Urban Development is preparing its own version of a housing and transportation cost index to encourage its widespread use. Many policymakers and practitioners have recognized that placing lower-cost housing in areas located far from job centers and public transit may not provide a truly “affordable” housing solution. To reduce the combined costs of housing and transportation, many communities are working to preserve affordable housing near existing and planned transit stations, job centers, and other places where transportation costs are low and to include affordable housing within new development in these areas.

In this new report, the Center for Housing Policy and CNT have partnered again to gauge the housing and transportation cost burdens of moderate-income households living in the 25 largest metro areas at the end of the decade. Newly available data give us an opportunity to assess the impact on combined costs of the rapid rise and fall of home prices during the 2000s, the recent rebound in rents, and the nation’s increased suburban­ization over the past decade.

Here’s what we found:

The problem is getting worse. Housing and transportation costs rose faster than income during the 2000s, increasing the burden that these costs placed on already stretched budgets. This held true for each of the 25 largest metropolitan areas, though the disparity was greater in some areas than others. For all households, including homeowners who have paid off their mortgage, housing and transportation together consumed an average of 48 percent of the median household’s income by decade’s end.

Moderate-income households pay a disproportionate share. For households earning 50 to 100 percent of the median income of their metropolitan area, nearly three-fifths (59 percent) of income goes to housing and transportation costs. For these households, the growing costs of place1 are particularly burdensome, leaving relatively little left over for expenses such as food, education, and health care, not to mention savings.

The combined burden of housing and transportation costs is greatest where costs are out of sync with local incomes; these are not always the places with the highest absolute costs. 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.

Transportation costs still shape differences in the overall affordability of metro areas. Six years later, it remains as important as ever to consider transportation costs along with housing prices in measuring overall affordability. The inclusion of transportation costs affects the relative affordability of many metro areas. For example, 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.

Moderate-income homeowners carry heavier cost burdens than renters. For the typical moderate-income renter, housing and transportation costs consume an average of 55 percent of income. Moderate-income homeowners carrying a mortgage face average costs of nearly 72 percent of income.

Cost burdens for moderate-income households vary substantially within metro areas. Even in metro areas where average cost burdens are relatively affordable, there are many neighborhoods that are out of reach for moderate-income households. In the Philadelphia region, for example, moderate-income households are faced with average housing and transportation costs exceeding 90 percent of their income in some neighborhoods.

Despite lower burdens than homeowners, moderate-income renters are still barely making ends meet in many metro areas. In the Los Angeles metro area, where average housing and transportation costs consume 61 percent of income for moderate-income renters, a typical renter household would not have enough left over at the end of the month to pay for food, health care, and other basic necessities. This would suggest these households are either cutting corners on essentials, or accruing debt.

We can make things better. There are multiple, promising approaches available to local and state governments to help reduce the combined costs of place to more manageable levels for moderate-income households. These include:

  • 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.

By creating and preserving affordable living options in location-efficient areas, and improving the location efficiency of compact communities where housing costs are relatively low, local and state governments can reduce the combined costs of place that have become so burdensome for moderate-income households over the past decade.


1. In this report, we use “costs of place” and “housing and transportation costs” interchangeably. In both cases, utilities are included.