The True Cost of Affordable Housing

According to the Center for Neighborhood Technology, a home should be considered affordable if housing cost AND transportation cost account for 45% of
a household’s monthly budget.

Transportation cost (i.e., cost of auto ownership, auto use, and transit), usually the second largest expense in an American household’s budget, is commonly overlooked when calculating housing affordability. Using the traditional definition, a home is considered affordable if it accounts for 30% or less of a household’s monthly budget. However, homes far away from city centers in transit-scarce suburban neighborhoods qualify as “affordable” even though homeowners spend up to an additional quarter of their household income on transportation costs. These households commute long distances to work and drive longer distances to errands and amenities. According to the Center for Neighborhood Technology, the new definition should be: a home is considered affordable if housing cost AND transportation cost account for 45% of a household’s monthly budget.

So how does this impact how we develop our communities? Location efficiency is an idea that locations, like energy consuming systems, can be designed to be more efficient. Compact neighborhoods with walkable streets and easy access to transit, stores and services have high location efficiency. They require less time, money and greenhouse gas emissions. A location efficient home is a more affordable home.

The idea is catching on. Recently Housing and Urban Development Secretary Shaun Donovan stated in a speech that HUD will be using location efficiency to score their HOPE VI and Choice Neighborhood Initiative grant applications. WRT develops location and energy efficient affordable housing communities all across the nation.