With their comprehensive “Housing + Transportation Affordability Index,” the Center for Neighborhood Technology (CNT) has developed a useful tool for estimating the combined cost of housing and transportation — the two largest shares of most family budgets — for homebuyers in 337 metro areas. The index is a useful tool for moving land use and development decisions away from sprawl, and for informing individual family choices by emphasizing the transportation costs associated with lower priced exurban homes.
However, the index is inappropriate, standing alone, as a tool for siting new low-income family housing. CNT has indicated that it intends the index to be consistent with fair housing goals, but without a strong fair housing overlay, the index has the potential to (once again) steer low-income families into more segregated, higher poverty neighborhoods, because both rental and transportation costs tend to be lower in these neighborhoods.
A recent study by the Urban Institute and the Furman Center found that in Seattle and New York, relative to whites, minorities tend to live in neighborhoods with higher walkability/transit accessibility, but lower opportunity. “The higher density and less auto-dependent neighborhoods that score highly on walkability/transit accessibility measures tend to be more urban and disproportionately populated by racial minorities,” it reports. Thus, if housing and transportation costs become the dominant method used by local housing agencies to locate housing for low-income families, it could reinforce separate and unequal development patterns that are the opposite of smart growth.
True Costs of Housing Location
In order to expand choice and access to opportunity, policymakers should consider not just transportation, but all costs, in particular the direct and indirect costs of living in higher poverty vs. lower poverty communities, in making location decisions.
For example, research has shown that families living in poor neighborhoods pay more for the same groceries than those living in wealthier communities, due to a lack of access to large, chain grocery stores. Small stores lack the range of products or the economies of scale that help drive down prices at chain stores. Groceries constitute a large portion of a household budget for low-income families; one study published by the Kaiser Commission on Medicaid and the Uninsured in 2004 estimates 17 percent. Thus, when calculating the cost of living in a particular neighborhood, ignoring increased food costs could lead to inaccurate assumptions about affordability.
Numerous studies have shown that low-income residents living in disadvantaged neighborhoods also pay more for basic financial services such as check cashing, short-term loans, tax preparation, and money transfers. A low-income family can spend thousands of dollars more in extra costs for these services, depending on the extent to which they use them and the types of services they use, according to a recent Brookings Institution report. High-cost financial service providers such as check cashers are much more densely concentrated in disadvantaged neighborhoods, where banks remain underrepresented.
While the H+T index does account for transportation costs, it does not reflect the possibility that low-income families living in poor communities may pay a higher purchase price for a car than low-income families living in higher-income areas. Families living in poor communities have also been found to pay higher rates for both car insurance and auto loans.
Indirect costs, while difficult to quantify, are also important to consider when evaluating neighborhood costs and benefits. Indirect factors affecting the cost or “value” of a particular neighborhood include: quality of local schools, access to employment, exposure to environmental hazards, exposure to crime, health outcomes, access to different types of social networks, and quality of municipal services.
For example, research indicates that about two-thirds of low-skill job openings are located in predominantly white suburbs, with over half of these jobs accessible by public transportation. Additionally, neighborhood poverty has been shown to negatively affect residents’ long-term economic mobility.
When added up, these factors suggest that new low-income family housing be sited in lower poverty, opportunity-rich communities. They are also a reminder of the need to dramatically improve services and outcomes for low-income families living in neighborhoods where the government has located low-income housing in the past.