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Study of Housing and Transportation Costs Finds Suburbs Most Costly, but Low-Income Renters Struggle Everywhere

An article in Housing Policy Debate,Another Look at Location Affordability: Understanding the Detailed Effects of Income and Urban Form on Housing and Transportation Expenditures,” confirms that expenditures on transportation vary for urban, suburban, and rural households, and that lower transportation costs in urban areas help offset higher housing costs for most income groups. For all renters, combined housing and transportation expenditures were highest in suburban locations. For renters with incomes higher than 35% of area median income (AMI), combined expenditures were lowest in urban locations. Renters in the lowest-income category spent the least in “midurban” neighborhoods (older inner-ring suburbs), but even in those locations they spent 91% of their income on housing and transportation costs.

Location affordability measures the share of income spent on housing and transportation. This measurement builds on the idea of location efficiency, which describes the accessibility of a given location to daily destinations, such as jobs, groceries, and other retail. Higher location efficiency is thought to lower transportation costs. Scholars continue to debate the extent to which location affordability can be predicted by neighborhood characteristics (e.g., whether a neighborhood is rural, suburban, midurban, or urban).

The authors used the Panel Study of Income Dynamics (PSID) to test the location affordability hypothesis. From the 2015 PSID sample, they selected 8,004 families for whom family income, transportation expenditures, vehicle ownership, total commute time, and basic family characteristics were identifiable. They matched the location of these families with data from the Center for Neighborhood Technology’s (CNT) Housing and Transportation Affordability Index, which measures the density of transit and jobs in an area. Because income is one of the influential predictors of transportation costs, families were grouped into five income categories (at or below 35% AMI, 65% AMI, 95% AMI, 135% AMI, and 200% AMI or above). Neighborhoods were classified as urban, midurban, suburban, or rural on the basis of the area’s gross household density, transit connectivity, diversity of land uses, and intersection density.

The patterns of combined housing and transportation costs for renters largely support the hypothesis of a beneficial trade-off between housing and transportation: housing costs generally increase as one moves from suburban to midurban and urban locations, while transportation costs fall. Housing costs were lower in rural locations than in suburban locations, but rural transportation costs were not higher than suburban transportation costs. Across all income groups, suburban renters spent the most on housing and transportation. For example, on average, suburban renters in the 65% AMI income group spent 61% of their income on housing and transportation, whereas urban renters at the same income level spent 47%. Suburban renters in the lowest income category spent 106% of their income on housing and transportation, compared to 98% for urban renters at the same income level.

The authors argue that further interventions are necessary to support the lowest-income renters, who spend nearly all their income on housing and transportation regardless of neighborhood type. They recommend increasing the supply of deeply subsidized affordable housing in location-efficient urban locations, as well as reinvesting in transit access for midurban locations that could become more location efficient over time.

The article can be found at: