The Cost of Commuting
The cost of driving keeps accelerating. The Brookings Institution believes those costs should change the way we think about housing affordability. The traditional measure is that a family can afford to spend about 30 percent of its income on housing. Brookings argues that families instead should spend no more than 48 percent of income on housing and transportation combined.
The point is that some urban neighborhoods are more affordable than they seem, because it costs less to get around, while some suburban areas seem more affordable than they are: Cheap homes, expensive commutes.
A new mapping program from the Center for Neighborhood Technology, based on a 2006 paper by Brookings' Urban Markets Initiative, lets users explore the "true affordability" of neighborhoods in 52 metropolitan areas, including Boston.
The two maps above show the same part of urban Boston. The blue areas on the map at left are unaffordable by traditional standards. But on the map at right, reflecting the Brookings standard, some of those same areas are colored white. Parts of Cambridgeport, the West End, even Back Bay are surprisingly affordable because it costs less to get around.
Take the West End. CNT calculates that a family making 80 percent of the median household income would spend 32.39 percent of its income on housing. Unaffordable. But such a family would spend only 10.89 percent of its income on transportation, and only 44.28 percent of its income on housing and transportation combined. That, Brookings say, is affordable.
One implication is that mortgage lenders should be willing to write larger loans for families with lower transportation costs. A California nonprofit has launched a mortgage underwritten based on the Brookings guidelines. The Location-Efficient Mortgage is backed by Fannie Mae but for now, it's is only available in four cities, of which Chicago is the closest to Boston.
Another implication, Brookings says, is that governments should spend more money expanding transit systems.
The flip side of the Brookings data is that many suburban areas are less affordable than they seem. People who move to exurbia in search of cheap housing frequently end up spending more money on the combination of housing and transportation. Brookings argues that homebuyer education should include an explanation of transportation costs -- and, by extension, that people should be denied mortgages if the combination of projected housing and transportation costs exceeds the affordability threshold.
A caveat: The Washington Post, where I first read about the new mapping site, points out that the Brookings research is based on data from 2000, including Census data. Median incomes have climbed since then. Transportation costs also have climbed; fuel prices have more than doubled. The exact effects on the maps won't be clear until after 2010, but the formula still works just fine for an individual buyer.
A second caveat: The 48 percent threshold in my view was set without very much thought. Brookings took the traditional standard for housing affordability -- no more than 28 percent of income -- and added the average share of income that American families devote to transportation, about 20 percent. The assumption is that the housing affordability standard was calculated to reflect spending on transportation. But the 28-percent guideline was set at a time when average transportation costs were lower, and therefore the combined standard probably should be calculated from scratch.
Enough caveats: What do you make the of the basic idea? Is buying a cheap house in the suburbs sometimes pennywise but poundfoolish? Should transportation costs be considered in approving borrowers for mortgage loans?
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Uh...what of the fact that most people don't work in downtown Boston? Pretty long commute to Waltham from the Back Bay.
Gnu,
Thanks for the comment. You make a good point. A neighborhood may only be affordable if your job is nearby, or accessible by public transit. The point of the study is that residents of some neighborhoods are more likely to have jobs that can be reached at lower cost.
In a technical sense, the study accounts for this by measuring the density of accessible jobs. A higher density is assumed to correlate with lower average transportation costs.
With respect to your particular example, I know people who take the commuter rail to Waltham from North Station and Porter Square. I mention this to make a broader point: If you live at the hub of a transit network, it is relatively easy to get to a large number of places.
I agree with Binyamin's comment - I've commuted from Cambridge to Waltham for more than four years now. I will say, however, that the outbound commute isn't a walk in the park; I took the commuter rail for most of that time, and the long gaps between trains moving in the off-peak direction makes that commute challenging for workers who can't count on regular 8-5 or 9-5 days.
Train, bus, or car, I've never spent as much on transportation as most of my suburbanite friends. The drive to Waltham is short and relatively brisk (i.e., minimal start-and-stop traffic), which keeps my gas bills within reason.
Some suburbs increase your gas costs so much because even things in your own town are more spread apart. If I live in a city, my everyday trips are shorter and I am more likely to be able to walk more than drive. Aside from Boston, there are other smaller cities in the Greater Boston area that are dense and small, which allow you to conserve gas and time on a daily basis because you are not driving miles to the supermarket or drugstore every time you need something.
Don't buy a house based on where your current job is... People change jobs frequently these days. A few years at a company and then your off to a new place of work where your house however isn't moving... Buy a house in an area where you can get to a lot of places. If I live in Marblehead and commute to downtown Boston then my new job is in Needham.... well you can see where I am going.
I currently live in South Boston and work out of my house. I am very happy with my job and am comfortable with job security. My wife is a teacher who commutes to the South Shore. We are currently looking for a house in that area. We could sell our condo right now and buy a house that is larger for less money. I feel that commuting costs would not be an impact in our case and we would be better off financially.
If we need to come into the city, the new commuter line offers an affordable option to gas and parking.
consider the price differential between urban and suburban real estate for the same sq footage. the difference may cover the cost of commuting for 10 or more years.
walking means spending more time doing simple tasks. driving for food means 2hrs ever 10-14 days. walking for food 1 hr every 1-2 days. walking range local merchants charge 50-100% more around here.
driving is faster. getting up early enough for the train (1.5h door to door), made driving even faster (45m d2d). 1.5 hr/d given back to me
In response to the question posed in the article, "should transportation costs be considered in approving borrowers for mortgage loans," I would say yes, but more in the sense that lenders should perhaps be more aware of all the financial pressures an applicant faces when applying for a loan. Something that hasn't been discussed much in all the discussions of the current foreclosure crisis is how much inflationary pressures outside of housing have led some families to be unable to make their mortgage payments. All in all, it underscores a really basic point: lenders should probably consider a whole host of factors in determining what constitutes an "affordable" mortgage payment. In 1999, when gas was relatively cheap and inflation a word barely spoken, allowing a borrower to spent 33% of their income on housing might not have driven many folks to their limits, but the total landscape in 2008 is considerably different.
Time is money .... I live in Charlestown and walk to work ... use my vehicle only for errands and pleasure. I use to sit in traffic two hours a day, now I go to the gym instead. Last year I put 7,500 miles on my car. It is also a $15 cab ride to the airport ... easy to get out of town. And best of all, my property value has tripled since i bought the house. I have 1,500 square feet of first class living space, including a fireplace and central air. City living can be easy living. Except for the mayor and his meter maids, city living would be perfect!
Pretty soon we will be wishing that we only spent 20% of our income on transportation. Oil will continue to go up and with it gas prices. At the current rate of increase, we could see $200 a barrel oil in a couple of years. And it will probably go much higher as 2.5 billion Indians and Chinese see their standard of living rise. Goodbye the days of sub $3 gas, hello the days of rampant inflation.
I'm with Hammer on this one. Live in the South End and could get by without a car although I do have one. Walk to work, grocery shopping, drs. (MGH), gym etc, not to mention all the restaurants and cultural events the city has to offer - and I don't have to pay $25 for valet or event parking - I walk. As for spending an hr. every few days to shop - it's only a 5 min walk to 4 or 5 great shops that don't charge double. If I have an extra large order I have it delivered. I have a great space that has not declined in value compared to suburbia. As far as price for the same square footage in the suburbs, you probably have a lot of space you never use and if designed properly, you can utilize 1000 sq' better than twice that amount.
All you city folk who hate the suburbs - I got some bad news for you. My wife and I both live in metrowest near 495, and work in the town in which we live, with excellent jobs in the tech industry (clearing over 250k a year). Our employers would need to pay more if we lived in the city, so its a win for them too. I can sometimes just walk to work, and I get the peace and quiet of the suburbs. I know many of you want the suburbs to crash and burn, but it aint happenin. We have a big yard, large woods and trails nearby, big floorplan, you name it - even our carbon footprint is smaller thanks to solar panels. City living is on the way out, much to the contrary of what city folks would like to think.
As someone who grew up with easy access to public transportation, I can say after living in the suburbs for 11 years, transportation and commuting has taken its toll. I am ready to move back into an urban setting where I can stop throwing money away not just on gas for my car, and time spent getting back and forth to work, but the gas we use for our lawnmower, leafblower, snowblower, and the utility costs for our home which is bigger than we need.... Not to mention in the next few years when my oldest starts to drive -- more gas, more insurance money... Where we live, you cannot get ANYWHERE without getting behind the wheel of a car. Not to mention the much higher property taxes because our town has such a small commercial base we bear the brunt of the increased fuel costs associated with all town services. There are definitely hidden costs associated with living in "cheaper" areas away from where all the jobs are... It does not just come down to salary and your mortgage.
Well if your kids need to get to a good school system they most likely need to be transported away from the City. That transportation costs money as well. The commuter rail is a better alternative to driving long distances if the option is available to you. I think your points are solid, but I wonder if they push for more telecommuting, in which case living in a cheaper cost of living area is the wiser move.
why not demand better local living?
It's your world. Make something of it!
zach
Great post! I couldn't agree more with the fact that "affordable housing" 20 or 30 miles from work isn't nearly as affordable as people think. Especially with today's gas prices.
re: Burblover's statement -- "I know many of you want the suburbs to crash and burn, but it aint happenin. "
Crash and burn? I wouldn't go that far, but I'd bet 10 to 1 that once we hit $6 or $7 a gallon, buyers will realize their monthly outlay for commuting 25 miles to work plus a mortgage payment on a $250,000 loan is about the same as a $325,000 loan on a home just 5 miles from work. That realization is going to cause a serious impact on the value of homes in the suburbs because buyers just won't be willing to make the commute unless it has a better financial justification. The only way that can happen is if prices in the burbs drop enough to outweigh the cost of commuting.
Visit www.CostOfCommuting.com & see how much less home you could afford commuting 25 or 35 miles at $6 or $7 a gallon.
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