Now THAT's An Act I Can Like

Congressman Blumenauer (D-Oregon) recently proposed legislation that would improve the way the federal government thinks about housing affordability. The bill, “THAT Act,” short for Transportation and Housing Affordability Transparency Act,” sparked a round of corny jokes around the Sightline office. (“Which act?” “THAT act?” “That’s what I just asked you!” Yuk, yuk. We don’t get out much.) Yet the law contains an important idea.

Blumenauer’s bill would require agencies like HUD to begin measuring the transportation costs associated with the location of housing as a way to improve upon the current simple measurements that treat only the direct costs of the housing itself. It’s an idea inspired by Center for Neighborhood Technology‘s “Transportation + Affordability Index.”

By my lights, Blumenauer’s proposal is a big step in the right direction. Housing affordability ought not to be narrowly construed as the price of the rent or mortgage; it should include the other (often hidden or unclear) costs that also affect affordability—and maybe the biggest of those is the cost of transportation. As CNT’s analysis makes clear, a centrally-located neighborhood with higher rents may actually be cheaper than a low-cost house in a far-flung suburb where long-distance driving is more or less mandatory for every trip.

Yet while I fully endorse measuring the so-called “location efficiency” of housing, I’m not sure that it goes far enough because it is still based on a definition of “affordability” that is, basically, a ratio between household income and expenses. A ratio-based measure sounds logical enough at first—and it’s how it’s always been done—but as Clark Williams-Derry pointed out when he evaluated CNT’s analysis:

People with high annual salaries, for example, can easily afford to spend much more than 45 percent of their incomes on housing and transportation. Once they’re done paying for cars and their mortgage, they’ve still got plenty left over for food, clothing, utility bills, and other basic necessities, as well as savings and some luxuries. So to a large extent, people who live in an “unaffordable” neighborhood are actually doing just fine!

But families with lower incomes just can’t afford to spend anywhere near 45 percent of their take-home pay on housing and transportation. If they did, they’d wind up without enough money to pay for healthy food, clothing and all the other goods and services that our society considers part of a decent standard of living. So many people who live in a so-called “affordable” neighborhood are actually struggling to pay the rent.

In other words: “affordability” is a highly relative concept that doesn’t lend itself easily to simple expense-to-income ratios. And that, in a nutshell, is why we worry about the enterprise of measuring affordability as it’s currently conceived.

It turns out that there may be better—and more holistic—ways to evaluate affordability, particularly using the “residual income model,” which attempts to factor in all of the necessities that a household faces. For more on that, I’ll direct you to Roger Valdez’s excellent introduction to the subject, “Toward a New Measure of Housing Affordability.”

So I like to think of Blumenauer’s attempt to factor in transportation costs as a way to get us pointed in the right direction. It’s a step toward more thoughtful and comprehensive measurement of the real challenges we face when it comes to affordability. 

Full text of the bill is here.