For the last several years something has really gotten under my skin: the way we talk about housing and affordability. I don’t like the way we measure it.
The first time I found myself getting unhappy about the discussion about housing affordability was a few years ago when I watched the debate over legislation to create incentive zoning in Seattle. By using a formula based on Area Median Income and the normative “rule of thumb” for housing costs, the Council decided that a hypothetical worker in Seattle making $45,000 should pay about $1,000 a month for rent. Developers who wanted to build extra housing should have to build more housing at that price.
That just didn’t seem to make sense to me at the time and it still doesn’t. My question is: can’t we find a better way to define affordability? I’m not the only one asking this question. The Center for Neighborhood Technology has developed a new measure and the Urban Land Institute’s Terwilliger Center is trying to do the same thing. There must be better ways to talk about what affordability means in an urban context.
A good definition of affordability matters because so much of the debate around density, sprawl, and growth management centers on the cost of housing. What about the oft repeated argument that housing in dense neighborhoods is too expensive for that hypothetical worker?
This question does make sense. A condo in downtown Portland or Seattle or Vancouver, BC really does cost more per square foot than a house out in the ‘burbs. Here’s what Harvard’s Edward L. Glaeser found in a study several years back before the real estate bubble filled up:
In some of America’s great cities, residential real estate prices have soared over the past twenty years. In Boston and San Francisco, the median home price rose by 153 and 81 percent, respectively, in constant dollars between 1980 and 2000. According to the U.S. Census, the median value of an owner-occupied housing unit in Manhattan rose from $245,633 in 1980 to $377,246 in 2000 (both figures in 2002 dollars), implying an average annual compounded real appreciation rate of 2.2 percent, which is double the national average real appreciation rate on the widely-used Freddie Mac Repeat Sales Price Index.
And a study done by the Canadian Centre for Policy Alternatives found the same thing about Vancouver. On a floor area basis, Housing really does cost more in the dense, compact, urban core we tout as being far more sustainable than sprawl.
With center city housing so expensive, at least relative to suburban, locations, doesn’t it mean that cities have an affordability problem? Not necessarily.
The reason it’s so hard to answer the question is, in part, because we don’t know what it is we’re asking. What does “affordable” really mean? If it’s 30 percent of 80 percent of monthly AMI—the way affordability is typically measured—that’s one thing. But if it’s something else—like whether a family has enough money left over to be self sufficient after paying or housing—it’s something entirely different.
I pay more to live in Seattle’s Capitol Hill neighborhood than I would if I lived in Maple Valley, an outlying suburb 30 miles away from downtown, but I don’t need a car where I live, which means that my cost of living is, in some ways, cheaper. (It also means that my transportation needs don’t rely on the subsidized roads between Seattle and Maple Valley either.) The problem is that our existing measures of affordability make it almost impossible to conduct a truly apples-to-apples comparison between affordability in different locations.
The challenge for advocates of density is to respond more convincingly—with better quantitative arguments—to policy makers who ask “but is it affordable?” Advocates also need a better push back to the argument that some opponents make that density only favors millionaires. I believe that life in compact, transit oriented communities is, in fact, both more affordable and more sustainable than the alternatives, but we’re not quite there yet, at least in terms of our analysis of affordability. Still, we’re headed in the right direction. The sooner we can revise how we measure housing affordability—like the US is trying to do with poverty—we’ll be well on our way to quantitatively expressing the true costs of living in sprawl, and the financial advantages of living in a dense, compact neighborhood.
Photo Credit: Photo of density in Redmond by author
wahomeowner
When buying a home it is important to differentiate between price and value. “Affordable” should also not be confused with the selling price. Sometimes homes that are sold as affordable/lower prices will need more components replaced over the lifetime of the property and can end up costing more than a home that is sold at a higher price.
Jan Steinman
There’s one dimension of “affordable” that is almost totally overlooked: sweat.Those who wish to build their own are faced with the same regulatory burden as is those who build thousand-unit subdivisions.In particular, those who want to do “alternative” building, using natural, local materials, are faced with tens of thousands of engineering fees before they put a shovel in the ground.Of course, local governments assert that building codes are there to protect the inhabitants from shoddy and unsafe building practices. And because we’re in the habit of regularly “flipping” our housing, it’s hard to justify cutting some slack for an owner-builder if that will endanger a future buyer. But isn’t it time to totally re-think the way we make dwellings? And shouldn’t those who want to do something carbon-responsible and sustainable beyond the stick-frame house have some way of proceeding?Here in British Columbia, you can build a trailer (or even a vehicle) yourself and get license and insurance for it as a “U-Built” vehicle. Why not have a similar program to encourage innovative “U-Built” housing?
Katje
Affordable, green, efficient housing in the Southwest USA,TEG (The Earth Builders Guild, NM) has been unduly affectedby LEED code impacts to traditional sustainable building.I prefer the European approach for Native and Bio-Regional.COST-OPTIMALITY. DISCUSSING METHODOLOGY AND CHALLENGES WITHIN THE RECAST ENERGY PERFORMANCE OF BUILDINGSThis publication has been created by the Buildings Performance Institute Europe (BPIE)Download the new BPIE cost optimality publicationhttp://www.eceee.org/buildings/docs/BPIE_costoptimality_publication2010.pdfDownload a flyer explaining the issuehttp://www.eceee.org/buildings/docs/BPIE_flyer_costoptimality.pdfRead more in eceee’s new policy brief on the EPBD recast available on our buildings pageshttp://www.eceee.org/buildings/http://www.eceee.org/buildings/docs/
Brice Maryman
Roger, do you know how constrained the Council’s hand is by RCW’s and Federal Requirements in setting affordability? I was at a meeting the other day and heard that there are significant constraints set by trickle-down policies from federal and state levels regarding income levels and how affordability is defined. How can local officials, like our Council, buck these structural deficits?
Roger
Excellent question Brice! Here’s the deal. Almost everything is, in fact, driven by federal level requirements in one way or another. Often it is legislation (“you’ll do thus and such to get this money for affordable housing, affordable being 30 percent etc.) or it is regulation in the tax code (tax credits for affordable housing, with affordable defined as 30 percent of etc). It would, indeed, be very difficult given all the money that comes from the federal level to buck the 30 percent rule of thumb. However, here are two ideas. First, any housing program that IS NOT funded with federal dollars or driven by federal or state regulation could experiment with different definitions. For example, the city of Seattle’s multifamily tax credit program or incentive zoning legislation could define affordable in a more sensible way. Second, a local government could invest in develop a parallel system to the federal systems requirements and see what data drop out of that. By being able to toggle back and forth between the current requirements and a new system, policy makers could get a better sense of what’s really happening and make a case to get cut loose of the federal or state requirements. That second idea is also important because nobody wants to walk blind into an entirely new system of measuring affordability without having a parallel system running along side first. It’s kind of like what the feds are doing with their new Supplemental Poverty Measure (SPM). If large cities in our region start moving ahead with new ideas and demonstrating some success we might see a shift at the federal and state level.
Jamie
Even to reach those affordability definitions that are in place, we’re creating a subsidized housing market similar to farm subsidies. Whether the local municipality is waving development fees, the project is being underwritten by HUD, or any other angle on this strategy, if they are not market rate homes then the true costs are being externalized to the market-rate housing or greater community. That’s not sustainable for the community as a whole. We need to find ways to ACTUALLY reduce the cost of housing into a safe middle-income affordability bracket. And I agree, the first step would be figuring out what that affordability bracket should actually be. Quite frankly, the recent economic issues have shown a lot of families that 30% is way too high to be safe and sustainable.The idea of “u-built” housing permits is very interesting!
SR
I like this discussion. Whether an individual or family has enough money left over after rent and other fixed costs are accounted for does have alot of bearing on how we perceive the word “affordable.” How can we ensure that the metrics for “affordability” encompass the needs of all or most people involved and contributing to our communities? If we’re going to use the term and embrace the goal then shouldn’t we make it fit all or most perceptions? Absolutely. Roger, I like the idea of a parallel system. What would it take to get it off the ground? Absolutely agree with you on the power the city has with private investments to make a more reasonable definition or mulitiple definitions.When we have significant community members living far from where they work and engage daily because they can’t “afford” rent or ownership near the location of their workplace then we know that current measurements are not creating healthy urban neighborhoods.