Wider view of affordability needed

The housing affordability dimension to the urban sprawl versus intensification argument is a messy debate. While limiting land supply through measures such as urban limits is likely to have a significant impact on land prices around the limit itself, it’s hard to know for sure what the impact of opening up land on the urban edge would have on prices throughout the majority of the city – particularly in the inner areas where it seems people most want to live.

Another complicating matter is fairly obvious – the further out people are, the more they’re likely to spend on transportation costs. Potentially this additional expense could counter any affordability gain we get (should that even exist) from opening up new land on the periphery. A recent Atlantic Cities article picks up on this matter:

Housing policymakers have long lamented the trend of home-buyers who “drive to qualify.” If they can’t find anything affordable in the city, house hunters wander farther and father out in search of a mortgage or a rent payment that matches their pocketbook. But of course, there’s a serious flaw in this thinking: The farther you go in search of cheaper housing, the more expensive your transportation costs become.

Scott Bernstein of the Center for Neighborhood Technology calls this “the hidden cost of housing location,” and CNT has for several years been trying to illustrate the tradeoff for homeowners and government officials who may not realize gallons of gas add up almost as fast as mortgage payments do. The Chicago-based organization maintains a massive, geo-coded database of location-specific information on average housing costs, driving rates, transportation costs, and transportation-related greenhouse gas emissions. The online, interactive index is both highly useful in allowing comparisons of typical household costs in different locations and highly revealing as it illuminates the benefits of close-in, walkable neighborhoods in bringing those costs down.

Remember we’re only talking about the cost to individuals here. The vastly increased costs of providing infrastructure to urban sprawl is in addition to this. So what kind of results do we get from taking a more holistic point of view of affordability – taking into account transport and housing costs.

Analyzing all this data in aggregate, CNT found that, between 2000 and 2009, U.S. transportation and housing costs increased at nearly twice the rate of incomes. But the good news, the organization reports, is that people living in “location efficient” neighborhoods—those with good access to transit, jobs, and amenities—experienced only half the increase in transportation costs ($1,400/year) of those living in car-dependent places ($3,900/year). This means more expensive housing may actually be the more affordable option, if that housing exists in the right place.

Suddenly New York City, with its notoriously high housing costs, looks a little more affordable with the nation’s lowest average annual transportation costs for a big metro region. Households around seemingly more affordable Birmingham, on the other hand, spend on average nearly $5,000 a year more than those in the New York region do just to get around.

It’s worth keeping in mind that transportation costs also have the ability to go up really quickly too – as we saw in 2008 most particularly. The article also goes on to highlight that places in the USA with the highest rates of mortgage foreclosure have also been places where transportation costs are really high:

CNT’s index reveals, for example, that high transportation costs are highly correlated with foreclosure rates. This isn’t surprising given that transportation typically represents a family’s second biggest expense.

On one location on the south side of Rapid City, South Dakota, for instance, the index shows that an average home costs 26 percent of median income. But, given average driving rates for the location, the costs of housing and transportation considered together balloon to 56 percent of median income. The Index also shows that the average household in the vicinity generates more than 8.6 tons per year of greenhouse gas emissions from transportation. Average emissions per household in the most accessible neighborhoods on CNT’s map are between 5.1 and 6.5 tons per year.

I really worry that these Greenfield areas the Auckland Plan proposes to open up could become future slums when petrol prices spike in the future, making it unaffordable in a transport sense to live in such a peripheral location. Especially as right now despite the persistent highs of oil on the international market price at the pump in NZ has remained relatively calm because of the steadily rising NZD . This could change very quickly; $3 or $4 per litre is not unlikely, all it would take is the NZD to return to its  historical average levels and oil to continue its steady march upward [“It’s highly likely that the Reserve Bank will make some strongly worded comments against the currency’s strength.”Herald 5 March]. Either way the ‘suburbanisation of poverty’ that is noticeable in the US looks like it is heading to Auckland, with the poor priced off the road and subject to another American expression: ‘No transit: No job’.

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