John Petro

Measuring True “Affordability” in El Paso

The rule of thumb for measuring housing affordability has been that a household should not pay more than 30 percent of its income for rent or mortgage payments. This measure used by all levels of government fails to incorporate the cost of transportation, which is the second-biggest expense for U.S. households.

Recently, El Paso, Texas became the first city to incorporate a new measure of affordability created by the Chicago-based Center for Neighborhood Technology. Their H+T Index includes both the cost of housing and the cost of transportation when determining affordability. No more than 45 percent of household income should go towards these combined costs, CNT concluded.

The old measure of affordability tends to give new developments on the outskirts of metropolitan areas an advantage when competing for government subsidies and loans for affordable housing. Since land on the outskirts tends to be cheap, the cost of that housing appears to be less. But when transportation costs are factored in, developments near the center of town begin to become more affordable, especially if these developments are close to mass transportation or are in walkable neighborhoods.

CNT looked into housing and transportation costs in El Paso and found that under the traditional affordability measure much of the city and surrounding county were considered “affordable.” But transportation costs in much of the city eat up between 24 and 28 percent of household budgets, making most of the city unaffordable in reality.

El Paso will use the new measure when distributing loans for affordable housing and will ensure that households will not be saddled with excessive transportation costs. This is a model for other cities to consider and adopt.

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Posted at 4:32 PM, Sep 07, 2010 in Urban Affairs
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