Saturday, December 17, 2011

What housing affordability really means

Housing affordability doesn’t get a lot of popular attention because it is an abstract concept that gets lost amidst the continuing foreclosure debacle. That’s why a recent report from the Center for Housing Policy titled Paycheck to Paycheck is so very valuable. It actually personifies the relation between income and expenses. Below I’ve used an example that I have employed in my classes recently—between Portland, OR, which is routinely lauded for its growth-management strategies and higher densities; and Phoenix, AZ, which was recently described in a gush of hyperbole as ‘the least sustainable city on the planet’. I’ll write more on this again, as the contrast is a revealing one. In brief, there is little to choose between the two cities; they have similar crime statistics and even similar population densities. The major difference is in terms of economic sustainability—the median cost of housing in the two locations.

I’ve extracted two graphics from the interactive report. The first shows the income required to purchase a median home in Portland, and the ability of an individual in a sample blue collar job or a service position to buy in. The second shows how much more affordable home purchase is in Phoenix, where all the speculative gains of the past decade have been wiped out. [It also shows why working partners and/or roommates are a necessity in the US].

Foreclosures have made housing affordable in Arizona once more. This was not of course the way to accomplish that, but it does indicate one of the benefits of suburban development in contrast with a tight greenbelt.

The report also offers one other important insight. Plenty of people cannot qualify for purchase or do not want to stay put. Interestingly, the rental market does not reflect these disparities: rents in Portland and Phoenix remain not just comparable but almost identical, which makes little sense given the ratios for homes prices. This seems to indicate a market that is not adjusting and that requires more research.