Formulas that calculate affordable housing usually only factor in housing costs. Joe Cortright of CityLab argues that automotive expenses should be factored in as well.
For example, homes in dense urban neighborhoods are pricey, but often times these owners and renters don’t need a car to get around, which saves them a large portion of their paycheck.
Meanwhile, renters and owners in exurbs may spend less of their income on housing (under the 30 percent threshold that defines who is cost-burdened), but households may need multiple vehicles to get to work and run errands. That leads to big bucks spent on car payments, insurance, gas, repairs, and all the other expenses required for car ownership.
Data from Harvard Joint Center’s recent State of the Nation’s Housing report back up Cortright’s claim.
What’s interesting to note here, is how, within each quartile (that measures household spending), households that spend less on housing end up spending a much larger share of their income on transportation. Conversely, households that spend a larger fraction of their income on housing spend, on average much less on transportation.
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