More than cost determines housing affordability

A new way of looking at affordability might help Seattle City Council make smarter land-use decisions.

A new way of looking at affordability might help Seattle City Council make smarter land-use decisions.

In the Atlantic Cities blog, Richard Florida posts data looking at what people in cities have left over after they've paid housing costs. It's a very important look at the numbers that hasn't been done before. This approach to considering affordability is called the residual income model and it is a much better way to consider the problem of "affordable housing" than the current method, which looks at monthly income as it relates to housing price per month.

In that old system, a person who pays 30 percent or less of their monthly income on housing is considered to live in "affordable" housing. The problem with this method of calculation is that it doesn't consider other costs of living associated with place. For example, a person living right near a bus line that takes her right to her workplace may not need a car. That saved expense might offset the extra housing costs that come from living right near transit.

What Florida points out is that many cities that are considered to have the most expensive housing also are at the top of the list for the amount of money people have left over at the end of the month for other critical expenses. One explanation of that is that "average wages and salaries are substantially higher, enabling them to more than compensate."

Today, without further analysis, it is possible that many people are living in Seattle and paying only 25 percent or less of their monthly income on housing but still struggling to make ends meet. On the other hand there are certainly people paying more per month because they choose to, and those people might still have enough left over to take care of expenses and even save money.

In the end, the City Council ought to take a much closer look at the way we define affordability, trying to look more broadly at the many factors that families consider when they decide where to live. Monthly housing costs are just one of those costs. To make Seattle the most attractive place to live, the council has to make better land use decisions that increase the amount, quality, and type of housing available in transit areas whether that housing is 30 percent of monthly income or not. The goal of making Seattle affordable has to be more broad that just housing price.

The Seattle Planning Commission has started asking these questions with their recent report Housing Seattle, which takes a look at defining affordabiity more broadly. There are a lot of hurdles to this approach, especially from the federal level where funding for housing is driven by the 30 percent rule. But the Commission has made a good start. 


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