30 Percent of Income Isn't a Realistic Measure of Housing Affordability

Housing affordability is a big problem in growing cities across the country, but how we define affordability remains problematic. Just look at the hyperventilating that's been going on at Curbed LA for months, or the opening lede to this New York Times article:

For rent and utilities to be considered affordable, they are supposed to take up no more than 30 percent of a household’s income. But that goal is increasingly unattainable for middle-income families as a tightening market pushes up rents ever faster, outrunning modest rises in pay.

Scary stuff, but no one ever seems to ask where that 30 percent cut-off comes from. I take housing affordability as seriously as anyone (as my incessant writing on the subject can attest to), but this sounds to me like a very generalized—and fairly arbitrary—measure of affordability.

Take my own living situation as an example. I pay more than 30 percent of my income on housing because I value living alone and being near high-quality transit. That's partly because it allows me to live car-free, which frees up thousands of dollars a year in transportation spending, and it's why housing + transportation (H+T) is a more accurate measure of housing affordability for many households. It's also just a personal preference to live alone in a fairly central location, and I don't think it makes me "rent-burdened" to willingly make that choice. I could always find a roommate, after all.

Other measures of affordability seem deliberately exaggerated to make their point, like the National Low Income Housing Coalition's annual Out of Reach study, which calculates how many hours a minimum wage worker would need to work to afford a 2-bedroom unit in each state. But who says anyone's entitled to a 2-bedroom unit? I certainly don't feel cheated that, as a student, I can't afford a 2-bedroom unit. I couldn't even afford one as a salaried researcher at a major university, but I didn't feel cheated because I didn't need a 2-bedroom apartment anyway.

These reports tend to ignore the fact that many people don't need a 2-bedroom home unless they're living with roommates (in which case rent would be split), or they have children or family to take care of. We shouldn't ignore those groups, but we should also be realistic about who actually needs multiple bedrooms.

For many people, especially those living in dense urban centers, living in anything more than a studio or one-bedroom is a choice that has much more to do with preference than affordability. Too often, we seem to mistake the choice to live in trendy, highly-accessible areas, in homes more spacious than we need, as an external burden being placed upon us. But if I upgrade from a studio to a one bedroom apartment I'm not more rent-burdened, I'm just making a choice to trade some disposable income for some disposable space. No intervention is needed to ensure that I can make that upgrade without any kind of financial sacrifice.

It is problematic that so much of our income—on the rental side, at least—is accruing to a relatively small and affluent class of property owners, and is probably part of the explanation for why inequality has grown in recent decades. That said, although the share of income we're spending on housing has increased consistently over the years, we're spending much less on other goods like food and clothing. The amount we spend on housing has only increased from 23.3 to 32.9 percent since 1901; the bigger problem is that housing plus transportation has increased from 23.3 percent in 1901 (when transportation costs were negligible) to 50.3 percent today. As I wrote last week, the increase in transportation costs has actually been a much more significant issue than the increase in housing costs.

None of this is to say that affordable housing isn't a major problem, but this 30 percent cutoff just doesn't tell us enough. If a new subway rolls through your neighborhood and drives up rents, that has to be balanced against the potential for massive transportation savings. Currently, most reporting doesn't take that into account at all. The Center for Neighborhood Technology has used a more realistic measure of affordability (housing + transportation) for years, and even HUD recently adopted the same, but major media and most advocate groups still ignore it entirely.