By Bill Holloway
Is a home worth an $850 price premium for each additional Walk Score point? That’s the value that Emily Washington and Eli Dourado came up with using a fixed-effects model to analyze home sales across all metro and micropolitan areas in the U.S. Along with that finding, published in Market Urbanism, the authors take issue with the claim, often based on revealed preferences (i.e., the fact that most people live in single family detached homes), that Americans prefer drivable suburban development. The fact that more people live in detached single family homes no more indicates preference for that type of development than the greater prevalence of Fords on the road means that people prefer Fords to BMWs.
Even with their price premium, however, homes in walkable urban neighborhoods often can end up cheaper than their suburban counterparts. Calculations cited in the Globe and Mail by David Hughes, a Toronto area mortgage broker, indicate that a homebuyer considering a $500,000 home in the suburbs versus a $720,000 home in the city could achieve modest savings (about $30,000) over several decades of home ownership by buying the more expensive urban home, where they have shorter commutes and less need for a personal automobile. Hughes undertook his calculations to illustrate the importance of the total combined cost of housing and transportation as a decision factor for people making choices about where to buy or rent a home.
Center for Neighborhood Technology’s Housing + Transportation Affordability Index shows the same economic calculation for metropolitan areas across the U.S. While large numbers of homes in every area are available at prices below the generally recommended 30 percent of median income threshold, far fewer fall below the housing and transportation combined affordability threshold, defined by CNT as 45 percent of median income. Many of the homes on the urban fringe that look affordable, based on their sale price or rent, are no longer affordable once transportation costs are added. Similarly, as illustrated by Hughes’ calculations, some centrally located homes that appear unaffordable based on their rental or purchase price, become affordable when transportation costs are considered.
Bill Holloway is a Transportation Policy Analyst at SSTI.
By Bill Holloway