By Chris McCahill
A new study looked at more than 300 metropolitan areas across the U.S. to understand which ones saw foreclosure rates drop the fastest during the economic recovery period between 2011 and 2014. The authors call this “housing market resilience.” It found that some of the most resilient areas were central cities with lower household transportation costs.
The study, published in the Journal of the American Planning Association, found that transportation affordability and housing market resilience were closely related in dense, central zip codes. In other words, foreclosure rates dropped more drastically in areas where families spend less than 15% of their income on transportation, based on data from HUD. This wasn’t the case in suburban areas, which typically don’t benefit from strong transit and walkable town centers.
Some areas with lower combined housing and transportation costs were also more resilient, but that relationship depended on the type of housing market. Additional housing costs, for instance, had no effect on resilience in the boom-bust markets of central cities. But combined housing and transportation costs were especially important for explaining the resilience of boom-bust suburbs that experienced some of the highest foreclosure rates. These were located mainly in California, Nevada, Arizona, and Florida. Foreclosure rates in these areas dropped fastest wherever families typically spend less than 45% of their incomes on these combined costs.
The authors give several possible explanations for these mixed results—including the relative economic stability of homeowners in affluent suburbs—but they stress the important role that transportation can play in housing policy. They explain:
“As our finding confirms, affordable central/high-density locations, which are more likely to have dense developments or accessible transit with pedestrian-friendly design, may reduce driving, which leads to greater location affordability and a smaller number of home foreclosures. […] By promoting the construction of affordable housing in areas near transit systems, planners could improve location affordability and foster housing market resilience in these areas.”
The ability to provide enough housing opportunities in areas like this, however, also depends on continued investment in non-auto transportation in and around cities.
Chris McCahill is the Deputy Director at SSTI.