To make good decisions, individuals must accurately assess costs and benefits. Some costs and benefits are real but not easily quantifiable, and others might be imposed on or accrue to other parties and thus are discounted in individual decision-making.

One area where costs and benefits are not easily compared is in land-use planning and neighborhood site selection. Housing location has a significant impact on transportation costs, but those transportation costs rarely factor strongly into housing decisions. The term “drive ‘til you qualify” refers to the fact that families qualify for mortgage rates independent of location and can simply drive farther away from a high-priced metropolitan area in order to qualify for housing they can afford. Unfortunately, all this driving has very real costs that significantly erode affordability.

According to a 2006 study by the Center for Neighborhood Technology (CNT), working families in 17 of 28 regions studied actually pay more for transportation than they do for housing costs. CNT has since expanded this research to develop a detailed Housing + Transportation Index (H + T Index). In March 2010, CNT released a detailed analysis of 330 metropolitan areas in the United States, representing more than 80 percent of the total U.S. population. This new data is compiled in a report, “Penny Wise and Pound Fuelish,” which is accompanied by an interactive with localized data on 161,000 neighborhoods.

According to CNT President Scott Bernstein, “Everywhere we looked in America we saw a drive ‘til you qualify effect. Somewhere between eight and 12 miles out from the center of each region’s population, housing costs drop precipitously, but transportation costs start to go up quite quickly.”  

One goal of the H + T Index is to enable families, housing developers, and localities to incorporate transportation costs into their housing decisions. Typically, housing is considered “affordable” if a family pays less than 30 percent of their income for housing costs plus utilities. Based on its research, CNT is proposing a goal for transportation affordability of 15 percent of a family’s income. Combining housing and transportation affordability would thus mean that these combined costs should be less than 45 percent of a family’s income.

Looking solely at average housing costs and income, CNT estimates that seven out of 10 communities nationwide (69 percent) are affordable. “That shrinks, however, to just four of 10 (39 percent) when both housing and transportation costs are considered and a 45 percent affordability benchmark is applied,” according to CNT. This difference represents 48,000 individual neighborhoods. The CNT report argues for housing policy changes based on these combined costs, including disclosure of average transit costs on individual home sales, improved comprehensive planning efforts by municipalities, and diversified public investments in transit and other infrastructure.

Department of Housing and Urban Development Deputy Secretary Ron Sims called the H + T Index “a remarkably innovative and imaginative tool that is badly needed and long overdue.” This perspective is echoed by Roy Kienetz, undersecretary of policy for the Department of Transportation (DOT), who said the H + T Index will aid DOT to engage in “performance-driven decision-making” about cost-effective transportation investments.

A key advance of the H + T Index is that it quantifies both the up-front and the ongoing costs of housing choice in a way that enables individuals to balance costs and benefits more accurately. This information may also trickle up to lenders and investors looking to underwrite larger projects and to public agencies making key decisions about housing and transportation policy.

For instance, the Metropolitan Transportation Commission in the San Francisco Bay Area has already set an official goal to reduce the combined housing and transportation costs for low- and moderate-income residents in the region by 10 percent by 2035.

Additionally, last month the Illinois Senate passed a bill that would require state agencies involved in housing and transportation decisions to take both costs into account when making planning decisions and spending public dollars.

For more information about CNT’s efforts and the combined costs of housing and transportation, see the links below:

Housing + Transportation Index:

“Penny Wise and Pound Fuelish,” Center for Neighborhood Technology (March 2010):

“Estimating Transportation Costs By Characteristics of Neighborhood and Household,” Transportation Research Record: Journal of the Transportation Research Board (2008):

“Home Buyers Don’t Factor in Commuting,” Pittsburgh Post-Gazette, March 24, 2010:

“Reducing Foreclosures and Environmental Impacts Through Location-Efficient Neighborhood Design,” Natural Resources Defense Council (January 2010):

Casius Pealer is director of the Affordable Housing Initiative at the U.S. Green Building Council, where he focuses on advocacy and public policy. He previously worked as an associate at a Washington, D.C.-based law firm and in-house at the District of Columbia Housing Authority, where he was responsible for structuring and negotiating mixed-finance affordable housing transactions. Pealer holds a master’s in architecture from Tulane University’s School of Architecture and a J.D. from the University of Michigan Law School.