A new study says that communities that are built to be “location-efficient” -that is built with multiple nearby modes of transportation available- are less likely to suffer dramatic real estate troubles like foreclosures.
Why?
Put simply, the NRDC study says that the average American spends 17% of their income on transportation, but that that figure can vary widely depending on where you live. So if you live in a car-depedent suburb and work at a distant employment center, for instance, you may spend 25% of your income on transportation and thus you have less of a buffer to weather financial challenges compared with someone who only spends 10% of his income on transportation:
Reduced automobile dependency creates an economic buffer for owners of location-effcient homes. The underlying principle is that the real cost of housing is a combination of mortgage and transportation costs. With more available alternatives to car ownership, residents of location-effcient homes have more fexibility when it comes to managing their transportation costs, making them less likely to default on a mortgage.
The study looked at different neighborhoods in Chicago to show how the math works:
In one neighborhood in the Chicago region, the median auto ownership per household is equal to one car per $33,000 of household income. If a homebuyer in that neighborhood has a credit score of 680, a total debt-to-income (“back end”) ratio of 41 percent, and a home loan-to-value ratio of 80 percent, the model predicts a 9.9 percent chance that the home will fall into foreclosure.
Now imagine a second buyer purchasing a home in a more location-effcient part of the Chicago region, where auto ownership per household is lower—for instance, one car per $58,000 of household income. If the second buyer has all of the same mortgage underwriting characteristics as the frst buyer, the chance that the home will fall into foreclosure falls to 7.2 percent. Moreover, the model shows that the homebuyer could have a much higher debt-to-income ratio (up to 62.5 percent holding other factors equal), a lower credit score, or a higher loan-to-value ratio, and still have only the same risk of foreclosure as the frst buyer.
To put it succinctly- the more “location-effecient” your home is, the more you have to spend on your home and weather inevitable economic troubles. Whereas if you’re sinking your money into one or more personal automobiles, you have less money to spend elsewhere and are at a greater risk of foreclosure.
Now remember what your monthly gas bill was in July of 2008 when gas was $4.25 locally.
It’s a pretty simple concept but it raises an important point: city governments, planners, real estate developers, and transportation managers “could help to reduce mortgage foreclosures insofar as they succeed at creating more location-effecient communities.”
As this year’s City Council election kicks off, one thing you’ll hear all 11 candidates say (well maybe not Johnny Pride) is that Santa Clarita needs more high-paying, high-quality local jobs. Virtually everyone in Santa Clarita agrees with this because virtually every Santa Claritan hates his commute over the hill. And they’re all right- we need high quality, high paying local jobs. It’s key to solving not only traffic problems, but to making Santa Clarita’s economy more robust, stable, and vigorous.
But, in my view, it is just as important to foster alternatives to personal automobile use locally and regionally. More paseos, more bike lanes, more frequent Metrolink trains, more amenities within walking distance- all are key to reducing homeowner’s transportation costs which not only helps the homeowner stay in his house during troubling economic times, but keeps our skies blue and our air clean.
Natural Resources Defense Council Report
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I spend about 400 a month in gas on 2 SUVs. One travels 1000+ miles a month, the other, not much at all. This is less than 3% of my gross income.
You go ride a bike.
Your transportation cost should include gas, maintenance, repairs, lease/buy payments, insurance…
Monthly income: $12,000
Gas for 2 SUVs: $400
Getting to be a douche on the internet: priceless
Walk66,
My math is off, its 2.85%
Proud to be a douch66
Congrats on your career success Drive66.
Regarding bicycles:
Don’t hate the player, hate the game.
I too make plenty of money to drive as much and as often as I want. I choose not to. We can coexist, you and I, douche and non-douche
Jeff,
I don’t exactly know what you mean by “Don’t hate the player, hate the game” but I can say this, I love driving my car and I have a problem with the “cars are evil, ride a bike” agenda. If it we’re up to you, we would all be taking the shame train or pedaling everywhere and that’s just not how I want to live my life. It’s called freedom of choice.
Live and let live,
P-)
I telecommute and really happy about that. I also like to walk and bike to run my errands if possible and enjoy our paseos.
Commuting vs discretionary leisure travel? Thats a rather large distinction that needs to be clarified.
My commute from Via Princessa and Sierra to Burbank costs me about 1.6 gallons of gas round trip. So whats that at today’s prices… $5.00 for 87 in the 2010 Focus (28.x MPG average per my Fuelly account)?
My wife gets 25.5 MPG in her 4cyl Rav4 (pre-recall, thanks for your concern) and her commute to Sherman Oaks is 41, so thats about the same 1.6 gallons.
All told, our daily expense (today’s prices) is $10.00 for gas for commuting.
That being said, I have significant weekend travel for leisure. Since the new year, I’ve been on a mountain cruise up Azusa Canyon, been down to Orange County 3 times to see friends, and traveled back and forth to Downtown LA twice, West LA twice, and Lancaster once for dinners or other evening entertainment. Like I said, these trips are discretionary, and when the gas climbs toward $5.00/gal we curtail them significantly.
All told, our montly gas card charges (on the American Express card… gets 3% rebate and we pay it off every month so no interest paid!) runs about $300-$400.
When we add in our two car payments, and our four cars worth of insurance (looking to sell a 2001 Toyota Celica if anyone is interested…) the total expense still doesn’t come anywhere near 10%… 8.5% to be exact.
Todd,
As someone who opened the proverbial kimono on water consumption last month, I respect and appreciate your comment.
Jeff, he’s not a hater of the players, he’s more like a coach. Or an owner. I mean, have you seen his roll of hundreds?? That’s just 4.56% of gross, right there.
I believe the point is being missed. Yes, you have a choice to drive as much as you desire. What the ever-increasing cost of gas will do is to effect the feasibility of living far from work. While those leisure trips to Orange County can be curtailed, what do people do when they can’t afford to drive to work. At $2.90 a gallon, those discretionary trips are not a problem. But when America starts seeing $5 and $6 a gallon, which is within this decade, realistically driving long distances to work may not be as feasible for large swaths of the work force. Some people may be able to afford gas at this price, but others won’t and they will be forced to move closer to their jobs.
And believe me gas will spike again not once the American economy recovers, but when the world economy recovers. India and China, about 2.2 billion people, or one third of the world’s population, is developing some of the same living and commuting patterns that we associate with the U.S. Not trying to infringe on freedoms, but this type of freedom is expensive.
“We can coexist, you and I, douche and non-douche”
*snort* I think I’ll make this my new motto. Maybe a bumper sticker for the car?
I’m shocked the transportation costs are as low as they are! I’ve either underestimated the number of SUV driving over extended $600 car payment Claritans or or underestimated the income of my fellow Claritan LOL.
Our numbers work out to about 15%. That’s for one (small) car payment, maintenance and insurance for two, and gas for one commuter car and one mom mobile (though it’s a tiny one!) that rarely leaves my little ‘zone’.
There are also hidden costs and subsidies to our car culture. The costs of air and water pollution, road maintenance and construction, and the like, are not part of the cost per gallon, but are embedded in tax laws (and therefore in many unrelated products you buy) such as income and sales taxes which feed general fund accounts at eh local, state, and federal level.
If we paid the TRUE cost on a per mile basis, the cost woudl be far higher than today. But the industry lobbies wont ever let that happen. And an arguyment is mad that the communal benefits of mobility are also s ahred benefit, that goes along with the shared costs.
I agree China will become the new mass consimers shortly, and we have to prepare for that era with solar and ven nuclear electric plants, feeding electric cars.
Biking in a suit in the rain or 100 degree heat is just not realistic. And our public transportatin network always fails in the “last mile” at either end. Again, cheaply-powered electric buses or mini-buses could solve that, but at great cost.
Pay one way or another, transportation is not cheap! We have been fooled into thinking it is cheap through decades of subsidizing in ways beyond the gallon cost.
sigh… I need my google toolbar with spell checker… it got uninstalled and I’m a-hurtin’!
Many, many jobs are needed here before we think about higher density housing. Otherwise, we are just sending more vehicles over the already conjested Newhall Pass. OVOV doesn’t cope with that too well. That is why it is taking so long to get the EIR done for OVOV. I’m sure they are struggling with the carbon footprint analysis that is required. Trains and bikes can solve the problem.
“There are also hidden costs and subsidies to our car culture. The costs of air and water pollution, road maintenance and construction, and the like, are not part of the cost per gallon, but are embedded in tax laws (and therefore in many unrelated products you buy) such as income and sales taxes which feed general fund accounts at eh local, state, and federal level.”
Obesity is a big one! And with obesity comes diabetes, heart disease etc. A walking/biking community is a healthy community and a healthy community saves everyone money.