What is affordable housing?

The most common measure used to define affordability is that a household should spend 30 per cent or less of its gross income on housing. The housing is deemed unaffordable if that figure surpasses 30 per cent.

It is a neat way of measuring affordability that has widespread usage and acceptance. It makes a great deal of sense in certain circumstances.

However, it is outliving its usefulness due largely to contemporary land-use patterns in many nations. For the US, and those countries like TT that followed, the massive thrust towards low-density, car-oriented suburban development meant that as seemingly cheap peripheral land opened up for the construction of what was considered affordable housing, transportation costs simultaneously increased.

For high-income countries that manufacture automobiles, the rise in transportation costs is less of a problem than it is for other countries, but it still represents a crushing rise in household expenses.

In the US, for instance, a new and improved measure of housing affordability called the H+T (housing plus transportation) Affordability Index has been developed to not only track the percentage of income that households spend on housing, but also on transportation. It accounts for three measures of average household income: a regional typical, a regional moderate, and a national typical.

The outcome is truly stunning. When the combined expenses are considered, New York — consistently ranked as the first or second most expensive city in the US — becomes as affordable (or unaffordable) as Orlando, Florida and Phoenix, Arizona — viewed as affordable southern, sun-belt cities.

Assuming a national typical household income of US$53,889 per annum, the average New Yorker would spend 37 per cent of income on housing, compared to 27 per cent in both Orlando and Phoenix. However, on transportation the figures would be 11 per cent, 20 per cent, and 22 per cent respectively. In other words, due to the compact nature of NY, and therefore its ability to sustain a highly developed public transportation system, the combined expenses are comparable.

This, however, does not give the full picture. Large, densely populated cities are, more often than not, more productive and pay higher wages. When assuming that household income is the typical regional value for the three cities, the combined H+T expenses drop to 39 per cent for NY, rise to 53 per cent for Orlando, and stay constant at 49 per cent for Phoenix.

What does this mean for us here in TT? We own cars at a rate that is comparable to first world countries, yet our average incomes are far lower and our vehicle importation costs magnitudes higher. In other words, for those households that own cars — and that is a huge part of the population — transportation costs are exorbitantly high. Add to that the fact that transportation costs rise as commute distance to work increases, due to fuel costs and vehicle maintenance costs. Housing far from an urban centre may appear more affordable at first glance, until you realise that it is not.

The H+T index was developed with the idea that affordability should be defined as a household spending less than a combined 45 per cent of income on housing and transportation costs. It’s no stretch to say that there are households locally spending close to 45 per cent of their income on transportation alone.

Even the improved H+T measurement, and its 45 per cent upper limit, were developed in the context of a wealthy country with relatively high average household incomes. In other words, the leftover post-tax household income is assumed to be enough to afford another hugely significant expense, that is, food.

Unfortunately, for us here in TT, this presents another complication. The H+T index states that the typical national household income in the US is $53,889 a year, or roughly TT$30,000 a month. The actual figure in TT, as far as I understand, is roughly TT$10,500 a month. How much money is left over, therefore, to afford food?

Once again, due in no small part to unwise land-use patterns, low agricultural output has led to food prices that are exorbitant in relation to incomes. Prices for chicken, flour, and rice, some of our dietary staples are not too different from those in the US when the currency conversion is done. Yet, our income levels are nowhere near those in the US.

So, what is affordable housing? It is far more nuanced and complicated than the benchmark 30 per cent, or the improved H+T 45 per cent of household income would imply. This is one area where we need to reassess what affordability truly means in our own context; taking into account local income levels, transportation costs, and food prices, in addition to housing prices.

Ryan Darmanie is an urban planning and design consultant with a master’s degree in city and regional planning from Rutgers University, New Jersey, and a keen interest in urban revitalisation. You can connect with him at darmanieplanningdesign.com or email him at ryan@darmanieplanningdesign.com