Combined housing and transportation affordability: Scholarly knowledge, data, indicators and tools

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About the project

Every year, thousands of families leave major urban centres in search of more affordable housing in smaller cities and towns. By doing so, many of them run into higher transportation costs, particularly in more car-dependent areas.

Not being aware of the ancillary individual and collective costs of their new residential location choice leads people to make choices that run counter to the households’ goal (to improve their financial situation) and also society’s (to curb urban sprawl and mitigate its environmental, social and economic impact). Some authors assert that informed, effective decisions can only be made if both transportation and housing expenses are factored into the concept of affordability. In fact, empirical evidence shows that whatever transportation money families can save in urban centres is not enough to offset rising housing costs. It may be difficult to convince families of the merits of transit-oriented development if the economic incentives are not aligned.

This study synthesizes available knowledge about the economic interactions between transportation and housing and provides an overview of the definitions, data, analysis methods, indicators and other tools that support decision making.

This knowledge synthesis is based on a scoping review of 165 academic and grey literature sources collected using automated and manual methods.

Key findings

For more than 60 years, researchers in a variety of disciplines have attempted to conceptualize the interaction between transportation and housing. The monocentric city model provides a sound theoretical basis for understanding the relationship between increased distance from economic activity, lower housing costs and higher transportation costs.

When budgeting, families use a variety of calculations to arrive at their transportation and housing allocations (based on factors such as the modes of transportation used and the size of their home), while also considering other expenses, such as leisure. Since every family will use different approaches to these calculations, affordability is a highly nuanced, complex, multidimensional and dynamic concept.

A number of affordability indicators have been developed in the housing sector to measure a family’s housing-price-to-income ratio, the residual income left after all major needs are met, and housing quality, among other measures. At present, there is no single indicator to simultaneously account for all these different aspects of affordability.

The affordability indicators used in the transportation sector are generally derived from the housing sector, so it follows that the conversation about transportation affordability must be expanded to accommodate other factors. Studies that have started to do this include research on families’ mobility gaps and on the financial vulnerability of choice of location to rising fuel prices.

Combined affordability indicators are currently limited to measuring the average ratio of housing and transportation expenses to income for households in different census blocks. Other dimensions of affordability are generally disregarded. Aggregation is often an issue in these types of analyses, as they cannot account for the diversity of household situations within particular neighbourhoods (such as different household types or tenure arrangements). Better, more specific affordability indicators could be developed, but research and development are greatly limited by the data available.

As it currently stands, there is little research interest in the long-term financial return on residential location choice, i.e., the impact of interest, capital gains and depreciation on household wealth. The knock-on effects of residential location choice on household mobility and transportation expenses have not been adequately measured or taken into consideration. There have also been few studies on the collective costs (such as externalities) of residential location choice.

Policy implications

This knowledge synthesis confirms the importance of taking transportation costs into account when analyzing housing affordability. It also suggests potentially interesting considerations for research and practice related to housing affordability, transportation affordability and combined affordability.

To support more informed decision making as well as more effective and equitable public policy, public and private institutions in the housing and transportation sectors would do well to pool their efforts to create databases for research use.

The indicators, methods and other applications developed based on these data could benefit individuals, mortgage borrowers, employers and sponsors/managers of public programs and services.

Further information

Read the full report (PDF document, 1.7 Mb - in French only)

Contact the researchers

Catherine Morency, P.Eng., PhD, faculty member, Department of civil, geological and mining engineering, Polytechnique Montréal

Fanny Tremblay-Racicot, PhD, faculty member, École nationale d’administration publique

Brigitte Milord, M.Sc. (economics), research associate, member of the Mobilité chair team, Polytechnique Montréal

The opinions expressed in this statement are the authors’ own and do not reflect the views of SSHRC, Infrastructure Canada or the Government of Canada.

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