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Want to move? A quick way to figure out if you can afford it

MinnPost photo by Steve Date

“Drive until you qualify.”

That’s been the mantra for house hunters down through the ages. Supposedly, the further a house sits from a city center, the less it costs — and the greater the likelihood that a would-be owner can nab a mortgage.

But there’s a hitch to that thinking. It’s true that housing (with the exception of ritzy enclaves on lakes and golf courses) does decline in price as you move away from town. But with that move come extra transportation costs, and they are higher than you think.

The Center for Neighborhood Technology (CNT), a self-described “think-and-do-tank” that focuses on making cities more efficient, has been looking at how affordable housing really is. Traditionally, bankers and financial planners told people to keep their housing expense to no more than 30 percent of their income. Using that standard, 76 percent of U.S. neighborhoods would be considered affordable.

But transportation costs are part and parcel of the location a family chooses. The more sprawly the area, the more residents have to drive and the more they spend doing it. The real measure of affordability, according to CNT, combines housing and transportation. And, the benchmark for spending should be no more than 45 percent of household income. Looking at things that way, the portion of affordable neighborhoods drops to 28 percent.

I wish I’d known all this before I moved from Queens, N.Y., to Connecticut. Sure, the housing out there was cheaper, but I never thought about what it would cost to commute to my job in New York City — as it turned out, $310 a month for a ticket on MetroNorth.

Fortunately, nobody has to make choices in ignorance any longer. That’s thanks to a new calculator available from the Urban Land Institute Minnesota, a civic improvement group. It can help you figure how much the whole housing/transport package will cost anywhere in the 13-county Twin Cities region. It was designed by CNT for the purpose of guiding policy-makers and developers in making sensible decisions about where to build transit and housing, not to mention shopping and schools. But the calculator’s principal value may be for consumers who are trying to choose housing that fits into their budget.

How it works

Here’s how the calculator works. First, you plug in a home address or a zip code (where you already live or where you’d like to move). I chose a three-bedroom, two-bath house on Blueberry St. in Inver Grove Heights, which is on the market for $244,750.

The calculator asks how many people in the family work and where. So I created a couple, let’s call them Mr. and Mrs. Commutalot, with the wife working in downtown Minneapolis at the Capella Tower, a journey of 20 miles, and the husband at a medical building in Edina, about 18 miles.

To refine the formula further, I had to supply how many miles the hypothetical couple gets from each gallon of gas (the calculator suggests 21, which is middling), how much gas costs — right now about $3.75 a gallon and how many miles they drive per year. (The calculator came up with 22,803 miles which sounds like a lot, but not when you consider that the Commutalots will have to do a lot of driving to reach shops, schools, doctors and so on in spread-out Inver Grove Heights.) Also added in was $160 a month for downtown parking for the Mrs.

Press a button and crunch, crunch, crunch, here’s what the calculator came up with:  The Commutalots will spend $18,623 a year for transportation and $18,996 for housing for a total of $37,619. That’s 47 percent of the $80,000 income I gave them, an amount just a wee bit lower than the median income of Inver Grove Heightians (about $82,000) and a bit more than the CNT benchmark of 45 percent. I thought this was a ridiculous sum, but in point of fact, it is based on real numbers gathered from tiny census blocks. (If you are interested in how CNT figured all this stuff, you can take a gander at its methodology.)

Interestingly, if Mr. and Mrs. Commutalot chose to rent, their costs plunge to $10,584, bringing their overall housing/transportation expense down to 37 percent of income. With the money they’d save, they could buy a villa in the South of France in a few years time.

A few more locations

After that, I went a little nuts and put four different locations into the calculator. First I looked at a pricier house in St. Louis Park, a three-bedroom, three-bath manse for $349,000. But instead of making the Mrs. drive downtown, I figured that she could take the express bus at $3 a pop. Not only would that save her from driving six miles each way to work but also nearly $2,000 on parking. What’s more, the Commutalots would be driving much less overall because St. Louis Park is more urban, with stores, schools and other facilities in easy reach.

And sure enough, even though they chose a more expensive neighborhood, the Commutalots would be spending $36,970 or 46 percent of their $80,000 income, almost the same as in Inver Grove Heights. Of course, if Mrs. Commutalot stubbornly insists on driving downtown, the family’s expenses shoot up to about 55 percent of income.

What if the Commutalots decide to become Mr. & Mrs. Downtowncool? They want to locate in the Warehouse District and walk to their favorite restaurants. Condos there are expensive; it’s unlikely they would be able to find a three-bedroom apartment. And even if they were willing to scale back on size, their housing cost, according to the calculator, would come to a whopping $28,500 a year. But they can keep transportation costs low (about $14,000 a year) by forcing the Mrs. to walk to Cappella Tower most days (but allowing her $75 a month to take the light rail or a bus when it’s freezing). The total for both housing and transportation would come to 52 percent of their income.

Since the median income downtown is just over $120,000, the Downtowncools, with their $80,000 a year, can’t really afford to buy. But here’s the twist. If they rented, they would cut their housing cost by half, bringing their total expense to a manageable 36 percent.

The lesson perhaps is that you might be able to live almost anywhere if you’re willing to change certain variables, like renting instead of owning, or busing instead of driving. So before you make your next move or dream about it — or to learn if your brother-in-law can really afford that place he’s buying out at Lake Minnetonka — consult the calculator.

Comments (1)

  1. Submitted by Don Berryman on 06/29/2012 - 11:40 am.

    the link to the calculator: http://htaindex.cnt.org/map/

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