The Affordability Index: A New Tool for Measuring the True Affordability of a Housing Choice

This brief describes a new information tool developed by the Urban Markets Initiative to quantify, for the first time, the impact of transportation costs on the affordability of housing choices. This brief explains the background, creation, and purpose of this new tool. The first section provides a project overview and a short summary of the method used to create the Affordability Index. The next section highlights the results from testing the index in a seven-county area in and around Minneapolis-St. Paul, MN. To demonstrate the usefulness of this tool at a neighborhood level, the third section projects the effect of transportation and housing choices on three hypothetical low- and moderate-income families in each of four different neighborhoods in the Twin Cities. The brief concludes with suggested policy recommendations and applications of the new tool for various actors in the housing market, and for regulators, planners, and funders in the transportation and land use arenas at all levels of government. The Housing and Transportation Affordability Index is a groundbreaking innovation because it prices the trade-offs that households make between housing and transportation costs and the savings that derive from living in communities that are near shopping, schools, and work, and that boast a transit-rich environment. Built using data sets that are available for every transit-served community in the nation, the tool can be applied in neighborhoods in more than 42 cities in the United States. It provides consumers, policymakers, lenders, and investors with the information needed to make better decisions about which neighborhoods are truly affordable, and illuminate the implications of their policy and investment choices.