Scott Bernstein is a believer in the power of information to help assess housing affordability. It's too bad, he says, most people get that metric entirely wrong.

On Monday, Bernstein – the founder of the Center for Neighborhood Technology and a long-time proponent of smart growth – shared his perspective with an audience at Metro Regional Center.

Much of Bernstein’s argument comes down to this: if you only look at the cost of the mortgage or rent, you’re missing the full equation of housing costs. And until you look at both, you’re not really equipped to solve the growing affordability crisis in many cities.

He showed how his organization’s Housing + Transportation Index – an open-source tool that anyone can use for free – shows something stark about true affordability.

Use the Housing + Transportation Index yourself

Residents in the Portland region spend approximately $11 billion a year on transportation.

For the average household, it's about 20 percent of what we take home in income.

But those costs aren’t sufficiently integrated into transportation or housing planning, Bernstein argues. And because transportation costs are spread out each time you go to the pump or buy a transit pass, not enough people are aware of how they add up to the overall cost of living.

“If people aren’t aware of how big a problem transportation expenditures are toward the cost of living there’s not going to be a demand” for better transit options, Bernstein said. “And if you don’t know change is possible the effective demand is going to be zero.”

A lot has changed since 19th century England, as depicted in this Victorian Era painting by Louise Rayner. But our notion of housing affordability remains about the same.

Is an 19th century English maxim the basis of what we think defines housing affordability?

The official conventional wisdom of housing affordability tends to be 30% of income on housing, Bernstein says – in fact, it’s defined that way in federal housing law.

But the source of that benchmark is murky. The best source Bernstein can find for it was an old English maxim advising “a week’s wage for a month’s rent.”

But that maxim misses something big that's also embedded in the price of where you live: how much it costs to get where you need to go.

The price on that house might be lower than comparable homes elsewhere -- but you won't know until you include transportation costs.

"Before you know it, you’ve bought an affordable house in an unaffordable location."

Where you live defines how far you have to go to get places you need to access, like work, school or shopping. Thus two kinds of costs can be defined as inherently tied to the location of your home: housing and transportation. And combining those costs shows the limitations of that old poem.

The average U.S. household spent 34 percent of income on housing last year, Bernstein said, and 17 percent on transportation. That means 51 percent of total income was spent on these place-based costs.

But even that statistic underestimates costs for some households, particularly those that live further than 20 miles from work, Bernstein said. For those people, transportation costs can actually exceed the cost of housing, when you add up the costs of owning, driving, maintaining, insuring and parking multiple cars.

“Before you know it, you’ve bought an affordable house in an unaffordable location,” Bernstein said.

Bernstein and his group define housing plus transportation affordability as 45 percent of income.

A similar target is embedded in Metro's Regional Framework Plan, which guides the agency's land use and transportation decision-making. A policy added in 2010 directs Metro to "reduce the percentage of the region's households…paying more than 50 percent of their incomes on housing and transportation."

And when you start to really look at how that adds up for people around the country and across the region, a lot of places that once looked affordable suddenly aren’t.

Two views of affordability in the Portland region: on the left, a map showing areas where people earning the median income can afford a home are marked in green. But when transportation costs are included, affordability for those houses looks more sparse.

At the region’s median income, over 200,000 households are in neighborhoods that appear affordable but aren’t – because transportation choices are too limited.

According to the federal government, housing affordability is defined as being able to spend less than 30 percent of your income on the mortgage or rent.

Taking the Portland-Vancouver region’s median income of $58,000, Bernstein used his organization’s online housing and transportation affordability index map to show which neighborhoods can meet that definition of affordability in the region.

See the map yourself and explore your community’s affordability

It’s a great big sea of green – from Vancouver in the north down through much of the region’s east side, Beaverton/Aloha south to Wilsonville and west to Hillsboro and Forest Grove. In fact, the average median-income household would spend 31 percent of income on housing, right in line with the federal government’s target.

But when transportation costs are thrown in, that sea of green turns into several distinct archipelagos. Areas near downtowns and transit look most affordable. And suddenly the average household is spending slightly over half its income on place-based costs.

At 80 percent of the region's median household income, housing plus transportation affordability looks even worse -- only a few places are affordable.

And that’s just for a median-income household. At 80 percent of median regional income – about $46,500 per household – things start to look really dire. Those islands of affordability become isolated atolls, and a household is spending more than 60 percent of income on housing plus transportation.

Almost nowhere that’s not immediately close to frequent transit or in a downtown looks affordable – again, even if housing costs alone might make it look that way.

Living within a half-mile of a transit station means a household sees, on average, a ten percentage-point drop in its combined housing and transportation costs.

Living near transit – if you use it – can be like getting a 10 percent raise, tax-free.

Bernstein’s group conducted national research on transportation costs for people living within a half-mile of rail, bus rapid transit or other fixed transit routes.

And virtually everywhere, the households that lived in that distance – which planners usually consider the maximum people are willing to walk to a transit station – reaped major rewards in lower combined costs of housing and transportation. They tended to drive less, own fewer cars and, unsurprisingly, use transit a lot more often.

In the Portland region, this added up to a 10 percentage-point savings in combined costs in 2009. That’s like a 10 percent raise without any additional income tax, Bernstein argues. For a household earning the median income in the region that would be 5,000 extra dollars to spend or save, a huge dividend.

“This isn’t theoretical,” Bernstein said. “When you invest the way you’ve been investing [in transit]… you’re providing a pretty tangible benefit” for people who choose to live near the system and use it to get where they’re going.

Numbers like these have power, Bernstein says – if we use them to drive decision-making. Some places already are.

Bernstein talks about the idea of “location efficiency.” It’s a measure of savings households can experience when they are near transit or within walking distance of amenities. A household being able to spend less than 45 percent of income on housing plus transportation is one sign it's location-efficient.

Some governments – from the feds down to cities and regions, including Metro – are already using such ideas to change how they approach housing, transportation and planning policy. They're making decisions about land use, transit construction, affordable housing and poverty reduction using the power of true affordability.

Metro's 2014 urban growth report, which will guide a Metro Council decision about the urban growth boundary next month – includes an appendix assessing housing and transportation cost burdens in the region and forecasting them to 2035. The analysis predicts a slight decline in the percentage of regional households spending more than 45 percent of their income on housing and transportation – from 17 percent today to 15 percent in 2035.

California used the idea to allocate $120 million of cap and trade proceeds for affordable housing near transit. The U.S. Housing and Urban Development Department and Department of Transportation are now using the idea to screen certain kinds of grant applications.

Bernstein believes this information should be accessible, and so it is – for free.

Bernstein argues that if more people and decision-makers knew these stats and appreciated their significance, more people could make informed decisions about where to live based on what they can really afford, and more governments would invest in transit and walkable neighborhoods and help get housing built near those investments.

To that end, the Center for Neighborhood Technology makes its housing and transportation affordability index available to anyone online – on an easy-to-use interactive map where users can type in a city, county, ZIP code or region and see for themselves what true affordability looks like – even comparing different incomes and averages.

Find it at htaindex.org