Newspaper article

Is There — or Is There Not — an Affordable Housing Crisis in the Twin Cities?

Newspaper article

Is There — or Is There Not — an Affordable Housing Crisis in the Twin Cities?

Article excerpt

Minneapolis city officials are saying it, a St. Paul neighborhood group is saying it, and housing advocacy groups are saying it: the Twin Cities are in an affordable housing crisis.

That might come as a surprise to some. After all, this isn’t San Francisco, overrun with wealthy tech bros and with limited room to expand. To be sure, the Twin Cities are more affordable than a lot of coastal cities.

In fact, overall, data on housing affordability in Minneapolis and St. Paul indicates that the portion of income people spend on housing is actually going down.

So does that mean talk of a crisis in housing affordability is overblown? Not quite. Because what that overall number fails to show is that even as housing becomes more affordable for some, it’s becoming less so for others.

Measuring affordability

First things first: how do we know whether housing is unaffordable or not? The standard measure for whether housing is affordable or not is if a household is spending 30 percent or more of its income on housing expenses.

That means a household making $30,000 a year shouldn’t spend more than about $750 a month on an apartment or house and utilities. A household making $100,000 a year shouldn’t spend over $2,500. If they do, they’re considered “cost-burdened.”

The 30 percent metric evolved out of federal housing programs, beginning in 1937, when the United States National Housing Act created the public housing program and set limits on the amount families could make to qualify for it, according to the U.S. Census Bureau. Eventually, a share of income — first 25 percent and then 30 percent— was adopted as a standard. Since 30 percent became a widely used benchmark for determining how much households would spend on rent and still be able to pay for their other expenses, it was adopted in the mainstream housing market.

But is a standard developed 80 years ago still relevant today? Not everyone thinks so. Critics dismiss the 30 percent benchmark as all but meaningless because it doesn’t account for the differences in other expenses households have, be they medical or transportation costs. Plus, they say, there’s no reasonable expectation that two households should aim to spend the same amount of their income on housing. Generally, poorer people spend a larger share of their income on rents or mortgages, while high-income people spend less.

“Clearly, Bill Gates doesn't spend 30 percent of his income on housing,” said David Bieri, an associate professor of urban affairs at Virginia Tech.

So what alternative measures are out there? One general way to think about housing affordability, Bieri said, is to ask whether or not a household could stay in its housing for the average duration of unemployment in the area. If it could, the housing might be considered affordable. If not, that household might be cost-burdened. But this would be complicated to measure in a comprehensive way for all households in a given area.

Sticking to numbers that are easier to measure, another metric, preferred by some, is the H+T index, calculated by the Center for Neighborhood Technology. H+T starts with a regular income threshold and adds in transportation costs, which it says are most households’ second-largest expense.

According to this measure, housing is affordable if households spend no more than 45 percent of their income on housing and transportation. When you factor in transportation like this, some parts of the suburbs, where households would presumably spend more on transportation, become less affordable.

In Minneapolis, the average moderate income household, making $55,000 a year, spends 44 percent of its income on housing and transportation costs — just under the 45 percent threshold — while in St. Paul, the average is 43, according to this index.

In San Francisco, a moderate income household makes $65,000 and spends 50 percent of that on housing and transportation. …

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