Tag Archives: household

Location Affordability in NYC

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Following up on two earlier posts (here and here) about Citizens Budget Commission policy briefs on housing affordability, I turn to a third one, Location Affordability in Large U.S. Cities. As a refresher, “Location affordability recognizes that the costs of housing and transportation, usually the two largest items in household budgets, are inextricably linked, and considering them together in relation to income gives a good sense of a city’s location affordability.” (1) the CBC’s key findings are that,

  • For moderate- and middle-income households, location costs in New York City are below the 45 percent affordability threshold due mostly to low commuting costs. New York City ranks well—ranging from second to sixth most affordable—among the 22 large cities.
  • For low-income households, location costs in New York City exceed the affordability threshold. A low-income family requires 47 percent of income for these costs and a single worker household requires 56 percent; for a single person earning a wage at the national poverty line, location costs in New York City are particularly burdensome at 101 percent of income. Almost all cities examined were unaffordable to low-income households. (1, citation omitted)

There are a lot of interesting implications that arise from these policy briefs.  Most important, they provide another (if it were even necessary) argument that scarce affordable housing dollars should be concentrated on low-income households. After all, NYC moderate- and middle-income households are doing better than in most other large American cities when transportation expenses are taken into account in an affordability index.

It would be most worthwhile for the de Blasio Administration to incorporate something like HUD’s Location Affordability Index into its housing plan.

Reiss on Paying off Underwater Mortgages

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MainStreet.com quoted me in What Bills Should You Pay First? It reads in part,

Consumers started prioritizing their mortgage payments ahead of their credit card payments as of September 2013, according to a new TransUnion study.

This reverses a trend that began in September 2008 when the mortgage crisis drove consumers to pay their credit cards bills ahead of mortgages. Consumers have placed an emphasis on paying their auto loans before their mortgages and credit card payments by a wide margin – since at least 2003, TransUnion said. The study obtained anonymous consumer information from December 2002 through December 2012, and each monthly sample included about 2.5 million consumers.

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Many consumers were faced with devaluing home prices and chose to preserve their credit line, said David Reiss, professor of law at Brooklyn Law School in New York.

“The underwater mortgage may have seemed like a sinkhole when prices were dropping and putting limited funds into it might have seemed like throwing good money after bad,” he said. “When a household’s income can’t cover all of its expenses, it has to prioritize its payments. If the mortgage is underwater, it may make sense to use those limited funds to protect assets that are integral to daily living and wage earning like an auto or to focus on tools like credit cards that may have some use going forward, if there is still any available credit left.”

Homeowners have reversed that logic with the rebound of housing prices, Reiss said.”If homeowners have equity in their home from those rising prices, prioritizing the mortgage protects that equity and keeps the household in the house to boot,” he said. “Not everyone makes such a calculation, but many do.”