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MN2020 - Location, location, location
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Location, location, location

June 20, 2011 By Conrad deFiebre, Transportation Fellow

Real estate professionals are fond of saying that only three things matter when it comes to home prices: location, location and location. It means identical structures can vary widely in value depending on where they are.

Usually, this pertains to market judgments about "good" neighborhoods versus less desirable ones. This calculation, however, tends to ignore an important attribute of any home address—the relative ease with which the residents can reach the places they travel to most often.

This is no small consideration. We spend huge amounts of time and money on routine travel to jobs, school, shopping and recreation—all the more so the farther out into exurbia we chose to live—but seldom factor those costs into deciding where to make a home. Many of us "drive to qualify"—focused on getting more house for the money rather than the recurring, escalating costs of getting anywhere we need to go.

The reasons are many: artificially cheap fuel and road user fees, excellent roads reaching far and wide, rugged individualism that values semirural isolation over urban community, even America's long-running love affair with driving.

"Too much of America is dependent on a pattern that imagines we will always have an unlimited supply of inexpensive gasoline," said U.S. Rep. Earl Blumenauer of Oregon. "Government policies in housing, in road transportation, reinforce that."

Blumenauer chairs the congressional Liveable Communities Task Force, whose new report, "Freedom from Oil: How Transportation Choices Can Provide Gas Price Relief," explains this problem in depth and recommends better public transit, pay-by-the-mile auto insurance and infrastructure strategies such as "Complete Streets" and "Safe Routes to School" that encourage walking and bicycling for short trips instead of driving.

More than three years ago, another report documented the link between the bursting of the housing bubble and the 2008 spike in gasoline prices. Economist Joe Cortright of CEOs for Cities, in "Driven to the Brink," noted that "although housing prices are in decline almost everywhere, price declines are generally far more severe in far-flung suburbs and metropolitan areas with weak close-in neighborhoods. The reason for this shift is rooted in the dramatic increase in gas prices over the past five years."

This was published in May 2008, before two separate episodes of $4 gas at the pump and also before three more years of steadily, sickeningly falling home prices. Cortright was telling us there's no free lunch in sprawl housing, and subsequent events have only driven the point home.

Others, such as U.S. Rep. Michele Bachmann, have blamed the housing bubble on lax government mortgage lending policies in inner city neighborhoods. She should have looked closer to home, in her 6th Congressional District, which includes three outlying counties with some of the worst housing foreclosure rates in Minnesota—Anoka, Sherburne and Wright.

      

Hennepin and Ramsey counties have had foreclosure epidemics, too, but at rates less than two-thirds that of Sherburne, where one in 15 owner families lost their homes from 2009 to the first quarter of this year.

More evidence of the economic link between housing and transportation was offered by the National Resources Defense Council. Its 2010 study, "Reducing Foreclosures and Environmental Impacts through Location-Efficient Neighborhood Design," found that the probability of foreclosure rose with a neighborhood's average number of motor vehicles per household.

It's easy to see why. According to U.S. Bureau of Labor Statistics, the average U.S. family spends 16 to 19 percent of its income on transportation. But in auto-dependent neighborhoods, that burden rises to 25 percent. In areas rich in transit, biking-walking facilities and close-by jobs, stores and schools, it's only 9 percent.

Even corporations are awakening to this reality. Swiss banking giant UBS, which moved its North American headquarters from New York City to exurban Connecticut 15 years ago, now is considering a reverse migration to the rebuilt World Trade Center.

To be sure, none of this suggests that people shouldn't be free to locate wherever they want—as long as they can afford it. But that means families and issuers of government-backed mortgages should pay more attention to built-in travel costs in determining whether any location is really affordable.

For a Minnesota example, a 2010 study by the Center for Neighborhood Technology titled "Penny Wise, Pound Fuelish" found that Orono residents paid $1,830 more a year for transportation than those in the close-in Seward neighborhood of Minneapolis. Orno is a western Hennepin County suburb about 18 miles from downtown Minneapolis. In metropolitan areas such as Boston, Chicago and Phoenix, the difference between the edge and the core was more than $3,000.

As a nation, we spend more on transportation than on anything but housing itself, more than on food, twice as much as on health care. Location efficiency drives down travel costs while cutting harmful vehicle emissions and foreign oil dependency. It's time for Minnesota to recognize these benefits and do more to realize them.

Photo credit: Joey Rozier, creative commons

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