Living near transit may reduce risk of foreclosure

Transportation costs add up

Steve Hawley, Feb 17, 10.

The risk of home foreclosures is lower in transit-oriented neighborhoods than in car-dependent communities, according to a National Resources Defense Council (NRDC) report cited in the Chicago Sun-Times.

The link gets stronger as gas prices rise, according to the article:

“In the suburbs, two or three cars and all that driving can cost more than the mortgage,” [Center for Neighborhood Technology president Scott] Bernstein said. “If gas prices go up, some percentage of people will find those pressures to be too much.”

Bernstein stressed that gas prices alone do not cause foreclosures, but they can hurt those people already dealing with high interest rates or recent job losses. He suggested that banks should offer better borrowing rates to individuals living in pedestrian- or transit-oriented neighborhoods to encourage more people to move there.

The NRDC report notes that the average American household spends $8,750 - or 17 percent of its pre-tax income - on transportation alone.

The Center for Neighborhood Technology (CNT), which contributed to the NRDC findings, has also created a Housing and Transportation Affordability Index for 55 of the nation’s largest regions, including Houston-Galveston-Brazoria, Dallas-Fort Worth, Austin-San Marcos, San Antonio, and El Paso. According to the maps, households in outlying areas of Houston spend more than 45 percent of their income on housing and transportation combined, while households closer to the urban core spend less.

Not everyone agrees with the NRDC and CNT:

Michael van Zalingen, director of homeownership services for Neighborhood Housing Services of Chicago, found the NRDC report “incomplete.” He noted that households facing foreclosure are typically in the red by $1,500 a month, because of job loss, a change in their mortgage cost or some other problem. Getting rid of a car and being able to take the train might save $200 a month, but that’s not enough.

“Fixing the transportation issue is not going to get those costs in line,” said van Zalingen. “If everyone had free excellent public transportation, at least 80 percent of the families in foreclosure would still be in foreclosure.”

However, van Zalingen agreed that banks should examine everyone’s ability to pay, and that transportation costs should be part of that equation.

NRDC report: Reducing Foreclosures and Environmental Impacts through Location-Efficient Neighborhood Design (pdf, 2.2 mb)
Center for Neighborhood Technology: Housing and Transportation Affordability Index