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Four
Reasons NAHB's Housing Affordability Rankings Don't Tell Us What We Care
About
by
Evan Manvel, Planning Advocate
Portland,
Oregon, is often named as one of the nation's least affordable places
to live. The National Association of Home Builders (NAHB) has aggressively
promoted this claim through their affordability rankings. The NAHB's "Housing
Opportunity Index" compares recent single-family home sales with
local median salaries, and determines what percentage of the homes on
the market could be purchased by someone earning the median salary. However,
there are several flaws in this seemingly simple calculation.
1.
NAHB's Calculation Answers the Wrong Question
People really care about the cost of living, not just the cost of housing.
For example, some areas are much cheaper to live in because transportation
costs are lower, even though housing prices may be similar. Home financing
calculations are starting to reflect the impact of factors beyond salary
on housing affordability: The Federal National Mortgage Association ("Fannie
Mae") gives homebuyers credit for selecting a home near transit,
which frees them from the need to finance a second car.
2.
Low Affordability Could Mean Low Salaries, Not High Housing Costs
Home prices are only half of the equation. One could interpret low affordability
rankings for Oregon cities to mean that Oregon's employment markets are
among the worst paying in the nation. If you look solely at price, the
average home in the most "affordable" housing market in the
West—Anchorage, Alaska—costs $3,000 more than in Eugene-Springfield,
supposedly the third least affordable market in the U.S. Eugene-Springfield's
ranking is caused by its low median salary, not high housing costs.
3.
Places Where Poor People Can't and Don't Live Are More "Affordable"
There's a twisted logic to the math: using a relationship of median income
to home price means as prices rise and force low-income people to move
away, median income increases, thereby making the city more "affordable."
4.
NAHB's Numbers Don’t Add Up
Even if we agree that a relationship of median income to median home price
offers a good measure of affordability, NAHB's rankings make no sense.
Portland's median price/income ratio is better than sixteen of the seventeen
cities ranked immediately above it—the only exception being Salem.
Consider the following table (from 1999 NAHB data for the 2nd quarter
of 1999):
| Region |
Median
Home Price ($000) |
Median
Income ($000) |
Ratio |
NAHB
Affordability Rank |
| Los
Angeles, CA |
190 |
51.3 |
3.70 |
169 |
| Salem,
OR |
123 |
43.2 |
2.85 |
170 |
| Portsmouth,
NH |
160 |
49.5 |
3.23 |
171 |
| Santa
Barbara, CA |
195 |
52.1 |
3.74 |
172 |
| Oakland,
CA |
255 |
65.5 |
3.89 |
173 |
| Laredo,
TX |
103 |
30.2 |
3.41 |
174 |
| San
Diego, CA |
203 |
52.5 |
3.87 |
175 |
| Lowell,
MA |
230 |
61.8 |
3.72 |
176 |
| Portland,
OR |
160 |
52.4 |
3.05 |
177 |
| Eugene-Springfield,
OR |
130 |
41.2 |
3.16 |
182 |
NAHB has repeatedly refused requests to release the complete set of numbers
behind their housing affordability rankings. While NAHB says it has never
claimed Oregon's planning laws cause its poor HOI rating, many enemies
of Oregon's planning program are abusing NAHB's questionable affordability
rankings to further their anti-planning agenda.
NAHB's
Response
| Notes on NAHB's Response
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