Notes on David Crowe's "NAHB Response to Evan Manvel,
Planning Advocate for 1000 Friends of Oregon."

by Evan Manvel, 1000 Friends of Oregon

For all its verbosity, Dr. Crowe's response acknowledges my first three criticisms of its index: that the Housing Opportunity Index is a limited index, that low affordability could simply mean low salaries, and that out-migration of low-income people increases the "affordability" ranking. On my fourth point, about NAHB's numbers not adding up, Dr. Crowe and I are ships passing in the night, as detailed below.

My Criticism #1 "NAHB's Calculation Asks the Wrong Question," urges people to think about what their underlying concerns are, and argues housing, transportation, and other activities are interlinked in many ways, including at the pocketbook. The title of the document, after all, is "Four Reasons NAHB's Housing Affordability Rankings Don't Tell Us What We Care About." While some policy analysts will care solely about the cost of housing, most people have broader concerns about "affordability", which the HOI does not (and perhaps cannot or should not) address.

My Criticism #2 "Low Affordability Could Mean Low Salaries, Not High Housing Costs" is agreed to by Crowe. The HOI lists Eugene-Springfield the third least affordable market in the nation. This is clearly due to their low median salary, not expensive housing. While Crowe may argue otherwise, for the general public making inferences from these rankings (about land use planning laws, among other things), cause is most definitely the issue. I urge NAHB to recognize many of their allies are using these numbers irresponsibly, and consider what about the rankings may invite such abuse.

My Criticism #3 "Places Where Poor People Can't and Don't Live are More 'Affordable,'" is agreed to by Crowe. Interestingly, in Crowe's response he notes Portland's affordability index has been falling. This could mean low-income people have remained in Portland, instead of leaving due to affordability concerns (if they left, the index would improve as the median salary would increase, which it has not been in real terms). While there are clear transaction costs (i.e. it's not easy for low-income people to move), housing has not become so expensive as to warrant moving out of the region (although displacement within the region is an important concern.)

My Criticism #4 "Numbers Don't Add Up," reflects my perception about the Housing Opportunity Index's lack of transparency. Because NAHB has refused to release the complete numbers about housing price distribution (which they use instead of median home price) to various people in our office, I am forced to use a rough estimate NAHB includes on their Web page: median home price. Using this ratio -- median home price to median income -- Portland fares better than 17 of the 18 cities ranked immediately above it in the HOI (only Salem, Oregon is better). Similarly, using raw home price, there are 31 cities with equally or more expensive median home prices.

In defending Portland's poor affordability ranking, Crowe is implying the distribution of home prices in Portland is very different from other cities (that is, the household earning the median income can afford a smaller segment of homes, even though the median price/income ratio is lower.) This is interesting to say the least, as NAHB has said other such distributions and rates of change should be assumed to be equal (for example, in defending their use of 1990 Census data for parts of the HOI, or making notes about "average" amounts spent on transportation.)

It is curious that NAHB argues in San Diego, where median home price is $43,000 more than in Portland, and median income only $100 more, the person with the median income can purchase a higher percentage of homes. Perhaps this is true. If it is, it points to the inherent weakness of the HOI: it picks one person at one income level, and does not take into account any other person's ability to find housing. If NAHB's numbers (about San Diego and Portland) are right, we cannot assume distributions are even close to similar, so generalizing from a single case is specious at best.

While rankings such as the HOI may be destined to have such weaknesses, this combined with the other key weaknesses of the index should compel policymakers and citizens to search for a more useful index of housing affordability.

Finally, I want to thank Dr. Crowe for correcting my error regarding median and mean incomes in an earlier draft of my criticism of NAHB's affordability numbers (since corrected), and his effort to explain the details of the HOI. Future drafts of my criticism will correct these errors.

NAHB's Response | Four Reasons...