Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Wednesday, January 21, 2015

Canadians are different than "Americans" when it comes to weighing choices about where to live

Well, at least residents of Greater Toronto are different.  The Toronto Star reports in "Buying a cheaper home outside Toronto may not pay off: Homebuyers should consider the high cost of commuting in the GTA when deciding where to live, says a study by Pembina-RBC," on a study published by the Pembina Institute, 2014 Home Location Preference Survey: Understanding where GTA residents prefer to live and commute, which looks at neighborhood preferences in terms of the cost of housing and cost of transportation.

From the article:
In the study, the likely selling price and carrying costs of each of those potential homes is calculated along with the lifestyle and financial implications of the different locations. The case studies showed that the most lifestyle friendly home choices in terms of walkable neighbourhood, amenities and shorter commute times aren’t always in downtown Toronto. They are also found in 905-area hubs such as Oakville, Port Credit and Markham Village.

Sometimes the difference in price, once commuting costs are factored in, is eye-popping. In one case, the report found that a house in Mississauga’s walkable Port Credit neighbourhood would have cost $1,000 a month less than a Milton house priced at $180,000 less.

But that difference depended on giving up one of the family cars in favour of a transit — a radical notion for many homebuyers.
Compared to the US, the results are startling because 81% of respondents prefer "location efficient living" that isn't automobile-centric and dependent, and this preference is true across all age groups.

The report is worth reading page-by-page because they drill down deeper into people's preferences, which is good in terms of dealing with the often "yes, but..." discussions that people have when discussing urban-town-city vs. "suburban" housing choices.

Separately the study provides four interactive case studies showing the economic costs of various housing and transportation combinations.

Key Findings:

1. GTA homebuyers prefer walkable, transit-friendly neighbourhoods to car-dependent locations

- When housing costs are not a factor, 81% of respondents would choose to live in an urban or suburban neighbourhood where they can walk to stores, restaurants and other amenities, and where they can access frequent rapid transit. They would choose these neighbourhoods even if it meant trading a large house and yard for a modest house, townhouse or condo.

2. Most homebuyers choose a location based on price rather than preferences

- Affordability is a primary consideration; over 80% of respondents choose a neighbourhood because that is where they can afford a home.

3. Walkable, transit-friendly suburbs are becoming more popular

- When the cost of housing is not a factor, only 19% of respondents would choose a suburban location with a large home and yard, but where a car is required and commuting takes more than 30 minutes.

- By contrast, 42% of respondents would choose a modest house, townhouse or condo in an urban or
suburban location that is walkable, and where it is possible to commute by rapid transit.

4. All age groups and family types prefer location-efficient living

- If cost were not an issue, all age groups would prefer to live in a location-efficient city or suburb, with 82% of respondents over 60 and 84% under 35 exhibiting that preference.

5. Understanding transportation costs makes homebuyers more likely to choose a walkable,
transit-friendly neighbourhood

- Homebuyer preferences shift when they are told that they can save a minimum of $200,000 over
a 25-year period by giving up one household car and walking, biking or taking transit.

- When informed of these savings, 60% of respondents would choose to live in an area with easy access to rapid transit, even if they could only afford a smaller home.

- Only 36% of respondents would choose a larger home in an area without access to rapid transit

Island Press - Option of Urbanism Investing in a New American Dream - Christopher LeinbergerThese results are in line, but more pronounced, compared to the findings by Christopher Leinberger as discussed in the book Options of Urbanism, where he writes that 30% of people prefer city-town living, 40% prefer traditional suburbs, and 30% are happy to choose either, depending on what is available at the time.

Similarly, they remind me of Kyle Ezell's thesis in the out-of-print book Get Urban, where he argues that you don't have to live in Manhattan to be able to live an urban experience.  And note that increased demand to live  in the center of cities is being experienced across the US, in cities like Nashville, Memphis, Detroit, etc., even if other parts of center cities languish.

And as the study makes clear, in Greater Toronto anyway, people don't have a hard time figuring out that walkable urban places, what Leinberger calls "WalkUPs" in other writings, aren't exclusive to center cities.

Note that in the US, while recommended housing costs tends to be around 30% of household income, transportation costs are 20% of household income.   According to the Housing + Transportation Affordability Index from the Center for Neighborhood Technology:
The traditional measure of affordability recommends that housing cost no more than 30% of income. Under this view, three out of four (76%) US neighborhoods are considered “affordable” to the typical household. However, that benchmark ignores transportation costs, which are typically a household’s second largest expenditure. The H+T Index offers an expanded view of affordability, one that combines housing and transportation costs and sets the benchmark at no more than 45% of household income.
And while it doesn't seem to have gathered a lot of traction, the Location Efficient Mortgage concept, developed by the Center for Neighborhood Technology at least 10 years before they developed the Housing + Transportation Affordability Index is designed to allow households to buy "more expensive houses" because it takes into account a lowered cost of transportation.

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At 10:25 AM, Anonymous Alex B. said...

It's always interesting to compare the US to Canada, but it's also worth noting some key differences between Canadian housing policy and US housing policy:

Canada has no mortgage interest deduction; the government policies on backing up mortgages aren't similar at all.

The end result is that the most common Canadian mortgages are much shorter in term (5, 10, or 15 years) and they are closed (e.g. the terms are set for the life of the mortgage - no refinancing without penalty), often requiring much higher down payments than we see in the US.

At 11:20 AM, Anonymous charlie said...

Killing the 30 year is a bigger deal than the deduction.

Average mortgage life in the US is about 7 years. People move. A lot. Basic exit strategy. Not sure what the numbers are like in Canada.

And in terms of the behavior, it is very much lke the US. What peopel prefer isn't what people can afford, and people pick affordability first.

Schools make a big difference as well.

At 11:31 AM, Blogger Richard Layman said...

what most intrigues me about the report is that it drills down on preferences, to a degree that we don't typically see in similar research in the US.

It's important because it shows a greater preference for "urbanism" than is typically expressed in the US, at least in the studies we see.

That's why Leinberger's work is so important. (At the same time, he is a developer at heart, and he is agnostic about where, e.g., suburban vs. center city, he doesn't really care, so long as it is urbanistic.)

2. wrt charlie's point about "average" life of a mortgage, I bet the reality is a bit more complicated, and "bi-modal."

Probably a large proportion of people are pretty mobile, and a large number of people are not. E.g., already we've been in our house for 6+ years, and as long as we stay in the DC area, we're likely to be here awhile.

There are 6 "new houses" on the block, and that's the case for 4 of the houses, all 6+ years. The other two are just too new to have reached that length of time, but there is no reason to think that they will not.

OTOH, according to the H&T index, the combined cost of housing and transportation in our block group is 17% of household income.

At 12:02 PM, Anonymous charlie said...

yes, I'd argue a higher valuation means it more likely that you will stay an invest.

The 30 year is built on the idea you will trade up every 5 years. Not a real interest in improving the area.

At 12:17 PM, Blogger Richard Layman said...

well, just your comments prove how difficult it can be to make sweeping statements on this topic.

E.g., the higher valuation point. OTOH, being stuck with a low value house may keep you in place too, but you won't invest in it. (cf. _Building Neighborhood Confidence_ by Goetze).

Partly this issue of involvement is the flip side of the other post on Councilmember platforms and civic engagement.

I argue, theoretically, that the reason renters aren't involved is that we don't endeavor to engage them.

But for a variety of reasons they may be less inclined to get involved, including the point you make about the likelihood of them being in the place for only a short time.

In public housing, I think that engagement is a big issue. People are likely to stay a long time, but aren't expected to be involved.

IF we could change that dynamic, things could probably improve both for the household and the housing project.

The LA Community Safety Project is one example of an element of this. And some of the great things the Tacoma Housing Authority is doing too.

Probably there are other examples, I'm just not familiar with them.


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