Is Sprawl Affordable for Americans?

Housing affordability has been one of the most persistent national concerns in the United States, mainly because housing costs are the biggest item in most household budgets. Urban sprawl has been proved by previous studies to be a driver of housing affordability. Previous studies, however, were structurally flawed because they considered only costs directly related to housing and ignored the transportation costs associated with a remote location. This study sought to determine whether, after transportation costs were taken into account, urban sprawl was still affordable for Americans. Multilevel modeling and the recently released location affordability indexes (LAIs) and metropolitan compactness indexes tested the relationship between sprawl and housing affordability. By controlling for covariates, this study found that in compact areas, the portion of household income spent on housing was greater but the portion of income spent on transportation was lower. Each 10% increase in a compactness score was associated with a 1.1% increase in housing costs and a 3.5% decrease in transportation costs relative to income. The combined cost of housing and transportation declined as the compactness score rose. As metropolitan compactness increased, transportation costs decreased faster than housing costs increased, creating a net decline in household costs. This is a novel finding, conditioned only on the quality of the data on which the LAI is based.