Rewarding urban living in mortgages and insurance
For over 50 years, the U.S. economy has shaped itself around suburban development and car-centric life. From mortgages to insurance, companies assumed that the standard household occupied a detached single-family home and drove to work. This built-in bias meant that even as Americans, from young singles to empty nesters, started to crave walkable cities once more, the economic deck was stacked against city life, keeping the middle class largely out of the cities.
Now, the market is responding to the recent demand by creating products tailored for urban living. Pay-as-you-drive insurance and location-efficient mortgages both give people credit for the driving they don't do and shouldn't have to pay for.
Progressive Auto Insurance is being, well, progressive by offering the nation's first pay-as-you-drive policy.
Drivers who sign up for MyRate will install a small wireless device in their cars that transmits to Progressive not just how many miles they drive but also when those miles are driven and, to some extent, how they are driven: the device measures the car’s speed every second, from which Progressive can derive acceleration and braking behavior. Which means that Progressive will not only be able to charge drivers for the actual miles they consume but will also better assess the true risk of each driver.According to Freakonomics authors Levitt and Dubner, between pollution, congestion, and damage from auto collisions create negative externalities to society of $300 million a year
People who commute by transit, foot, bike, rollerblade, scooter, or carpool save a lot of money in transportation costs (and more with PAYD insurance). Why not account for that in determining mortgage qualification? Lower expenses mean someone can reasonably afford a higher mortgage. That's the idea behind the Location-Efficient Mortgage, which are available so far in Chicago, Seattle, Los Angeles, and the SF Bay Area to home buyers who purchase homes in efficient locations.
It takes time for the economy to shift to accommodate new consumer demand, but it does. And the consumer demand is there for more walkable, transit-oriented urban neighborhoods. Not everyone wants to live in a townhouse with a corner grocery nearby, but more people do than can find safe, affordable townhouses. As long as cities allow more to be built, insurers and mortgage lenders will adapt.
- The war on Dana Milbank's car
- Two maps that explain what DC might look like as a state
- Have you been "walkblocked"? Are you "zonely"? New terms sprout in the urbanist lexicon
- David Catania's platform supports Metro, streetcars, bus lanes, bike lanes, transit-oriented development, and more
- This German city's monorail redefines river transportation
- "We built this city on: hot hipsters." Cards Against Urbanity wants to make you laugh
- Do you know the station? It's whichWMATA week 23