High Housing Costs Not Offset by Low Transport Costs

Growth-management planners who have made housing unaffordable in California, Oregon, and other states respond that this high cost is offset by lower transportation costs in their cities. They call it the H+T Affordability Index, and the supposed reduced cost of transportation excuses all of the housing affordability problems their plans create.

In fact, most of their cost numbers are hypothetical, and their estimates seem likely manipulated to achieve the result they wanted. Fortunately, we now have a relatively independent source of information that directly contradicts the H+T claim.

The Economic Policy Institute (EPI) is a left-wing organization that seems to believe in income redistribution. However, it has no axe to grind about urban sprawl, so when it calculates the cost of living in various cities, it has no incentive to skew the data in favor of heavily planned regions.

EPI’s “family budget calculator” estimates the costs to families of various sizes of housing, food, child care, transportation, health care, other necessities, and taxes in each of more than 600 metropolitan and rural areas across the country. Frankly, their exact numbers may not be a lot more reliable than the H+T estimates, but at least they are not biased towards planning, so the relative costs may be more accurate.

According to EPI, the costs that vary the most among cities are child care, housing, and taxes. For a family of four, child care in the most-expensive cities costs four times as much as the least with a range of $18,000 a year; housing is more than three times as much with a range of $15,000 a year; and taxes, though a much smaller share of family budgets, can be about ten times as much in some areas as others with a range of $11,000 a year. (Taxes are actually estimated to be less than zero in some areas, apparently because the cost of living in those areas is so low that families earning the amount needed to cover those costs collect earned income credits on their tax bills.)

By comparison, transportation costs vary only slightly among cities and regions. The total range is only $1,700 a year. Moreover, Houston and Atlanta, the regions with some of the greatest sprawl, have the lowest transportation costs. But then, so do New York and Los Angeles, two of the more compact urban areas in the country.

Ayurvedic supplements to boost stamina are very much helpful for curing the problem of extreme fatigue due to excessive viagra side online exposure to stomach acid from so much vomiting. PEG-MGF is used to get free levitra produce stem cells in muscle fibers, so that they can fuse together and create original muscle cells. This semi – liquid version of kamagra hard pills is highly effective to treat testosterone deficiency. sildenafil 100mg tab Think of it on line viagra like a brand new car. EPI explains that it based transport costs mainly on vehicle-miles traveled. While it admits that public transportation may reduce this cost, it notes that “even public transportation carries significant costs if used every day.” (In fact, on average transit collects 24 cents per passenger mile, while driving costs about 35 cents per vehicle mile. So, if your car carries, on average, 1.6 people, driving is less expensive than public transit.)

One problem with both the EPI and H+T indices is that they are based on averages (and hypothetical averages at that). Low-income families have many ways to reduce these costs. For example, they can minimize child-care costs by enlisting the help of grandparents or other relatives. They can minimize transport costs by buying an old used car rather than a new car every five years. They can minimize housing costs by locating in less-desirable neighborhoods.

Of these options, housing is the most problematic. Less-desirable neighborhoods mean poor schools, more crime, and possibly longer commutes to work (especially as many transit agencies cut service to low-income neighborhoods in order to build rail lines to middle-class neighborhoods). Moreover, in regions with firm urban-growth boundaries, less-desirable neighborhoods are often gentrified by childless yuppies who can’t afford the better neighborhoods so they buy homes, evict the renters, and fix them up. So unless the low-income family is buying their less-desirable home, they run the risk of being kicked out.

Part of the variation in housing costs is due to differences in average incomes: in unfettered markets, median home prices tend to be about twice median family incomes. But most of the variation is due to growth-management planning making housing more expensive. Growth management also explains part of the variation in average incomes, as rising housing costs push low-income families out of rigidly planned regions.

The Antiplanner is not persuaded that EPI’s data are highly accurate. The food costs, for example, don’t vary at all from region to region, yet food in bigger cities with more supermarket competition tends to be lower priced than in small cities and rural areas.

But even if transport costs vary more than EPI estimates, they cannot possibly offset higher housing costs, as the total cost of transportation in the most-expensive areas–about $8,600 a year–is little more than half the variation in housing costs between the most- and least-expensive housing markets (which, as already noted, is more than $15,000 a year). Thus, the H+T hypothesis is simply wrong: planners cannot rely on lower transport costs to excuse their complicity in making housing unaffordable.

Incidentally, I was first alerted to the EPI index by a slightly overwrought article on the Atlantic Cities web site. That article includes a map showing costs in various cities but it contains a small error, attributing the costs of Austin County, Texas, to the Austin urban area, which is more than 100 miles away from the county.

Bookmark the permalink.

About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

7 Responses to High Housing Costs Not Offset by Low Transport Costs

  1. C. P. Zilliacus says:

    The Antiplanner wrote:

    EPI’s “family budget calculator” estimates the costs to families of various sizes of housing, food, child care, transportation, health care, other necessities, and taxes in each of more than 600 metropolitan and rural areas across the country. Frankly, their exact numbers may not be a lot more reliable than the H+T estimates, but at least they are not biased towards planning, so the relative costs may be more accurate.

    I checked them for parts of the United States that I know something about, and they seemed intuitively correct.

    EPI explains that it based transport costs mainly on vehicle-miles traveled. While it admits that public transportation may reduce this cost, it notes that “even public transportation carries significant costs if used every day.” (In fact, on average transit collects 24 cents per passenger mile, while driving costs about 35 cents per vehicle mile. So, if your car carries, on average, 1.6 people, driving is less expensive than public transit.)

    Please remember that taking transit usually involves spending more time on the trip as compared to driving a private automobile. There are some exceptions (for example, where commuter trains can run on tracks that allow speeds over 70 MPH; where buses can run in fast-moving tolled or HOV/toll or HOV lanes and even on rail lines where some stops are skipped (the best example of that probably being the sections of the New York City subway with four tracks, two local and two express)).

  2. Dan says:

    Randal, this is worse than your normal fare. You might want to tell Cato/AFP that you may want to cut back on the blog to work on your white papers, which may get distributed to elected staff. Blog output rarely makes it to staff level. I’d say you are tipping over toward unacceptable and this weak argumentation would never pass muster in a white/policy paper.

    .02

    DS

  3. MJ says:

    The EPI data critique aside, if the “Affordability” index people are still focusing on expenditure data, using transit fares (instead of actual costs), and ignoring the value of travel time, then their argument is moot.

  4. C. P. Zilliacus says:

    Dan wrote:

    Randal, this is worse than your normal fare. You might want to tell Cato/AFP that you may want to cut back on the blog to work on your white papers, which may get distributed to elected staff. Blog output rarely makes it to staff level. I’d say you are tipping over toward unacceptable and this weak argumentation would never pass muster in a white/policy paper.

    Dan, if you disagree with Randal, how’s about some specifics? The above is (IMO) weak, and I think you can do better.

  5. Frank says:

    When I read this post late last night/early this morning (don’t hate me for having summer off), I was bothered from the first sentence’s unsupported assertion. Over and over and over this assertion pops up with little or no supporting evidence. The post is loaded with eye-rolling rhetoric such as “gentrified by childless yuppies” (and I very much resemble resent that remark). There are a few good points (such as options for lowering car ownership costs), but they’re lost in the muck.

    Seems like I have to agree with Dan on this one.

  6. Frank says:

    Maybe I’ve posted this before. If so please excuse.

    Portland, Oregon, is well known for its relatively unique urban growth boundary (UGB), a very tight form of zoning designed to control sprawl. The UGB has recently been criticized for raising housing prices. From a theoretical perspective, the UGB will put upward pressure on land and thus housing prices, but the magnitude of this effect is uncertain. Increasing density should substitute for higher land prices, partially offsetting any reduction in the supply of housing. In addition, at any given moment, speculative factors influence housing price levels in bull markets such as the one Portland has been experiencing. This article presents an econometric analysis assessing these conflicting effects. We find the UGB has created upward pressure on housing prices, but the effect is relatively small in magnitude. Source. [Emphasis added.]

    Here’s a significant driver:

    Abstract: House prices generally depend on inflation, the yield curve and bank credit, but national differences in the mortgage markets also matter. House prices are more sensitive to short-term rates where floating rate mortgages are more widely used and more aggressive lending practices are associated with stronger feedback from prices to bank credit.

  7. Fred_Z says:

    No facts. No logic.

    What exactly is incorrect in AP’s facts and principles? Why do his facts and principles not hang together in syllogisms?

    If you won’t answer those two simple questions, shut up and go away.

Leave a Reply