Location lowers consumer costs for housing, transportation

Metropolitan areas with more compact growth, a wide mix of land uses, plentiful transportation options, and which were mostly developed prior to the use of the automobile are generally less expensive places to live, in terms of the combined costs for housing and transportation, according to an analysis of consumer expenditures by the Urban Land Institute.

The analysis, conducted by ULI Senior Resident Transportation Fellow Robert Dunphy, involved consumer expenses in 28 metropolitan areas during 2001, according to spending data released earlier this year by the U.S. Bureau of Labor Statistics. Not surprisingly, housing accounted for one-third of spending by U.S. households in 2001, twice the amount spent in 1972, reflecting "higher homeownership and larger and lavish homes," Dunphy said in a ULI news release.

However, transportation costs ranked a close second to housing, at 19 percent of the average household budget, more than food and clothing combined. The average household spent more than $7,600 annually on transportation, of which $7,200 was for buying and maintaining cars and trucks. In comparison, an average of $400 was spent on public transportation, which included expenditures for air fares.

Together, housing and transportation costs accounted for 52 percent of annual consumer expenditures nationwide, with lower-income households spending an average of 53 percent and higher-income households spending an average of 49 percent. The differences in metro area expenditures reflected local variations in costs for housing, transportation, and incomes.

"The price of location works two ways," Dunphy said. "One way to cope with the high cost of housing is by moving to a lower-cost location and commuting. Another way is to bite the bullet, pay the cost of a prime location, and enjoy the savings in time and transportation costs conferred by being closer to work and entertainment and having travel options. Urban housing markets are composed of both kinds of consumers."

Market breakdown

The top 10 markets in which housing accounted for the highest share of household spending were: Los Angeles, San Diego, San Francisco, Atlanta, Washington, New York, Miami, Boston, Chicago and Denver, with the portion ranging from 36 percent in Denver to nearly 38 percent in Los Angeles. Markets in which housing accounted for the lowest share of household spending between 29 percent and 32 percent were St. Louis, Pittsburgh, Minneapolis/St. Paul, Kansas City, Cincinnati, Houston, Dallas, Tampa, Anchorage, and surprisingly, Honolulu a high market for home prices, but not for annual spending on housing.

The survey showed nine metro areas in which transportation spending accounted for at least 19 percent of household spending. Tampa, with a share of 25 percent, led the list for cities with high transportation costs, followed by Phoenix, Dallas, San Diego, Cleveland, Houston, Seattle, Pittsburgh, Cincinnati and St. Louis. Cities rating on the lower end for transportation costs 17 percent or less of household spending were New York, Boston, Washington, San Francisco, Philadelphia, Baltimore, Milwaukee, Portland (Ore.), Honolulu and, surprisingly, Atlanta a city known for its auto dependency.

The most expensive markets, in terms of combined spending on housing and transportation. were San Diego, with a share of 58 percent; Tampa, 56 percent; Los Angeles, 55.7 percent; Miami, 55.1 percent; Denver, 54.9 percent; Atlanta, 54.7 percent; Phoenix, 54.3 percent; San Francisco, 54.1 percent; and Cleveland, 54 percent.

New York and Washington are prime examples of trading high housing costs for affordable transportation, moving those areas from the high housing cost category to the middle-cost markets for combined housing/transportation costs, Dunphy noted.

"The study documents the pocketbook benefits of smart growth. The large cities with concentrated growth, mixed-use development and transportation options are places where high housing costs are somewhat offset by more affordable transportation, helping to bring down the combined location costs," Dunphy said. "Moreover, homeowners in these higher priced housing markets have the advantage of building wealth through home equity, rather than buying cars, which only depreciate."

Dunphy's analysis points to several strategies that have either been implemented or proposed to lower combined location costs:

More affordable housing in accessible locations Using financial incentives, tax advantages, special mortgage products and other programs to create more affordable housing opportunities in close-in locations.

Pay at the pump insurance Including the cost of car insurance in the price of gasoline, making drivers more cognizant of their total driving costs and possibly encouraging them to economize by driving less.

Gap transportation Reducing the need for two cars by increasing the availability of car sharing services for occasional driving needs.