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February 07, 2006

The True Cost of Home Ownership

Milhwyfwysprawl_cnu City housing is unaffordable. It's cheaper to buy a house in the suburbs, where you can get more for your money. Right?

Not so much, according to a new study from the Brookings Institute, "The Affordability Index," which challenges the conventional wisdom by arguing that the best way to assess affordability is with reference to the costs of both the home and the transportation necessitated by the home's location.

In an analysis of the Minneapolis-St. Paul metropolitan region, it turns out that the suburbs aren't nearly as affordable as they first appear; nor are city neighborhoods nearly as pricey. That's largely because suburban residents must spend more on cars ownership and use--they have, on average, 2.1 cars per household--while in-city residents can rely on cheaper forms of transport--they own only 1.2 cars per household. Even when in-city transit is factored in, a city resident spends less than half as much on transportation as a resident of far-flung suburb. That's real money--roughly $500 per month--that can make a big difference when it comes to affording a house.

But in deciding where to buy (or rent, for that matter), few of us assess the transportation-related costs, a factor which surely contributes to buyers choosing far flung developments. If planners can devise ways to apprise buyers (and renters) of the true costs of their housing choices, it would likely encourage residential density and mixed-use zoning. Because living near good transit service and within a short walk of services isn't just eco-groovy--it's smart financial planning.

Below the fold, two maps of affordability in the Minneapolis area...

(Click for larger versions.)



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» Affordability from Bruno and the Professor
The invaluable Cascadia Scorecard has a great post up on the myth of unaffordable urban housing. Turns out, when you factor in the cost of owning 2.1 cars (the average for suburbanites) versus 1.2 cars (the average for cityfolk), it's not so expensive ... [Read More]

Tracked on Feb 7, 2006 4:15:52 PM


I think that most home-buyers are well-aware of the additional cost of transportaion to outlying suburbs. I'd be curious to see the numbers of cars not per in-city resident but of in-city home-owner -- I bet it is similar to the figures for the suburbs.

And btw, you also have to add in the cost of education. Many parents in the Seattle area look at it as
1. private school if you live in Seattle
2. public school in the suburbs.
That's a $15 to $20 thousand a year swing per child.

Posted by: David Sucher | Feb 7, 2006 4:19:21 PM

Having grown up in the suburban Twin Cities (West St. Paul, represent!) it feels worth mentioning that transportation ownership cost analyses of the region are probably more pronounced for a couple reasons. First - it's harder to rely on transit there even if you choose to live near it because of the weather. If I miss my bus in the northwest, it's a hassle I'm willing to deal with, but my patience drops linearly with the mercury. It's a lot harder to choose to spend less disposable income on personal transportation. Second, the weather is a ton rougher on cars. The salt on the roads and potholes created by the wider annual temperature variation increase car ownership costs.

My wife and I considered transit accessibility a huge factor when we bought our Seattle home. IMO, transit agencies really fail to evangelize the fact that when choosing between a 20 minute bus (rail, etc.) commute and a 10 minute drive - you forfeit all 10 minutes from your day if you drive, but you can use the 20 minutes on public transportation almost however you want.

Posted by: Patrick Niemeyer | Feb 7, 2006 5:17:47 PM

1) I think most people considering where to buy a house don't think about whether they can make lifestyle changes based on where they decide to live; i.e., the family that has two cars rarely makes a conscious decision to live closer in and get rid of one car. Usually the decision is framed in terms of "we already have the expenses for these two cars and can't afford to live closer in as a result".

2) Regarding education: Let me be very blunt and say that I am firmly of the opinion that those who feel they can't send their kids to public school in Seattle are a) mostly white; and b) scared of the idea of having their white kids in school with all those colored kids. In other words, racist.

Performance of children in school (of all types of school) has far more to do with the level of effort and involvement of the parents and students than it does with what school district you happen to live in.

Finally, for me the education equation is different: I would rather send my kids to Seattle Public Schools than to schools in the wealthy suburbs because they will a) learn how to deal with people different than themselves; and b) be less likely to end up victim to senseless suburban violence. Incidents like the Columbine school shootings seem far more likely to happen in Bellevue or Edmonds than they do in Seattle.

Posted by: Roy Smith | Feb 8, 2006 5:54:24 PM