Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Thursday, October 12, 2006

Housing and Transportation Costs

There is rarely such a thing as a free lunch:

Relocating to Cheaper Housing May Not Help Low-Wage Families - WSJ.com: By JAMES R. HAGERTY> Moving to an area with lower housing costs often doesn't pay off for low-income Americans... transportation costs in places with cheaper housing are often so high that they wipe out the savings from lower rent or mortgage payments. Such places tend to be farther from employers or short on public transportation, which makes commuting costlier.

The study found that housing and transportation costs combined eat up an average of 57% of annual income for "working" families, which the study defines as those with incomes of $20,000 to $50,000 a year. The combined costs ranged from 54% of income in Pittsburgh to 63% in San Francisco; in 25 of the 28 metro areas, the combined total was within three percentage points of the 57% average.

The findings contradict the common notion that many people would be better off financially if they moved from areas with high housing costs, such as California, to states like Texas or Georgia, where housing is much cheaper. The median house price in San Diego, at $613,000, is four times that of Dallas. But the study found that working families in San Diego spend 59% of their income on housing and transportation, only slightly more than the 57% they spend in Dallas. Families in Dallas spent just 26% of their income on housing, compared with 31% in San Diego, but the Dallas families spent more on transport.

The study also found that moving to an inexpensive outer suburb, but continuing to work near a city center, often backfires. Typically, a move that adds more than about 12 miles to a one-way commute will result in a rise in transport costs that outweighs the savings on housing, the researchers found...

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