cheap housing offset by higher transportation costs
Wall Street Journal - October 11, 2006
Relocating to Cheaper Housing May Not Help Low-Wage Families By JAMES R. HAGERTY
Moving to an area with lower housing costs often doesn’t pay off for
low-income Americans, according to a study to be released today by
the Center for Housing Policy, a nonprofit research group based in
Washington.
The study, which looks at families with low to moderate incomes in 28
metropolitan areas, found that 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.
The data on housing and transport costs for working families come
from the 2000 U.S. Census. Since then, both housing and transport
costs have jumped, but Barbara J. Lipman, research director at the
Center for Housing Policy, said the results are still valid. Housing
and transport costs have grown by roughly similar amounts.
The center is an arm of the National Housing Conference, a nonprofit
group that favors more spending on affordable-housing programs for
low- and moderate-income people. The conference is funded by groups
including the MacArthur Foundation and mortgage-finance companies
Fannie Mae and Freddie Mac.