Study: Costs for Basic Needs Climbing Faster than Income

A study finds that Miami residents spend nearly three-quarters of their money on housing, transportation.

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It's not your imagination: if it feels tougher to pay the bills now than it used to, that could easily be the case. A recent study shows that costs for basic needs have far outstripped income growth in recent years.

Combined costs for housing and transportation grew by 44 percent in the 25 largest U.S. metropolitan areas from 2000 to 2010, compared to only a 25 percent income hike, according to a recent study from the Center for Housing Policy and the Center for Neighborhood Technology. All told, moderate-income households (those making 50 to 100 percent of the median income) in those metro areas spend a majority of their income — 59 percent — on housing and transportation.

While the researchers didn't know exactly what they would find, the findings confirm their suspicion that life is generally getting less affordable.

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"At the end of the day, we did know that people are struggling, and this just confirms that the basic cost of living has gone up faster than incomes." says Jeffrey Lubell, Executive Director of the Center for Housing Policy. The study takes into account spending on housing costs like rent, mortgages, and utilities, as well as transportation cost estimate models that consider both automobile and public transit usage.

Like many other economic phenomena, this disparity between cost-of-living growth and income growth varies widely by geography. In Detroit, for example, the median income grew by only 8 percent from 2000 to 2010, while growth in housing and transportation costs grew by more than four times that rate, at 38 percent. At the other end of the spectrum, income grew by 28 percent in Seattle, nearly keeping pace with the 33 percent rate of growth in housing and transportation.

Still, housing and transportation costs outpaced income growth in all 25 metro areas, and in some places those growth rates helped to make for far less affordable lifestyles than others. In the Miami metropolitan area, housing and transportation costs combine to take up 72 percent of income for moderate-income households, according to data from the Census Bureau's 2006-2010 American Community Survey. The Riverside, Calif. metro area is close behind, with its moderate-income residents spending more than two-thirds of their income (69 percent) on transportation and housing.

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Meanwhile, Washington, D.C. — known as being an expensive place to live — is by this measure the most affordable of all the metro areas. Its moderate-income residents spend 51 percent of their money on housing and transit. Close behind are nearby cities Philadelphia (52 percent) and Baltimore (53 percent).

Washington is affordable in part because its residents have the highest incomes of any metro area in this study. In terms of dollars, housing and transportation are more expensive here than in any other metro area studied, at $2,660 a month, but Washington, D.C.'s high incomes make even these costs more manageable.

Still, Lubell says the city's relative affordability also points to transportation as a significant but often-overlooked part of a city's living experience. Of the 25 cities in this study, Washington, D.C., has the eleventh-most affordable housing (at 30 percent of the income of moderate-income households). However, it is tied with San Francisco as the cheapest metro area for transportation. Residents of the D.C. metro area spend 21 percent of their income on transportation, compared to 32 percent in Miami. Tampa residents spend the most in this area, at 35 percent.

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Likewise, he points to New York, which despite its notoriously high housing costs comes in as the tenth-most-affordable metro area of the 25 studied.

"Just imagine comparing New York to Cincinnati or Houston or Dallas — these are places where housing tends to be fairly low as a share of income, but transportation tends to be fairly high as a share of income because families are living far away and drive long distances," he says. "New York is exactly the opposite," he adds, pointing to the city's high housing prices but efficient transportation system.