Housing + Transportation Costs

Coordination of land use and transportation planning is essential to improve quality of life. This web site is a resource to assist local governments in using important performance measures to quantify progress in achieving community planning goals and objectives. A number of planning and research documents are provided. Information in these can help to maximize community improvement by focusing on economic efficiency, social cohesion, imageability, and environmental protection.

 

The chart below depicts information from U.S. Consumer Expenditure Surveys (CES) against per capita personal income/vehicle miles traveled ratio (PCPI/PCVMT) over time.  PCPI/PCVMT is a key metric of community resiliency or the ability to withstand economic downturns.  As background, the first CES in 1901 showed expenditures in the following proportions: food 46%; housing 24%; and transportation 2%. The total is almost 73%, the bulk of consumer expenditures. The total has dropped to a fairly consistent level between 63%-65% from 1984-2012.  In part, this is due to expenditures on food dropping dramatically to 35% in 1935, 26% in 1960, and to between 13%-15% from 1984-2012.  At first glance it might seem as if consumers are better off.

 

However, the proportion of expenditures on housing increased to 33% by 1935 and has remained near that level since at least 1972.  Strikingly, transportation expenditures increased to about 9% in 1935, 15% in 1960, and has varied mostly between 18%-20% since 1972.  Consequently, housing plus transportation expenditures increased from about 26% in 1901 to between 49%-52% since 1972.  The bulk of spending formerly allocated to food and nutrition is now dedicated to travel.

 

PCPI (2010 $) has risen dramatically from about $6,200 in 1935 to more than $40,000 in 2012.  Setting aside income distribution equity issues, this appears to be a dramatic improvement in quality of life.  It comes at a price, much of which is associated with reliance on automobile travel.  PCVMT increased from virtually nothing in 1901 to about:  360 in 1918; 1,800 in 1935; 4,000 in 1960; 6,000 in 1972; 8,600 in 1990; 10,100 in 2005; before dropping to 9,500 in 2012.

 

The ratio of PCPI/PCVMT metric shows the extent that quality of life can be separated from the automobile-oriented economy.  The ancillary benefits are reduced reliance on non-renewable fuels, overall environmental damage/emissions reductions, and less time spent in traffic congestion.  Perhaps more importantly are the benefits gained from dollars retained in local economies from reduced travel, resulting in higher levels of base, wealth-building, and overall employment.  As depicted by the chart, PCPI/PCVMT ratios (2010 $) have ranged from about 3.6 to 4.5 since 1935 (BEA Income and FHWA VMT Data).  Of note is the high PCPI/PCVMT ratio of about 4.5 in 1950 (and PCVMT of about 3,000) which then began to decline as the massive highway-building program began.  The PCPI/PCVMT ratio bottomed-out at 3.6 in 1995.  In relation, the chart also shows the rising proportion of household transportation expenditures from a low of 8.5 percent in 1935 to a high of 25.7 percent in 1986.  The level has since stabilized at about 16-19 percent through 2012.  At the same time, PCPI/PCVMT ratio began to climb from the 1995 low to a high of 4.3 in 2012.  There could be several reasons for this trend change.  Declining marginal benefits from increased travel may have reached a point where they are no longer worth the increased transportation costs.  It may have become more difficult to reduce or even maintain past travel times without moving closer to employment and amenities due to increasing congestion.  The recession and sluggish economy from 2008 forward has likely curtailed driving.  The newest generation has not been driving to the same extent of their parents. 

The 1950s in the U.S. are often thought of as an idyllic time as the country transitioned to a more suburban and prosperous lifestyle during the post-war period.  The benefits of transportation are evident as higher percentages of households owned vehicles which allowed quicker access to more amenities.  Declines in weighted population densities (clustering) in the U.S. have continued for years as population and employment spread out.  Average household number of vehicles was about one in 1960 and is near two in 2014.  One of the main reasons for this trend is that consumers are not receiving market-rate pricing signals regarding the costs of transportation.  Transportation statistics for recent years and a study by the Public Interest Research Group show that roadways are subsidized by up to 50 percent and more from general and non-user revenues [1][2].  Public transportation subsidies are even higher.  Consequently, driving increases and transit use declines.  General revenues struggle to keep up with this rising inefficiency as no one wants to increase taxes.  Citizens pay these subsidies through sales or property taxes disproportionately to the level they use roads or transit.  Market-rate pricing through vehicle miles traveled (VMT), congestion pricing fees, and distance-based transit fares are a rational answer to this dilemma.  With VMT fees, those using the roads pay taxes by the distance they travel.  This provides direct accountability for the wear and tear on the road.  This charge allows reductions in sales or property taxes and encourages people and entities to move closer together to reduce travel costs.  Those with low-miles per gallon (MPG) vehicles might not pay much more than they do with conventional fuel taxes.  Others with higher-mpg cars will still save money from reduced fuel usage as always.  However, they will no longer be able to avoid full accountability for the costs imposed by their vehicles on the roadways.  Congestion pricing accounts for the delays to others that drivers impose when choosing to drive at peak periods.  It also can be used to charge a premium for using express lanes.

 

Research has shown that transportation pricing reform could improve economic efficiency by reducing VMT up to 30 percent or more [3].  This would represent an optimal level of PCPI/PCVMT ratios that balance housing, transportation, and health needs that are not detrimental to future generations and the ecosystem.  The ratio was 4.2 in 1935 when streetcars existed in most larger urban areas and transit expenditures represented 60% of household transportation spending.  Transit expenditures declined to 13% of household transportation spending by 1950 to about 5%-6% from 1972-2012.  It is well documented that more choices for transportation (i.e. auto, car sharing, public transportation, bicycle, walking) increases economic efficiency.  The return of fixed guideway transportation in the form of streetcars and light rail is evidence of their viability in appropriate urban settings.  Public policy can be informed through use of the right performance measures to help establish modal balance.  Basic key metrics include weighted population and employment densities, roadway and sidewalk connectivity indexes, mode share, PCVMT, per capita transit ridership, percentage of households and employment within ¼ to ½ mile from transit among others.

 

1. Federal Highway Administration. (2015). Highway Statistics. Tables HF-10, LGF-21 

2. Dutzik,T., Weissman, G., & Baxandall, P. (2015). Who Pays for Roads? Frontier Group. U.S. PIRG Education Fund.

3. Litman, T.  (2014). The Mobility-Productivity Paradox. Victoria Transport Policy Institute.

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Information on this web site is based primarily on research and analysis conducted by R. Arkell, AICP.  Apart from the citations, this information including conclusions, interpretations, and opinions does not necessarily represent the interests, views, or position of any other person, organization or agency.