2007 Consumer Expenditures on Transportation & Housing: US Metropolitan Areas

It is popular for analysts to use the US Consumer Expenditures data to make points about the costs of living between metropolitan areas, especially with respect to transportation and housing. This is not a completely valid exercise, because the Consumer Expenditure report does not principally measure the cost of living. The Consumer Expenditure report is more a measure of preferences.

This is illustrated by considering the transportation sector. The Consumer Expenditure report divides transportation expenditures into four categories --- (1) vehicle purchases, (2) gasoline and motor oil, (3) other vehicle expenses and (4) public transportation.

The vehicle purchases category is reflective of the problem. This category reports the net cost of new and used vehicle purchases. The price a household pays, however, is not necessarily reflective of the cost of living with respect to vehicles. Some households might be happy with a new economy car with a base price of $10,000. Others may want a mid-sized car that may have a base price over $20,000, while still others may want a luxury car costing over $50,000 or even $200,000. All of these purchases are recorded as consumer expenditures. The $10,000 purchase may be reflective of the cost of living, the $20,000 to $200,000 purchase is reflective of a preference that exceeds the base cost of living. The same argument can be made with respect to houses. Many people buy houses that are more expensive, which skews the housing figure upward.

The only transportation expenses that are generally reflective of reflective of the cost of living are gasoline and motor oil and other vehicle expenses.

The following discussion outlines the situation with respect to Consumer Expenditures in Houston, which has often been the target of discrediting efforts by organizations hostile to the suburban lifestyles that now prevail throughout all metropolitan areas in the United States. The following data is calculated from the 2006-2007 Consumer Expenditures report, which is the latest and which contains information for 18 metropolitan areas.

    1. Houston ranks 2nd in total transportation expense per household, following Phoenix. A major component of this expense is vehicle purchases, with a considerable portion being “discretionary” as people buy cars that are more expensive than required for basic transportation (above). It also includes public transportation expense, principally airline fares.

    2. Houston ranks 3rd in automobile operating costs (gasoline and motor oil and other vehicle expense) per household, behind #1 San Francisco and #2 Los Angeles.

    3. Houston has a higher number of workers per household than most of the other metropolitan areas. This requires more vehicle travel. Houston’s automobile operating costs per worker rank 5th, behind #1 San Francisco, #2 Detroit, #3 Los Angeles and #4 New York.

    4. There is a well-known trade-off between house prices and driving distance, as many households live farther from employment locations so that they can afford better homes. Houston’s consumer expenditures per household on shelter (mortgages and rents) ranks 15th out of the 18 metropolitan areas. Only Dallas-Fort Worth, Cleveland and Detroit have lower combined housing and vehicle operations costs.

    5. When housing and vehicle operations are combined, Houston ranks 11th. The Houston figure is below both the average (mean) and the median for the 18 metropolitan areas.

Finally, the public transportation category is also misleading, because it includes airline travel and is not limited to local transit use. For example, in Houston, Federal Transit Administration data indicates that transit fares are at a level that would correspond to about $30 annually per household, leaving more than $450 for other expenses, principally airline fares.

United States Department of Labor, Bureau of Labor Statistics, http://www.bls.gov/cex/ .
Metropolitan data: http://www.bls.gov/cex/#data