Thursday, August 23, 2007

Forbes flubs Houston commute costs + misc

Several people have passed along the recent Forbes article proclaiming Houston the most expensive city in the country for commuting. Forbes is usually on the ball, but for some reason they let the Surface Transportation Policy Partnership (STPP), a nonprofit research firm with a very anti-car agenda, do their ranking - a group I've criticized before for the flaws in their approach.

They note that Houstonians spend 20.9% of their annual household costs on getting to work. From that data point they make the leap that Houston is an expensive city to get around in. The problem is that a lot of those costs are completely voluntary. What do people do when they have a good income and cheap house? They buy a nice new SUV, truck, or luxury car to drive around in. These vehicles have high depreciation and fuel costs. But they chose to buy that vehicle for their commute and pay those costs. They could have just as easily bought a Honda Civic, Toyota Prius, or similar vehicle and cut their costs in half or more.

Here's an analogy: if a survey shows people living in River Oaks have expensive clothes, does that mean it's expensive to buy clothing if you live in River Oaks? Of course not. River Oaks people can buy their clothes from Target just like anyone else if they want to, but they choose to go out and buy expensive clothes instead.

One test I like to apply to these proliferating city rankings is this: is there something stupid or absurd the city could do to improve its ranking? If so, that's a sign of a bad ranking framework. In this case, if Houston adopted policies to drive up housing prices (or really increase any other household costs), hitting people's incomes and forcing them to cut back and buy cheaper cars, our commute-cost ranking would improve. Bad action -> good ranking = bad system.

On the plus side, they at least note that when it comes to combined income spent on housing and transportation, we drop dramatically to #14 because our housing is so affordable.

Moving on to an excerpt on transit:

The study also found a very high correlation between cities that had extensive train systems and those in which households spent the least on transportation costs. Four of the five cheapest commutes were rated as having large or extensive rail systems...

It's important to understand, though, that the least costly commutes tend to be accompanied by high housing costs. New York and San Francisco were among the cheapest in the country, at two and seven respectively and have some of the highest housing expenses and least affordable housing markets in the nation.

Of course, when calculating the "cost of commuting" for those cities, they're ignoring the taxes that people pay to subsidize the transit system. Not surprisingly, if you can get the government to pay 60-80% of the cost of your transit commute, your out-of-pocket cost looks pretty cheap.

UPDATE: The Antiplanner picks up the story too, and gets a response from the Forbes author.

Moving on, a few minor items to finish out the week:

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18 Comments:

At 12:22 AM, August 24, 2007, Blogger Michael said...

Like I said before, you raise some valid points. But the article is clear - they are talking about household costs, not taking into account taxes, or what is voluntary and what isn't. You can say it isn't apples to apples, but look at where that gets Washington DC and St. Louis every year when the homicide rankings come out.

I think average cost, after taxes, is an important metric. Take housing costs, for instance. By your argument, I could live in a 200 square foot shack in San Francisco for $700 / month. By that logic, San Francisco doesn't have expensive housing, there are just a bunch of idiots there buying million dollar homes when they could choose to be homeless, or rent a dump, or settle for less square footage. Hey, I could drive a used '83 Camry with 150,000 miles on it! Or not. An average is meant to come up with a figure representing the hypothetical "average" person. Does that person want to live in a shack, or drive a Pinto? Um, nope.

What metrics do we look at, then? Average price per square foot, for one, in housing. Note that this number does not include yearly taxes either - it is a sales price. In commuting, what are my average costs, out of pocket? If we are going to look at taxes, then we have to remember that Houston's highway system is also subsidized by the government. And, if anything, Houston is foolish to not take federal money that is ours for the taking to build more mass transit projects.

Why does Houston have a higher average cost? Let's look at some real reasons that are pretty obvious:
1) We commute further - from the Woodlands and beyond - we average some of the highest commute times in the nation. Longer commutes are more expensive - a price you pay for sprawl. And being a really big city. Maybe it is not fair to compare Houston to Tulsa in this way, but, then you have no comparison...
2) Our traffic is bad - we sit in traffic an extra 60 some odd hours a year. Again, time sitting in traffic is wasted time, gas, etc.
3) We have tollways on several of our major arteries - this could easily drive your cost of commuting up $1-2k per year, if not more
4) In general, we don't drive very fuel efficient or cost-effective vehicles here. Lots of Houstonians have trucks, SUVs, etc. I'm not going to argue this is bad, just that it is more expensive than driving a Civic.

Anyway, the numbers make sense to me. And Forbes, apparently.

Even if you look at federal tax dollars, I think this skews the numbers even further from Houston. Why? We are paying the same federal taxes as our friends in NY, Chicago, etc. But we get almost nothing to help build mass transit projects locally because the politicians we elect oppose these efforts. So, in effect, we are just giving money to Dallas, NY, DC, etc. How does that make Houston look cheaper to you? In my cost / benefit analysis, looking at taxes for mass transit is an area where we share the cost, but get virtually no benefit.

Maybe if we were Tulsa, and our mass transit projects would not be approved, then your argument makes sense. We would be subsidizing NYC "against our will". But here in Houston, the opposite is true. We are subsidizing NYC because we don't want these projects - to go with your theme, this seems like another "voluntary cost".

 
At 8:08 AM, August 24, 2007, Blogger Brian Shelley said...

A better metric would be to break down commuting trips by of mode of transportation, trip time and distance. Then calculate the expected costs given the price of fuel in that area and actual cost of public transit, but use a standard vehicle depreciation for all cities.

A better metric for estimating cost of housing needs to exist as well. There needs to be a cost/sq. foot of property improvements separated from land costs.

I have heard reports that the average home in Houston is not only cheaper, but larger than the national average. However, this begs the question of whether homes in Houston are cheaper because they are of lower quality. Is it fair to weigh a cheap tract home in Houston to a home of the same size in San Fran with very expensive upgrades? It has been my limited experience that in other cities homes are more expensive, smaller, and include lower value amenities. This would further expand the price gap between Houston and other major cities.

 
At 9:53 AM, August 24, 2007, Anonymous Anonymous said...

I have to chuckle at the punches at STPP when there are so many posts here from Reason. I'm just sayin'...

 
At 10:53 AM, August 24, 2007, Blogger Tory Gattis said...

Housing and commuting are inherently different. If housing is more expensive in a city, it's more expensive across the range for equivalent houses. You can't escape it. But you can escape having an expensive driving commute, based on your choice of vehicle. A Honda Civic is pretty much the same cost to own and operate across the country, with minor differences for gas, taxes, and insurance.

Brian's right, you have to compare equivalents. The ACCRA cost of living index does that, by creating a middle lifestyle standard, and finding its cost in each city. 100 is US avg, and Houston is 74 for housing, 99 for transportation, and 90 composite/overall, which is amazingly inexpensive for a city our size. That puts us right at the national average for transportation, not the most expensive in the country. Other transportation indexes: NYC is 125, SF 115, Chicago 117, Boston 114, DC 110.

BTW, we do take our federal transit money. It's going to the LRT-BRT system.

 
At 10:56 AM, August 24, 2007, Blogger Tory Gattis said...

> Anyway, the numbers make sense to me. And Forbes, apparently.

Oh, I agree the data is correct. I just disagree with the leap of logic from "people here spend a lot of their income on cars" to "it is inherently expensive to get around Houston."

 
At 11:49 AM, August 24, 2007, Blogger ian said...

"if you can get the government to pay 60-80% of the cost of your transit commute, your out-of-pocket cost looks pretty cheap."

And if you factor in externalities such as air pollution and lost time due to traffic congestion, they look (and are) even cheaper...

 
At 11:53 AM, August 24, 2007, Blogger Michael said...

Nobody made the "leap of faith" that transportation is "inherently more expensive" in Houston. I guess your concern would be that readers of Forbes would do that... but the article makes pretty clear that Houstonians may in part be choosing to spend more money on transportation, as you suggest. There are also some inherent factors at play as well, as I mentioned previously.

 
At 12:05 PM, August 24, 2007, Anonymous Anonymous said...

I think that taxes on vehicles make a big difference too.
When I used to live in Northern Virginia (DC metro), I was paying over $1300 in annual “personal property tax” on my car. That’s over a $100/mo of taxes on the darn car. I am not saying everybody is paying that much annually on their cars. The average car is probably around $200-$400 annually. I choose to drive a $45K car regardless if I am in Houston or in DC area but the ownership cost of the car is much much less in Houston.

My understanding is that Virginia is one of the few states (actually a commonwealth) that have this type of tax on vehicles.

Plus the gas in Houston tends to be 10-20 cents cheaper than DC area at any given time.

 
At 3:44 PM, August 24, 2007, Blogger Tory Gattis said...

> And if you factor in externalities such as air pollution and lost time due to traffic congestion, they look (and are) even cheaper...

On average, transit commutes take longer than car-based ones, so they actually have a higher lost-time cost. Air pollution is debatable, and depends on all sorts of assumptions. Half-empty diesel buses or LRT trains running on coal-produced electricity can actually have higher pollution per person than cars. But if the transit runs full, as they often do at commute times, they do pollute less on a net basis than a single person car.

 
At 5:21 PM, August 24, 2007, Anonymous Anonymous said...

Your argument really doesn't make sense since the type of cars people buy here are the same as in all cities across the country. It's not like people on the coasts all drive hybrids or something... give me a break, I have first hand experience to tell you that simply is not true. I'll agree there are more trucks on the road here, but there are definitely not more huge SUVs here than in other cities.

Overall, given the cheap cost of housing and good job market, I'll agree that Houston is a bargain compared to most cities; but as far as cost of driving I think the WSJ has a point that you just want to dismiss because you don't like it. Let's be honest here.

 
At 10:27 PM, August 24, 2007, Blogger Phlip said...

Agree with commenters above . . . You, Tory, are the only one I've seen making that "leap of logic." Sounds like you're putting words in the mouth of the Forbes writer. I thought the article itself was perfectly clear.

 
At 10:34 PM, August 24, 2007, Blogger Tory Gattis said...

In cities with higher housing costs, people have to make budget cuts elsewhere, and that includes buying cheaper cars - whether used or new. When you do that, you have less depreciation, and your cost of commuting is less. But it's not that these cities are "cheaper to get around in," just that people there, on average, don't buy the more expensive vehicles, because they can't afford them.

 
At 11:23 AM, August 25, 2007, Blogger Brian Shelley said...

"the type of cars people buy here are the same as in all cities across the country. It's not like people on the coasts all drive hybrids or something...I'll agree there are more trucks on the road here, but there are definitely not more huge SUVs here than in other cities."

Personal observation does not equal fact. It is my personal observation that the average truck is not as cheap as the average car, and uses more gasoline. I would expect that if one city spent 10% more per car it would hardly be noticable.

 
At 1:49 PM, August 25, 2007, Blogger marzolian said...

I had also read the Forbes story, and thought it didn't tell the whole story. Your response and the comments add more background. However, I think the shortest and simplest rejoinder would be to ask, what percentage of income is spent on housing?

I suspect that the total expenses, housing + transportation, would show Houston to be more in line with the national average.

 
At 7:30 PM, August 25, 2007, Blogger Tory Gattis said...

> what percentage of income is spent on housing?

Here's their excerpt:

"The percent of household income Houstonians spend on transportation may be the highest in the country, but when combined with the amount residents spend on housing expenses, Houston's aggregate cost ranks them 14th, with the composite cost equaling 52% of household income."

52% - 21% = 31% on housing. I do not think this percentage varies too much around the country, but what you can buy with that third of your income varies very considerably.

 
At 8:34 AM, August 27, 2007, Anonymous Anonymous said...

I think a component not mentioned directly be Tory was trying to illustrate is that the personal vehicle is not just for transportation. In Houston, people have the luxury of paying more for a new car that they'll enjoy.

I feel that many people in Houston don't look at there car as something they have to have, but something they can enjoy having.

 
At 11:11 PM, August 27, 2007, Blogger Max Concrete said...

The article's claim that Dallas' light rail is providing a great benefit to the area is absurd. TOTALLY RIDICULOUS!

The ridership for DART is embarrassingly low for such an extensive system. In April 2006 the Dallas Morning News reported "DART usually records about 60,000 light-rail trips a day and 17,000 light-rail trips on Sundays." On September 21, 2006, the newspaper reported "A 4.3 percent increase in light-rail ridership" in the previous year. Not much, considering the spike in gasoline prices during the period.

The truth is that Dallas is pouring billions into the light rail to get a minimal/negligible benefit. Downtown Dallas, the focus of the light rail, has been in decline for a long time and local officials have recently been taking drastic measures to save downtown, such as huge tax breaks for residential development. In the meantime, the Uptown Dallas area has been booming even though it is not convenient to the rail line. New development has been clustering along the Woodall Rodgers Freeway.

I think it is safe to say that Dallas would be far better off it had used buses for the express transit, saving billions of dollars which could have been used for more useful projects like highways. The Forbes claim is total idiocy.

 
At 10:44 AM, August 28, 2007, Blogger Michael said...

Not sure about Dallas, but I do know that there was just an article in the Chronicle this weekend talking about all of the planned development along the main street line here. New skyscrapers and mixed-use development, house of blues, etc.

Also, our ridership for a single line is over 40,000 per day, so I don't think our problem is getting riders. Our problem is that we are 25 years behind where our system should be at this point because of political opposition to the will of the voters.

The beauty of light-rail is that as Dallas or Houston requires the increased capacity, you know what they have to do? Nothing - maybe add an extra train for additional frequency. If they require additional capacity for highways, they have to expand the highway again, which requires additional huge construction costs, eminent domain expenses, etc.

 

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