A new study tells us something which seems very reasonable: Living in distant suburbs may reduce housing expenses, but "working households" -- those who earn $20,000 to $50,000 annually -- may lose such savings to steep commuting costs.

That's the essential conclusion of a study by the Washington-based Center for Housing Policy. Entitled The Heavy Load: The Combined Housing and Transportation Burdens of Working Families, the report says that cheap houses in distant locations may be more costly than believed.

In general, says the report, transportation costs "tend to increase along with commuting distance. At some distance, generally 12 to 15 miles, the increase in transportation costs outweighs the savings on housing -- and the share of household income required to meet these combined expenditures rises."

The study shows that in 28 major metro areas the cost of transportation is, on average, greater than the cost of housing for households with incomes ranging between $20,000 and $50,000.

In other words, when you add up the cost of auto payments, gas, maintenance, insurance and such the total is greater than the expense for mortgages or rent. "Nationally," says the report, "for every dollar a working family saves on housing, it spends 77 cents more on transportation."

Because they have fewer dollars with which to work, it follows that working households have larger relative costs for basic needs such as food and housing. For instance, while all households spend 20.2 percent of their income on transportation, working households are paying 29.6 percent.

If you combine transportation costs with housing expenses then on average you can account for 57 percent of all income for working households. However, combined costs differ substantially by market from a low in Pittsburgh (54 percent) to a high in San Francisco (63 percent).

What's especially striking is the racial divide shown by the report. In neighborhoods with steep housing and transportation costs, the population is disproportionately Black (32 percent) and Hispanic (32 percent). In areas with low housing and transportation costs, Blacks (6 percent) and Hispanics (9 percent) are noticeably absent.

What to do?

The report recommends such ideas as developing housing and transportation policy together, encouraging infill real estate construction and accelerating job creation in areas with low- and moderate-income households.

What's interesting is that the report does not suggest more public education regarding transportation options. The term "teach" does not appear within the document, and yet many transportation costs are self-inflicted: A look at any highway shows an over-abundance of gas-guzzling behemoths occupied by single drivers.

Transportation costs can be substantially reduced by encouraging the use of more-efficient vehicles, work-pooling (sharing a ride to the same work site) and better maintenance which allows vehicles to be kept longer.

Moreover, the savings from exurban real estate are simply too great to overlook -- especially when households have no practical alternative and a growing volume of jobs can be found in suburban and exurban locations.

As an example, in the Washington metro area the typical existing home in the District of Columbia sold for $564,200 in September according to Metropolitan Regional Information Systems. That's a price which is simply out of reach for a household which takes in not more than $50,000 a year.

Meanwhile, in Washington County, MD -- about 40 miles from the District -- MRIS says the average September sale price was $244,580.

That's a price differential of $319,620. At 6.50 percent over 30 years the monthly principal and interest mortgage expense for the typical District house amounts to $2,020 more than the cost of a property in the exurbs. Higher property taxes and steeper insurance costs are extra.

You can buy a lot of transportation with $2,000 a month. But if distant homeowners are smart, they'll buy a small-but-safe gas miser, work close to home and use their monthly mortgage savings to reduce consumer debt and pre-pay mortgage loans.

Of course, for working households there's no practical downtown option because an extra $2,000 a month for mortgage payments does not exist. For households with limited incomes, the exurbs may be the best choice among many -- and not a bad choice at all if you value fresh air and natural beauty.

For more articles by Peter G. Miller, please press here.

Published: October 17, 2006

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .