Car Reliance, the Suburbs, and the (sometimes) Middle Class
This is a great piece by the Atlantic's Citylab, because it digs down into something I have been aware of for some time. Car reliant suburbs have a major impact on the finances of the middle class, as an increased percentage of income goes to their vehicle.
The way I like to explain this is the economic irrationality of the middle class. They consider when purchasing a house the cost of the mortgage and taxes, but struggle quantifying costs beyond things involving those house costs. Externalities are basically an abstraction when deciding to buy a home. This could for example mean the cost of heating a larger house, but in some cases the largest is transportation. Here is the biggest thing, car dependency does not come with predictable costs. The price of gas could vary significantly from year to year, insurance and maintenance as well are not easily pinned down either as they are circumstantial. There might be a range, but it is usually not calculated. Yes, car payments may be predictable, but everything else is basically a form of chaos. Here is the thing, the more vehicle miles traveled, the more likely these externalities can present an issue. This creates a sensitivity standard based on miles traveled of middle class suburban and exurban home owners, which is exclusive to this group which are car dependent.
For people like myself, who live in the city, especially a city like DC with decent public transit, these calculations are actually easier. Public transit has close to a normal inflationary curve. Even though the cost of transportation does impact things like food costs, overall, the externalities are not nearly as deep. There is a certain level of price insensitivity living in an urban setting. If one can stabilize housing costs through buying a home, those housing costs are usually fairly predictable.
Which gets me to the great recession, one of the triggers for the great recession, not the only one, was a spike in fuel costs. The great recession originated not in the transit friendly cities, but in defaults in the suburbs and exurbs of America. The reason why is because people had to choose between paying their mortgage, or paying to get to work. While they may not have been overextended with lower fuel prices, they were when fuel prices went up. The price sensitivity for every extra mile traveled for the middle class began to take it's toll. Somebody who was middle class was suddenly at the edge of poverty, based on transportation costs with no viable alternative. In fact one of the smartest economic moves during the recession may have been the cash for clunkers program, as it may have freed up fuel costs for recovery, and reduced the sensitivity somewhat with more efficient and reliable cars. However, even with this program, the sensitivity was still present, largely based on living circumstances.
Here may be the truth of those buying homes in cities with good walkability and public transit, they may have a better idea of the externalities of suburban, and especially exurban living. Knowing that in the long run, cost of transportation with vehicles is not predictable, and the more one has to drive, the less they are in control of their economic future. +CityLab