Monday, August 15, 2005

Not calculating the cost of sprawl

The New York Times has a long article on people choosing to live in "exurbs," converting farmland and open space into isolated, long-distance commuting, bedroom towns. This raises a host of issues, but one interesting aspect of the piece was the polling that said people are willing to increase their commute by 15 minutes if it saves $12,000 on the cost of a house compared to a similar one that is closer to work.

People are not thinking through the costs in this case. Fifteen minutes at highway speed is 15 miles, or 30 miles round-trip, or 7,500 miles annually. At a reasonable allocation of 33 cents per mile (for gas, insurance, and car depreciation), that 15 minute extra commute costs the $2,500 each year. In effect, the person living further away is giving up an income stream of $2,500 annually to save $12,000.

So which is better? This nifty site says the present value of $2,500 annually over the life of a 30-year mortgage, assuming an inflation rate of 4%, is $43,208. That's how much less a house in the exurb should cost for each additional 15 minutes of commute time.

Just one more reason why converting open space to sprawl is a bad idea.

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