There are five of us in our family, and I am sad to say that we own five cars. This costs us over $27,000 a year. I have a car for business and pleasure. My ex-wife works; she has a car. Our son, away at college at Fort Worth, has a car; our eldest daughter has to have a car for college and her part-time job. Our youngest daughter recently got her driver's license and has a car to drive to school and to her music lessons. Cars are essential to my children's social lives. Neither I nor my ex-wife can afford to take time off from work to chauffeur the children, which they don't want or expect anyway. Even more horrifying, we can't afford to buy collision insurance for our children's cars. So if one has a wreck and is at fault, the repair bills will be astronomical; if a car is totaled, it will be need to be replaced somehow.
City of Houston Council Member Peter Brown, writing a note to authors Andres Duany, Elizabath Plater-Zyberk, and Jeff Speck in Suburban Nation, The Rise of Sprawl and the Decline of the American Dream"
There are a horde of things I could write about this book, including claims by people like James Howard Kunstler that modern day suburbanization (notice that I didn't say American suburbanization or sprawl) creates neighborhoods which nobody cares about, but I would suggest that you tell that to the people that actually live in those neighborhoods. I think you would find a very different opinion as to whether the people who actually live in those places care about them or not.
Today is the birthday of your's truly. I happen to be writing this epistle from London where I will be holed up for the next few weeks.
A while back I wrote about that I would try to deal with the issue of development (or the lack of it) in downtown Houston. A number of weeks back, I walked around downtown Houston and surveyed the state of development in downtown. Downtown Houston has been the recipient of a vast amount of public largesse over the past 15+ years. Houstonians have watched as their public elites have built two sports temples located in downtown at the cost of circa $600 million, plus, a light rail line at the publicly stated cost of $325 million (most likely much higher than that), have torn up an array of downtown streets in order to put in fibre optic and other telecommunication lines, as well as a sewer line to Buffalo Bayou, a new County Courthouse, formed a TIRZ and two management districts, and who knows what else, all in an effort to "revitalize downtown! So why was it that after all that effort, the Houston Chronicle carried a story about how seven nightclubs closed within a period of two months, and that the Houston Press carried a story about how is was that three downtown "eyesore" structures, all of which were located right up against the downtown Light Rail line could not be developed? That was even after the effort on the part of "Smart Growth" architect Doug Childers to make an effort to get into one of those structures in order to make Smart Growth development work.
Meanwhile Houston Mayor Bill White has had to give away $14 million in public monies in order to get a commercial development to come to downtown, which itself has no residential development. At the same time, downtown office space in Houston's magnificent skyscraper skyline is getting scarce and vacant space is down below 10 percent. I can testify to this. My company, VLICA (the Very Large Industrial Company of America), which is located downtown and for whom I have been working for over the past 12+ years, is going to take another floor from our landlord and plans to rent two more over the next two years.
So what is going on? Why is it that the commercial market in downtown Houston is booming to the point where developers are thinking of building new skyscrapers while the desperately desired downtown residential market languishes at a few thousand residents and does not attract scores of thousands of "urban pioneers" which would suddenly make Houston's downtown streets blossom like London's?
The answer lies in the cost of measuring how much it costs to transport people, goods, or ideas per mile from one place to another.
As can be seen from Mr. Brown's epistle above, many people in the Smart Growth movement have tried with a frenzied desperation to point out how expensive it is to own and operate a car. I will not contest that owning and operating a car costs real money, but there are two things that the Smart Growth crowd overlook in their analysis of transportation and its costs. The first is asking that if it really is so expensive to own and operate a car, then why is it that people in wealthy developed areas of the world continue to buy and use cars and trucks, even in the face of rising gasoline prices? The second thing they fail to ask is that there has been some movement towards inner cities again, but how much of that can be attributed to Smart Growth type policies?
To answer these questions, I, The Mighty Wizard, as a mere student of urban affairs who does not work in the field of urban issues, had to go back to what the Master taught me while I was in school. And who was that Master? None other than Barton Smith. To answer these riddles, I found myself leafing through my faded and crumbling lecture notes from Smith's courses of ages gone by and from my textbooks. I read Smith's thoughts. They were questions, questions that needed answering.
And so it was that I found my answers.
You see, the Smart Growth types really do have a point. Owning and operating a car really does cost money. Say for just a moment that you have gone out and bought a brand spanking new and shiny car. That car has set you back $24,000, for which you were able to cough up a $4,000 down payment. You have put the remaining $20,000 on a 5 year payment plan at 9% interest. We will add to this picture. You are married. You and your spouse face the prospect that you have a job in downtown Houston and are trying to decide where to live. You have spotted a house in the Heights for $250,000 that is 4 miles away from downtown that is really nice, but there another house in Spring Branch that costs $150,000 that is acceptable, but happens to be another 7 miles away. The schools at least seem similar in quality and so do the neighborhoods.
So what is it that you are going to do? The Smart Growth crowd points to the fact that you are helplessly addicted and enslaved to your automobile, but is that really the case? More to the point, CM Peter Brown complained that he and his family spends $27,000 per year on cars. Surely CM Brown, who happens to be smart enough to have gotten elected to City Council, would not spend $27,000 on anything without getting something in return, wouldn't he? The real question is, what is it that we get when we buy automobiles or trucks? What is CM Brown getting in terms of accessibility and mobility when he wisely spends wastes $27,000 per year on private automobiles?
The answer to that question is... miles. Let us do the math. You have a $250,000 house in the Heights verses a $150,000 house in Spring Branch. The house in the Heights is 4 miles from downtown, while the house in Spring Branch is 11 miles away. What would you prefer to choose?
If we put down at $15,000 down payment on both properties, a 30 year mortgage at 6 percent interest rate works out to $809.39 per month in the case of the $150,000 house, while the mortgage on the $250,000 house works out to $1,408.94. Add to that in that in Houston, the added property taxes usually amount to about 3 percent of the values of property (minus the 30 percent or so in deductions) means that the property taxes on the $250,000 home will be about $1,800 greater than the taxes in the $150,000 home.
What all of this means is that the annual carrying costs of owning that $250,000 home in the Heights will be about $9,000 per year greater than owning the home in Spring Branch. The question facing our prospective Houston residents is whether the added cost and frustration in commuting the extra 7 miles in distance in each direction every work day will be less than or greater than the $9,000 cost per year of living close in? To answer that question, we need to ask what is the cost of owning and operating a private vehicle such that it allows the extra 14 miles per day of commute and what is the prospective cost in time for the commuter to drive that extra 14 miles per day?
To answer these questions, let's take the Smart Growthers at their word. That $24,000 car which has a $4,000 down payment and a $20,000 note for 5 years at 9% interest will have a note of about $415.17 per month. We will throw in that the car will depreciate in value $14,000 over 5 years, so that it is worth only $10,000 5 years later. That means that the depreciation rate is $233 per month. The insurance rate is $150 per month, the $3 per gallon gasoline costs $195 per month if your car gets 20 miles per gallon and you drive it the 13,000 miles per year that Americans drive their cars ("enlightened" Western Europeans who have mass transit drive their cars 8,000 - 10,000 miles per year BTW), and to boot your car repairs cost you an average of $100 per month.
So what is the cost of owning and operating your car? If you add all of those numbers up, it costs a whopping $1,093 per month to own and operate your new and shiny car so that you can drive it the "typical" 13,000 miles per year that your average wasteful, environmentally hating and uncaring, carbon spewing American drives their car every year.
So what is the cost? If you multiply $1,093 x 12 months per year, that adds up to a whopping $13,116 per year to own and operate that evil car! Boy do the Smart Growthers and the train nuts have that straight! Or do they? What if you divide that number by the number of miles you drive your car? Then what kind of math do you get? The answer is that the cost per mile of driving that brand new spanking car is about $1.01 per mile. Bear in mind what happens to the cost per mile of owning and operating that car after you actually pay off that car and if you decide you are going to keep the car.
The second part of our equation is what is the value of commuting that extra 14 miles per day to our prospective Houstonian? Lots of econometric studies have concluded that people tend to value their time in commute at about 30-50 percent of the value of their pay at work. Say that our prospective commuter is an accountant who is getting paid $60,000 per year, which is $30 per hour. If we plug in $15 per hour (50% of his / her pay), then if traffic is moving at 30 miles per hour during his / her commute at 5:00pm rush hour, the value of that commute works out to about $7 per day ( $15 per hour of time valuation * 14 miles extra commute (7 miles back and forth in both directions) / 30 mph travel speed during the commute). So if our new Houston resident is "paying" or valuing his or her commute at $7 per day to travel that extra 14 miles, that means that the annual commute valuation is (at 50 weeks per year, 5 days per week of work), 250 days of work * $7 per day of value in commuting. That equals $1,750 in valuation of sitting in traffic.
We then throw in the fact that it costs $1.01 per mile to own and operate our vehicle (note that this includes the cost of gasoline, depreciation, cost of the monthly note and repairs!) and we are left with the fact that it will cost an extra $14.14 per day for our hapless and helplessly enslaved Houston commuter to commute from Spring Branch instead of making the environmentally friendly commute from the Heights. That means that at 250 commute days per year, the costs of operating that car equal $3,535 per year. Add $3,535 per year and $1,750 in commute times and what do you get? $5,285 in added commute costs for living in Spring Branch verses the $9,000 per year in added costs for buying property for living in close in the Heights.
The answer is that unless there is something really incredible that draws our prospective Houstonians to live in the Heights, our prospective Houstonians will decide live in Spring Branch, all other things being equal. Incredibly, in all 7 of the prominent writings which I have read from the Smart Growth crowd, all of them have wailed about the cost of owning and operating a car, but none of them have made the final step in analyzing that the real decision why it is that urban areas continue to sprawl out, despite the best efforts of planners and Smart Growthers to stop the phenomenon. The real decision lies in what it costs in owning and operating the car and that involves deciding how much is it going to cost to own and operate a car per mile.
Addendum - May 20, 2007: I saw an ad in the Sunday May 13, 2007 edition of the Houston Chronicle. There were two downtown lofts being advertised. I cannot remember the details of one of the lofts, but I do remember that the other was being pitched for $165,000. And what, pray tell, do you get for your $165,000? How about 704 square feet of living space. Isn't paying $230 per square foot for the equivalent of a one bedroom apartment a bargain?
Continuing: I can hear the endless bitching, wailing, objections, and complaints. You are wrong Mr. Mighty Wizard, end of story! What happens if these people don't have kids? What happens if they are buying "quality of life" and "lifestyle" and not housing? What happens if they don't own a car?
Sorry folks! Nice try, but you still are enslaved to these ideas. If you don't have kids, then you are free to be able to devote more of your pay to a mortgage and are able to purchase access closer in. That is the case if you are a 20-something hipster or if you happen to be a 55 year old couple whose kids are now raised and out of the house. However that doesn't necessarily mean that every person in those groups will necessarily decide to move closer in so that they will take advantage of the amenities of being close to town. Some will decide that they like living in rural or suburban areas anyway and not make the move in. As far as the numbers, all you have to do is change the numbers around to any figures you decide to plug in. Do the math and you will start to understand why it is that people decide to live where they decide to live. You can buy access to your job and your desired lifestyle. All you have to do is figure out how much it costs in terms of your time and your money.
It is ideas like these that go a long way to understanding why it is that downtown Houston is not drawing thousands of "urban pioneers" which Duany and Co. so desperately desire. It also goes a long way to understanding why it is that areas like Washington Avenue and Montrose are seeing booms in development while downtown Houston sees pressures in commercial space while few "urban pioneers" decide to move there. Why move downtown and pay downtown real estate prices when you can buy a condo or a house just a few miles away and have a 10 minute commute into downtown and have access to all of its amenities? While you are at it, you Smart Growthers and Peak Oil types might want to figure out what will really happen once the alleged end of petroleum comes and the price of a gallon of gasoline rockets to $10 per gallon or more. You might want to ask yourself what has happened to American driving patterns (and indeed the driving patterns of the rest of the world) in the face of the fact that the price of a barrel of oil has gone up from $25 per barrel to $60 over the past 6 years or so. What is going on with those upscale middle class folks (average income of $70,000 per year) who work in downtown Houston, yet take a subsidized Metro bus ride into downtown Houston to their jobs from 20 miles away via riding in on the HOV canyons which we have carved out just for them? What would happen if we took away those HOV lanes and gave them back to the general public?
Better yet, what is the price of CM Brown's transportation costs of his entire family averages 10,000 miles of driving per year per vehicle? The answer is that his family is spending 54 cents per mile to own and operate their entire fleet of vehicles. That would be a better way of understanding CM Brown's statement of his complaints regarding his purchasing of transportation for his family. Now then gentle readers, I ask you this. What would happen if CM Brown's family decided to drive 60,000 miles per year instead of 50,000 miles? What would be the cost per mile of his family driving that extra 10,000 miles?
Enough for now. This has been a long and tiring epistle. Still, it is one of the most rewarding ones I have ever written. Over the next 2 weeks, I will write about London and why it is that mass transit continues to draw big numbers in the Imperial City.
Ciao for now,
Wizard