Well, no, not quite the way to think of it

Commuting costs are, for many people, one of their biggest outlays after housing.

Yes, of course the two are distinct. But a much more useful way of thinking about it is that commuting and houses are part of the same set of costs.

I think it\’s Mark Wadsworth who makes this point. Even done some calcs showing how well it works. Around London, certainly, housing prices fall as a function of commuting costs into the centre. Housing plus commuting costs (using commuting costs as being equivalent to that amount extra on mortgage payments each year) seem fairly static.

No, it doesn\’t work perfectly, Mayfair skews things etc. But well enough that a useful rule of thumb would be to use commuting and housing costs as two facets of the same overall cost.

17 thoughts on “Well, no, not quite the way to think of it”

  1. Therefore, if we allow rail fares to float to an unsubsidised level, it should follow that housing costs in the satellite towns will fall. Bringing home ownership into the reach of more young people living there. Thereby enriching the quality of life in those towns.
    Works for me.

  2. I’ve got a theory that a few years after Crossrail opens that the politicians will start talking up what the Olympics did for Stratford, when it was really about the travel time to the city.

  3. When I lived in Tokyo there was a very clear relationship between rent and the distance from the centre. Every stop on the Chiyoda Line going out of town reduced the monthly rent for a standard 2 bed flat by Y25,000.

  4. There are quite a lot of people who commute from e.g. Brighton to London when they could live somewhere cheaper e.g. Orpington/Bromley and spend a lot less.
    I like the beach as much as anyone but is it really worth an hour + more on the train a day, a smaller house and 1-2K more per year on the train?

  5. On a separate note, no comparison of this kind should ever be allowed to pass without making the point that tax is a much bigger expense than housing, commuting and food put together.

  6. Commuting is a cost of *employment* not of housing. A commuter who retires on a decent pension and remains in the same house will often find himself better off because the absence of NI contributions and commuting costs (and some other smaller work-related costs) outbalance the reduction in his gross income. For the unemployed looking for a job it is clearly a cost of employment alongside tax, NI, the loss of tax credits, the loss of housing benefit, the loss of free school meals etc and it means some hard-working guys would be better off on the dole which is the great untalked-about scandal of Brown’s catastrophic micro-(mis)management.
    It could also be argued that the extortionate rents and house prices in London and the South-East is a cost of employment.

  7. Stuart (#2), I don’t know if it necessarily does on balance, but how’s this for one possible answer:

    Home ownership will encourage capital investment to get the house how the owner-occupier wants it. However rental (on the typical short notice lease) discourages capital investment by the tenant, and the landlord will generally only invest to make it look attractive to what the letting agents tell him a typical potential tenant wants.

    So home ownership will allow more specialisation of properties.

  8. “Commuting is a cost of *employment* not of housing.”
    Sorry John but just don’t see that. Two guys doing the same job for the same company, the top line of the pay slip’s exactly the same. Where they choose to live’s got nothing to do with employment.
    Dave’s “There are quite a lot of people who commute from e.g. Brighton to London when they could live somewhere cheaper e.g. Orpington/Bromley and spend a lot less.” illustrates what’s always been wrong with travel subsidies. The higher the fare the more subsidy the individual attracts. It’s always discriminated in favour of the wealthy who can afford the unsubsidised element of the fare.

  9. Staurt: A lot of people want to buy a home rather than rent, according to revealed preference (that people will take out mortgages).

    As people are typically capital-constrained in buying homes, they have to take out mortgages to do so. Lending money is risky, even when there’s a secured asset such as a home (the mortgagee might not take care of the property causing the house value to fall, or the house value may fall for outside reasons). Consequently lenders typically demand downpayments so the borrower shares some of the risk. Lowering the total value of the mortgage needed would mean at the margin slightly more people could buy their homes

    If you think that people are generally okay at figuring out what’s in their general welfare, that implies that more people being able to afford to buy their home increases overall quality of life.

  10. @ bis
    *cost* of employment, not reward, to the employee. You appear to think I am referring to the cost to the employer.

  11. Commuting is a sequence of costs, so really, you should include the discounted present value of all future commuting from a particular residence into your calculations.

    For example, I moved from the big city to a small city 12 years ago. At that time, I made about $40/hour, the commuting time I saved when I moved was about 2 hours a week. So, I saved 100 hours per year, or around $4K. But I save that every year. My discount rate is 5%, and to a rough approximation my lifetime savings will be that $4K divided by that 5% … or about $80,000.

  12. An advantage of commuting from the end of a line – e.g. Brighton – is that you get a seat on the morning train.

  13. Stuart, to translate the short Richard, if you own your own home you can put the kitchen of your dreams in it. Bit difficult to take granite worktops with you every time your tenancy expires (which is every 6 months in the UK).

  14. Rather, that is the short translation of Richard. I am not making any presumptions about the length of any bit of Richard.

  15. I fully endorse dearieme. If you have a seat and have a laptop-based job (and many, many commuters do) then the travel time can effectively be work time. Your company will be happy to fork out GBP30-50/month to get 40+ productive hours/month. (If not, it’s a pennypinching HR fiefdom and you should look for a new gig forthwith).

  16. “If you have a seat and have a laptop-based job (and many, many commuters do)”

    A seat? Where do all these many commuters commute from, pray? 😉

    Personally I think something should be done about the monopolies the train companies have on each route. How is it that First Group keep winning contracts (recently the West Coast mainline) when they consistently perform so badly?

    Now if the companies had to bid to run each scheduled train service (e.g. the 7.59 from Stevenage) that might be interesting.

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