Living in the City Isn't Just Cheaper, It's Also a MUCH Better Investment

Image from

The Atlantic


More good news on the economics of living in the city

. A recent comparison by David Hughes, a broker at Mortgage Group Ontario, Inc., calculates that, over a 40-year horizon, living in the city costs about the same as it does in the suburbs. Slightly less, in fact.

Specifically, he found that a house in the suburbs valued at $500,000 will cost about $688k over 40 years, and a two-car household will rack up an additional $688k in vehicle costs over that same time-frame. Total cost: $1,304,995.

By comparison, a home in the city valued at $720,000 will cost $1,031,130 over 40 years. A family that doesn't own any personal automobiles but spends about $250 a month on transit and another $250 on taxis and car-share will spend approximately $240k in transportation costs over that time-frame. Total cost: $1,271,130, or about $33,000 less than the suburbs. (Tables for each scenario are found

at the original article

—apparently I don't have permission to recreate them here.)

As the article notes, this doesn't take into account the physical and financial costs associated with the stress of longer commutes, congestion, etc. It also misses something even more important by ignoring what these two hypothetical families are left with at the end of their 40-year experiment: the homes themselves.

The surburban and city houses are both completely paid off, but one is worth far more than the other. When all is said and done, the city-dweller owns a home worth $220,000 more than the suburb-dweller, even though they spent $30,000 less in total housing and transportation costs. This is before taking into account the fact that

urban homes increase in value faster than suburban homes

, and that

homes in the most expensive markets increase in value faster than those in the least expensive markets

. It also ignores the fact that, even given equivalent rates of home appreciation, the gap in value will grow over time. (If both increase in value an average of just 2% per year, the suburban home will be worth $1.1 million in 40 years, and the city home will be worth $1.59 million, almost $500k more.)


investing in a home as a primary retirement vehicle may not be the best idea

, if we're talking about spending the same amount of money either way we may as well point out that one option is far superior to the other from an investment standpoint.

As I've written

on multiple occasions, for all the time we spend focused on housing + transportation (H+T) costs, we spend relatively little time discussing its investment implications. Homes are an asset and vehicles are a liability, and in a country where the majority of people aren't saving enough for retirement, it's important that we make this point crystal clear. Yes, living in the suburbs is expensive, unhealthy, unproductive, and bad for the environment. When you earn enough to afford a home, it's also a terrible investment decision.