Relationship between Households' Housing and Transportation Expenditures

Abstract

Because of growing concern about the significant increase in American household transportation costs, federal agencies have endorsed the notion that it is not merely the affordability of housing alone that is important but the affordability of housing and transportation taken together. Most transportation studies have focused on the relationship between the costs of housing and commuting. Thus the relationship between household expenditures on housing and overall transportation has remained mostly unexamined. With the use of U.S. Consumer Expenditure Survey data, this study made an effort to bridge the gap in the existing knowledge base through an examination of this relationship. In the absence of theories about the relationship between the two types of expenditures, this study leaned heavily on a stream of literature on lifestyle choice, which was advanced to explain the absence of a trade-off between the costs of housing and commuting postulated by urban economic theorists. To account for endogeneity between household expenditures on housing and transportation, three-stage least-squares models were used with the two types of expenditures defined in dollar amounts and as shares of income. For the sake of comparison, a third model, which defined the two types of expenditures as shares of household total expenditures, was used. The relationship between the two types of expenditures varied depending on the definition used. In addition, the models showed the way in which dwelling type, building age, number of household automobiles, public transit use, and metropolitan area size affected transportation expenditure. The implications are discussed.