Do higher travel costs make the fringe unaffordable?

The new art of Cartosimpsonology

A common argument is that households who settle on the fringe because housing is more affordable end up worse off because of higher transport costs. They are forced to buy a second or third car and they use more petrol because they have to travel further.

Of course there’s an assumption here – that ordinary families actually could find a suitable dwelling, at an affordable price, in an area where transport costs are significantly lower than they would be on the fringe.

Consider the municipalities of Casey and Cardinia, which together comprise the largest Growth Area in Melbourne. At around 45 km and 55 km respectively from the CBD they are also the most distant fringe growth areas.

The median price of an established house and garden in Casey (Narre Warren) is $350,000. Now compare that with the City of Monash, which stretches between 13 km and 24 km from the CBD. The median price for a house in this municipality is $780,000 (although in Clayton it’s $618,000).

A more likely alternative for a settler in Monash who’s primary concern is affordability would be a unit. However the median price for a unit is $464,000 ($401,000 in Clayton).

Thus the Growth Area has a considerable advantage in price and size – it’s much cheaper and offers a three to four bedroom house with a garden compared to a two bedroom unit. Clearly a Monash location would need to offer a considerable saving in transport costs to offset Casey/Cardinia’s advantages.

According to the Department of Transport’s VISTA travel survey, the average traveller residing in Casey/Cardinia travels in total 28.9 km on a weekday – that’s travel for all purposes and by all modes. Even though it’s half the distance from the CBD, the corresponding figure for a Monash resident is 24 km, about 17% less.

Rates of car ownership aren’t spectacularly different either. Casey/Cardinia households have an average of 1.85 vehicles per household, compared to 1.65 in Monash. Nor is public transport use all that different – cars account for 91% of travel in Casey/Cardinia (all purposes) compared to 88% in Monash.

Yes, transport costs are lower in Monash but the advantage appears to be pretty small compared to the differences in housing price and size.

I did a ‘quick and dirty’ calculation of the difference in petrol costs between the two locations. I first converted the weekday person travel I mention above to an annual figure (I assumed travel on a Saturday and a Sunday was 30% longer) and multiplied it by the mode shares and household car ownership rates cited above.

The resulting figures for total annual household car use are 19,322 km in Casey/Cardinia and 13,936 km in Monash. At $1.30/litre, the annual difference in total household petrol costs, assuming a vehicle economy rate of 11 L/100 km, is $770. I’ll round that up to $1,000 p.a. to reflect the cost of additional servicing and wear and tear.

It’s a rough and ready calculation, but it’s a modest difference even if the Casey/Cardinia annual travel were increased to 25,000 km per year. However it is an average figure. What about those households in Casey/Cardinia who are ‘forced’ to incur the cost of buying and operating a second car? For example, only four per cent of Casey/Cardinia households have no car and 67% have two or more cars.

While these rates are higher than Monash, they’re not that much higher. Eight percent of Monash households have no car and 57% have two or more. Multiple car ownership is endemic to Melbourne’s suburbs, old and new.

In other words only a small proportion of Casey/Cardinia households could be regarded as potentially ‘forced’ into multiple car ownership as a consequence of their location. A good part of the difference might in fact be explained by demographic factors – Monash is a 1960s area with an ageing population that has less need for multiple car ownership, whereas Casey/Cardinia has a younger age profile.

Some care is in any event needed in using the concept of ‘forced’ car ownership. In their study of Melbourne, Currie and Sensbergs estimated that lower income households with multiple car ownership comprise about 9% of all outer suburban households. Currie and Delbosc point out that this group is:

more concerned about home affordability and living in ‘greener’ areas than with transport. They emphasised the benefits of the increased mobility of owning cars and none of them regretted their home location decision. In this context it is difficult to see their car ownership as ‘forced’ as their home location decision was quite deliberate.

I suspect that for many fringe settlers home ownership means a house and by necessity that house has to be in the Growth Areas. The increase in value of their property over the last ten years would have swamped the additional cost of transport compared to a more accessible location.

On the face of it, the argument that the advantage in affordability offered by the Growth Areas is offset by higher transport costs, looks shaky. But as I’ve only looked at a limited part of Melbourne and as my calculations were done on a table napkin, I’m not going to go as far as declaring the myth is busted. But it’s starting to look like a zombie idea.

5 Comments on “Do higher travel costs make the fringe unaffordable?”

  1. Joseph says:

    The causation may work the other way – people with more cars choose to live further from the city. If you’re a contractor reliant on driving to wherever you happen to be working that day you may have both a ute and car. If you travel by road anyway why pay more for a house that has good access to public transport?

  2. Simon says:

    People’s preferences are a product of their environment. I lived in Japan for 5 years, and can tell you that 2-child families there will typically choose a small 1-bedroom apartment close to the centre of the city instead of a 4-bedroom house on the outskirts. They do it for the obvious reason – transport costs, both time and money.

    The logic of the equation is the same in Tokyo as it is in Melbourne (or Sydney), but the answer comes out different due to our policy of subsidising low-density living and private transport.

    Who woulda thought? People’s decisions on housing and transport are a response to government policy. Justifying that policy by showing that people respond to it makes no sense – people respond to bad policies as strongly as they respond to good ones. The important thing is whether the response is the one you want.

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