Location Efficiency

A new study out from the Natural Resources Defense Council has linked “location efficiency”—a measure of the transportation costs in a given area—and mortgage foreclosure rates. From the report:

The study shows that factors such as neighborhood compactness, access to public transit, and rates of vehicle ownership are key to predicting mortgage performance and should be taken more seriously by mortgage underwriters, policymakers, and real estate developers. With transportation costs accounting for roughly 17 percent of the average American household’s income—and the ongoing foreclosure crisis still garnering much attention—the need for better land use planning and better lending practices has never been more clear. NRDC recommends changes both to planning-related policies and mortgage underwriting procedures that can reduce transportation costs and risk of foreclosure while offering significant environmental benefits.

The best way we know of to reduce transportation costs is to get out of a car and start riding a bike instead. Doing so saved us at least $7000-$8000 last year.

Read the Report (PDF) →

7 Responses to “Location Efficiency”

  • Jt says:

    Thanks for this post. My family very deliberately made the choice to be close to work, day to day shopping, etc. What a difference in the money but sanity! Yes we did pay a little more (not much more than 10%) for our house than a similar house in subdivisionland, but it’s so worth it and the ROI is high.

    Though we’re not on the edge of foreclosure, but the saving really helps. It’s allowed us to keep our son in one of the top pre-k programs in town. The ironic part is that getting to his school is the only thing that’s fairly prohibitive on the bike. We go sometimes on the bike but darkness sets in early this time of year and it’s on some busy roads (not streets). The placement of his school is definitely handy for the car folks, but still a rat race to get there by car or bike. Fortunately we will be at a neighborhood school in the fall and the Xtracycle will be out every day.

    There are so many common simple living connections of place, transportation, size of dwelling, food, shopping, and other things that we’ve just lost in this country. I hope we can put the pieces back together. I know I’m preaching to the choir here, but it’s nice to know that like minded are out there. I hope we can be a positive demonstration of what we believe. At least the research continues to bear this out.

  • John Berg says:

    How do you figure that a bike saves you $7-8K a year? I commute by bike, but if I used a car instead, the commute would cost, at most, $2K a year, including the $500 for parking. Perhaps you could enumerate the costs, so that people considering biking could evaluate the difference.

  • Alan says:


    “How do you figure that a bike saves you $7-8K a year?”

    We sold one of our cars and cut our total annual mileage by approximately 70%. So along with reducing our total mileage, we eliminated the vehicle payment, insurance, and service.


  • stevep says:

    I bet a household could save even more than $8K per year. My car lease is $300 per month, gas is at least $100 per month, insurance is about $1000 per year. That’s $5800, not including the occasional car wash, urban parking costs and regular maintenance. And this is a household, so my wife probably has a car too.
    Cycling gear isn’t cheap either, but I would have to work pretty hard to spend the same amount of money on bikes every year. Maybe I could get a Moots Comooter; that might do it.

  • peteathome says:

    I save quite a bit commuting and shopping by bike. I live in NJ where insurance rates are very high. Not using a car saves $1000 a year in insurance alone. But since we only buy used cars when we have cars, and because even with a car we only rack up maybe 5000 miles a year, the expense of car purchase, maintenance, and gas is only 2-3K a year. So a total of maybe $4000 a year by using a bike.

    I like in a community that is well located for bike commuting and shopping. But because that makes it desirable, home prices are higher than if I lived in a suburban or exurban community. So my guess is that home ownership costs and taxes more than outweigh my bike commuting savings.

    Still, it is worth it to me just for the quality of life issues.

  • Doug P says:

    Your model of spending more on the home vs spending time and money commuting has benefits financially. The money you spend may be the same, but you are investing in assets which tend to appreciate over time, whereas cars, gas, insurance, ect. is money lost. Communities which invest in homes or public transportation vs communities which invest in cars, ect. will tend to be more prosperous in the long run. I bought my house 10 minutes’ walk from my job. I worked there until I retired. I never regretted for one moment buying a small 60 year old home instead of a large suburban home for the same price.

  • Zen says:

    Depreciation is usually a good chunk of the $8k figure.

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