Houses appreciate. Cars depreciate. That simple contrast is a key to building wealth over a lifetime, writes Todd Litman, a researcher with the Victoria Transport Policy Institute.
Even though housing is more expensive in walkable, transit-rich neighborhoods, vehicle costs are substantially lower. Households in such neighborhoods shift their spending from transportation to housing. Over 40 years, this shift will add a million dollars of net worth to a typical household, Litman calculates.
The potential savings are demonstrated in the Housing & Transportation Affordability Index (H+T Index), created by the Center for Neighborhood Technology in Chicago. The Index makes the case that households should not spend more than 45 percent of their income for housing and transportation combined. This goal is best achieved in walkable neighborhoods, even though the cost per square foot of housing may be higher in those neighborhoods.
CNT founder Scott Bernstein notes that poor and working-class families are routinely given financial advice on how to get a car loan, but they are not educated on the financial advantages of reducing transportation expenses.