Florida's Transportation Affordability Problem

By Bob Rackleff, Leon County Commissioner and
Steering Committee Member, Florida 2025 Transportation Plan
February 17, 2005

Florida’s near-total reliance on private vehicles for transportation has created a serious affordability problem for many residents of this state.

Using data about the Tampa metropolitan statistical area (MSA) as an indicator for the rest of Florida, consumer costs for transportation have soared in recent years. In fact, the Tampa MSA in 2002 had the highest percentage of household spending on transportation of any of the 28 SMAs surveyed nationwide.

Consider these data from the Consumer Expenditure Survey, Bureau of Labor Statistics (BLS) 1997-2002:

• Average household spending on transportation in the Tampa MSA rose from $6,958 to $8,850 – an increase of $1,892, or 27 percent, in only five years. The national average in 2002 was $7,759 spent on transportation.
• Almost half of the increase in total household consumer spending in Tampa ($4,083) in those five years went for transportation.
• Tampa households spent the highest percentage of consumer spending in 2002 on transportation – 23.2 percent – of all 28 MSAs covered by the survey. The national average in 2002 was 19.1 percent. The lowest MSAs were Baltimore (13.2 percent), New York (15.3 percent) and Philadelphia (16.0 percent).
• This was nearly three percentage points higher than the 20.3 percent spent to own or rent a home in the Tampa MSA.

Assuming that the rest of Florida resembles the Tampa MSA, our transportation system produces the highest percentage burden of consumer spending on private transportation in the nation.

This is a direct result of our one-size-fits-all state and local transportation policies that emphasize roads and private vehicles over all other modes, especially walking and transit, and development policies that encourage urban sprawl. In turn, it calls into question the promise that more road building will enhance economic development and prosperity.

Some consequences of this high consumer spending for transportation include:

Consumers have less money for home ownership. The primary tradeoff with higher transportation spending is less spending on shelter (the cost of buying or renting a home) – which should concern Florida’s residential real estate industry.

• Tampa households in 2002 spent $1,098 more on transportation than on shelter.
• This is in line with the average Southern household, which spent $1,129 more on transportation than on shelter. Northeastern households spent $1,762 more on shelter than on transportation.
• In what may be related, the 2002 value of homes owned by Southern households ($82,912) was 31.9 percent less than the value of homes owned by Northeastern households ($121,815).

The working poor bear a disproportionate burden. High transportation costs are a special burden on the working poor, because nearly all of them must drive to work and other activities.

• Southern households earning $15,000 to $19,999 in 2002 paid 28 percent of their income for transportation, compared to 17.8 percent for Southern households earning $50,000 to $69,999.

These costs prevent many low-income families from owning a home – especially important to achieve financial stability.

• Homeowners with under $20,000 in income have a median wealth 81 times higher than renters with comparable incomes, according to the National Association of Realtors (NAR).

Florida receives less federal tax subsidy. Because higher transportation costs decrease consumer dollars available for home ownership, Florida collectively misses out on billions of dollars a year in federal income tax deductions for home mortgage interest.

• For example, the doubling of retail gasoline prices in six years now costs Florida consumers about $7.5 billion more annually.
• Spent instead on home mortgage payments, that $7.5 billion could generate $1.875 billion in increased tax deductions flowing to Florida taxpayers (with a 25 percent marginal tax rate) as well as significant deductions for ad valorem taxes.

Consumer wealth is less. Transportation spending is an expense that drains a household’s asset wealth. This drain is likely to grow as high gasoline prices persist and increase in coming years.

• New private vehicles lose about 60 percent of their original value in their first three years, and money spent to operate and maintain them is lost forever.
• In contrast, home purchase spending is an investment in an asset that has appreciated strongly in recent years, allowing families to build wealth and financial stability.
• The appreciation in turn leads to higher consumer spending by homeowners, because of the “wealth effect.” As the NAR states, “For each dollar increase in real estate assets, less mortgage debt, consumers spend an additional eight cents in that year.”

Result: Florida has a more vulnerable, less productive economy. The more a state produces what it consumes, the more productive it is. High transportation spending thwarts that because it includes so little in-state value added – and reduces spending on shelter, with a high in-state value added. We are also more vulnerable than most other states to oil price shocks, as we already witnessed during the two such crises in the 1970s.

In developing the 2025 Florida Transportation Plan, what should we do?

Understand better the relationship between our transportation system, the affordability problem and, ultimately, Florida’s productivity. By giving this problem the same level of attention as housing affordability, Florida officials could determine the reasons why private transportation is the largest single expense for the average household and develop strategies to lower such expenses.

Improve our understanding of the economic and equity stakes in affordable transportation. Only by understanding the real consequences of having the highest-cost transportation system in the nation can we overcome the tremendous inertia of past decisions.

• Likewise, by understanding the long-term benefits of change we can build a constituency whose interests this serves and overcome our inertia.

Expand transportation choices. Transportation costs so much because private vehicles continue to be the only real choice almost all Floridians have to get around and because urban sprawl continues to increases distances to work, schools and other activities.

• A combination of new investments in multimodal transportations and new incentives for more compact, walkable communities can expand these choices, beginning with the most urgent projects first.
• As well, an important side benefit of improve transportation choices would be to improve pedestrian safety in a state with the nation’s worst rate of pedestrian fatalities.