Tag Archives: costs

An American right to a good deal?

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Amid inflation and high prices, the Chicago Tribune editorial board ended an editorial on prices at Starbucks this way:

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It’s no sin to offer good value. Americans are practical people. We’re betting most of those who duck into a Starbucks would be pleased to see some special deals on the menu.

What American does not like a good deal? At the same time, Americans tend to say that the market sets prices. So what happens if prices seem unfair or unreasonable?

Two recent phenomena highlight this tension:

  1. Higher levels of inflation coupled with higher set prices. Is this fair? Sure, Americans keep buying during this time but they are spending more money on goods that used to be cheaper.
  2. High housing costs. Americans want to benefit as homeowners from rising property values but do not like paying high housing prices.

At what point do Americans deserve a good deal? Or when should non-market forces jump in to change conditions? This could depend on the particular context, leaders and influential actors, and what the public wants. Regarding the second example above, Americans have worked over decades to back up mortgages so that more people could pursue homeownership while not providing much public housing.

Even as Americans do not have a right to good deals, they tend to have at least some companies willing to offer goods or services at prices lower than others. This does not always occur and there are situations – such as with monopolies – where the government will step in. Without intervention, individual consumers are left trying to find a bargain or going without in a country devoted to consumerism.

When renovating a home might be more expensive than tearing it down and building a bigger new home

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In response to concerns from Portsmouth, New Hampshire residents that teardown McMansions were going to be constructed, the developer said:

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“By the time we renovated them, it would have been more expensive to do that than building a brand new energy-efficient home. That’s how we made the decision,” Chinburg said…

The company comes up with homes prices, he said, by “basically adding up what it costs to buy the property and build the homes,” and then adding “a fair margin.”

“Unfortunately that’s the market now … we’re not gouging people,” Chinburg said.

It would be interesting to see a breakdown of the different costs. Older homes may not be a great state of repair, they may need to be brought up to code, and they may not have the current features property owners expect. All of this requires money.

This reminds me of what can happen with big box stores. Vacant ones may not be very attractive given maintenance costs and the need to reconfigure the space for another user. Why not just build another one?

And while teardowns tend to occur in places where land is desirable, I wonder if this points to a tough future for many older homes and the aging American housing stock: will the costs of maintaining or updating the home be perceived as worth it?

You should know your neighbors – so you can save money?

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This story highlights an interesting gap in who knows their neighbors. Yet, this statistic is brought up so you can make sure you are not paying their utility bills. First, the statistic:

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However, chatting to your neighbors is not as common as it used to be. A Pew Center study shows that fewer young Americans are familiar with their neighbors. Among adults under age 30, about a quarter (23%) claim to not know any of their neighbors, compared with 4% of those aged 65 and up.

Why might it be useful to know your neighbors?

That’s what happened to Brooke Patterson. She took to TikTok to explain how she realized that she had apparently been paying for her entire apartment building’s utility bills — for two years.

The gap cited above could be the result of multiple factors. People 65 and up might have lived in places longer. They had different social norms regarding neighborly interaction. They might not rely on technology as much in order to interact with people.

Is the primary goal to knowing your neighbors to save money? Or others might suggest your neighbors could help you look out for your property. Other primary goals for knowing your neighbors could include acting neighborly – looking out for each other, offering aid when helpful – and building community. That could come with cost savings down the road or even positive money if the character of the neighborhood helps boost property values. This might be another difference over time: what people hope to gain through social interaction.

What are the odds the new Kennedy Expressway construction ends in 3 years?

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Chicago area drivers will soon face another major construction project, this time on the Kennedy Expressway, for several years:

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The $150 million project will take place along a 7.5-mile stretch from the split at I-94 south to Ohio Street, and at the massive underpass near Hubbard Street downtown. It will include rehabbing 36 bridges and the highway’s reversible express lane access system, replacing overhead signs, upgrading lighting, paving and painting.

The work is designed to improve safety, traffic flow and reliability on the 10-lane expressway, used by more than 275,000 drivers each day, the Illinois Department of Transportation said. The last major rehabilitation of the 63-year-old roadway was in 1994, and bridges were last repaired a decade ago.

Construction is expected to take place in phases over the next three warm-weather seasons, starting with the inbound, or southbound, lanes this year…

The outbound work and the updates at Hubbard’s Cave are expected to be complete in late fall 2025.

The last major road project nearby went over budget and over time. Are there publicly posted odds regarding this project?

Given the importance of this stretch of highway for the Chicago road network, it is hard to say that the construction should not happen. Even as the cynic might note that as soon as this project is over the next stretch of the Kennedy will be under construction, roads do need repair. But, what are the consequences if the project is not completed on time? Are there any significant incentives that can help make sure this project stays on track and within budget?

It does not help that the timeline for this project is so long. At some point, the regular driver on the Kennedy may have a hard time remembering when the road was not under construction. In fall 2025, how many will remember the optimism of a prediction of 3 years? If it goes into 2026 and the cost went up some, how many will care? I will set a mental note for late 2025 but we will see what happens…

Metrics we need: claim that an expensive and lengthy construction project will cut delays 50%

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With the unveiling of the reconstructed Jane Byrne Interchange in Chicago, this promise was made:

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Illinois Department of Transportation engineers are promising a 50% improvement in traffic delays as the interminable Jane Byrne Interchange rebuild wraps up…

It’s estimated the redo could save more than $180 million hours annually in lost productivity from workers in traffic jams and result in a one-third reduction in greenhouse gases.

Can we start tracking this immediately and see if the promise is true?

With numerous major projects facing longer-than-predicted timelines and significant cost overruns, perhaps this is a way forward in marketing. Ignore the extra time and money; it will be worth it!

At the same time, why not use similar metrics for all sorts of infrastructure projects? Infrastructure is needed for many areas of modern life to go well. Yet, people may not want to endure construction or costs. Promises like this at least fix a number on what people might experience as a positive outcome. And if the modeling is so difficult, does this mean that it might be hard to justify a big project? (I could imagine a different number that is also accurate but less negative: without this project, there will be this % of a negative outcome.)

The American difficulty in building and funding major infrastructure projects, California high-speed train edition

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The cost and time needed to build a high-speed rail line in California keeps increasing:

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A New York Times review of hundreds of pages of documents, engineering reports, meeting transcripts and interviews with dozens of key political leaders show that the detour through the Mojave Desert was part of a string of decisions that, in hindsight, have seriously impeded the state’s ability to deliver on its promise to create a new way of transporting people in an era of climate change…

When California voters first approved a bond issue for the project in 2008, the rail line was to be completed by 2020, and its cost seemed astronomical at the time — $33 billion — but it was still considered worthwhile as an alternative to the state’s endless web of freeways and the carbon emissions generated.

Fourteen years later, construction is underway on part of a 171-mile “starter” line connecting a few cities in the middle of California, which has been promised for 2030.

Meanwhile, costs have continued to escalate. When the California High-Speed Rail Authority issued its new 2022 draft business plan in February, it estimated an ultimate cost as high as $105 billion. Less than three months later, the “final plan” raised the estimate to $113 billion.

This is not the first time this has happened in the United States. Many major projects, ranging from highway construction to tunnels to bridges, involve expanding timelines and budgets. Even though people may not care as much about these changes once the project is done and things work, the extra time and money comes from somewhere and can affect a lot of people.

There must be some major projects that are completed on time and on budget. Are these properly celebrated?

The home of the brave and the (electric F-150) pickup truck

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With all of the talk of the electric Ford F-150, I ran into this statistic about sales of the current F-150:

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Still, if you’re going to pick an electric ambassador to the gas-loving masses, it would be hard to do better than the F-150. The truck has been the best-selling vehicle in the country for decades; more than 2,450 Americans buy a new one every day.

This is a hard number to understand. Roughly 2,500 a day? Some context might help. Americans like driving. They purchase millions of vehicles each year. According to Statista, they purchased over 11 million in 2020. Back in the early 1980s, the number was just over 2 million but there was a steady rise from the early 1990s to the late 2000s and then again in the last decade.

The anecdotal evidence I have matches these numbers. Having spent much of my life in the suburbs, I do not recall seeing many pickup trucks when I was younger. They were more of an occasional sighting, Now, there are pickups all over the place in all different sizes. The F-150 is indeed popular as are numerous other makes and models. The pickup is now a normal suburban vehicle.

According to Edumunds, the F-150 dominates car sales across the United States (and some other vehicles, including pickups, lead in a small number of states).

This reminds me of a magazine advertisement I used for years in my Intro to Sociology course. The ad was two pages and showed a parked pick-up truck within a swampy area. Sitting by the truck were roughly 15 dogs and standing nearby was the solitary man with his gun and camo. All of it screamed individualism and male vehicle. And this message is repeated over and over in television ads for trucks during sporting events and in many other places.

The electric pickup has the chance to keep Americans driving for decades in the big vehicles there are used to. There might still be a range issue for longer trips. But, imagine pickups that can accelerate even faster and just need to be plugged in at night.

The later costs of sprawl

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One writer suggests the sprawl of the Sun Belt leads to significant costs down the road:

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Over time, growth has reduced those advantages. Jobs and people moving to states like Texas and Georgia slowly bid up the price of land and labor. Ample spare capacity for land and transportation infrastructure — think six-lane highways — let sprawl be a growth outlet for decades, but over time congestion and distance from airports and job centers raised the cost of sprawl as well. The 2008 financial crisis arguably busted the sprawl model in the largest Sun Belt metros of Houston, Dallas and Atlanta, where until the onset of the pandemic single-family building permits had lapsed to 35% below the 2006 highs, despite those metros still having reputations for sprawl and fast growth…

What’s needed to maintain past growth momentum and meet the expectations of these new populations is a continued push up the value chain towards local economies based on knowledge work, with higher-paying jobs and college-educated workers. The specific services or investments needed to lure these types of jobs and workers will shift with the political winds — it might be a greater investment in schools and universal pre-K programs today, and transportation infrastructure tomorrow. It’s the same kind of policy arms race these communities have been accustomed to for decades, only with more services replacing low taxes as the policy lever.

For now, the most likely tweaks to the governance model will probably be incremental — stormwater improvements, sidewalk construction and other “complete streets” projects, modest increases to educational funding — simply because the votes aren’t there to raise taxes enough for the kind of revenue needed for bigger changes.

But these tensions aren’t going away. It’s eventually going to require larger investments than current leaders and older voters are willing to make. Ultimately, the choice for these communities is to spend the money needed to stay competitive in the new arms race, or lose out to places that will.

In the United States, growth is good. Communities need to grow to show that they are exciting, thriving places. New residents and businesses signal good things to come.

But, the piece quoted above notes the longer-term possibilities of such growth. What happens after the fast growth slows or ends? Is it sustainable? How do communities switch from fast growth to mature growth or stability? My own research in the Chicago suburbs suggests this is not necessarily an easy switch. When the land starts to or does run out, communities have to make important decisions. Should they grow through increased density and/or allow taller buildings? How much will it cost to maintain all of the existing infrastructure? How much redevelopment or teardowns will take place? Even during the high growth periods, the costs can increase – see battles within sprawl over the costs for new schools and who pays – let alone as the sprawling areas age.

More broadly, what happens to sprawling suburbs decades after the sprawl has ended? We can now look back at numerous postwar suburbs and see what happened. The Levittowns always draw some attention for the ways they changed and are still the same. Many of these suburbs are over a half century old (though others are newer). These communities revolve around single-family homes and driving, among other things, and this might continue for decades. Or, it might not if conditions and ideologies change.

Four hidden costs of moving to the suburbs

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A financial adviser warns people moving from the city to the suburbs about several costs they might not consider:

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A larger house equals larger monthly bills…

More space requires more furniture…

You may need a car…

It’s more expensive to commute to work.

A few thoughts on each of these:

  1. The larger monthly bills could vary quite a bit across suburban homes depending on the size of the home, the costs in each municipality, and whether the home is updated (think insulation, efficient appliances, etc.). Best to check on these costs in each possible residence.
  2. There are multiple ways to get cheaper furniture to reduce costs. Not all rooms have to be fully furnished (perhaps less entertaining during COVID-19 helps with this). Rather than focusing on furniture, why not buy a smaller house? Wait, Americans need somewhere to put all their stuff (including furtniture)…
  3. Yes, most suburban living will require a car unless living within walking distance of needs and work or living in an inner-ring suburb with great public transportation. Cars are not cheap once you add up car payments, insurance, gas, and maintenance. And cars need parking and storage space with many desiring a garage on their property for that, adding to property costs. But, Americans like their driving in the suburbs.
  4. Commuting can be financially costly as well as stressful. The time might not be as much of an issue (though certain routes in certain locations certainly add up) as the inability to do much else while driving.

Thinking more broadly about suburban costs, I wonder if presenting potential suburban residents the full array of problems with suburbs – financial costs, exclusion, limited cultural amenities, moral minimalism – would change people’s minds. The suburbs have a certain appeal in American life and the suburban single-family home is a strong draw to many.

Calculating the costs of commuting versus benefits of living further from work

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INRIX recently published data on traffic and congestion in major American cities with Boston leading the way. Here is one of the data tables:

INRIXcongestion2020

When put in these terms, it looks like commuters lose a lot of hours and money by sitting in traffic. In addition to the time it should take to commute by car, drivers in Boston lose over 6 days to congestion and over $2,000 dollars. The cost for the city/region is huge when all the drivers are added together. In New York City, $11 billion lost!

On the other hand, people keep commuting. Why would they do this in light of these costs? The pull of the suburbs and locations away from their work is strong. Perhaps workers should be able to live near their work but a good number choose or are pushed to locations far from their jobs. And they might be willing to put up with these costs because the places where they live offer other good things (and measurable benefits). In American life, suburbs offer single-family homes, places for family life, and more. Losing 100+ hours in traffic each year in the biggest cities could be tolerable if it comes with a bigger, cheaper home in a well-regarded community.

In an ideal world, workplaces and communities that people want to live in and would thrive in would be located near each other. Sometimes they are but often they are not. In a country where Americans and their government have prioritized certain things – driving over mass transit throughout metropolitan regions, for example – even the hassles of commuting make some sense.