Cost of Living Is Really All About Housing  

No question about it: how much money it takes to make ends meet varies dramatically across the country. It takes a whole lot more money to get by in New York, San Francisco, Boston, or D.C. than, say, Pittsburgh or even Portland.

These differences boil down to gaps in what economists call the “cost of living,” a figure that takes into account how much you need to do everything from pay rent to buy a gallon of milk, and which is a function of both national and local economic trends.

But what actually drives these big regional differences in living costs?

The Bureau of Economic Analysis (BEA) collects data on the various components of living costs for every metro in the country based on measured called Regional Price Parities (RPP). RPP tracks the different price levels of categories like food, transportation, housing, and education, as compared to the national level, which is set at 100.  My colleague José Lobo of Arizona State University calculated average RPPs for 2008-2012 for four different categories: overall cost of living, cost of living for rent, cost of living for goods, and other. RPP is a weighted statistic, but Lobo was able to isolate the different effects of housing costs and the costs of goods on overall cost of living, or RPP.

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