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Our cars are making us poor

Cost of driving
In 2023, AAA estimated the annual cost of car ownership at $12,182/year, or $1,015/month. This includes the cost of purchasing/financing the car, gasoline, insurance, registration, inspection, and ongoing maintenance costs. The figure also takes into account that some of the purchase cost will be recouped when the vehicle is eventually sold. This is the average cost, so for half of car owners, it costs more than $1,015/month to drive.

In the same year, the Federal Highway Administration revealed that the average American drives 13,476 miles/year. At a cost of $12,182, that comes to $0.90/mile, or almost a dollar per mile.

These figures may come as a surprise because there isn’t a single monthly car bill of $1,000+. Instead, there’s perhaps a car payment of $500 once per month, insurance payment of $150/month, $50 to fill up on gas here and there, registration and inspection are only done once per year, and maintenance is too sporadic to keep track of. As a result, most people don’t realize how much their car truly costs.

In the same year (2023), the US Census found the median income per capita was $43,289 per year, before taxes. After federal taxes only, this figure drops to approximately $36,766 (depending on living situation), and drops further if state taxes are involved. Using these figures, the average American spends 33.1% of their income on their car. For every dollar earned at work, a third of that dollar was spent getting to work and back. That’s on average, so for half of Americans, it’s worse.

By comparison, Ireland is home to the most expensive mass transit, at an average cost of $118/month, or $1,416/year. If an American were to spend the same amount on transportation, it would only be 3.85% of their income, rather than 33.1%. By giving up their car and switching to the most expensive public transit in the world, the average American would save $10,766 each year. Every other country’s public transportation is even cheaper.

 

Cost of Infrastructure and the Suburban Ponzi Scheme
Car-dependent transportation is unaffordable not only to the individual, but also to local governments.

Suburban development is typically done at a massive scale, most often with bonds, or in other words, debt. Frequently, by the time the debt is paid off, the city is on the hook for massive amounts of repair and maintenance. In response, a city will often try to increase revenue by means of new development, which is paid for with another bond. It’s essentially impossible for a city to develop in this way while financially supporting itself. This leads many towns into a downward spiral of debt and eventual bankruptcy.

A Ponzi scheme is defined as a form of fraud in which older investors are paid off with money obtained from more recent investors. This creates the illusion of a legitimate business operation with high rates of return, while the value only exists on paper. A Ponzi scheme can only sustain itself as long as there are always new investors contributing money, but once that stops, the system collapses. All Ponzi schemes eventually fail; it’s only a matter of when.

Modern suburban-style development is built following exactly this model. A new development is built with an initial investment in the form of a bond, and it’s paid for with the money to be brought in with future development.

As a result, suburban-style development is entirely dependent on future growth in order to stay financially viable. When the city stops growing for any of a myriad of reasons, the scheme collapses, and in many cases, the city declares bankruptcy.

New commercial and residential developments often come at little cost to a city. When roads or freeways are built, usually less than 25% of the funding comes from the city itself. Instead, state and federal governments provide the majority of the funding. In the case of neighborhoods and shopping centers, cities are frequently able to secure a deal in which the developers pay for infrastructure, including parking lots. This has the effect of causing cities to encourage as much development as possible, since the city isn’t responsible for the initial cost, but receives an initial bump in tax revenue.

This would all be fine if the tax revenue generated by new developments were enough to cover the cost of maintaining them. The problem is suburban-style infrastructure is overwhelmingly expensive to maintain and doesn’t generate enough revenue per acre. According to a 2019 report by the non-profit Volcker Alliance (summary story), the total cost of repairing US infrastructure would come to over $1.04 trillion. In the same year, $1.04 trillion was equal to 5% of the GDP of the United States and represented nearly a third of all tax revenue collected by the federal government. Most of this infrastructure cost was needed to pay for roads and highways, with a smaller amount needed for public waterworks and buildings. This enormous cost is due to the fact that concrete roadways have an initial expected lifespan of only 25 years, with maintenance required every eight years afterward (Wisconsin Department of Transportation). Asphalt roads have a shorter initial lifespan of 18 years, with maintenance required every 12 years afterward. In less than one generation, the costs of maintaining roadways and parking lots come due, and in most cases, cities are on the hook for the bill.

Worse still, the cost to build and maintain infrastructure has an inverse relationship with its ability to move people.

By investing almost exclusively in cars, we’re paying more for worse transportation!


The average American loses 97 hours per year to traffic - not 97 hours total spent commuting, but rather 97 additional hours tacked onto their commute. For the average driver, this comes at a personal cost of $1,348 per year, in addition to the $12,182 they’re paying to drive the car. Collectively, the United States loses $87 billion each year due to traffic congestion.

 

Cost of Wasted Land
This shouldn’t need to be said, but parking lots don’t employ people, pay taxes, or contribute to the local economy. They’re not good for the environment either, as they displace wildlife, prevent rainfall from recharging the soil, and contribute to the urban heat island effect. A parking lot makes land less valuable than building nothing at all.

In the image below, we can see an image of a typical suburban-style shopping center, the kind almost any city would be glad to have.

All of the orange is either a road or a parking lot. Well over half the space is earmarked exclusively for cars. All that space has to be set aside to support only a few businesses.

In between all that orange is “green space” which is equally un-useful for any purpose. You’ll never see anyone going for a jog or tossing a frisbee in any of these places, nor is this “green space” a functional place for native plants and wildlife.

Here’s what the same place looks like at ground level. This space sits empty 99% of the time, and even on the rare occasion it’s being used for car storage, it’s not creating jobs, nor increasing property value, nor contributing to the city’s budget. Also, no one wants to be here. No one is saving up their money so they can visit a place like this one day:

By contrast, below is an image, at the same scale, of a mixed-use neighborhood in an American suburb:

While there’s still a lot of orange, this isn’t nearly as bad. A much lower percentage of the land is set aside for cars, which allows for more space to be dedicated to housing, commercial, a train station, and even a city park in the northwest corner. This neighborhood, which is the exact same size, creates more jobs, houses more residents, pays more taxes, transports more people, contributes more to the local economy, and importantly, people want to be here.

If a city were making a “Visit Our Town” brochure, they’d put a picture of the 2nd neighborhood on it, not the 1st. Everyone understands, on a fundamental level, that no one prefers car-centric development. As this shows, suburbs can be done in a manner which is both financially solvent and which everybody likes!

When you get down to it, land is the only resource a city truly has. All of its valuable development is a result of how the city allocated its land. Its people were drawn there because of what the city did with its land. Anything the city invested in, such as education, public services, and infrastructure, is not only a means of using its land, but is only made possible through revenue generated by putting something valuable on its land.

Land is a finite resource, and when a city runs out of land, it’s effectively out of its only resource. It’s in every city’s best financial interest to only allocate land in such a way that the investment will pay off, rather than incur ongoing costs. Car-centric infrastructure is not only costly in a direct sense, but is further costly by means of missed opportunities. By investing in alternative transportation, we make our cities quieter, safer, cleaner, more pleasant, and more economically viable, for both the citizens and the city itself.

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