Where does San Diego stack up compared to the rest of the nation? We take a look at how much of our income we spend in areas such as housing, transportation and food.
March 26, 2012 12:18 p.m.
Kelly Cunningham, National University System, Institute for Policy Research
Related Story: San Diegans Spending More On Housing Than Most Americans
CAVANAUGH: If you've had the feeling it's getting more expensive to live in San Diego despite the economic downturn of the haft few year, you are correct. A new report from economist at national university finds that during the worst economic times, since the great depression, the overall price index has actually risen. But that's just the tip of this informational iceberg of a report. Joining me now with more about the breakdown of the high and rising cost of living in San Diego is my guest, Kelly Cunningham, national university system institute for policy research. Welcome back to the show.
CUNNINGHAM: Thank you, it's nice to be here.
CAVANAUGH: Is it odd that the cost of living should rise during a time of such high unemployment and the collapse. The housing market?
CUNNINGHAM: Well, actually this is the reflection of the overall cost of living. There have been some things that have come down certainly due to the recession, and we have seen housing prices fall, and what this meant -- or what we're looking at are the cost of expenditures or the cost of living and what we spend on it, and some things have come down. Other things are going up. And of course the very timely irrelevant thing right now are gas prices. We're seeing those really start to take off. And those all get factored into our cost of living.
CAVANAUGH: Now, this survey was done I think before the recent spike in gas prices; is that right?
CUNNINGHAM: Right. This is how the consumer price index or the inflation rate is measured, and it's done by the bureau of laborer statistics, they do it across the nation. San Diego is one of the only 18 large metro areas that they give data specifically for us, and so this is what we're taking a look at. But it has shown that prices are starting to increase, and there's reason -- different reasons for that. It depends on how we spend our dollars. What we're buying as consumers.
CAVANAUGH: One of the factors of course, even as I say, before this year's sky-high spike in gas is as you mention, gas and energy prices. What are the other factors that are pushing the consumer price index up?
CUNNINGHAM: For San Diego, and for, had, everybody, is the cost of housing. That's hour No.†1 biggest expenditure category. But we find in San Diego, we actually pay a higher proportion of our budget on housing than other places across the nation. We compare this to the U.S., where 20% of the U.S. budget goes to housing. In San Diego, it's 29%. We pay a considerably higher proportion of our income, our budget, our spending on housing. And that's -- that isn't probably such a big surprise. We've always done that. But it really has impacted us. One of the things I point out in this study, it's shown that the cost of buying a house has gone down. We know that. But in turn, the rental rate has increased dramatically over the last three years. And this is -- you know, logically, you can understand that. As people have lost their home to foreclosure, they've -- they go out into the rental market and are renting. And that is very evident in San Diego where we're seeing rental rates are increasing so much that they're actually when they measure the average expenditure for rent is almost to -- about what it costs to buy a house in San Diego. That isn't true for the rest of the country.
CAVANAUGH: As you said, San Diego among the 18 cities that you looked into, has the highest percentage of income spent on housing and shelter than anywhere else?
CUNNINGHAM: Right. Well, in the measurement of change metropolitan areas, the highest percentage of our budget is spent on housing.
CAVANAUGH: We're No. 1 in that?
CUNNINGHAM: Yes, we are No. 1 in that one regard, which is not necessarily such a good thing.
CAVANAUGH: Well, what about the percentage of home ownership? What's happened to that?
CUNNINGHAM: That was kind of interesting too. We did see during the bubble, housing price bubble that we saw up until -- which eventually collapsed in 2007, and we did see home ownership rates in San Diego go higher. Now, historically, San Diego has always had a low rate of home ownership, and part of that is due to the military. We have a high population of military who are very transient. But in modern times, that isn't such -- that isn't as overwhelming a factor for San Diego. It's the fact of how expensive housing is, and people just can't afford it. We did see home ownership rate, or I would call it home indebted rate, but people buying homes climbed until we hit about 63%. Now since 2007, that's fallen back down to 50%. So half the population are renters. And nationally, the home ownership rate is, like, 66%.
CUNNINGHAM: Compared to that, we're much lower. And it's a factor again, partly the military, but also just how extensive it is, and the fact that people with the housing collapse, and people going into foreclosure, we've seen a dramatic decrease.
CAVANAUGH: So we were low even when we were high, but now it's 66% nationwide, national average, and 50% for San Diego.
CAVANAUGH: Wow. With so much of our money going to housing, does that mean there's not much left for other things?
CUNNINGHAM: Yeah, when you look at the percentage of total, other things get reduced. You can look at it that way. But even when you look at it in how much we spend compared to the U.S., there's very interesting to look at some of the factors there that we are spending more for some things but less on other things. And the best example is utilities. It isn't because we have low utility prices, but we have the weather, we don't have to spend as much on utilities in the winter team to heat. In that regard, San Diego is doing quite well. We spend less for utilities. Some other studies, the rate of utilities is quite high, but we don't have to use as much.
CAVANAUGH: Some of the utility advocates we've spoken to made the point we pay one of the highest rates for our utility usage, but the overall is much lower because of our mild weather.
CUNNINGHAM: Yes, we spend I think 15% less than average for what the rest of the U.S. pays for their utilities.
CAVANAUGH: How does the fact that we're paying so much on housing and shelter affect the overall local economy?
CUNNINGHAM: A big part of our economy is actually based on the building of housing, construction. And that is the industry that's been most hurt in the recession, and of course the housing bubble collapse. Consequently, I think it's a big reason why our unemployment rate is still relatively higher than the rest of the nation. It's 9.3%, and I think the nation is 8.5%. We lost a lot of jobs in construction, and they have not come back. It's really impacted our economy. And consequently, a lot of people are not able to work. And that's just one factor. Some of the other factors in this, we have such a high cost of housing that it makes it difficult for employers to retain employees because some of our tech industries, they'll look at cost of housing and compare our cost of housing with other areas where it's much less, and they'll go elsewhere to work.
CAVANAUGH: It's something to look at the graphs that you have and the lists, because in other areas that you surveyed, they'll have the same kind of median income or expenditure, but when it comes to housing cost, you look at San Diego, and whoa, that's eating up a chunk of what you're making.
CUNNINGHAM: We don't necessarily have the highest housing prices. But when you compare it to the average incomes, the we're No. 1 in the highest percentage of our expenditures.
CAVANAUGH: What about transportation costs? How do we compare to cities like San Francisco or New York?
CUNNINGHAM: Well, those are two interesting examples. We actually pay less on transportation. And that's surprising. Transportation includes the cost of buying a car, as well as maintenance, but also the gas that we put in. And -- but we pay less overall for transportation except in one category, which is for gas. We pay higher. And actually from other studies, we know that even more recently, we're paying the highest gas prices in the nation. There's a lot of things that are interesting about that. As a metropolitan area, we see the highest housing prices seem to be around the coast and around where the employment centers are. So as a consumer, if you want to live close to working you have to pay a premium for housing. If you want to live further away, but then you've got to drive and spend the money on gas, then you get hit either way. You can't escape the fact that we're paying a lot to live here. And that's just one of the factors. So I see consumers try to cut back in other ways, but as far as gas, it's really hard, especially given our mass transit system, which we have the trolley, but that works for some, but not everybody.
CAVANAUGH: Especially not if you have to live in Temecula and work downtown. What did you find as far as our food habits?
CUNNINGHAM: One of the interesting things, San Diegans compared to the rest of the U.S., we spend more on eating out. San Diegans like to eat out. Apparently we -- even though our -- we're kind of crunched on our budget because of housing, but we still like to eat out. And it was interesting that on every other category for food consumption at home, we ate less, we spend less on food consumed at home, except for fruits and vegetables. We spend less on meat and some other categories, dairy products, cereals. But we spend more for fruit. So I guess we like to eat healthy.
CAVANAUGH: That's very good. And we also -- you found that we drink more beer? We spend more on booker.
>> Yeah, we spend more on beer, and that can be a function of price, but it's also, you know, the consumption of it, and clearly we're spending quite a bit more on alcoholic beverages. I think it's part of our liking to eat away from home and apparently go out and drink.
CAVANAUGH: Now, this survey finds that actually food, whether we're eating out or eating in is getting more expensive. Why is that? Is that transportation costs?
CUNNINGHAM: That's the factor that dips into it, yes. We do grow some food here, with but not relatively as much -- a lot of our agriculture is decorative plants. But it does cost more to bring food here. That plays into it, definitely.
CAVANAUGH: Now, a healthier lifestyle with all those veggies leads to healthcare. Are we spending more of our income for healthcare?
CUNNINGHAM: Surprisingly, we spend less. And we spend about 15% less for our healthcare. 25% less, actually. That's a function of our -- we're a little bit younger, so you don't spend as much. You spend more when you get older. That's part of it. Price is part of it. But I think it does go back to our healthy lifestyle. We find too, one of the things is we spend a lot less on tobacco. The biggest discrepancy from a national average was spending on tobacco. And we like to get outdoors. I think San Diegans tend to have an active, outdoor lifestyle. I think we're healthier in that respect. So we don't want have to spend as much on healthcare. I would have to say. Because I know from other things, our healthcare prices are not really lower. But we spend less because we don't need to, apparently.
CAVANAUGH: Because we tend to be younger you said, San Diego is traditionally known as a retirement community. Is that something we should not be known for anymore? Is the population tending younger?
CUNNINGHAM: The statistics from this survey, the bureau of laborer statistics shows that we're -- average age is about 2.5 years younger than the national average. What that means, we probably have a spectrum. We do have certainly a large retirement community. Although I think with the recession and the high housing prices, I know that people moved away from San Diego. And so we might have lost some of that older population because of that factor. But on average, we do have -- it's a function of children and how many children -- and younger people are at college. We have a large college population. All those things get in there. But on average, we actually are a little bit younger. And the military too, that's a big factor. Military tends to be younger. So that kind of skews the average a little bit.
CAVANAUGH: One part of the survey that was a little disappointing is where we stand when it comes to charitable contributions.
CUNNINGHAM: I'm surprised by that too. It's cash contributions. The way to define it is is contributions outside of the household. That also applies to childcare, if you are a divorced family. But we do spend less on cash contributions. I would it's partly because of our high cost of living.
CAVANAUGH: So what's the takeaway message from this report for San Diego?
CUNNINGHAM: Well, I think we do pay to live in San Diego. It's -- we're here because we like to live here. The joke was you're paid in sunshine dollars.
CAVANAUGH: Sunshine bucks.
CUNNINGHAM: That's true. We get paid less than some other metropolitan areas because of the lifestyle and the weather.
CAVANAUGH: And when you get hit by a economic downturn, it doesn't mean prices go down.
CUNNINGHAM: Right. It doesn't change the fact we still have to commute. You can cut back on some gas spending, but in a lot of ways you can't. You still have to commute to work, because of the way our whole county is set up, you still have to drive to wherever you go to shop and work.
CAVANAUGH: How will all this information be used?
CUNNINGHAM: This is actually what goes into the consumer price index. When they measured the -- this is hour pattern of spending. When they talk about gas prices will go up a certain percentage, it's factored into how much that goes into our overall cost of living. The latest cost of living increase, inflation rate for San Diego was 3%. And we're seeing that start to rise again. Inflation starting to rise. So when you go to your boss and say I need a cost of living increase, that's when you're talking about.
CAVANAUGH: And then he says no, here's your sunshine buck, right?
[ LAUGHTER ]
CUNNINGHAM: Yeah, that's right.
CAVANAUGH: I've been speaking with Kelly Cunningham with the national university system institute for policy research. Thanks so much.
CUNNINGHAM: Thank you.