In recent days the Herald “Sideswipe” column has helpfully illustrated some of the core issues around urban sprawl and using travel time savings as a measure of the worth of a transport project. It started with this on Monday:

 Good life in the country costs less

OK, so you move out to, say, Whangaparaoa from the North Shore to get a more affordable mortgage. The estimated extra petrol costs ($55 a week) aren’t going to make it more expensive than the difference in mortgage payments. Mike Dennehy explains:

“1. You live close to town and have a $500,000 mortgage. Using Westpac’s online mortgage calculator, repaying a $500,000 mortgage over 20 years at the current rate of 5.6 per cent p.a., your monthly payments are $3468.

“2. You move out of town and get an affordable house at, let’s say, a $300,000 mortgage. Using the same calculator, the monthly repayments are only $2081. The difference looks like this – you will save $320 a week on your mortgage, and pay an extra $55 a week for transport. You’re $265 a week better off, and you’re on the housing ladder. It gets better: the annual difference is $16,640, but you only have to come into work for a maximum of 48 weeks, so the extra travel works out at $2640 a year. You’re better off by a whopping $14,000 a year!”

A reader responded to this on Tuesday with:

“If you live in Whangaparaoa instead of, say, Takapuna, you will spend around 30 minutes extra each way in your car at rush hour. Since in each eight-hour work day most people spend at least a couple of hours doing pretty much nothing (coffee, gossip etc), commuters work an extra day a week, equal to 20 per cent of their salary in lost time/money.”

I do wonder if this particular reader is a transport economist for the NZTA, as this evaluation seems to be straight out of the Economic Evaluation manual. Finally today there are some more responses in today’s Sideswipe, including one from yours truly:

Commuting isn’t equal to cash

“A commuter in Whangaparaoa might spend a lot of time commuting by car, but this isn’t ‘equal’ to 20 per cent of their salary,” says Cam Pitches. “People choose to commute in their own time, not their employers’. A recent NZ Transport Agency survey found that 40 per cent of people actually enjoyed their commute. Common responses identified any time savings would be spent on non-work/non-study activities such as sleeping, more time getting ready for work, eating breakfast, family time, household chores and reading.”

Cheaper doesn’t mean better value

A reader says Mike is right that buying a cheaper house further out will cost you less to pay off, but he is forgetting that at the end of paying off the mortgage, you have a house worth $300,000, not $500,000.

 West is best for the commute

Gary lived in Cockle Bay, Howick, for 27 years, but this year he moved west, to Riverhead. “I work in Newmarket and it was 24km to work from Howick. Now I travel 28km to work, but the trip is 20 to 30 minutes quicker because I don’t have to battle traffic on the Pakuranga Highway anymore. I now enjoy the wide open spaces for the same sort of money as a house in Howick. Because of the position of Riverhead and new motorway links, I can head north or south out of Auckland, or go anywhere within Auckland and not have to use the harbour bridge. That alone made the move worthwhile.”

These are quite useful illustrations of how human behaviour contradicts the official way benefits are calculated, as covered in this post.  The last is a good example of how increasing capacity of a transport corridor encourages longer distances to be travelled.  It is also backs up David Metz’s research which concluded that in spite of billions of pounds being invested in transport in the UK, average commute times have remained largely unchanged for decades. Perhaps it is time we focussed more on the absolute peak carrying capacity of the transport corridors we build too?  And favouring transport projects which reduce our reliance on fossil fuels.

Of course the other important issue is how much more productive/relaxed a commuter would be on the 897X from Whangaparaoa, over a commuter in their their car – again a point ignored when travel times are considered to be an economic “bad”.

Hopefully NZTA takes note of their own survey and revisits some of their economic assumptions.

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  1. I travel on the ‘bus from Pukekohe to the University each day, a total of about 2 hours and 20 minutes travel time. It is not a financial loss, since I have no way of being paid for that time – and it IS time that I can spend doing things that I would otherwise do at home – reading, for example – and I also do a certain amount of work-related stuff there as well. The ‘bus trip is relaxing – actually a part of my day that I look forward to.

    Since I could not afford a house in the City, it’s not a matter of a choice I make anyway – but, in addition, talking to some friends who commute to the University from places like Botany, their travel time is not a lot less – and is a lot more stressful.

    ‘Bus monthly pass is about $50/week.


    1. John is there a reason you don’t catch the train? It’s a bit quicker from what I can see, and you could bus up to Uni from Britomart if you wanted to avoid the walk.

      1. Probably the fact that his bus monthly is about $50 a week while the train pass option is about $70 a week? Or it could be inflexible service: timetable is hourly most of the time, and the last train leaves town at 7.15pm.

    1. Basing the marginal cost on the additional petrol is OK if you can survive with the same number of vehicles, but the calculation goes out the window if the move out to Whangaraoa means a household needs two cars instead of getting by with one. Also: $300,000 sounds pretty fanciful for a house in Whangaparaoa. I did a quick search on Ray White for 3 beds in that location, 800K! That’s one big deposit for a first time buyer… Barfoots have 2 bed units ~ 65 sq m, being sold off-plan (i.e. not yet built) for 340-odd. They have similarly priced 2-bed apartments in the CBD for that as well, so I’m not sure how valid this comparison really is.

      1. The marginal cost is not only the additional petrol though — if I own a car in town and use it only occasionally, it’ll have far fewer repairs needed and maintain its value much better than a car taken out on a lengthy daily commute.

        Agree, though, that the costs really escalate when you need to add extra vehicles.

  2. The rapid development in the capability of electronic devices has mitigated the loss. But it has not eliminated it entirely – it’s still not possible to have an intimate time with a partner on the bus, or spend time with family, for example – public transport is a constrained space that opens some possibilities and forecloses others. That deserves factoring in.

    Perhaps some thorough research is deserved; it would be a small fraction of the budgets they use annually on roads. It also seems worthwhile to look at how some of those constraints on space can be relieved. I’m not suggesting beds in buses(!), but things like being able to buy a decent coffee and breakfast on or near a PT platform mean that an enjoyment constraint (food) is now no longer so severe. There are others that deserve attention, surely.

    1. “No city in the world will ever manage to end congestion because when traffic flows, people are drawn to their cars. The key is to find a balance, the point at which it is worthwhile for commuters to use public transport because it’s faster then driving,” he says.

      “That way Sao Paulo needs urgently to invest more in public transport instead of building new roads and expressways that will only be filled up with more cars.”

      Rinse and repeat.

    2. They are investing in an expanded metro – the newish line 4 seemed pretty good for example but the sprawl means public transport cannot keep up. It was hit and miss in traffic to the main airport though – certain politicians should be sent to SP to show that sprawl is not such a good thing.

  3. This only makes sense if you:
    – ignore apartments
    – already have a car (or two if your partner is working)
    – don’t mind losing the option to walk or cycle to work

    For my family, we would go from $100 monthly for transit to $1700 monthly assuming the $0.7 / km price for a car commute (20k commute with 2 cars). So with the original calculus of a $300k vs $500k mortgage I would actually pay _more _ if I took the cheaper house. One car wouldn’t work most days (afternoon shifts).

    I think the writer of the article can’t even imagine that there are people who can’t afford to own a car.

  4. Peter Newman of Curtin University Perth has researched the personal savings of car-dominant cities vs PT-dominant cities. Not surprisingly, savings are greater in PT-dominant cities.

    When you’re car-dependent you think nothing of going into debt to maintain your mobility (ie get to your job). If the car needs petrol, repair or replacement this takes precedence over virtually all other expenditure. The above article is typical of the reason many choose the faraway suburbs because they only look at the petrol cost, not the overall cost of running one or two cars.

    Tom’s has quoted car cost of $0.70/km for a car commute, but this is not the marginal cost of car useage. About 20-30% is petrol, then there are costs per km such as tyre replacement and the wear-and-tear component of depreciation. Most of the rest are fixed charges such as insurance and the obsolescence component of depreciation, which apply even if the car isn’t used. So the marginal cost per km is well below $0.70/km, and the big costs are of requiring 2 vehicles rather than 1.

    The article also didn’t consider the house asset value at the end of one’s working life. A residence in the outer suburb probably has low rate capital gain, whereas the inner suburb is greater.

  5. I haven’t read the study, but an interesting choice of words in “personal savings”. Presumably this is acknowledging that someone else is subsidising PT via rates and/or taxes. Yes I know rate/taxpayers pay for roads too, but the ongoing subsidies (maintenance costs) are far lower. Just saying that all cost factors need to be taken into account in making such a comparison – and maybe they were.

    Totally agree with your other points. IRD allows 77c/km reimbursement for up to 5000km/yr, then a lower rate that I can’t remember. Typical petrol costs are 15-25c/km depending on the vehicle. As for capital gains, absolutely true (for a house anyway, not so for apartments where the gain seems to be much lower, similar to commercial buildings).

    1. You could probably find the study if you spend long enough looking up Peter Newman’s publications and presentations on Google. Otherwise email him. Most academics are happy to know that others are looking for their work.

      I recall the study examined transport expenditure and personal savings at the city rather than the individual level. So it has included any PT subsidies.

  6. I’ve been working on a theory for a while now that perhaps time savings isn’t the best way to really capture the “benefit” of a transport project. There are two main reasons for this:

    1) As David Metz says, people generally “bank” their time savings and just take longer (by distance) trips. That has a benefit, in terms of improved accessibility, but that’s different to placing a value on time and adding up all the savings.

    2) It perverts the type of projects we invest in by ignoring important other values. Amenity improvements, improved transport choice, environmental costs and benefits and so forth really aren’t captured by time savings.

    Overall, I wonder whether focusing on the impact of a project on land values might be a better way of judging its benefit – at least in urban areas. If a place has vastly improved accessibility due to a transport project then presumably its land value will go up. I guess the trick is to isolate the change in land values to just the effect of the transport intervention, which could be a big challenge.

    1. I think you are bang on the money with the impact on land values. Taking that thinking further points to who should be asked to pay – a case of those who benefit pay rather than user pays. A look at how railways were financed in the push west across the US is interesting (albeit in principle rather than detail).

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