Cost of Living in the U.S.

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Understanding the cost of living in the United States is crucial for individuals and families alike, whether they are considering a relocation, planning their budget, or simply curious about economic trends. From bustling metropolises to tranquil rural areas, the landscape of expenses varies significantly across the country. In this article, we delve into the factors influencing the cost of living, identify areas where it’s more expensive or cheaper to reside, and explore recent trends shaping these dynamics.

Where is it More Expensive to Live?

Certain regions in the US stand out for their higher cost of living, primarily driven by factors like housing prices, utility expenses, healthcare costs, and overall demand for goods and services. Cities like San Francisco, New York City, and Honolulu consistently rank among the most expensive places to live in the country. These areas often boast vibrant economies, cultural diversity, and extensive amenities, but they come at a premium price tag.

In addition to major cities, states such as California, New York, and Hawaii generally have higher living costs compared to the national average. Factors contributing to this include high real estate values, elevated transportation expenses, and state-specific regulations affecting taxes and utilities.

Factors contribute to the higher cost of living in certain areas

• Housing Market Dynamics: Regions with limited land availability and high demand often experience inflated housing prices. Cities like San Francisco and New York City exemplify this trend, where housing scarcity drives up rental and real estate costs.
• Economic Prosperity: Booming economies and high-income levels in metropolitan hubs drive consumer demand, leading to increased prices for goods and services. The presence of well-paying jobs in industries like finance, technology, and entertainment further escalates living expenses.
• Geographical Constraints: Coastal cities and areas with scenic landscapes often face higher living costs due to limited space for development and higher construction expenses. This is particularly evident in states like Hawaii and parts of California.

Where is it Cheaper to Live?

Conversely, several regions in the US offer a more affordable cost of living, attracting individuals and families seeking to stretch their budgets without compromising on quality of life. States like Mississippi, Arkansas, and Oklahoma generally have lower living expenses compared to the national average. These areas often feature lower housing costs, reduced taxes, and more moderate healthcare and utility expenses.

In addition to rural areas, smaller cities and towns in states like Texas, Tennessee, and Indiana offer a balance of affordability and amenities, making them appealing options for relocation or retirement.

Factors contribute to the lower cost of living in certain areas

• Lower Housing Costs: Areas with ample land availability and lower population density typically feature more affordable housing options. This is common in rural areas and smaller towns across the Midwest and South.
• Reduced Taxes and Regulations: States with lower income taxes, property taxes, and business regulations often translate these savings to residents through lower overall living expenses.
• Cost of Goods and Services: Areas with lower labor costs and overhead expenses may offer goods and services at more competitive prices, contributing to a lower cost of living for residents.

Recent Trends in Cost of Living

In recent years, several trends have emerged regarding the cost of living across the United States:

• Skyrocketing Costs in Urban Centers: Major cities like San Francisco, Seattle, and Boston have witnessed significant increases in living expenses, driven by rapid population growth, escalating housing prices, and rising demand for amenities.
• Suburban Shift: The COVID-19 pandemic spurred a migration trend away from densely populated urban areas towards suburban and rural regions. This shift has impacted housing markets and living costs, with some suburban areas experiencing price surges while others remain relatively stable.
• Regional Disparities: Economic disparities between regions continue to influence living costs, with coastal and urban areas generally commanding higher prices compared to inland and rural communities.

The map below, created by TA-MajestyPalm using the Economic Policy Institute’s Family Budget Calculator, shows the cost of living (COL) by U.S. county in 2023.

This cost of living calculation aims to establish a “modest yet adequate standard of living” at the county level, typically exceeding the costs provided by MIT’s living wage calculator. Here is the full summary.

For a single adult, the calculation includes:

• Housing: Utilizes 2023 Fair Market Rents for Studio apartments by U.S. county.
• Food: Based on the 2023 USDA’s “Low Cost Food Plan,” meeting “national standards for nutritious diets,” assuming the majority of food purchases are made at grocery stores. Data is specified by county.
• Transport: Incorporates 2023 data considering “auto ownership, auto costs, and transit use” on a county-by-county basis.
• Healthcare: Incorporates 2023 data encompassing Health Insurance premiums and out-of-pocket costs by county.
• Other Necessities: Encompasses expenses related to clothing, personal care, household supplies/furniture, reading materials, and school supplies.

A few noteworthy points for the map above:

• The “average COL” of $48,721 is derived from the sum of (all people living in each county multiplied by the cost of living in that county), divided by the overall population. It acknowledges the fact that although fewer counties have a higher cost of living, these tend to be more densely populated. The average county COL, excluding population factors, would hover around $42,000.
• As evident from the map, the distribution of the cost of living is not uniform. While numerous counties exhibit a COL 30% or more above the average, there are scarcely any with a COL 30% below the average.
• Technically, Danville and Norton City in VA would fall into the “VLCOL” category (COL 30%-45% below average) by approximately $1000. However, the creation of a lower tier specifically for these two cities was deemed unnecessary.
• Interestingly, certain cities boast a lower COL compared to their suburbs, such as Baltimore and Philadelphia.
• A special mention goes to Springfield, MA, for having the lowest cost of living in New England (excluding the super rural far north).”