Business

Washington, D.C., Is Not the Most Expensive Place to Live in America

It's just a rich metropolitan area with an unusual number of homeowners.

By Derek Thompson
Wikimedia Commons

The claim that Washington, D.C., is the most expensive city in America is suddenly everywhere online, including this viral article from The Washington Post that's all over Facebook. Others are rightly pointing out that New York, San Francisco, and Honolulu have been named the most expensive places to live in basically every other meaningful study.

There are two facts here.

The difference between these two facts is a story in how we can tell lies with true data.

The claim that D.C. is the most expensive place to live comes from a Bureau of Labor Statistics study that you can read here. A graph from this study shows the "average" resident of Washington, D.C., paid more for housing in 2012 than the "average" resident of any other metropolitan area.

The Average D.C. Resident Spends the Most on Housing

BLS

I'm putting the word "average" in massive, gargantuan scare quotes here. According to the government, the "average" D.C. resident spent $11,510 on what the BLS calls "owned dwellings" and $4,396 on what BLS calls "rented dwellings" in 2012.

In the real world, however, how many "average" people do you know who own a house and rent an apartment and spend thousands of dollars on each dwelling, every year? Unless the market for pieds-à-terre in the district exploded in the two years since I moved, I'm confident the answer is "exactly zero." This is an awkward "average" that includes both homeowners (of which D.C. has a lot) and renters (of which New York and San Francisco have a lot).

Seventy percent of D.C. households own a home, compared to just 56 percent of New Yorkers and 52 percent of San Franciscans. So although both houses and apartments are more expensive in San Francisco and New York, more Washingtonians own homes, which means they spend more on housing. (It's worth pointing out that the typical D.C. resident is also richer: The average post-tax income in D.C. in $77,000, compared to $73,000 in SF and $58,000 in NYC.) "You have to look at the compositional make-up [of homeowners and renters by city]," a BLS spokesperson told me. "The homeowner vs. renter aspect is really what's driving this."
The BLS' definition of metropolitan areas includes the city and its suburbs. So "Washington, D.C." includes not only the District of Columbia, but also 13 of the 30 counties with the highest median income in America, including Montgomery, Fairfax, and Falls Church. When you compare Manhattan and D.C. home values directly, there is no contest. The median home value of a Manhattan residence is $1.25 million. In D.C., it's $463,000. Only when you include all the suburbs does Washington, D.C., and its abundance of homeowners compete with New York for total living costs.
As WSJ's Josh Zumbrun writes in a great explainer, there are much better ways to identify the most expensive city to live in America, and they all side with New York, San Francisco, or some other non-D.C. city.

The government pays its employees more money in New York than D.C. Moving to New York as a government employee is sufficient cause for a roughly 4 percent wage increase. And other indexes seeking to gauge the cost-of-living also find New York more expensive. The 2014 Mercer Cost of Living Rankings said New York was the most expensive city in the U.S. and the 16th most expensive in the world. D.C. is the 92nd most expensive city in the world by their method.

He also passes along this important chart showing the cities with the highest cost-of-living for people of a certain income, which, like practically every study, puts New York, Honolulu, and San Francisco atop the list.

The Most Expensive Place to Live in America

WSJ

D.C. is expensive. And D.C. residents have every right to complain that it's too expensive. The city's development is hampered by a building-height law that is absurd and deserves national ridicule. But the BLS never said that D.C. was the most expensive American city to live in. If you find yourself making that argument, you are using true data to tell a false story.