The cost of living varies significantly across cities in the United States. Some cities, like New York and San Francisco, are notorious for their high costs, while others, like many cities in the Midwest, have a much lower cost of living. For people moving to or within the US, the cost of living is an important factor to consider when choosing a place to live. In this article, we’ll examine data on the cost of living in major US cities to determine which has the highest overall cost.
What factors determine cost of living?
The cost of living index takes into account various expenses like:
– Housing costs – This includes rent or mortgage payments. Housing costs can vary dramatically between cities.
– Transportation costs – The cost of a monthly public transportation pass and other commuting expenses are considered.
– Food costs – Groceries and dining out expenses are included.
– Utilities – Electricity, water, gas, and waste removal costs.
– Healthcare – Health insurance premiums and medical expenses.
– Taxes – Local and state taxes affect disposable income.
– Miscellaneous goods and services – Everything from haircuts to dry cleaning to movie tickets.
These factors are weighted and combined into an overall cost of living index. The national average cost of living index is 100, so a city with a score of 120 would be 20% above average.
Data overview of cost of living in major US cities
| City | Overall Cost of Living Index |
|---|---|
| New York, NY | 153.1 |
| San Francisco, CA | 149.6 |
| Honolulu, HI | 148.1 |
| Oakland, CA | 135.6 |
| Los Angeles, CA | 124.3 |
| Seattle, WA | 122.3 |
| Washington, DC | 121.3 |
| Boston, MA | 119.4 |
| San Diego, CA | 118.9 |
| Denver, CO | 104.5 |
This table provides an overview of the cost of living index for some of the most expensive major cities in the US. It is based on data for over 300 urban areas provided by the Council for Community and Economic Research.
New York tops the list with an overall index of 153.1, meaning the cost of living there is 53.1% higher than the national average. Four other cities in California – San Francisco, Oakland, Los Angeles, and San Diego – rank in the top ten. Honolulu and Washington DC round out the top five most expensive urban areas.
Housing costs
Housing makes up the largest share of cost of living. High real estate prices get passed along to renters in the form of high rents.
The median home price in the San Francisco metro area exceeds $1.3 million. In New York, it is over $800,000. The table below shows median home values in the five cities with the highest housing costs:
| City | Median Home Value |
|---|---|
| San Francisco, CA | $1,310,000 |
| San Jose, CA | $1,260,000 |
| Oakland, CA | $940,000 |
| Los Angeles, CA | $869,000 |
| New York, NY | $816,000 |
For renters, the patterns are similar. Rent costs in these cities are approximately double the national median. Here are median rents for 1-bedroom apartments:
| City | Median 1-Bedroom Rent |
|---|---|
| San Francisco, CA | $3,690 |
| New York, NY | $3,350 |
| Boston, MA | $2,810 |
| San Jose, CA | $2,520 |
| Los Angeles, CA | $2,350 |
Clearly, housing costs make these cities far more expensive than the national average. But several other factors also contribute to the high cost of living.
Transportation costs
Transportation includes public transit, vehicle expenses, and commuting costs. New York and San Francisco have some of the oldest and most extensive public transit systems in the US. A monthly pass runs around $100 in both cities. Other cities with high transportation costs primarily drive up expenses through long commutes by car. For example:
| City | Average Commute Time |
|---|---|
| New York, NY | 37 minutes |
| San Francisco, CA | 34 minutes |
| Oakland, CA | 32 minutes |
| Washington, DC | 34 minutes |
| Los Angeles, CA | 32 minutes |
While public transit keeps commuting costs reasonable in NYC and San Francisco, other expensive cities see long commute times by car. Long commutes not only waste time but add to transportation costs through fuel, maintenance, and depreciation expenses.
Food costs
The cost of groceries and dining out is incorporated into the overall cost of living calculations. Food costs will be higher in cities with high rents and labor costs. For example, groceries cost about 45% more in San Francisco and New York compared to the national average. Honolulu’s isolation makes goods more expensive – groceries cost 55% above average.
Restaurant meal prices tell a similar story. A meal for two at a mid-range restaurant costs:
– $75 in San Francisco
– $72 in New York City
– $65 in Honolulu
Compare that to just $40 for the same meal in Memphis or Oklahoma City. High rents and labor costs get passed along through higher restaurant prices in expensive cities.
Healthcare costs
With sky-high housing costs, residents in expensive cities need higher salaries to maintain their standard of living. This leads to increased healthcare spending. Employer health insurance premiums track closely with salaries – higher salaries mean higher premiums.
Annual health insurance premiums for families in expensive coastal cities can be double the average premiums in rural and Southern states. For example:
– $20,712 in San Francisco
– $18,664 in New York
– $17,355 in Boston
Versus just $9,992 in Birmingham, Alabama or $10,552 in Columbus, Ohio. The gap in healthcare premiums illustrates how almost every component of cost of living interconnects.
Other goods and services
Prices for other goods and services also reflect the higher wages and business costs in expensive metro areas:
– Haircut – $55 in San Francisco vs. $17 in Houston
– Movie ticket – $16 in New York vs. $9 in Dallas
– Dry cleaning – $15 in Boston vs. $8 in Nashville
Higher costs compound the overall strain on household budgets in high cost of living cities.
Taxes
State and local taxes contribute to geographic differences in cost of living as well. Most high-cost cities are also in high-tax states. Top state and local tax burdens:
| State | Tax Burden % of Income |
|---|---|
| New York | 12.7% |
| California | 11.0% |
| Hawaii | 10.9% |
| Minnesota | 10.8% |
| Connecticut | 10.7% |
The additional taxes consume more of residents’ incomes compared to states like Tennessee and Florida, which have no state income tax and lower overall burdens.
Salary differences
Salaries do tend to be higher in cities with an elevated cost of living. But higher pay may not be enough to cover the full difference in costs.
For example, the average salary in San Francisco is about $20,000 above the national median household income. However, remember that San Francisco’s cost of living is 53.1% above average. So an equivalent standard of living to the national median would require a salary almost twice as high as the median, putting it out of reach for many workers.
Geographic differences in salaries also depend heavily on industry and occupation. Technology and finance jobs concentrate in high-cost labor markets, inflating salaries. Pay in other sectors like education, healthcare, and government tends to be more consistent regardless of location.
Tradeoffs of cost of living
While most discussions focus on the downsides of high living costs, it’s important to recognize the tradeoffs. Expensive cities usually offer higher salaries for skilled workers. These cities also tend to have:
– More job opportunities and access to culture, dining, and entertainment
– Public transit reducing transportation costs
– Mild weather year-round
Additionally, cities like San Francisco and New York attract vibrant communities of young, highly-educated professionals. The combination of amenities, economic opportunity, and lifestyle form part of the appeal for these high-cost areas.
Cost of living changes over time
Cost of living indexes provide a snapshot at a point in time but costs are always changing based on economic conditions. Over the past decade, New York and San Francisco have pulled away from the pack as the most expensive cities. But changes can reshape the landscape.
For example, in the early 1980s Detroit, Cleveland and Buffalo ranked as some of the highest cost of living cities primarily driven by a strong manufacturing economy. Rust Belt cities have since seen dramatic cost declines amid economic stagnation. On the flip side, costs have skyrocketed in tech hubs like San Francisco and Austin where job growth has surged.
So cost comparisons reflect the economies of cities at a moment in time. Looking to the future, climate change and its impacts could also dramatically alter cost of living in vulnerable regions like Miami and New Orleans.
Conclusion
Evaluating the data makes it clear that New York has the highest overall cost of living among major US cities. New York tops the comparison based on housing costs, transportation, food prices, healthcare, and taxes. San Francisco and other cities in Hawaii and California comprise the rest of the top five.
While the high costs impose challenges, these cities offer higher salaries and other quality of life benefits. Individual preferences around lifestyle, climate, and job opportunities will also factor into any cost evaluation. Regardless of where you choose to live, understanding how costs of living vary can make planning and budgeting easier. Comparing costs before a move can prevent sticker shock.
There are always tradeoffs to consider with cost of living. But being informed makes it simpler to find a city that best aligns with both your finances and preferences.