There are many reasons why people might buy a house in the city or in the suburbs. But which one is actually more affordable? Given Montreal’s much higher home prices, most people would naturally say the suburbs. But according to Luc Gagnon and Pierre-Olivier Pineau of the Interdisciplinary Research Group on Sustainable Development from HEC Montreal, this is not necessarily true. And the numbers support them.
When purchasing a home, people tend to consider only housings costs and neglect transportation costs, they write. But because of the added distance, the number of vehicles per household increases dramatically: 0.8 per household in Montreal versus 1.6 for a household in the suburbs. The annual cost of a vehicle can range from $9,900 to $23,000. In other words, if a family chooses a location that prevents them from having to buy another vehicle, they can afford to buy a home that costs $200,000 more.
According to the authors, families are not the only ones to underestimate transportation costs; banks do the same when approving a mortgage. But for how much longer?