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In San Francisco, it would cost a family of four $148,440 per year to achieve a "modest yet adequate standard of living." This includes food for two adults and two children, but no restaurants. It also includes healthcare purchased through Obamacare's lowest-cost options and the indulgence of a second bedroom shared by both children.

In Boston, this lifestyle would cost $113,558 a year, and $75,488 in Dallas, Texas.

These numbers come from the Economic Policy Institute's Family Budget Calculator, an interactive fact sheet that lets users find out what a modest living costs in most cities across the U.S. It's an expansive tool to play with, positively filled with data that are, admittedly, probably only of real interest to the kind of people who think that the chained CPI makes for interesting cocktail conversation.

Yet while plugging numbers into this calculator, I couldn't help but ask the same question over and over again. Who can afford this?

See a gallery of the most expensive places for families to live in the U.S.

The median household income in the U.S. currently hovers slightly north of $59,000, a number less than half of what the EPI estimates it would cost to afford a life without glamour in New York City ($124,129). Chicago comes in at a more svelte $88,536 and Houston's $74,718 cost of living is cheaper still, but these all still blow past what the ordinary household is bringing home per year.

And the calculator's estimates are probably on the conservative side. It lists my own home town of Ann Arbor, Mich. as featuring $905 one-bedroom apartments. You might find that apartment there, but it would almost certainly come with black mold, cold showers and a ghost.

Affordability has become one of the biggest problems for American cities, which has in turn become one of the biggest problems for the national economy. Almost all of the new job creation since the end of the Great Recession has happened in or around urban areas. Rural communities have never replaced the jobs they lost over 2008 and 2009, and as a result their job market is actually smaller today than it was 10 years ago.

Which is, in turn, a major problem. As Americans, particularly millennials, try to find work and build their financial futures, they increasingly have to move to cities in order to do it. Yet once there they face costs of living that are all but crippling. The new wealth that these workers build gets soaked by rent seekers, whether in the form of food prices, transportation or literal rent.

Bad as that is for individuals, on a macroeconomic scale it's a near-catastrophe. By the numbers, today's white collar city workers make up the new backbone of the American economy. They should be filling the role that blue collar workers did across the country 50 years ago, creating a vibrant consumer marketplace ready to buy homes, raise children, take vacations and otherwise enjoy the fruits of hard work.

Yet instead of advancing their financial future, urban millennials drive rideshares and rent out their bedrooms just to make ends meet. They aren't building their role in the economy. Many struggle just to hang on.

There are a few reasons for this.


Recently, I spoke with the Pew Research Center's Drew DeSilver about why costs of living in the cities have gotten so high. His answer:

"Housing, housing, housing and housing."

Cities have become pressure cookers. Where 100 years ago the population was split almost 50/50 between rural and urban residents, today nearly four-in-five Americans live in or around a city. That migration is accelerating, and not just because of jobs. More and more people want the accessibility and lifestyle that comes with a city, and particularly a walking community.

Yet apartment construction simply has not kept pace, creating what's known as an "inelastic housing supply." People enter in ever-greater numbers looking for someplace to live and the volume of homes and units hasn't expanded to meet their needs. In many places the city's footprint has stopped growing altogether, limiting the available space to build new apartments even if a developer wanted to.

So the rent climbs, driven by a growing population and a development market that has slowed to a crawl.

Family Costs

Housing, the EPI's Zane Mokhiber warned, may be a headline issue, but it's not the only one.

"According to the family budget data, rental costs consistently take up a large share of family's overall budget in metro areas, but it's not always the largest, especially for families with children," Mokhiber wrote in an e-mail. "Child care costs are high everywhere, but even more so in urban areas since center-based child care tends to be more expensive than home based care. Also, transportation costs can take up a significant share of a budget, especially if a family has to rely on a car to get around."

Families with young children overwhelmingly depend on having dual incomes, but this means that someone has to watch the kids while both parents are at work. The costs of child care in a city can vastly exceed comparable rural or suburban services. In Boston alone daycare can cost more than $24,000 per year according to the EPI's numbers, compared to a little more than $10,000 nationally.

For many dual-earner households, the costs are high enough to consume one parent's entire paycheck.

The One-Way Ratchet

Urban expense has turned into a self-fulfilling prophecy.

There are two ways (broadly) that a marketplace can function. In one, over-supplied sellers compete against each other for limited consumer dollars. This pushes prices down, because the buyer can always get a better offer. In the other, over-abundant consumers compete against each other for limited supplies. This pushes prices up, because the seller can always find a better offer.

The latter is generally known as a bidding situation, and it's what drives urban costs of living.

Services and housing stock are simply not expanding as fast as urban populations, and the resulting over-demand and under-supply means that sellers can charge based on who will pay the most. Yet the problem with a bidding marketplace is that unless something comes along to substantially change the relationship between supply and demand, bidders will generally keep pushing the prices up.

That's what has been happening in most major cities. High prices chase away people who can't afford to pay thousands of dollars per month in rent, while at the same time erecting a barrier to entry for incoming residents. Only people who can find a way to pay these prices (through wealth, debt or the odiously termed "side hustles") will move into the city. The population becomes increasingly affluent, pushing prices higher still as moneyed residents jockey among themselves for limited options.

So prices climb higher and higher. A landlord who didn't build so much as a stick of new furniture between 2000 and 2017 would still have seen his income double.

And that, ultimately, is the crux of the problem. In a bidding situation consumers themselves will drive the prices and profits ever higher, disincentivizing existing suppliers from expanding the marketplace. Their best-case scenario isn't to add new housing stock, it's to restrain new competitors from doing so through regulatory and commercial leverage. A landlord who wants to make more money can do so far more securely by letting rent continue to increase passively than by taking on the trouble of erecting a new building.