Cost of Living



LIVING BETTER ON LESS, AS RESIDENTS OF THIS REGION DO, IS POSSIBLETHANKS TO A COST OF LIVING THAT SIGNIFICANTLY BEATS NATIONAL FIGURES.

One could look at the six factors that determine a region’s comparative cost of living and make a snap judgment that Kansas City probably sits right in the middle of metro areas nationwide. After all, we’re above national average scores in three of those categories, and below the average in the three others.

One would also be wrong to make that assumption. A deeper dive into the numbers for cost of living shows just how much better off residents are here, compared to other areas—and how, compared to those communities, our position is increasingly improved.

Screen Shot 2016-05-31 at 10.19.29 AMTwo years ago, this region was indeed dead center among 32 large markets, ranking No. 16 in terms of cost of living. What’s happened since then? While we’ve seen a rebound in the housing market nationwide, the spikes that set up the real-estate crash of 2008 in coastal communities are driving up costs there again at rates that far out-strip the increases in Kansas City’s housing costs.

That is the single biggest factor in this region’s rise from 16th to No. 11 in a comparative list of city rankings for 2015, according to cost of living index updated quarterly by C2ER, the economic research firm.

Let’s add some context to comparative figures for cost of living—particularly how far a dollar goes. Compared with those same 30 metro areas, Kansas City ranks 23rd in mean hourly wage. But if you account for the higher cost of living, it ranks fifth among those MSAs. The mean annual salary here of $46,800 has the buying power of $50,269, compared to national averages. 

And the mean wage of $65,890 in Washington? Compared to Kansas City, that’s a buying power of just $44,643. Moving here from San Francisco is an even better deal: The mean wage of $64,990 there is the COLA-adjusted equivalent of just $36,905 compared to national averages.

Housing, of course, accounts for much of that differential. The housing figures have shown us that the six components of the cost of living index are not all created equal. As a tool, an average can be a blunt instrument when you’re seeking precision, but you have to look at the share of income that Americans spend on housing to appreciate its impact.

On average, Census figures tell us that a U.S. household spends roughly 27.8 percent of its after-tax income on housing. Compare that with 31.5 percent on the broad category of miscellaneous goods and services, 14 percent on food, 12.1 percent on transportation, 10.2 percent for utilities, and 4.4 percent on health care, and it’s easy to see why a sharply lower indexed figure for housing costs can make a dramatic difference in overall cost of living rating. In Kansas City’s case, the region came in with a most recent rating of just 93.8 for housing, compared to a national average of 100.

Atop that, we enjoy lower-than-average ratings for utilities (92.6), miscellaneous outlays (96.7) and transportation (90.4), which allows us, at an overall index of 93.1, to fare better than peer communities such as Dallas (94.4), Houston (98.5) and Denver (109.4).

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Miami County, Kan, is nearly identical—79.9 percent. If those figures are outliers, they’re not by much: Johnson County to the north is the region’s most affluent and second-most populous; it has a home ownership rate of 71.9 percent.

Each component of the index is pegged to a national average of 100 in that category. Because those figures are unmoored from actual dollar values, when the underlying costs increase for all communities, a lower rate of increase in any one category can improve a region’s overall score—especially if it’s a category that accounts for a bigger share of household spending. That’s how this region fell from an overall score of 97.5 two years ago to its current 93.1.

On a somewhat broader scale, Missouri ranked 11th nationally, just ahead of Kansas, with respective scores over 91.5 and 91.9 on the state-by-state index.

There are two ways to look at where Kansas City ranks with respect to the rest of the nation when you dive deeper into housing costs. One is that our housing stock here is simply a better value—you can get not just more home for your dollar, but a higher quality of home.

Since market lows that followed the crash, home prices in the KC region have recovered by 15.6 percent, according to Freddie Mac. That attests to the very stability that minimized wide-scale market cratering here. Put that modest increase up against places like Atlanta, where prices are 44.2 percent higher than their trough; Denver, up 45.9 percent; Miami, up 50.2 percent; San Francisco, up 60.4 percent.

Other factors holding down our comparative cost of living are the proximity to much of the nation’s agricultural output and production, particularly beef, pork, poultry and grains. That yielded a score of 85.8 on our grocery bills. Yes, we pay more for avocados here, but the discounts on rib-eyes can’t be beat. And our health-care costs are also pleasantly lower than average with a reading of 95.3, in part because of a highly competitive Kansas City market that, by most any measure of hospital economics, simply has more bed space than needed for a population of nearly 2.4 million.

There’s one more way to view the lower costs here, and that’s through the perspective of an employer. With the Kansas City region’s overall affordability, businesses can still attract talented workers, even if they’re not paying New York-level salaries. That dynamic underpins the Kansas City Value Proposition, the ability of large law firms, accounting firms, architecture and design firms and other professional services to compete for business around the globe with top-tier competitors and to win on price.

That’s because their employees can enjoy a higher quality of life without correspondingly high salaries.

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