Why Transit Access Could Be a Hidden Homebuying Bargain

The most expensive part of a cheaper home might be the car you need to live there.

Housing and transportation accounted for 50% of household spending in 2024, the most recent year for which data is available, according to the U.S. Bureau of Labor Statistics. Housing ate up 33% of that budget, while transportation accounted for another 17%.

Since then, housing costs have moderated in much of the country, with rents and even list prices falling modestly—but the cost of car ownership has kept climbing. New cars are 33% more expensive than they were just five years ago, and even used cars are up more than 40%. That’s to say nothing of insurance costs (up 19% nationwide and over 50% in some states) and gas prices (now over $4 per gallon).

That’s changing the math behind one of real estate’s oldest affordability hacks: “Drive until you qualify.”

For decades, buyers priced out of urban centers have been told to move farther out to find more affordable list and rent prices. But it’s also these far-out areas that are most dependent on cars and have the least access to reliable public transportation.

As households across the country try to bring down the total cost of daily life, the more central (and maybe more expensive) home near public transit is starting to look more like a financial advantage. But in a market defined by scarcity, transit-oriented housing may be the scarcest of all.

Only 10% of housing nationwide is within a half-mile of frequent bus or rail service that arrives at least every 15 minutes in the middle of the day, according to research from the Urban Institute. And just 6% of housing is within a half-mile of an urban rail station.

The appeal of transit-oriented development

Transit-oriented development (TOD) prioritizes building homes, offices, public services, parks, stores, and other daily necessities in walkable neighborhoods served by frequent, reliable, and fast public transportation.

Anyone who has moved from urban sprawl to a dense metropolitan area (or vice versa) will understand the appeal. Easy access to transit makes it easier to live with fewer cars, fewer trips, or no car at all. That can lower the cost of daily life well beyond what even a 2% mortgage rate could offer.

It’s a trade-off I think of often as a New York City renter. My share of the rent is close to the national median of roughly $1,600 per month. But I pay only $132 per month for unlimited subway and bus access, with maybe an extra $100 or so for car share services on late nights or special occassions. That brings my monthly housing and transportation expenses to roughly $1,832 per month.

Meanwhile, if I were paying the $1,500 median monthly rent in my hometown of Phoenix, I might save a little on housing costs, but I’d incur an additional $1,025 per month to own a car, according to an estimate from AAA. That would bring my total monthly housing and transportation costs to $2,525 per month.

That’s a difference of more than $8,000 annually—and it’s a calculation that’s showing up in more buyer decisions, says Thomas Ummels, a real estate agent.

“The mortgage is just one number, but the hidden second mortgage is the transportation cost nobody talks about,” Ummels says.

He recalls one couple who considered buying a home about 45 minutes outside the city because it was $350 cheaper per month than a more central option near transit. But once they factored in a second car, insurance, gas, downtown parking, and tolls, he says, the farther-out home would have cost about $600 more per month overall.

They chose the home two blocks from a subway station instead.

The TOD paradox

It’s a clear cost-of-living case for moving to transit-oriented housing. The problem is that, nationally, this housing is hard to find. Only 45% of housing units are located within a half-mile of bus or rail transit and much of that service is unreliable, according to research from the UI.

A bus stop a half-mile away can’t help a household cut costs if the bus comes irregularly, stops running early, requires multiple transfers, or doesn’t connect to jobs, childcare, schools, grocery stores, or doctors’ offices. To change the household budget, transit has to replace actual car trips.

That scarcity also makes the homes and businesses that do exist in transit-oriented spaces more expensive. Research suggests single-family homes near high-quality transit often sell or rent at a premium (2.3% nationally), especially when transit access is paired with walkability and neighborhood amenities. That can make what is actually an affordable home when accounting for both housing and transportation costs look unaffordable at face value.

The Housing and Transportation Affordability Index captures this irony perfectly. The traditional measure of affordability recommends that housing cost no more than 30% of household income. Under this view, a little over half (55%) of U.S. neighborhoods are considered affordable for the typical household. 

But when transportation costs are factored into the equation, the number of affordable neighborhoods drops to 26%, resulting in a net loss of nearly 60,000 neighborhoods that Americans can truly afford.

Interestingly, the reverse can also be true. In expensive, transit-rich places, high housing costs may be partly offset by lower transportation costs.

In New York City, for example, transportation made up a smaller share of household spending than it did nationally, according to a 2024 report from the New York State Comptroller. Less than half of city households owned a vehicle in 2023—far below the national rate—showing how access to transit can change the total cost of living, even in a high-rent market.

Where TOD is plentiful—and where it’s scarce

One reason transit-oriented housing has not become a broader cost-of-living solution is simple: The country has not built enough of it.

From 2000 to 2022, the number of U.S. housing units near frequent transit increased by 20%. Even so, that growth lagged behind the overall increase in housing stock, which rose 23% over the same period, according to the UI.

Some places are doing better than others. Compared with all other states, New York, Illinois, and Massachusetts have the highest shares of housing near rail lines, with at least 15% of units located near rail. In each of those states, the bulk of those units sits within dense urban areas.

Among large urban areas where at least 5% of housing units are near rail, Charlotte, NC; Seattle; and San José, CA, saw the greatest increases in rail-adjacent housing between 1980 and 2022. Cleveland, by contrast, lost housing units near rail over that period.

But in much of the country, transit-oriented housing remains scarce. Less than 20% of housing units in Alabama, Arkansas, Maine, Mississippi, South Dakota, and Wyoming are located near transit at all. And even where housing is technically close to a bus or rail line, the service may not be frequent enough to change household budgets.

Solutions and setbacks

So what got in the way of transit-oriented housing? It turns out, many of the same barriers that are currently driving the national housing shortage, now estimated at 4.03 million homes, according to research from Realtor.com®.

The first is a familiar villain: Exclusionary zoning continues to limit apartments, townhomes, and mixed-use development near transit stops and stations. And in many regions, land-use planning and transportation planning are still poorly coordinated, making it harder to align new homes with reliable service.

Rail systems, which offer some of the most reliable forms of public transit, have also not expanded fast enough in many growing metros, even as population growth has pushed more households farther from urban centers.

Any fix, then, will have to package solutions that address all of these speed bumps: allow more housing near transit, invest in frequent and reliable service, and coordinate between the authorities who can make the ecosystem work.

Some states and cities are already moving in that direction. California and Colorado have adopted land-use rules aimed at promoting more housing and mixed-use development near transit—and since 2022, more than half of new housing units built in the Golden State are located within a half-mile of any transit, according to the UI.

But even as more places try to build around transit, another obstacle is emerging: the financial health of the transit systems themselves.

About half of U.S. transit agencies surveyed—51% of 122 responding agencies—said they expected to face a fiscal cliff within five years, according to the American Public Transportation Association. Among the largest agencies, that share was 71%. APTA also found that the largest agencies expected shortfalls equal to 10% to 30% of their operating budgets.

That creates another version of the same paradox. At the exact moment households need alternatives to expensive car ownership, many transit systems are struggling to maintain the service that makes those alternatives possible.