Lowest Cost of Living States -- OK the Best

The great state of Oklahoma is the lowest cost of living state in the union.  It barely edged out Tennessee for that prime spot.  As of the 4th quarter of 2012, the cost of living by state is indicated in this map provided by the Missouri Economic Research and Information Center.

The ranking is based upon data provided on cities and metropolitan areas on the cost of groceries, housing, utilities, transportation, health care, and a miscellaneous category.  Thus, it may not reflect the cost of living in the more rural areas of a given state.

It is worth noticing that the lowest cost of living states are all contiguous, with the exception of Idaho and Utah.  The contiguous block stretches from Ohio west to Nebraska, skipping Illinois, from West Virginia and west of the Applachian Mountains to Georgia, the only state on the Atlantic seacoast, and then west to Texas, skipping Louisiana.  The southern Great Plains states, the lower Midwest, the interior Southeast states, and the interior Mountain states are the best.

The most variable of the cost factors is the cost of housing.  In the 16 lowest cost of living states, housing is the cost with the lowest index rating.  In the 13 most expensive states and the District of Columbia, housing is the highest index value, with the exception of Alaska for which it is 2nd highest.  In Alaska the utilities index is the highest.  Housing costs are affected by the availability of land in relationship to the population.  They are affected by real estate taxes, policies to limit development and other land use controls, building codes, rent controls, contractor licensing requirements, labor and wage laws, and other cost of doing business factors.  In some areas they are also affected the extent of local federal, state, and local government ownership of land.

Utility costs are the second most variable cost.  These are a function of distance from such inexpensive and reliable resources as coal and natural gas or a lack of sufficient natural gas pipeline capacity.  Some states discourage coal electric plants or nuclear power plants.  They are also very much a function of state mandates for wind generation, solar power use, and biomass use for electricity.  In addition, many states like to attach special taxes to utility bills, especially those states so dominated by Progressive Elitists that they believe energy use is a sin.  Meanwhile, they require the consumer to subsidize so-called green energy ii obeisance to Gaia, so long as it is not in their backyard.  The worst states for utility costs are:

Alaska, index 168.4
Hawaii, index 167.7
New Jersey, index 133.9
Vermont, index 129.0
Rhode Island, index 127.3
New Hampshire, index 125.7
Delaware, index 122.8
Connecticut, index 121.0
Massachusetts, index 120.7

The third biggest variable cost is health care.  States dictate the kind and coverage of health insurance policies, restrict the building of new hospitals, license physicians and control the medical schools in their states, license pharmacists, optometrists, and registered nurses, and they meddle with regulations on x-ray equipment and other medical equipment by requiring often wasteful calibration, maintenance, and safety procedures on equipment they know nothing about.  States also have great impact on medical malpractice costs, Workman's Compensation insurance, and other medical liability costs in their courts.  The most expensive states for health care are:

Alaska, index 140.2
Connecticut, index 119.4
Massachusetts, index 119.0, home of RomneyCare
Hawaii, index 116.5
Rhode Island, index 116.3
Oregon, index 114.8
New Hampshire, index 114.2
Maine, index 113.4
Washington, index 112.9

The least expensive, and closely competitive, states in the overall ratings are:

Oklahoma, #1, index 90.5
Tennessee, #2, index 90.6
Kentucky, #3, index 91.0
Arkansas, #4, index 91.5
Indiana, #5, index 91.7
Kansas, #6, index 91.9
Texas, #7, index 92.0
Nebraska, #8, index 92.0
Idaho, #9, index 92.1
Missouri, #10, index 93.0
Alabama, #11, index 93.2
Utah, #12, index 93.2
Mississippi, #13, index 93.2
West Virginia, #14, index 93.3
Georgia, #15, index 93.7
Ohio, #16, index 93.9

The ignominious last fifteen states are not just last, but have been entirely lapped in the race:

Oregon, #37, index 107.0
Delaware, #38, index 108.2
Maine, #39, index 110.9
New Hampshire, #40, index 119.7
Vermont, #41, index 119.9
Massachusetts, #42, index 122.9
Maryland, #43, index 123.1
Rhode Island, #44, index 123.5
California, #45, index 125.6
New Jersey, #46, index 129.8
New York, #47, index 130.4
Connecticut, #48, index 132.7
Alaska, #49, index 134.5
District of Columbia, #50, index 144.8
Hawaii, #51, index 167.1

All of the 15 most expensive states have long been Democrat Socialist Party controlled with the exception of New Hampshire and Alaska.  Much of Alaska costs come from remoteness and the extreme weather.  New Hampshire while neither strongly Republican or Democrat does have a strong environmentalist factor contributing to high housing and utilities costs.  Government controls come with a big price tag which goes well beyond high taxes alone.  They are a major factor in the cost of living in that they raise of cost of many goods and services.

Favorite retirement states of Florida and Arizona fall in the undistinguished middle, but in the lower half of the states. Florida is #28 with an index of 99.0.  Arizona is a rather poor #35 with an index of 102.5.

The Oklahoma branch of my family is happily enjoying their lowest in the nation cost of living.  I, on the other hand, am most distressed by the cost of living in statist Maryland, ranked #43, with a skyhigh index of 123.1.  Earlier in life, I lived in 5 of the 16 best states and in 3 of the ignominious most expensive 8 states.

Government Abuse of Building Permit Power

The Cato Institute Daily Podcast for 14 May 09 features Tim Sandefur, an adjunct scholar at Cato, discussing examples of local government abusing their control of building permits to deny the permit requester the right to vote or to charge them exorbitant fees. Permits are supposed to be the means to eliminate public safety hazards, but they are actually now used for much more. They are used with high fees to reduce general taxes. They were used in the most famous case on such matters to impose beach access for the general public over the land of a family who wanted a permit to add a second story to their home. That case went to the Supreme Court, where the argument that the home blocking the view of the beach from the highway was ruled no excuse to impose an unrelated requirement for a public easement on the property owners.

The featured issue in the podcast is that of the Griswolds of Carlsbad, CA. They wanted a permit to add two rooms to their home for their grandchildren when they came visiting. Carlsbad said they would grant the permit if the Griswolds would give up their right to vote "No" on property assessments! You might think this is really unreal. But, similar permit cases in Santa Rosa, CA and Missoula, MT have occurred in which the requester was required to give up the right to vote if they were to receive the permit.

While we are the subject of permits, I will add that permits are also used as a tool to enforce building codes, many of which require the use of expensive and old-fashioned materials which are difficult to install. These requirements are often not updated often and are designed to require the permit requester to use expensive, licensed tradesmen. They are also designed to keep pre-built housing from competing with the local builders who will hire local workers. In reality, permits and building codes are used for many purposes other than safety purposes. They are another tool in the hands of the power seekers in local government.

A Request for an Overview Discussion of the Financial Meltdown

I have received a request that I provide an overview discussion of what I believe caused the home mortgage and financial crisis we suffered. Robert G. Curry wrote:

I wonder if you have given some thought to the causes of the current financial meltdown. The history leading up to what happened this year, etc.

Have you covered any of this on your blog?

It would be informative to be able to get an overall picture of the actions from the Carter years to the present of who did what, and who's primarily to blame, both through actions or neglect of action, for the meltdown.

How did we get from the so called "Fair Housing Act," through the "No Red Lining," to the "NINJA" loans, to the packaging of junk mortgages as A rated bonds, to the insuring of those bonds by the people at AIG, to the bailouts?

My response to Robert was:

I have discussed it a number of times, but not as comprehensively as you are suggesting I do. Partly, this is because it is a complex history. Partly, because the time period from Sep through Dec is our busy season in my laboratory, though all of 2008 was very busy for me. But, there is also a very critical component to the housing and financial meltdown which is due to problems caused by local and state governments in addition to the unhealthy contributions to the problem made by the Federal government. This really complicates the issue. I have addressed some of the local problems in a few posts as well.

When you look at where the mortgage defaults have occurred, you find that they are very far from an even distribution across the country. Mostly, the problem spiked in those areas where local and state government have such restrictive policies on home-building that home prices have become inaffordable for most people who in other parts of the country could readily buy a home with their income. In California, the average home buyer is paying 8 times his income to buy a home, when paying more than about 2.5 times your annual income for a home makes you a sub-prime borrower. We can argue that the average home buyer in California has no business buying a home, but human nature being what it is, they still badly want a home. In large part, the fact that homes cost so much in California is because of local and state government policies. For the most part, this is the pattern of where mortgage defaults are occurring. In Nevada the problem is that the Federal government owns 84.5% of the state and land around Las Vegas is not available because it is penned in by Federal land. Florida is another area with a spike of failures, where apparently there is a lot of speculation in homes based on quick improvements and rolling over the homes. This may have other explanations, maybe just that a lot of baby boomers are retiring or will soon and home values may have been rising due to their plans to move there upon retirement and it became an easy money fad to buy homes in anticipation of an easy resale at a higher price. Ohio and Michigan have elevated mortgage failures due in part to the very bad business climate in those states, which is causing them to lose jobs badly.

Because of these local issues, many people have put more and more pressure on Congress for affordable housing. In effect, many present home owners in local areas were happy with the rising home values due to government restrictions and maybe did like less traffic on the roads, lower taxes due to having fewer public schools to build, and more parks, but others wanted housing they could afford and some of the home owners are probably feeling guilty for favoring restrictions that they must realize are causing homes to be unaffordable. Congress does nothing to address the local building restrictions, so they have done as much as they can to press the envelope on lowering the costs of home mortgages. Many of the problem programs you named resulted in good part in response to some very vicious local housing affordability issues.

Of course, this then becomes a good lesson in how excessive government meddling in economic matters and in matters of property, causes all sorts of problems, the attempted responses to which cause still more problems.

Robert has a grasp of much of the path taken at the national level to attempt to make housing more affordable. He understands that this process began long ago and has resulted in a major problem for the economy. I was on the verge some time ago of addressing this side of the problem more thoroughly, but upon looking into it, it became clear that it was even more complex even on the federal affordable housing side of the issue than I had thought. It was going to take some real effort to sort it all out. In the process of looking into that, I realized that a good part of the reason pressure was put on the federal government to make home mortgages more available and less expensive was due to problems already caused by local and state governments which made housing in some substantial parts of the country ridiculously expensive.

There is a push-pull problem here of massive proportions. Government creates a bad problem, then government responds to the screams of pain that result by appearing to address the problems at least in part. Only then it is found to have planted many dozen rattlesnakes into our prairie dog colony. We suffer a financial meltdown and Wall Street and the banks become beggars who are put on the dole. Meanwhile, many home buyers are still sub-prime borrowers and they now cannot get loans. The home building and real estate industries then suffer, but mostly in those areas where most homes are very expensive for most potential buyers.

Meanwhile, the local and state governments are still very happy to follow policies that greatly increase the cost of housing in many communities. There is little movement on their part to address the prime reason for the housing and, ultimately, the banking and financial institution problems. Zoning restrictions, green park policies, antiquated and expensive building codes, excessive federal land ownership, disallowing pre-assembled housing so more local tradesmen will be hired, requiring excessively large home lots, high-handed and unavailable county building inspectors, and many more policies that cause home prices to be much higher than they need to be remain very popular in many communities.

So, as incensed as I am about the many bad choices made by the federal government regarding their powers to influence and control the lending institutions and to put pressure on them to follow unwise and risky lending policies, I do not want us to lose focus on the most fundamental of the originating problems. We allow local and state governments, with some assistance from the federal government, to infringe upon our property rights and thereby to deny many of us the much improved housing that we, in our pursuit of happiness, could have otherwise attained.