Real Estate November 16, 2010, 11:55PM EST

Exclusive Suburbs Are Poised to Cost More

Property tax increases and rising transportation expenses are likely to make suburban living more expensive, especially in America's high-income communities

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Tree-lined estates, charming shops, a golf club, and exceptional schools are among the many reasons some of the wealthiest people who work in Manhattan choose to live in Scarsdale, an historic village about 20 miles northeast of New York. They pay handsomely for it. With home prices, the cost of living, and tax rates placing among the highest in the U.S., Scarsdale is also the most-expensive suburban community to inhabit in New York State.

Just how expensive is it? The cost of living is 211 percent higher than the state's average, according to data from real estate researcher Onboard Informatics. Even amid a national housing downturn, a home in Scarsdale sells for a median price of about $1.2 million, far above the $171,700 U.S. median, as estimated by the National Association of Realtors. Other things are expensive too: Non-retail expenditures such as mortgage and utility payments add up to an annual $106,016 per household.

Residents of such upscale suburbs may soon find that life is getting even more expensive. Bush-era personal income tax cuts are nearing their 2011 expiration date, local governments are considering property tax increases to meet budgets, and the U.S. Energy Information Administration expects gasoline prices to rise 6.3 percent next year. Tax increases and fuel costs do not impact only suburbanites; they can have a greater effect on those with high incomes, big houses, and the practice of driving to work.

Some residents see high costs as a worthwhile trade-off for a heightened quality of life. "Where do you move that is going to cost less?" says Boine Johnson, who served as Scarsdale's mayor from 1975 to 1977. "Here you're half an hour from midtown Manhattan, a few minutes from major shopping at White Plains, and you have a rural sense," he says. "With strong zoning, you won't have a junkyard pop up next to you. All that costs money."

A Strict Evaluation Model

To identify the most expensive major suburbs in each state, Businessweek.com worked with Onboard Informatics to weigh such expenses as mortgage and utility payments, clothing, food and beverages, property taxes, health care, and home prices in villages, towns, and cities within a 40-mile radius of major cities (those with populations over 250,000) or a state's most populous city if none meet the threshold. Since the ranking focuses on major suburbs, only places ranked by the Census as having populations greater than the state median are included.

Additional high-cost suburbs on the list include Darien, Conn., Saratoga, Calif., and Paradise Valley, Ariz.

Some expensive suburbs such as Greenwich, Conn., were not included because they are defined as county subdivisions or demographic entities other than Census places. Certain communities missed the list because their populations fell below the state median, such as Bloomfield Hills, Mich., or because they were located too far from qualifying cities. Suburbs with both wealthy and low-income areas experience a broader range of home sale prices and property taxes, affecting their rankings.

Property taxes are a prime expense for owners of large homes. The Village of Scarsdale is located in Westchester County, where in 2009 median property taxes (1.66 percent of median home values) were the nation's highest in dollar terms, at $9,044, followed by New York's Nassau County and Bergen County in New Jersey, according to the Tax Foundation, a nonpartisan tax research group based in Washington.

Westchester County ranked seventh nationwide in property taxes paid as a percentage of income, at 8.24 percent. In Essex County, where Milburn—New Jersey's most expensive suburb—is located, the median property tax was $8,245, the country's sixth-highest; property tax as a percentage of income stood at 8.69 percent, second-highest in the U.S.