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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."
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.
Some 65 percent of Scarsdale's taxes go to public schools, which spend $12,948 per student, according to Sperling's Best Places, more than twice the U.S. average of $5,678. In Darien, Conn., the public schools spend $9,561 per student.
Residential property tax rates increased in many places during the downturn, says William Ahern, the Tax Foundation's director of policy and communications. Such hikes offer local governments a way to meet budgets when revenue from the states falls short.
Property tax collections nationally increased by more than 4 percent in fiscal 2008. They were up in all but four states, according to a Tax Foundation report issued in August. Florida, where home values have plummeted, saw the biggest increase in tax collections, 11.7 percent, followed by Indiana and New Mexico.
Properties may be incorrectly assessed, too. Scarsdale residents generally have been willing to pay high taxes to maintain their strong school district. As housing values have fallen, however, Rose Marinaccio, office manager of real estate brokerage Engel & Vöelkers Scarsdale, says that the town has received a record number of reassessment applications this year from residents hoping to lower their tax bills.
"When the fiscal 2009 data are published, we are likely to see that local governments—and state governments in those states that levy property taxes—have also raised property tax rates to make up for revenue lost from sales and income taxes during the recession, as well as revenue lost from property taxes on houses that have foreclosed," states the Tax Foundation report.
The potential expiration of the Bush-era personal income tax cuts in 2011 could affect affluent communities, too, in the suburbs and elsewhere.
A further concern is transportation. The lower cost of housing in suburbs—more space for less money—attracted many families. People bought homes on the outermost fringes of U.S. metro areas because they could qualify for mortgages there, says Maria Choca Urban, director of transportation and community development at the Center for Neighborhood Technology, a Chicago-based think tank. The hidden expense, she says, is the cost of transportation for residents, who must drive to get anywhere.
A CNT report says that transportation costs have risen dramatically over the last century, starting from a range of 2 percent to 3 percent of income and climbing to 15 percent in many places and above 28 percent in many others—depending on the need for private transportation. The group estimates that the average household transportation cost in more than 300 metros nationwide is about $827 per month, or nearly $10,000 annually. Costs decline in densely concentrated communities that offer public transportation and sidewalks.
In Scarsdale, transportation expenses consume more than 28 percent of income for half of households, estimates CNT, based on 2008 gas prices and regional income levels. In contrast, most households in cities such as New York and Boston spend less than 18 percent of their income on transportation.
In dollar terms, average household transportation costs in Scarsdale total nearly $32,000 per year, according to Onboard Informatics. (The average household in the village has 3.14 people, according to Census Bureau data.) The average household in far-off Mission Hills, Kan., a suburb of Kansas City, spends $33,161 annually on transportation. In Hunters Creek Village, Tex., the bill comes to $30,957.
"If [a household] can shed one car, they can conceivably drive the other car further and shed a pretty significant cost," says Choca Urban. Still, she adds, many suburbs do not have access to mass transit, and it takes about 10 years for new transportation systems to come online.
In the near-term, cost increases may disproportionately affect suburban residents, but the amenities that attracted them—good schools, green space, and low crime rates—have always come with a certain price.
Click here to see the most expensive suburbs in the U.S. by state.