Long winters, long commutes drive up Twin Cities living costs, Economist survey finds

Long winters and the long distances that people drive are raising the cost of living in the Twin Cities relative to many metro areas around the world.

This week's news that the Economist ranked Minneapolis third among the 19 North American cities in its annual cost-of-living survey and 26th of the 133 global cities — tied with Brisbane, Australia — surprised many people locally.

Civic boosters routinely boast that the Twin Cities and Midwest have lower living costs than other parts of the country, particularly the big cities on the coasts.

But Minneapolis for many years has ranked higher on the Economist survey than some other big cities, including San Francisco and Washington, D.C., that are perceived as less affordable. Minneapolis ranked below only New York and Los Angeles among North American cities in the Economist surveys published this year and last year.

In part, that's because the Economist's data business, called Economist Intelligence Unit, excludes the cost of housing. While it surveys rental prices in cities around the world, housing is left out of the index because the cost variability is too great from a city like New York to one like Dakar, Senegal.

"We can't quite compare it the way we can the price of a loaf of bread," Roxana Slavcheva, head of city practices for the Economist Intelligence Unit in London, said in an interview Wednesday.

The survey also doesn't account for tax costs, the effects of which are fiercely debated in Minnesota, because they also vary widely around the world.

For instance, while the region's utility rates are about average, people in the Twin Cities spend more because winter is so long. As a result, relative to New York — the city used as the base for the cost-of-living index — people in the Twin Cities pay slightly more on utilities over a year. By contrast, people in San Francisco and Washington spend only half as much as those in New York.

Transportation costs here are shaped by the relatively longer distances that people drive. Los Angeles by far leads the way in such expenses among North American cities. But Minneapolis is slightly ahead of San Francisco, while New York and Washington, where reliance on mass transit is higher, have lower transportation costs.

The Twin Cities also face higher food costs than Los Angeles and Washington, but lower than San Francisco and New York, the survey shows. Clothing costs locally are lower than in New York, Los Angeles and Washington but higher than in San Francisco.

The Economist Intelligence Unit's surveyors examine prices of more than 400 goods and services twice a year to produce the index. Of the 133 cities it covers, 16 are in the United States.

"We're trying to see how cities have become expensive or less expensive relative to each other," Slavcheva said.

The fluctuation of currencies often affects the results. Last year, the volatility of the Mexican peso produced inflation in Mexico City, lifting its costs to the same level as those in Miami and Detroit. Broadly, all U.S. cities in this year's ranking fell because of the effects of the weaker dollar. Singapore and Paris were at the top of the list.

"In the context of Minneapolis, while we produce income tables and try to give clients general levels of income and a comparison of prices, we don't necessarily stress affordability," Slavcheva said. "Cost of living and affordability are very emotive topics, and everyone will have a different feeling depending on their income and wage."