MoCo: Not as Rich as You Think, Part One

When our state legislators go to Annapolis and look for adequate funding for our schools and transportation facilities, they confront a common attitude from the rest of the state. “You guys in Montgomery County are rich,” a legislator from another area will likely say. “You’ve got more money than you know what to do with. We’re the ones with needs.”

It may be true that there are needs across the state. But the conventional wisdom that Montgomery County is universally wealthy is DEAD WRONG. In this series, you will find out that we are not as rich as you think.

It is true that Montgomery County has a high median household income in nominal terms. The Census Bureau’s American Community Survey estimates a variety of economic data for 16 of Maryland’s 24 counties (including Baltimore City) for 2006. (Caroline, Dorchester, Garrett, Kent, Queen Anne’s, Somerset, Talbot and Worcester Counties had 2000 populations of under 50,000 and their small size probably prevented reliable mid-term estimates). Of those 16 counties, Montgomery’s median household income ($87,624) was higher in 2006 than any other county except Howard ($94,260). In fact, Montgomery’s household income was 35% higher than the state’s. This would seem to support the view that we are rich.


But the factor people miss when they look at household incomes alone is that Maryland’s counties have wildly varying costs of living. This is particularly true of Montgomery, a jurisdiction in which many people work but cannot afford to live. One of the biggest determinants of the cost of living is the cost of housing. Below are the median home values for each of the 16 counties tracked by Census in 2006. Montgomery’s median home value ($527,700) is 58% higher than the state average ($334,700).


For those who have lived in Montgomery a long time and no longer have mortgages, high home values can be a substantial addition to wealth. (Set aside the higher property taxes they create.) But for those with mortgages, higher home values mean higher servicing costs. Below are median monthly housing costs, including mortgage payments, for the 16 counties tracked by Census in 2006. Montgomery is the leader ($2,285 per month), followed by Howard ($2,103).


So Montgomery has higher household incomes, higher home values and higher housing costs than the rest of the state (with Howard as a partial exception). How do those components balance? In the chart below, we calculate median monthly housing costs as a percentage of median household income by county in 2006.


The data above shows that 31% of median pre-tax household income goes to pay for housing in Montgomery County. Only Baltimore City (38%), Prince George’s (34%) and Allegany (34%) rank higher. The other 12 counties tracked by Census all rank lower with Howard – the richest county in nominal terms – at the bottom.

This data illustrates what every resident of Montgomery County knows and is not commonly appreciated in other parts of the state: a dollar does not go far here. Montgomery’s proximity to the nation’s capital combined with its quality schools and modest crime pushes up the price of its real estate, and through it, nearly everything else. Yes, people here have higher incomes in nominal terms, but many here need those incomes to maintain middle-class living standards. For a lot of people in the county, this is not real wealth – it is the illusion of wealth, but one that is believed by politicians from elsewhere in the state.

Tomorrow we will begin to explore the consequences of that illusion.