Cover Story

Through the Roof

Why is Lafayette's cost of living ' especially in real estate prices ' higher than comparable communities?

What does it cost to buy the good life in Lafayette? More than other places in the South, especially when it comes to housing, according to an annual survey by national business organization ACCRA.

The nationwide survey, which has compared the cost of living in urban metro areas for the past 37 years, shows that Lafayette's cost of living index is higher ' sometimes far higher ' than other comparable communities, especially for those who make decent salaries.

The index compares the smallest consumer items, like the price of a T-bone steak and a bottle of J&B Scotch, a pound of ground beef and a six-pack of Heineken beer. But beef and alcohol are nothing when it comes to comparing the cost of an upscale home. The average cost of a new four-bedroom home here is tens of thousands more than in Mobile, Hattiesburg, Beaumont, Houston, Dallas and Midland, to name a few.

Lafayette homeowners also paid more last year than their counterparts in neighboring Baton Rouge, according to the most recent ACCRA survey, released in February.

Cost of living calculators can be tricky. They're not all created equally and use different methodology, sometimes making the data suspect. But ACCRA (formerly known as the American Chamber of Commerce Research Association) is a well-respected source for cost of living figures. Another reputable organization is, whose co-founders are often quoted in The New York Times and the Wall Street Journal.

Both organizations conduct in-depth surveys. ACCRA relies on community volunteers who are trained to strictly follow an exhaustive manual. employs a stable of trained economists. Both organizations collect quarterly data.

The results are widely different, but equally valid. ACCRA numbers, based on averages, show that a more affluent lifestyle in Lafayette is more expensive than other places. numbers, based on median numbers, show that the Lafayette market as a whole is more in line with the rest of the South.

The difference between the two lies behind the numbers.

ACCRA, based in Arlington, Va., was originally founded to help local chambers of commerce gather and compare the cost of living in their communities. Its first survey was conducted in 1968.

But as cities began focusing on economic development, creating separate organizations to help attract desirable businesses, the membership of the group shifted.

Today, ACCRA's members include chambers of commerce, economic development organizations, government agencies, universities, utility companies, community development groups, consultants and data providers. The non-profit ACCRA has nearly 500 members from 47 states and four Canadian provinces, according to its Web site.

ACCRA breaks down and weights the information it collects into six separate economic indicators: 13 percent grocery items; 30 percent housing; 9 percent utilities; 9 percent transportation; 4 percent health care; and 35 percent miscellaneous goods and services.

The mission of ACCRA is to study a specific standard of living, according to its manual. It is designed to answer this question: "How do urban areas compare in the cost of maintaining a standard of living appropriate for moderately affluent professional and managerial households?" ACCRA describes "moderately affluent" homeowners as parents with college degrees, one child, and a combined household income of between $70,000 and $100,000.

In other words, the survey compares the cost of living for the workers every metro area would like to attract. Businesses use these numbers when touting a city to potential employees, says Erol Yildirim, project manager for ACCRA's cost of living numbers.

"We are the only organization that collects data like this," Yildirim says. There are plenty of other groups that study housing and consumer markets, including the government, but none that measures affordability for upscale workers and publishes the results. ( numbers are available only through subscription.)

The numbers do not take into account tax burdens, and ACCRA cautions that they are only a "snapshot" in time. They can move up and down a bit based on market forces ' and they often do. That might explain, for instance, why a T-bone steak during the most recent survey was so much cheaper in Houston. T-bones might have been on special at several competing grocery chains there.

According to ACCRA, Lafayette, actually South Louisiana, doesn't fare so well in the overall indices, falling behind in key categories. (Lafayette's cost of living is still far more affordable than the East or West coasts.)

But in the South, where Lafayette is compared to the same cities every time, the results are consistent ' it costs more for a certain segment of the market to live here.

The Lafayette Economic Development Authority makes this claim on its Web site: "The cost of living in Lafayette is below the national average ..."

Lafayette is just barely below the national average, which is 100 percent. The overall index here is 99. The composite index, however, puts Lafayette at dead last for cost of living when compared to Mobile, Hattiesburg, Beaumont, Houston, Dallas and Midland.

The good news is that Lafayette does well in health care, groceries, transportation and utilities. Lafayette is a medical hub for all of Acadiana, keeping basic health care costs like a visit to the doctor more affordable. Transportation costs are in line because the price of a commute, car maintenance and gas are about the same or better here as they are in other places in the South. (The transportation index does not take into account car insurance rates or motor vehicle taxes.) Discount groceries are available at places like Wal-Mart and Super 1 Foods and the city-owned Lafayette Utilities System helps keep the price of utilities down.

But Lafayette ranks poorly in the two most heavily weighted categories ' homes and goods and services, which is where most discretionary income gets spent, and that's what affects the overall index. The goods and services category compares the price of clothing, dry cleaning, liquor, newspaper subscriptions and entertainment, just to mention a few.

Housing is where Lafayette compares least favorably. That index is 105.04, up slightly over the year before. Atlanta's is 90.7, which makes it second behind Lafayette. Midland's is 72, which makes it the best.

Midland, on paper at least, is the most comparable city to Lafayette, with a population close in size and an economy still largely dependent on the oil and gas industry. Located in far West Texas, Midland boasts a higher per capita income, but a far lower cost of living than affluent people enjoy in Lafayette. It is the hometown of First Lady Laura Bush and at one time vied for the moniker "more millionaires per capita," a phrase also used to describe Lafayette during its oil boom heyday.

Robert F. Hebert moved to Lafayette from Auburn Ala., with his wife after retiring from the university there. He is now a professor of economics at UL Lafayette.

Like most professionals, he purchased a home after moving here, but found his dollars didn't buy as much house as he expected. He didn't buy a new home, so his residence wouldn't have been included in the ACCRA cost of living survey. He bought a beautiful bungalow in White Subdivision, adjacent to the Saints Street area. In his case, he ran into the simple law of supply and demand.

"It is almost trite to say that prices are determined by supply and demand," Hebert says via email. "If the cost of living in Lafayette is higher than other places it is either because the demand for the items that comprise 'living' is higher, or the supply of those items is lower, or both. On the demand side, income is a major determinant."

In other words, the market will charge what a consumer is willing to pay, and high-end earners in Lafayette are apparently willing to pay it.

Several housing industry sources in Lafayette believe a combination of factors has created the higher prices for new homes. "From what I've heard and seen in Lafayette, most new homes are custom built," says Mary Jane Bauer, chief executive officer of Realtor Association of Acadiana. "People here want marble and granite and longleaf pine floors. In Houston, parts of houses are stored in big warehouses, and they're built like cookie cutters. The buyer is given very few choices."

Her colleague, Judy Keller, agrees. Keller is the C.E.O. of the Acadian Homebuilders Association Inc. Her group represents some 700 homebuilders in a four-parish region.

"Lafayette does not do tract houses like Houston," Keller says. Most subdivision builders there offer three or four housing styles in a single area "and they build them over and over again. We build more custom and individual homes."

Lafayette has steadily grown over the past decade and a half, which also affects the demand for houses. And the most recent homebuilding activity in Lafayette has been high-end homes like those built in River Ranch, which can skew the average price of a larger new home.

Keller and professor Hebert also point out that Lafayette is the smallest parish in Louisiana. "Lafayette parish is very small in land area. If there are things about our parish that make it a desirable place to live (coupled with relatively high per-capita income), demand for housing will be high ... but the supply may be constrained simply because of limited land," Hebert says.

There is still plenty of affordable housing in Lafayette, and in popular upscale neighborhoods. In's comparison of the Lafayette market, the median price of an existing single-family home is only $110,000.

But there's a big difference between's numbers and those generated by ACCRA. measures the entire market of single-family existing homes in what the Census Bureau calls a Metropolitan Statistical Area, according to economist Kasie Blanchette. That means homes outside of the city limits get caught in the net. ACCRA measures just the new-home market in Lafayette, and bases its numbers on four-bedroom houses with at least 2,400 square feet.

The key here is the difference between median and average. ACCRA uses averages, which takes all of the surveyed numbers and divides them by that value. Using that measuring stick, the average sales price of all homes sold in Lafayette was about $143,000 in 2004.'s median number discounts extreme data and measures only by the middle value.

But Lafayette still strikes out when it comes to housing affordability, according to's numbers. When compared to the same cities used by ACCRA, the number of people who can actually afford to buy a home here is much lower, based on per capita income figures. The estimated per capita income in Lafayette is $17,860, making it the worst of the comparable cities, except for Hattiesburg. Per capita income in Midland, for instance, is $22,589, meaning far more of that city's population can actually afford to buy a home.

In Lafayette, there's a big difference between what the "haves" and the "have nots" can buy, which affects the median values of homes here.

As the C.E.O. of the Lafayette Economic Development Authority, Gregg Gothreaux is an unabashed cheerleader for Lafayette. But he admits that the high cost of upper-end housing, reported on LEDA's own Web site, is a conundrum that puzzles him.

"I call it the Lafayette attitude," he says. "It's an attitude that demands nicer things."

Lafayette, for instance, keeps Albertsons in business, even though some prices might be lower at Super 1 Foods. And Lafayette was the first city in Louisiana to attract a Super Target, what Gothreaux calls "sort of the chic Wal-Mart."

He says that Lafayette is still not in a position to attract large numbers of upwardly mobile college graduates. His goals for the city right now are to find jobs that will lift the median incomes of the existing lowest-paid workers, not to attract more of them.

On the other end of the spectrum, his goal is to attract the higher-paying jobs where the price of a home isn't as much of an issue.

Gothreaux says that in his 18 years of economic development, the ACCRA cost of living index has proven to be a factor in business recruitment only three times that he can recall. One of those companies was in the oil industry, and the workers felt they could get a bigger house for a lower price in Houston.

They were correct ' the average cost for a new, four-bedroom home in the Houston area is $182,500, more than $100,000 less than the average price here. Gothreaux argues that these homes are outside of the Beltway, creating monster commutes for the workers. And he's right. An extensive search for new homes in all of the bigger metro areas surveyed by ACCRA shows that these homes are in the outlying areas.

He also argues that the lower cost of doing business here offsets the higher cost of buying a new house. He tells potential businesses that a home in Lafayette is a proven commodity. He's right there, too. Homes in Lafayette have steadily appreciated in the years since the 1980s oil bust, sometimes in the double digits. Homes began appreciating with a vengeance in 1989, when prices rose, for instance, more than 16 percent in the fourth quarter of that year. A study released by the Office of Federal Enterprise Oversight in February shows that despite a glitch in appreciation in the third quarter of 2003, home values increased by a healthy 7 percent in 2004. Unless the home market here becomes overheated, causing a market correction, homes should continue to appreciate.

The one immeasurable quality that Lafayette does have is its quality of life. "I don't know about you, but we don't want to live in Houston or Midland," says the Realtor Association's Bauer.