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Bill Popp: Anchorage's cost of living high but can shrink

Bill Popp

It's a well-known fact for anyone who lives here that Anchorage is an expensive city. If you are a recent transplant, you probably suffered severe sticker shock when you rented your first apartment or bought your first piece of furniture. The prices of food, housing, health care, transportation and other day-to-day costs associated with living here often far exceed national averages, for a variety of reasons. We are a relatively small population, located on the northernmost edge of the continent, at the end of a very long supply chain. Economies of scale do not line up in our favor, and probably won't until we have a lot more people living in Anchorage and in Alaska.

While it's one thing to understand in general terms that there is a high cost of living here, as an economic developer I am driven by the need to measure these things quantitatively as opposed to qualitatively. That is why the Anchorage Economic Development Corp. participates in the national Cost of Living Index (COLI) survey developed by the Council for Community and Economic Research. The survey measures prices of various goods and services in 306 areas located in all 50 states in order to calculate the average cost of living in the United States. COLI measures the cost of six weighted expense categories: groceries, housing, utilities, transportation, health care and miscellaneous goods and services.

In 2013, the cost of living in Anchorage was 26 percent more than the national average, making our city the 23rd most expensive city in America. To put that into perspective, Seattle was only 19 percent over the national average. What makes us so expensive? Frankly, everything -- with the exception of utilities, which came in 1 percent below national average. Of the five areas we were above average costs, housing is far and away the leading contributor. At 55 percent over the average, Anchorage ranks as the 20th most expensive housing market in the nation. Chicago and Philadelphia are only 36 percent and 42 percent above the national average, respectively. While I understand that different market forces are at work in those cities, it should concern all of us that we pay more for housing than dense, highly populated urban areas like those.

Is there anything we can do to lower our cost of living in Anchorage? I think there is. While much of the COLI report can be disheartening, there was positive movement that may point toward a solution. The cost of groceries in Anchorage showed a significant drop from the year prior. In 2013, groceries cost 13 percent more than the national average, compared to the previous mark of 26 percent above the national average in 2012. Why Anchorage's grocery bill suddenly got cut in half is open to some debate but based on my experience with the Anchorage economy, and in particular, the retail sector, I'm fairly confident that increased competition in the grocery business in Anchorage is the key driver. The opening of several new Wal-Mart superstores, a new Sam's Club and the remodeling and expansion of other groceries has resulted in more competition locally and has reduced our cost of groceries as a result.

As with so many things in economic development, it turns out that growth and diversification are the key. Alaskans need to come together on the idea that a rising economic tide floats all boats. Encouraging new businesses to come to Alaska, as well as aggressively growing our existing economic base, is the key to our future prosperity. As more businesses enter the Anchorage market, prices will drop, allowing our population to grow, and eventually allow us to get economies of scale they take for granted in the Lower 48.

While this is already happening organically in the retail and grocery sectors, more direct actions will be required to move the ball on the harder indicators such as housing, transportation and miscellaneous goods and services. Tools such as well-thought-out economic incentives, work force development and attraction programs, entrepreneurship development and investment in key infrastructure projects will need to be brought to bear. This effort is going to require policymakers and local businesses to work together with the full support of the community. Once we, as a city, decide to make Anchorage's cost of living a priority, there is no doubt in my mind that we will be able to come up with solutions to address these problems and make Anchorage a more affordable city in which to live, work and play.

Bill Popp is the president and CEO of Anchorage Economic Development Corp. (AEDC). He has spent more than 40 years in the private and public sectors.

 


Bill Popp
EconomyBy BILL POPP