It’s the Car, Not the Fare: Rethinking Transport Poverty
Key Takeaways
- Our current transport systems are bad for households on low incomes and the policies we put in place to address it are at best, misguided.
- Many households without a car aren’t car-free by choice, and are often cut off from jobs and services because they live where non-car alternatives are poor.
- For many low-income households, the biggest transport cost is not the fare or the fuel. It is having to own a car in the first place, because there’s no realistic alternative.
- Car-dependent transport systems also add hidden costs to the poor, such as the cost of parking built into rents and prices, plus worse air pollution and higher crash risk.
- Driving, as currently taxed and subsidised, is regressive, and it is becoming more so as wealthier households switch to EVs.
- Public transport subsidies aren’t automatically pro-poor, and they’re regressive for many poor people who pay for a service they can’t use because they do not have access to good services.
- Fuel tax cuts and universal free fares mostly treat the symptoms, and they take money away from the better services that would actually reduce car dependency.
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A better transport system for households on low incomes would:
- Reduce car dependency by providing good alternatives
- Support incomes, not individual modes
- Plan land use so people can more easily reach what they need
What Next?
Do you have a full analysis of how your local transport system currently impacts households on low incomes?
Introduction
When we talk about transport and poverty, the conversation usually turns quickly to fares and fuel prices. Should public transport be cheaper, or even free? Should we cut fuel taxes to ease the cost of living?
In my view, these questions mostly miss the point. For many low-income households, the biggest transport cost is not the fare or the petrol. It is having to own a car in the first place. Our transport policies largely ignore that cost.
This week I continue my series on looking at our transport systems from different perspectives, this time from the perspective of poverty. I’ll start with how we misdiagnose the problem. Then I’ll look at whether our transport systems are progressive or regressive, and why the usual policy fixes fall short. Finally, I’ll set out what a transport system that actually helped reduce poverty would look like.
Problem Misdiagnosis
In many countries, transport is the second biggest household expense after housing. Even that understates the cost. It leaves out the taxes we pay to fund roads and public transport, and the wider costs of transport, such as healthcare and emergency services for people hurt in crashes.
Yet when we discuss transport costs and household budgets, we tend to talk about fares, petrol prices and sometimes car insurance. We rarely talk about the biggest transport cost for most households: the car itself. Much of the mainstream commentary is written by relatively well-off people who simply assume every household has a car. That ignores households who don’t own one. It also ignores households who would be much better off if they didn’t have to.
Because this post is about poverty, I want to focus on two groups of households.
Households who can’t afford a car
Most of these households aren’t car-free because they have great walking, cycling or public transport options. Often it’s the opposite. Lower-income households tend to live where housing is cheaper, and cheaper housing is often in places with poor alternatives to the car. Research on combined housing and transport costs shows this clearly. Housing that looks affordable on the urban fringe often stops being affordable once you add the cost of getting around.
These households benefit from low fares. But their bigger problem is accessibility. Poor public transport, unsafe cycling and long distances make it hard to reach jobs, education, healthcare and shops. They don’t just need cheaper alternatives. They need good ones.
Households forced to own a car
The second group scrapes together enough money to buy and run a car because they feel they have no choice. Researchers call this “forced car ownership”. These households typically run older, less reliable cars. They face more costly repairs and high-interest car loans, and a breakdown can cost them a shift or even a job. Many also have good reasons to depend on a car, such as shift work, irregular hours, or juggling childcare and other trips that public transport doesn’t serve well.
For this group, being able to give up the car would save far more than the policies we usually reach for. Lower fares don’t help much because they rarely use public transport, and a small cut in fuel tax is worth only a little. Locally, I estimate the savings would be in the region of AU$4000 (2800 USD per annum) if they switched to public transport, car share and occasional taxi use.
To be clear, I’m not arguing that these households should give up access to a car, only that they shouldn’t be forced to own one.
Hidden costs
Car dependency also raises costs in ways that don’t show up as transport spending. Donald Shoup’s work on parking showed that providing parking for all our cars raises housing costs and the prices of goods in shops. Lower-income households carry those costs whether or not they own a car, and they take up a bigger share of their income.
Looking too narrowly
There are two broad ways to reduce poverty: increase incomes or reduce costs. People in transport who care about poverty tend to focus almost entirely on costs. Within costs, they usually focus on the charges transport agencies control, such as fares. That means they miss the systemic problem of car dependency and how transport interacts with the wider tax and welfare system. As I’ll argue below, the result is second-rate solutions.
More than money
Financial costs are not the only way people on low incomes pay for our transport systems. They are more likely to live near busy roads and breathe worse air, and more likely to be killed or seriously injured in a crash.
A Progressive Transport System?
Most countries try to make their tax and welfare systems what economists call “progressive”. Higher-income earners pay a larger share of their income in tax, and the money funds support and services aimed at lower-income people. A system is regressive when it works the other way, taking a larger share of income from poorer households or channelling its benefits to richer ones.
So how do our transport systems measure up?
Driving
Start with fuel taxes. Lower-income people tend to drive older, less fuel-efficient cars and are much less likely to own an electric vehicle. So they pay more fuel tax per kilometre driven than wealthier drivers. Higher-income households drive more, so they pay more in total fuel tax. But what matters for progressivity is the share of income. In many countries, fuel tax, and car costs more generally, take a much bigger share of a low-income household’s budget
This is getting worse as we electrify the car fleet. Wealthier households are switching to EVs first, which means they pay little or no fuel tax. The fuel tax base is shifting onto the households least able to afford a new car.
Meanwhile, as I set out in an earlier post in this series, driving is heavily subsidised. Those subsidies mostly go to the people who drive the most, and they tend to be on higher incomes. Lower-income households help pay for those subsidies through general taxes such as sales taxes and council rates, whether they drive or not.
Overall, driving, as it is currently taxed and subsidised, is regressive, and becoming more so.
Public transport
Public transport is more complicated, because it depends on who uses it.
The best public transport systems are used by everyone, rich and poor alike. So a large share of the subsidy goes to people on middle and higher incomes. By contrast, where public transport is poor, as in much of the United States, riders are disproportionately low-income. There, subsidies are more progressive, but only because the service is too poor for anyone with a choice to use.
I’m not suggesting we should design public transport just for poor people. But it does mean public transport subsidies are not automatically the most targeted way to support people on low incomes.
There’s also another problem. Think about someone on a low income who has to buy a car because public transport can’t meet their needs. They help pay for a service they can’t use, while also carrying the full cost of a car. For them, public transport subsidies are regressive.
Walking and cycling
Cycling depends a lot on local culture. In some places, cycling is seen as a middle-class activity where expensive bikes and gear are part of the identity. In places like Amsterdam, people ride old battered bikes in everyday clothes, often without helmets. There, cycling is a cheap way to get around, and people on low incomes use it widely.
Even so, the cost of a bike can be a barrier for the very poor. Recent research suggests that giving low-income people access to e-bikes works well in a number of contexts. Bike libraries are also starting to appear. But overall, we put very little effort into making sure people can actually get a bike.
Walking costs nothing, so it might seem like the ideal option for people on low incomes. But it depends entirely on what is within walking distance. People on low incomes disproportionately live too far from jobs and amenities to walk, even with good footpaths.
Overall, our transport systems skew toward cars, and the car system becomes less progressive as wealthier households switch to EVs. Public transport subsidies don’t do much to offset this.
A big caveat
We should never look at transport in isolation when thinking about poverty. A household facing high transport costs but earning enough to cover them comfortably is better off than one with cheap transport and an income that can’t cover its basic needs.
So we need to look at both sides of the household budget, income and spending. We also need to look at the systemic issue underneath: the need to own a car, which is by far the biggest transport cost. Ignore that, and whatever solutions we come up with will inevitably be poor.
Poor problems, poor solutions
As always in public policy, if we get the diagnosis wrong, we get the solutions wrong. Transport and poverty is a clear example.
The best solution: tackle car dependency
The root problem is that our transport systems fail to give low-income people good alternatives to the car. For a household forced to own a car, removing that need would make a big difference to their finances, far bigger than any fare discount or fuel tax cut. Yet transport poverty policy rarely focuses on this.
The second-best solution: look at the whole household budget
Suppose we don’t tackle the systemic problem. The next best thing would be to look at households’ incomes and costs as a whole, not just their transport costs, and to support low-income households through the tax and welfare system. That way, they can spend money on what they need most, whether that’s transport, rent, or food.
What we usually do instead
Most places do neither. Instead, the focus falls on what transport agencies directly control, which usually means fares. Politicians are drawn to fuel tax cuts for the same reason.
Fuel tax cuts are a poor way to help low-income people. Most of the benefit goes to people who drive the most, and they tend to be on higher incomes. The cuts reduce revenue that could fund better alternatives and make driving cheaper, which encourages greater car dependency.
Universal low or free fares have similar problems. I won’t repeat all my criticisms here (you can read them here). In short, they drain revenue that could fund more and better services. Those services are what would actually reduce car dependency for people on low incomes. As we saw above, many of the poorest households don’t use public transport at all, either because it doesn’t serve them or because they’ve been forced to own a car. A free fare is worth nothing if no bus goes where you need to go.
Targeted concession fares for low-income people are a better option. They cost much less than making fares free for everyone and provide direct support to those who need it. But they still treat the symptom rather than the cause. They do nothing for the low-income household that has had to buy a car.
In short, the policies we usually rely on are the easiest for transport agencies and politicians to deliver, not the ones that do the most for low-income people. Some, such as fuel tax cuts and free fares, make the underlying problem harder to fix.
So what would a transport system that actually helped reduce poverty look like?
What would a transport system that supported poverty reduction look like?
If we designed our transport system to help reduce poverty, rather than treating poverty as an afterthought, here’s what I think it would look like.
1. Reduce car dependency by providing good alternatives
The priority should be giving people real alternatives to owning a car: frequent public transport, safe walking and cycling, and carshare. These alternatives need to be good enough to replace the car for most trips, not just affordable.
2. Support incomes, not individual modes
Rather than using transport subsidies to help people on low incomes, support low-income households’ incomes directly. Funding for this could come from gradually reducing driving subsidies. Transport agencies can’t do this on their own. It means working with treasuries and welfare agencies to move funding from transport budgets into income support.
I would avoid giving these households money that can only be spent on transport. It makes more sense to let people spend support on the needs they prioritise. There’s little point giving someone extra money for transport if they’re being evicted because they can’t afford the rent.
Yes, this would mean higher fares. But as services improve and driving subsidies fall, public transport becomes more attractive anyway. Many people can avoid the higher cost of driving by switching to better alternatives. Those who keep driving, including tradespeople and others who really need a car, would benefit from less congestion as others switch to more space-efficient options.
3. Plan land use so people can reach what they need
Better land use planning would put jobs, shops and services within walking or cycling distance of more people. One example is people-first, transit-oriented development around stations. Done at scale, with significant increases in housing supply, this should also ease pressure on housing costs.
What this would mean
People who don’t own a car would have much better access to jobs and services. People who currently have to own a car they can’t really afford could give it up and save a lot of money. Measured by poverty indicators that take account of essential costs, this could lift some of them out of poverty altogether.
What strikes me is that this prescription is almost the exact opposite of what we usually do to tackle transport poverty: cutting fares and cutting fuel taxes.
Conclusion
When we talk about transport and poverty, we tend to talk about fares and fuel prices. These are visible and easy to measure. But they are not the main way our transport systems hit the poor.
For many low-income households, the biggest transport cost is not the fare or the petrol. It is having to own a car in the first place. Some households can’t afford a car and are cut off from jobs and amenities. Others scrape together enough to buy one and then carry a cost they can’t really afford. Both are symptoms of the same problem: car dependency. Our current mix of fuel taxes, road subsidies and public transport subsidies does little to fix it, and as wealthier households move to EVs, it is getting worse.
That’s why the usual fixes, such as cheaper fares and lower fuel taxes, are at best second-rate. They treat the symptoms, and in the case of fares, they usually take money away from the services that would actually reduce car dependency.
If we are serious about tackling poverty, we need to start from the right diagnosis. That means giving people good alternatives to owning a car, supporting low-income households’ incomes rather than subsidising particular modes, and planning our cities so that jobs and amenities are within reach without a car.
It’s the car, not the fare. Until our policies reflect that, our transport systems will worsen poverty, not reduce it.
