Alaska is America’s last frontier with rugged wilderness, fascinating history, and unique culture that draws many people to visit or move there. However, the high cost of living often deters people from calling Alaska home. In this article, we will analyze various expenses to determine if Alaska is truly as expensive as its reputation suggests.
Housing Costs
Housing is typically the largest regular expense for households. Alaska has exceptionally high housing costs compared to most of the United States.
According to the U.S. Census Bureau, the median value of owner-occupied homes in Alaska is $255,000 as of 2019. This is 41% higher than the national median home value of $181,000. Some areas like Anchorage have a higher median home value of $306,200.
Renting is also very expensive in Alaska. The median gross rent in Alaska is $1,134 per month according to 2019 Census data. This is considerably higher than the U.S. average of $1,097. Rents are highest in more urban areas of the state.
| City | Median Gross Rent |
|---|---|
| Anchorage | $1,236 |
| Fairbanks | $1,181 |
| Juneau | $1,312 |
Limited housing supply and high construction costs due to Alaska’s remote location help drive up housing expenses. The extreme winter weather also increases utility and maintenance costs for homeowners.
Food Costs
Groceries and dining out are more expensive in Alaska than most states. Food expense accounts for 13% of the average household budget in Alaska.
A gallon of milk costs around $3.69 in Anchorage compared to the U.S. average of $3.27. Eggs are $2.71 per dozen vs $1.72 nationwide. Even fresh produce like potatoes, carrots and onions cost two to three times more than the Lower 48 states.
Most food arrives in Alaska by cargo ship or plane which adds substantial shipping costs. Perishable items often have a short shelf life after arriving frozen or refrigerated. Grocery selection is more limited than in the continental U.S. High labor, real estate and energy costs also drive up prices.
| Food Item | Alaska Price | U.S. Average Price |
|---|---|---|
| Milk (gallon) | $3.69 | $3.27 |
| Eggs (dozen) | $2.71 | $1.72 |
| Potatoes (lb) | $1.92 | $0.66 |
| Carrots (lb) | $2.58 | $0.93 |
Dining out is similarly expensive with most meals costing 25-50% more than other states. A meal at an inexpensive restaurant that would cost $12 elsewhere might be $15-18 in Alaska. Fast food like McDonald’s is slightly higher too.
Transportation Costs
Owning and operating a vehicle in Alaska comes with higher expenses. According to AAA estimates, the average annual cost of owning a sedan in Alaska is $9,561 compared to the national average of $8,849.
Gasoline prices currently average around $5.10 per gallon across the state. This is 60 cents higher than U.S. average gas prices. Fuel has additional taxes and transportation fees added in. Many isolated towns rely on fuel delivered seasonally when rivers or tundra are frozen solid enough for trucks.
Auto repairs cost more due to high labor costs and parts shipping expenses. Insurance rates also run higher, especially with the need for comprehensive coverage.
| Expense | Alaska | U.S. Average |
|---|---|---|
| Gasoline (gallon) | $5.10 | $4.50 |
| Auto Insurance | $1,450 | $1,189 |
| Oil Change | $65 | $46 |
| Antifreeze Flush | $150 | $122 |
Many Alaskan communities are off the road system, so flying is the only way in. Over 150 communities depend on aviation for food, mail, medical needs and travel. Bush plane charters typically charge $300-500 per hour.
Healthcare Costs
While healthcare costs across America continue to rise, Alaska residents shoulder higher medical expenses than most states.
According to data from the Agency for Healthcare Research and Quality (AHRQ), average annual healthcare spending per person in Alaska is $11,064 as of 2019. This is second only to North Dakota and 22% higher than the national average of $9,032.
With many small and remote communities, Alaska struggles to recruit sufficient healthcare workers. Providing modern facilities and medical transportation across a vast wilderness comes at a major cost too.
| Healthcare Spending | Alaska | National Average |
|---|---|---|
| Per person | $11,064 | $9,032 |
| Hospital care | $5,039 | $4,160 |
| Physician services | $3,030 | $2,126 |
| Prescription drugs | $1,356 | $1,220 |
Alaska does not have the lowest healthcare costs across all spending categories. But when looked at in total, only North Dakota residents pay more for healthcare than Alaskans.
Utilities
The cost of keeping the lights on and the house warm during Alaska’s frigid winters really adds up. Residential electricity rates in Alaska average 21.10 cents per kWh, nearly double the U.S. average of 13.31 cents per kWh.
Natural gas is more affordable at $1.237 per therm vs $1.003 nationwide. However, only around 18% of Alaskan households use natural gas for heating. The majority rely on electric, heating oil or propane which are considerably more expensive.
| Utility Type | Alaska | U.S. Average |
|---|---|---|
| Electricity (cents/kWh) | 21.10 | 13.31 |
| Natural Gas ($/therm) | $1.237 | $1.003 |
| Heating Oil ($/gallon) | $4.64 | $3.64 |
| Propane ($/gallon) | $2.94 | $2.77 |
Many homes are not connected to natural gas pipelines and must import heating oil and propane. Prices fluctuate seasonally and are usually highest in winter. Excellent insulation is a must to lower heating bills.
Taxes
With no statewide sales tax and relatively low property taxes, Alaska’s tax burden is among the lowest in the United States. Alaska collects most of its tax revenue from oil production instead of taxing citizens directly.
Alaska has an average property tax rate of just 0.85% compared to 1.08% nationally. A $300,000 home would pay $2,550 per year in property taxes. Sales tax varies from 1.76% to 7.50% across different municipalities.
The state has no personal income tax but does levy a corporate income tax. State and local tax revenue per capita is $7,048 in Alaska vs. $9,222 for U.S. states overall.
| Tax Type | Alaska | U.S. Average |
|---|---|---|
| Income Tax | None (except corporate) | 2.59% to 5.96% |
| Sales Tax | 1.76% to 7.50% | 6.22% |
| Property Tax | 0.85% | 1.08% |
Low taxes help offset Alaska’s high cost of living, especially for retirees who may pay significant income tax elsewhere. However, critics argue Alaska’s tax structure leads to over-reliance on oil revenue.
Cost of Living by City
Some cities and towns across Alaska’s diverse regions have lower costs than others. But prices remain well above U.S. averages statewide.
Anchorage – As Alaska’s largest city, Anchorage is generally one of the most affordable parts of the state thanks to economies of scale. However, prices still run 20-50% above national averages.
Fairbanks – Located in Interior Alaska, Fairbanks often has the highest heating bills since winter temperatures can reach -40°F. Food and housing costs are comparable to Anchorage.
Juneau – Alaska’s remote capital city has very high housing costs but cheaper electricity and heating oil than other regions.
Ketchikan – This rainy southeast port town has expensive groceries and restaurant meals. Auto and marine fuel is cheaper than other cities.
Rural villages – Off-road and off-grid communities pay extremely high prices for staples like milk, bread and eggs. Fuel prices are astronomical in remote bush villages.
Conclusion
After analyzing housing, food, transportation, healthcare, utilities, and taxes, it’s clear the cost of living in Alaska is significantly higher than any other state. While low taxes provide some offset, most costs run 25-100% above national averages.
Housing, food, and healthcare in particular strain the budgets of Alaska residents. The state’s detached location from national infrastructure networks and harsh climate add many layers of expense.
Some ways for Alaskans to reduce costs include insulating homes thoroughly, hunting/fishing, gardening, buying in bulk, and flying less. But ultimately most residents consider the state’s natural beauty and unique way of life worth the premium they pay.
