A deep understanding of housing and travel demands and respective costs based on residential location choice is the most important decision that reflects the behavior of a household. This article aims to analyze how travel and housing demand and associated costs are affected by urban residential location Choice. Using the Residential location choice theory assumes that a household’s demand for travel and housing is derived from their location choice. While choosing a location the monetary calculus of rent and commuting cost also play an important role in deciding to choose where to live, as there is a trade‐off between rent and commuting cost in the monocentric city model. Results of comparative static suggest that transport accessibility to the house will lead to an increase in house rent and demand for housing in that area. Moreover, to availability of transport, in the form of a diverse choice of frequent and affordable public transport, increases the travel demand as the commuting cost will be significantly reduced. Similarly, the effect of income on the commuting cost and house rent shows that due to the rise in income, commuting cost and house rent will increase. The results from the GMM analysis on the socio-economic survey conducted from Rawalpindi and Islamabad, Pakistan provide supportive empirical evidence.