One interesting tradeoff that we've used to make our lives car-free is to trade housing costs for automobile costs. The only reason that we can afford to live in a condo in Cambridge, MA, is that we don't have to make any car payments or pay the high costs of maintenance and gasoline. Now, that is not to say that we don't have any transportations costs at all. We pay to ride the subway and the bus, we pay occasionally for the use of a zipcar, and we spend a significant amount of money on our bicycles. But those costs pale in comparison to the cost of car ownership.
Lowering our transportation costs allows us to tolerate an increase in housing costs, hence we can afford to live in an expensive city. We've kept our housing costs as low as possible by living in a 2-bedroom , 660 square foot condominium. We don't have a yard, but we do have many parks nearby (and we live on a private way which sort of functions as a paved yard for kids in the neighborhood). Personally, I like to think of our closest park as a yard that's maintained by the nice people at the Department of Public Works. We're willing to live in a small place in order to be able to live without our car, and we see it as a choice we are making, rather than as a constraint that we are forced to live with.