Jeff McLaren
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Suburban Sprawl Exposing Hidden Costs, Identifying Innovations

Précis by Jeff McLaren

         There are giant and far reaching costs associated with sprawl: increases in 1) Smog, 2) climate change, 3) chronic disease, 4) emergency room visits, 5) reduced productivity, 6) increases in government liabilities. But there is hope to supply affordable housing while reducing all these six costs.

                The principle reason for sprawl is prices: the way the rules and regulations are enacted and enforced creates a price structure that encourages suburban sprawl. Sprawl is defined with five traits: 1) low density, 2) separation of and reduction to single use or purpose (that is strict zoning), 3) leapfrog development, 4) automobile dependence and 5) fringe development (often on farm land).        

         Sprawl has been encouraged by 1) municipal government's zoning bylaws that try to encourage new development in rural areas, 2) by starting development with low density 3) by strict separation of zoning categories and finally 4) by forgoing pedestrian infrastructure. One of the most important drivers of sprawl is property prices. Prices are the most common and most important consideration for most people in determining where to live and where to set up shop. “Demand creates suburbs, and prices shape demand.”        

         The importance of price is often debated with pro-sprawl advocates claiming that sprawl is a function of consumer preference. Considering that people want to live in the suburbs for other reasons than price goes against several studies: “The claim that buyer prefer the suburbs hides the reality that many can only afford a house in the suburbs.” A second argument for consumer preference claims that people want larger houses and bigger yards. But again empirical evidence in reports suggest that these preferences are actually the left over compensation for more desirable amenities such as “...walkable, mixed-use neighbourhoods, short commutes to work, and easy access to frequent rapid transit.” A third argument for consumer preference of suburbs is the mistaken perception that suburbs are safer. The truth is that the longer car trips makes death or injury more likely for residents of the suburbs than their urban neighbours. Sprawl is not a function of preference in any objective sense it is a function of price and perceived affordability.        

         Building, sale and resale prices are lower for suburban sprawl because of a framework of government policy and law that subsidies: 1) a free-to-use road network and support services; 2) the automobile by failing to internalize externalities of road use (such as smog and illnesses from smog etc.) and 3) undercharging developers for true costs of servicing new developments.        

         Everyone pays for a subsidy. Businesses pay the costs of sprawl through 1) traffic congestion delay which raises deliver costs, 2) and with reduced productivity resulting from excess mental and physical stress from longer commute times. Homeowners pay the price for sprawl through 1) increase costs due to automobile dependency, 2) increased chances of injury, 3) rising obesity due to less active life style, 4) smog in the on route neighbourhoods, 5) high density neighbourhoods subsidize low density neighbourhoods, and 6) extra fuel cost of long commutes. Governments pay 1) many of the costs of development, 2) the legacy liabilities, 3) excess health care due to the risks of driving longer and 4) new spending due to climate change.        

         Proper cost benefit analyses should always be preformed on all new development proposals. Some ideas to consider in these analyses are 1) all new development has costs but some development costs are significantly lower: for example established areas which possess most of the infrastructure are almost always cheaper to redevelop; 2) in Canada road use is not full paid for by fuel taxes nor all taxes and fees associated with driving. Additionally none of the social costs (pollution, noise, delays accidents etc.) are covered. 3) Free parking has real and significant costs which are paid by customers with higher prices on goods and services; by employees with reduced wages; and tax payers through higher property taxes. Free parking is a wealth transfer to parkers from everyone else. 4) added smog and climate change will force more costs on as a result of more extreme weather. 5) Affordable housing in sprawling neighbourhoods is only due to a transfer of housing sticker price to the owners transportation costs: or from upfront cost to lingering costs. An improved measure of affordability ought to measure housing and transportation costs. 6) Medical evidence has linked sprawl with a number of chronic diseases such as diabetes, obesity, mental health (road rage) and violent death due to collisions (4 times higher than homicide). 7) The value of ecosystem services will be lost to sprawl if not protected.

                  There are several policy options to stop or limit the growth of sprawl and to revitalize the already built up areas of municipalities.          1) to affect the cost of sprawl (non-property)taxes and user fees could be changed in order to change market equilibriums in desirable directions. 2) Development charges could be charged to favour some areas over other so as to encourage redevelopment rather than new development. 3) utility pricing reform such that developers pay the actual cost of development as determined by the true capital costs of the development.

         4) Property tax reform comes in four types: A) Land value taxation considers only the value of the land. It has the virtue of moving in lock step with development of amenities in the area including the city services but does not penalize development of the actual land. This creates a virtuous race to the top in terms of good, smart, proper and needed development. B) Property class tax means charging a different rate of tax depending on the class of property: desired properties would have a lower tax rate and less desired properties class would have a higher tax rate. C) Spatial-Based tax means charging a different tax rate in different regions of the city: development would be encouraged with low tax rates in regions where the city determines a need for development. D) Targeted tax reductions for specific sites can also give an incentive to development in those sites.

         5) Transportation pricing reform: the shifting or eliminating of subsidies which promote undesirable growth. There are six existing subsidies that could be reformed. A) Transit, car sharing and active transportation subsidies. Canadian governments spend much more on roads than on transit; by subtly shifting this huge amount of money from roads to transit, car sharing lanes and access friendly sidewalks a major shift in people's behaviour is possible. B) Parking pricing is currently set up to discourage parking in dense areas and move them to less dense areas. B.1) expand metering to suburban parking lots; B.2) Provide for a parking levy on free parking; B.3) increase parking fines. C) Fuel Taxes: increasing fuel taxes creates a disincentive to drive and therefore reduces suburban sprawl. D) Road Use pricing: charging for the use of a road. Four examples are D.1) road tolls, D.2) cordon area tolls, D.3) congestion pricing (varying tolls depending on the amount of congestion), D.4) carpool or high occupancy lanes or discounts. E) change flat rate licensing and insurance fees based on distance traveled per period. F) publish greater amounts of useful information such as a walk ability index and a housing + transportation index.

                  Whatever policy instruments are chosen a certain amount of equity and fairness are necessary. For example user pay systems are usually regressive and flat taxes or any charge unrelated to consumption is usually unjustified except as a government money maker. Six fair pricing principles are: 1) Apply charges to negative externalities and apply subsidies to positive externalities. 2) Price instruments should be progressive with consumption quantities. 3) Allow a phase in period to allow people to plan ahead. 4) Allow grandfathering for the most vulnerable in society. 5) In case of unchangeable regressive policy consider using income to alleviate the worst of the regressive policy. 6) Review and make public every step in price instrument implementation.

                  One should combat sprawl and any other negative externality with a wide range of tools for seven reasons. 1) It sends a clear message. 2) Tools have different types of impact. 3) Several tools at once generate synergistic results. 4) Price elasticity will vary over different tools; this may generate more stable results. 5) several policy tools implemented at low rates distort the economy less than few policies with high rates. 6) Some tools work fast others work slowly. 7) Potential disadvantages of some can be offset by others.

                  The role of the provincial and federal governments is very important because municipalities are provincial creations with very limited powers and strict rules of governance. It is therefore critical that provincial and federal policies not work against municipal goals. Three reforms at the higher levels of government that would definitely help cities control sprawl are: 1) Carbon Pricing: “Underpriced or unpriced climate change emissions constitute a subsidy to motor vehicle use, and thus to sprawl.” 2) Highway tolls. 3) Regional Governance or alliances of municipalities (or upper tier municipalities) to tackle larger regional issues in harmony. In essence infrastructure has been principally managed from the supply side it may be better to principally manage it from the demand side.

Added on: 2014-02-16 11:12:21
Précis by: Jeff McLaren
© 2008 - 1, Jeff McLaren