Urban Economics: It's Time to Stop Subsidizing Suburban Developers
Towns like the one where I grew up – Middletown, Ohio – grow by building more houses out at the edge of town. What was a cornfield when I grew up is now a subdivision of new houses. But in a town that has the same population now as it did fifty years ago, the housing market is playing a zero-sum game. These new neighborhoods are being built at the expense of older, existing neighborhoods.
The new subdivisions are different from the old neighborhoods in some very significant ways. Leaving aside the aesthetics of the McMansions, these new neighborhoods simply don’t play nice with their older siblings. The first thing you notice when you approach them is the entrance. These aren’t gated communities for the most part. But the developers who built them love to give them names and splashy entrances. The names are evocative and aspirational, ones like Beckett Ridge, or Morningcrest Woods. I’ve got no problem with that. And you’ll see these names on the little pretend gate that marks the entrance. It’s usually a pair of short wall fragments, in either brick or stone, flanking the road as you drive into the subdivision.
Here’s the first problem. There’s usually only one or two roads into the subdivision. Every car that goes in or out of that development has to go through that entrance. The logic for this design choice is understandable, if unfortunate. Having just the one entrance means that there is no through traffic, that nobody who doesn’t live in the subdivision will be driving through on the way from one place to another. And although nobody will say it, it implies that people who can’t afford to be living there won’t be going there.
This is quite different from the subdivision where I grew up, one that was laid out in the 1950’s. In older subdivisions, the streets were more or less on a grid, and they connected to the streets that already existed. In other words, they extended the grid of the city, rather than building new mini-cities outside it. Having streets that connect into the grid is more efficient and environmentally sound in a couple of ways. First, it actually reduces the amount of time that people are driving. You don’t have to drive a quarter mile to the subdivision entrance before backtracking to head the other way.
This makes the roads safer for pedestrians, too. It might seem counter-intuitive that having more streets and more paths for cars to drive makes pedestrians safer, but it does. Having a greater number of smaller, less busy streets means that any one street will have less traffic, which allows for more pedestrian traffic, which in turn makes the streets safer for everybody.
Looked at from a distance, the way roads are designed for new developments might make economic sense for the developer, but not for the city.
Another difference I’ve noticed in my hometown is that the new subdivisions often don’t have sidewalks. Who needs them, you might ask? In the movie Field of Dreams, we learn that when it comes to baseball fields, “if you build it, they will come.” In the case of sidewalks, it is certainly true that if you don’t build them, no one will use them. People walking their dogs, going for a run, or even (shock, awe) just going out walking can walk in the streets if they want. Or they can traipse across people’s yards. The problem is that most people don’t like doing either of those things. They’d rather just drive. Any distance greater than 100 yards is too far for most people to even think about walking.
Sidewalks in residential neighborhoods also enhance safety in two other ways. One is by giving young bicycle riders a place to ride their bikes that isn’t on the street. Once children are in high school, they are mature enough to ride their bikes in traffic. But before that, most parents discourage it. They don’t want their children riding their bikes without adult supervision, which means the children don’t use their bikes for transportation. They grow up lacking independence, judgment, and self-confidence. They are passengers in their parents’ minivans, instead of explorers of the world around them.
There is also a herd immunity effect. If there are virtually no pedestrians and no bicyclists, cars will go as fast as their drivers think they safely can. But when drivers have to take other people into account, people who aren’t in cars, their sense of what makes for a safe speed drops considerably. Even a slight drop in vehicular speed translates into a substantial drop in traffic fatalities. If a car going 25 miles per hour hits a bike going 15 miles an hour, the cyclist might be injured but not killed. If the car is going 35 or 40 miles per hour, all doubt is removed. Somebody’s going to die.
So far, I’ve been arguing that the layout of new subdivisions leads, perhaps unintentionally, to a more dangerous city. But I’ve got another criticism to make. These new developments are getting sweet financial deals from the cities that permit them to be built. And that financial gift comes at the expense of the people who have been living in the city all along.
Developers have an economic incentive to build as many houses per acre as they can, while maximizing the lot size for each house. The way to make the math work is to minimize the amount of unsellable land. A spider web of dead end streets will result in less paved roadway. Omitting sidewalks makes people’s front yards seem larger. Using ponds to capture water runoff looks like an amenity, but one that turns out to be devoid of the life and diversity that existed in the creeks and streams that used to be there.
The new developments I see also don’t have the same amount of land devoted to parks and public spaces as their parent cities already have. And when they do have parks and other “public amenities,” they are often tucked away from public view. If the streets had been laid out on a grid and connected to the city’s other streets, people from other parts of town would see the parks and use them. But instead, the people in the subdivision seem to be doing what they can to keep the “other people” out.
To me, it seems like the new developments aren’t just bad neighbors, they’re bad citizens. They aren’t paying their fare share of taxes, and they’re not sharing what they’ve got with other members of the community. In the construction phase, they skimp on the sidewalks, streets, and parks that other members of the community can use. And as ongoing entities, they are less safe than they could be. And over the long haul, they lead to less healthy people and a less healthy environment.
There is an answer to this unnoticed problem. City zoning boards need to start doing their jobs. New subdivisions almost always require changes to zoning. What had been agricultural land gets rezoned as residential. This is the one moment in time when the city – and its citizens – have some leverage. Zoning changes like these should come with conditions: Streets will be connected to the existing city grid. Every street will have sidewalks on both sides. A certain percent of the land will be deeded to the city for parkland.
Why isn’t this already happening? Because cities want to encourage development and economic activity. The prospect of new construction sounds like new jobs, and that’s good. New houses lead to new property tax revenue, which is good. What is bad, though, is when existing residents are asked to subsidize the business dealings of developers. And what makes it especially bad is that nobody recognizes that such a subsidy is being doled out in the first place.
This problem is especially acute in towns that aren’t growing. By artificially subsidizing the construction of new homes and new subdivisions, the city is encouraging the devaluing of existing houses and existing neighborhoods. At the margin, there are people moving into newly-built houses rather than upgrading existing houses.
So why is this a civic problem? Because if the same number of citizens are sprawled out over a larger area, the cost of serving those citizens goes up. Operating costs for fire and police go up. More significantly, so do capital costs, as new fire stations and new schools need to be built. If townspeople were living in the same area as they always had, those costs never would have occurred.
As population spreads out, people live on average farther and farther from the city center. What was once a retail center becomes a shell of what it once was. Not because of functional obsolescence, but just because of inconvenience. And as the center of town becomes less of a draw, the incentive to live closer to it also slips. Sooner or later, there is no “there” there.
If cities want to expand geographically, they should do it in one of two ways. One way is for the city itself to be responsible for laying out new streets and new neighborhoods. This makes it easier to enforce standards of city planning, but less responsive to the ups and downs of the property market. If cities are willing to use their municipal borrowing power to sell bonds and develop neighborhoods when the market demands it, all the better. But if a city is either too small or too credit constrained to do that, it would need to do this sort of building out of general funds and recurring taxes. That would lead to work that is slower and steadier, but that’s what cities are good at doing in the first place. It’s a city’s job to keep the streetlights on and the potholes repaired, and that work goes on year after year. The relative constancy of property tax revenue supports that sort of steady investment. If a city chooses to grow its neighborhoods this way, that wouldn’t be a bad thing.
The second way cities can expand geographically is what we see more of today: rezone land once a developer thinks it’s a good time. And if this is the approach cities are going to take – for understandable economic reasons – then they should at least make sure that they’re not selling out their existing citizens just for the benefit of the developers and the construction trades.
The level of infrastructure in new developments should always be at least as good as what the existing neighborhoods have. The people paying for that should be the people buying those new homes, rather than the existing taxpayers. Anything else would be a secret subsidy.
Requiring new developments to play by the same rules as the old ones will lead to more restrained growth, less decay of existing houses and existing neighborhoods, better use of tax dollars, and safer streets and sidewalks. Anything less that that would be a shame.
The new subdivisions are different from the old neighborhoods in some very significant ways. Leaving aside the aesthetics of the McMansions, these new neighborhoods simply don’t play nice with their older siblings. The first thing you notice when you approach them is the entrance. These aren’t gated communities for the most part. But the developers who built them love to give them names and splashy entrances. The names are evocative and aspirational, ones like Beckett Ridge, or Morningcrest Woods. I’ve got no problem with that. And you’ll see these names on the little pretend gate that marks the entrance. It’s usually a pair of short wall fragments, in either brick or stone, flanking the road as you drive into the subdivision.
Here’s the first problem. There’s usually only one or two roads into the subdivision. Every car that goes in or out of that development has to go through that entrance. The logic for this design choice is understandable, if unfortunate. Having just the one entrance means that there is no through traffic, that nobody who doesn’t live in the subdivision will be driving through on the way from one place to another. And although nobody will say it, it implies that people who can’t afford to be living there won’t be going there.
This is quite different from the subdivision where I grew up, one that was laid out in the 1950’s. In older subdivisions, the streets were more or less on a grid, and they connected to the streets that already existed. In other words, they extended the grid of the city, rather than building new mini-cities outside it. Having streets that connect into the grid is more efficient and environmentally sound in a couple of ways. First, it actually reduces the amount of time that people are driving. You don’t have to drive a quarter mile to the subdivision entrance before backtracking to head the other way.
This makes the roads safer for pedestrians, too. It might seem counter-intuitive that having more streets and more paths for cars to drive makes pedestrians safer, but it does. Having a greater number of smaller, less busy streets means that any one street will have less traffic, which allows for more pedestrian traffic, which in turn makes the streets safer for everybody.
Looked at from a distance, the way roads are designed for new developments might make economic sense for the developer, but not for the city.
Another difference I’ve noticed in my hometown is that the new subdivisions often don’t have sidewalks. Who needs them, you might ask? In the movie Field of Dreams, we learn that when it comes to baseball fields, “if you build it, they will come.” In the case of sidewalks, it is certainly true that if you don’t build them, no one will use them. People walking their dogs, going for a run, or even (shock, awe) just going out walking can walk in the streets if they want. Or they can traipse across people’s yards. The problem is that most people don’t like doing either of those things. They’d rather just drive. Any distance greater than 100 yards is too far for most people to even think about walking.
Sidewalks in residential neighborhoods also enhance safety in two other ways. One is by giving young bicycle riders a place to ride their bikes that isn’t on the street. Once children are in high school, they are mature enough to ride their bikes in traffic. But before that, most parents discourage it. They don’t want their children riding their bikes without adult supervision, which means the children don’t use their bikes for transportation. They grow up lacking independence, judgment, and self-confidence. They are passengers in their parents’ minivans, instead of explorers of the world around them.
There is also a herd immunity effect. If there are virtually no pedestrians and no bicyclists, cars will go as fast as their drivers think they safely can. But when drivers have to take other people into account, people who aren’t in cars, their sense of what makes for a safe speed drops considerably. Even a slight drop in vehicular speed translates into a substantial drop in traffic fatalities. If a car going 25 miles per hour hits a bike going 15 miles an hour, the cyclist might be injured but not killed. If the car is going 35 or 40 miles per hour, all doubt is removed. Somebody’s going to die.
So far, I’ve been arguing that the layout of new subdivisions leads, perhaps unintentionally, to a more dangerous city. But I’ve got another criticism to make. These new developments are getting sweet financial deals from the cities that permit them to be built. And that financial gift comes at the expense of the people who have been living in the city all along.
Developers have an economic incentive to build as many houses per acre as they can, while maximizing the lot size for each house. The way to make the math work is to minimize the amount of unsellable land. A spider web of dead end streets will result in less paved roadway. Omitting sidewalks makes people’s front yards seem larger. Using ponds to capture water runoff looks like an amenity, but one that turns out to be devoid of the life and diversity that existed in the creeks and streams that used to be there.
The new developments I see also don’t have the same amount of land devoted to parks and public spaces as their parent cities already have. And when they do have parks and other “public amenities,” they are often tucked away from public view. If the streets had been laid out on a grid and connected to the city’s other streets, people from other parts of town would see the parks and use them. But instead, the people in the subdivision seem to be doing what they can to keep the “other people” out.
To me, it seems like the new developments aren’t just bad neighbors, they’re bad citizens. They aren’t paying their fare share of taxes, and they’re not sharing what they’ve got with other members of the community. In the construction phase, they skimp on the sidewalks, streets, and parks that other members of the community can use. And as ongoing entities, they are less safe than they could be. And over the long haul, they lead to less healthy people and a less healthy environment.
There is an answer to this unnoticed problem. City zoning boards need to start doing their jobs. New subdivisions almost always require changes to zoning. What had been agricultural land gets rezoned as residential. This is the one moment in time when the city – and its citizens – have some leverage. Zoning changes like these should come with conditions: Streets will be connected to the existing city grid. Every street will have sidewalks on both sides. A certain percent of the land will be deeded to the city for parkland.
Why isn’t this already happening? Because cities want to encourage development and economic activity. The prospect of new construction sounds like new jobs, and that’s good. New houses lead to new property tax revenue, which is good. What is bad, though, is when existing residents are asked to subsidize the business dealings of developers. And what makes it especially bad is that nobody recognizes that such a subsidy is being doled out in the first place.
This problem is especially acute in towns that aren’t growing. By artificially subsidizing the construction of new homes and new subdivisions, the city is encouraging the devaluing of existing houses and existing neighborhoods. At the margin, there are people moving into newly-built houses rather than upgrading existing houses.
So why is this a civic problem? Because if the same number of citizens are sprawled out over a larger area, the cost of serving those citizens goes up. Operating costs for fire and police go up. More significantly, so do capital costs, as new fire stations and new schools need to be built. If townspeople were living in the same area as they always had, those costs never would have occurred.
As population spreads out, people live on average farther and farther from the city center. What was once a retail center becomes a shell of what it once was. Not because of functional obsolescence, but just because of inconvenience. And as the center of town becomes less of a draw, the incentive to live closer to it also slips. Sooner or later, there is no “there” there.
If cities want to expand geographically, they should do it in one of two ways. One way is for the city itself to be responsible for laying out new streets and new neighborhoods. This makes it easier to enforce standards of city planning, but less responsive to the ups and downs of the property market. If cities are willing to use their municipal borrowing power to sell bonds and develop neighborhoods when the market demands it, all the better. But if a city is either too small or too credit constrained to do that, it would need to do this sort of building out of general funds and recurring taxes. That would lead to work that is slower and steadier, but that’s what cities are good at doing in the first place. It’s a city’s job to keep the streetlights on and the potholes repaired, and that work goes on year after year. The relative constancy of property tax revenue supports that sort of steady investment. If a city chooses to grow its neighborhoods this way, that wouldn’t be a bad thing.
The second way cities can expand geographically is what we see more of today: rezone land once a developer thinks it’s a good time. And if this is the approach cities are going to take – for understandable economic reasons – then they should at least make sure that they’re not selling out their existing citizens just for the benefit of the developers and the construction trades.
The level of infrastructure in new developments should always be at least as good as what the existing neighborhoods have. The people paying for that should be the people buying those new homes, rather than the existing taxpayers. Anything else would be a secret subsidy.
Requiring new developments to play by the same rules as the old ones will lead to more restrained growth, less decay of existing houses and existing neighborhoods, better use of tax dollars, and safer streets and sidewalks. Anything less that that would be a shame.
February 14, 2018