Fiscal and Economic Benefits of Smart Growth

This “Meet the Experts” interview, filmed by Smart Growth America, dates back to the New Partners for Smart Growth conference early this year. But the themes are enduring. I make the case for smart growth as a strategy for lower-cost growth and economic development.


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28 responses to “Fiscal and Economic Benefits of Smart Growth”

  1. Peter Galuszka Avatar
    Peter Galuszka

    Good stuff but you should get rid of the background music.

  2. yeah.. WHAT IS that background music? yeeech!

    but good job… and I wonder if it would sound any different if you had a T-shirt and tattoos… nose jewelry .. etc..

    but for speaking off the cuff – extemporaneously (thank god for spell checkers), you done GOOD! you memorize very well!

    seriously, good job!

  3. PhilBest Avatar

    Smart growth is a good idea, but prohibitions on conversion of rural land to urban land, is grossly counter-productive.

    The inflation in economic land rent from blunt restrictions on urban growth always imposes far greater costs on the population than simply paying for more sprawl. Wendell Cox and Ronald Utt in “The Costs of Sprawl Revisited” find that the aggregate sums stated in “The Costs of Sprawl 2000” paper, while alarming, actually come to $50 per household per year.

    But growth contained cities always have house price median multiples of 6 or higher instead of around 3. The housing cost involved would be dozens of times higher than $50 per household per year.

    But it gets worse – the house price median multiples are double, but the cost of land is dozens or hundreds of times higher per square foot and the the cost of land everywhere in the city is forced up by a similar percentage.

    This means that inner city stuff is inflated in price at least as much as fringe McMansions, even though the density is much higher at the centre – the land rent is much higher too. And the opportunity cost of space sacrificed to the kind of amenities families might want, is too high.

    Houston doesn’t just have affordable suburban McMansions, it has affordable centrally located Condos too, many of them suitable for families. And surroundings suitable for families. Take a look:,multi-family-home/price-na-150000/sby-1?pgsz=50

    The price of land ends up swamping other factors in location decision making, and LESS clustering of specific types occurs. It is counter-productive to cram every kind of urban activity into one single cluster – a net of economies over diseconomies (land rent, congestion) is produced when the free market allows clusters of multiple types to evolve at different locations.

    The UK’s urban planning system prevents anything like Silicon Valley from ever occurring – this is common knowledge among urban economists in the UK.

    1. I’m trying to reconcile the perception that rural land conversion is being restricted since I do live in an exurban county that has doubled in population in 20 years and has a huge commuting demographic on I-95 which is by all accounts near it’s maximum ability to transport rush hour commute.

      the restriction is not on rural land conversion – that’s happened and is ongoing but the ability of I-95 to carry those who want to live in exurban locales and commute to NoVa is the restriction.

      I-95 is not only at the limits of it’s ability to move commuters at rush hour, it’s a national East Coast Highway than has been essentially destroyed for
      that use as unsuspecting travelers get caught in the maw – and from that point on – find other means to do that trip.

      and people who commute are demanding that more non-tolled lanes be added which if done would not only be horrendously expensive but would
      encourage even more exurban commuting.

      It’s not restrictions in rural land-conversion that’s the problem. MOre than enough land is available to those in search of it.

      the problem is the limits of transport infrastructure to support the massive commute load.

      this is a cost, by the way, that many who commute, believe all taxpayers should pay – not just them. Most are opposed to tolls to pay for the expansion of infrastructure necessary to support commuting.

      Exurban commuters are heavily consumptive of transport infrastructure.

      it’s a true cost of sprawl.

      what the counter argument?

  4. PhilBest Avatar

    Anthony Downs: “A Growth Strategy for the Greater Vancouver Region”, 2007:

    “……The cost of land poses a key dilemma for urban planners everywhere who want to concentrate jobs together so they can be best served by public transit. Such concentration raises the costs of land near centers; in fact, it would confer a monopoly advantage on landowners who owned such land and could exploit firms trying to locate there. Now firms want to locate elsewhere to cut their land costs.

    Planned concentration of jobs in a few centers is not consistent with private ownership and control of land. Some type of collective control over that land would be necessary to prevent monopolistic exploitation of land values. In theory, this could be done with high land taxes in such areas and special zoning rules. But adopting those devices is politically difficult in a free enterprise economy…….

    “……A similar but less intensive dilemma concerns land near transit stops, where it would be most efficient to concentrate high-density housing and jobs. That also creates ownership monopolies over such land unless it is specially controlled or taxed. Yet focusing development near transit stops is a key to using more transit…..”

    Conclusions from “Discovering the Efficiency of Urban Sprawl”, Alex Anas, 2011

    “The data on the largest U.S. MSAs show that commute times increase only slightly with city size: the elasticity of the average commute time with respect to the number of workers was about 0.1 in 1990 and 2000. Our CGE simulations of Chicago explain this by showing that with jobs and population sprawling to the suburbs, the average road distance between home and job and home and shop can become shortened as congestion increases on the average mile, so that travel time per consumer remains stable. These results suggest that urban sprawl itself has not been the cause of significant travel cost increases.

    Meanwhile, theoretical models of urban areas with polycentric and dispersed employment show that more sprawl, not less, is often needed to offset the negative externality of unpriced congestion and improve efficiency. Planners, like urban economists devoted to the monocentric model, have long viewed sprawl as something that should be reduced. Such a bias leads to potentially drastic planning and policy remedies of which the restrictive urban growth boundary is the prime and most costly example. A higher level of sprawl and polycentric land use may indeed be optimal. To the extent that T.O.D. and the New Urbanism are perceived as antisprawl tools, they may be wrongly promoted. But these tools of modern planning have an important role to play in serving niche markets. Planners may do better to view them as mechanisms that will promote efficient polycentric land uses.”

    William Wheaton, the economist who designed the first computer model of the urban economy back in the 1970’s, virtually repudiated every result it would have given meanwhile, in a 2002 paper with the self explanatory title, “Commuting, Ricardian Rent, and Housing Prices in Cities with Dispersed Employment and Mixed Land Use”. His conclusions in 2002 were that cities, left to themselves, will evolve an increasingly efficient spatial balance of housing and dispersed jobs, with stable or reducing commute times, and economic land rent falling, with the urban land rent curve becoming progressively flatter and fewer and fewer locations commanding significant price premiums. This matches the real life outcomes of cities like Houston.

    “Smart growth” as it is currently being pursued in Atlanta is probably going to be a success story because Atlanta has such a low, flat urban land rent curve. “If you build it, they will come” has much more chance of being true when the condos at the TOD and walkable nodes cost $100,000 or less, not $500,000 and over.

    The problem is that the planners dislike the choices people make when the choice is between a $100,000 CBD or smart growth condo and a $160,000 suburban McMansion; but their policies that force the suburban McMansion up to $450,000 in price also forces up the CBD condo to $500,000 plus.

    1. I appreciate the response.

      some points:

      I know of very few urban growth boundaries and MSAs often consist of multiple jurisdictions each with their own planners and their own tax and land-use policies which are not coordinated.

      so there is no real central MSA-guided land-use and tax plan.

      the closest you come to this is the MPOs which are regional and often align with the MSAs.

      so when I look at Houston and Atlanta, I try to understand what is it that is fundamentally different about them compared to DC, LA, Seattle or Chicago.

      Both Houston and Atlanta have every large exurban lands.

      Where I live – over and over, people say that we cannot remain a commter-centric bedroom community and that we must have policies to attract jobs.

      but employers have found that bedroom community workers won’t take a local job if it pays significantly less than their Urban CBD job even if it saves them the time and cost of the commute.

      Virtual every large urban area in the country , if not every one of them – has
      a significant AM and PM rush hour. I just don’t see any trend towards equilibrium.

      finally – I may have gotten confused as it sounded like there needed to be a “super” regional planning function and then I heard it’s better to just let the free market work – which I’m not sure what that implies with respect to planning… – no planning ?

      Most exurban areas have no control over the factors that bring urban workers to their jurisdiction to live and if they try to restrict subdivisions, people just buy large lots which in turn overwhelms rural roads.

      Once the local rural roads and the mainline interstate commuter roads are overwhelmed – there is huge hew and cry to “fix” them .

      so I’m not sure how letting the free market “work” fixes this and the one interesting thing where there really is “regional” planning going on is the MPOs. The MPOs by law must generated a road plan for their region – and that road plan has to be fiscally constrained. They can only plan roads to the extent that they have real available money. They cannot draw prospective lines on a map.

      and … as a group – from all the jurisdictions in the MSA – they have to agree on what roads will be funded.

      the lack of known available money is leading to toll roads and HOT Lanes – in DC, in Atlanta, Seattle, Houston, etc…

      I’m of the view that HOT Lanes and tolls are going to have a dramatic impact on commuting to the exurbs.

      Many, if not most of those who commute to the exurbs hate tolls with a passion but taxes are also hated (and I don’t think the “govt-provided” GPS black box in your car has a snowball chance).

      I do not see how we go away from tolls.. though… I think they are here
      to stay – and the will influence solo commuting behaviors and even the value of land and land-use.

  5. PhilBest Avatar

    In cities with no fringe growth constraints, land IS worth only around $70,000 per acre even in the mature, central, and public-transport-served locations.

    This is perfectly possible in a city with a land rent curve anchored in rural values of $10,000 per acre beyond the fringe, and a land rent curve flat enough to still be only 7X higher relatively close to the city centre.

    Cheshire and Mills (1999) found that the difference in city centre land values, between a growth contained UK city and an unconstrained US city similar in many other ways, was around “300 times”. Yes, that means similar land might be $70,000 in the US city and $21 million in the UK city. This is why a 30-year-depreciated 1000 sq ft condo can be $60,000 in Houston and a 30-year-depreciated 300 sq ft apartment can be $600,000 in London. Cities in Canada, Australia and parts of the USA are heading the same way thanks to urban planning crazes.

    Guess who wins, and wins big?

    Oh, we all know the “vested interests” we have to be on guard against, are the “vested interests” in “sprawl”, don’t we……?

    The correct way to achieve efficiencies and avoid massive zero sum wealth transfers is via land taxes, intelligent zoning, special assessments, and properly “priced” infrastructure.

  6. I’m seeing terms like “fringe growth constrained”.

    I assume it’s a growth boundary of some kind but are there places in the US besides Portland that have them?

    looking at NoVa – there is no “constraint” to the exurban counties arrayed around it with the exception of one – Fauquier.

    and inside of NoVa, I don’t see restrictive growth policies either.

    also – Jim Bacon mentions it “govt provisioned infrastructure” and you also mention “properly price infrastructure”.

    can you expand on this also?

  7. Peter Galuszka Avatar
    Peter Galuszka

    Background music makes it sounds like he’s selling annuities, burial insurance or reverse mortgages.

  8. indeed! you’d think instead of that music and that flower – that the background would be an aerial view of SPRAWL (or Smart growth) and
    gridlocked cars honking like geese in flight.

  9. DJRippert Avatar

    A Republican leaning independent? Who was the last state-wide Democratic candidate you supported?

    I am the founder, president and sole member of VIVA – Virginia’s Independent Voter Association. There is a reason you are not in my club. You are a Republican leaning Republican who always votes Republican!

    Darrell is the only commenter on this blog who might gain membership into VIVA.

    1. It IS interesting when you look at more granular samplings of voters and when you get to “independent” …then strip out the “leaners”, you’re down to a precious few of truly independent voters who can honestly say they have voted both sides on a regular basis.

      I don’t know about Darrell.. he might be one of those tea party types!


    2. reed fawell III Avatar
      reed fawell III

      “Darrell is the only commenter on this blog who might gain membership into VIVA.”

      A registered Democrat, I guess I would not qualify either.

      1. DJRippert Avatar

        That’s OK – the group meetings are pretty boring.

        1. reed fawell III Avatar
          reed fawell III

          Serve copious beer, wine, or liquor, and I’ll be there.

  10. reed fawell III Avatar
    reed fawell III

    To sum it up –

    Socializing is healthy for people. Cities build civilizations.

    Both are good for us. Build such places that do such things.

    1. when the country was first settled … before we had public schools – church was often the center of social life.

      I don’t think you need massive urban areas for folks to socialize.

      all across this country in rural America there is a rich social fabric.

      and in some respects, better than the city, because in those rural areas, everyone tends to know everyone else. there are no strangers like you’ll see in most cities.

  11. mbaldwin Avatar

    Excellent presentation by Jim Bacon. Yes, if music, substitute Baroque.

    And some daunting commentary requiring more thought.

    But more superficially, a focus on economic efficiency, if broadly defined, remains politically and practically attractive, and valid. The historian Samuel Hayes’ explained how significant was this concept during the progressive era in his”The Gospel of Efficiency.” It’s a concept Republicans lost after Nixon (“Cost of Sprawl” published under his CEQ) as they became prisoners of a narrow “market” perspective.

    Besides the costs of dispersed development in required public services, transportation, and schools we have opportunity costs of lost agricultural, tourist, and open space services, and the adverse impacts on rural business services (vets, supplies, etc.) and the loss of “free” ecological services important for water and air quality.

    As a farmer in rural northern Va. I’m conscious of the fragility of the rural economy and its vulnerability and how poorly understood and calculated are the attributes needed to sustain it.

    1. reed fawell III Avatar
      reed fawell III

      How true. And I suspect that done right both growth and preservation of rural lands are mutually reinforcing instead of the reverse.

      In any case, those rural lands are equally precious too.

      The last small farm on the Buckland Road at the old mill on Broad Run in the “50” deserves to last forever, so as to benefit people forever.

      Yes, we go about destroying our children’s legacy mindlessly. For another perspective see:

    2. DJRippert Avatar

      mbaldwin – I would be keen to hear more of your thoughts on the fragility of the rural economy. Let me play the Devi’s advocate – I don’t give a rat’s ass about farmers or farms. People have to eat so there will always be a market for food. People have to heat their homes in the winter so there will always be a market for the fuel required to heat houses. People have to get to and from work in order to make the money required to buy food, heat houses, etc. So, there will always be a market for transportation.

      A lot of things are important in modern life. Why are farmers always at the front of the line when it comes to bellyaching and whining? I can only laugh when I hear farmers talk about how industrious and self-reliant they are as they piss and moan about the latest Farm Bill not transferring enough non-farmer wealth to farmers.

      So, what gives? Food is an absolute necessity. You’d think the people who grow food would be able to make their way in the free market without an endless array of subsidies and prop-ups.

      Sorry if I sound harsh. I am sick and tired of crony capitalism in all its forms – mandatory beer distributorships, Dominion Resources, mandatory car dealerships, Star Scientific, the Farm Bill, etc.

      1. Jeeze DJ..

        we’ve had this discussion about which land use is contributing the most to the degradation of the Bay and although I think urban storm water is but not yet confirmed officially, DJ and conventional wisdom says it’s the farms.

        but, here’s the deal. A “farm” that is fallow, “retired”, no longer used to produce food – does not do much in terms of runoff.. as long as there is grass and trees and no animals pooping.. the runoff is not much different than totally unused land.

        but for land that is productive and does have runoff – who is the beneficiary of the food grown? Isn’t it the urban dwellers?

        and if we were going to require less runoff from the farms – who ultimately would pay for it? not the farmer, right? such increased restrictions costs -would be incorporated into the price of the food.

        there-in lies a quandary for Va farmers who are going to have to compete against farmers in other states who do not have Chesapeake Bay restrictions on them.

        So they are literally at a competitive disadvantage to other farms not subjected to as severe restrictions.

        on top of that- their land in most exurban locales is worth far more as residential than farm in a perverse way in that the farm pays taxes far in excess of it’s needs for services and residential is the opposite.

        but it’s also true that farms can be put in land-use, can put unproductive land into conservation easements and receive other Federal and State help.

        but perhaps Mr. Baldwin can do a better job of educating on these issues.

  12. mbaldwin Avatar

    Thanks for your response DJR. Basically we agree. I’m a small farmer, and no doubt not typical in a bunch of ways I won’t bore folks to describe. I, of course, get no government subsidies and believe our federal farm subsidies constitute a fiscal disgrace. It’s wasteful and harmful in fostering increasing reliance on inhumane treatment of animals and chemically risky in ways we’re only beginning to understand. We’ve built an industrial agriculture of immense productivity, and we subsidize the biggies.

    I grew up with farms and I’ve found farmers to be increasingly destructive environmentally, hating predators and now the deer those predators controlled.

    But let’s not fool ourselves that we will foster a balanced, healthy, humane, environmentally sustainable and productive agriculture until we have a market system, supported by practical government policies, that incorporates these costs into products. I actually think we are making some progress in small ways and can achieve this result.

    Moreover, as we have practiced farming in

    1. DJRippert Avatar

      Thanks. I’ve never really heard anybody defend the Farm Bill. I’ve heard lots of people complain about it – including most farmers. But every year it seems to come up in Congress and every year it gets passed. Why not a Zinc Bill for zinc miners? Or a Software Bill for programmers?

      I guess guaranteeing the food supply is important but wouldn’t the free market guarantee that supply better than a subsidized market?

      1. well I can tell that DJ is not a member of CBF because just hours ago, I received this:


        Click here to tell Congress to protect key conservation provisions in the Farm Bill!
        CBF needs your immediate action to ensure the Farm Bill protects Virginia’s rivers, streams, and Chesapeake Bay from the greatest threat to water quality—nutrient and sediment runoff.

        Right now, the Farm Bill is being negotiated in conference, which means we have to act quickly in order to keep conservation programs in the bill and help Virginia’s farmers continue to reduce soil erosion and nutrient runoff. ”

        what did DJ call this? rent-seeking?


        1. DJRippert Avatar

          Of course it’s rent seeking. I got the same e-mail.

          “Virginia farmers have made tremendous strides reducing runoff, but more farmers need technical assistance and cost-share funds to get our streams and the Bay back to health. That’s why it’s essential that Congress passes the Senate version of the Regional Conservation Partnership Program (RCPP).”.

          When Congress passes a law like Obamacare do the people who must pay increased health premiums get “cost share funds”? Of course not. When Maryland assesses a runoff tax do retailers get “cost share funds”? Of course not. But when farmers are told to clean up their act and prevent runoff from their farms from harming other people’s property, what happens? “Cost share funds” have to be provided.

          The CBF is in favor of subsidizing farmers to comply with the anti-pollution regulations. I am not.

          1. Since farmers sell their stuff to people to eat… I suspect clean-up costs are going to be incorporated into the price of the food they sell.

            I would define rent seeking at trying to get govt money to better your own finances not seek money to pay for regulations.

            ultimately, people pay for regulations .. the cost of which gets incorporated into goods and services – like food which in the process of being grown to be sold to consumers results in byproducts that wash into rivers.

            we can require the farmer to take more steps to prevent the runoff …increase the costs but then he will pass those costs on to consumers.

            right? but the CBF sees getting those same funds via a different path – taxes – then provided to the farmers as a “grant” as easier to swallow but in the end the money comes from the same taxpayer / consumers – only the path changes.

            Libertarian and Conservative types would say – don’t tax and don’t regulate … and let the “market” decide.

            but in my mind what we should all care about more – if we are going to spend the money – is that it’s cost effective and not wasted on feel-good but ineffective things.

  13. mbaldwin Avatar

    Disregard that last line!

  14. […] Jim Bacon, of Bacon’s Rebellion, who describes himself as a free-market, individual-rights kind of guy, seems to agree. In a recent video, Bacon talks about how taxes can be lower when city centers grow. Moreover, key locations such as restaurants and businesses are closer to their customers. […]

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