Changing the Ground Rules to Cease Subsidizing Sprawl

In my last post, I took the post-recession temperature of sprawl.  I was checking the hypothesis that sprawl had succumbed to changing housing desires about the time the recession took hold.

Although I found evidence that that sprawl isn’t the dominant paradigm that it had once been, I also found evidence that it still lingered, ready to reassert itself given the opportunity.  (Voldemort comes to mind.)  The one battleground I described was a large development outside of Las Vegas where the developers were arguing that the public prefers the types of housing that sprawl provides, while urbanists were arguing that there was still insufficient choice in the marketplace to truly judge what the public prefers.  (And I argued that both sides were ignoring the roles of economic incentives.)

My conclusion was that we can’t consider sprawl to be securely in the rearview mirror, but must continue to have a strategy for dealing with possibility of sprawl reasserting itself.

The unabashed perspective of this blog is that sprawl needs to be curtailed for the long-term environmental and financial health of our communities and our world.  But that doesn’t mean that I want the curtailment to occur by government fiat.  Instead I believe that the primary reason sprawl has lived past its expiration date is because we propped it up with economic advantages when it began to falter and have continued to do so for far too long.

Ultimately, I believe that people who choose to live in sprawl settings should bear the true costs of those choices, just as one bears the mostly true costs of other aspects of life, whether travel, cuisine, or attire.

If someone chooses to pay the additional costs of living in a car-oriented location, that would be a decision that I wouldn’t make, but I believe in personal choice.  But if someone chooses to live in a car-oriented setting and expects that others should help cover the additional costs of their choice, that’s just wrong.  And yet that is what our system has become.

So, what are these additional costs and what adjustments can be made?  As thought exercises, how would the changes play out?  How would our world adjust to new economic signals?

My Exhibit A has always been the price of gasoline.  Early in the history of this blog, I linked an academic study that attempted to quantify the true cost of gas, including the environmental and geopolitical costs.  Depending on the assumptions used, the study found that the correct cost for gas should be between $6 and $15 per gallon.  The study was several years old when I linked it, so may now be nearly a decade in the past.  Over that time, the correct cost of gas can only have increased due to the increasing slide into climate change and the sharpening unrest in the Middle East.

For many years, I’ve argued that we need to push the price of gasoline upwards into that higher range.  Recognizing the social disruptions that would occur with this change, I’ve argued for a gradual, legislatively-fixed bump of 25 cents per year until a threshold, such as reduced gasoline usage, is met.

Given the long delay in adopting this approach, I could argue that 50 cents is becoming a more appropriate annual bump, although I also acknowledge the greater inevitable distress, especially to those of lesser means who have been pushed to the urban fringe by other policies and to whom the additional cost would be a particular burden.

To be clear, although I wouldn’t object to a bit of debt reduction, I’m not looking to create a tax windfall for the federal government.  Instead, I argue for a gas tax increase to be largely revenue neutral, with corresponding decreases in income and corporate taxes as some environmental and defense costs are shifted to gas tax revenues.

To me, a change to the gas tax of this magnitude would result in a steady increase in downtown development, probably coupled with stronger transit, bicycle, and walkability systems.  Also, there would be households, already on the financial thin edge, that would be over-stressed by the changes and would need assistance.  If others see other possible unintended consequences, please share.

However, changing the gas tax would require federal action, which is of course impossibly unlikely.  Perhaps more likely, although still on the far fringe of reality, is state-based action.  I’ll highlight two possibilities, which I suspect would work best in tandem.

First, impact fees on new construction, which are often close to $40,000 per home, differentiate only slightly between urban, easily served areas and suburban neighborhoods, which are more difficult to serve.

Second, property taxes have a one percent cap, despite the difference in municipal costs between urban and suburban locations.  (Here is a graphic showing the difference in one location.)

So, what if we combined those two situations into one possible fix?  Instead of a flat $40,000 impact fee everywhere in town, the impact fee would go to $80,000 on the suburban fringe and drop to $10,000 in the urban core.  At the same time, the maximum property tax rate would go to 1.2 percent on far-flung homes and drop to 0.8 percent on urban homes.

(Admittedly, this presentation assumes a dichotomy between urban and suburban when in fact there is a gradual shading between the two, but let’s keep the model simplistic for today.)

There would be a number of complex interactions between the two.  Suburban homeowners would likely see a home value bump as cost of the unbuilt homes near them would go up by $40,000, pulling up the value of built homes, but that increase would be partially mitigated by the prospect of paying higher property taxes.

One could justifiably argue that the package of changes wouldn’t be fair to many.  I’d agree.  But the system of subsidies that has existed for over a half-century has been even less fair.  It’s never easy to unwind from a long period of misguided policies.

As with the gas tax idea, I believe that these policies would lead to a renaissance in urban construction, along with stronger non-automotive transportation options, but the insights of others would be appreciated.

I love this subject and could likely continue to chat about it for another thousand words.  But I’ve already taken enough of your time.  If you have thoughts you wish to share, please do so.  I’ll engage in the comments section.

In my next post, I’ll circle back to the subject of induced traffic, noting that new lanes aren’t the only type of traffic improvement to be plagued by the problem of congestion that persists despite all efforts to reduce it.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (davealden53@comcast.net)