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)

Post-Election Urbanism

Those readers who have been following me over the last few months know that I bemoaned the absence of urbanism discussions in the presidential campaign.   That absence continued right to the end.  With the challenger conceding the election and the incumbent giving his victory speech in historic cities that have continued importance in the national economy, urban policies and urbanism went unmentioned.

Despite the silence from the top, there was still good news on election day.  And there are many willing to offer urbanist to-do lists for the new administration.

From the ballot boxes, Eric Jaffe reports for Atlantic Cities that most transit ballot measures around the country passed.  And the great majority passed by margins that were greater that the margin in the presidential election, showing solid local commitments to a key element of urbanism.

Smart Growth America offers a different list of the ballot results, many of which were good news for urbanist issues beyond transit.

Kaid Benfield of the National Resources Defense Council despairs of the election results facilitating any great breakthroughs in Washington, D.C.  But he still offers a list of changes at the federal level that he’d like to see implemented over the next four years, starting with improved inter-agency coordination.  Among his other suggestions is an increased focus on the triple bottom line, assessing the financial, social, and environmental benefit-cost ratios of possible urban undertakings.

It’s a modest list from Benfield, but the minimalism might just make it achievable.

Emily Badger and Sommer Mathis of Atlantic Cities weren’t as diffident as Benfield.  They present a more elaborate and optimistic list, including reorganization of the Federal Rail Administration to facilitate high-speed rail development, creation of a national infrastructure bank to get the country moving on long-deferred maintenance and improvement projects, and the implementation of a “location efficiency” standard for federal buildings, to keep future buildings from being sited on urban fringes.

Also, Badger and Mathis take up an idea offered by Governor Romney in the final weeks of the campaign, a reduction in the home mortgage deduction.

I’ve long argued that the home mortgage deduction, which began as an economic stimulus measure to help the recovery from the Great Depression and has become engrained in the tax code over the following eighty years, is creating inappropriate marketplace incentives.  However, an abrupt removal of the deduction would upset too many long established family financial plans.  Therefore, I’ve argued for a gradual elimination.  Perhaps four percent per year for 25 years.

To that end, I prefer the Badger/Mathis proposal, which sets the maximum amount of mortgage debt subject to deduction at $500,000.  For comparison, Romney proposed a cap on the total amount of deductions.  At various times, he proposed cap amounts of $17,000 and $25,000, either of which would have had a far greater immediate impact that the Badger/Mathis approach.

Indeed, I would add incrementalism to the Badger/Mathis proposal, perhaps starting the mortgage cap at $750,000 and then reducing it by $50,000 per year until it reached $300,000.  I believe that economies respond better when given time to adjust to new rules.

Lastly, Badger and Mathis propose a 15 cent increase in the federal gas tax, which is another argument I’ve made over time.  However, once again I’d propose an incremental approach.  Perhaps 15 cents per year, for at least ten years if not more.  Nor should the increased revenues be directed solely toward road construction and repair.  The use of gasoline has had far-ranging geopolitical and environmental implications, the costs of which have been subsidized by the general fund.  An increased gas tax can begin to redress that imbalance.

Rebuilding Space in the Urban Place also supports an increase in the gas tax.  Plus they provide a graphic of the current state-by-state gas taxes.  If you’ve been complaining that California has the highest gas tax in the country, you’ve been wrong.  Connecticut and New York lead the parade, although only by fractions of a penny over California.  Meanwhile, the lowest taxes are in Hawaii, but transportation costs ensure that Aloha State motorists still pay plenty at the pump.

Finally, Kristen Jeffers, writing as the Black Urbanist, presents a list of urbanist strategies that is nominally for her home state of North Carolina, but can apply to the country as a whole.  She includes commuter rail, improved bicycle facilities, and continuing grassroots movements.

I include the Black Urbanist not so much because her list is any different than Benfield or the others, but because it often seems that the most influential urbanist writers are middle-aged white guys.  (Not that I call myself influential, but it’s also my demographic.)  It’s comforting to see that a black woman comes to the table with almost the same list of wants for the next four years.  It’s a check that we’re on the right path.

Follow-Ups

A regular reader, who has become a friend through this blog, was enthusiastic about my recent posts on bicycling.  His comments seemed worthy of sharing.

“When I was new in the biking public of Petaluma, I started to learn and know who the other regular bicyclists in town were.  Then it got to be too many.  Now I don't even think about it, I see so many different people — every single day — riding bicycles on our streets and pathways.”

That’s good to hear.  And there’s plenty of room on the streets for more bicyclists.

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