Quantifying the Cost of Sprawl (2013) | Hacker News Reader

Quantifying the Cost of Sprawl (2013)

citylab.com

39 pointsjseliger38 comments

Left out of this equation is perhaps the most important number to buyers: price. All of these numbers show us how much more efficient it is to serve households in urban environments, and how much more tax revenue it yields for governments -- but that is not passed along to buyers.

For example, the suburban house that I paid $350K for 15 miles away from downtown would cost a $1M if I wanted a similarly appointed condo in the city. And that excludes the additional taxes, building fees (which can be substantial), and parking costs.

How so? Maybe other aspects of city properties are desirable and drive up the price, but the efficiency gains still apply and without them it would be even more expensive.

Maybe you could get an even bigger house than your suburb one in a third world country for even cheaper.

A good friend of mine lives in a 1200sf condo in the city, and he pays almost $500/month in HOA fees. Isn't that a good proxy for efficiency? Unless the association is making a tidy profit. That's a bit more than my ongoing expected maintenance costs for this house are.

Often HOAs are nearly mandatory. Local governments love it when HOAs provide services (through extra fees) while the government also collects full taxes on the property.

I think the idea is to get a smaller house in the city.

I've been reading a blog called McMansion Hell lately (highly highly recommended), and it has a great article detailing some of the pitfalls of large, affordable suburban homes [1].

[1] http://www.mcmansionhell.com/post/150597521816/mcmansions-10...

Like a lot of this literature I think your blog entry is going to convince nobody but the converted. Especially the fatuous appeal to the fantastic construction of yesteryear. The crappy construction of yore is not still standing; that doesn't mean it never existed.

I think the article starts with the assumption that all other things are equal, ie comparing a $350K home in the city to a $350K home in the suburbs. Both homes will pay the same in property tax, but the home in the suburb requires vastly more infrastructure (roads, water, sewer, gas, electricity, telecommunications, etc) to support it for the simple reason that it suburbs are more spread out. Those costs are hidden from the homeowner, the city must absorb them. In the scenario where the home in the suburb is much less expensive than the one in the city, this problem is only exasperated because now the suburban house pays even less in property tax.

I guess I don't fully understand the problem here. Acknowledging that this likely varies by location; the 'city' I live in (Oregon City, OR) is a small town and completely tax-separate from the big city I work in (Portland). Not even in the same county. The folks in Portland aren't subsidizing my suburban lifestyle, and Oregon City is filled mostly with other homeowners just like me. So aren't we paying our own taxes towards our water, sewer, gas, electricity, and so on?

My property taxes are lower than Portland at the same time that my infrastructure should cost more based on the analysis given in this article. But instead, I'd pay more in all regards to live downtown.

If you work there, then there's an infrastructure cost to your travel, office, etc. There are also some tax revenues when you do stuff in town. But you're by no means separate.

Exactly. That's how suburban bedroom communities in effect suck away tax money from the big cities they rely on.

Not exactly. I pay 1% earnings tax to Kansas City, MO even though I live in a KS suburb.

I don't think that arrangement is the norm, though I believe it existed in Pittsburgh where I used to live.

In any case, even where those taxes exist, you still have to look at the range of services consumed vs taxes paid. You might be underpaying or overpaying.

I think it's almost tautologically true that higher density requires (for example) less road, and less road is cheaper than more road. So that would just mean the differences you pointed out must be external to this analysis.

As a first stab in the dark I'd ask: does Oregon City have any poor people, or old people? If it's a rather new community build as a satellite for Portland's professional class, the demographics may be completely different from that of the state as a whole.

Portland may also suffer from its past: maybe they have pension obligations that they didn't build capital for. Or, conversely, Oregon City may be underfunding its future obligations.

I also just looked u the numbers to see what the difference is and you are right:

    Portland Pop: 604,000  Budget: 4,000,000,000 = $6600/person/year
    Oregon C.Pop:  34,000  Budget:   165,000,000 = $4860/person/year

The City of Portland is footing the bill for most of the roads you drive on, while missing out on essentially the only revenue they could receive from you, whether it be funding Tri-Met or paying for the other costs of running the city. Most of your waking hours are spent under their protection for police, fire & EMS, yet at most they are getting nominal taxes from your employer.

Wilsonville, OR pulls a similar scheme wherby they have a large taxable commercial base, but since they have very few residents they need to provide little school or medical funding, thus making the tax burden on businesses there minimal. City Of Industry, CA does the same thing but to an even larger degree, and Intel Oregon liked to use this exact strategy to minimize their tax burden.

When it comes to utilities, the cost to serve a house in Oregon City with Gas, Electricity, Internet, etc both for maintenance and installation is significantly higher. Where I could pull fiber to a 50 unit MDU in tens of hours and get a 40% uptake rate, suburbs and exurbs (which Oregon City is a mix of) would take me a few hundred hours to connect 50 homes, just due to the sheer quantity of extra wiring needed. Then you get into the uptake rate, and you are looking somewhere like 20% to 25% with a massively higher maintenance burden (somewhere on the order of 2x to 3x). This is why 3rd party ISPs and WISPs focus on apartments and condos, and why Centurylink covered Portland with fiber, but won't cover suburbs like Kent, WA with fiber. The ROI is bad, and doesn't make sense.

You're right, the folks in Portland aren't subsidizing you, you're paying your own taxes. The difficulty is that in the long term, those taxes might not bring in enough revenue. As long as the suburb keeps growing there is no problem, because state/federal grants, special taxes levied on new development, and ever-increasing property values keep the money flowing in. But eventually growth will slow, property values will stagnate, and aging infrastructure will become more expensive to maintain. Oregon City will have to raise taxes dramatically just to maintain the status quo, and this could have the perverse effect of driving people away and reducing tax revenue further. This is exactly what is currently happening in Detroit.

http://www.strongtowns.org/the-growth-ponzi-scheme/

Higher density would mean the costs would come down. The $350k house doesn't cost that much because it's 15 miles from downtown, but because it's the 225,000th (made up number) closest house to downtown.

Imagine you could miraculously cut 5 yards from the length of every city block. Your house would suddenly be a mile closer to downtown. But – assuming no reaction from the outside world – the competition for housing and the relative competitiveness of your house wouldn't change.

van Mises wrote: "if a man has been run over by a car, it doesn't help to run it back over him in the opposite direction"

Laws have supported the current norms in urban architecture for half a century. It is therefore the case that there are many more suburban homes and fewer city homes than the market would bear under a different regime. Changes to the regulatory situation would mean that a great deal of capital must be reallocated, and the costs will be absorbed by homeowners, i.e. innocent people. Urbanists must keep this in mind: what works in the long term will hurt in the transition.

The price of all real estate is inflated because of government intervention in the mortgage & finance markets.

or lack of intervention in the property markets? I don't know about the US but in the UK the only time we built enough housing was when the government got involved after the second world war.

That's because both governments heavily regulate land use. I.e. You only building housing on your land with government permission.

I'm not sure, the UK has relaxed it's planning laws in recent years but house building seems tied to the general economic cycle and way below what we really need.

Yes but because land is so dear it tends to be the case that only high-end homes get built - ie expensive and low density.

The basic problem is that land & housing prices are too high relative to people's wages. I think the reason they are so high is because of government intervention in the finance & housing markets.

Whereas I think it's because of lack of government intervention in the finance & housing markets.

What? Why would you need more govt intervention to get market to fill such an obvious need?

I think if you think about it it is obvious that tax revenues per square foot are going to be much higher for a many-story apartment complex than for a single-family home. Less than clear is who would be compelled by that information to move to a city center.

I am a bit surprised to see tax revenues for a Walmart are lower than even the home; it seems to me like that would be a more interesting angle to explore.

Well, that was written more to say that municipal governments should allow more apartment complexes, than to say you should move in to them.

That said, if you prefer your 2 acres far out of town, be aware that the bill for sprawl can come due in the worst possible ways. It's pretty nasty to find out that since your city hall couldn't afford to keep up with repairs on your sewer main, they didn't. It's especially bad to find out by a raw seweage backup in your cellar. Perhaps that would compel you?

If you really live in the hinterlands you probably have a septic tank and a well, and besides that similar issues can crop up in cities too.

Then you're liable to live where fire department coverage is nominal (as in, it exists, but the drive to your house is so far there's no point.)

That's not necessarily true. Have you spent much time in the suburbs? Plenty of places you could live where you don't have city water or sewers but the town fire department isn't very far away.

And compact development produces on average about 10 times more tax revenue per acre.

So the author of this article is trying to sell this approach based on the "benefit" of tax revenue per acre? Is that (should that be) the primary goal of a city's design... to squeeze out as many tax dollars as possible from every square inch of space?

The main problem with compact development (my observation) is the HOA fees that tend to be baked into owning in one of these "compact" developments. These fees are very often ostentatious and do not map out to actual costs of building or maintaining shared infrastructure "compactly". And let's not even get into the pitfalls of CCRs that disallow pet ownership, fine members for paint colors, etc.

Plenty of low-density suburban neighborhoods have similar HOAs and restrictions, though at a lower $/sq.ft. than a downtown high-rise.

A city should be financially solvent, and a lot of them are not, long term.

http://www.strongtowns.org/the-growth-ponzi-scheme/

HOAs enjoy all kinds of wild quasi-governmental powers without the same level of accountability as a real government; I think they're a tremendous downside to ownership in both condos and new developments.

A city shouldn't strive to maximize tax revenue, but they should definitely strive to make sure the revenue is at least a few cents higher than the cost of maintaining the roads, water and sewer hookups, police & fire, et cetera.

For many cities it's simply a matter of selling a few parking lots to developers and letting them put up condo complexes. Old timers will scream and yell about the loss of parking, but those condos will mean the water mains get maintained on time.

Why would you live in a HOA controlled area? At least in the Pacific Northwest they are viewed as scum of the earth, and are not a common burden most people will encounter.

Except it doesn't... developers skip the urban infill for the burbs because the gross costs (entitlement fees) are way higher. Sure, it cost less per lot for urban infill when you only consider lot costs for sewer, water, etc (in-tract) but older municipalities are so fucked with decaying tax bases and overhead that they try to extract it all in taxes and fees (mellow-roos and in-lieus) that they make single family development cost-prohibitive anywhere but the outermost rural areas. To compare condo to single-family cost is just stupid: the cost of building multiple units is - only - justifiable when the prices are sufficiently high: in urban areas that are already built up. First world problems.

Eh, utilities aren't the main showstopper, zoning is. So much land in cities is zoned for 2 to 3 story single family detached homes, and upzoning it after homes are built on that land is hard to do, and its even harder to find a block that is all willing to sell to one developer. Hence why the edges of gullies and ravines become where high density buildings are built, since low density housing is very hard to uproot.

What this causes is more low density urban infill, which is much more destructive. Where one older home was before, 2 cheap as chips 3000sqft concreteboard boxes will be built as cheaply and quickly as possible. Builder errors like forgetting to put eaves on the house will be fixed by nailing an overhang on afterwards, only to leak 4 or 5 years down the line.

If high density development was easier in urban cores, there would be much less incentive to build shoddy detached housing. As it stands there is a ton of pent up demand, and tons of zoning to block development.

Zoning is not a show-stopper everywhere. You'd be surprised to know that many places you can develop much higher densities "by right." Phoenix, for example, has the density potential of Brooklyn near its downtown (just south) but it's solely ramshackle, chicken-wired single family at the moment. Downtown Oakland could be 100 times as dense as it is currently. Zoning, per se, isn't the issue there but the people who will fight it at all costs (the developer's). You could rezone all of West LA to Manhattan density tomorrow and you'd get nowhere... People will fight it.

You're right, I oversimplified because I was being facetious. I used to be a developer of both sprawl (Toll Bros and KB Home) and infill. I am bitter about how we live in the US. No one should be paying $500/SF to live in Oakland when there are empty lots and single-story strip malls occupying space for high rises. High-density development is no more difficult than suburban development from a technical matter. It is a market problem. The costs get driven up arbitrarily at times by bad actors.

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