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PLAIN ECONOMIC SENSE
For release after Jan. 4, 1999
Column 362
A Review of Cost of Sprawl Studies
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
Last September, Dr. Robert Burchell, a distinguished professor of urban planning at Rutgers University, made a presentation on the cost of sprawl studies to the National Policy Education Conference in Portland, Ore. While I reported his results from earlier studies last year, his latest presentations included more recent studies, including one from Michigan. Perhaps the most striking points in his presentation are the comparisons in public infrastructure costs for unplanned sprawl development compared to more compact planned development.
Based on a composite analysis of studies in Florida, New Jersey and Michigan and a national study, Burchell concluded that planned development saved 25 percent in road extension infrastructure costs, saved 15 percent in utility extension infrastructure costs, and saved 5 percent in school infrastructure costs. The savings in school infrastructure costs result, because there is greater utilization of existing school infrastructure and less need for new capacity.
In the New Jersey study, compact growth resulted in 60 percent less overall land conversion, with 83 percent less conversion of fragile lands, and 39 percent less conversion of agricultural lands. In addition, the median cost of housing per unit in the New Jersey study declined 6.1 percent or $10,500 for the compact development because of less infrastructure and land costs in comparison to the sprawl development.
Based on the Michigan and New Jersey studies, Burchell concluded that compact growth is about two to four percent less costly in terms of annual expenditure fiscal impacts for cities and schools. This was due primarily to less maintenance costs for public infrastructure under compact growth scenarios.
How valid are the results? I am inclined to accept the study results for the road and utility infrastructure extension costs, the land conversion estimates, and the housing costs. An important question to ask is who pays for these capital costs? If there are no subsidies involved, most of these infrastructure costs are paid by the developer who in turn passes them along to the home or property buyer. Therefore, compact development strategies are very important in providing affordable housing.
I am a little more suspicious of the numbers regarding the annual budgetary savings for cities and schools. A similar study, called "Cost of Community Services in Three Central Iowa Cities" created quite a stir in the statewide media last spring. Readers should know there is a substantial literature in planning that refers to a hierarchy of fiscal impact according to use. In general these studies and the literature find that nonresidential development and even farmland uses of land are superior from a fiscal impact perspective and most standard forms of residential land use is inferior from a fiscal impact perspective.
For example, the study of three Iowa cities found that fiscal impact revenues generated from new business development more than offset the costs while the fiscal impact costs of new residential development more than offset the revenues generated. In reviewing this study several assumptions were made. The study methods allocate revenues and expenditures among business and residential land uses and are somewhat arbitrary.
Average costs of community services per household are used in the Iowa study and many other studies on fiscal impacts. However, the last few houses added to a community typically require a smaller marginal cost for the police, fire, and other public services actually added. Finally, communities typically do not have the option of creating business development without residential development or residential development without business development. If they do neighboring communities must pick up the slack. Many communities have lost business growth because of lack of residential growth and availability of housing. Therefore the two strategies are linked and the fiscal impacts are linked and somewhat inseparable.
The relevant policy question regarding land use facing Iowa and Iowa's communities is not whether business development has greater costs or benefits than residential development. Rather the important policy question is, "What mix of residential developments (unplanned growth, managed growth, trophy homes, compact town homes, multi-family dwellings; central city redevelopment, and/or rural community infill and development) is needed to prudently use our land resources while meeting the needs for the types of employment opportunities being generated and lifestyles desired by those who live in the community, commuting region and state?"
Edelman is a professor of economics and an extension public policy specialist at Iowa State University.
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