TALKING TO EACH OTHER INSTEAD OF SHOUTING: A DIALOGUE ABOUT SPRAWL AND URBAN DEVELOPMENT

Peter Holle, president of the Frontier Centre for Public Policy, a conservative think tank, responded to my comments in another blog entry with some remarks of his own about sprawl, and other issues of urban governance and development. In this entry, I reproduce most of his comments, in boldface, and follow them with my responses in italics.
I submit this entry as a beginning of what I hope can be a more extensive dialogue. Those of us who disagree on important questions of city politics have too often been self-indulgent in preaching to the converted, and ignoring our opponents. Genuine dialogue is much more likely to produce good policy than rigid adherence to set points of view.

PH: Sprawl is natural outgrowth of dispersing economy (communications and car technology, rising wealth levels). Policy makers largely waste time and resources trying to stop this.
CH: Whether that statement is true depends on what you mean by “sprawl”. If you mean any extension of a city or metropolitan area that includes single-family residences, you’re right. It’s true globally that cities are growing and that many affluent home-buyers are looking for spacious homes and grounds as far from the city centre as possible.
However, there is room for a considerable proportion of low-density, single-family development, even with land use regulations aimed at limiting sprawl. Sprawl becomes toxic when low-density development gets preferential treatment so that it is, in effect, subsidized, and when low densities are combined with rules that require strict separation of land uses – keeping residential, commercial and industrial tracts of land strictly separated from each other.
That kind of development has the effect of limiting choice, by putting developers in the position of having to make financial sacrifices and fight bureaucratic battles if they wish to provide an alternative to conventional low-density, land-use-separated development. It puts home buyers in residential districts that are strictly separated from work and shopping in the position of being completely dependent on their automobiles for transportation. And it makes it impossible to provide convenient bus service except with unsustainable levels of subsidy. Finally it often strands the elderly, youth, poor people and disabled people, or makes them dependent on others for their transportation.
Land development is very strictly regulated, down to very small details. The suggestion that it represents the untrammeled operation of market forces is simply wrong. In fact, a true free market in land is an impossibility, because free markets presuppose, among other things, unlimited supply and the supply of land is by nature limited. Land use is always regulated and we have sprawl because our regulations require or encourage it.
PH: Insofar as we have sprawl it is artificial, an outgrowth of old style government policy. Our recommendations for curbing artificial sprawl include the measures set out in boldface below:
Tax land not improvements. The existing property tax system penalizes density.
CH: Your point, I take it, is that, since we tax buildings, and the improvement of them, development of land incurs a tax liability, while land that remains undeveloped and sparsely developed is very lightly taxed. That greatly weakens the incentive to develop the land and thereby works against density. It has long been advocated that either only land be taxed (the single tax), or that the tax on land be raised, while that on improvements is reduced (the split tax). If it becomes expensive to leave land lying idle, its owners will be more interested in developing it, so that it produces revenue.
These proposals are well worth considering. The split tax has been tested in a number of Pennsylvania cities, and there is a good case to be made in favour of it. As well, it could be argued that the main problem is that the split tax does not go far enough – that a single tax would have produced a better result. In practical political terms, some powerful oxen would be gored by either change. Perhaps we should be forging a left-right coalition to advocate for a reform of the property tax.
PH: Fund services with user fees not property taxes to catch free riders.
CH: Free riders are people who cause problems, but do not pay for them, and therefore have no incentive not to cause the problems. The classic free rider case is air pollution. Each automobile driver and each factory contribute to air pollution, but they do not pay to clean up the dirty air they have produced. As a result, virtuous citizens and companies that seek to reduce air pollution pay for their virtue, while those that continue to spew pollutants do not pay for their wrong-doing. The virtuous ones pay for cleaner air but continue to breathe dirty air.
Even the most starry-eyed market utopians – those who believe that virtually all political and social problems are best solved by the application of free market principles – agree that the free rider problem requires some kind of intervention from government. An obvious solution is to find a way of charging the polluters for their pollution, so that they are forced to pay for their sins.
That line of reasoning makes perfect sense for air pollution. It is more difficult to see how it applies to public parks, zoos and public libraries. Typically, these have been paid for initially and maintained with funds collected from taxpayers, and available for all to enjoy. Restricting access to them with user fees makes them available only to those who can afford to pay. Everyone pays taxes. To bar some of them from the use of public services that they have helped pay for seems unfair.
As for the free rider problem, it is difficult to see what harm is caused to public parks, community centres and public libraries by opening them to the public at large, without restriction. By the same token, there is a potential public benefit in providing opportunities for recreation and literacy to people who cannot afford to pay. And sprawl? Will the proceeds of user fees be used to finance anti-sprawl measures? My advice to readers is not to bet the farm on that proposition.
PH: Increase efficiency of city services using modern delivery models.
CH: I’m in favour of that as long as it’s not a fancy way of saying “cheap labour”. Following on the publication of Osborne and Gaebler’s Reinventing Government, many improvements have been made in the delivery of city services by using newer administrative techniques, including some that involve methods imported from private enterprise. The result has been both increased efficiency and lower cost.
Unfortunately, some of the lower costs have been achieved by forcing wages down, typically by exposing unionized city workers to competition from private contractors who pay lower wages. As a result, workers who had enough money to be able to buy the many things their children needed in order to get a good start in life are now less able, or entirely unable, to do that.
Low wages – not only in the delivery of municipal services, but generally – are a good way of reducing the life chances of the next generation, by putting today’s parents in the position of not being able to afford to give their kids the care and education they need. This is a very short-sighted policy, which, in the long run, incurs both economic and social costs.
PH: Remove rent controls and target assistance to low income earners in order to make housing affordable for them.
CH: I agree that the case for rent controls is weak, because it involves a transfer of wealth from landlords to tenants, which is not at all the same as a transfer of wealth from the wealthy to the poor. In addition, it may reduce the incentive to maintain rental dwellings. But we shouldn’t kid ourselves that removal of rent controls will free us of the need to make some public provision for affordable housing, and social housing. Affordable housing is not what developers make money on.
As for targeting housing money to low income earners, that’s one of several ways of dealing with the fact that, in most cities, even some people who work hard may not be able to afford shelter. We can’t do justice here to this complex issue. Let’s take it up another time.
PH: Encourage development in the centre city, with the objective of supporting it more as an interesting living place and less as a shopping and working place.
CH: I don’t think that downtown needs to be less a working and shopping place than it is now, but I do agree that we need to place heavy emphasis on housing, including affordable housing, in the development of the commercial heart of the city. That, in turn, will open more possibilities for retail trade – in other words, shopping. For the city as a whole, perhaps the most important single planning objective should be to take sensible measures to reduce as much as possible the existence of areas that are exclusively devoted to any one use.
The most recent Winnipeg zoning code revisions – like those in many other North American cities – take some modest but useful steps in this direction. Like affordable housing, this is another critically important but complex issue that we should resolve to discuss in more detail another time.
PH: Zoning restrictions on supply and disproportionate investments in light rail/mass transit are yesterday’s answers. They simply push people to live outside the zoned area, penalize home owners by artifically raising house prices, and otherwise waste scarce resources that should be used for other transport infrastructure.
CH: Zoning restrictions and investments in public transit are two different issues. I agree that conventional zoning is too restrictive. As I argue above, conventional zoning in effect mandates sprawl. We need to make it much easier for developers to do infill development and to offer suburban choices that are different from the familiar pattern of large residential areas, strictly separated from shopping and workplaces.
As for public transit, Winnipeg has a system that continues to be generally efficient, despite the fact that it has been poorly supported. We need to support transit and improve it, in order to reduce dependence on private automobiles and to enhance the freedom of the young, the elderly, the poor and the disabled, as well as their ability to control their lives and provide for their livelihoods. As I argue elsewhere, this is not as hard to do as many would have you believe.
Want to find out more?
Alanna Hartzok defends the split tax in “Pennsylvania’s Success with Local Property Tax Reform: The Split Rate Tax”, American Journal of Economics and Sociology, Vol. 56, No. 2, 205-213 (Apr., 1997). Unfortunately, this issue is seriously under-researched.
On new service delivery models, see David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector, New York: Penguin, 1993. This is a readable classic that, for better or worse, foreshadowed a great deal of what has gone on in municipal government since it was published.

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