[This article was originally published by the Independent Institute.]
In June, I wrote for Catalyst about the high cost of regulatory limits to urban density. Because the regulations block an economically-productive form of development, I called them “America’s biggest domestic policy failure.” But if housing affordability is a concern, urbanists might be just as interested in limits to what’s pejoratively called “sprawl,” or growth.
Sprawl limits are referred to as “growth management”, and come through various laws—conservation easements; local, state or federal parkland preserves; large-lot zoning; and best known of all, Urban Growth Boundaries (UGBs).
UGBs are invisible lines that are drawn around certain metros, and represent where urbanized development must stop. They are generally enforced by regional bureaucracies, since they involve many municipalities working together and require periodic extension. Other localities have alternative forms of growth management that function like UGBs, and that are even less flexible.
There are usually two rationales for growth management. The first is environmental: it preserves natural areas on the metro fringe. That goal seems short-sighted, for reasons I’ll state below. The second is that growth management helps contain infrastructure costs. If growth cannot extend beyond a boundary, or does so incrementally, it will prevent excess extension of roads, pipes, etc. That might be a valid benefit, and one I’ll explore in a later article.
In this piece, however, I’m more interested in the costs of growth management. The main one is affordability; when governments draw lines where growth can and cannot go, it reduces the supply of buildable land, and thus also the supply of housing.
This makes housing more expensive, according to the economic literature. One study, titled “A Line in the Land”, found that in various U.S. cities, growth restraints led to price increases and political manipulation by NIMBYs. Other studies, focusing on Portland, said that pre-UGB the city never had home price medians above the national median. But the UGB caused a price spike in the early 1990s, and has continued, writes Portland State University business professor Gerard Mildner, because of the UGB’s rigidity.
“Since 1980,” he writes, “the area inside Portland’s UGB has expanded by 10%, while the population of the metropolitan area has grown by 78%.”
Now Portland’s home price medians are $467,000, nearly double the national median. The metro issues far fewer permits relative to population than famously elastic markets like Dallas and Houston.
Growth management advocates often say that metros can maintain their housing elasticity by upzoning the core. But this often isn’t allowed either, due to the density limits described above. Instead they become places that can’t grow anywhere—up, in, or out.
Randal O’Toole, a research fellow at the Independent Institute, argues that even if these metros allowed ample infill, they would not become affordable with growth containment policies still in place. Because peripheral land is cheaper, and low-rise suburban tract housing easier to build, suburban greenfields are more hardwired for affordability than infill neighborhoods, he believes. In a recent public debate, O’Toole noted that every state has low-density zoning, but only some struggle with affordability. They are generally the ones that instituted strict suburban growth management policies. The suggestion is that these arbitrary lines are part of the regulatory salad that makes housing expensive, and may even be the most significant regulation of all.
Beyond affordability issues, growth management amounts to an oversimplified approach to urbanism. The main reason boils down to the fact that cities are complex. They have millions of people and businesses, all with different needs, and peripheral land is often most suitable for meeting those needs—from industrial companies that want cheap horizontal land, to young families who want quiet places to raise children. It is unsurprising, then, that consumer surveys often show a preference for single-family homes, and that cities have, since the inception of streetcars and automobiles, become decentralized—it is how many Americans want to live.
Growth containment laws posit that all these complex operations should occur inside a narrow boundary, whether or not expensive urban land is the best place for them. This violates “comparative advantage”—an economic principle stating that different land areas have different optimum uses—and is tyrannical to boot.
The expectation, in hand, that land directly outside a major city should be “preserved” also defies comparative advantage. The optimum use for suburban land is usually development—homes, stores, offices, factories—which is why developers build it there. Natural amenities are still available when driving an hour or two outside most major U.S. cities. There’s no point in forcing the suburban areas right next to cities also to be farms and forests. It’s a bit of agrarian-romanticism that ignores the entire point of urbanization.
But the most ironic thing about growth containment is that it may worsen sprawl.
In Portland, the UGB only extends 10-15 miles east, west and south beyond city limits (Portland’s northern boundary is Vancouver, WA). That is a limited buildable area for a 2.2-million-person metro, and causes people to leapfrog to distant cities.
Consider: 8 of Oregon’s 10 fastest-growing cities sit right inside the edge of Portland’s UGB, showing the demand for suburban sprawl and the desire to live near, but not in, the city. In a free market, Portland’s workforce would likely sprawl another 10 or 20 miles beyond the UGB. In its current regulated market, workers don’t have this option, and many can’t afford housing within the UGB—especially along its border. So, they move to Vancouver, where growth has been faster than in Portland, and where commute times into Portland have increased 300%. Or they move to Salem or Corvallis, which, according to demographer Wendell Cox, both have a sizable percentage of residents who commute into Portland. As a result, Portland’s commuter statistical area is now comparable to larger metros like New York.
“Perhaps the greatest irony is that an ‘urban containment’ policy designed to prevent sprawl could well be accelerating it,” wrote Cox in New Geography. “Higher prices, in part due to [the UGB], have forced more people to look ever further for housing that is affordable.”
A similar effect can be found in Boulder, CO, Charlottesville, VA, San Francisco, or other cities surrounded by green preserves. Housing within the urbanized core is expensive, and housing on the immediate suburban fringe can’t be built. Therefore, the working classes live in far exurban towns and commute in. This negates the apparent “environmental” benefits of growth containment, and thwarts the urbanization process.