Editorial

Subsidized Sprawl Servicing a False Economy

If suburban homes are no longer affordable once their prices reflect the actual cost of servicing, that suggests the logic of greenfield development is actually a false economy.

By Ryan McGreal
Published May 12, 2009

Hamilton city planners want to increase development charges to recoup more of the cost of servicing new subdivisions. The Hamilton Halton Home Building Association (HHHBA), long accustomed to getting its way in Hamilton, has been busy whittling the city down.

Citizens at City Hall (CATCH) reports that while the planned increase has already been cut by $1,500 per house, the HHHBA request to freeze development fees at their current low rates could cost the city $7 million in unpaid servicing charges.

Planning staff recommend increasing the development charge per house by $7,394 to $26,967. Even with the incrase, that would still put Hamilton in 20th place out of 25 neighbouring municipalities.

The issue is that current charges aren't enough to cover the necessary but expensive expansion of water and sewer treatment and distribution facilities, which are already running over-capacity.

The Hamilton Spectator recently echoed the HHHBA call to freeze rates at their current level, claiming that a recession is no time to increase development charges.

This, of course, is an excellent case in point of the often large gap between the rhetoric of free market capitalism and the actual political objectives of business interests. Businesses tend to want free markets for everyone else and preferential treatment for themselves.

Sprawl a Net Drain

It should go without saying that if suburban homes are no longer competitive or even affordable once their prices reflect the actual cost of providing public services, that suggests the logic of greenfield development is actually a false economy.

Now, if subsidizing sprawl produced a net benefit to society as a whole, it might be justified. Unfortunately, sprawl is a net drain by a variety of measures.

The configuration of low density sprawl land use requires high rates of car ownership and results in much higher distances driven, with accompanying higher rates of fuel consumption, air pollution and GHG emissions.

The air pollution results in higher rates of heart disease, and the sedentary habits that attend car-dependent living results in higher rates of obesity, heart disease, diabetes and other lifestyle-related conditions (see here, here, here, here and here).

In addition, sprawl results in the destruction of dependable farmland. This is particularly disheartening in Hamilton, which is surrounded by some of the best farmland on the planet but lost 20 percent of its farmland between 1991 and 2006.

Sprawl also forces public service providers to re-deploy their scarce resources outward. Fiscal pressure from the steady growth of sprawl development is forcing the Hamilton-Wentworth District School Board (HWDSB) to close inner city schools so it can afford to build new suburban schools.

All the money and resources sunk into increasing road capacity also turns out to be counter-productive. As a result of induced demand and other counter-intuitive network effects, investments in increased lane capacity generally result in more, not less, congestion.

In fact, cities that invest the most in road capacity end up with the worst congestion and the most air pollution. This is because more people drive longer distances more often when it is easier to drive. This 'traps' people in car-dependent living arrangements that persist even when increasing congestion wipes out the putative advantages to driving.

No Political Will

Unfortunately, City Councillors don't seem willing to stand up to the home building industry. A motion by councillor Brian McHattie for the committee looking at the issue to proceed with endorsing the staff recommendation and passing it to City Council was defeated 6-2.

Instead, they voted 6-2 to make no recommendation, which leaves wide open the possibility that the status will remain quo. For what it's worth, the audit and administration committee is open to delegations from local residents and organizations when it considers this issue at its June 4 meeting.

Contrast Hamilton's spineless pandering with Halton regional chair Gary Carr, who last October flatly stated, "Growth is not paying for itself. Until it does, we are not going to continue to grow. It's as simple as I can put it."

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan writes a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. He also maintains a personal website and has been known to post passing thoughts on Twitter @RyanMcGreal. Recently, he took the plunge and finally joined Facebook.

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By pam (anonymous) | Posted May 13, 2009 at 03:39:57

BOTTOM LINE = WE NEED TO STAY CONCENTRATED IN CITIES. AND GIVE THE PLANET A BREAK!!!! POLITICAL WILL! that's what's needed!!!!! Nothing is more devastating to LIFE ON EARTH than covering the planet with URBAN INFRASTRUCTURE. The land and habitat is degraded . Everyone loses.

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By rusty (registered) - website | Posted May 13, 2009 at 08:14:42

Ryan,

We are often questioned on this site to back up our claims that sprawl is a net loss to the city. This article addresses some of those complaints. However, I wonder if it would be possible to see the nitty gritty of the city's report? I would love to see some definitive line by line analysis of how much money sprawl costs (in financial terms only). For instance, how much does it cost to build a 100 yards of new road and sewer infrastructure? How much does it cost to maintain that infrastructure? What amounts are recouped, per house, from the home builders and property tax payers? How many homes are typically serviced in a sprawl model, and what are the net costs/revenues?

It would be nice to nail down this economic argument once and for all. Any ideas? (and don't throw it back at me please! I think I just saw Jason put his hand up...)

Ben

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By C. Erl (registered) - website | Posted May 13, 2009 at 10:00:19

Sprawl begets high taxes that suburban homeowners and councillors always moan about, yet the connections are never made.

Quality transit costs less then new roads, brownfield and innercity development is more affordable then suburban sprawl style development and building high density along new urbanist lines is more sustainable then any kind of power center/low density project the city will sink millions of taxpayer dollars into.

Ryan, maybe if people like us keep laying down the cold, hard facts, some people will wake up and change things here before its too late.

Great editorial!

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By A Smith (anonymous) | Posted May 13, 2009 at 13:33:42

Ryan >> The issue is that current charges aren't enough to cover the necessary but expensive expansion of water and sewer treatment and distribution facilities.

Why should new home buyers have to pay the full cost of expanding treatment facilities? In the free market, if a business has to expand, it passes these costs on to all of it's customers, not simply new customers. Therefore, make developers pay the cost of laying pipe, building roads, but not for the expansion of water facilities.

>> Businesses tend to want free markets for everyone else and preferential treatment for themselves.

Therefore, how do we solve this, by giving government more of taxpayers money to spend, or less?

>> Sprawl also forces public service providers to re-deploy their scarce resources outward.

I agree, make people pay the true costs of what they consume. However, this also includes public transit. By subsidizing mass transit, the government is promoting excess fuel consumption, air pollution and GHG emissions. It may be less than subsidizing roads, but it is not as effective as a true market based approach.

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By Ryan (registered) - website | Posted May 13, 2009 at 14:04:06

A Smith, I'm not going to downvote your comment because, unlike most of the comments you leave on this site, this particular one is entirely appropriate to the content of the article.

Why should new home buyers have to pay the full cost of expanding treatment facilities?

It's not just the cost of increasing capacity, which would ensue regardless of whether people move into the suburbs or into the downtown. It's the cost of providing service to those far-flung subdivisions - the kilometres of new water and sewer pipes, the pumping sub-stations, and so on.

Therefore, make developers pay the cost of laying pipe, building roads, but not for the expansion of water facilities.

That seems reasonable.

I agree, make people pay the true costs of what they consume.

What I wrote was, "if subsidizing sprawl produced a net benefit to society as a whole, it might be justified."

As you know, I support public spending on public goods - particularly on those public goods, like national defence, public education, health care, and efficient transit, that produce positive network externalities and which benefit everyone, not just the people who directly use them. The evidence overwhelmingly demonstrates that societies which invest public money in public goods are much better places to live by a variety of measures than societies which do not.

The problem with sprawl is not that it is subsidized, but that it is subsidized even though it is a net detriment to the public good, in various ways detailed in the article.

The answer is not to oppose all subsidies reflexively, but to oppose subsidies for harmful activities.

By subsidizing mass transit, the government is promoting excess fuel consumption, air pollution and GHG emissions. It may be less than subsidizing roads, but it is not as effective as a true market based approach.

Citation definitely needed.

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By A Smith (anonymous) | Posted May 13, 2009 at 15:25:20

Ryan >> I support public spending on public goods - particularly on those public goods, like national defence, public education, health care, and efficient transit, that produce positive network externalities and which benefit everyone,

According to the BEA (tinyurl.com/o7uo9z), U.S. government spending on health and education has been growing faster than the overall economy for decades...

1960-69...4.42% of GDP
1970-79...7.15% of GDP
1980-89...7.56% of GDP
1990-99...8.83% of GDP
2000-08...9.81% of GDP

However, during this time period, the overall performance of the economy has slowed dramatically. Therefore, while there may indeed be benefits from government spending, the evidence also suggests that it might be at a much lower level as a percent of the economy, than we see today.

>> The problem with sprawl is not that it is subsidized, but that it is subsidized *even though it is a net detriment to the public good*

You may be correct, but the majority of people still like the idea of living in the suburbs. Therefore, to them, sprawl is a public good. If they had to pay directly for the costs of that lifestyle, I think most would switch to a more urban way of life, even without subsidies for public transit. In my opinion, by promoting the idea that government should be making economic decisions, you are allowing subsidized sprawl to continue. If people had to pay for what they consume (exceptions for true hard luck cases), I think Hamilton would very much resemble your more "urban" vision of what this city should look like.

>> Citation definitely needed.

When you subsidize something, more people use it. Therefore, if people were forced to pay market rates for mass transit, do you think there would be as many buses on the streets?

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By jason (registered) | Posted May 13, 2009 at 17:01:58

if people were forced to pay market rates for highways would we have any highways at all??? Perhaps in a few select affluent communities, but then, why would they need them. They would just abruptly end at the next town line.

Given the true choice with market rates for transit vs. highways I'm willing to bet that our transit systems would be the envy of the rest of the world.

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By Anonymous (anonymous) | Posted May 13, 2009 at 17:18:10

Just a quick point that seems to be lost. Developers do in fact pay all costs for roads, pipes, lights etc within the subdivision, it is included within the cost of the house. Development charges are collected for the off site growth, new police cars, library expansions, water treatment plant upgrades, signage, traffic lights, intersection improvements. This needs to be made clear, all the infrastructure you see within the new subdivision is paid for by the developer and not through development charges, the development charges pay for off site upgrades. From what I've read above, people on this site think that the city pays for the roads and other infrastructure within the subdivision, this is not the case. Developers dedicate this infrastructure to the municipality whom maintain it through property taxes. Just wanted to provide a clarification point and am looking forward to more posts.

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By adam (anonymous) | Posted June 05, 2009 at 10:59:12

Who pays for replacing the pipe when they are "busting all over the place" as quoted by Terry Whitehead in Ward 8? Is it the developer who initially installed the shoddy pipe or the city?

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