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Friday, April 15th, 2011

Replay: The Power of Greenfield Economics

I’ve touched on this before in other posts, but it is worth highlighting again. The great move from the city to the suburbs has been attributed to various factors: changing lifestyle preferences, the automobile, subsidies to sprawl, urban industrial pollution, etc. While there is probably truth in all of these, possibly the most powerful of them all is greenfield economics.

What is greenfield economics? This is simply the set of conditions that flow from building on new territory or exploiting new markets vs. redevelopment of old places, organizations, etc. Being able to start with the proverbial blank slate enables a huge number of benefits. Consider:

  1. Everything is new and state of the art. A brand new home in the suburbs is new, comes with a warranty, and probably needs limited maintenance for the first few years. Also, it is built to the current fashion, with the layout, square footage, and room sizes people prefer today. The kitchen has stainless steel, not harvest gold. Everything about it is what the market is demanding today. As fashions and tastes constantly change and evolve, it seems unlikely older homes are hitting the market sweet spot, often requiring renovations, plus they require significant maintenance just to keep them up

  2. No legacy costs. More broadly, the area has no legacy costs. There are no brownfields to clean up, no dead malls, etc. There are no unfunded pensions because nobody has accrued a pension yet. There are no bond repayments from yesterday’s boondoggles. And so on.

  3. No legacy institutions and culture. A greenfield isn’t saddled with bunch of deals, and accommodations made years ago. It’s isn’t saddled with a mayor who is the grandson of the city council president from 40 years ago. There are a limited number of powerful special interest groups. As anyone who has tried to change an organizational culture that no longer meets institutional needs can tell you, this is a daunting task.

  4. Ability to defer infrastructure costs. In particular, arterial street capacity and freeway capacity are built with a lag. This lets new towns avoid costs in the short term.

  5. Scale economics are in your favor. Costs consist of fixed components and variable components. In a growth scenario, the fixed portion gets amortized across more units, meaning your cost per unit drops. Also, this allows substitution of additional fixed costs for variable costs to gain further unit cost efficiency. As long as growth holds, that alone can drive down cost per resident and business. This helps keep taxes low.

  6. Efficiency of large lot development. New suburbs are usually developing relatively large parcels, which is efficient in that environment. For example, the land was probably acquired from a small number of original owners. The planning and zoning process is pretty much the same whether you are building five houses or five hundred. Again, there are unit costs efficiencies from building many units, etc.

  7. Few low income residents. Because new towns tends to feature owner-occupied housing and new apartments, a job and credit history is generally needed to get in. Thus the nature of new places is avoid low-income people, and the associated social service costs. Part of the reason that the outer suburbs experienced particular stress in the housing collapse was because the weakened lending standards allowed people with marginal finances to buy in. A return to the status quo ante means those types of buyers will likely be excluded in the future. That doesn’t do anything to help lower income and working class people – they still have to live somewhere – but it will keep them from newer suburbs, as will restrictions like large lot size zoning and building codes that mandate upscale materials.

It isn’t hard to see why building new and moving to new places, particularly when staying within the same economic and amenity region, is very attractive.

You might say that this is a transitory state and the problems of the city will eventually hit the suburbs as well. Very true. And indeed, that’s what we see. Inner ring suburbs across America are struggling. Some of them are failed towns worse than any inner city. Many of today’s boomburgs will no doubt share the same fate 30 years from now. As a general rule, it seems that only the most affluent suburbs have staying power. But that doesn’t help you if you are a central city or inner ring suburb today.

Eventually all of the items above go into reverse. The town becomes “full”, it gets old, and its own deferred costs catch up with it. Then all of the logic that made the greenfield so powerful works to equally devastating effect in reverse. As the population and tax base shrinks, fixed costs loom large, for example.

The kicker in all this is that the liabilities and costs almost all attach to the territory, not the people. Thus they can be escaped simply by moving to a new greenfield. It’s like prospectors skipping from one clapped out mining town to the next. Or being able to run up a huge credit card in someone else’s name and skip town.

This is a huge structural challenge for old places. There is certainly a lot of work to be done on understanding how to deal with it. But the first step is recognize that simple greenfield economics can account for Hazel Morrow-Jones finding that “people like new and big homes far from the central city.” That’s where the greenfields are and people implicitly get that.

This post originally ran on February 4, 2010.

31 Comments
Topics: Strategic Planning, Sustainability

31 Responses to “Replay: The Power of Greenfield Economics”

  1. Everett says:

    Can anyone comment on the effectiveness of brownfield/redevelopment tax credits in balancing the effect of greenfield economics?

    Usually, I hear from one side that supporting the credits that also happens to be thick with boosterism and unrealized projects. The counter argument seems to be full of thinly veiled racism in favor of sprawl. What I haven’t seen/heard is a balanced rationalization of the credits (one way or the other).

  2. Matthew Hall says:

    This seems THE great challenge for creating more functional and efficient metro areas in the U.S. Even the U.S. can’t go on reinventing the wheel forever. State and federal policy change seems absolutely essential for the development of economic and political regionalism. It would be nice if this didn’t have to happen only in response to the end of cheap credit and energy but that seems to be what it will take for many metros to take stock of their assets and liabilities.

  3. Chris Barnett says:

    Everett, there’s more to it than tax credits. Some sites are so contaminated that they can’t be economically reused as residential or green space. Projects don’t go forward because the severity of the contamination is underestimated at the start. Sometimes the highest and best (or only allowable) use for a brownfield is to re-use it for factory or warehouse space, or as a parking lot.

    Aaron didn’t explicitly mention something I would call “stringiness” (the presence of “strings” or “red tape”) in older areas. It’s more than “legacy issues”. It’s the multiple layers of regulation and custom.

    Environmental re-use regs (federal and state) is just one of those. Another (one of Aaron’s favorites) is locally-designated historic districts. Yet another is local zoning overlays (for everything from view-sheds to design standards to groundwater protection). Trust me: redeveloping sites subject to any one of these things is tricky enough. Layer two or three or four together and it’s a bear, partly because each new “thing” to deal with adds another level of risk. In a risk-averse banking climate it’s easy to just say no to redevelopment deals that don’t have some kind of public finance (tax credits, loan guarantees, brownfield funds, etc.).

    Greenfield places (by definition) just haven’t experienced the issues that give rise to these kinds of regulations and requirements layering onto each other. It’s most often far EASIER and more predictable for developers to buy and hold farmland or rangeland until it’s at the edge of development.

    One of the key factors on the supply side has been the vast improvements in mechanization of agriculture and yields: we don’t need as much farmed land or as many farmers. This plays out two ways. Selling for development is the retirement fund for an aging farmer without farming heirs; exurban land is still worth more to sell for development than for continued farming when expected ROI (the net farm income stream) is annuitized.

    Even farmers who want to continue farming will sell their place when development reaches it, then reinvest further out (cheaper land).

    Economics is sometimes dismal. This is one of those times where factors converge and create a result no one likes but no one can stop UNLESS and UNTIL the preference of home-buyers changes dramatically.

    What government policy will actually get people to change their feelings and preferences for new suburbs? And importantly: would such a policy be politically possible and actually “doable”? Americans in general don’t like their major life choices (where and how to live, eat, work, worship, spend money, and send their kids to school) restricted by government.

  4. Everett says:

    Thanks for the insight, Chris!

    (I imagine the “restrictions” will actually look a lot more like the incentives that planted the seeds for sprawl back in the 40s and 50s, where it is just economically favorable to do so.)

  5. Graeme says:

    While greenfield economics no doubt have played a large role in the increasing suburbanization of America (and the rest of the developed world to an extent) I feel that blaming economics overlooks the many structural biases perpetuated by our government and culture at large. This is largely the same problem I have with an Urban Ecology (Chicago School) model, in that it reduces urban development (redevelopment, capital investment, etc) down to a “naturalistic” economic tendency. What about the effects of racism, sexism, and class oppression? Certainly the American government created policies that made the economics suburbanization more favorable but this was limited to certain groups (white, male, even straight). In addition, our culture consistently upheld the suburbs as a bastion of freedom, going so far to declare them a bulwark against communism. Suddenly, moving to the suburbs became quintessentially American, almost a patriotic duty. I wouldn’t say that “greenfield economics” were the primary mover of people to the suburbs; rather, the structural incentives created and continued though biased policies and spatial representations were more to blame.

    I guess it should be noted that this post comes after I’ve read a lot of David Harvey for class. BTW Aaron, love the blog and thanks again for coming to the urban innovation symposium.

  6. Chris Barnett says:

    Graeme, even if all those social factors were once present (along with cheap oil and abundant Federal highway funds) before the Civil Rights era, today they are largely mitigated: the large minority of “social-issues Republicans” notwithstanding, we do not live in a society that could be described as overwhelmingly racist, sexist, and homophobic today. We aren’t building huge new expressways (in Midwestern cities, at least). Gas is inching toward $4/gallon. Many expressways are congested enough that average commutes are increasing. Green is the order of the day.

    And yet the suburbs keep growing.

    All that’s really left to explain continuing exurban development and increasing suburban share of metropolitan population is greenfield economics, along with what some posit as an innate tendency for Americans to want to be surrounded by their own physical space.

    It appears to be what a majority really wants. The Census clearly documents that more and more people keep trading longer, more expensive commutes for beanfield, er, greenfield living.

  7. Chris Barnett says:

    Incidentally, Aaron once proposed “the mother of all impact fees”, an attempt to internalize all those externalized or deferred costs inherent in the “greenfield economics” model of development.

    In concept I agree wholeheartedly, at least partly because I’m not ever moving to a new house in the ‘burbs. But it’s one of those things like carbon taxes: not politically possible. Not now, and probably not until all of today’s suburbsn Boomers and Xers are gone.

  8. Graeme says:

    Chris, while I agree to a degree about greenfield economics driving contemporary suburbanization I fundamentally disagree on the role you subscribe to racism. I don’t want to drastically shift the discussion of this post but I want to say that racism, sexism and homophobia still shape our society. I mean, you only need to look as far as white privilege or the lack of gay marriage to understand the subtle ways inequalities shape society. They have not been mitigated!

    with that said, and with apologies on being political…

    yes, suburbs keep growing and yes greenfield economics explains part of this. But, I dislike the idea of consumer preference. I know, i know, this will put me at odds with a lot of people. Right now, for my gentrification course I am grappling between consumer preference and preference shaped through manipulation. And there is something about power shaping preference, whether its advocated moving to the suburbs or viewing urban areas with disdain, that I can’t seem to dismiss. anyway, i’ll leave it open ended on that point since I am still undecided myself.

  9. To quote from the post “The Sprawl Bubble” two days after this post:

    “Powerful enablers are required for such a sweeping thing to happen. Post-WWII suburbanization was caused not simply by the availability of the automobile, or postwar housing demand, but by a converging set of public policies that resulted in blighted cities, towns, and villages, as well as an uglified, overdeveloped countryside. Without getting into gory detail, the major enablers included the national highway system, subsidized government loans for new suburban housing, the often intentional withholding of needed capital to renew older neighborhoods, and notoriously destructive urban renewal projects. These policies, and others too, amounted to the most massive outlay of taxpayer subsidies and incentives the world has ever seen. The ’burbs were not built by chance. Or merely by customer choice.”

    These “greenfield economics” have been largely driven by public policy, in plain view. Public policy could have been more about building more up than out, and building more public transport than roads, but that didn’t happen.

    Further, I know it’s politically incorrect to say certain things, but some of the reasons people keep moving further and further away from urban cores are 1) not wanting to live near other people (they want enough space between them and others to feel “free”), and 2) not wanting to live near people who don’t look like them or share the same culture.

    Last, there are often environmental and cost benefits to rehabilitating existing buildings over building new ones, and I dread that this seems to escape discussions like these.

  10. Simon says:

    Here’s an Australian perspective. Although our cities sprawl in a similar fashion to US cities, our brownfields are well-developed and never abandoned. In fact they are nearly always more expensive than the newer suburbs on the fringe, and there are always people willing to move into them – the people moving in are usually wealthier than the people moving out.

    Point by point:

    (1) Renovation of an old home is always cheaper than building a new home.

    (2) Seems a peculiarly US issue

    (3) There are just as many legacy institutions and legacy cultures in the city edge regions as in the inner-city and inner-suburbs. Often the inner-areas have more progressive politics that are less wedded to the ways of the past.

    (4) New areas have to pay infrastructure, but old areas already have the infrastructure in place.

    (5) Large-scale brownfields sites are as large as the greenfields sites.

    (6) Same as (5)?

    (7) This applies more to inner areas than outer areas.

  11. Chris Barnett says:

    Simon, I’d argue very hard that building a new (infill) house is sometimes cheaper than rehabilitating a decrepit old one. (Please see my post at the end of the Banas “Sprawl” thread for a descriptive definition of “decrepit”.) In this I consider the life-cycle efficiency of new homes built with new materials, the sunk cost of development infrastructure, and the likelihood that a replacement structure would probably be smaller than the one it replaced.

    If every US home were constructed as the house my German immigrant forebears built in the 1830′s, I’d agree with you wholeheartedly that renovation is “always” cheaper. But only a relative few US homes are built that way: south-facing, tucked in a hillside using solid sandstone blocks 2 feet thick, with a virgin-timber deck for the second floor. That house will probably stand for at least another 175 years and accommodate repeated renovation and updating. Most American frame houses won’t.

    Further, most of the US population lives where a temperate and humid climate plays hell with wood-frame construction if the abundant moisture penetrates (or is trapped in) the building envelope, something very likely with a house built before modern advances in building codes and materials.

  12. Chris Barnett says:

    Steve, there’s nothing politically incorrect about recognizing the innate American preference for space. It is not a result of US Government, State, or local “policy”, zoning laws, or racism: even people in demographic minorities buy bigger houses in the suburbs when they are able. See Census 2010.

    That the innate preference is aided and abetted by greenfield economics is what makes it a powerful engine with significant momentum and powerful resistance to change.

    That the preference has survived decades of significant social change and accelerated recently demonstrates that it is not fueled by redlining, urban renewal, or racism. Low interest rates and lax lending standards are probably a bigger culprit today.

  13. George Mattei says:

    This debate may be moot. The comment about the “mother of all impact fees” was accurate, it’s not politically feasible.

    However, economics is economics. We’ve had a great run at greenfield development, and built up a huge bubble. It burst. The Invisible Hand has spoken. We built too much,and spent too much, and now we owe the bill.

    Eventually the bill will be paid and the economy will get to the point that we can build out again, but that won’t happen soon. And by the time we do, other economic and cultural shifts will have come into play. Being stuck in a neighborhood for a decade may change people’s perception of real estate as being disposable. Taxes are going to go up. Gas is going up (although tech changes may mitigage this to a point).

    Greenfield economics may essentially be dead.

  14. Chris Barnett says:

    George, the economics of greenfields will only change when the expressed preference of the American consumer changes.

    Severe recessions a generation apart (in 1981 and 2008) did not change the American preference for suburban living. Americans have demonstrated repeatedly that we are (in the aggregate) more likely to buy fuel-efficient cars and continue driving the same distance to work.

    Greenfield economics isn’t a model, it’s a natural outcome of cost structures and expressed preferences (i.e. “dollar votes”). The cost structures won’t change enough in the short run…in fact, the marginal cost of new/infill development at the edges will be even lower since it will be possible for the next few years for builders to pick up developed lots below cost from the carcasses of bankrupt developers, builders, and banks.

  15. Chris Barnett says:

    In fact, $5 gas and half-empty suburban office and retail may just lure decision-makers to move their offices closer to home…in the ‘burbs. And vulture investors will have paid little enough for the properties that low-rent deals will be sustainable for them.

    Even in crisis, the greenfields win.

    Now THAT would be an urban disaster story.

  16. EngineerScotty says:

    Chris…

    but what happens when the suburbs densify?

    At any rate, we’ve had suburban office and retail for decades now. Businesses relocating there due to lower rents doesn’t sound (to me) like an endorsement of suburbia over other areas; it sounds to me like chasing low rents. Which is all well and good; but begs the same question that is begged by similar assertions of suburban preference in housing: Does it reflect demand or supply or other market distortions? (Or some combination of all of these).

    The article demonstrates a good reason for an oversupply of suburban housing. There isn’t an oversupply of quality urban housing (greenfield economics don’t apply; and there are many restrictions on adding supply in addition)–urban neighborhoods tend to either be expensive (and full), or dilapidated.

  17. Sam McKinley says:

    I don’t buy this “innate preference for space.” All the discussion on greenfield economics here demonstrates that greenfield is the only type of development likely to occur, and somehow that proves it’s what everybody wants? Who knows what they’d prefer if given a choice?

  18. Chris Barnett says:

    Sam, alternatives exist; people do have a choice.

    In Indianapolis (with which I’m most familiar) a young couple just starting a family with a household income of up to $73,500 or so can buy any number of houses rehabbed or built in near-downtown neighborhoods using NSP subsidy. And those houses don’t sell in the $175-200K range for which such buyers would easily qualify. Most are well under $150K.

    Some are under $100K and are new single-family homes on “streetcar suburban” lots 3-4 miles from downtown: infill urban, not greenfield. (Aaron knows these neighborhoods.)

    They’re not exactly selling like hotcakes. Even Indianapolis’ shining example, the Fall Creek Place project, has slowed considerably.

    Affordable old houses, townhomes, single-family homes and high-end condos…a wide range of choices…are available in certain neighborhoods of almost every big city. Buyers are choosing suburbs, and not because that’s the only thing available.


    Like Aaron, I don’t hate suburbs. I grew up living in suburbs all over the US (MSP, LA, and Philly metros, among others), and my siblings and parents live in suburbs today. But I don’t particularly like suburban life for myself, and have have lived in “old city” neighborhoods for the past 25 years. I raised kids in the city, and helped start an urban coop grocery in the city. So I am far from a suburban apologist.

    But I did study economics, work today in community development, and am a realist about both. Denying the suburban preference and the attendant growth is (to me) a lot like denying global climate change: you can do it, but you’ll ultimately be proven wrong over and over again by hard numbers. The causes may be arguable, but the numbers aren’t, and they really do speak for themselves.

    Does it really matter if suburbanization was abetted by racism, classism, redlining, urban renewal, zoning laws, FHA and VA mortgage subsidies, or something else? Suburbs continue to grow even as those other factors have changed and modernized or disappeared. (An overwhelmingly white racist electorate would never have elected Barack Obama. Even Indiana, center of the modern Klan 90 years ago, voted for him while re-electing a Republican governor.)

    Suburbanization has been steadily growing for 100+ years in the US, and continues unabated even as the country has grown “urbanized” and diverse. I think that says something significant and deep about the American psyche as expressed in people’s choice of where to live.

    That the development and finance machines continue to churn out beanfield developments instead of urban redevelopment means something, and it does NOT mean that government policy has led to Farmer Jones’ land becoming “Green Acres Estates”. If anything, urban redevelopment is more highly subsidized.

    Quite simply, more people want to live in exurban tan vinyl boxes on half-acre lots than in similar houses in urban neighborhoods, for various reasons. I understand that I am either out of step or 35 years ahead of my time, but I do not imagine that the “right” thing is for the state to diktat my choice for everyone.

  19. George Mattei says:

    @ Chris Barnett:

    I disagree. There is an overwhelming “expressed preference of the American consumer”, as you say, for suburban living.

    However, even with the tilting of the playing field with subsidies and government enabling of suburban development, you still reach a point where it just doesn’t work anymore.

    We have somewhere north of 23 square feet of retail per person. That’s just not economically sustainable long-term. Same with housing. We have an ever-growing supply of vacant housing. At some point, the system just collapses under its own weight. If you haven’t noticed, that happened in 2008.

    Now, will it start up again? I think you are saying yes, because of the overwhelming preference for greenfield development. However, believe it or not, I don’t think we have felt the full impact of this crisis yet. Our current system of taxation cannot support our current level of infrastructure and built environment. So taxes are going to go way up. This will continue to put a damper on greenfield development. Add that to higher energy prices and oversupply, I just don’t see it coming back soon.

    By the way the 2008 depression was WAAAY worse than the early 80′s. Although the unemployment rate went higher in the early 80′s, most metrics show that this latest bust was 2x to 3x more severe.

  20. Chris Barnett says:

    In 1960 there were 125 million Americans living in urbanized areas. By 2010 that number more than doubled, to 252 million. There is no “inflection point” for math like that: metros must continue expanding to accommodate all those newcomers.

    The math on increased urbanized population, growth of overall population, and reduction in average household size has driven a huge ongoing demand for “beanfield” housing units new to the market. I’d say we’re in a market correction, and I think the market overhang will be absorbed (other than in the former boomtowns where construction and development simply fed on itself, such as Inland Empire, Las Vegas, Phoenix, and South Florida).

    If nothing else, in most metros the exurbs have the best public schools, and those are truly “magnet schools” that attract families. Parents will put up with a lot to get their kids a better high-school education, including long commutes. At some point, houses will get cheap enough to clear the market (possibly as rentals), and we will be back to worrying about the obsolete and decaying inner-ring ‘burbs.

  21. Chris Barnett says:

    Retail is funny. Where we will end up with the oversupply is not at the edges…chain retailers all chase the high-income suburbanites, skipping ever outward and leaving the “losers” behind. (Is there such a thing as a new exurban Sears or Kmart? No. It’s Target and Kohl’s. And there’s no such thing as an inner-ring Panera or Cheesecake Factory.)

    The problem will show up in 1970′s inner-ring suburban malls, like Lafayette Square and Washington Square in Indianapolis, which are surrounded by strip mall after strip mall. It will show up on 1950′s and 60′s “Miracle Miles” (such as Keystone Avenue in Indy or Main Street east of Bexley in Columbus). And pretty soon we’ll be talking about the disaster in our first-ring suburbs. Again.

  22. Wad says:

    Chris, the retail market is undergoing a dynamic shift, and it’s a good thing — especially for urban area shoppers.

    Whereas there was one general direction retailing has headed to for the past few decades — to the exurbs and into “power centers” — now, stores are more willing to try formats that fit their respective communities.

    Target has differentiated itself by being a mass merchandiser with an eye toward design. Not only in their products, but their stores as well. Target has proven adept at urban format and reused spaces. These have helped Target’s bottom line.

    There are also non-CBD areas that wish to preserve a pre-auto Main Street area. For a while, well-to-do areas were able to leverage these urban forms as a way to protect local businesses and keep out chains. Yet the chain stores see lucrative markets and have proven eager to jump through any local codes designed to frustrate them.

    This also means low real estate prices in urban areas are going to be higher, pricing out whatever businesses are there now.

    This is what activity may shift to the inner-ring malls.

    The question is whether the inner-ring malls will want to absorb the businesses. In the worst case, loathsome land uses (saloons, pool halls, etc.) might move in. In a more optimistic case, these down-on-their-luck areas will be the sandboxes for ethnic and upstart entrepreneurs.

    They just may the Jacobsean economic laboratories if urban and exurban areas become too expensive.

  23. Anon says:

    Have you considered that the driving force behind suburbanization isn’t subsidies or zoning or any corporate manipulation, but rather people’s hard wired aversion to physical exertion and discomfort.

    Most people would probably agree that the suburbs are dull, ugly and expensive (in an indirect way), but they are comfortable. They facilitate the auto-centered lifestyle which requires minimal physical exertion.

    The out-of-shape guy goes to the doctor and the doctor says, “you have to exercise or you will suffer years of painful chronic diseases and likely die a decade before you would otherwise!” Does the guy start exercising? No. If the threat of death doesn’t motivate, what ad campaign or tilted subsidy could?

    Think of the phenomenon of Chicago’s Magnificent Mile. On any summer day, there are a couple thousand suburbanites strolling the street on vacation. They are gawking at a “spectacle” they would have seen in any downtown in the country in 1950 – thousands of other people walking and shopping on a commercial strip.

    Pull one of them aside. Ask, do you like this? Yeah, I love it! Would you like a street like this four blocks from your house? Absolutely, that’d be fun! Would you like to do your grocery shopping on a street like this? Ummm…no. What if you had a cart to carry your stuff home? Nah. What if the streets were clean, the snow was shoveled, and you passed five friendly people who knew your name on the way home? Well…probably not. Why? Four blocks is a long way to walk every week, both ways, and it’d be cold or hot sometimes, or rainy, and with the kids, I’d have to keep them out of the street… its easier to strap the kids in the car seat, throw the bags in the trunk…we just like this on vacation.

  24. Chris Barnett says:

    Wad, I didn’t say it as well as you, but that is exactly the niche that the inner-ring malls and accompanying strip malls will have to fill, even as new retail development at the edge continues. Mall owners will also have to knock down some of their anchor spaces or build them out as libraries, offices, megachurches, or some kind of tax-assisted housing project. And yes, there will be dance-hall saloons, strip clubs, pool halls, and just-scraping-by ethnic restaurants in the surrounding mix.

    As for Target, even when they “go urban” they’re chasing higher incomes. Their newest store in Indy is 8+ miles from downtown, in a former 50′s suburban center-turned-mall-turned back to open-air power center. It is right on the line between a 1920′s streetcar suburban neighborhood and a 50′s ranch-house tract, in the favored quarter of Indy where the 1, 3, and 5-mile incomes are all well above median. It replaces a store barely a mile south that closed several years before.

    When Walmart moves further out, they take a whole lot of flak. Don’t kid yourself: Target’s new urban openings get a lot of press, but the suburban and exurban big-boxes dominate their roster and earnings. The urban stores are still a relative rarity.

  25. Chuck Banas says:

    Many of these ideas have been discussed here before, but I’m glad they’ve been collected and distilled into a single post. This is probably the clearest, most comprehensive description of the greenfield phenomenon I’ve ever seen.

    The shorthand: new (suburban) development is preferred because no one pays the true costs upfront. Brownfield redevelopment is more expensive because all of the deferred costs have already come home to roost.

    Greenfield development certainly has its own inherent advantages, but public policy shouldn’t further amplify those economics. The role of government should be to internalize the externalities so that the upfront cost better reflects the true cost. Otherwise, we are continually in a no-win situation where we’re borrowing from our own future. The system ultimately collapses. Quod erat demonstrandum.

  26. Wad says:

    Chris, we’re seeing a lot of it right now. The question becomes whether communities will allow these uses to filter.

    Community resistance to strip clubs, saloons, pawn shops and the like is well understood. The issue is when an Out-group moves in.

    We’ve had enough of a history to know that demographic diversity also yields economic diversity. We still also know that there are vocal, visible attempts to push back against The Other, whomever group that happens to be.

    Sometimes, an area in rapid transition allows a group to move in without much static. Entrenched or monolithic communities often get whipped up in a demagogic frenzy.

    It can stem from outright harassment or violence to using policies to outlaw out-groups.

    Policies such as banning mulitunit housing or housing conversions, English-only laws, aggressive use of food-hygiene regulations, among others, serve as a public fig leaf for underlying resentment but stultify demographics and economics.

  27. Wad says:

    Chuck Banas wrote:

    Brownfield redevelopment is more expensive because all of the deferred costs have already come home to roost.

    Here’s another reason. It’s very hard to break out of a secular decline loop.

    Besides the costs — which shouldn’t be higher since redevelopment can be done cheaper and easier now that there’s a knowledge tree for it — there’s also the perception of undesirability.

    Businesses with a choice would want to bypass the brownfield, and the brownfield area would rather hold out than to settle for a lower-value use. When a lower-value use does move in, chances are it’s because an elite developer has left the market and sold it to a smaller firm or ethnic ownership.

    This would also make it harder for the brownfield to tap into capital to redevelop.

    The process continues until the development is finally abandoned or hits a capitulation point where it unexpectedly rebounds.

  28. Alex B. says:

    Thanks for this enumeration – #3 in particular is often forgotten.

    I’m surprised, though, that in your introduction you neglect to blame “the great move from the city to the suburbs” on racism, considering probably the most common term for the phenomenon is “white flight.” Besides, aren’t you from Chicago, where racial displacement was thoroughly documented in “Making the Second Ghetto?”

  29. Thanks for the comments.

    Alex B., race certainly played a role early in suburbanization. I’m not trying to give a comprehensive overview of why people left cities. My intent was to demonstrate that there were powerful economic reasons for preferring greenfields apart from issues like racism and subsidies.

  30. Baja says:

    While you properly recognize increased costs that cities bear, you ignore their inherent economic advantages. Cities do a horrible job of selling these advantages to suburbanites, often because those who control many of America’s largest cities are elite ideologues who communicate that they are better and smarter than the unwashed masses. Other cities do a better job of communicating. Houston, Minneapolis and Denver come to mind immediately. I’m sure there are others. I fled urban America years ago and am now heading back, in part because the future with regard to oil has arrived and the economics of city living are now more attractive to me than those of exurbia. That said, I won’t be moving to Chicago or any other city that is atrophying on its own arrogance. Though I value and prefer diversity, I remain fiscally and socially conservative and would not consider living in a city where I am viewed as a pariah. I believe those cities that practice diversity rather than simply preach it have a very bright future, regardless of how green the outlying fields may be.

  31. Ellen says:

    I read this piece with a completely different perspective. I think the points you make about greenfield economics also apply to the growth of the American south and west (e.g., exurban communities around Charlotte, Atlanta, Raleigh, Phoenix) vs. decline in upstate New York and Pennsylvania. People are often amazed at the high property taxes in NY compared to, say, NC or VA. I’m sure high taxes are among the many reasons why residents leave NY for these other states. I don’t doubt that politics are a factor (part of the “legacy culture”?), but so are the “legacy” costs borne by older cities, towns, and villages in NY. How can these communities ever be competitive?

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