Thursday, May 22nd, 2014
I’ve long argued that the real reason sprawl, or suburban development as we’ve been practicing it, is a problem isn’t because it’s ugly, environmentally damaging, racist, or some other form of evil. The more fundamental problem is that it’s a long term financial loser. The numbers just don’t add up over the long term when you take a lifecycle view of it.
As I outlined in “The Power of Greenfield Economics” and elsewhere, new suburbs look attractive for a number of transitory reasons: everything is new, state of the art, and exactly in line with current market tastes; no legacy costs; no legacy institutions, deals, political dynasties, etc; few low income residents and thus low social service costs; deferred infrastructure development; the efficiency of large lot development; and scale economics in public service provision in a growth environment.
Eventually though, your shiny new suburb fills up and so growth comes to a halt, then often about the same time it gets old. This send all of those positive factors into reverse, triggering a cycle of decline that will ultimately cause major problems in vast tracts of suburban America that aren’t either a) wealthy communities or b) in markets that have tight restrictions on new building (which preserves these communities at the expense of rendering them unaffordable).
The perfect display of this is happening before our eyes in Indianapolis as the Indianapolis Business Journal reported this week in a major story called, “Aging suburbs face long road back” which sadly is likely behind a paywall at this point.
Like many places, the old city of Indianapolis found itself losing population to suburban areas further out in Marion County due to a variety of factors. Their solution to this problem was city-county merger, a system called Unigov. In a sense, it was regional government in which the city annexed its suburbs.
Problem solved, right?
No so fast. The problem is that growth at a rate of 200,000+ people per decade plus further expansion of the urban footprint sent growth out past the boundaries of the merged city and into the surrounding counties. As this happened, the old suburbs of Marion County themselves got old and fell out of favor, and are increasingly zones of suburban blight. The city is now close to being right back where it started. Unigov bought Indianapolis 40 years, but other than using that captured suburban tax base to build up downtown – a legitimately important and impressive accomplishment – it otherwise continued with business as usual. The result is that vast tracts of the city are now behind the 8-ball, with no plan or prospect for near term change. Per the IBJ:
Poverty is encroaching on the outer townships of Marion County, adding to their handicap in the competition with doughnut counties, where houses are newer, and sidewalks, sewer connections and bike paths come standard. Now, Marion County’s suburban neighborhoods also face the flight of national retailers and poverty-driven challenges for their school districts. Spreading poverty makes it even more difficult to market a four-bedroom, two-bath house on a suburban lot in, say, Warren Township on the east side against a similar product over the county line. “That’s a tough nut to crack,” said John Marron, an analyst at the Indiana University Public Policy Institute. “To me, it’s easier to sell the authentic urban experience.”….. For decades after Unigov merged city and county government in 1970, Marion County’s suburban townships propped up the city’s tax base. Now they could become a drag.
Wayne Township has the largest low-income area outside of Center Township, with 20 square miles and 62,327 residents. Many of those neighborhoods are inside the I-465 belt. One encompasses a cluster of apartment complexes just south of Ben Davis High School. Marron thinks the changes in Wayne Township stem from its concentration of homes built in the 1970s or earlier—a less desirable housing stock than is available farther west in fast-growing Hendricks County….The median Wayne Township sales price in 2013 was $66,505…“We have not seen any significant economic development here on the west side for some time” [says Wayne Township schools Superintendent Jeffrey Butts].
This was entirely predictable. Given that Wayne Township’s officials, no matter what they might say in this article, are dead set against change (such as merging their independent fire department with IFD), don’t expect much change in the results.
One thing the IBJ didn’t highlight but represents a big overhang in these aging suburbs is the aging in place population. A lot of these places skew older as there are baby boomers and up who bought and have simply stayed put. On the one hand, this is great. On the other, that long term population masks the fact that there’s no next generation moving in, so as the older generations start to die, the situation is going to continue to degrade. We already saw this happen in a lot of the inner city.
But the most telling quote in the entire article was from West Side Chamber of Commerce President Rick Proctor when he said, “There’s probably never going to be enough money to retrofit all of Indianapolis with the amenities all of us would like in our neighborhoods.”
Ladies and gentlemen, we have a winner!
The bottom line is that the type of development that’s been ongoing in Indy and most American communities can’t ever generate enough tax revenue to pay to provide the infrastructure, amenities, and services necessary to support it. To show you what I mean, I’ll show you a picture from the old city, the supposed “urban core”. This is my block:
As you can see, the infrastructure here is minimal. Not even curbs much less sidewalks. Spend any time in Indy as you’ll immediately get it that this place has always been cheap. Even the old city was never built right to begin with.
What would it cost to retrofit this street with real infrastructure? What would it cost to perform routine maintenance and basic services like street lighting (currently provided at minimalistic levels), street sweeping (not performed) or snow plowing/salting (not performed either, unless there’s over six inches of snow)? Let’s just say it would be a huge amount of money. Now ask yourself how much in property and income taxes these mostly 2-3 bedroom, one bath worker cottages are likely to produce in taxes. It’s clear the math will never work. And this is in a neighborhood that still has a lot of pull to younger families thanks to its proximity to the urban commercial districts in the area.
I wrote an entire series on building suburbs that last, but one thing is clear. You have to at least build the infrastructure up front if you wait to have any hope. Because if you want to provide basic streets and arterials, etc. until later, then you’re not going to be able to afford it. If your development can’t support the cost of full infrastructure, that’s a powerful market signal that it’s not viable. This is a government concern because it’s the government that’s forced to come in after the collapse and pick up the pieces – or try to anyway. Of course, that would be the same government that got us into this mess in the first place.
The most tragic thing about all this? Despite the ample evidence of the catastrophe that awaits, Indianapolis is still doing more of the same. Right now in Franklin Township, one of the few places inside the city limits that is still a greenfield from a development perspective, the city is approving and permitting out vast tracts of low-grade sprawl there. We are building tomorrow’s addition to our pile of problems right now. And nowhere in any city initiative that’s currently ongoing is there any hint of changing that. The same is true all over America. I might suggest the old adage applies: if you’re in a hole, first stop digging.