NCE Cities – Sprawl Subsidy Report ANALYSIS OF PUBLIC POLICIES THat UNINTENTIONALLY ENCOURAGE AND SUBSIDIZE URBAN SPRAWL Lead Author: Todd Litman, Victoria Transport Policy Institute The New Climate Economy CONTENTS Page The New Climate Economy (NCE) is the flagship project of the Global Commission on the Economy and Climate. It was established by seven countries, Colombia, Ethiopia, Indonesia, Norway, South Korea, Sweden and EXECUTIVE SUMMARY 3 the United Kingdom, as an independent initiative to examine how countries can achieve economic growth while dealing with the risks posed by climate change. The NCE Cities Research Programme is led by LSE Cities at the INTRODUCTION 9 London School of Economics. The programme includes a consortium of researchers from the Stockholm Environment Institute, the ESRC Centre WHat ARE SPRAWL AND SMART GROWTH? 10 for Climate Change Economics and Policy, the World Resources Institute, Victoria Transport Policy Institute, and Oxford Economics. The NCE Cities Research Programme is directed by Graham Floater and Philipp Rode. THE DEMAND FOR SPRAWL 17 WHat ARE THE INCREMENtaL COSTS 20 AND BENEFITS OF SPRAWL? SUMMARY WHat IS THE ESTIMatED MAGNITUDE 42 OF SPRAWL COSTS? This report investigates evidence that current development policies result in economically excessive sprawl. It defines HOW MUCH URBAN EXpaNSION IS OPTIMAL? 47 sprawl and its alternative, “smart growth,” describes various WHat POLICY DISTORTIONS LEAD 55 costs and benefits of sprawl, and estimates their magnitude. TO ECONOMICALLY EXCESSIVE SPRAWL? It identifies policy distortions that encourage sprawl. It discusses factors to consider when determining the optimal WHat ARE THE POLICY IMPLICatIONS FOR 61 amount and type of urban expansion for various types of RAPIDLY URBANIZING COUNTRY CITIES? cities. It discusses the implications of this analysis for rapidly urbanizing countries. It identifies potential policy reforms SMART GROWTH EXAMPLES 62 that could result in more efficient and equitable development patterns, and describes examples of their implementation. EVALUatING CRITICISM 66 It also discusses criticisms of sprawl cost studies and smart CONCLUSIONS AND RECOMMENDatIONS 69 growth policies. REFERENCES 74 An abundance of credible research indicates that sprawl significantly increases per capita land development, and by dispersing activities, increases vehicle travel. These physical changes impose various economic costs including reduced agricultural and ecological productivity, increased public infrastructure and service costs, plus increased transport ANALYSIS OF PUBLIC POLICIES THat UNINTENTIONALLY ENCOUR AGE AND SUBSIDIZE URBA N SPRAWL MARCH 2015 WWW.NEWCLIMATEECONOMY.NET 1 costs including consumer costs, traffic congestion, accidents, Internal Review pollution emissions, reduced accessibility for non-drivers, Ian De Cruz, Chandan Deuskar, Wanli Fang, Nick Godfrey, and reduced public fitness and health. Sprawl provides Alexandra Gomes, Vijay Jagannathan, Jeremy Oppenheim, various benefits, but these are mostly direct benefits to Philipp Rode, Nikolas Thomopoulos sprawled community residents, while many costs are external, imposed on non-residents. This analysis indicates that Victoria Transport Policy Institute sprawl imposes more than $400 billion dollars in external 1250 Rudlin Street, Victoria BC costs and $625 billion in internal costs annually in the U.S., V8V 3R7, Canada http://www.vtpi.org/ indicating that smart growth policies which encourage more efficient development can provide large economic, social and environmental benefits. Although these costs reflect LSE Cities North American conditions, the results are transferable to London School of Economics and Political Science developing countries. Houghton Street London WC2A 2AE www.lsecities.net This paper should be referenced as Litman, Todd (2015), Analysis of Public Policies That Unintentionally Encourage and Subsidize Urban Sprawl, Victoria Transport Policy Institute, Supporting paper commissioned by LSE Cities at the London School of Economics and Political Science, on behalf of the Global Commission on the Economy and Climate (www.newclimateeconomy.net) for the New Climate Economy Cities Program. While every effort has been made to ensure the accuracy of the material in this report, the authors and/or LSE Cities will not be liable for any loss or damage incurred through the use of this paper. © LSE Cities, London School of Economics and Political Science, 2014. ANALYSIS OF PUBLIC POLICIES THat UNINTENTIONALLY ENCOURAGE AND SUBSIDIZE URBAN SPRAWL WWW.NEWCLIMATEECONOMY.NET 2 EXECUTIVE SUMMARY The world is experiencing rapid urbanization. How this occurs will have immense economic, social and environmental impacts. To help identify optimal urban development policies, this report investigates the costs of sprawl (dispersed, segregated, automobile-oriented, urban-fringe development) and potential benefits of smart growth (compact, mixed, multi-modal development). This analysis starts by identifying basic physical impacts of sprawl, which include increases in the amount of land developed per capita, and by dispersing destinations, increases in total motor vehicle travel. Compared with smart growth development, sprawl typically increases per capita land consumption 60-80% and motor vehicle travel by 20-60%. Figure ES-1 Sprawl Resource Impacts Sprawl has two primary resource impacts: it increases per capita land development, and by dispersing destinations, it increases total vehicle travel. These have various economic costs. This figure illustrates these impacts. This provides a framework for understanding various economic costs of sprawl, including displacement of agriculturally and ecologically productive lands, increased infrastructure costs, and increased transportation costs including increases in per capita facility costs, consumer expenditures, travel time, congestion delays, traffic accidents and pollution emissions, plus reduced accessibility for non-drivers, and reduced public fitness and health. To the degree that sprawl degrades access by affordable modes (walking, cycling and public transit), these impacts tend to be regressive (they impose particularly large burdens on physically, economically and socially disadvantaged people). To the degree that sprawl concentrates poverty in urban neighborhoods, it tends to exacerbate social problems such as crime and dysfunctional families. To the degree that it reduces agglomeration efficiencies, increases infrastructure costs, and increases expenditures on imported goods (particularly vehicles and fuel), it tends to reduce economic productivity. Sprawl also provides benefits, but these are mostly direct internal benefits to sprawled community residents; there is little reason to expect sprawl to provide significant external benefits to non-residents. Figure ES-2 indicates the typical costs of automobile travel under urban conditions, including internal-fixed (ownership), internal-variable (operating), and external (imposed on other people) costs. These total thousands of dollars per vehicle-year. ANALYSIS OF PUBLIC POLICIES THat UNINTENTIONALLY ENCOURAGE AND SUBSIDIZE URBAN SPRAWL WWW.NEWCLIMATEECONOMY.NET 3 Figure ES-2 Estimated Urban Automobile Costs $3,000 Internal Variable $2,500 Internal Fixed $2,000 External $1,500 $1,000 (2014 U.S. Dollars) $500 Average Cost Per Vehicle-Year Cost Per Vehicle-Year Average $0 Vehicle Travel TimeVehicle OperationCrash costsParking Air pollutionCongestion Fuel externalitiesRoadway Noise Traffic ServicesWater Pollution Ownership subsidies Source: based on Litman 2009 This figure illustrates the estimated costs of motor vehicle ownership and use. Sprawled urban areas typically have two to five times the traffic fatality rates as in smart growth communities. Very low crash casualty rates (under 5 annual traffic fatalities per 100,000 residents) generally require a combination of smart growth development and transportation demand management strategies, as indicated in Figure ES-3. Figure ES-3 Traffic Death Rates Traffic fatalities per 100,000 residents typically average 20-30 in developing country cities, 10-20 in affluent, automobile- dependent cities, 5-10 in affluent, compact cities, and just 1.5-3 in affluent, compact cities with strong transportation demand management (TDM) programs. ANALYSIS OF PUBLIC POLICIES THat UNINTENTIONALLY ENCOURAGE AND SUBSIDIZE URBAN SPRAWL WWW.NEWCLIMATEECONOMY.NET 4 To quantify sprawl costs, this study divided U.S. cities into quintiles (fifths) and estimated the additional land consumption, infrastructure and public service, transport and health costs of more sprawled development. For example, this analysis indicates that sprawl increases annualized infrastructure costs from $502 per capita in the smartest growth quintile cities up to $750 in the most sprawled quintile cities. This analysis indicates that sprawl’s incremental costs average approximately $4,556 annual per capita, of which $2,568 is internal (borne directly by sprawl location residents) and $1,988 is external (borne by other people). These external costs probably total more than $400 billion per year in the U.S. Sprawl also provides benefits, including cheaper land, which allows households to afford more private open space (yards and gardens), and it lets affluent households move away from urban social problems such as concentrated poverty and associated crime. However, these are internal benefits and economic transfers (some people benefit but others are worse off), there are seldom