Dr. Barton Smith is an economics professor at the University of Houston and the Director for the Institute for Regional Studies. He has authored numerous urban economic and real estate papers in various publications including the Journal of Real Estate Research, Regional Science and Urban Economics, and the Journal of Urban Economics. He is also a frequent and highly sought after speaker on the topics of urban growth and real estate. He is considered one of, if not the leading economist in Houston.
Dr. Smith recently spoke at the Houston Real Estate Symposium about the Houston real estate markets and the effect transportation and specifically, light rail, might have on real estate values in Houston. I had a chance to speak with Dr. Smith about his presentation and other thoughts about urban decentralization, the impacts of light rail in today’s cities, prospects for mass transit, walkable communities, and location rationale, among other things. Here are some of the important points of his presentation and my discussion with him.
The Economic Impact of Light Rail in Houston
Dr. Smith believes the economic impact directly related to light rail will be negligible. In other comparable cities he studied like Denver, the economic spillover was miniscule. Although he believes rail service may help redevelop some areas that already have redevelopment potential on other merits, he does not believe it will be a primary factor in economic growth. In terms of ridership, Dr. Smith has an even grimmer view of light rail. While the current bus system captures 3% of all current trips in the Houston area, (an amount Smith believes is high by most cities’ standards) he believes light rail will capture even less, possibly 1% of possible trips. One reason for this is the increase in suburb-to-suburb commuting, which is not well accommodated by rail systems.
Patterns of Metropolitan Growth
The Houston area, like many others in the US and increasingly around the world, is decentralizing. In fact, Dr. Smith noted that 92% of Houston’s population is located outside what is commonly referred to as the inner city. In addition, he says that most employment is located outside the city as well. Only a mere 7% of the Houston area workforce is located in the Central Business District. In terms of spatial structure, Dr. Smith believes Houston exhibits a multiple-nuclei pattern of development common to many North American cities. He believes these work centers (or edge cities) have developed and are still developing around the metropolitan area. Typically, residents will locate in and around these work centers and have a 30-minute or less commute. One of the reasons this is occurring is the fact that CBD location is not as important as it used to be.
Also of note is the fact that these edge cities appear to reach critical mass and then stabilize. Smith says the Galleria area around Houston is one such edge city that is reaching that stage. In the book, “Edge City” Joel Garreau discovered that once edge cities reached a congested state and density level that made driving nearly unbearable, they stabilized while other edge cities in the region grew. What is most interesting is that the density level reached was never high enough to make mass transit work. In other words, these work centers or edge cities increase in density right up until the point that driving is painful, but possible but before mass transit is desirable. Smith concurs with Garreau’s logic in Houston as more edge cities continue to blossom around the metropolitan perimeter.
There are numerous policy implications ranging from downtown redevelopment to transportation to smart growth that I discussed with Dr. Smith. In regards to redevelopment in Houston, Smith believes approximately two-thirds of downtown redevelopment involves public dollars while the remaining one-third is private dollars. This, obviously, is not a positive leverage equation for central city redevelopment. Smith says the story is similar for places like Denver that have poured public money into their downtowns with little private investment.
In terms of transportation and smart growth, Smith describes a dichotomous situation where rail supporters battle road supporters by latching on to smart growth ideals in hopes of attaining light rail political victories. Smith offers little hope for proponents of walkable communities as well citing factors such as the local culture and weather in deterring walking as a legitimate means of travel.
Road building policy is also a big issue. Smith says Houston did little road building in the 1990’s while experiencing explosive growth, a situation created by overly pessimistic growth forecasts. Consequently, Houston is an extremely congested city and traffic is a major local issue. Although Smith acknowledges that congestion pricing may have some positive effects, he sees few alternatives except capacity improvements. One factor blocking these improvements may be the gas tax revenue allocation in Texas. He says that while the Houston area contributes about 26%-27% of all Texas gas tax revenues, they get only 11%-12% in return for road construction.
Although Houston is an extreme example of decentralization given its size, the trends observed here can be seen in almost any American metropolitan area. Location, still is and will likely always be important for businesses and individuals, but the location decisions of these individuals and firms is much more flexible than ever before and not tied to downtowns or restricted by fixed route public transportation.
Despite many cities’ attempts at redistributing growth to accommodate transit use and strong downtowns, decentralization will likely continue. Although urban downtowns/CBDs and suburban centers will evolve, they are not likely to achieve the residential and employment densities needed for widespread walking and transit use. In light of these continuing trends in urban spatial structure and transportation, we should question as a society whether rail investments or smart growth efforts are ill-fated. It appears the market forces that are favoring decentralization are too strong to simply reverse by spending public money in downtown redevelopment projects or building light rail systems that won’t attract most commuters. Instead of cursing societal trends such as decentralization and driving, we would be wise to embrace them and focus on how to best address traffic congestion and growth issues through market mechanisms.
Chris Fiscelli is a senior fellow in urban and land use policy at Reason Foundation