Policy Study

A Line in the Land

Urban-growth Boundaries, Smart Growth, and Housing Affordability

Executive Summary

More than 100 cities and counties have adopted some form of a growth boundary-a limit on land development beyond a politically designated area-to curb sprawl, protect open space, or encourage the redevelopment of inner-city neighborhoods. Statewide mandates for growth boundaries exist in Oregon, Tennessee, and Washington.

Urban-growth boundaries, however, have potentially negative, if unintended, side effects. By reducing the supply of developable land, for example, housing and land prices could increase, reducing housing affordability and production. Local policymakers and citizens need to understand the nature of these tradeoffs and impacts before they adopt growth boundaries.

Growth boundaries, in fact, have not achieved many of their supporters’ objectives. Their effectiveness has been constrained by:

  • Persistent preferences for single-family, detached homes by prospective home buyers;
  • Poor coordination among local public agencies;
  • Housing-price increases; and
  • Political manipulation by antigrowth interest groups.

This study explores the experiences of four cities and regions to more fully elucidate the intended and unintended effects of growth boundaries.

  • Portland’s growth boundary was adopted in 1979 as part of Oregon’s statewide growth-management law. The growth boundary, encompassing 24 cities and three counties, has hemmed in development as Metro, the elected regional government, attempts to foster higher density development and redevelop urban areas. Meanwhile, housing prices have increased dramatically. In less than a decade, Portland has transformed itself from one of the most affordable to one of the least affordable housing markets on the West Coast. While inflation as measured by the Consumer Price Index increased by 52.5 percent from 1990 to 1995, lot prices in Portland more than doubled.
  • Boulder County, Colorado has had urban-service areas in place since 1978. Combined with the county’s strict growth controls to protect open space, an effective urban-growth boundary exists. While housing prices in Boulder County are 13.2 percent higher than nearby Denver and 23.9 percent higher than Fort Collins, price increases have not been as rapid as in Portland. This appears to be a result of aggressive city-level annexations that bring new land inside the service areas and mitigate housing inflation. If the growth boundary becomes an effective limit line, however, the county will face a deficit of over 20,000 housing units by 2010 at current rates, and the boundary would place significant upward pressure on housing prices.
  • Lancaster County, Pennsylvania has one of the nation’s most aggressive county-level growth- management programs. Fueled by a desire to protect the rural character of the county and the flavor of the local Amish culture, local policymakers enacted farmland protection programs (in the 1980s) and growth boundaries (in 1990) to hem in urban development. Nevertheless, almost 60 percent of the county’s land development still occurs outside growth boundaries. Despite a recommended density of five units per acre (one-fifth acre lots), actual densities average three units per acre (one-third acre lots) inside the boundary and less than one unit per acre (more than one acre) outside the boundary.
  • Northern California’s experience illustrates how growth-management tools such as urban-growth boundaries can be used by political interest groups to stop new development. In Sacramento County, an urban-service area is being converted into a growth boundary via political resistance to new development even though infrastructure is provided privately. A proposed 5,000 home development in the Tassajara Valley in Contra Costa County in the San Francisco Bay Area was withdrawn as a result of local resistance despite a projected regional housing deficit of 34,000 homes by 2020. County elected officials are considering reducing existing growth boundaries to prevent further development.

Urban-growth boundaries are not the only approach available to create the growth patterns that Smart Growth advocates champion. Market-oriented approaches can produce many of these elements with greater efficiency and with fewer negative consequences. Recommendations for harnessing the incentives and power of the real-estate market to achieve these include:

  • Relaxing density restrictions in zoning codes to allow for market-determined densities;
  • Purchasing development rights to private land with private funds to protect open space in strategic areas of the city or metropolitan area; and
  • Pricing public infrastructure at its full marginal cost to ensure new development pays its way without subsidizing new or existing residents.

Local policymakers need to recognize the political, economic, and social tradeoffs implicit in adopting restrictive land-use policies, including urban-growth boundaries. While local policymakers should avoid subsidizing lowdensity development, they must also avoid subsidizing high-density development. A market-driven approach is more likely to achieve broad land-use and housing goals than establishing arbitrary limits on land development through urban-growth boundaries.