Urban Containment: The Social and Economic Consequences of Limiting Housing and Travel Options

Policy Study

Urban Containment: The Social and Economic Consequences of Limiting Housing and Travel Options

Evaluating key research on urban containment's cost-effectiveness in reducing greenhouse gas emission and impact on housing affordability

Responding to a growing interest in curtailing carbon emissions, some cities are limiting their urban footprint-a practice called “urban containment.” Urban containment policy seeks to control “urban sprawl” and to reduce GHG emissions by densifying urban areas and substituting transit, cycling and walking for car and other light duty vehicle use. This study evaluates four urban containment reports-by the U.S. Department of Energy, the Transportation Research Board (Driving and the Built Environment), the Urban Land Institute (Moving Cooler) and the U.S. Environmental Protection Agency-to determine their cost-effectiveness in reducing greenhouse gas (GHG) emissions and their impact on household affluence and the poverty rate.

Urban Containment and Cities

Cities have experienced declining population densities for centuries. This occurred as urban areas expanded at a greater rate than population, due in large measure to improved transportation technologies, as walking was substantially replaced by transit and later, transit was substantially replaced by cars. Even in the densest parts of urban areas-the core municipalities-population densities have declined virtually around the world.
The physical expansion of cities, known as “urban sprawl,” has been a principal concern of urban planners for decades, which has led to the adoption of “urban containment.” The most important urban containment policies are restrictions on urban fringe development- by means of urban growth boundaries or similar land-rationing measures-and policies to reduce light duty vehicle use.

Concern about GHG emissions drives an increasing emphasis on urban containment policy. This is based on the assumption that higher densities and less car use would translate into materially lower GHG emissions. In effect, urban containment policy seeks to replace the more liberal land-use policies that have been typical in U.S. metropolitan areas since World War II.

Urban Containment and Greenhouse Gas Emissions

The DOE report, which reviews other reports, indicates that urban containment policies “have significant potential to impact … GHG emissions significantly over the long term.” The DOE report provides an overview of urban containment policy and summarizes GHG emissions reduction projections from previous research. The two most important reports reviewed- Driving and the Built Environment and Moving Cooler-indicate that urban containment policies could reduce 2050 greenhouse gas emissions from light duty vehicles by 1% to more than 10%. The later EPA report projected 2050 GHG emissions reductions at 4.3%.

These projections raise several issues for analysis:

  • Driving and the Built Environment itself raises doubts about the political feasibility of implementing the policies the reports deem “necessary” to reduce GHG emissions.
  • Moving Cooler was strongly criticized by a sponsor, AASHTO (American Association of State Highway and Transportation Officials), which withdrew from the project indicating that the conclusions were based on “assumptions that are not plausible” and that the report “did not produce results upon which decision-makers can rely.”
  • Recent analysis casts further doubt on the potential for urban containment to reduce GHG emissions.
  • Comprehensive research at the University of California questions the robustness of the association between strategies to increase population densities and reducing GHG emissions.

In response to these uncertainties, this analysis examines and evaluates the range of projections from both Driving and the Built Environment (range minimum) and the EPA report (range maximum). This study finds that the overwhelming share of GHG emissions reduction projected in each of the reports is caused by fuel economy improvements from the base years that are assumed in the modeling, not urban containment policy. Since fuel economy is likely to continue to improve, even greater GHG emission reductions are likely in the near future. Moreover, this study contends that additional GHG emissions from the increased traffic congestion likely to be produced by the denser environments created by
urban containment policies could materially mitigate or even overwhelm the projected GHG emissions reductions projected in the reports.

Finally, this study cautions that the use of long-term projections based on anticipated human behavioral changes is inherently unreliable, suggesting substantial margins of error. Moreover, the projected GHG emissions from urban containment policy are so small that they could be offset by projection errors and unreliability.

Urban Containment and Mobility

Economic growth in metropolitan areas is strongly associated with higher levels of mobility. Metropolitan areas are labor markets. If employees are able to access a larger percentage of jobs in a fixed period of time (such as 30 minutes), the economic productivity of the metropolitan area is likely to be greater.
U.S. metropolitan areas rely principally on light duty vehicles for personal mobility. Transit access is very limited. On average, only 6% of jobs in major metropolitan areas can be reached on transit in 45 minutes by the average employee. In contrast, nearly two-thirds of jobs can be reached by light duty vehicle in that same time frame.

Low transit use not only reflects reachability of employment but also quality of transportation mode. While transit works for some point-to-point downtown commuters, it is less effective for other trips, including non-work travel, which makes up nearly 85% of trips. This is because light duty vehicles offer a vastly speedier, less burdensome mode of transportation for all manner of non-commute trips, such as parents transporting children or pets, equipment or large or heavy items, groceries in need of refrigeration/freezing, or “trip-chaining” several errands.

Higher densities are strongly associated with increased traffic congestion. This not only impedes personal mobility but is also a concern with respect to commercial traffic and build-upsiness costs. Texas A&M Transportation Institute data indicate a strong relationship between limiting the expansion of roadways and greater traffic congestion over the last three decades.

By favoring modes of transport (transit, cycling and walking) that cannot equal the mobility provided by light duty vehicles, urban containment could retard the productivity of metropolitan areas and significantly degrade people’s everyday lives, leading to a lower standard of living and greater poverty.

Urban Containment and Housing Affordability

For much of the period since World War II, there has been comparatively little variation in house prices relative to household incomes around the country. However significant differences have arisen in more recent decades, in some places more than in others, and especially in dense, urban areas.
Economic theory indicates that limits on supply tend to increase prices, all things being equal, regardless of the good or service (including land for housing).

This potential association is largely dismissed by urban containment advocates and the DOE report, yet a considerable body of research confirms the economic theory that limiting the supply of a good (land) upsets the ratios between demand and supply, leading to higher prices (houses). The fundamental difficulty is that the “competitive supply of land” identified by economist Anthony Downs is not maintained.

This study finds the expected correlation between higher house prices and limited land supply confirmed by the research. As early as 1973, British researchers were associating higher house prices with urban containment and especially noting negative effects on low- income households. A number of researchers have identified similar results across the United States and internationally. A study by the Tomas Rivera Institute in California expressed concern about the negative impacts on Hispanic and African American households.

A detailed examination by Dartmouth economist William Fischel identified the land use regulatory structure as the principal reason for California’s extraordinary house price increases. An examination of housing affordability in Portland shows substantial price increases since the research cited in the DOE report, and particularly large increases in housing costs in high-density and low-income core areas. Housing is generally a household’s largest expenditure item, thus the variation in housing costs between metropolitan areas has a greater impact than that of other expenditure items. Therefore the higher house prices relative to incomes that are associated with urban containment reduce household discretionary income, leading to a lower standard of living and higher poverty rates.

Urban Containment and GHG Emission Reduction Costs

It is necessary to minimize the costs of any level of GHG emissions reductions to preserve economic growth and the standard of living. The normal metric for evaluating the cost of GHG emissions reduction is the cost per metric ton of carbon dioxide equivalent. Cost varies significantly between economic sectors, and it is important to select the most cost- effective strategies, regardless of economic sector. “Across-the-board” reductions can lead to more-costly and less-effective strategies being implemented, which could threaten economic growth.

The cost per metric ton of carbon dioxide equivalent emissions from urban containment policy is hundreds to thousands of times the cost of reducing emissions in the power sector. There are thus vastly more cost-effective alternatives to urban containment policy for reducing GHG emissions. Research by both the Congressional Budget Office and Resources for the Future found that sufficient GHG emission reductions can be achieved without reducing driving or living in denser housing.

Urban Containment and the Broader Economy

There are broader consequences to urban containment policy. Research has associated urban containment policy with slower metropolitan area employment growth and slower economic growth. Further, during the last decade there was a pronounced net domestic migration toward lower cost housing metropolitan areas from higher cost areas. With their restrictions on development outside the urban footprint, urban containment policies effectively trap people and businesses into higher cost areas, with unintended consequences for the broader economy.

Urban Containment and the Standard of Living

The United States has the most affluent metropolitan areas in the world, despite their low density. International data indicate that, compared to other nations, traffic congestion in the United States is less intense and average work trip travel times are better, indicating a higher level of mobility. International data also indicate that housing is generally more affordable relative to incomes than in other nations.

Implementation of urban containment policies will likely lead to more-congested cities and less mobility, as well as lower discretionary incomes as house prices rise relative to incomes. The result would be a lower standard of living and greater poverty.

Sufficient GHG emissions reductions can be achieved without urban containment policy and its attendant economic problems. The key is focusing on the most cost-effective strategies, without unnecessarily interfering with the dynamics that have produced the nation’s affluence.

Wendell Cox is principal of Demographia, a St. Louis region-based public policy firm. Mr. Cox was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley, where he introduced the amendment to Proposition A (1980) that established the local funding set-aside for the Los Angeles light rail and metro lines. He was also appointed to the Amtrak Reform Council by Speaker of the House Newt Gingrich to complete the unexpired term of New Jersey Governor Christine Todd Whitman. There, he was instrumental in forging the final financial self-sufficiency plan that was required by the U.S. Congress.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.