Urban Sprawl: Lessons from Urban Economics

Strong sentiment against the phenomenon known as "urban sprawl" has emerged in the United States over the past few years. Critics of sprawl argue that urban expansion encroaches excessively on agricultural land, leading to a loss of amenity benefits from open space as well as the depletion of scarce farmland resources. The critics also argue that the long commutes generated by urban expansion create excessive traffic congestion and air pollution. In addition, growth at the urban fringe is thought to depress the incentive for redevelopment of land closer to city centers, leading to decay of downtown areas. Finally, some commentators claim that, by spreading people out, low-density suburban development reduces social interaction, weakening the bonds that underpin a healthy society.¹

To make their case, sprawl critics point to a sharp imbalance between urban spatial expansion and underlying population growth in U.S. cities. For example, the critics note that the spatial size of the Chicago metropolitan area grew by 46 percent between 1970 and 1990, while the area's population grew by only 4 percent. In the Cleveland metropolitan area, spatial growth of 33 percent occurred over this period even though population declined by 8 percent.² Similar comparisons are possible for other cities.

In response to concerns about sprawl, state and local governments have adopted policies designed to restrict the spatial expansion of cities. Twelve states have enacted growth management programs, with the best known being New Jersey's 1998 commitment to spend $1 billion in sales tax revenue to purchase half of the state's remaining vacant land. Under a similar program, Maryland had allocated $38 million to localities for purchase of nearly 20,000 acres of undeveloped land through 1998. Tennessee's 1998 antisprawl ordinance requires cities to impose growth boundaries or risk losing state infrastructure funds, mirroring an earlier, more stringent law in Oregon. Following the appearance of 240 antisprawl initiatives nationwide on November 1998 ballots, the November 2000 election saw many additional measures put before voters. Prominent statewide initiatives in Arizona and Colorado were defeated, but a number of local measures in California were approved.³

The stakes in the sprawl debate are substantial. Measures designed to attack urban sprawl would affect a key element of the American life-style: the consumption of large amounts of living space at affordable prices. Ultimately, an attack on urban sprawl would lead to denser cities containing smaller dwellings. The reason is that antisprawl policies would limit the supply of land for residential development, so that the price of housing, measured on a per-square-foot basis, would rise. In response to this price escalation, consumers would reduce their consumption of housing space, making new homes smaller than they would have been otherwise.

The goal of this paper is to assess the criticisms of urban sprawl and to identify appropriate remedies. To do so, it is important to start with a definition of sprawl. In this paper, urban sprawl will be defined as spatial growth of cities that is excessive relative to what is socially desirable. While no one doubts that spatial growth is needed to accommodate a population that is expanding and growing more affluent, the definition used here points to excessive growth as a problem.⁴

If the criticisms of sprawl are correct, then public policies should be altered to restrict the spatial expansion of cities. The resulting losses from lower housing consumption would be offset by gains such as improved access to open space and lower traffic congestion, and consumers on balance would be better off. But if the attack on sprawl is misguided, with few benefits arising from restricted city sizes, consumers would be worse off in the end. People would be packed into denser cities for no good reason, leading to a reduction in the American standard of living. The same conclusion would arise if some limitation of city sizes is desirable, but policymakers are overzealous. If only mild measures are needed to restrict urban growth that is slightly excessive, but draconian measures are used instead, consumers are likely to end up worse off.⁵

This paper...