Land Use Patterns

Economics 312 Martin Farnham

100 years ago, cities looked much different

•  Monocentric city dominated –  In most cities, both manufacturers and office firms

wanted to locate at center •  Office firms to minimize distance to clients •  Mfg firms to minimize distance to central railroad terminal

–  65-75% of jobs were located near city center –  Land use was roughly organized into concentric

rings, with office firms in the center, then a ring of manufacturers, then a ring of residential users.

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Land Use Model of Monocentric City

•  Different bid-rent functions for different land users can generate predictions on land-use allocation that match the old observed monocentric city – Highest bid-rent users locate in central

business district (CBD) – Users with lowest bid-rent locate furthest

out – Employment is concentrated in CBD (office

workers in office buildings; mfg workers in factories) 2

Allocation of Land in Monocentric Model

•  Allocation of land in CBD determined by relative WTP of potential users –  In general, expect office

WTP>mfg WTP>residential WTP

–  Why? People are expensive to transport

•  Require more space, comfort

•  Face high opportunity cost of time (w)

–  Office firms more able to substitute away from land

Bid

-ren

t per

hec

tare

Office bid-rent

Competing Bid-Rents Under Monocentric Assumptions

Distance from CC

Mfg bid-rent Residential bid-rent

3

Office

Land Allocation in Monocentric Model

•  Hierarchy of WTP implies offices locate in center, mfg locates outside center, residences locate furthest out

Bid

-ren

t per

acr

e

Office bid-rent

Distance from CC

Mfg bid-rent Residential bid-rent

mfg resid CBD

4

Land Use in Monocentric City

•  Firms choosing location face a basic tradeoff –  Freight and travel costs will be lower near city center

(remember, this model assumes a central rail node that mfg firms want access to)

–  Wages will be lower near suburbs •  Wages lower near suburbs because workers accept a lower

wage for lower commuting costs –  If travel and transport costs are high relative to commuting

costs, center of city will draw business

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The Monocentric City Does Not Describe Modern Cities Well

•  In monocentric city, employment concentrated at center –  In modern cities, employment dispersed

throughout metro area •  Modern metro areas tend to be “multi-centric,”

not monocentric –  Manufacturers, office firms have increasingly

dispersed away from primary center to urban subcenters

–  Suburbs are not just residential; firms increasingly locate in suburbs

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Spatial Distribution of Employment in Modern Cities

•  In US (2001), median workplace is 7 miles from city center

•  Only 22% of jobs within US metro areas are within 3 miles of center; 2/3 of jobs are within 10 miles –  New York, San Francisco most concentrated (45%

of jobs within 3 miles); then Portland (30% within 3 miles)

–  Detroit (5%), Chicago (9%), Los Angeles (7%), Dallas (11%) among least concentrated

–  Differences due to a combination of geography, policy, history 7

Spatial Distribution of Residences in Modern Cities

•  In US, median residential location in metro areas is 8 miles from city center

•  20% of residents live within 3 miles of city center –  20% commute from suburbs to central city –  40% commute from suburb to suburb –  Unlike monocentric model

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Suburbanization

•  Suburbanization is the decentralization of employment and population that occurred over the past 100 years or so –  In 1948, 64% of US urban population lived in

central city; 39% by 1990 –  In 1948, 67% of manufacturing employment was in

CC; 45% by 1990 •  Suburbanization can be attributed to several

factors

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Suburbanization of Population •  Can measure degree of population

suburbanization by using population density gradient –  Tells us percentage change in population density

(e.g., population per acre) from moving an extra km from city center

•  A high density gradient implies concentration near center

•  Population density gradients in North American cities have been decreasing (at least in the industrialized world), implying decentralization of population over time –  In developing countries, this trend is reversed due

to urbanization. 10

Causes of Suburbanization--Lower Commuting Costs

•  In days of foot travel needed to live near city center to access jobs, services –  Even with streetcars, needed to live near enough

a streetcar stop to get into CC •  Car plus highways dramatically lowered

commuting costs; cars have had huge effect on urban areas and suburbanization

•  Rising incomes increased demand for larger homes, bigger yards; made cars more affordable

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Causes of Suburbanization--Urban Maladies

•  Cities have long been associated with poverty, crime, and pollution; these and other factors may have driven some out –  Decaying housing stock –  Racial conflict (e.g., US race riots in 60s, 70s) –  Concentrated poverty==>middle class flight –  Decentralization of manufacturing (William J.

Wilson); reduced job opportunities in cities –  Crime (Cullen and Levitt find each central-city

crime leads, on average, to one person migrating out of city)

–  Education: bad schools in inner cities (esp in US) 12

Suburbanization of Manufacturing--Causes

•  Changes in transport technology –  Shift from horse-wagon to truck for within-city

transport •  Lowered intracity transport costs •  Lowered the cost of locating away from city center (recall

you can pay workers lower wages if you locate near them and thereby reduce their commuting costs)

–  Shift from trains (with station in central city) to truck for city-to-city transport

•  Further lowered cost of locating away from central city, since railroad station was less critical to inter-city shipping

•  Increased incentive to locate near suburban workforce and to locate near highways 13

Suburbanization of Manufacturing--Causes

•  Growth of urban highway systems has changed shape of cities –  Central city is no longer “median location” (i.e.,

location that makes you most convenient to the most potential employees)

–  Now firm location along beltways, freeways makes for more convenient commuting by employees, procurement of inputs (by truck), and distribution (by truck)

–  Pushes firms to locate along freeway system

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Suburbanization of Manufacturing--Causes

•  Shift to single-story plants –  Assembly lines are heavy, difficult to maintain on

upper floors of buildings –  Forklifts can’t be transported in elevators –  Technological change in manufacturing increased

relative attractiveness of single-story plants •  Shift to greater use of air transport made

airports (typically located in suburbs) good places for some firms to locate near

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Suburbanization of Office Employment

•  Recall face-to-face contact is important for office firms –  In monocentric model this, combined with high

employee travel costs (high-skilled workers get paid high wages while travelling to meet clients), makes office firms locate in central city

•  Since 1970s office space has grown fast in suburbs

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Suburbanization of Office Employment--Causes

•  Communications technology –  To some extent, better communication replaces

need for face-to-face contact –  Some firms split activities into CBD vs. suburban

•  People who need to meet with clients locate in CBD •  Suburban office handles datawork, paperwork

–  Will telecom ever completely replace face-to-face contact?

•  Various aspects of communication work better in person •  Trust may be easier to build in person

•  Suburbanization of population; as with manufacturing, office jobs may follow people 17

Suburban Subcenters

•  Recall that there are benefits to firms locating near each other – Offset to some extent by congestion and

high rents in high density areas •  Just because cities have become

decentralized does not mean firms don’t cluster – May form suburban subcenters

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Case Study--Los Angeles

•  Los Angeles and Orange County had 28 suburban subcenters in 1980 –  1.58 jobs per resident in subcenters (0.43 jobs per

resident in overall metro area) –  Average distance to city center is 27 miles –  Basic types include

•  Mixed industrial, mixed service, specialized entertainment, specialized manufacturing, specialized service

•  1990 revision of this paper finds 32 subcenters.

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Case Study--Los Angeles

–  LA case suggests that subcenters specialize; suggests localization economies are at play

–  Subcenters provide diversity of services within metro area

–  Employment throughout metro area is relatively dispersed (due in part to existence of subcenters)

–  Employment density still decreases as you move away from city center (though less so than monocentric model would predict)

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Edge Cities •  Edge cities are concentrations of office and

retail space outside the core metro area –  Sometimes evolve on their own (e.g. Surrey,

Richmond, Langford) –  Sometimes highly planned; single developer will

build entire “city” •  Dominated by industrial parks, strip malls, tract housing

–  Big edge cities have more office space than many major city CBDs

•  Irvine, California, had 40 million sq ft of office space planned as of 1995 (more than Washington, Boston, LA, or Chicago)

•  To some extent this is a coordinated approach to handling the problem of high inner-city rents vs. office firms’ need for face-to-face contact 22

City Centers and Subcenters

•  Central city still dominates metro area, just less so than it used to –  Rents higher in CC than in subcenters –  Employment density higher in CC than in any

subcenter •  What is role of CBD today?

–  Financial and professional services still more concentrated in CBD

–  Many firms in subcenters rely on firms in CBD for business services

–  Suburbs are not truly self-sufficient, though cities face increasing competition 23

Decentralization in Canada •  Are Canadian cities different from American

cities? –  Gas costs more here (so commuting costs should

be higher==>cities more centralized) –  Housing is not subsidized as heavily here as in the

US (no mortgage interest deduction)==>lower demand for housing, smaller lots

–  More money (per capita) is spent on public transit here than in US

•  Some argue that Canadian cities are fundamentally different –  e.g. Goldberg and Mercer, 1986, argue Canada

has more compact urban form than US 24

Decentralization in Canada

•  Other evidence suggests that basically similar trends are occurring here

•  2001 Census –  Most metro area growth between 1981 and 2001

in Canada was in suburbs •  25% of job growth was in central cities •  Rest was outside core (suburbs, or outside metro areas)

–  Between 1981 and 2001 share of workers employed in central municipalities fell from 71% to 62%

–  These numbers are higher than in US, though measurements are based on different definitions of metro areas and core municipalities.

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Decentralization in Canada

•  In Sherbrooke, Toronto, Windsor, Winnipeg, Regina, Calgary, and Vancouver number of suburban workers more than doubled since 1981 –  Meanwhile very little job growth occurred in central

cities in these metro areas –  Windsor (+18%) and Calgary (+34%) are

exceptions •  Core municipality outgrew suburbs in just 4 of

27 CMAs over the 20 year period.

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Toronto Decentralization

•  Since 1951 greater Toronto area has tripled in population from 1.5 million population to 4.6 million (in 1996) – Yet land use increased by more than 6-fold – Population densities declined – Land use per capita rose

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2011 Census update

•  Suburbanization continues in largest cities – Suburbs accounted for 83% of population

growth in Toronto, Montreal and Vancouver – Central city accounted for 17% of growth

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Decentralization in Canada

•  Suburb-to-suburb commuting has risen in Canada, as in US

•  Commuting lengths have increased (though remain smaller than in US)

•  So basic trends in Canada and US appear to be quite similar…though arguably Canada has managed to somewhat stem the tide, with policies to encourage more compact land use

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Urban Sprawl

•  A big current policy issue in North America (including Victoria) is that of urban sprawl. –  Cities today occupy larger “footprint” than they

used to (relative to population) –  Decreasing urban density leads to concerns about

loss of open space, wilderness, increased pollution/congestion from long commutes

•  Is sprawl a problem?

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Is Sprawl a Problem?

•  One side says: No, because what we have is just people exercising their desire to live in big houses with big yards. Just as we don’t tell people what to eat for dinner, we shouldn’t tell them how to live.

•  The other side says: Yes, because an individual’s decision to live in a big house with a big yard and long commute has effects on other people, and those effects aren’t being taken into account by that individual.

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Is Sprawl a Problem?

•  In the terms of economics, an externality exists. –  Total social costs of someone buying (and living

in) a big house in Langford include construction costs and the commuting costs of the individual (private costs) plus the loss of nice views and longer commutes for others in the area (external costs).

–  Private market transactions only account for the private costs; ignore external costs

–  Since only private costs are taken into account, the private market tends to provide too much of the good (e.g. houses in Langford) 32

Is Sprawl a Problem?

•  Note that many environmentalists make an aesthetic argument against sprawl. –  “It looks bad.” –  This is not an economic argument, unless we can

translate “looking bad” into a dollar cost imposed on the rest of society.

–  Can survey people and ask them about willingness to pay to reduce sprawl.

–  Can statistically measure reductions in land values as a result of sprawl, and use this as a measure of cost of sprawl.

–  Same with congestion/pollution costs of sprawl. 33

Sprawl Bad in US Compared to Rest of World

•  European cities tend to be much denser – Average German city 4 times as dense as

average American city – Barcelona 28 times as dense as Atlanta

•  Asian cities even denser – Hong Kong has about 360 people per

hectare – New York (densest by far in US) has about

40 people per hectare 34

Causes of Higher Relative Sprawl in US

•  Low gas prices –  Makes it inexpensive to live long way from work.

•  Mortgage subsidy –  Makes people consume bigger houses.

•  Minimum lot-size zoning –  Since schools in US are locally financed,

communities have incentive to keep out poor (who pay less in taxes than their kids consume in school services); minimum lot-size rules keep poor out but cause people to select larger yards than they would otherwise

•  Underpricing of fringe infrastructure –  Developers often don’t pay for expansion of roads

and sewers--implicit subsidy to fringe growth 35

Conditions that Limit Sprawl in Europe

•  High gas taxes, high car taxes •  Costly electricity==>smaller fridges and

freezers in homes==>high demand for walkable neighborhood shops (instead of strip malls) –  Also, anti-big-box rules to protect Mom and Pop

stores •  Agricultural subsidies increase farm WTP for

land (hems cities in) 36

Costs of Sprawl •  Home energy costs

–  New suburban homes are more efficient than old urban homes, but would use even less energy if smaller

•  Commuting pollution costs –  Suburban HHs drive 30% more than central city

HHs •  Loss of agricultural land

–  Is this a problem? –  If food shortages occur, farmer’s profits would rise

so WTP for land would rise, so farmers would buy back land from suburban homeowners and cultivate it.

–  “Food security”? –  Aesthetic appeal of farms (possible externality) 37

Anti-Sprawl Policies

•  Providing better public transit, higher gas taxes (or carbon taxes)

•  “Smart Growth” policies (limiting new building permits to urban core-- Portland, Oregon for example)

•  Population limits on urban areas (could Victoria do this?)

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