Challenging the myth that sprawl is cheaper

While a suburban mortgage may look cheaper, it’s perpetuating a problem for municipalities, businesses, and taxpayers. Canadian municipalities, and their taxpayers, are also faced with billions of dollars in unfunded costs for new suburban developments. Sprawl is one of the major contributors to air pollution, which the World Health Organization had identified as one of the leading causes of cancer, and also contributes to climate change, loss of farmland and nature, vehicle injuries and death, and risk of chronic disease.

Although many municipalities have goals for reducing future sprawl and creating more liveable communities, many unintentionally encourage sprawl with charges and taxes that obscure the real costs. To restrain sprawl, local governments must turn prices around and so that they reward denser, healthier and more liveable development. When we do so, we will reap significant economic and environmental benefits.

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Why are suburbs growing so fast?

Suburbs are growing 160% faster than city centres. Today, half of urban residents live in the suburbs.

Why are so many Canadian families and firms locating in the suburbs? The key factor is price: it’s cheaper to buy a house or office space in suburban areas than in the city centre. Much of this lower price is because of distance to amenities, but some is because of how government policies subsidize the suburbs. There are many hidden costs, some paid by sprawl dwellers, others paid by all Canadians.

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Costs of sprawl

New suburbs cost city governments more than denser urban developments—for creating and maintaining roads, sewers, water, community centres, and libraries, and providing fire protection, policing, and school bussing. The revenue collected from suburban developers and households rarely covers all the costs of the new infrastructure. Other taxpayers wind up picking up these costs. Here are a couple of examples:

  • Across just 17 of the more than 40 new developments underway or planned in Edmonton, net costs have been projected to exceed revenues by nearly $4 billion over 60 years.
  • The City of London, Ontario found that over a 50-year period sprawling growth would entail capital costs $2.7 billion higher, and operating costs about $1.7 billion higher, than for a compact growth scenario.

There are also many hidden costs that affect health, productivity and the environment.

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Cost of roads and highways

The vast majority of roads in Canada are free to use, but they aren’t cheap to build or maintain. Governments in Canada spend almost $29 billion on roads every year – far more than they spend on transit, rail, air, marine and all other transportation modes combined. Fuel taxes, licence fees and all other motor vehicle payments cover just over half of that cost. The rest- $13 billion- is subsidized from general taxes.

Cars aren’t any cheaper for families than they are for governments — suburban households drive about three times more than households close to the city centre. All that extra driving has a big impact on household budgets, family stress, and personal health. Extra car ownership and fuel cancel out much of the household budget savings from lower home prices, bringing the real cost of a suburban house closer to the sticker price of an urban residence.

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More density can save our cities billions

In established, denser neighbourhoods, service delivery is more affordable and some infrastructure already exists, so new developments entail lower municipal spending. Denser growth patterns can save cities, and their taxpayers, billions in capital costs and city services:

  • Halifax Regional Municipality (HRM) found it would potentially save as much as $715 million over the next two decades by increasing the number of new dwellings sited in the urban core from 16% to 50% of new dwellings.
  • Calgary found that by adopting a denser growth pattern that used 25% less land, it could save $11 billion in capital costs alone.
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Innovations that support denser communities

Growing awareness of the full costs of sprawling suburbs has led a number of Canadian cities to restructure taxes and charges, correcting the inadvertent incentives that lead to sprawling development. These tools include:

  • DEVELOPMENT CHARGES. Development charges generally do not recover the full cost of new infrastructure in suburban developments, in effect passing them on to the whole municipality. Some cities have added up these costs and have restructured charges to developers to more closely match the real costs of servicing new buildings and neighbourhoods.
  • UTILITY CHARGES. Operating and maintaining water and wastewater service can cost twice as much in the suburbs as in high-density areas. Because suburban properties require longer water and sewer lines, some municipalities are charging by the foot to connect.
  • PROPERTY TAXES The property tax system in many cities encourages development on the fringes, instead of in underutilized areas closer to the core. To correct this, Canadian municipalities can change the tax rate based on location, or class of development. They can also give special rebates to developers who revitalize old buildings or areas.
  • TRANSPORTATION PRICING REFORM. Through higher fuel taxes, charging for “free” parking and vehicle registration fees, governments can recover the costs of creating and maintaining their road network.
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Economic benefits of density

Urban density provides “economies of agglomeration”: the fixed costs of infrastructure are spread over more businesses and households, which reduces each one’s costs.

Living and working closer together also has labour benefits. With more potential workers to choose from, businesses get better choice of employees and higher labour productivity, and employees benefit from more choices of work. Urban density also makes it easier for firms to access suppliers, customers, and specialized knowledge.

And we all benefit from knowledge spill overs that happen within sectors and between sectors when businesses and people work closely together.

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Equity and fairness

Focussing on the combined costs that determine housing affordability — housing + transportation — is key to designing sprawl pricing policies to avoid unfair impacts on lower-income families. Using pricing to better reflect the true costs of sprawl will result in new municipal revenue. Some of this revenue can be used to support transit, build truly affordable, well-located housing, and support social services. Reducing further sprawl also further reduces the smog emissions from vehicle use that disproportionately harm lower-income people.

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Federal and provincial roles

Other levels of government can support municipal innovation to restrain future sprawl.

Existing provincial legislation prevents some of the reforms that municipalities could take to change the prices and create incentives for denser development. Expanding the powers of all municipalities would provide them with an essential tool to address sprawl.

Provincial and federal governments could also change their own policies to support municipalities in reducing sprawling development. Transit investments, carbon pricing, highway tolls and higher fuel taxes, and improved regional governance arrangements can make it easier for municipalities to manage sprawl.

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