Property, Prosperity and Poverty:
Wendell Cox Lecture
It is a pleasure to have
this opportunity to speak to you this evening. I come to you as a great admirer
of Margaret Thatcher. Her accomplishments in modernizing the British state and
economy are unprecedented. I only regret that our Ronald Reagan was unable to
be as successful, hampered as he was by our separation of powers government. I,
for one, believe that your parliamentary system lends itself much better to the
structural reforms that are necessary to roll back the frontiers and
restrictions of socialism. Nonetheless, we have not done badly in the United
States. Urban Sprawl and Smart
Growth: I will discuss the
relationship between property rights, prosperity and poverty. The context is
land use planning and how crucial elements of wealth creation have or are being
taken away by bureaucratic fiat. In the US this is most evident in urban areas,
where so-called "smart growth" policies are being implemented in an attempt to
control urban sprawl. I use the term "urban sprawl" in its non-perjorative
sense, though advocates of smart growth would have use believe that the very
phenomenon is evil incarnate. This is not to say that I favor urban sprawl.
Rather I favor freedom, and no compelling justification has been demonstrated
which justifies the abridgement of freedom necessary to outlaw urban sprawl. Nonetheless, you in the UK
have long ago sought to outlaw urban sprawl. Here you refer to the topic under
various names, such as town planning and the new urbanism. Indeed, it is London
itself that is the birthplace of "smart growth," with its Green Belt, which
forms the type of urban growth boundary so favored by US planners (Slide 3). The smart growth movement
finds suburban development objectionable, despite its popularity among the
people. Instead, advocates of smart growth want higher density cities and often
refer to European cities as models to be copied (Slide 4). They also
demonstrate a doctrinal aversion to the automobile, believing that if we can
just make cities more compact, automobile demand will decline and public
transport will become dominant (Slide 5). US urban planners make many
trips to Europe and view scenes like the Place de Republic in Paris (Slide 6),
rarely venturing outside the attractive, tourist oriented historical cores.
Chief among them are advocates of the Portland, Oregon urban planning model
(Slide 7), to which I and other critics have successfully appended the label
"Nirvana." Portland has has imposed an urban growth boundary, has sought significant
public transport improvements, has neglected motorway improvements and has
undertaken strategies to increase urban densities. So fervent are these modern
day missionaries that I have encountered them on at least three continents. But
theirs is a false gospel. Portland, as I will show, has accomplished little
beyond what we call "spin" --- their success lies in the skill of their public
relations and the naievety of American urban planners all too eager to believe
in what is not. Urban Sprawl: World's Oldest
Land Use Trend: In fact urban sprawl
is the world's oldest land use trend. As soon as people could figure out how to
live away from where they worked, they did. The modern explosion in urban
sprawl was spawned not by the automobile, but rather by the railway. Of course,
all of this was accelerated by the automobile, which gave people the freedom to
move throughout the urban area with relative ease. Urban sprawl is greatest in
the United States, which has urban densities of less than 3,000 per square mile
(Slide 9). This compares to 13,000 in Western Europe and 40,000 in affluent
Asian urban areas (such as Tokyo, Hong Kong and Singapore). It surprises some people to find out that
America,s least sprawling urban area --- the one with the highest population
density --- is Los Angeles, which is more dense also than any urban area in
Canada. Portland, by comparison, is less than one-half as dense as Los Angeles. But it would be a mistake to
presume that urban sprawl is an American phenomenon alone. From the 1960s to
the 1990s, urban population densities fell at a greater rate in Canada, Western
Europe, Asia and Australia than in the United States (Slide 10). In fact,
virtually all urban population growth in Europe has been in suburban areas.
Take the example of Amsterdam (Slide 11), which expanded its urban land area 65
percent, while its population dropped. In the case of every central city of
more than 400,000 in 1960 that has not expanded its municipal boundaries, the
population has dropped, with all growth in suburban areas. The ville de Paris,
for example, lost more than 600,000 people from 1962 to 1999, while its suburbs
added nearly three million --- nearly as many as lived in Paris at its peak. But despite the great amount
of time that American planners spend in Western Europe, they have rarely
ventured beyond the equivalent of the Paris cafe across the street from the Louvre. In fact, if you venture outside the Boulevard
Peripherique which encircles Paris, you find an urban landscape similar in many
ways to that of an American suburb. Approximately 80 percent of Parisians live
outside Paris, and about the same percentage work outside Paris. So the Paris
of American planners is by no means all of Paris (Slide 12). The same is true throughout
Western Europe. The suburbs of Copenhagen are not that different than those of
America (Slide 13). The high-tech Arlanda Corridor in Stockholm is at least as
sprawling and public transport unfriendly as similar corridors in Austin or
Seattle (Slide 14). Europeans as misled as American planners might well judge
from a visit to Disney World in Florida that they had seen what America looks
like (Slide 15). And what of Nirvana? New
Urbanist architect Andres Duany complained in a Portland Oregonian
article that only after four visits to Portland's cutesy core, which planners
like to credit to smart growth, was he able to break free to see what lies
beyond. What he found was sprawl indistinguishable from that of other US urban
areas (Slide 14). In fact, Portland,s cutesy core was built between 1900 and
1940 and has nothing whatever to do with smart growth. Similar cores can be
found in a number of US cities, such as Seattle (even better preserved),
Pittsburgh, Cincinnati, San Francisco, Chicago, New York and others. As I said before, the whole
nonsense about urban growth boundaries started with London,s Green Belt. Of
course the purpose was different --- planners knew that by drawing a line
around London, development would leap frog out further, which of course it did
(Slide 17). Since 1931, the last census before establishment of the Green Belt,
London as we know it today (GLC) has lost more than 1,000,000 residents. At the
same time, the counties and subsequent unitary authorities adjacent to the
outside of the Green Belt have gained nearly three million (Slide 18). Whether
or not one likes the Green Belt, no one can seriously argue that automobile use
is less than it would have been without it, nor that it has strengthened the
core. But, in the final analysis,
as people become more affluent they want more space and they want the freedom
of mobility and access that the automobile affords (Slide 19). As Greg
Easterbrook of the centre-left US magazine, The New Republic put it,
"sprawl is cause by affluence and population growth, and which of these, exactly,
do we propose to prohibit?" The False Farmland
Crisis: Advocates of smart growth
often suggest that urbanism is a threat to agriculture --- at least when there
is no-one nearby who knows better. The agricultural threat argument is perhaps
the most disingenuous. Despite urban sprawl, urban areas consume only 2.6
percent of US land area (Slide 21), 400 years after the first European
settlement. In the last 50 years, agricultural production has become more
productive, which has made it possible to take out of production much more land
than has been taken for new urbanization. In the United States, land equal to
the size of Texas and Oklahoma (Slide 22) --- more than three times the area of
the United Kingdom --- has been returned to "open space." But of course, here
you have a much greater crisis. Now, nearly 1,000 years after Hastings, some 11
percent of your land has been taken by urbanization (Slide 23). This is hardly
a clear and present danger. Finally, how can it be that, in the fact of this
agricultural crisis, prices are so low that our respective governments spend
billions of pounds on agricultural subsidies (Slide 24)? Smart Growth: Denying
Housing Opportunity: The most
destructive impact of smart growth is its opportunity destroying impact on home
ownership. We all know that rationing scarce goods raises their prices. It is
no different with land and housing. Portland,s land rationing through its urban
growth boundary managed to produce the greatest reduction in 1990s housing
affordability (Slide 26) in the US (percentage of homes affordable to the
median income family), at the same time that affordability was generally
improving in the rest of the nation. Of course, Portland,s planning theologians
have an answer, having commissioned reports by a consulting profession all too
prepared to describe the conditions under which the sun rises in the West. They
claim that Portland,s housing affordability loss is the natural consequence of
the market --- Portland is growing fast and it is such a desirable place to
live that prices have been driven strongly upward. One would, of course, expect
a similar dynamic in other urban areas that grew as fast or faster. But the
opposite is true. In every major metropolitan area that grew faster than
Portland during the 1990s, housing affordability increased. Examples
include Phoenix, Atlanta, Dallas-Fort Worth, Las Vegas and Raleigh-Durham.
Pheonix provides a case in point. Not only did Phoenix grow faster than
Portland, but it also densified at a greater rate. But the densification of
Phoenix resulted from market conditions, not from the dead hand of the
planners. Yet housing affordability increased in Phoenix (Slide 27). A couple of years ago, an
anti-sprawl Washington lobbying group published a report that classified US
urban areas by degree of urban sprawl. Their purpose had been to show that
transport costs are higher in more sprawling areas, which is not, in itself
surprising. But they overlooked housing. Housing costs are so much lower where
sprawl is greater that it more than makes up for the higher transport costs.
Food skews the data even more in favor of sprawling areas. And, the same data
set shows that home ownership is higher where sprawl is greater (Slide 28), an
issue on which, not surprisingly, the anti-sprawl report was silent. As you know, we in the
United States have been trying to bring our African-American (Black) minority
into the economic main stream. An important component of this campaign is to
increase home ownership, which not only makes communities more stable but also
creates wealth. We have been more and more successful at this, as Black and
Hispanic home-ownership rates have been rising at well above those of
non-Hispanic whites. The anti-sprawl lobby would like us to believe that sprawl
injures minorities. It was that belief that led Professor Matthem Kahn of Tufts
University to look at the data, which to his surprise showed that Black home
ownership rates are higher where sprawl is greater (Slide 29). Another smart growth
strategy, development impact fees, is also raising the price of housing and
reducing home ownership. These fees are imposed by local governments
purportedly for the purpose of paying for incremental infrastructure
improvements to support new development --- such as for water systems, sewer
systems and schools. Strangely, the elements of infrastructure provided by the
private sector do not seem to need impact fees --- for example, telephones and
natural gas. But, of course, the result of impact fees is higher housing prices.
This has been the principal cause of the housing affordability crisis in
California, especially the San Francisco Bay Area, where middle income families
often have to live 75 miles outside the urban core to afford home ownership
(Slide 30). In both our countries, smart
growth and town planning are raising housing prices and reducing home
ownership. Prices are raised by rationing land, by limiting development, and by
more limited competition between builders and developers in the more regulated
regime. Then there is the matter of political corruption and its costs ---
something of which we are all too aware in the United States. When governments
control where development is to occur, interested property owners have an
incentive to influence the political process, even in inappropriate ways, to
have their land included for development (and wealth creation). The UK
government,s requirement that 60 percent of development be on brownfield sites
is also raising prices. Finally, unnecessary "amenities" and regulations
imposed on new housing raises prices. In some American suburbs, for example,
new housing must have brick facing, which of course has nothing to do with
structural integrity or any other legitimate government building concern (Slide
31). Urban planning costs a lot.
A recent report by University of Pennsylvania researchers indicates that
virtually all of the housing price difference between urban areas can be traced
to planning and zoning. Where regulations are stronger, prices are higher. We
see the same thing in the United Kingdom. Professor Jules Lubbock of Essex
University has estimated that town planning adds £40,000 to the price of a
house in Essex County. And, research has indicated that town planning is a
major contributor to the higher prices that are paid for groceries in the
United Kingdom compared to Western Europe (Slide 32). The Limits of Public
Transport: Public transport is, in
both our countries, often seen as an important strategy for reducing traffic
congestion and for making more dense urban centers work more effectively. It is
not. But let me digress a bit.
You have made great progress in getting the escalating cost of public transport
under control. Under Mrs. Thatcher, London Transport began competitively
tendering its bus service, a process that was complete by 2000. Today, the cost
per mile of Transport for London bus services is at least 45 percent below what
it was in 1985, and ridership is considerably higher. Similar cost improvements
were made outside London through the bus deregulation process. Nonetheless, the potential
for public transport to make things better is very limited. That is not to say
that there is not a place for public transport. Today, more than 50 percent of
travel in the Tokyo-Yokohama urban area is on public transport. In the London
area, which includes not only Greater London but also the Southeast England
catchment area from which people commute to the London core, the number is
approximately 19 percent. In New York, only nine percent of travel is on public
transport, which is well above the less than two percent US urban average. In
fact, without New York, barely one percent of US urban travel is on public
transport (Slide 34). Moreover, public transport,s
market share is dropping virtually everywhere. It has fallen nearly 20 percent
in Tokyo, by a third in Paris and more than 50 percent in New York.I do not
have good historical data for the London area (Slide 35), but the limited data
available makes it clear that public transport,s market share has dropped in
London as well. Currently, new urban rail
projects are very popular, especially in the United States, where Congress has
provided billions of dollars for building them. They could not be more out of
place. The low population densities combined with the dispersed trip patterns
have created a situation in which it would have been less expensive to have
leased each new daily rider a new car, ad infinitum. In some cases, a luxury
car, such as the pictured Jaguar XJ8 would have been less expensive as an
alternative (Slide 36). But public transport,s
principal problem is that its distinctive competence is service within and to
dense urban cores (Slide 37). Dense urban cores are generally either a thing of
the past, or are declining in their importance. For example, from 1961 to 1991,
employment in central London fell from 1.40 million to 1.14 million (Slide 38),
during which time overall employment in the London area was increasing. The
same is true in Paris, London, New York and virtually everywhere else. The
dense urban cores are losing both employment and population share. And public
transport simply does not provide automobile competitive service outside trips
to or within the dense urban core. Most travel within outer London (inside the
Green Belt but outside the old London County Council area) is by automobile,
because there is little automobile competitive service. Further, there is
little auto competitive public transport service between suburban locations
outside the Green Belt (Slide 39). This is not unusual. The 80 percent of
people who live outside the ville de Paris are poorly connected by public
transport to the 80 percent of jobs that are outside the ville de Paris. Whether in the suburbs of London, Paris, Los Angeles or Portland, you cannot
get from
get where you are to where you want to go on automobile competitive public transport, because it simply does not exist. So it is time to forget
the romantic notion that public transport can reduce traffic congestion in the sprawling suburbs that contain most of the urban population in Western
Europe and America.
The exceptions, of course,
are the Japanese urban areas, where dense suburban rail networks operate
throughout the area, through the core on underground lines and are supported by
thousands of connecting buses. These systems (Tokyo-Yokohama, Osaka-Kobe-Kyoto
and Nagoya) provide automobile competitive service throughout much of the urban
area. But lest anyone think these systems can be replicated, it is well to
recall that they were built with the city, not after the city had developed.
And, recall as well, that public transport,s market share is falling in these
urban areas, like virtually everywhere else. The reality is that the
central business districts that are so crucial to the success of public
transport represent a small and declining portion of urban employment In London
and Paris, the share is approximately 20 percent and falling. It is less than
15 percent and falling in Tokyo, and in most US urban areas it is 10 percent
or less. Roadways: The smart growth advocates would have us believe that a more compact and
dense urban area would have less traffic congestion. Nothing could be further
from the truth. The international data shows a strong association between
greater traffic intensities and higher population densities. The US, with its
low population densities, has the fastest urban traffic. There are less than one-half
as many hours of vehicle travel per square mile in the United States than in
Western Europe (Slide 41). Us Department of Transportation research indicates
that the intensity of traffic (in vehicle miles) increases at 0.8 percent per
each 1.0 percent increase in population density (Slide 42). And, faster traffic
that stops less means less air pollution (Slide 43). The relationship between
density and traffic is also illustrated by the case of London. Average work
trip travel times to central London were 55 minutes in 1996. The balance of
inner London had an averge of 41 minutes, while less dense outer London
averaged 29 minutes. In the suburban areas ringing the Green Belt, average work
trip travel times were only 22 minutes (Slide 44). And, now back to Nirvana.
Portland has seen its traffic congestion increase substantially over the past
decade (Slide 45). In fact, Portland,s plans provide the best evidence of their
own bankruptcy. Through 2040, Portland plans to emphasize public transport,
discourage automobile use, and make the city more dense --- though still not as
dense as sprawling Los Angeles. Yet automobiles will provide the bulk of the
new transport demand (Slide 46) according to the projections of the very same
public agency in charge of land use planning (Metro). It hardly seems worth the
effort. Democratisation of
Prosperity: From American Dream to Universal Dream: In the US we speak of the "American Dream" of home
ownership. Public policy has encouraged home ownership for at least 70 years
and we have made substantial progress. Home ownership is at the very root of
wealth creation. I was pleased to see a stack of the Peruvian economist
Hernando DeSoto,s book The Mystery of Capital (Silde 48) in the stockroom downstairs. DeSoto sets about to find
out why it is that so many nations that have nominally adopted capitalism over
the past 15 years have not achieved wider prosperity. The fundamental reason is
the weakness of property rights protection, and especially with respect to
growing urban areas, the inability of people to obtain title to their homes. We
should thus be most careful about any public policy that would reduce home
ownership in the longer run. The data is clear that home ownership is being
reduced in the United States by smart growth. There can be no question but that
home ownership in the UK is being reduced by planning policies that
artificially drive up the price of housing. In the United States, more
than 40 percent of family wealth is in home equity. The percentage tends to be
even higher among lower middle income families (Slide 49). I don,t mean to
sound like the typical haughty American, but, among nations larger than Liverpool (Luxembourg), the United States continues to
have the highest gross domestic product per capita (purchasing power parity) in
the world. Recently the Swedish Research Institute of Trade caused
a stir with a report to the effect that the average American Black household
has higher income than that of the average Swedish household (Slide 50). This
is not to say that we have "arrived" in the United States, but it is worth
asking why such strong economic performance has persisted. Many analysts point
to our more liberal employment policies. You in the UK know better than most
how destructive a system can be that relies on the good will of trade unions
that have been permitted excessive power. But I believe that there is another
factor. Land use and development have been much more free in the United States,
which has also contributed to a more affluent society for all. We see evidence around the
world that what was called the American Dream is in fact the American Dream.
Swedes are quickly forsaking their Stalinist housing estates for single family
housing, while single family housing projects are to be found along Tokyo,s
orbital route (Slide 51). Neither the smart growth nor
new urbanism advocates have identified any problem that requires their
strategies (Slide 52). Indeed, the strategies of smart growth lead to lower quality of
life and less economically inclusive societies (Slide 52). Smart growth and new
urbanism are like Buddhism. They ought to be permitted, but not required. A few years ago a number of
us met in the mountains of Montana and drafted the Lone Mountain Compact,
which outlined free market principles of land use. At the core was the
statement (Slide 53):
Thank you.
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