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For years, research has shown that smart growth development can reduce costs for localities and in some cases can even increase public revenue. Over the last 10 to 15 years, research about smart growth development strategies has continued to develop. However, one question in particular still remained: What impact does smart growth development strategies have on municipalities’ bottom lines? An organization called Smart Growth America sought to answer that very question.
Smart Growth America published a report entitled Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development. This report examined 17 case studies of municipalities across the country. Localities in this study included Afton, MN; Champaign, IL; Charlotte, NC; Fresno, CA and Phoenix, AZ just to name a few. Specifically, the report compared municipal revenues in two types of development scenarios: smart growth and conventional suburban. Smart growth development is characterized by buildings located closer to each other, neighborhoods that allow ample walking for residents, streets with better connections among destinations, a greater mix of home types and increased transportation options. On the other hand, buildings farther away from each other, neighborhoods designed primarily for driving, street systems with longer distances between destinations and fewer public transportation options are characteristics of conventional suburban development. The report by Smart Growth America focused on three financial aspects of these two strategies: the cost of upfront infrastructure, the cost of providing ongoing services, and the tax base created by additional development.
So, what did this comparison study show? First, smart growth development costs about one-third less for upfront infrastructure than conventional suburban development. Some type of infrastructure is of course required to support and supply any development. Often, the most expensive forms of infrastructure in new developments include roadways, water lines and sewer lines. The less expensive costs for upfront infrastructure in smart growth development scenarios can be attributed to the fact that smart growth development typically requires fewer infrastructures. This means that upfront capital costs, maintenance costs, and presumably costs for eventual replacements are lowered. Additionally, smart growth development scenarios often reuse existing infrastructure, which serves to further lower upfront capital costs.
Secondly, the comparison study showed that smart growth development saves municipalities an average of roughly 10 percent on ongoing delivery of services. Examples of ongoing delivery of services include the cost of services provided by first responders in emergencies such as police, fire and ambulance. The way a community is configured has a profound impact on delivery of public services. Because smart growth development utilizes street systems with better connections among destinations, service vehicles may drive fewer miles, thus allowing a reduction in operating costs. Further, research showed that the savings on services in rural areas were even higher.
Finally, the survey concluded that smart growth development produces 10 times more tax revenue per acre than conventional suburban development. Tax revenue typically refers to property and sales taxes, as well as licensing fees and other small sources of revenue in some instances. This finding is particularly significant because for most communities property taxes are an extremely important source of revenue. In fact, a 2010 U.S. Census survey of local government budgets nationwide showed that 48 percent of revenue from municipalities’ own sources came from property taxes.
The findings of Smart Growth America are significant for multiple reasons. The primary reason is because it shows that smart growth strategies create significant revenue for local governments and significant savings for residents! These findings are particularly relevant to local governments given our anemic recovery. Areas that experienced or are experiencing a lot of sprawled “McMansions” development are burdened with high land use and development costs. Localities across the country have seen that low-density developments fail to pay for their own infrastructure. Transportation costs for families have ballooned, in some cases to more than a quarter of their income. There is a significant correlation between lack of transportation and access to higher paying jobs. By making the decision to utilize smart growth development strategies, local governments may find that that their public balance sheets AND quality of life for residents can be improved for decades to come.
 Smart Growth America, Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development, available at http://www.smartgrowthamerica.org/documents/building-better-budgets.pdf
 U.S. Census Bureau (2012, September), State and Local Government Finances Summary: 2010, available at http://www2.census.gov/govs/estimate/summary_report.pdf.
 Shaila Dewan, Is Suburban Sprawl on Its Way Back?, Sept. 14, 2013, available at http://www.nytimes.com/2013/09/15/sunday-review/is-suburban-sprawl-on-its-way-back.html?_r=0.
A great blog post about how best use HUD’s new data on housing affordability:
Three Ways to Use Data from the Location Affordability Portal to Inform Policy and Practice:
1. Understand the “complete costs of place” of a proposed affordable housing development. If we really want to deliver housing that is affordable, we need to focus not only on the costs of rent or a mortgage, but also on the costs of heating / cooling the home and getting to and from work and around town—collectively, the “complete costs of place.” A home that offers low housing costs but requires residents to spend all the savings on higher transportation costs is no bargain. While cost is not the only relevant factor in siting affordable housing (see below), it is an important one, and developers can increase the odds that a home with low housing costs is truly affordable by using the Location Affordability Portal to estimate a site’s transportation costs and factoring that into an estimate of the complete costs of place.
2. Target transportation investments to places with low housing costs but high transportation costs. There are two main ways of ensuring that the combined costs of housing and transportation are affordable to low- and moderate-income households: reduce the housing costs of places where transportation costs are already low (see item No. 1 above) or reduce the transportation costs of places where housing costs are already low. The Location Affordability Portal can help communities identify places where transportation investments—such as car sharing, improved commuter bus service, and improved pedestrian infrastructure—are needed to help improve affordability for low- and moderate-income households that have relatively affordable housing costs but high transportation costs.
3. Compare communities and regions. Sometimes policymakers, advocates or researchers find it useful to compare housing costs across regions—for example, to identify places with policies we may wish to emulate. If these analyses consider only housing costs but ignore transportation costs, they may well give us distorted results. For example, in an analysis of the housing and transportation costs of the 25 largest metro areas, we found that Houston had the eighth most affordable housing costs (as a percentage of income). But when we considered housing and transportation costs together, Houston dropped to 17th, making it one of the less affordable regions. The Location Affordability Portal provides useful metrics for comparing the combined costs of housing and transportation costs across jurisdictions.
Housing is a cornerstone for our families and our communities in Virginia. For 30 years, the Virginia Housing Coalition has advocated that every family and every individual in the Commonwealth should have an affordable and decent place to call home. As we emerge from the worst housing recession in our nation’s history, there are many reasons to focus on the housing status of our citizens here in Virginia.
- More than a million Virginia households are housing cost burdened – meaning, they pay more for housing than they can afford.
- Over 100,000 families lost their homes to foreclosure and this epidemic is still affecting our people and our neighborhoods. Many areas of the state still lag behind our stronger markets.
- The homeownership rate in the state and the nation are continuing to decline. We need to make sure that rental housing is available to meet this growing demand, but we also need to rebuild the opportunity for young families to buy a home and begin to build equity. Homeownership has long been the principle way that lower and middle class households increase wealth.
- The cost of rental housing has outpaced the growth of renter incomes over the past decade. In 2013, it would take a wage of $20.72 per hour to afford Virginia’s 2BR Fair Market Rent ($1,078), but the average renter wage in Virginia is only $15.79.
- Finally, while we have begun to make progress in reducing homelessness, this progress is threatened by cuts to federal rental assistance funding.
Good housing policy does more than just provide adequate shelter to Virginians. Housing is an important element of our state’s economy. Housing construction generates jobs and economic spinoff benefits the surrounding community. For example, the construction of 100 single family homes in Fairfax County supports 222 short term jobs and 20 long term jobs, bringing the total economic impact to over $16.5 million. Usually, housing leads us out of a recession. That has not been the case with the Great Recession. Our homebuilding industry has been in a depression for the past five years and that needs to change in order for economic growth to accelerate in our state.
Housing is integrally connected to many of the important issues that you will face as Governor. Housing density, location and development patterns fuel our transportation needs and expenditures. Good, stable housing correlates with improved educational achievement in young children, as well as providing mental and physical health benefits, especially to our older citizens.
As Governor, we urge you to place a priority on the development of a detailed housing policy and plan in the first year of your term. We also ask you to commit to continue funding for the Virginia Housing Trust Fund – an effort that has already begun to yield benefits to families across the state. The first round of Housing Trust Fund projects will be getting underway by the end of the year and will serve a broad range of housing needs in the state, including veterans, persons with disabilities and individuals experiencing homelessness.
On behalf of our membership across the state, we look forward to working with you to expand and improve housing opportunities for all Virginians in the next four years.
Bob Newman, President
An interview with Shanti Abedin from the National Fair Housing Alliance examining how Banks are maintaining the homes they own in different neighborhoods.
Many neighborhoods in America today still lack racial and ethnic diversity. In some of these communities, the differences between neighborhoods is so stark, it seems like they are segregated. In addition to the racial/ethnic differences, there often exist dramatic economic disparities. Some neighborhoods feel like completely different parts of the world.
Given how much progress America has made on race issues, some people assume that this type of segregation must exist because people choose to live separately, that segregation is a preference. But research tells a different story.
The reality is that even though African-Americans prefer highly integrated neighborhoods, they still end up living in segregated communities, regardless of income or even after moving. In one survey conducted in Long Island, New York, almost 70% of African-Americans surveyed stated they preferred an integrated community. Studies indicate that if given the economic opportunities, African-American families formerly in public housing will move into more integrated areas and live there for years.
Part of the reason behind US segregation comes from the fact that African-Americans still experience pervasive housing discrimination, including but not limited to predatory lending, racial steering, and discrimination based on credit. Racial steering is when a lender or real estate agent specifically shows families housing in different neighborhoods based on their race or ethnicity.
Unfortunately, these patterns of segregation are affecting other ethnic minorities. Latino Americans are, by and large, also concentrated in minority neighborhoods. The most troubling pattern is that often these neighborhoods are suffering from disinvestment and lack important tools for economic growth such as quality public schools. Some may claim African-Americans and Latinos have a tendency to clump near family members, but studies show education and services are both higher priorities. There are opportunities for improving public education by reducing segregated housing patterns. Segregated communities are often not satisfied with the quality of their schools. Other studies indicate how segregated public schools and universities reinforce the idea of racially segregated neighborhoods.
What continues these patterns of residential segregation despite the desire of residents to live in diverse communities? Lack of knowledge about inclusive and diverse neighborhoods, in addition to aversion to integrated areas seems to fuel this residential segregation. There is evidence to suggest that the neighborhood preferences of Caucasian Americans play an important role in their neighborhoods’ racial composition. There is also evidence to show that communities experience racial blind spots. African and Latino Americans are more likely to know about highly segregated and integrated communities but not as much about majority white neighborhoods; Caucasian Americans are not likely to know about integrated communities, even when integrated communities are predominantly white.
As advocates for inclusive and economically vibrant communities, we need to close the ignorance gap regarding mixed income communities. Part of this means addressing misconceptions about affordable housing. Affordable housing can be a scary term, but it simply means having a wide range of housing options for all of the regions residents and work force. Improving the affordability of a community does not dramatically lower the property values of surrounding neighborhoods.
As a nation, we have come a long way in combating discrimination. Unfortunately, the journey is not over, housing discrimination still exists even though market demand tells us that people want to live in inclusive and diverse neighborhoods. A commitment to community integration requires us to address the persistent prejudice, ignorance and mistrust people hold about different racial and ethnic groups. Making this commitment is the first step towards creating the vibrant neighborhoods where we want to live.
 Maria Krysan & Reynolds Farley, The Residential Preferences of Blacks: Do They Explain
Persistent Segregation?, 80 SOC. FORCES, 937-80 (2002)
 Stefanie DeLuca & Peter Rosenblatt, Walking Away from “The Wire”: Residential Mobility and Opportunity in Baltimore (Johns Hopkins University, Working Paper, 2010).
 Stefanie DeLuca & Peter Rosenblatt, Walking Away from “The Wire”: Residential Mobility and Opportunity in Baltimore (Johns Hopkins University, Working Paper, 2010).
 Margery Turner & Stephen Ross, How Racial Discrimination Affects the Search for Housing, in THE GEOGRAPHY OF OPPORTUNITY at 81-100 (Xavier de Souza Briggs ed., 2005)
 Pat Rubio Goldsmith, Learning Apart, Living Apart: How the Racial and Ethnic Segregation of 8 Schools and Colleges Perpetuates Residential Segregation, 112 Tchrs. C. Rec. 1605-1606 (2010).
 Keith Ihlanfeldt & Benjamin Scafidi, Whites’ Neighborhood Racial Preferences and Neighborhood Racial Composition in the United States: Evidence from the Multi-City Study of Inequality, 19 HOUSING STUDIES 325, 325-359 (2004).
 Maria Krysan, Confronting Racial “Blind Spots” POVERTY &RACE (2008), http://www.prrac.org/full_text.php?text_id=1193&item_id=11275&newsletter_id=101&header=Housing&kc=1.
As any homebuyer or renter knows, purchasing a new place to live is a multi-step process. But a lesser known truth about this common practice was recently released in a study from the U.S. Department of Housing and Urban Development. The HUD study findings confirm that you, as a consumer, can fall victim to racial housing discrimination at any point during the browsing and purchasing or renting of a new home, from the first phone call to the sale itself. HUD’s release from more than 8,000 fair housing tests conducted across the country indicates that although blatant discrimination in the advertising and sale of homes may be on the decline, more subtle forms persist with equal consequences to the housing consumer.
Searching For a Home
Before the first showing, homebuyers peruse the availability of homes in their preferred area. Throughout the country, testers found that when contacting agents about advertised residences for sale, black homebuyers learned about roughly 17.0 percent fewer housing availabilities than their white counterparts, and were “shown 17.7 percent fewer homes.”
The First Call: Scheduling an Appointment & Pre-Qualification Process
The 2013 HUD study showed significant disparities in the initial contact between buyer and REALTOR along racial lines, even when it came to sensing racial background over the phone. According to HUD, black “renters whose race is readily identifiable based on name and speech are significantly more likely to be denied an appointment than minorities perceived to be white.” During an in-person visit, renters who are identifiably black “are shown fewer units than minorities who are perceived to be white”. Similarly, homebuyers who are identifiably black…“face higher discrimination during the in-person visit than those who are perceived to be white.”
Significant numbers of testers in certain metro areas (including the Richmond, VA region) were repeatedly denied appointments by housing providers because they had not yet been prequalified. The report cites a case where the black tester called and spoke with an agent who insisted that she must be prequalified in order to see homes. He refused to meet with her until she had talked to a lender. The white tester was not asked about prequalification over the phone, and made an appointment to meet with the agent.
For example, field testers in certain metropolitan areas were so consistently denied appointments based on lack of pre-qualifications that HUD had to grant testing organizations permission to use qualifying dollar amounts over the phone just to schedule a first meeting. These nine localities included
Albuquerque, N.M.; Atlanta, Ga.; Chicago, Ill.; Dallas, Texas; Fort Worth, Texas; Greensboro, N.C.; Miami, Fla.; Washington, D.C. and our own Richmond, Va.
The First Meeting & Showing the House
A significant racial divide was also found when testers first met with real estate agents and were shown houses. In terms of variety of neighborhoods shown, national trends indicate that more homes and apartments are communicated and shown to white homeseekers than to racial minorities. HUD reports that
“agents spend more time with white homeseekers than with equally qualified blacks” and that “in about two-thirds of in-person visits, one tester is shown more units than his or her partner, with whites significantly more likely to be favored than blacks.”
Even an agent’s description of a neighborhood can be tinged with discriminatory language. The report states that:
“whites hear more positive comments about white neighborhoods and more negative comments about minority neighborhoods than do blacks, potentially steering them away from mixed or minority neighborhoods.”
Minority home buyers sometimes experience other forms of discriminatory treatment as well, relating to housing costs and financing, housing quality, and the helpfulness of the sales agent. These differences are less consistent and smaller in magnitude than the differences in numbers of homes available and shown.
But one particularly potent finding from the 2013 study may be the most unsettling – these disturbing trends only amplify when particular cities and towns (localities) are put under the magnifying glass, particularly urban areas.
The unfortunate truth is that even after sale, discrimination can occur during a buyer or renter’s time at their residence, and on bases of a variety of different “protected classes” other than race. The study itself cites the limitation that:
“results reported here probably understate the total level of discrimination that occurs in the marketplace… (and) do not capture all the forms of discriminatory treatment that minority home seekers may experience.”
HUD even indicates that the extent of housing discrimination faced by “minority home seekers with lower incomes, less wealth, weaker English language fluency, or blemished credit” may extend to levels beyond those actually reported this year.
We need to do more. To stop these disparities, it is paramount that buyers, renters and housing industry professionals are educated in fair housing practices.
Enforcement is still a necessity, as HUD states:
“Prejudice has by no means disappeared….minorities still face significant barriers to [their] housing search, even when they are well-qualified as renters or home buyers.”
A strong method to enforce fair housing laws is to have local fair housing organizations increase their proactive testing of the housing industry (the sales market more so than rentals). Another proactive step is to research what specific localities and neighborhoods are experiencing these discriminatory housing practices, in order to pinpoint areas where investigations could really make a difference. Reinvesting in neighborhoods to create equal access to services and encourage diversity is another long-term method to reduce these detrimental disparities facing minority home seekers, renters and owners. It is for these reasons that fair housing organizations like HOME fight for equal opportunity to housing for all, through fair housing policy change, education and enforcement.
As poverty increases, affordable housing, access to public transportation, and linkages between housing, transportation, and job centers become more important for RVA region.
The recent New York Times story about suburban poverty is getting a lot of attention. The story notes the shifting growth of poverty from the urban core of New York to its suburban peripheries, but it’s based around Confronting Suburban Poverty in America, a book released today by Elizabeth Kneebone and Alan Berube at the Brookings Institution. Admittedly, I haven’t read the book yet (yet!), but this trend came up in some data I was looking at recently. In Virginia, Richmond and its immediate counties – Chesterfield and Henrico – are good examples of this trend in action.
The shift of poverty growth from the city to the suburbs is a trend we can see pretty clearly in the numbers. A look at data comparing poverty in the City of Richmond and the counties of Chesterfield and Henrico, shows trends that aren’t far off from those outlined in the Times article.
The City of Richmond gets attention throughout the region for its poverty rate, which was 26.4 according to 2011 estimates. The city’s mayor, Dwight Jones, made the development of an antipoverty strategy one of the first priorities of his second term. But the bulk of the region’s poverty growth – numbers of people rather than rates – is happening in the suburbs.
From 1989 to 2011, which is as far back as the Census Bureau’s Small Area Income and Poverty Estimates go, the City of Richmond’s population in poverty has grown by about 14%, or about 6,200 people. In terms of poverty rate, that’s a 3.4 point increase, from 23.0 to 26.4. In the same time period, Henrico has seen its population below poverty grow by 163% (20,500 individuals), and Chesterfield by 181% (14,500 individuals).
Suburban poverty rates remain lower the city’s 26.4, but poverty growth in the counties has outpaced total population growth. Point increases in the poverty rate of a suburban county – where the total population has been growing rapidly for decades – represent more people than point increases in the rate of the city – where the total population only recently reversed its shrinking numbers. Henrico’s poverty rate increased 5.0 points between 1989 and 2011 (5.8 to 10.8). Chesterfield’s increased 3.4 points (3.8 to 7.2). As noted above, Richmond also had a 3.4 point increase over those 22 years. But Chesterfield’s 3.4 point increase represents 14,500 individuals, more than double Richmond’s 3.4 point increase of 6,200 individuals.
The chart below shows pretty clearly just how significant those changes have been:
The growth of poverty in jurisdictions throughout the region is cause for concern, and the trend of more rapid suburban growth is important. As the suburban population of individuals below poverty increases, Richmond’s share of the region’s poverty drops. In 1989, the city’s share of poverty among the three jurisdictions was 68.5%. Today, it’s 47.9% (see the chart below). There are more people in poverty in the immediate suburbs of Richmond than there are in the city.
The shifting geography of poverty away from the region’s urban core has important implications for policy decisions at the local and regional levels. While there is still need for the antipoverty resources and strategies traditionally concentrated in the city, the counties are facing a growing problem. The more widely distributed suburban residential patterns may make addressing those needs more costly.
Urban poverty in the Richmond region isn’t shrinking, but that’s not for lack of attention or effort. Suburban poverty in Richmond has surpassed urban poverty in total numbers, presenting new challenges to the counties. As the population of suburban poor continues to expand, antipoverty resources and infrastructure – affordable housing, access to public transportation, and linkages between housing, transportation, and job centers – will only increase in importance across the region.
This is a guest post by Mike MacKenzie. Mike is a Housing Research Analyst at HOME. He joined the staff in January 2013 after spending 2012 helping HOME study how local governments identify and address fair housing needs. The former journalist and radio producer is passionate about sharing information and analysis that promotes transparency, informed decision-making, and accountability. Mike specializes in fair housing planning, the spatial impacts of local policy decisions, and the federal regulations that guide local and state governments. He received his Master of Urban and Regional Planning at Virginia Commonwealth University in 2011.