Urban Sprawl and the Greenness of Cities

1. Urban Sprawl and the Greenness of Cities
Jan K. Brueckner
University of California, Irvine
OECD Forum on Urban Green Growth, Spatial Planning and
Land Use
November 9–10, 2016

2. Market Failures and Sprawl
Cities grow spatially for good reasons: larger populations, higher
incomes, and better transportation to the suburbs.
But market failures (which cause the economy to do the wrong
thing) exist, and they cause too much spatial expansion.
One market failure comes from road congestion, with each
commuter failing to recognize that her presence slows down other
drivers.
Too much driving then occurs, so that commute trips are too long
and the city is too spread out.

3. Market Failures and Sprawl
Another market failure comes from a failure to account for the
pollution caused by urban transportation and residential energy
use.
Commute trips are then too long, dwellings are too big, and
buildings aren’t tall enough (height means greater energy
efficiency).
The result again is a city that’s too spread out.

4. Remedy for the Congestion-Related Market Failure
Congestion tolls can remedy the congestion-related market failure,
as in London, Stockholm and Singapore.
Tolls make driving more expensive, making cities more compact in
the long run.
Research shows that optimal congestion tolls would reduce the
urban land area by 12–20%.

5. Remedy for Pollution-Related Market Failure
Congestion tolls would also reduce pollution, but different
instruments would be better for specifically targeting it.
A higher gasoline tax is needed along with extra taxes on housing
and land (together, equivalent to a carbon tax).
My research shows that, to address urban pollution, the US gas
tax should be raised from $0.49 to $0.71.
Residential taxes on both floor space and land should be levied,
but at a rate much lower than existing US property taxes.

6. Remedy for Pollution-Related Market Failure
The result is a 9% shrinkage in the city’s land area and a 4%
reduction in emissions per capita.
Findings are based on a typical carbon cost of $40 per ton, but
they get more dramatic with an extreme $220/ton value.
The optimal gas tax then rises to $3.90/gallon (a European level),
and the real estate taxes quintuple.
The urban land area shrinks by 36% and emissions per capita fall
by 19%.

7. Loss of Open Space
Another environmental market failure is the developer’s failure to
consider the open-space benefits from land on the urban fringe
(lost after conversion to urban use).
This market failure is less clearcut than the others, since people
may not care much about access to fringe open space.
Local parks may matter more.
Regardless, development tax is remedy.

8. Greenbelts or UGBs as Remedy
Urban growth boundaries (UGBs), also called greenbelts, are a
different potential remedy for these market failures.
But they treat a symptom of market failures (sprawl) rather than
underlying causes.
Nevertheless, UGB does exactly the right thing under open-space
market failure.
But a UGB does not achieve enough densification in the city
center under other market-failures, relative to ideal remedies.
So UGB is not a good remedy for pollution-related urban sprawl.

9. Lessons
Cities are too spread out because of several market failures.
Addressing the pollution-related market failure through taxes can
shrink a city’s area by as much as 36%.
Shows that significant urban sprawl comes from ignoring the
effects of pollution.
Ignoring the congestion-related market failure also exacerbates
urban sprawl.
UGBs are not good remedies for either of these market failures.