Growth of Compact Development Likely, Important for Reducing VMT

About two years ago, the Urban Land Institute published Growing Cooler: The Evidence on Urban Development and Climate Change,
which argued that it will be crucial to build cities in a more compact
fashion if the country hopes to avoid substantial growth in vehicle
miles traveled and carbon emissions over the next few decades.

At the time Sarah Goodyear summarized some of the findings:

The report cites real estate projections showing that two-thirds of
development expected to be on the ground in 2050 is not yet built,
meaning that the potential for change is profound. The authors
calculate that shifting 60 percent of new growth to compact patterns
would save 85 million metric tons of CO2 annually by 2030.
The
savings over that period equate to a 28 percent increase in federal
vehicle efficiency standards by 2020 (to 32 mpg), comparable to
proposals now being debated in Congress…

2883223507_b86ffc3f60_m.jpgLess of this, please… (Photo: SkilliShots/Flickr)

In other words, better development choices can and should be a key part of efforts to meet emission goals.

Then
about a month ago, the National Academies’ Transportation Research
Board released its own report on the effects of compact development. In
many ways it supported the conclusions of the Growing Cooler report. Increased density can produce significant reductions in VMT. And there’s this:

The TRB report suggests that if 75 percent of this new construction is
of a more compact variety, that emissions could be reduced 10 percent
or more from the baseline scenario (and that is not taking into
consideration the deployment of cleaner electricity generation and
other potential sources of savings).

Of
course, as some commenters noted at the time, the TRB report also
quoted figures for a future, a "moderate" scenario, in which a far
smaller share of new development was built compactly. On the whole, the
authors were a bit more conservative in their view of the effects of
increased density, and a good bit more conservative in their assessment
of how much density might actually be increased.

The
difference in conclusions is largely about the assumptions used to
build models. Yesterday, Reid Ewing, Arthur C. Nelson, and Keith
Bartholomew offered some comments on the TRB report’s findings, focusing on ways in which their assumptions differ.

For instance, with respect to the 75% conclusion quoted above, they write:

Their “moderate” scenario assumes that 25 percent of residential
development between now and 2050 will be compact, defined as twice the
density of trend development.  Their “upper-bound” scenario assumes
that 75 percent of residential development will be compact.  We, on the
other hand, assume that between 60 and 90 percent of all new
development through 2050 will be compact…

The NRC committee’s “moderate” assumption translates into as much as 80
percent of the built environment continuing to be sprawled, despite the
forces described above moving us toward more compact development.  For
instance, between 2010 and 2050, more single-person households will be
added than households with children. Moreover, roughly two-thirds to
three-quarters of the net gain in households between 2010 and 2050 will
be among households without children. Housing demand functions of
households without children and single-person households are different
from households with children.

In other words, much of the growth in low-density suburban development
was driven by an increase in the share of households with children (and
with multiple children). From the 1970s to the 1990s, the massive baby
boom generation was busy having and raising kids, and they
overwhelmingly opted to do their child-rearing in suburbs.

But
that same generation is now making the transition from suburban parents
to empty-nesters to retirees. At the same time, their children are not
getting married and having kids at nearly the same rate as they did.

Now, the decline in the share
of households with children will eventually be offset by increases in
the overall population, and so demand for traditional suburban
development will hold steady and eventually increase. But since so much
of the current built environment is low density, these demographic
shifts mean that most of the new housing built in the coming half
century will need to be more compact to satisfy household demand.

That
is, household types that tend to prefer more compact development
constitute a growing share of a growing population in a world where
existing housing supply is not oriented toward such demand. It would be
very strange indeed if only 25% of new development were of a more
compact sort.

So why did the
TRB report conclude, unrealistically, that levels of compact
development might be so low? Well, because the process of modeling the
future is hard, and scientists tend to be pretty conservative about it.
In particular, they’re often reluctant or unable to incorporate into
their models things that will probably happen, but which are
"exogenous" in nature — that is, outside the scope of the model.

Take
the above question. Just how compact new development can be will depend
in part on how successful cities are at changing land-use rules that
support low-density, car-oriented development. Given increasing demand
pressure for more compact housing in walkable areas (and the developer
money to be made building it) it stands to reason that local
governments will increasingly change their zoning rules to accommodate
denser building.

But there is basically no way to incorporate
this assumption into a model. It involves the potential for action
among thousands of disparate local government organizations, the
sitting members of which have yet to be chosen.

A cautious
modeler will be reluctant to go out on a limb on this point, and his
results will be conservative as a result. That’s part of the way
reports like this are written, but it doesn’t mean that we, as readers,
have to dumbly accept that what the report’s authors were forced to
assume is what the real world will actually be like.

When talking about development forms, there are many such assumptions biasing results toward conservatism.

For
instance, it has been very easy in recent decades for developers of
suburban tract housing or strip malls to obtain financing for their
projects. So common were such development types that Wall Street firms
developed standardized financing terms for builders, which served to
reduce financing costs.

Denser projects or in-fill projects,
by contrast, were less common and more complex. As a result, financing
for them required a certain amount of customization. Not only did this
frequently increase borrowing costs, it also led many finance firms to
abandon the business for less cumbersome opportunities.

Growth
in the share of development that is of a compact form will increase the
incentive to develop cheaper and more standardized financing options
for compact projects, thereby making the construction of additional
compact developments easier and more affordable.

But this
process is essentially unmodelable. Things will likely work this way,
but careful researchers simply can’t guess how financial products will
evolve in future decades and plug that guess into their models.

The
moral of the story is this: whether the topic is the effect of climate
change regulations, or high-speed rail system construction, or compact
development, experts will produce analyses that try to predict likely
outcomes and which will be widely circulated and quoted by policymakers
and journalists.

These reports are not the final word. They
have to be read critically, with an understanding of the limitations
faced by their authors. If you don’t get the constraints researchers
face, then you can’t understand their results.

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