American cities are paying too much for sprawling housing

The housing abundance movement has won more of the intellectual argument than anyone might have predicted a decade ago. Across much of American politics, even in Zohran Mamdani’s New York (listen, I love the guy), it is now at least possible to say out loud that we have too many pointless rules making it impossible to build enough housing. But that doesn’t settle the politically harder questions of…where exactly should the housing go, and what should it look like?

There has often been disagreement among housing reformers on that point — or at least a difference in emphasis. Should advocates try to add homes in already vibrant urban and suburban areas, which would add density but run into a buzzsaw of zoning codes and angry neighbors? Or should the focus be building at the urban fringe, in the form of sprawl, where land is cheap and plentiful and obstacles to building are fewer?

These approaches, known respectively as infill and greenfield development, aren’t necessarily opposed; with America millions of homes short, most housing experts would say that we need both. But there are many reasons to prefer building in over building out. Building on top of or in between existing development reduces the toll on the environment and wildlife, minimizes commute times, and better supports compact, walkable, livable communities. And a recent report from the Pew Charitable Trusts’ housing policy initiative, the World Resources Institute, and the research firm ECOnorthwest advances another, less appreciated reason to favor infill: It could help keep your city solvent and maybe even keep your property taxes down.

How? The researchers simulated different future housing construction scenarios across 10 diverse states, including fast-growing ones like Arizona and Texas and slower-growing states like Pennsylvania. They then compared the public costs of essential services like roads and sewer lines for homes built within existing communities versus those built at the edge of cities.

Each home developed near jobs, shops, and transit, according to the report, would require upfront infrastructure expenses about $21,000 less on average than those added at the urban fringe, amounting to a one-third reduction in the cost of that infrastructure. (The categories used in the report are more complex than just an infill-versus-greenfield split, but for simplicity, I’ll use these terms as shorthand.)

The ongoing maintenance for all that infrastructure, meanwhile, added up to about 50 percent less on average for homes built within established communities, while communities developed this way would raise about 13 percent more in property taxes per acre on average because they have more households concentrated in the same land area.

Urban analysts have made variations of this observation many times before, and the logic is mostly basic geometry: Compact housing development allows cities to spend less per person on physical infrastructure like roads, and to spread the costs of that infrastructure across more households. Yet American land-use policy is set up to discourage precisely that kind of growth. As a result, we build many more single-family homes than apartments or condos, and increasingly in low-density areas outside of major population centers.

Meanwhile, the US is fast hitting fiscal limits — higher interest rates, an aging population, and amid it all, a nationwide revolt over property taxes. Fiscally efficient growth matters more than it has in a long time, and that might be the invitation we need to rethink America’s abiding instinct to grow ever outward.

Sprawl costs cities more, but it’s not everything

To understand how this works, it helps to picture it through real-world examples: Take the largely middle-class suburb of University Park, Illinois, which is home to about 681 people per square mile, and compare it to nearby Chicago, which is nearly 18 times as dense. That means University Park serves many fewer people per mile of road or foot of piping, providing a thinner tax base to pay for the infrastructure on which the community depends.

As Pew’s report notes: “Home construction in established areas relies primarily on existing infrastructure and often includes apartment buildings, duplexes, townhomes, and accessory dwelling units (ADUs), all of which require less infrastructure per unit than detached single-family homes.” While the report relies on modeling, its findings comport with more empirically grounded research on the question.

Cheaper infrastructure, however, does not mean lower costs across the board. Arpit Gupta, an associate professor of finance at New York University Stern School of Business, has pointed out that physical infrastructure like roads, bridges, sewers, and water services makes up only a small share of local governments’ costs in the US. Social spending, on things like healthcare and education, are much more fiscally important. That’s one reason why even though the governments of blue cities like Chicago benefit from the economics of density, they are often costlier to build and live in, thanks to factors like higher public sector wages and more onerous environmental review and permitting processes.

Nevertheless, while a sprawling community may be able to shoulder the burdens of more extended infrastructure so long as it continues growing, should growth begin to stagnate, the costs of years of greenfield development can really start to hit. And in the US, one need not even venture outside the suburbs to see it. Earlier this year, I spoke with John Zeanah, the chief of development and infrastructure for Memphis, Tennessee, about what this pattern has meant for the city. “Memphis lived it firsthand,” he said. “There are significant costs associated with sprawl that ultimately are unsustainable.”

Many sprawling American cities — Houston, Dallas, Phoenix — are growing quickly in population, but there are also many others whose populations have stagnated or declined in recent decades and that are now burdened with figuring out what to do with an overly large geographic footprint. In the late 20th century, Memphis grew by literally annexing nearby unincorporated developments, but in recent years its population has been declining.

By 2015, compared to about 50 years prior, “the city’s land area grew by over 50 percent with virtually no population growth. This meant 50 percent more infrastructure to service and maintain,” Zeanah told me in an email. The costs of this go well beyond just hard physical infrastructure, Zeanah explained, extending to services like police, fire, and transit, all of which must serve a larger area than they would otherwise and need to be supported by a stagnant tax base.

Memphis is now trying to undo these mistakes. Its latest comprehensive plan, Zeanah wrote to me, recognizes that “the city’s most viable path was to concentrate investment in existing neighborhoods and corridors where land and infrastructure capacity was available, relative costs are lowest, and the return on public investment is highest.” In other words, exactly what Pew’s research points to.

Can we overcome the barriers to density?

The challenge is that American cities and suburbs hoping to make that philosophical change in how they grow — adding infill to already thriving neighborhoods rather than sprawling outward — face a gauntlet of regulatory and cultural barriers.

There are, of course, local zoning codes and parking minimums that bar dense home construction and have become a political albatross for cities trying to reform their approach to housing. There are NIMBYs who don’t want sudden changes to their proverbial neighborhood character and wish to push any development further afield. And municipalities also have structural incentives to grow outward, because it can be easier to find money for new infrastructure than for maintaining existing infrastructure. “Local jurisdictions can access funding for upfront infrastructure costs (from federal, state, and private sources) relatively easily but face limited options for paying for long-term maintenance, making greenfield development appear fiscally attractive in the short term,” Tushar Kansal, a senior officer for Pew’s housing policy initiative, said in an email.

Ultimately, fiscal sustainability may be a relatively minor argument in favor of building homes as infill in established neighborhoods, albeit one with particular salience at the moment, given the American cost of living crisis and anger about taxes. But the US remains a very rich country that can afford the material costs of sprawl and exclusionary zoning if we really want it.

The stronger case for infill is based not on fiscal thrift, but rather on human freedom, quality of life, and the bigger benefits to our economy of allowing population growth in our most prosperous cities. We should legalize more housing in places where people already live, because more people want to live there — and that alone should be enough.