Smart Growth and Economic
Prosperity: A Sourcebook
Part II
Created by Smart Growth America
with generous support from the William Penn Foundation
September, 2010
Two Basic Economic Arguments
for Smart Growth
1. Smart growth saves money.
2. Smart growth makes money.
1
What is Smart Growth?
• Development and redevelopment in or
adjacent to existing cities, towns and villages.
• A mix of uses in one neighborhood and a
more compact pattern overall to support
more economic and social activity.
• Roads and public spaces designed to support
convenient transportation choices.
2
Smart Growth Promotes
Economic Growth
•
•
•
•
•
•
Attracts private investment
Attracts employers and workers
Supports small businesses
Improves access to jobs
Increases property values
Provides greater stability in times of economic
uncertainty and rising energy costs
• Responsive to demographic shifts
3
Smart Growth Increases
I. Economic Development
Public investments in smart
growth stimulate private
investment.
4
Smart Growth Increases
I. Economic Development
See “Case Studies” for Examples
5
Smart Growth Promotes
Vibrant Economies
• Quality-of-place investments give regions a
competitive advantage in the new global
economy.
• Economic development that incorporates
smart growth strategies is more successful at
attracting and retaining a talented workforce
and new business.
6
Smart Growth
II. Attracts Talent
• In the last U.S. census, almost two-thirds
(64%) of college-educated 25- to 34-year-olds
said they looked for a job after they chose the
city where they wanted to live.
• Regions with a competitive advantages are
those that can generate, retain and attract the
best talent.
7
Attracting Talent:
Generation Y Demands Clean, Green
Places
• CEOs for Cities conducted focus groups of
college-educated recent movers in the 25 to
34 year-old age group & found a consistent
theme:
“They want to live in places that they can be
proud of, part of, and that are clean and
green”
8
Attracting Talent:
Young Professionals Demand…
• Opportunities for social interaction;
• Environmental quality—literally, the quality of
one’s surroundings, including both the built
and natural environment;
• Abundance of cultural amenities;
• Transportation options, including convenient
public transportation.
9
Smart Growth Draws
III. Successful Businesses
• Blockbuster Entertainment cited the Dallas Area
Rapid Transit as a major factor in establishing its
headquarters in the central business district near
Akard Station. The relocation brought 1,000
employees downtown.
• Software company Fast Enterprises chose Denver
over 36 other cities for its headquarters location.
The company sought a location near a transit
stop with coffee shops and restaurants nearby.
Fast Enterprises began hiring software engineers
at an average salary of $82,000.
10
Smart Growth Draws
Successful Businesses
• United Airlines chose to move its operational
headquarters from the Illinois suburb of Elk
Grove to downtown Chicago.
• Quicken Loans moved 1700 of its employees to
downtown Detroit in August, 2010. The company
located its workplace next to the city’s premiere
active public space, Campus Martius, which
recently received an award as the most
outstanding example of a public open space.
• Blue Cross of Michigan has plans to move 3,000
workers to downtown Detroit in mid-2011.
11
Smart Growth Draws
IV. Successful Retail and Small Business
Small business is
the primary engine
for economic
growth in the
United States, and
many of them rely
on people walking
by.
12
Case Study: Lodi, CA
Walkability Attracts and Sustains Small
Business
• Town of 60,000 launched $4.5M pedestrianoriented project
• Sidewalks widened, intersection curb bulbouts, street trees, lighting, benches
• Helped attract 60 new businesses, decrease
vacancy rate from 18% to 6% and increase
downtown sales tax revenue 30%
13
Case Study: Maryland
Smart Growth Delivers More People
A tale of two book stores:
• Bethesda store anchors a
walkable downtown shopping
area. Rockville store is in a
strip mall.
• The Bethesda store earned
15% more than Rockville in
one year and made 20% more
per sq. ft.
• People stay longer, spend
more and are more likely to
hang out in Bethesda.
Bethesda store
Rockville store
14
Smart Growth Makes Money By
V. Bringing People Together
The competitive advantages of bringing people and
businesses closer together include
•Larger markets allow producers to specialize,
reducing costs;
•Increased creativity results from exposure to new
ideas and perspectives;
•Increases access to labor markets; and
•Increases rate of knowledge transfer.
15
Smart Growth Promotes
Productivity and Innovation
• Doubling employment density improves
productivity by about 6%.
• Doubling of population density also improves
productivity by about 6%.
• Doubling employment density in urban areas
increases patent activity by 20%.
16
Case Study: Cambridge, MA
Bio-tech Firms Cluster in Kendall Square
• Over 150 biotech firms have located as close
as possible to Kendall Square (adjacent to
MIT) because of:
– Access to pool of talented labor
– Connections to research institutions and hospitals
– Creation of specialized institutions that provide
services to biotech firms
– Access to information/ease of information transfer
17
Smart Growth Promotes Productivity by
VI. Increasing Transportation Choices
18
Smart Growth Promotes
Stronger Economies by Saving Money
on Transportation
• Reducing driving by one mile per day per person in
each of the 51 largest metro areas would produce an
aggregate annual household savings on direct
transportation costs of $29 billion annually ($40 billion
when the time value is included).
• In most regions in the county, only a fraction of the
money spent on gas and vehicles stays in the local
economy. Building more compact, transit oriented
communities not only creates value and leverages
investment, it assures that more of the savings flows
back into the local economy.
19
Portland’s
transportation policies
save its residents $2.6
billion that can be
invested in the local
economy.
Source: “Portland’s Green Dividend,” Joe Cortright, CEO for Cities (2007).
20
Case Study: Chicago, IL
More Money in Commuters’ Pockets
Chicago commuters drive 2.1 miles less than
the national average, which translates into
direct household savings of $2.3 billion, of
which about $2 billion is available to be
reinvested in the local economy.
21
Case Study: Wisconsin
More Money in Taxpayers’ Pockets
• Public transit use saves Wisconsin riders and
taxpayers $730.2 million annually.
• As riders spend their out-of-pocket savings
elsewhere, the estimated total indirect effect
on the economy includes $1.1 billion in total
output, $163.3 million in tax revenue, and
11,671 new jobs created.
22
Case Study: Michigan
More Money in Taxpayers’ Pockets
• Michigan transit agencies accounted for 9,200 jobs in
2008, while adding $1.3 billion to Michigan's economy,
including savings to riders of nearly $350 million in fuel
and other transportation expenses.
• Every 10 jobs created in public transit generated six
additional jobs elsewhere.
• Bus systems in Michigan generate nearly $1.50 of
economic benefit for every $1 spent on bus services.
• Transit dependent riders generate $67 million in
economic activity.
• Without transit, home care and public assistance cost
would have increased by more than $50 million.
Smart Growth Promotes
VII. Strong Metropolitan Economies
Regions work best with strong central cities.
They serve as
•Hubs for critical infrastructure networks;
•Centers of government, hospitals and schools;
•Primary employment centers; and
•Primary engines of innovation and economic
growth.
24
Smart Growth Promotes
Regional Access
Increasing regional accessibility
• Reduces unemployment and underemployment
by providing access to jobs;
• Spurs local and small business creation by
providing access to retail, recreation and
entertainment opportunities; and
• Increases productivity by reducing traffic
congestion, delays, productivity losses, accidents
and pollution.
25
Smart Growth
VIII. Creates More Jobs
26
Smart Growth Creates Jobs
through Fix-It-First Investment Policies
Employment Impacts per $1 Billion in Infrastructure Spending.
Category
Direct and
Indirect
Plus Induced
Domestic Content of Inputs
Energy
11,705
16,763
89.4%
Transportation
13,829
18,930
96.8
13,714
18,894
96.8
New Construction
12,638
17,472
96.7
Repair Work
14,790
20,317
96.9
Rail
9,932
14,747
96.9
Mass Transit
17,784
22,849
96.7
Aviation
14,002
19,266
96.9
Inland Waterways
17,416
23,784
97.3
School Buildings
14,029
19,262
96.9
Water
14,342
19,769
96.9
Average Roads and
Bridges
27
Smart Growth Creates Jobs
through Increased Investment in Public
Transportation
Type of Project
Recovery Act Funds
Associated With
Projects Under
Contract
Direct, on-Project
Job-Months per
Jobs Created or
$Billion
Sustained (FullTime Equivalent Job
Months)
Public
Transportation
$4,405,188,041
72,328
16,419
Highway
Infrastructure
(STP Funds)
$15,809,805,858
138,831
8,781
Source: “What We Learned From the Stimulus,” Smart Growth America, 2010
28
Smart Growth Creates Jobs
through Investment in Rail
Infrastructure
• Rail investments create more jobs per dollar spent than highway
investments because more of the money goes to labor-intensive
products like rail cars and track rather than land.
• $1 billion of rail capital investment creates about 7,800 green jobs.
• Including the re-spending effects, $1 billion of rail investments
creates between 12,300 to 26,600 total jobs.
• Rail capital investments create and sustain proportionately more
medium-wage jobs - and fewer low-wage jobs - compared to the
broader economy.
• Rail capital investments benefit those hardest hit by the recession,
providing a higher proportion of employment to workers without a
college degree.
29
Smart Growth Creates Jobs
by Improving Access to Jobs
• Unskilled workers are often concentrated in
center cities or scattered in outlying suburbs.
Because of the lack of public transportation,
these workers are isolated from new job centers.
• In some metropolitan areas, lack of access to jobs
can actually contribute simultaneously to both
labor shortages and unemployment or
underemployment.
• These access issues create a drag on regional
economies.
30
Smart Growth Creates Jobs
by Increasing Transit Access
• Increasing transit frequency provides access to
10 times more jobs for low income workers
within the same travel time.
• Increasing transit accessibility to jobs reduces
time spent on welfare.
31
Regional Access
Improves Returns on Transit
Investments
• Every $1 invested in reverse commute transit
services provides $1.90 in benefits to the
average user and $1.50 to society. That’s a
return of 340%, and reflects increases in
salaries, increased income tax revenues,
money saved on social services and avoided
external costs of using other forms of
transportation.
32
Case Study: Wisconsin
Benefits of Improved Access to Jobs
By providing better access to jobs, including
access to higher paying jobs, public transit
programs in Wisconsin saved the state $74
million on employment-related social service
costs.
33
Smart Growth Promotes
IX. Stability In Times Of Economic
Uncertainty
• Smart growth development holds value better in downmarkets.
• Foreclosure risk decreases with proximity to core urban
areas and transit nodes.
• Construction downturns in urban areas are less
pronounced.
• Risks from rising energy prices are reduced.
• Agricultural and forestry base is maintained, which
contributes to diversified economies.
• Efficient use of infrastructure capacity reduces fiscal impact
of economic downturns.
34
Smart Growth Promotes
Stable Property Values
“[T]he subprime crisis was most pronounced in places
where poorer people could afford to buy—largely in
the distant suburbs where land was cheap and builders
were active. In the past decade, empty-nesters and
young professionals have returned to cities and have
shown a willingness to pay a premium to be close to
their offices and to stores, coffee shops, bars, music
venues, and other entertainment. Downtowns have
come to life while suburban malls are struggling.”
Source: “The Unraveling of the Suburban Fringe,” Bloomberg Business Week, July 12, 2008.
35
Case Study: Phoenix
Home Values and Sprawl
36
Case Study: Philadelphia
Home Values and Sprawl
37
Case Study: Miami
Home Values and Sprawl
38
Smart Growth Promotes
Lower Foreclosure Rates
Spatial distribution of homes in various stages of foreclosure in
metropolitan Washington, DC (Number per 10,000 units)
Counties organized by proximity to DC core.
39
Smart Growth Promotes
Stable Property Values
Change in single-family home prices between 2005 and 2007.
40
Smart Growth Neighborhoods
X. Meet Market Demand
• Consumer surveys consistently show that about one-third of
the current home buying market wants the smart growth
product.
– Demand varies according to geography, age of respondents, and
household status (eg. single, growing family, etc.).
• To meet this demand, about 600,000 units in smart growth
neighborhoods would need to be produced annually
nationwide.
– It is difficult to measure actual production, but real estate experts
conclude that far fewer units come on the market each year.
Source: EPA White Paper: The Market for Smart Growth. Gregg Logan, Robert Charles Lesser & Co. 2007.
41
Buyers Prefer Smart Growth
Community A: standard suburban
development: large lots, no
sidewalks, amenities a few miles
away, commutes to work of 45
minutes or more, no public
transport
Community B: TOD-based, mix of
unit types, sidewalks, shopping,
schools within walking distance,
commutes less than 45 minutes,
high-quality transit.
• 55% preferred Community B vs. Community A.
• Percent increased to 61% of those thinking of
buying in next 3 years.
Source:Belden Russonello & Stewart, National Community Preference Survey, National Association of Realtors ® and Smart
Growth America (2004)
42
Buyers Prefer Smart Growth
• Downtown and in-town housing has topped
the list of hot markets for the ULI Emerging
Trends in Real Estate for several years.
• In 2003, sales price per sq. ft. for attached
housing was higher than for detached housing
for the first time in history.
43
Smart Growth Neighborhoods
Meet the Needs of Older Americans
• A 2008 AARP poll found that 44% of elderly say
that they do not have enough access to public
transportation.
• 54% said that they would walk, bicycle and take
transit more if their streets were improved.
• In 2000, 71% of elderly polled indicated transit
access was a priority.
44
Smart Growth Neighborhoods:
Limited Supply
Continued sales of low-density, single-use
subdivisions are not evidence that it is the only
product buyers want.
•“People will accept the product they’re offered if
they have no other options.”
•“If a builder or developer offers choices that better
meet consumer preferences, they will have an
advantage over other providers, especially where
supply is limited as with smart growth products.”
Source: EPA White Paper: The Market for Smart Growth. Gregg Logan, Robert Charles Lesser & Co. 2007.
45
Smart Growth Neighborhoods
Meet the Coming Demand
• The US will add about 100 million people in the next 20
years, or about 40 million new households. 35 million
households (about 88%) will not have children and about
13 million, or about 1/3, of these new households will be
single person households
• By 2025, the demand for attached and small-lot housing
will exceed the current supply by 35 million units (71%),
while demand for large-lot housing will fall short of current
supply.
• By 2030, there will be about 363 million people and at least
half of them will want to live near transit.
• These projections were made prior to the recent
fluctuations in energy prices and the housing crisis.
46
Smart Growth Neighborhoods
Meet the Needs of Today’s Households
Households are smaller and more fluid, with fewer households composed of married
couples with or without children. Yard size and schools become less important, while
access to jobs and restaurants becomes more important.
Household Composition,
1950 and 2008
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
1950
Married w/Children
Married, no kids
2008
Other families
All other households
Chart Source: National Association of REALTORS training, Smart Growth for REALTORS,
Elizabeth Schilling (forthcoming)
47
Building Permits Bear Out
Projected Demand for Smart Growth
Percentage of residential permits pulled in central cities and
older suburban cores.
48
Smart Growth Neighborhoods
Are Under Construction
Percentage of residential permits pulled in central cities
and older suburban cores (cont’d).
49
Smart Growth Neighborhoods
Attract Price Premiums
• Home buyers pay a 15.5% premium for a set of six
smart growth characteristics, including
•
•
•
•
•
•
pedestrian accessibility to to commercial use;
mixed land use;
proximity to light rail, subways and trolleys;
greater street connectivity;
more streets and shorter dead-end streets; and
more and smaller blocks.
50
Smart Growth Neighborhoods
Sustain Value over the Long-term
People pay more for homes in new urban
neighborhoods than in conventional suburban
neighborhoods.
•A smart growth premium of 21% for Kentlands
and 18% for Lakelands over surrounding
neighborhoods.
•The premium was sustained over time.
•The smart growth price premium held during
the economic downturn.
51
XI. Value of Transit Oriented
Development
• See Separate Powerpoint
52
Smart Growth Adds Value through
XII. Walkability
The “walkscore” is a measure of proximity
to popular destinations.
Bloomfield, CT
Walkscore = 68
City average = 49
Kalispell, MT
Walkscore = 97
City average = 65
Knoxville, TN
Walkscore = 89
City average = 47
53
Smart Growth Adds Value:
The Walkscore Premium
Buyers will pay measurably more for homes with higher- than-average Walkscores,
just as they would for an extra bathroom or granite counters.
“Walking the Walk”, August 2009, p23
54
Smart Adds Value to
Commercial Development
Office and retail properties with a Walkscore
of 80 were worth between 29% and 40% more
than properties with a Walkscore of 20. These
properties also had lower capitalization rates
and higher incomes.
55