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Old 06-20-2011, 10:09 PM
 
8,328 posts, read 14,561,754 times
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This very interesting series of articles was posted on the "Strong Towns" blog: comparing the modern real estate development/suburban sprawl model to a Ponzi scheme.

The Growth Ponzi Scheme, Part*1 - Strong Towns Blog - Strong Towns

The Growth Ponzi Scheme, Part*2 - Strong Towns Blog - Strong Towns

The Growth Ponzi Scheme, Part*3 - Strong Towns Blog - Strong Towns

The Growth Ponzi Scheme, Part*4 - Strong Towns Blog - Strong Towns

The Growth Ponzi Scheme, Part 5*(finale) - Strong Towns Blog - Strong Towns

Quote:
The underpinnings of the current financial crisis lie in a living arrangement -- the American pattern of development -- that does not financially suppport itself. The great experiment of suburbanization that America embarked on following World War II has no precedent in human history. As it enters its third generation, the flawed assumptions that were overlooked are now coming back to bite us in a cruel way. Like any Ponzi scheme, there is only one way this ends.

In the great American experiment of suburbanization following World War II, we redirected our county's extensive resources into a living arrangement unseen at any point in human history. We abandoned thousands of years of history, knowledge and tradition in building cities and towns in order to try this new -- and completely untested -- approach.


In a way, this was an odd thing for such a pragmatic generation, having been conditioned on financial depression, scarcity and war, to undertake. I don't think they ever saw it that way, however. The Great Depression had cut short efforts to improve the industrial city. With the automobile offering the promise of mobility for all, it was seemingly within our grasp for each American family to one day live the life of European royalty, complete with a country estate outfitted with all the modern trappings. America's ascendancy and absolutely financial domination worldwide made this dream appear possible. We likely never stopped to think it through.


What is more puzzling -- at least to those that think about it -- is how there has been so little questioning of the logic behind this arrangement. American suburbanization is a grand experiment, but one where the hypothesis -- suburban development provides prosperity -- is never really tested. It is basically a law, not a theory, that has crept into our ethos. It is only the collapse of the housing market, along with the much less talked about but even more consequential collapse of the commercial real-estate market, that has allowed critics of suburbanization to avoid the label "kook".


Suburban development has become equated with the American dream. It's continual propagation is nearly unquestioned. Even those who think we are in a deep financial hole that will take years to correct ultimately envision "recovery" to include a return to building more and more of this same pattern. But is that even possible?
This makes a lot of sense to me--it is similar to the "Growth Machine" theory first proposed by Harvey Molotch: Cities build suburbs at the behest of development interest in order to generate development fees, which means they can keep property taxes low, until the development fees are spent, necessitating either raising property taxes or more development. Raising taxes gets city council and mayors voted out of office, and approving development attracts support of real estate developers--resulting in another cycle of development, until a city's infrastructure costs become so high that more development ends up requiring so much infrastructure that the fees don't cover costs anymore--or the city runs out of places to develop--resulting in a collapse of city income. It's just like a Ponzi scheme--it works until you run out of suckers willing to chip in their cash, then the whole thing collapses.
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Old 06-27-2011, 12:11 PM
 
Location: Fairfax County, VA
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I am going to eventually read those soon. Thanks for posting them.
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Old 06-27-2011, 08:57 PM
 
Location: Sinking in the Great Salt Lake
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It is obvious our current system depends on perpetual growth to survive, and everyone knows nothing can actually grow in perpetuity, so the question remains:

Why do we keep trying? Are we stupid or something?

It's long past time for a new way.
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Old 06-27-2011, 11:50 PM
 
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People really want to believe they can get something for nothing, and people who are comfortable tend to assume that their comfort is a birthright. It's human nature, perhaps.
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Old 06-28-2011, 06:14 AM
 
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Economic growth is essential to maintain the number of jobs we have, and more to absorb the new entrants to the labor force. Homebuilding used to be a good source of growth but is near death for the past few years. Plus the population is still growing. It is estimated that 100 million will be added in the next 50 years. That is like adding a city the size of Indianapolis every six months. Clearly we are not building that.
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Old 10-20-2012, 10:43 PM
 
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Citiwire.net In an Austere Era, Sprawl is Simply Too Costly

Here's another article where there term "ponzi scheme" is used to describe using new development to subsidize current costs. He says that smart growth is a better value for taxpayers.
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Old 10-21-2012, 08:51 AM
 
Location: Thunder Bay, ON
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Chuck Marohn looked at the ability of certain suburban developments to pay for themselves, one of them was his own street. I think he mentioned the houses were on lots of about 5 acres and worth $250,000. That's $50,000 of property value per acre. The result was that it didn't even come close to paying for itself through taxes.

However, not all suburban development is equal. In Toronto, new suburban development is roughly along the lines of $750,000 homes on 1/8 of an acre or $500,000 on 1/12 of an acre, or around $6,000,000/acre. I suspect a lot of suburbs of major metropolitan areas are not overly different, I'd expect at least $1,000,000/acre for the NW, Florida and SW. So it's a completely different situation than the small town exurban development Chuck Marohn looked at. Mind you, that's for new construction, as it ages, the value often decreases, but it would still be orders of magnitude more than small town exurbia. These denser suburbs do require a lot more services per acre, with a denser road network, more highways, transit, and a lot of costs are not related to density but to population, such as paying teachers. I would be interested in knowing how this denser kind of suburban development compares.

The more traditional residential areas of Toronto, the ones built in the late 19th century for example have about $15-20,000,000 of property value per acre, and the highrise condo developments can be upwards of $100,000,000/acre. Although I think it's safe to say dense condo development requires much less road costs than suburbia, transit costs can be quite high. The amount of transit spending Toronto is expected to need over the next few decades (assuming 2-2.5 million pop growth) would likely require upwards of $1000/year per household.

Anyways, it is interesting to see what's happening to suburbs that run out of land. They do tend to run into financial difficulties. It's part of the reason why the former suburbs amalgamated into Toronto. Mississauga has largely run out of greenfields and is now facing it's first deficit and having to hike taxes after decades of abundance and low taxes. They're trying to encourage intensification, but from 2006 to 2011, the population of the built up area only increased by about 10-15,000 with the rest of the 45,000 population growth in the last remaining greenfields. From 1970 to 2000, Mississauga was growing by about 80,000 every 5 years.

Brampton, the suburb just North of Mississauga looks like it's at the same place as Mississauga 20 years ago, in fact it's been growing even a bit faster. 20 years from now, it will be near build out and have a similar population, a little over 700,000, with most of Brampton being typical Toronto suburbia, even more so than Mississauga. Brampton also has more workers than jobs, the opposite of Mississauga, so it won't get as much revenue from industry/commercial properties that require fewer services.
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Old 10-25-2012, 10:58 AM
 
2,553 posts, read 2,004,793 times
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It's on my to-do list to read these, based on your excerpt. Portraying it as a Ponzi scheme would make some sense.

But, what really interests me is that once the scheme has run its course, we haven't, largely, seen the usual reconsideration of assumptions; even as the marginal cost of further outward development exceeds the marginal benefit of it, and even as suburban areas run out of growth-fueled income, we have, as a society, continued to push the low-density growth model, attributing the inevitable failures of it to anything but that model.
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Old 10-25-2012, 11:15 AM
 
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Suburbs are absolutely sustainable, the next construction boom is going to come with the refinement of '3d printing of concrete' all of those 70s era ranches that no one wants to buy any more are going to be destroyed and new homes '3d printed' on the property for not much more than the cost of concrete, all the building costs will be for wiring/plumbing/fixtures. New building technologies that make it cheaper to go bigger will make space a premium and suburban living will contiguously be more and more attractive. Not to mention constant improvements in gas mileage and electric vehicles that make travel continuously easier.
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Old 10-25-2012, 11:40 AM
 
Location: Mt. Airy
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Quote:
Originally Posted by HiFi View Post
Suburbs are absolutely sustainable, the next construction boom is going to come with the refinement of '3d printing of concrete' all of those 70s era ranches that no one wants to buy any more are going to be destroyed and new homes '3d printed' on the property for not much more than the cost of concrete, all the building costs will be for wiring/plumbing/fixtures. New building technologies that make it cheaper to go bigger will make space a premium and suburban living will contiguously be more and more attractive. Not to mention constant improvements in gas mileage and electric vehicles that make travel continuously easier.
The next construction boom is going to come with even more financed debt and extensions on lowered interest rates (which have such a wonderful impact on business investments). There's nothing sustainable about modern American economics, especially when the federal government is pushing a particular industry. If another construction boom comes, expect an even more uncomfortable burst than this last one, which includes both new suburban and urban developments.
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