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I just read this article. Although it's in a periodical related to government finance, it has clear urban planning conclusions as well. On a per-acre basis, urban mixed-use development generates the most property tax revenue by far.
The point is also raised that typically cities pay for "horizontal infrastructure" linking low-rise buildings together. In contrast, tall buildings have "vertical infrastructure" paid for by the developer directly within the building. Thus it's far easier for the municipality to recoup its initial infrastructure investment for a dense, mixed-use development.
I just read this article. Although it's in a periodical related to government finance, it has clear urban planning conclusions as well. On a per-acre basis, urban mixed-use development generates the most property tax revenue by far.
The point is also raised that typically cities pay for "horizontal infrastructure" linking low-rise buildings together. In contrast, tall buildings have "vertical infrastructure" paid for by the developer directly within the building. Thus it's far easier for the municipality to recoup its initial infrastructure investment for a dense, mixed-use development.
It's actually much more dire than you state. The suburban development gives the illusion of wealth. When the new infrastructure goes in (curtesy of the developer) and it's all new and you start collecting ad valorem taxes on the lots then a positive cash flow begins. And it encourages more and more development which because 1. it's greenfield, 2. it's cheap and 3. it's off the shelf plans that require little thought - it can happen very quickly. But what happens is the infrastructure ages and since it's not supported by nearly enough tax base because low density development is both cheap and not very desirable, the cash flow dips into the red. And that happens in development after development, subdivision after subdivision and cities are going to be in very bad shape with having only a small core that can subsidize a huge ring of low value sprawl and aging infrastructure.
It's actually much more dire than you state. The suburban development gives the illusion of wealth. When the new infrastructure goes in (curtesy of the developer) and it's all new and you start collecting ad valorem taxes on the lots then a positive cash flow begins. And it encourages more and more development which because 1. it's greenfield, 2. it's cheap and 3. it's off the shelf plans that require little thought - it can happen very quickly. But what happens is the infrastructure ages and since it's not supported by nearly enough tax base because low density development is both cheap and not very desirable, the cash flow dips into the red. And that happens in development after development, subdivision after subdivision and cities are going to be in very bad shape with having only a small core that can subsidize a huge ring of low value sprawl and aging infrastructure.
I know people are going to call you a hack for this, because of previous posts in UP and the specific language used here. All the same, I see your point.
Quote:
Originally Posted by Komeht
low density development is both cheap and not very desirable
The problem with desirability is that as it increases, the COL in the area increases and thus the cost of providing city services generally goes up for no net gain despite the increase in government income.
Others are going to say or think, "Of course houses are desirable. That's why so many have been built!" But, would they be as popular if they cost the homeowner the true and full price to keep their neighborhoods in "like new" (or, even, "good") condition? I think that if the levels of government and society didn't subsidize home ownership, private homes would be far fewer and more compact.
I know people are going to call you a hack for this, because of previous posts in UP and the specific language used here. All the same, I see your point.
The problem with desirability is that as it increases, the COL in the area increases and thus the cost of providing city services generally goes up for no net gain despite the increase in government income.
Others are going to say or think, "Of course houses are desirable. That's why so many have been built!" But, would they be as popular if they cost the homeowner the true and full price to keep their neighborhoods in "like new" (or, even, "good") condition? I think that if the levels of government and society didn't subsidize home ownership, private homes would be far fewer and more compact.
Run the tape in reverse. Would anyone ever consider purposefully blighting an area in order to make it more affordable?
Of course not. Increasing the value in housing by making it a better place increases the wealth of a community.
The municipalities have seen this coming, and have largely pushed the maintenance down to the homeowners. Most new developments have HOAs (at the direction of the municipalities) that deal with most of the local maintenance issues . Since the homeowners want to protect their property values, the pay the HOA fees necessary to keep up the subdivisions.
This can cause it's own problems (there can be petty dictator type issues), but largely, it works.
Quote:
Originally Posted by Komeht
It's actually much more dire than you state. The suburban development gives the illusion of wealth. When the new infrastructure goes in (curtesy of the developer) and it's all new and you start collecting ad valorem taxes on the lots then a positive cash flow begins. And it encourages more and more development which because 1. it's greenfield, 2. it's cheap and 3. it's off the shelf plans that require little thought - it can happen very quickly. But what happens is the infrastructure ages and since it's not supported by nearly enough tax base because low density development is both cheap and not very desirable, the cash flow dips into the red. And that happens in development after development, subdivision after subdivision and cities are going to be in very bad shape with having only a small core that can subsidize a huge ring of low value sprawl and aging infrastructure.
Of course not. Increasing the value in housing by making it a better place increases the wealth of a community.
No, it really does not. Assuming the whole of an area when up in value, not just an enclave, then the net benefit to the city is zero because the cost of providing services also goes up.
Somehow I suspect that the little 1 mile section of Eighth Avenue in Manhattan I traverse every day incurs more maintenance costs than the streets in my entire town, let alone my development.
Further, you all need to look at a municipal budget sometime, and see where physical infrastructure costs fit in.
Anyway, with suburban subdivisions, generally the developer pays for the initial infrastructure and then either the streets are dedicated to the town (at which point maintenance costs are handled by property taxes like everything else) or they aren't, in which case an HOA or condo association maintains them. As it ages... well, it's low-density, relatively low-traffic roads. Really not that expensive to repair. Water and sewer lines are just below the surface, and are typically (though not always) funded through a utility corporation. Gas, same thing, though almost always a utility.
The municipalities have seen this coming, and have largely pushed the maintenance down to the homeowners. Most new developments have HOAs (at the direction of the municipalities) that deal with most of the local maintenance issues . Since the homeowners want to protect their property values, the pay the HOA fees necessary to keep up the subdivisions.
This can cause it's own problems (there can be petty dictator type issues), but largely, it works.
HOAs don't, by and large, maintain the heavy infrastructure (roads, water, waste water, sewer, power) - that is turned over to the municipality upon completion and the municipality assumes both policing and maintenance of the road - that is the model that has been used to grow cities for the last 60 years.
HOAs trim hedges, mow lawns, plant daises, fix signage and whatnot - all that is relatively cheap. If they had to maintain the roads the HOA fees would be so onerous as to make the subdivisions unmarketable - remember, every single one of the home owners is also paying hefty property taxes to the city. If they had to pay for their infrastructure they'd in effect be paying twice.
In any case, it's a ponzi scheme that only works so long as you grow fast enough to hide the ever increasing red tape. When the pace of growth slows to the point where the city is in the red on infrastructure then a fast downhill slope is quickly reached. Just ask Detroit what that feels like when you can no longer keep up with basic infrastructure.
HOAs don't, by and large, maintain the heavy infrastructure (roads, water, waste water, sewer, power) - that is turned over to the municipality upon completion and the municipality assumes both policing and maintenance of the road - that is the model that has been used to grow cities for the last 60 years.
HOAs trim hedges, mow lawns, plant daises, fix signage and whatnot - all that is relatively cheap. If they had to maintain the roads the HOA fees would be so onerous as to make the subdivisions unmarketable - remember, every single one of the home owners is also paying hefty property taxes to the city. If they had to pay for their infrastructure they'd in effect be paying twice.
In any case, it's a ponzi scheme that only works so long as you grow fast enough to hide the ever increasing red tape. When the pace of growth slows to the point where the city is in the red on infrastructure then a fast downhill slope is quickly reached. Just ask Detroit what that feels like when you can no longer keep up with basic infrastructure.
Well it is a ponzi scheme and the homeowners DO pay twice. There are plenty of places where local government provides ZERO services and exerts control over the provision of services while taxing the residents of these subdivisions.
The homes are inflated in "value" to boot due to the cost of putting in the infrastructure. The homes aren't worth more, they simply cost more to build because the cost of installing infrastructure must be recovered from the home/lot sale. The homeowner, however, will have no ownership interest in the infrastructure. The false value results in higher taxes being paid and other property owners end up having "comparables" that aren't really comparable.
There are several subdivisions with private roads that will have to be maintained privately until such time as they can be turned over to and accepted by the county or city for maintenance. The true cost of those roads is not known by homeowners until way down the line.
The developer will ensure the HOA assessment is low initially in order to facilitate home sales. The HOA will be an involuntary membership corporation. A lien will be placed on every lot with a requirement to pay assessments for the HOA's liabilities. The developer's lots will be excluded from this obligation so long as the lot is owned by the developer. The developer will control the HOA and will saddle the HOA corporation with numerous liabilities - all to be borne by the homeowners through assessments and liens on their homes. The cost of maintaining the roads is high but won't be apparent to homeowners until the maintenance issues start appearing - usually after the developer has exited the picture.
There is a federal law that mandates disclosure of these costs: The Interstate Land Sales Full Disclosure Act. However, there is an exception to the disclosure if the purchase of the lot also includes a requirement that a house be built on the lot within 2 years. You'll find most of the "master planned" subdivisions avoid the federal disclosure law by only selling lots tied to a construction contract from one of the production home builders. By the way, the Act is also applicable to condominiums and there are a number of Austin area condo developers that did not provide the required disclosures nor place prospective buyers on notice of the Act.
Well it is a ponzi scheme and the homeowners DO pay twice. There are plenty of places where local government provides ZERO services and exerts control over the provision of services while taxing the residents of these subdivisions.
The homes are inflated in "value" to boot due to the cost of putting in the infrastructure. The homes aren't worth more, they simply cost more to build because the cost of installing infrastructure must be recovered from the home/lot sale. The homeowner, however, will have no ownership interest in the infrastructure. The false value results in higher taxes being paid and other property owners end up having "comparables" that aren't really comparable.
There are several subdivisions with private roads that will have to be maintained privately until such time as they can be turned over to and accepted by the county or city for maintenance. The true cost of those roads is not known by homeowners until way down the line.
The developer will ensure the HOA assessment is low initially in order to facilitate home sales. The HOA will be an involuntary membership corporation. A lien will be placed on every lot with a requirement to pay assessments for the HOA's liabilities. The developer's lots will be excluded from this obligation so long as the lot is owned by the developer. The developer will control the HOA and will saddle the HOA corporation with numerous liabilities - all to be borne by the homeowners through assessments and liens on their homes. The cost of maintaining the roads is high but won't be apparent to homeowners until the maintenance issues start appearing - usually after the developer has exited the picture.
There is a federal law that mandates disclosure of these costs: The Interstate Land Sales Full Disclosure Act. However, there is an exception to the disclosure if the purchase of the lot also includes a requirement that a house be built on the lot within 2 years. You'll find most of the "master planned" subdivisions avoid the federal disclosure law by only selling lots tied to a construction contract from one of the production home builders. By the way, the Act is also applicable to condominiums and there are a number of Austin area condo developers that did not provide the required disclosures nor place prospective buyers on notice of the Act.
By the time the infrastructure maintenance problems occur (at least in any incorporated area - I'm not talking about far off hinterland developments outside of a municipality) the costs will be borne by the municipality. Once the infrastructure is in place it looks like a cash flow positive situation for a while, but the real costs are not apparent at that time and the tax base completely insufficient - so the municipality ends up bleeding a little red on each one of these subdivisions and cumulatively it can have devastating impact on city coffers. Of course, the illusion can be maintained as long as the pattern of new growth can mask the ever growing river of red ink of these developments. Of course, that just kicks the can further down the road and makes the final bill that much more daunting when it finally comes time to pay the piper.
Now there might be HOAs that are completely private and maintain their own infrastructure but these wouldn't then be within municipalities where they're also paying a huge property tax bill.
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