Introduction

Last week we looked at how and when sprawl-type development is a financial burden for cities. Today we consider the economic benefits of an alternative to business-as-usual sprawl. There are many options other than a typical sprawl subdivision beyond dense, high-rise urban living. Today we will focus on one called traditional neighborhoods. The intention is not to critique sprawl verses traditional on aesthetic grounds. Both have merits there. The focus in on the economics.

Traditional Neighborhoods

A traditional neighborhood is still relatively low density in its appearance. It will have a mix of small residential, commercial and institutional buildings sitting on a variety of parcel sizes. Buildings usually look similar from the street because of a uniform height and setback. Closer inspection will reveal a variety of building widths and depths that add variety to the product mix. The mix will also include homes with detached or shared walls. The image below is a Google street view of two neighborhoods this author has lived in. It nicely captures the distinctions that matter for our discussion today.

The top picture is a traditional neighborhood built in the 1920s in Richmond Virginia. Notice the variety of building types on the same block. To the right, you can see single family row houses. On the left, you can see a small multifamily building. The same street includes smaller row houses, detached mini-mansions and a corner convenience store / market. Some of the homes have garage apartments on the back alley.

The bottom image, a 1970s Dallas Texas subdivision, is a typical single-family home neighborhood with detached houses, rear entry garages and nice front yards occupying the setback from the road. Curb-loaded sidewalks border each street. Nearly all these homes have identical configurations: four bedrooms, three bathrooms and a two-car garage.

Subdivision vs. Traditional Neighborhood

Both neighborhoods are green, attractive and in high demand. Both can easily be considered suburban, compared to the dense, high-rise living advocated by many sprawl haters. Both are relatively easy to build and can be created with modern construction techniques. Prices will depend on the overall supply and demand. Interestingly, in many cities, the traditional neighborhood homes fetch higher prices implying that the market could support more of these products. Also, as we pointed out last week, traditional and subdivision neighborhoods can decline. There are run-down examples of both in most cities. Traditional neighborhoods do have some economic and financial benefits, however.

Private Benefits of Traditional Neighborhoods

Traditional neighborhood homes are generally on smaller lots. This reduces per unit costs. They use less land. Given standard construction practices, homes on these smaller lots also require smaller foundations and roofs. That lowers construction and maintenance costs. Developers install a little less utility infrastructure because of the shorter setbacks. For many households, living in this kind of neighborhood permits them to reduce the number of cars they own. Households will tend to drive each car they own less in these neighborhoods.

Public Sector Benefits

Transit services can cover traditional neighborhoods at a lower cost since more people are a short walk to the bus lines. City infrastructure maintenance costs are lower because local government inherits a smaller infrastructure inventory with a traditional neighborhood. Public services such as police and, especially fire protection, can be more efficiently delivered given the higher household and business density per acre. Neighborhood security is improved from visibility of the street from close-set buildings and higher pedestrian traffic. Other services such as libraries and parks can draw on a larger population in walking distance. More frequent, smaller parks can be smaller and easier to maintain and can sometimes even provided by the neighborhood itself since it serves a limited market.

Benefits to the Local Economy

Traditional neighborhoods offer other benefits that strengthen the local economy. This helps households and local government financial stability. These benefits include supporting: competitive industry clusters, mixed-income populations and local businesses.

Cities with a traditional neighborhood form can accommodate clusters of businesses in related industries in a small area. Historically, the private sector took advantage of this by quickly establishing districts for the various trades and manufacturers. The proximity of similar businesses lower the costs of securing workers, suppliers and customers. Proximity also supports innovation because spontaneous interaction of these entrepreneurs and workers in the neighborhood permits the rapid exchange of ideas. Today, highly competitive clusters of technology startups, designers, and other high-end services thrive in traditional neighborhoods for these reasons. This gives their home cities a competitive advantage.

Traditional neighborhoods provide a variety of housing types: rental units of all sizes, town houses and single-family homes. This lets a neighborhood accommodate residents at every stage of their life cycle as their incomes and space needs change. People can enter a community as young singles in studio apartments. Then they can start a family in a larger apartment or buy a home. When it is time to downsize, options are available. All survey evidence indicates that people generally want to age in place once they pick a neighborhood. Typical subdivisions with a single housing type are prone to booms and busts as the founding generation seeks more affordable options in their later years. Some of these subdivisions recover, some don’t. Traditional neighborhoods thus offer cities a more stable tax base compared to single-product subdivisions.

Finally, traditional neighborhoods support small-scale mom and pop businesses. They offer a variety of building types and many households in walking distance without the need for expensive parking. Most traditional neighborhoods support small clusters of retail with professional services, bars, restaurants, markets, repair shops, etc. These may occupy some or all four corners of an occasional intersection – not every corner. Scattered, lone commercial buildings are also typically available for businesses in these neighborhoods. These sites often are focal points for surrounding households.

The arguments here are not meant to say traditional neighborhoods are better in every case. Survey research varies, but there appears to still be a strong preference for single family homes. This product can easily be accommodated in traditional neighborhood form. Our argument is that cities have given up many economic benefits by changing their building and land use regulations to facilitate subdivision sprawl. Today, there is a growing market for traditional neighborhoods but city ordinances often make this form illegal to build. This is unfortunate because these economic benefits go right to the bottom line of private and public decision makers. What to do? We certainly can’t abandon eighty percent of our housing stock and build entirely new neighborhoods all at once. In the following weeks, we will look further at the costs and benefits of traditional and sprawl neighborhoods and at how communities can make changes that will put them on a more fiscally sustainable path.