Has Sprawl Recovered Enough for the National Economy?

by Christopher Leinberger | January 27, 2010

SprawlA new study conducted by researchers from the University of Alabama and University of Florida, sponsored by the Natural Resource Defense Council , shows that car-dependent communities have statistically higher rates of mortgage foreclosure than communities with multiple transportation options, such as transit, biking and walking. This also explains to some extent why across the country that “walkable urban” home values over the past two years have been flat or slightly down while fringe “drivable sub-urban” communities have suffered the worst price declines. 

The average American household spends 17 percent of their pre-tax income on transportation, 94 percent of this amount is for ownership and maintenance of cars. However when the data are disaggregated, drivable sub-urban households spend about 25 percent on transportation while walkable urban households only spend about 9 percent. This 16 percent difference represents well over a trillion dollars in households spending each year. If this spending was redeployed from cars to housing, education, and savings, it would be a major economic driver (excuse the pun). 

The major implication of this study is on the largest peace-time intervention in the American economy by the federal government, and, no, it’s not the bank bailouts. As reported on the front page of the Washington Post earlier this week, the Federal Reserve, the Treasury, and Fannie Mae and Freddie Mac have spent well over $1 trillion over the past year in propping up the securitized mortgage market and assuming untold risk of further mortgage defaults in the future. This is more than the bailout of the banks, AIG, and the car companies combined.

This mortgage bailout and the assumption of huge future risks were made in the hope that troubled housing, much of it on the fringe, will stabilize and regain its value. To some extent, it is a bet that sprawling development will recover its previously inflated value, a wager I’d decline. 

The Post story also mentioned that these federal props are being dismantled and will be gone by the end of the first quarter of this year. Two months later, the federal tax credit for the purchase of new homes will end as well. 

The obvious question is whether the housing market can stand on its own or will it push the economy back into recession; the feared “W” scenario experienced in the 1930s and in the early 1980s. The worst outcome of all would be if the bailout of housing, and particularly sprawl, left us without the resources to invest, especially on infrastructure and transportation choices, in the future. 

Source URL: http://www.newrepublic.com//blog/the-avenue/has-sprawl-recovered-enough-the-national-economy