OUTLINE OF CLASS TRANSPORTATION AND METRO POPULATION Agglomeration benefits and costs

1. TRANSPORTATION AND METROPOLITAN DEVELOPMENTKSG HUT251/GSD 5302 Transportation Policy and Planning, Gomez-Ibanez OUTLINE OF CLASS TRANSPORTATION AND METRO POPULATION Agglomeration benefits and costs Role of government in managing agglomeration Office rents as a signal TRANSPORTATION AND METRO LAND AREA/DENSITY Land use as a tool to shape transportation Transportation as a tool to shape land use Simple monocentric commuting model

2. METRO POPULATION AND TRANSPORATATION WHY CITIES? BENEFITS OF AGGLOMERATION • Economies of scale within firms • Agglomeration economies (economies across firms and households) • In production: • Within industries (localization economies--clusters) • Across industries (urbanization economies--diversity) • In consumption EMPIRICAL ESTIMATES OF AGGLOMERATION ECONOMIES • Typical: 4% to 20% increase with each doubling of metro population • Effects fall off with distance • Effects seem to vary significantly by industry

3. METRO POPULATION AND TRANSPORATATIONWHY CITIES? COSTS OF AGGLOMERATION • Intercity: transportation of raw materials to and finished product from metro area • Urban: • Scarcity of centrally located sites • Congestion, pollution, flooding CITY SIZE • Tradeoff between MB and MC of agglomeration • Market not necessarily optimal given that both benefits and costs involve externalities

4. METRO POPULATION AND TRANSPORATATION OPTIMAL CITY SIZE (AFTER ALONSO) MSC SOCIAL COST AND BENEFIT OF AGGLOM-ERATION MSB CITY POPULATION

5. METRO POPULATION AND TRANSPORATATIONROLE OF CITY GOVERNMENT MAXIMIZE AGGLOMERATION BENEFITS • Business climate • Identify, nurture clusters MINIMIZE AGGLOMERATION COSTS • Efficient infrastructure Transport, water, sewage, sanitation, flooding • Efficient land controls Titles, density and use controls, state-owned lands COSTS EASIER FOR GOVERNMENT TO INFLUENCE THAN BENEFITS?

6. METRO POPULATION AND TRANSPORATATIONROLE OF CITY GOVERNMENT MCefficient MC SOCIAL COST AND BENEFIT OF AGGLOM-ERATION MB efficient MB CITY POPULATION

7. METRO POPULATION AND TRANSPORATATION EXAMPLE: CENTRAL OFFICE DISTRICTS • WHY CENTRAL LOCATION Con: ● Multi-centric cities Pro: ● Highest rent = most acute tradeoff ● Reflects conditions in secondary centers • WHY OFFICES Con: ● Only one building type (5-10% of space) Pro: ● Every city has offices ● Office demand expanding (services) ● Mainstay of center • DATA Class A offices: primary business district, up-to-date systems, large and flexible floor plates, professionally managed

8. METRO POPULATION AND TRANSPORATATIONOFFICE SUPPLY AND DEMAND S PRIVATE COST AND WILLING-NESS TO PAY D SQUARE METERS OF CENTRALLY LOCATED OFFICES

9. METRO POPULATION AND TRANSPORATATIONIMPORTANCE OF INFRASTRUCTURE AND LAND REGULATIONS

11. TRANSPORTATION AND METRO LAND USE/DENSITYLAND USE/DENSITY ‹―› TRANSPORT LAND USE TO SHAPE TRAVEL BEHAVIOR PROPOSALS • Increase overall density • Jobs/housing balance • Neo-traditional neighborhoods, transit-oriented development (higher density, grid vs. cul-de-sac streets, local retail) • Smart growth (a little bit of all three) TRANSPORTATION TO SHAPE LAND USE TYPICAL CONCERNS: INCREASE OVERALL DENSITY OR REVITALIZE CENTER

12. TRANSPORTATION AND METRO LAND USE/DENSITYLAND USE/DENSITY ―› TRANSPORT • INCREASE OVERALL DENSITY IDEA: Replicate Europe (Newman and Kenworthy) PROBLEMS: • Other contributing factors? • Cost in other objectives? • JOBS HOUSING BALANCE IDEA: Shorten work trips LIMITATIONS: • Jobs-housing balance is self correcting • Residential location is not determined just by work trip

13. TRANSPORTATION AND METRO LAND USE/DENSITYLAND USE/DENSITY ―› TRANSPORT • NEO-TRADITIONAL NEIGHBORHOODS, TRANSIT-ORIENTED DEVELOPMENT IDEA: Make local walk trips and/or transit work trips easier (e.g., slightly higher density, grid streets instead of cul de sac, local retail) LIMITATIONS: • Modest effects • SMART GROWTH IDEA: Combination of all three LIMITATIONS: • Political acceptability • Modest effect on travel? • Modest savings in infrastructure

14. TRANSPORTATION AND METRO LAND USE/DENSITYTRANSPORT―› LAND USE/DENSITY • SCALE OF CONCERN • Can transportation policy influence how closely residences and workplaces locate to the metropolitan center or overall density? • THREE REASONS FOR MODEST EFFECT • PARALELLS WITH THE PAST MISLEADING • Past changes in accessibility larger (e.g. walk to streetcar to auto) • Other factors were involved (especially changes in income, industry mix)

15. TRANSPORTATION AND METRO LAND USE/DENSITYTRANSPORT―› LAND USE/DENSITY • ANY RESPONSE TO CHANGE IS SLOW • Building stock is fixed, durable, heterogeneous (Pickrell p. 413) • Neighborhood characteristics important and hard to alter (e.g., public schools, class and race) • TRANSPORT CHANGES ESTABLISH CONFLICTING INCENTIVES FOR RESIDENTIAL DENSITY E.g. an decrease in time or cost commuting to the CBD: • Allows CBD workers to move residences farther out, but • Increases the number of workers commuting to the CBD

16. TRANSPORTATION AND METRO LAND USE/DENSITYTRANSPORT―› LAND USE/DENSITY TRANSPORTATION MORE LIKELY TO AFFECT LAND USE • At small scale than large (e.g. which suburb not suburb vs. center) • In fast growing city rather than slow • Where transportation incentives support rather than conflict with other forces (such as income and industry mix)

17. MONOCENTRIC MODEL All work in CBD RESIDENTIAL LOCATION: How far out to live Commuting cost Housing cost Gross price of location = C+H Distance from CBD Distance from CBD Distance from CBD

18. SIMULTANEOUS CHOICE OF LOCATION AND HOUSING TYPE Commuting cost Housing cost Gross price Single family apt Single family apt Distance from CBD Distance from CBD Distance from CBD

19. RELATIONSHIP BETWEEN TRANSPORT COSTS AND LAND RENTS LOCATIONAL EQUILBRIUM (assuming all houses, households identical) Disequilibrium Equilibrium Components of gross price gross price gross price Structure cost Land price Commuting cost Distance from CBD Distance from CBD Distance from CBD

20. EFFECTS OF A CHANGE IN COMMUTING COSTS ON LAND RENTS Land rent pivots with Remember how land rent determined Increase in commuting costs Structure cost Decrease in commuting costs Land price Commuting cost Distance from CBD Distance from CBD

21. RESIDENTIAL LOCATION IF COMMUTING COSTS TO CENTER • DECLINE • Increases real incomes • Increases housing consumption −›move out • Increases value of travel time −›move in • May also reduce MC of commute −›move in • INCREASE • Decreases real incomes • Decreases housing consumption −›move out • Decreases value of travel time −›move in • May also increase MC of commute −›move in

22. WORKPLACE LOCATION MANY COMPETING CBDs AND SBDs • TWO TYPES OF INDUSTRIES • POPULATION SERVING • Retail sales, local services • BASIC OR EXPORT • Export oriented • Compete with other CBDs and SBDs

23. NET EFFECTS CHANGE IN COMMUTING COSTS TO CBD INCREASE DECREASE RESIDENCES OUT IN EMPLOYMENT • POP SERVING OUT IN • BASIC IN OUT NET EFFECTS • JOBS IN CBD MORE LESS • RES. DENSITY ? ?

24. METRO DEVELOPMENT AND TRANSPORATATIONCONCLUSIONS • City population and density a product of tradeoff between agglomeration economies and costs, a chief cost being urban transport and congestion • There is little reason to believe that the market will result in the optimal size or density since agglomeration economies and congestion costs are externalities • The underpricing of transport probably makes overall population and central employment larger than it should be, but the effects on residential density are ambiguous. • Beware of arguments that transportation policy will have a large effect on density. They are often based on misleading historical analogies, ignore the durability of the building stock, or offsetting effects. • Controls on land use or density may be a relatively expensive way to correct for transport mispricing