Lec-5 Urban Spatial Structure and Urban Sprawls

Lec-5 Urban Spatial Structure and Urban Sprawls Engr. Dr. Attaullah Shah

Some basic questions • Why the new townships in Peshawar have been developed in the Hayatabad and Regi Lalma? • What is the impact of high prices of plots on the density of population in Hayatabad? • With the introduction of Property Tax and Sales Tax on transfer of plots, what can we expect about the new urban developments in the city? • If the City Government imposes, traffic congestion fee on the commuters coming in the vehicles, how can it help is restraining the urban sprawl. • What is effect of higher property tax and plot prices on the density of the Hayatabad town ships Peshawar • What is advantage of zoning of Urban lands?........

Consumer’s Choice

Analysis of Housing Production • Housing developers produces housing floor space using a variety of inputs such as land, building material, labor, machinery etc. • If the floor space of house is assumed to be produced by land and building material only. Q= F(N,l) The Floor space Q is function of land N and building material l This is sometimes called the “Capital” in the housing production • The production have several properties which are also applied to housing production such as • The marginal product of capital: If the land input is fixed, then additional doses of building material (Capital) leads to smaller and smaller increases in the floor space • The building becomes taller and taller and there is always limitation in increase of the building height and even floor space as we go up • The returns are also diminishing due to the fact that for taller buildings more material in consumed in the foundation beams and columns

Economies of scale in the building production • Doubling the inputs of land and capital of mterial would increase the floor space by more than double-Why? • The housing developers will choose the input of land and capital to maximize profit, leading to structure of particular heights. • The developers will also set the size of dwellings within the structure but will keep the consumer choices in mind. • Hence the floor space is divided into the of the size that the consumers desire/prefers at particular location. • If the developers leases the land from its owner ( As the land located in the cantonments) and pays the cost of capital (Material). If the rent of the land is r and input price is r then then the developer production cost is iN+rl • The value of i is though constant but the spatial variation in rent of land is necessary to produce housing throughout the city. The rent close to the CBD is high where as the land rent is low in the suburbs

Developers will compete vigorously for the land in central location because of high floor price • Developers low demand for land away from central area makes lower rent of land at suburbs • The developer will bid up the land price to the extent where profit is exhausted. • This leads to another urban spatial structure: Declining land rent (land value) as distance from the CBD increases as already discussed. • When developers move close to CBD, the land increases substantially and the developers optimize the land by putting more material inputs (capital) and tends to increase the height of the building. This leads to taller buildings. • Moving away from the CBD, would give the developers to use the land more lavishly and larger houses are built with low building heights

As first choice, the developer goes for central city location • The iso-cost line is steep as ro is high. The bundle of (lo,No) would lie at the point of tangency • If the developer moves away from the CBD to suburbs • The iso costs line is flatter and the tangent point move down, showing more land and less capital. Hence the developer would build garden apartments, Green acres, garden residencia, Garden Towns etc • Building highest is reflected in capital per acre of land which is the N/l • The No/lo is steep than N1/l1 Hence the building heights tends to be low as we move away from CBD to suburbs

Population density and spatial structure • Population density D is No of people per acre (area) • If each dwelling is space per person, then density is simply dwellings per acre • In CBD more hieght and less floor area per person (dwelling), the density will be more, whereas in the suburbs Low height and larger dwellings, the Density is less. The urban planner uses the regression equation for predicting the density in different parts of the city and suburbs

Logical structure of the Urban Spatial Model

Intercity Prediction • Size of land area occupied by a city determines how much housing the city contains • The city land areas is the result of competition between housing developers and farmers for use of land • If the rent of agri and rent rA is high, then it will be productive and the farmers will be willing to pay for that or when the crops grown on the land is having high price. • If the agriculture rent is assumed to be constant whereas the land cost of other land is decreasing with distance • A land owner will offer the bidder who offers more. At the equilibrium point both the farmers and developers pay equal • At the lesser distance developers would pay more and beyond that the farmer would pay more. • The city supply demand equilibrium depends on i. Population ii. Agri rent iii. Commuter cost • iv. Income

Effect of population on Agriculture land • Suppose a city is equilibrium faces one time increase in the population L, which has the following : • The housing stock gets insufficient and excess demand is created • Excess demand increases the per sft price of housing p at all locations • The dwellers now choose smaller sizes of houses and q falls at all locations, unless the city is rebuilt • This leads to boost in the housing profit and developers would compete more rigorously for land, increasing the rent land at all locations • - Developers would start high rise building to economize the land use by constructing taller buildings • - With taller buildings and smaller dwellings, the No of people per acre of land would increase, leading to higher density at all locations D of the city • - This increase in land rent from r to r1 the urban rent curve shits up

If the rent of agriculture land increases, from rAo to rA1 would raise the land • Then x0 decrease to x1. That would mean the exiting houses in the area between x0 and x1 are bulldozed and the land is converted to agriculture • This would decrease the housing stock and the demand for houses would increase • This would push the developers to reconstruct houses on some part of vacated land again and the urban agriculture divide is relocated between the two points. - • This takers us to conclusion that a city with higher cost of agriculture will differ fm the city of the same population but where the agriculture land rent is low. • The city with high land rent will be spatially smaller and the density will be more, taller building and smaller dwellings as compared to the city with low land rent and low density nature of desert cities • Please comment and give an exmaple?

The Effect of Commuting cost and income When the commuting cost increases due to increase in the gasoline prices etc, people would prefer to come closer to the CBD. As a result the housing price near CBC would increase and decrease in the suburbs The developers have high profits near CBD and lower profits at suburbs The land competition is then higher near CBD and lesser near suburbs hence the location reduces from x0 to x1 . - • Hence the higher commuting cost would push the people inside and the city would shrink • The dwelling size would reduce near the centre and population density would also increase near the centre • For example the gasoline and toll taxes are very high in European cities as compared to USA, which makes the dwelling size smaller, rents high and buildings taller at the central city than USA cities • The increase in income would have opposite effect-Why?

Migration between cities • When L, rA, y or t increases, the welfare of city measured as common utility level is affected • When L increase the resulting increase in the housing pmakesthe city cost of living high and the people having the same level of income are now worse off. • With increase in the income of people makes them better off. Thus the difference between L and y in two cities can lead to welfare difference and people would migrate from low welfare city to high welfare city, till equilibrium is reached • People migrate from low income cities to high income cities and the high till such time that the city population has grown to the level when the advantages of high income are offset by the increase in population

Summary

Urban Sprawl and Land Use Control • Critics of the Urban Sprawl argue that: • Expansion consume too much agriculture land leading to loss of farmland • The long commuting from the urban centers leads to traffic congestion and pollution • Growth of urban fringe leads to less incentives for development of areas near city centers, thereby decaying the downtown • The low density suburban sprawl reduces the social interaction required for healthy society • Life becomes more automobile dependent depriving the people from the benefits of exercise in the open areas and thereby leading to obesity and health problems • During 1976-1992, the US urban rate grew at 2.5 percent per year. The rate of spatial growth has far exceeded the population growth rate, showing a high growth rate of urban sprawl

Market failures and urban sprawls • The amenity benefits generated by the open space are lost when these spaces are used by urban development • The planner would like to convert the agriculture land into urban use when the urban rent (r) is more than the sum of the agriculture land rent and lost open space benefits • r > rA +b • Hence the boundary of the city is set at r > rA +b and not r > r= rA • The higher effective agriculture land having both the benefits of agriculture use and open space amenities would lead smaller cities. • Hence in the presence of open space amenities, the socially optimal city is spatially smaller than the city generated by free market equilibrium

If the land tax of b is used, then the net land rent is r-b • The land owner would switch the agriculture land to urban use if r-b > rA. The city would expand to the extent when r =rA+b. This is the condition which also determines the city extent. Hence the urban equilibrium with development tax is socially optimal • The development tax is equivalent to the increase in the effective agriculture rent, the resultant city has smaller extent and smaller dwellings; Hence cities with development tax are more expensive than cities with no tax. This would make the city residents worse off. • The benefits from additional space when counted, the problem would end up in the better off- An outcome and goal of the Govt. intervention. • Since majority of the people are not much interested in the open spaces away from their houses, therefore imposing anti sprawl policies may make the average person worse off. • In this context misguided anti sprawl policies can lead can be harmful as it may lead to high cost of living in shape of smaller dwellings

Market failure related to traffic congestion • Due to traffic congestion externalities: The presence of single extra congested road would slightly decrease the speed of other cars. The commuting time would increase as a result. The cost to the individual drivers is not very high but the overall sum of this delay congestion is large and appears as the social cost of congestion. • At the other side the private cost of commuting which includes the individual own time and money cost is less than the social cost (Private cost elements plus externality damage done to other cars in the form of higher time cost resulting from the presence of extra car). • To correct this market externality and resulting market failure, the commuters must be charged a congestion toll equal to dollar values of congestion cost they impose on other drivers. When this toll is charged, the commuting choices will ne better from society point of view

This congestion externality and resultant market failure, is thus offset by the congestion toll, which in turn affect the urban spatial structure. Hence the raining cost of commuting would shrink the cities. • The urban residents would choose to live closer to the urban centers. • Hence the city spatial size in the absence of congestion toll is too large. Thus the free market city again takes to much space. • After careful study, congestion fee of $0.17 per mile have been proposed by transportation economists in USA. • Mathematical models show that when appropriate model is charged, the city radius decrease by 10% and population densities rise dramatically near the city centers. • Congestion toll started from Singapore followed by UK, where the commuters entering the cities are charged. In addition peak hours rates at bridges etc. It is believed that the cities will get more compact in the presence of congestion toll

Other distortions in urban land use • Financing of urban infrastructure such as streets, sewers, parks, schools etc. • The extension of city services, leads to decreasing returns to scale. For example in case of large sewerage line and sewerage plants, the cost per meter may increase due to larger sewers and more costs of pumping machinery. These costs are generally shared by the city residents in the form of property taxes and the suburban residents are not penalized for being most costly to serve. The suburban residents even if they pay, make very small share and their major burden of infrastructure extension is taken by the urban residents. • Thus the cost of occupying the suburban houses inclusive of taxes would look attractive to the residents, encouraging the growth of suburbs. • This under pricing leads to excessive urban extension. To solve this issue, the actual cost of infrastructure development in suburban areas called “ Impact fee” are adopted to remove the under pricing distortions, which restrict the urban sprawl.

Other distortions include: • The Federal Taxes on houses give subsides for own house, thereby encouraging large houses. These big house in turn use large agriculture lands. • The subsidization of automobile transportation would make the cost of commuting lesser and residents in the suburbs would prefer to commute from farther areas, thereby extending the cities extent • The agriculture subsidies and crop price support programmes, bolster farmers income, making the farming more profitable and the land rent rA would increase, thereby push the cities inside

Scattered development and sprawl: • Many undeveloped areas in the boundary of the are left in case of scattered development which waste the resources by failing to generate compact cities • Scattered development raises the commuting cost but the land developers leave some area vacant for possible future use when the city grows/extends • Urban growth boundary: • As an alternative, the Urban Growth Boundary (UGB) is set to limit the quantity of the land to be converted to urban use. • The effect of the UGB is same like Urban tax as both are aimed to restrict the urban expansion as in both case the urban land rent curve is shifted upwards. • High restriction of UGB gives no obvious benefits to ordinary consumers due to open spaces. This shifts substantial part of the population towards the city centers and thereby increasing the densities at the city centers. The UGB restriction needs to be carefully implemented as it may lead to worsen the common people rather than to improve them.

Other Urban Land Use controls • Building height and densities restrictions: • In Paris tall buildings are prohibited near the city centers • The Indian cities of Mumbai and Bangalore have been developed over strict height controls of buildings • The height restrictions put limit on the FAR, which is the ratio of the covered area to the total lot areas. If all of the lot area will covered with buildings, then the buildings heights will be restricted to 8. But in case of half FAR, the same covered area will be provided in 16 floors. • Usually the building highest are restricted and smaller near the city centers and we move out of the city, the buildings heights would increase. • This height restriction leads to urban Sprawl as the population of the city would be adjusted in the outskirts. • In locations, where there are no height restrictions • .

Zoning of Urban Land: • Zoning laws specifies the land uses in various parts of the city such as commercial, residential, industrial, educational etc. • For each zone, there are FAR requirements • Suppose in the rectangular city with no CBD, everyone in the city is working at home and no commuting is involved. Hence the price per sq ft will the same for all areas. • Suppose that two automatic factories are located in the city requiring no people to work in. The people around the factories will be affected by the pollutions, which will affect the housing prices around factories. • The land rent losses will extend over many blocks • With zoning the factories will be located in the same places, then the losses to negative externalities are less as these are located at one end.

Chapter summary

Conclusion This paper has examined the relationship between the property tax and urban sprawl through both theoretical and empirical analyses. The theoretical model incorporates two countervailing effects: (i) the property tax suppresses improvements, which in turn reduces population density and (ii) the tax reduces dwelling sizes, which raises population density. The theoretical model adopts a log-linear utility function that exhibits a variable elasticity of substitution greater than one. The model shows that increasing the property tax reduces the city size and thus, urban sprawl. Based on a dataset of the effective property tax rates and using GIS methods for 448 urbanized areas, the empirical analysis estimates a regression equation relating an urbanized area’s size to a property tax rate measure and other control variables, such as population, income, agricultural rent, and transportation expenditure. Results from the empirical analysis are consistent with ﬁndings from the theoretical reasoning, suggesting that higher property tax can make cities smaller: city size would decrease by 0.4% if the property tax increases by 1%. Property tax and urban sprawl: Theory and implications for US cities Yan Song , Yves Zenou- Journal of Urban Economics

The effect of transportation subsidies on urban sprawl Qing Su- University of South Florida Doctor of Philosophy dissertation- Department of Economics-College of Business Administration University of South Florida • ………….. Since this thesis focuses on the effect of transportation subsides on urban sprawl, we emphasize the transportation policies or practices that may be effective in curbing sprawl. Our empirical analysis provides evidence that the spatial size of an urbanized area is negatively related to the transit subsidy and the percentage of the working-age population. using transit and positively related to transit cost. ………

City Growth with Urban Sprawl and Problems of Management for Sustainable Urbanization By: Golam Rahman, Deanna Alam and Sirajul Islam, City Growth with urban Sprawl and Problems of Management, 44th ISOCARP Congress 2008 http://www.isocarp.net/data/case_studies/1203.pdf • T he current practice, generally, involve spatial planning to ensure the best land use, distribution of necessary urban infrastructure and services judiciously, proper implementation of the plan and smooth management of urban functioning of the services. In practice, all these matters are not achieved as they should have been. Consequently, the concept of urban sprawl-emergence of a situation of unauthorized and unplanned development, normally at the fringe areas of cities especially haphazard and piecemeal construction of homesteads, commercial areas, industrial areas and other non-conforming land uses, generally along the major lines of communications or roads adjacent to specified city limits, is observed which is often termed as the Urban Sprawl. The area of urban sprawl is characterized by a situation where urban development adversely interferes with urban environment which is neither an acceptable urban situation nor suitable for an agricultural rural environment.

Lec-5 Urban Spatial Structure and Urban Sprawls