Incentivizing sustainable urban form Fresh Outlooks Foundation Building SustainABLE Communities Conference November 27, 2013 David Thompson Policy Director, Sustainable Communities Sustainable Prosperity

Comprehensive overview (not) Just touch on three points:  Costs of sprawl  Causes  Reforms More: Making markets work for the environment

Sprawl Costs  To the environment  Known for decades  To human health  Known for years  To municipal budgets  Just starting to get a handle on it  A potential game changer Making markets work for the environment

Costs to municipal budgets  Edmonton  Net loss from 17 developments in 60 years ~ $4 billion  Halifax Region  50% of growth in urban areas - save $715 million in 20 yrs  Calgary  25% denser development would save City $11 billion in capital costs alone Making markets work for the environment

Municipalities are aware of the costs, and are acting…  Cdn municipalities adopting density goals  E.g. St John’s, Saint John, Ottawa, Hamilton, Saskatoon, Calgary, Edmonton, Kelowna, Metro Vancouver  Kelowna OCP : “OCP objectives are focussed on compact urban form (mixed use neighbourhoods and higher density in core areas)”  CMHC 2005, 2011 Census: little success Making markets work for the environment

Why little success? Need to look at causes. Making markets work for the environment

Sprawl Causes  “Pure” market demand for sprawl?  Much of it boils down to price (big decision driver)  Can get 3BR, 2 bath house in centre of town: $  Sprawl subsidies  Road subsidies: $13.5 billion per year, net  Mischarging on development costs, utilities, property taxes  Failure to internalize externalities  This is an opportunity  Reform prices, make sustainable housing affordable Making markets work for the environment

Price reforms  Transportation pricing  Fuel tax (sharing, or power to levy), road pricing, PAYD, parking pricing, etc.  Development charges  Average rate structure – subsidizes sprawl  Marginal, or area-based rates – fairer  Special rates  Zero rate/ credits for downtown, brownfields  Reduce rates near transit corridors Making markets work for the environment

Price reforms  Property tax adjustments  Lower tax rates for denser classes of property (e.g. multi-family)  Lower rates in central areas and near transit corridors to encourage density  Utility pricing adjustments  Frontage-based levy to encourage density Making markets work for the environment

Reforms: Equity and Fairness  Pricing policies, if badly designed, can unfairly affect low income Cdns  1990s “user fees” on public goods: head taxes  Good design: Link prices to sprawl goals, and to income / wealth Making markets work for the environment

Multiple incentives No magic bullet; need a range of tools  None is large enough to curb sprawl on its own (E.g. DCs a full order of magnitude too small)  Multiple incentives sends clear policy signal  Less economic distortion  Offset negative impacts Making markets work for the environment

Economic benefits of density  Spread infrastructure & service costs across more payers  Better access to workers – higher productivity  Better access to jobs – reduced unemployment  Industrial specialization and local outsourcing  Knowledge spillovers, within and between sectors  Access to suppliers and markets  “Economies of agglomeration” Making markets work for the environment

Conclusions  Sprawl costs high  Not inevitable  Result of market failures and policy failures  These failures can be corrected  We can make sustainable housing affordable  Affordability will (continue to) drive decisions  But… toward sustainable urban form Making markets work for the environment

David Thompson Policy Director, Sustainable Communities Sustainable Prosperity Making markets work for the environment

Event of interest to some?  "What is the Role of Pricing in Managing Metro Vancouver's growth?"  Symposium chaired by Larry Beasley  January 20, 2014 Vancouver  Sustainable Prosperity and Canadian Urban Institute Making markets work for the environment