Question of the Week: Why is Master-Planned Development Less Financially Resilient?
Every week, we take one of the best questions submitted to the Strong Towns Knowledge Base, and we answer it here. This week’s question comes out of a discussion we see our members having on our Slack channels and in Local Conversations groups: Why is Master-Planned Development Less Financially Resilient?
The Knowledge Base is a crowd-sourced repository of your questions and answers about how to build a strong town. We on the Strong Towns staff chip in when we can, but we can’t get to everything—which is why we encourage all of our members and readers to head on over and add not only questions, but comments with any additional advice, useful links, or wisdom you have to offer!
Why is Master-Planned Development Less Financially Resilient?
There are two aspects to the Strong Towns critique of America's suburban experiment—the prevailing model of development that we, as a country, embraced in the years following World War II, and that still predominates today.
One critique is that much suburban development is financially unproductive. What we mean by this is that it does not generate enough public revenue to cover the cost of the government services it requires—and, in particular, the maintenance of the infrastructure that serves it.
For an at-length discussion of this problem, read the Growth Ponzi Scheme series.
The other critique of the suburban experiment is that it is not a very resilient approach over time. In our modern, suburban era, development tends to be done all at once, at a huge scale, and to a finished state. This critique applies not only to prototypically "suburban" environments like houses on cul-de-sacs, but also to often much denser and taller urban environments such as a "lifestyle center," "entertainment district," or "manufactured downtown."
These pieces by Chuck Marohn on incremental vs. master-planned development provide a good outline of the difference between these approaches: The Power of Growing Incrementally | The End of Incrementalism
The critiques of these two aspects of the prevailing model of development in modern America are separate. They are related, but it's important to understand some key distinctions.
Tax Base Productivity: An Important Part of the Story, but Not the Whole Story
One way you can analyze the productivity of your city's development pattern is tax value per acre—how much wealth is being generated on a given area of land to pay for the infrastructure and services needed. But it doesn't always tell the whole story. Value per acre is largely a function of the intensity of land use. The more productive economic activity is concentrated in a given area of land, the more that real estate will likely be worth, and the greater the tax revenue it will likely produce.
Value Per Acre Resources:
An explanation of why value per acre, rather than total property value, is a more informative measure of how productively your city uses its land
An analysis by Verdunity of why fine-grained development—smaller lots—tends to perform better financially according to this measure
If you try to compare a master-planned "entertainment district" to a traditional downtown on the basis of value per acre alone, you're likely not to find a stark contrast. In fact, mixed-use districts are sprouting in many American suburbs that are far denser—more residents and/or more businesses per acre of land—than their conventional suburban surroundings. On a pure value-per-acre basis, these projects may look quite good.
But that metric fails to consider two things: the costs to the public of pursuing such projects, and their long-term prospects as succesful, productive places.
Why "Entertainment Districts" and Other Master-Planned Developments Fall Short
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When a new brewpub, restaurant, or entertainment venue opens in your town, is this a sign of growth, or merely a shift in where patrons spend their dollars? And what does that imply about cities that subsidize such things?