TRANSPORTATION AND METROPOLITAN DEVELOPMENT KSG HUT251/GSD 5302 Transportation Policy and Planning, Gomez-Ibanez OUTLINE OF CLASS (1)TRANSPORTATION AND METRO POPULATION  Agglomeration benefits and costs  Role of government in managing agglomeration  Office rents as a signal (2)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

METRO POPULATION AND TRANSPORATATION WHY CITIES? BENEFITS OF AGGLOMERATION lEconomies of scale within firms lAgglomeration economies (economies across firms and households) lIn production: lWithin industries (localization economies--clusters) lAcross industries (urbanization economies--diversity) lIn consumption EMPIRICAL ESTIMATES OF AGGLOMERATION ECONOMIES lTypical: 4% to 20% increase with each doubling of metro population lEffects fall off with distance lEffects seem to vary significantly by industry

METRO POPULATION AND TRANSPORATATION WHY CITIES? COSTS OF AGGLOMERATION lIntercity: transportation of raw materials to and finished product from metro area lUrban: oScarcity of centrally located sites oCongestion, pollution, flooding CITY SIZE lTradeoff between MB and MC of agglomeration lMarket not necessarily optimal given that both benefits and costs involve externalities

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

METRO POPULATION AND TRANSPORATATION ROLE OF CITY GOVERNMENT MAXIMIZE AGGLOMERATION BENEFITS lBusiness climate lIdentify, nurture clusters MINIMIZE AGGLOMERATION COSTS lEfficient infrastructure Transport, water, sewage, sanitation, flooding lEfficient land controls Titles, density and use controls, state-owned lands COSTS EASIER FOR GOVERNMENT TO INFLUENCE THAN BENEFITS?

METRO POPULATION AND TRANSPORATATION ROLE OF CITY GOVERNMENT MB MC efficient SOCIAL COST AND BENEFIT OF AGGLOM- ERATION CITY POPULATION MB efficient MC

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

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

METRO POPULATION AND TRANSPORATATION IMPORTANCE OF INFRASTRUCTURE AND LAND REGULATIONS Class A office rent ($m2) Metro pop (mil) Country GDP per capita ($) Class A&B offices (mil m2) City At nom. X rate At PPP X rate Mumbai Tokyo , London , New York , Jakarta ,3024.6

TRANSPORTATION AND METRO LAND USE/DENSITY LAND 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

TRANSPORTATION AND METRO LAND USE/DENSITY LAND USE/DENSITY ―› TRANSPORT 1.INCREASE OVERALL DENSITY IDEA: Replicate Europe (Newman and Kenworthy) PROBLEMS:  Other contributing factors?  Cost in other objectives? 2.JOBS HOUSING BALANCE IDEA: Shorten work trips LIMITATIONS:  Jobs-housing balance is self correcting  Residential location is not determined just by work trip

TRANSPORTATION AND METRO LAND USE/DENSITY LAND USE/DENSITY ―› TRANSPORT 3.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 4.SMART GROWTH IDEA: Combination of all three LIMITATIONS:  Political acceptability  Modest effect on travel?  Modest savings in infrastructure

TRANSPORTATION AND METRO LAND USE/DENSITY TRANSPORT ―› 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 1.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)

TRANSPORTATION AND METRO LAND USE/DENSITY TRANSPORT ―› LAND USE/DENSITY 2.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) 3.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

TRANSPORTATION AND METRO LAND USE/DENSITY TRANSPORT ―› 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)

Distance from CBDDistance from CBDDistance from CBD Commuting costHousing costGross price of location = C+H MONOCENTRIC MODEL All work in CBD RESIDENTIAL LOCATION : How far out to live

Distance from CBDDistance from CBDDistance from CBD Commuting costHousing costGross price SIMULTANEOUS CHOICE OF LOCATION AND HOUSING TYPE Single family apt

Distance from CBDDistance from CBDDistance from CBD DisequilibriumEquilibriumComponents of gross pricegross pricegross price LOCATIONAL EQUILBRIUM (assuming all houses, households identical) Structure cost Land price Commuting cost RELATIONSHIP BETWEEN TRANSPORT COSTS AND LAND RENTS

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

RESIDENTIAL LOCATION IF COMMUTING COSTS TO CENTER  DECLINE 1.Increases real incomes a.Increases housing consumption −›move out b.Increases value of travel time −›move in 2.May also reduce MC of commute −› move in  INCREASE 1.Decreases real incomes a.Decreases housing consumption −›move out b.Decreases value of travel time −›move in 2.May also increase MC of commute −›move in

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

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

METRO DEVELOPMENT AND TRANSPORATATION CONCLUSIONS 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