Houston lures business and top workers with 'back to basics' approach

[moni]

I'm not sure, but do you think Kleinberg is referring to the 400,000 illegal immigrants in Houston? Just wondering is all.

[lockmat]

I would prefer to live with just family, but I wouldn't mind if my family has own separate area. Would be great if with separate entry.

What are woolie and lockmat's preferred cities anyway? No point if it is different from mine.

Metro Houston is my first love

[TheNiche]

I'm not sure, but do you think Kleinberg is referring to the 400,000 illegal immigrants in Houston? Just wondering is all.

Of course he is, but not directly. He's tip-toeing around the hot-button issue by playing the race card in nonsensical and sometimes insensitive ways.

[webdude]

Frankly, I think that if it weren't for costs or other tradeoffs in some form or another, I'd expect a greater number of people would retreat to the countryside or to waterfront than live in a dense walkable city center. But the reality of the situation, as I've pointed out throughout the thread is that there is no attainable ultimate ideal. Everyone is limited by practicalities, even the uber wealthy. Everyone must make tradeoffs.

Houston, lacking geographical or political constraints on growth, and not being encumbered by a great deal of infrastructure from technologically-obsolete economies, provides an excellent testing ground for revealed preference because everyone just kind of winds up where they want to be. If I recall, for every 22 new households in our region, only one is inside the loop. You suggest that there are many people that get priced out of a place that they'd rather live? Sure. So what? I'd like to live in River Oaks, so I am as much a vicitm as yourself. How do you suggest we ration off finite resources in a way that would negate this so-called problem???

Well, it started because you tried to undermine the number of folks who do want to live in a dense walkable city. It is this type of prevalent mentality that can delayed the building up of density in Houston. Yes, there is no ultimate ideal, but we can start by getting rid of that mentality, especially to those in charge.

And I wouldn't use our region as a good indicator of whether ppl really want a dense city, because the inner loop isn't really dense. With other cities, its driving in the subs vs not driving in the city. Here, its a case of driving further vs driving nearer.

[lockmat]

You suggest that there are many people that get priced out of a place that they'd rather live? Sure. So what? I'd like to live in River Oaks, so I am as much a vicitm as yourself. How do you suggest we ration off finite resources in a way that would negate this so-called problem???

We don't live in a perfect world and like you said, must make tradeoffs, or in other words be wise about our decision making. And maybe you were hyperbolizing, but I think some people forced to live outside an urban area b/c of price don't want to live in River Oaks, just at least inside the loop or in some moderately priced condo or townhome. But maybe that is possible and I just haven't researched enough.

In a perfect world, each individual would be a direct client of a developer. I can't go up to one right now and ask him/her to build me a moderately priced condo to live in inside the loop. Can I? How do developers know if there is a market for middle incomed people? There isn't one right now, so they can't even see if there's a trend or demand for it. Obviously there is one for people with lots of money. I don't see why people with less money would want any different just b/c they have less. If anything, they might want it beacause people with money have them or b/c of the cool factor.

[TheNiche]

Well, it started because you tried to undermine the number of folks who do want to live in a dense walkable city. It is this type of prevalent mentality that can delayed the building up of density in Houston. Yes, there is no ultimate ideal, but we can start by getting rid of the mentality, especially to those in charge.

So let me make sure I'm straight. According to you, it is less important for public policy purposes how many people are willing to actually pay to live in a particular place than it is that people want to live there (not that I'm conceding that most people actually do want to live there)? Is that right?

Well if that's the case, then perhaps I should lobby the City to subsidize the construction of more neighborhoods like River Oaks because I want to live there, not that I ever will because I'm not willing/able to make the tradeoffs necessary.

And I wouldn't use our region as a good representation of suburb sprawl vs inner loop city density, because the inner loop isn't really dense.

Uh, yeah. That's kind of my point. In fact, the densest part of our region is outside the inner loop...and it has some of the lowest rents in the city.

[TheNiche]

In a perfect world, each individual would be a direct client of a developer. I can't go up to one right now and ask him/her to build me a moderately priced condo to live in inside the loop. Can I?

Depends on what "moderately priced" is. And you can always ask. With condos, developers will use your input anecdotally as they scout for locations and draw up conceptual product before subjecting it to market research. With townhomes, you might just be able to get them to do a custom low-end job if you're in on the ground floor of it. Everyone likes a pre-sale.

How do developers know if there is a market for middle incomed people? There isn't one right now, so they can't even see if there's a trend.

I would argue that there is a market for "middle incomed" people, but I'm not sure what that means to you. Regardless, the answer is market research.

[lockmat]

I would argue that there is a market for "middle incomed" people, but I'm not sure what that means to you. Regardless, the answer is market research.

I would love to research and learn how market research is done. Without knowing their formulas, it sounds so much like a shot in the dark. But I guess it's not.

Ok...what about high 100's to 225k-ish range? I guess I could do this myself.

[TheNiche]

Obviously there is one for people with lots of money. I don't see why people with less money would want any different just b/c they have less. If anything, they might want it beacause people with money have them or b/c of the cool factor.

If you want it badly enough, you'll find a way to come up with the cash. It may mean subjecting yourself to ramen noodles every other night, long working hours at a second job, finding a roomate, or making a major investment in education, but it can be done.

I hope RedScare doesn't mind me using him as an example so often, but he's a lawyer that formerly lived in The Woodlands and owned a Porche. He worked hard and and was on a path to what most people would consider pretty fabulous material wealth, if I may say so. He's a smart guy--I'm sure he'd have accomplished that if he really wanted to. But then he reassessed what he valued in life and figured out that he'd rather have more leisure time, less stress, and a less suffocating neighborhood. So he downsized into a little bungalow in the Heights (before the prices got ridiculous) and cut back on working hours. He no longer owns a Porche. Does that mean that he'd turn one down if it were offered to him, free of a tradeoff in terms of lifestyle? I'd think not. I'd like a Porche too...but that doesn't mean that I'm going buy one because I have a finite budget--not only in financial terms but in terms of lifestyle--and that budget is put to higher and better uses without a Porche.

Make sense?

I would love to research and learn how market research is done. Without knowing their formulas, it sounds so much like a shot in the dark. But I guess it's not.

Ok...what about high 100's to 225k-ish range? I guess I could do this myself.

Yeah, there's product for you out there. Hell, you could probably even afford a small unit in Mosaic if you were so inclined.

[lockmat]

If you want it badly enough, you'll find a way to come up with the cash. It may mean subjecting yourself to ramen noodles every other night, long working hours at a second job, finding a roomate, or making a major investment in education, but it can be done.

Yeah, I understand tradeoffs. I can easily look back a the past year and see the ones I have made. Everything from to riding my bike to work, bringing my lunch, eating off the dollar menu and suppressing the urge to buy those new pair of shoes and even sweating it out in my apartment to save money on the electric bill...all so I can save my money.

And I'd love to get a unit, but I'm just concerned about the future; wife, kids, etc. I'd rather buy a home with at least two bedrooms so I don't have to sell and repurchase...but that's a whole other discussion.

Yeah, there's product for you out there. Hell, you could probably even afford a small unit in Mosaic if you were so inclined.

I guess if I just would have quoted my price from the beginning...weeks ago, this whole discussion wouldn't have been necessary. But I'm still concerned about getting a house for that price or a little higher fit for a family.

[woolie]

Yeah, there's product for you out there. Hell, you could probably even afford a small unit in Mosaic if you were so inclined.

All of like 200sf. Mosaic is nuts. I don't see how they're calling it anywhere near "affordable." I'd rather have more sf in a midrise than a tiny highrise unit in a weird, somewhat isolated part of town. No one willing to pay Mosaic prices has lived in that neighborhood -- trust me, I was there for 4 years.

Anyway, our income is starting to round out after heavy, long investments in education, so we have an increasing number of options available. We're renting a place now, deciding on our long term plans and goals. My girl might be interested in law school a few years down the road, so that flavors things a bit.

[KinkaidAlum]

Who cares if more people choose to live in the suburbs than the inner city?

Who cares if SugarLand is growing faster than central Seattle?

Who cares what most people want compared to what others desire?

This is AMERICA. There should be choices. You want the suburbs, sprawl, strip centers, and 4 car garages for your Hummer... fine.

I don't want those things and I have no shame in saying so.

It seems as if the niche, music, and midtown WOULD jump off the bridge if everyone else was as well...

[woolie]

hopefully kinkaid would be available to help me find housing in Boston a few years down the road...

[MidtownCoog]

What people like Kinkaid forget is that people have been living urban in Houston (even if it is New Frontier sytle) longer than any city in Texas. And Houston is making progress.

Houston is not Boston for obvious reasons. I have lived in the burbs, the central core and a walkable city. They all have good and bad.

I will say there's a lot more to life than being able to walk to the grocery.

Is that really what defines a person?

Popular walkability?

[TheNiche]

Who cares if more people choose to live in the suburbs than the inner city?

Who cares if SugarLand is growing faster than central Seattle?

Who cares what most people want compared to what others desire?

This is AMERICA. There should be choices. You want the suburbs, sprawl, strip centers, and 4 car garages for your Hummer... fine.

I don't want those things and I have no shame in saying so.

Actually, I agree with you completely. If you pay attention to my comments, you'll notice that I've avoided making judgements as to what kind of a lifestyle is good or bad. What I have been making is observations, and I've been trying to be pretty objective throughout, recognizing that there is a segmented market driven by individual differences and budget constraints.

[N Judah]

How do you suggest we ration off finite resources in a way that would negate this so-called problem???

I say get rid of taxes (gas, sales, property) and then see what people's preferences REALLY are. Then the only finite resource left to ration off will be the land, and we'll have the free market for that.

Well if that's the case, then perhaps I should lobby the City to subsidize the construction of more neighborhoods like River Oaks because I want to live there, not that I ever will because I'm not willing/able to make the tradeoffs necessary.

Or do what people have been doing all along -- lobby the city or state govt. (or pay people to do so on your behalf) to reappropriate tax money for the purpose of subsidizing freeway construction with the intent of encouraging creation of suburban neighborhoods which would otherwise not exist.

[ArchitecturalPRGirl]

Actually, I agree with you completely. If you pay attention to my comments, you'll notice that I've avoided making judgements as to what kind of a lifestyle is good or bad. What I have been making is observations, and I've been trying to be pretty objective throughout, recognizing that there is a segmented market driven by individual differences and budget constraints.

I also very much agree with you two, especially Kaid. Everyone wants different things and by God should have them! lol. I will take my tiny little urban place and you your mcmansions:)

I'm having a boring day, we need some better topics. Come on Niche, bring it!

[musicman]

hopefully kinkaid would be available to help me find housing in Boston a few years down the road...

i'm sure he'll help you with furniture.

[TheNiche]

I say get rid of taxes (gas, freeway, property) and then see what people's preferences REALLY are. Then the only finite resource left to ration off will be the land, and we'll have the free market for that.

Actually, if you get rid of gas taxes and eliminate property taxes, say in favor of sales taxes, then you create an enormous incentive to use cars and to spend considerably more on housing. In turn reduce funding for new road construction commensurately, but allow for private companies to fund tolled facilities, and I think that the net effect would be more roads, less congestion, even better housing affordability, and more suburban development. In that strain of thought, I'm all for the idea. Privitization of transportation infrastructure is good.

...not that I expect it to happen or anything.

[musicman]

Yeah, I understand tradeoffs. I can easily look back a the past year and see the ones I have made. Everything from to riding my bike to work, bringing my lunch, eating off the dollar menu and suppressing the urge to buy those new pair of shoes and even sweating it out in my apartment to save money on the electric bill...all so I can save my money.

And I'd love to get a unit, but I'm just concerned about the future; wife, kids, etc. I'd rather buy a home with at least two bedrooms so I don't have to sell and repurchase...but that's a whole other discussion.

just keep saving you're money. that is the best thing you can do. don't worry about wife, kids, two bedroom home now. you're whole life can change tonight.

[N Judah]

Actually, if you get rid of gas taxes and eliminate property taxes, say in favor of sales taxes

Nah, get rid of sales taxes too. Forgot about that one.

[ArchitecturalPRGirl]

just keep saving you're money. that is the best thing you can do. don't worry about wife, kids, two bedroom home now. you're whole life can change tonight.

I was thinking the same thing when I read his post.

[TheNiche]

I also very much agree with you two, especially Kaid. Everyone wants different things and by God should have them! lol. I will take my tiny little urban place and you your mcmansions:)

No, I'm not really a mcmansion kind of guy... I'll pass. In fact, as much as I argue for a housing market free of regulation or subsidy, which would typically favor the suburban property owner and the well-being of the populous as a whole, I have ownership interests in several properties, none of which is outside the loop. Likewise, I argue against historical preservation as a public policy, but have a stake in two properties that would qualify as historical, neither of which I have any intention of tearing down and in fact am putting money into. Now, give me a tall slender concrete phallic symbol that soars high above the treeline and provides a nice rooftop deck overlooking the upper reaches of the Ship Channel, a bunch of entangled railyards bustling with activity, and downtown Houston, and I'm one happy urbanite!

I'm having a boring day, we need some better topics. Come on Niche, bring it!

Bring what? Bring it where?

[TheNiche]

I was thinking the same thing when I read his post.

Ditto. You can't anticipate the preferences or timing of your future wife. For all you know, she'll own a condo too...then one of you have to sell. ...never mind the issue about timing the arrival of kids. It could be many years. If you're going to buy something, buy it with yourself in mind. ...or just continue saving up in a very low-priced rental unit and figure out what you want to do when the right moment comes.

Nah, get rid of sales taxes too. Forgot about that one.

Nope, taxes gotta come from somewhere, and income taxes act to discourage people from being economically productive. I'd rather have a tax that discourages people from spending on consumption goods.

[N Judah]

Actually, if you get rid of gas taxes and eliminate property taxes, say in favor of sales taxes, then you create an enormous incentive to use cars and to spend considerably more on housing. In turn reduce funding for new road construction commensurately, but allow for private companies to fund tolled facilities, and I think that the net effect would be more roads, less congestion, even better housing affordability, and more suburban development. In that strain of thought, I'm all for the idea. Privitization of transportation infrastructure is good.

...not that I expect it to happen or anything.

Ok, assuming your scenario -- the way I see it, without the gas tax, every single road is a toll road (since there would be no money for road maintenance). Whereas the gas tax was a form of unavoidable toll, with the actual cost of driving staring people in the face people -encouraged by the prospect of finding a way to pay less- will be more inclined to try to drive during off-peak/cheaper hours or if they cannot afford the peak-time toll they will try to avoid driving completely. Also, without eminent domain, it would be almost impossible for private companies to build new tollways. Car purchases would be more expensive, as would be car maintenance. I am not sure what the elimination of property taxes would achive but I would think there would be a lot of rent-seeking behavior as people would have a huge incentive to artificially drive up the cost of housing (by lobbying for zoning laws, etc) without any kind of repercussion through property tax increase.

So in the end people will drive cheaper cars less frequently, or not at all (if they can't afford it or can avoid it). Assuming no land use restrictions, the rent-seekers in innately desirable locations will either add value by making their homes more aesthetically pleasing or through densification. I don't know what else will happen.

[TheNiche]

Ok, assuming your scenario -- the way I see it, without the gas tax, every single road is a toll road (since there would be no money for road maintenance). Whereas the gas tax was a form of unavoidable toll, with the actual cost of driving staring people in the face people -encouraged by the prospect of finding a way to pay less- will be more inclined to try to drive during off-peak/cheaper hours or if they cannot afford the peak-time toll they will try to avoid driving completely. Car purchases would be more expensive, as would be car maintenance. I am not sure what the elimination of property taxes would achive but I would think there would be a lot of rent-seeking behavior as people would have a huge incentive to artificially drive up the cost of housing (by lobbying for zoning laws, etc) without any kind of repercussion through property tax increase.

You fail to take into account changes within land markets. If you assume that all streets and highways change over to toll roads (ignoring for now the congestion-reducing effects), what happens to land prices? Answer: prospective homebuyers would have to absorb the cost of using roads, so land values have to be discounted in price by an amount that compensates homebuyers for that cost; otherwise they would locate elsewhere. I will grant you that there may be an ever-so-slight change in the relative prices between single-family homes on the urban periphery and better-located housing, but the fact that the form of the housing may not be comparable and that infill development typically costs considerably more per square foot than what can be had on a greenfield site would make for a very slim advantage inside the city.

...now stop holding constant the current level of congestion on account of peak-demand pricing, and the level of access to these outlying areas becomes much better than it ever had been in the past. The opportunity cost of time wasted in traffic (never mind the gasoline or wear and tear on the vehicle) is exceptionally high...and since new construction is typically marketed to those that can afford it (i.e. not poor people that can afford to waste time riding transit), the kinds of people that would've been most prone to pay for more leisure time are the very same people that would've used far-flung transportation infrastructure, whether it is tolled or not.

In summation, I will ask you a question: do you think that the Sam Houston Tollway (which charges tolls in excess of what is necessary to finance its construction and maintenance, and yet is still heavily used) has done more to discourage suburban sprawl or to encourage it?

I am not sure what the elimination of property taxes would achive but I would think there would be a lot of rent-seeking behavior as people would have a huge incentive to artificially drive up the cost of housing (by lobbying for zoning laws, etc) without any kind of repercussion through property tax increase.

There's already plenty of incentive to lobby for land use controls and other barriers to development; that it hasn't happened within the City of Houston is amazing to me, but even if it did, cities exist as an economic entity that go well beyond our large central city. For the purposes of this analysis, I don't think that a political upwelling could be reliably predicted--bear in mind, after all that we're already dealing within the realm of the politically impossible.

The effect on development of doing away with property taxes is hard to gauge. There are some important coefficients that come into play that I'm not even going to attempt to guess at. ...and the combination of universal toll roads and changed tax policy is just hard to figure.

Also, without eminent domain, it would be almost impossible for private companies to build new tollways.

Nope. Gotta have a government-administered mechanism (one that recaptures fees from highway developers to cover costs) to allow for eminent domain. This is true for more than just highway infrastructure, too. Pipelines, rail, electric transmission lines, etc. need it too.

[KinkaidAlum]

What people like Kinkaid forget is that people have been living urban in Houston (even if it is New Frontier sytle) longer than any city in Texas. And Houston is making progress.

Houston is not Boston for obvious reasons. I have lived in the burbs, the central core and a walkable city. They all have good and bad.

I will say there's a lot more to life than being able to walk to the grocery.

Is that really what defines a person?

Popular walkability?

Popular Walkability is an awesome definition. It also happens to be my initials (P.W.). I'll keep it.

What defines you though is I.B.

[N Judah]

You fail to take into account changes within land markets. If you assume that all streets and highways change over to toll roads (ignoring for now the congestion-reducing effects), what happens to land prices? Answer: prospective homebuyers would have to absorb the cost of using roads, so land values have to be discounted in price by an amount that compensates homebuyers for that cost; otherwise they would locate elsewhere. I will grant you that there may be an ever-so-slight change in the relative prices between single-family homes on the urban periphery and better-located housing, but the fact that the form of the housing may not be comparable and that infill development typically costs considerably more per square foot than what can be had on a greenfield site would make for a very slim advantage inside the city.

Locating elsewhere would not be an effective way to avoid the cost of using roads, since all of the roads would be toll roads. All homebuyers could really do to make things easier would be to locate closer to their jobs, causing increased demand for properties near the city center or other areas which were innately desirable to begin with. As the land became more valuable, new landowners would make improvements (such as densification, or aesthetic improvement) to recoup their cost.

Basically the way I see it, instead of land being discounted to compensate homeowners, there would be a premium placed on land in locations that helps homeowners avoid the cost of driving. Jobs might at some point relocate to the periphery, but that would simply re-start the process as homeowners working at those places would do everything they could to locate as close as possible to avoid the cost of transportation (for example, core areas, when dense enough, could support private buses, or people could walk or take a bike). The toll roads at these relocation points would be cheaper at first but would become more expensive as more people used them.

...now stop holding constant the current level of congestion on account of peak-demand pricing, and the level of access to these outlying areas becomes much better than it ever had been in the past. The opportunity cost of time wasted in traffic (never mind the gasoline or wear and tear on the vehicle) is exceptionally high...and since new construction is typically marketed to those that can afford it (i.e. not poor people that can afford to waste time riding transit), the kinds of people that would've been most prone to pay for more leisure time are the very same people that would've used far-flung transportation infrastructure, whether it is tolled or not.

Well, if infill development costs more per square foot, that would indicate something about the people who are living close to the innately desirable areas relative to the people who are still relegated to the outlying areas even accounting for increased cost of transportation. If that cost gets high enough they will decide that they are better off living close to their job and paying the premium.

I think it would be true that access to the outlying areas will be better, but there will be less new construction since the cost of transportation will be that much higher. Congestion pricing would almost guarantee a limit to the population growth along the tollway, so for tollway makers to recoup their investment they would have to ensure that construction would be of high quality -- higher than it is now along non-tolled freeways, meaning less affordable and probably of much lower density than most people could afford. I think in the end only the rich will want to live in the peripheries.

In summation, I will ask you a question: do you think that the Sam Houston Tollway (which charges tolls in excess of what is necessary to finance its construction and maintenance, and yet is still heavily used) has done more to discourage suburban sprawl or to encourage it?

Well, its construction was subsidized politically through use of eminent domain (and as such construction costs are artifically low). I'd like to see the effect on sprawl of a tollway that is completely private from start to finish. I think it would be easy to thwart that kind of a project to the point of making it unprofitable, which is why you almost never see it.

Also, I'd be interested to see how much development occurred with the prospect of the Sam Houston tollway eventually becoming free, as was the original plan.

Nope. Gotta have a government-administered mechanism (one that recaptures fees from highway developers to cover costs) to allow for eminent domain. This is true for more than just highway infrastructure, too. Pipelines, rail, electric transmission lines, etc. need it too.

People don't like giving up their land so some private contractor can make money. Even for federally-funded freeways there is still opposition, so that would be pretty interesting, especially if land-use restrictions or some other form of accountability came into play.

[TheNiche]

Locating elsewhere would not be an effective way to avoid the cost of using roads, since all of the roads would be toll roads. All homebuyers could really do to make things easier would be to locate closer to their jobs [i.e. elsewhere], causing increased demand for properties near the city center or other areas which were innately desirable to begin with. As the land became more valuable, new landowners would make improvements (such as densification, or aesthetic improvement) to recoup their cost.

Basically the way I see it, instead of land being discounted to compensate homeowners, there would be a premium placed on land in locations that helps homeowners avoid the cost of driving. [it doesn't work that way in practice. When new transportation infrastructure is built that reduces total origin/destination trip costs, landholders capture all of the benefit in the form of higher land values; likewise, when the transportation costs increase, landholders suffer in the form of lower land values. By itself, the urban boundary would indeed shrink back just a bit, and on the surface, you would be correct. However, it is my position that there has been insufficient construction of roads in many areas and that once new toll roads were completed, the TOTAL cost of accessing outlying areas, which includes not only the out-of-pocket expenses but also the opportunity cost of travel time, would actually decline. Thus, the short-term effect would be as you describe, but the long-term effect would likely be to increase accessibility to outlying areas, causing even more suburban development.] Jobs might at some point relocate to the periphery, but that would simply re-start the process as homeowners working at those places would do everything they could to locate as close as possible to avoid the cost of transportation [You overestimate the influence of transportation costs. Most households rank home size/quality, school quality, and the cost of services as more important than transportation costs alone. A perfect rent gradient curve does not typically apply in practice.] (for example, core areas, when dense enough, could support private buses, or people could walk or take a bike). The toll roads at these relocation points would be cheaper at first but would become more expensive as more people used them. [The more expensive are toll roads, the more incentive there is to build more capacity.]

Well, if infill development costs more per square foot, that would indicate something about the people who are living close to the innately desirable areas relative to the people who are still relegated to the outlying areas even accounting for increased cost of transportation. If that cost gets high enough they will decide that they are better off living close to their job and paying the premium. [Once again, the perfect rent gradient curve does not apply in practice. Your theory applies very well when referring to a monocentric city comprised entirely of single-person households, but breaks down entirely when consumer markets become fully-segmented, multiple residents of households are employed in different locations in a polycentric city, school zoning results in income-segregation, and other factors all come into play.]

I think it would be true that access to the outlying areas will be better, but there will be less new construction since the cost of transportation will be that much higher. [it is my contention that the market could justify substantial new construction at present because TXDoT is only able to PAGO with the present gas tax, and that pent up demand for roads would result in new construction throughout the city, inside and out.] Congestion pricing would almost guarantee a limit to the population growth along the tollway, so for tollway makers to recoup their investment they would have to ensure that construction would be of high quality -- higher than it is now along non-tolled freeways, meaning less affordable and probably of much lower density than most people could afford. [Firstly, I think that you underestimate what people can afford (or are willing to pay for, rather) for reasons previously mentioned. Secondly, the network of roads, owned by various interests, would be in competition with one another, not functioning as a monopoly. The result would be that road developers would build additional capacity up to the point at which the present value of the marginal cost of further enhancements are equal to the projected present value of the revenue stream, where Revenue = Price * Volume. Thirdly, you are correct that they would build with greater quality; after all, whenever they're road was being reconstructed, they'd just be losing money to competing roads; this decreases the long-term average transportation costs for consumers because there are fewer construction delays than there had been under the present system; you can also expect for them to have a better way of clearing accidents efficiently because that would cause drivers to divert to other companies' roads.] I think in the end only the rich will want to live in the peripheries. [Again, consider the extent of market segmentation.]

Well, its construction was subsidized politically through use of eminent domain (and as such construction costs are artifically low). I'd like to see the effect on sprawl of a tollway that is completely private from start to finish. I think it would be easy to thwart that kind of a project to the point of making it unprofitable, which is why you almost never see it. [Our current system of eminent domain is itself inefficient. I'll grant you that it needs reforms, and those reforms coupled with privatized transportation would actually make ROW acquisition less expensive in many cases (though admittedly not all). Consider the Katy Freeway. Many of those properties that were condemned are deep commercial properties. Retail improvements that were demolished tended to be of fairly low value relative to the land, and the expansion of the road and the accompanying increase in traffic volume is sure to make that land much more valuable for retailers. I submit to you that many property owners (though certainly not all) will be made better off because their land value will increase more than enough to recoup for the lost land, and also that many of the improvements would ultimately be demolished and replaced anyway to serve the larger market to which is has access. Likewise, in areas just beyond the suburban fringe, large landholders have even been known to give away rights of way to influence the route of roads--the Grand Parkway, for instance--so as to be able to capture the valuable freeway frontage. ...in a competitive environment you would expect that they might be willing to pay the road developer to take ROW through their property. There are of course thoroughfares where expansion would necessitate the taking of many houses, at least one of which may have an irrational owner that refuses to sell at any price. In that case, there would need to be recourse of the traditional sort. To prevent everyone from jumping on that bandwagon, keeping eminent domain prices exhorbitantly high as is the tradition, bear in mind that there is competition for ROW between many road owners...only the most viable projects would win out, and that means that the home- and property-owners that value their homes the least get bought out first. Another thing you would start seeing a lot of is grade-seperation at extremely busy intersections and at many rail crossings; you may even find that nearby civic associations would start forming special taxing districts to pay road developers the difference between the capitalized revenues and costs of a rail seperation in order to abate noise from freight trains.]

Also, I'd be interested to see how much development occurred with the prospect of the Sam Houston tollway eventually becoming free, as was the original plan. [i'd like to see that too, but my question still stands. Did its existence incite more development or retard it? I think you know the answer.]

People don't like giving up their land so some private contractor can make money. Even for federally-funded freeways there is still opposition, so that would be pretty interesting, especially if land-use restrictions or some other form of accountability came into play. [Yeah, depending on the setup, small cities in the path of roadbuilding projects might be in a position to create a massive bottleneck with enormous external impacts (for instance, by requiring much lower capacity than is economically justified by regional needs) or alternatively might be in a position to extort enormous sums of money from road developers for the right to pass through a strategic location in the context of the region, becoming wealthy by virtue of geographic and historical coincidence...I'm thinking about I-10 in Spring Valley, Hunters Creek, and Hedwig Village. It seems as though the administering agency would have to be an entity like H-GAC, which is pretty well set up for the job. With that in mind, perhaps municipalities desiring special treatment would have to pay a formula-based fee to owners of roads to prevent them from being developed. I don't know, that's just an idea. ...but I will grant you that this already-politically-infeasible concept would run into other very difficult political issues.]

Any other points to raise?

[N Judah]

It doesn't work that way in practice. When new transportation infrastructure is built that reduces total origin/destination trip costs, landholders capture all of the benefit in the form of higher land values; likewise, when the transportation costs increase, landholders suffer in the form of lower land values. By itself, the urban boundary would indeed shrink back just a bit, and on the surface, you would be correct. However, it is my position that there has been insufficient construction of roads in many areas and that once new toll roads were completed, the TOTAL cost of accessing outlying areas, which includes not only the out-of-pocket expenses but also the opportunity cost of travel time, would actually decline. Thus, the short-term effect would be as you describe, but the long-term effect would likely be to increase accessibility to outlying areas, causing even more suburban development.

Interesting -- though I think that if increased land values on the fringe (and these increased land values you refer to only occur on the fringe) coupled with overall increased transportation costs actually makes the total cost of accessing outlying areas cheaper, then I must be seriously underestimating worker productivity if the half-hour saved somehow makes up for it all. I guess it's true that you shouldn't skip breakfast

But having said that, I think a lot of what you qualify as "suburban" development will actually in practice look like a series of small towns, or at least clusters of development as people seek to live close to their jobs.

You overestimate the influence of transportation costs. Most households rank home size/quality, school quality, and the cost of services as more important than transportation costs alone.

Well, if all roads were toll roads I suspect their priorities might change. I know mine would.

The more expensive are toll roads, the more incentive there is to build more capacity.

Or they could avoid the risk and simply charge more...

Once again, the perfect rent gradient curve does not apply in practice. Your theory applies very well when referring to a monocentric city comprised entirely of single-person households, but breaks down entirely when consumer markets become fully-segmented, multiple residents of households are employed in different locations in a polycentric city, school zoning results in income-segregation, and other factors all come into play.

I agree. In fact, I think proximity to employment is the main determining factor when it comes to finding a place to live. I think it's a nice idea to think that people can simply move to the middle of nowhere to avoid paying a toll, but if it were that easy I'm sure most people would be in a small town somewhere telecommuting.

I'd like to see that too, but my question still stands. Did its existence incite more development or retard it? I think you know the answer.

I think it was successful at redirecting quite a bit of development from the city to the suburbs. If toll roads were truly creative in terms of development people would just buy up some cheap land in North Dakota, set up a toll road, and wait for the office buildings to pop up.