Bigger is not better
Visiting economist debunks myths about the benefits of growth
By David Schwartz
Dave Shreve knows a thing or two about economic development. An economist and consultant from Charlottesville, he was formerly a member of the University of Virginia faculty and currently serves on the Albermarle County (VA) Economic Development Authority. So when he told a packed audience of Chapel Hill residents last month that growth and development rarely deliver on their promises, people sat up and listened.
Shreve identified three goals communities typically pursue through economic growth and development, and he explained why growth doesn’t accomplish them:
- Job Creation
Municipalities and counties often promote economic development as a way to create jobs for local residents and reduce unemployment. However, while new enterprises may lead to new hiring locally, new hires are often “cannibalized” from existing local employers (in the case of low- or medium-skilled work) or imported from elsewhere (in the case of highly-skilled work). In either case, new enterprises don’t reduce local unemployment or provide work for local residents who need it most.
- Improve public finances
Municipalities often pursue growth because they believe that “increasing the tax base” (building more stuff upon which to levy property taxes) will increase revenue available to pay for government services. But towns often fail to anticipate the price of providing services to growing populations – schools, roads, buses, police, fire, parks, etc. New costs usually exceed new revenues, so growth and development end up making a town’s fiscal situation worse, not better.
As Shreve said, the fiscal effects of growth are particularly insidious, because while new revenues show up immediately, costs often get postponed until a town can no longer put off the large capital expenditures needed to build new schools, widen roads, manage stormwater, and so on.
If a town is experiencing problems with flooding, traffic congestion, and school overcrowding, Shreve said, that’s a clear sign the costs of growth are being “kicked down the road.”
- Provide Affordable Housing
Growth is often promoted as a means to bring down the cost of housing for low- and moderate-income households. “This may be the biggest argument we face in Charlottesville,” Shreve said. “Folks tell us, ‘If you guys succeed in getting us to slow down our rate of growth, all you’re going to do is make housing more expensive, and make it even harder for lower income families to live here.’” In fact, said Shreve, complex factors shape real estate prices in a given area: national and regional employment patterns; levels of income inequality; market power of local real estate developers (i.e., lack of competition); the degree to which local governments depend on property taxes; and the ratio of owner-occupants to investor-owners. In and of itself, growth rarely promotes housing affordability, and it tends to make housing even more expensive.
Are there any benefits to growth? Sure, said Shreve, up to a point. “As villages and towns grow in their infancy and early stages, they gain things—public services, amenities, restaurants, diversity of culture and opinion—that make up what we call civilization, and these are things we value.”
But, as Shreve said, we reach a point when the benefits of further growth diminish, while the costs—to our public finances, local environment, and quality of life—multiply. And it’s hard for us to discern when we’ve reached that point.
So, what should we do? “When elected officials or the citizens of a town are facing decisions about economic development, be very clear about what you mean, about what you think you’re getting, and about how you want to get there.“ Grow, Shreve said, if you want that new shopping destination or that new housing complex. But don’t think growth will reduce local unemployment or lower your cost of living, because it won’t.
Grow if you want that new shopping center.
But don’t think your cost of living will go down.
View a video recording of Dave Shreve’s lecture at the Chapel Hill Public Library at: https://vimeo.com/album/3375157/sort:preset/format:detail
David Schwartz, a founding member of CHALT, lives in the Little Ridgefield neighborhood. He is a regular contributor to the Chapel Hill News.