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Fit for Fat City: A "Lite" Menu of European Policies to Improve Our Urban Form

Urban sprawl in the United States reflects distinctive geographic, demographic, and economic circumstances, but also results from a unique combination of public policies. American and European cityscapes are shaped in part by fundamental differences in how societies have organized everything from national tax and transportation systems, to housing strategies, agricultural subventions, energy conservation efforts, protection of small businesses, and local fiscal responsibilities. While most of the public agenda abroad cannot, and should not, be mimicked here, some general aspects are decidedly worth contemplating. They suggest ways that U.S. cities could benefit from selective revisions of our tax structure, transportation budget, public housing program, and federal regulatory framework.

POLICY BRIEF #44

Urban settlements grow in three directions: up into high-rise buildings, in by crowding, or out into the suburbs. Although cities everywhere have developed in each of these ways at various times, nowhere in Europe has the outward dispersal of people and jobs matched the scope of suburbanization in the metropolitan areas of the United States. In 1950 less than a quarter of the U.S. population lived in suburbia. Now well over half does. Why have most European cities remained compact compared with the sprawling American metropolis? And what lessons, if any, might be worth learning from abroad?

Misconceptions

At first glance, the answer seems elementary. The urban centers of Europe are older, and the populations of their countries did not increase as rapidly in the postwar period. In addition, stringent national land use laws slowed suburban development, whereas the disjointed jurisdictions in U.S. metropolitan regions encouraged it.

But on closer inspection, this conventional wisdom does not suffice. Although the contours of most major urban areas in the United States were formed to a great extent by economic and demographic expansion after the Second World War, the same was true in much of Europe, where entire cities were reduced to rubble by the war and had to be rebuilt from the ground up. Consider Germany, whose cities were carpet bombed. Many today are old in name only, and though the country's population as a whole grew much less quickly than America's after 1950, metropolitan areas of West Germany experienced formidable economic growth and in-migrations. Yet the metropolitan population density of the United States is still about one-fourth that of Germany. New York, our densest city, has approximately one-third the number of inhabitants per square mile that Frankfurt has.

Moreover, the dispersed pattern of development in the United States has continued apace even in places where population has increased little or not at all. From 1970 to 1990, the Chicago area's population rose by only 4%, but the region's built-up land increased 46%. Metropolitan Cleveland's population actually declined by 8%, yet 33% more of the area's territory was developed.

Nor can our extreme degree of decentralization necessarily be imputed to the fragmented jurisdictional structure of U.S. metropolitan areas, wherein every suburban town or county presumably has autonomous control over the use of land. Actually, a number of urban regions in the United States are less fragmented than are those in much of Europe. Since 1950 about half of America's central cities at least doubled their territory by annexing new suburbs. Houston covered 160 square miles in 1950. By 1980, exercising broad powers to annex its environs, it incorporated 556 square miles. In the same 30-year period, Jacksonville went from being a town of 30 square miles to a regional government enveloping 841 square miles, making it two-thirds the size of Rhode Island. True, the tristate region of New York contains 780 separate localities, some with zoning ordinances that permit only low-density subdivisions. But the urban region of Paris—Ile de France—comprises 1,300 municipalities, all of which also have considerable discretion in the consignment of land for development.

The fact that central agencies in countries like France exert influence on these local decisions through national land use statutes is not always a telling distinction, either. The relationship of U.S. state governments to their local communities is roughly analogous to that of Europe's unitary regimes to their respective local entities. Not only are the governments of some of our states behemoths (New York State's annual expenditures, for example, approximate Sweden's entire national budget), but a significant number have enacted territorial planning legislation reminiscent of European guidelines. Indeed, from a legal standpoint, local governments in this country are mere creatures of the states, which can direct, modify, or even abolish their localities at will. Many European municipalities, with their ancient independent charters, are less subordinated.

Different Courses

The more interesting contrasts between the formative influences on urban spatial structures in America and Europe lie elsewhere. With 3½ million square miles of territory, the United States has had much more space over which to spread its settlements. And on this vast expanse, the diffusion of decentralizing technologies—motor vehicles, for example—began decades earlier than in other industrial countries. (In 1921, 1 in 12 Americans owned an automobile; Germany did not reach that ratio until 1960.) But beside such fundamentals, the public agendas here and in key European countries have been miles apart. The important distinctions, moreover, have less to do with differing urban programs and land use controls than with other national policies, the consequences of which are less understood.

Copious agricultural subsidies in Europe, for example, keep more farmers in business and help dissuade them from selling their land to developers. Thanks to scant taxation of gasoline, the price of automotive fuel in the United States is almost a quarter of what it is in Italy. Is it surprising that Italians live closer to their urban centers, where they can more easily walk to work or rely on public transportation? (On a per capita basis, residents of Milan make an average of 350 trips a year on public transportation; people in, say, San Diego make an average of 17.) Gasoline is not the only form of energy that is much cheaper in the United States than in Europe. Rates for electric power and furnace fuels are too. The expense of heating the equivalent of an average detached U.S. suburban home and of operating the gigantic home appliances (such as refrigerators and freezers) that substitute for neighborhood stores in many American residential communities would be daunting to most households in large parts of Europe.

Systems of taxation make a profound difference. European tax structures bear down on consumption. Why don't most Dutch people and Danes vacate their tight towns and cities, where many commuters prefer to ride bicycles, rather than sport-utility vehicles, to work? The sales tax on a new, medium-sized car in The Netherlands is approximately 9 times higher than in the United States; in Denmark, 37 times higher. The U.S. tax code, by contrast, favors spending over saving (the latter is effectively taxed twice) and then provides inducements to purchase particular goods—most notably houses. The effect of such provisions is to lead most American families into the suburbs, where spacious dwellings are available and absorb much of the nation's personal savings pool.

Suburban homeownership has been promoted in the United States by more than tax policy. Federal Housing Administration and Veterans Administration mortgage guarantees are estimated to have financed more than a quarter of all single-family homes built in the postwar period. Meanwhile, the housing stocks of many countries in Europe were decimated by the war. Governments responded to the emergency by erecting apartment buildings and extending rental subsidies to large segments of the population. America also built a good deal of publicly subsidized rental housing in the postwar years, but chiefly to accommodate the most impoverished city-dwellers. Unlike the mixed-income housing complexes scattered around London or Paris, U.S. public housing projects further concentrated the urban poor in the inner cities, turning the likes of Chicago's South Side into breeding grounds of social degradation and violence. The effect was to accelerate the flight of urban middle-class families from the vicinity of these places to safer locations on the metropolitan fringe.

Few forces are more consequential for the shape of cities than are a society's investments in transportation infrastructure. Government at all levels in the United States has committed hundreds of billions to the construction and maintenance of highways, passenger railroads, and transit systems. What counts, however, is not just the magnitude of the commitment, but the distribution of the public expenditures among modes of transportation. In the United States, the share claimed by roads has dwarfed that of alternatives by almost 6 to 1. An unrelenting increase in automobile travel and a steady decline in transit usage, however heavily subsidized, was inevitable.

Dense cities dissipate without relatively intensive use of mass transit. In 1945 transit accounted for approximately 35% of urban passenger miles traveled in the United States. By 1994 the figure had dwindled to less than 3%—or roughly one-fifth the average in Western Europe. If, early on, American transportation planners had followed the British or French budgetary practice of allocating between 40% and 60% of their transport outlays to passenger railroads and mass transit systems, instead of reserving 83% for highways, many U.S. cities would without doubt be more compressed today.

Dense cities also require a vibrant economy of neighborhood shops and services. (Why live in town if performing life's simplest everyday functions, like picking up fresh groceries for supper, requires driving to distant vendors?) But the local shopkeepers cannot compete with regional mega-stores proliferating in America's metropolitan shopping centers and strip malls. Multiple restrictions on the penetration and pricing practices of large retailers in various European countries protect small urban businesses. The costs to consumers are high, but the convenience and intimacy of London's high streets or of the corner markets in virtually every Parisian arrondissement are preserved.

For Richer or for Poorer?

To conclude that a wide range of public policies in Europe has helped curb suburban sprawl there is not to say, of course, that all those policies have enhanced the welfare of the Europeans—and hence that the United States ought to emulate them. Most households are not better off when farmers are heavily subsidized, or when anticompetitive practices protect microbusinesses at the expense of larger, more efficient firms. Nor would most consumers get greater satisfaction from housing strategies that assist renter-occupancy but not homeownership, or from maximalist tax and transportation policies that force people out of their cars and onto buses, trains, or bicycles. Arguably, the economies of some nations in Western Europe have faltered in recent years amid these sorts of public biases, while the United States has prospered in part because it has successfully resisted them.

Still, if we wonder why the cityscapes of America and Europe typically look so different, we would do well to get beyond clichés (about underfunded U.S. urban programs, inadequate U.S. land use planning, or balkanized U.S. metropolitan governments), and to recognize the full breadth of hard policy choices that make for international differences. We should also recognize that not all of the policy mix in this country compares favorably with the alternatives overseas. Among other corrections, urban America would stand to gain from some judicious adjustments of national tax policy, the highway trust, the public housing program, and the federal regulatory regime.

Remedies

Tax Reform.

Shifting the target of taxation modestly toward consumption merits serious consideration. The current system takes dead aim at earnings and savings, while interposing preferences for selected economic activities such as the purchases of homes or the bond issues that finance new sports stadiums, industrial parks, and malls. This blend of incentives frequently overstimulates the exodus of population and jobs from central cities to suburbs. Here's how the Jones family will reckon with the U.S. tax code: Why should we bother to save very much if our savings are taxed twice, first on our income then on the interest from that income? Why not pour all of what we do save into as large a dwelling as possible, the mortgage interest of which is deductible? And why should we search anywhere but in suburbia? After all, that's where our mortgage will buy more house, as well as where the latest commercial and recreational conveniences are being built. Life in the suburbs will mean owning several vehicles and driving them more, but this luxury is so lightly taxed it scarcely gives pause.

A tax structure that influences consumer decisions in this fashion is steering capital into particular sectors by, perhaps inordinately, diverting it from others. The Jones family need not be asked to live as their counterparts in Germany do, with no tax deduction for home mortgage interest, or to swallow an impost of $3 per gallon on gasoline, as in France or Italy. But if the Joneses—and most other investors—were slightly less tempted by preferential tax treatment to sink the economy's savings into suburban real estate, more could be borrowed for alternative forms of urban investment, including businesses in the inner cities, where loans are often notoriously hard to obtain.

Transportation.

Some American communities wish they could pull in their girth and shape themselves in ways that are somewhat less dependent on the automobile. These aspirations do not stand a chance as long as Congress persists in sponsoring highway spending sprees that eviscerate metropolitan centers and pull new waves of development to their outer reaches. This is not to say that leveling the playing field for a more nuanced transportation strategy calls for lavishing more subsidies on inefficient rail transit, nor does it mean allowing the nation's interstate system to fall apart. It may, however, require breaking the long-standing habit of hypothecating vast revenues for new highway construction. This fiscal device was useful to ensure completion of the interstates, but now it mostly distorts the terms of public discourse about urban transportation projects. The highway trust fund's formidable vested interests too easily characterize diversions of earmarked receipts to social needs other than roads as contravening a contract—or, literally, as breaching a trust.

Few other advanced nations have hitched the financing of their surface transportation systems to a cash cow like this one. Proponents of highway expenditures in most countries are forced to rummage amid general revenues for road-building dollars. Without a claim to an exclusive account, the highway lobby in this country, too, would have to vie with other interests for public resources, including those who suspect that throwing hundreds of billions of dollars at the nation's traffic problems by robotically building additional freeways (as contemplated by much of last spring's legislative authorization) is a waste of money. In short, a less formulaic means of funding the nation's transportation requirements might allow other priorities to compete and perhaps would even give precedence to innovations such as greater experimentation with efficient price-rationing of the existing infrastructure.

Public Housing.

Of the past half-century's urban policy blunders in the United States, few have left a more distinctive, and deadly, mark than the decision to condense a critical mass of impoverished residents into isolated inner-city housing complexes. Many (though not all) of these became pits of blight, crime, and social decay that have abetted the exurban flight of the American middle class. The postwar crime wave in Washington, D.C., for example, can be traced in no small part to the relocation of thousands of poor families from old neighborhoods surrounding the Capitol into new housing projects further north and east, across the Anacostia River.

It should be a high priority to close down failed settings like these, and to disperse their occupants either into scattered, mixed-income projects (as in many European cities) or, with rent vouchers, directly into private housing. A bold effort along these lines is currently under way in Chicago. Most other major cities ought to heed the Chicago Housing Authority's example, as should policymakers in Washington.

Regulatory Overhaul.

America's central cities will continue to expel merchants and middle-class households as long as the municipal authorities continue to levy harsh taxes to deliver unsatisfactory public services. In their quest for fiscal relief, however, urbanists cannot just clamor for more generous grants-in-aid from the federal and state governments. These governments ought to abolish, or else fully compensate, more of the unfunded commandments they impose. With respect to lifting controls that raise direct costs for private enterprise, the national governments of Germany, France, or Italy are by and large laggards compared with that of the United States. But when it comes to relieving the local public sector from uncompensated decrees, we Americans might take a page from some models abroad. What Edward I. Koch, a former mayor of New York City, once called the "millstone" of unfunded mandates may actually be heavier for municipalities in this country than it is in quite a few others. The trouble seems to be that U.S. policymakers are trying to have it both ways: through most of the 1990s they have sought less discretionary spending in the federal budget, but also no letup in the nation's activist social agenda. At the same time, they have wanted the cities, even fiscally feeble ones, to be self-supporting.

Consider the debacle of America's urban public schools. Few, if any, other nations devote so large a share of total school spending to nonteaching personnel. There may be several excuses for this lopsided administrative overhead, but one explanation almost certainly is the growth of government mandates and the armies of academic administrators needed to handle the red tape. The problem, according to a 1996 report by the U.S. Advisory Commission on Intergovernmental Relations, can be illustrated by the requirements of the Individuals with Disabilities Education Act. Local authorities are compelled to spend some $30 billion to meet the special needs of pupils with disabilities, while the federal government reimburses a paltry 8% of the added expense. Compliance costs for urban school districts, where the concentrations of handicapped students are high and the fiscal means to support them low, are sometimes staggering. In Washington, D.C., the city has found itself administering special ed at a cost of almost $65 million a year.

Or look at urban mass transit in America. Its empty seats and sorry finances are no secret. Less openly acknowledged, however, is the fact that Section 504 of the Rehabilitation Act, and more recently the Americans with Disabilities Act, have added major financial obligations to our teetering transit systems. (Never mind, for instance, that the Washington Metro, the nation's most modern and well-designed subway system, is increasingly hard pressed to cover its mounting maintenance bills, estimated at $200 million a year. The system will be required to tear up 45 stations and install bumpy tiles along platform edges, at an estimated cost of more than $15 million.) Special accommodations for handicapped persons are desirable and just. But if federal courts, agencies, and Congress insist on the most expensive means of providing this service, at a minimum they ought not resort to what local officials call "shift and shaft federalism"—blithely passing the costs on to local taxpayers.

Deregulation, in the form of fewer top-down directives, would ease the burden on many cities and, indirectly, their overtaxed neighborhood businesses. An unrelenting accretion of state and federal dictations will only force cities, already stretched for revenues, to raise their rate of taxation, driving away the firms and people they desperately need. The proper precept to follow is simply this: if the national government or the statehouses deem their mandatory social wish list to be important, they should pay for it. In this respect, the welfare states of Europe are sometimes more honest. Top-heavy and extravagant as they can be, at least some accept a greater share of direct responsibility for the fiscal obligations they create.

SERIES: Brookings Policy Brief Series | # 44