Even in tough economic times, there is a way to stimulate growth and cut back on spending.

That’s the finding of a new study by The Brookings Institution, which found that compact development patterns and reinvestment in established areas can actually save taxpayers’ money and improve regional economies.

According to the study’s authors, who are part of the Brookings Institution Center on Urban and Metropolitan Policy, the process is a carefully choreographed dance that involves managing growth to ensure urban vitality.

By making a few smart choices, local governments can spend less on public infrastructure and services and improve the regional economy, including real estate values.

“In sum, the best academic literature suggests that smart growth is especially smart in times of fiscal conservatism,” said the report, “Investing in a Better Future: A Review of the Fiscal and Competitive Advantages of Smarter Growth Development Patterns.”

The debate over spending versus economic viability has sharpened in recent years. After the stock market bubble burst in the 1990s, the subsequent years of economic sluggishness and ongoing state and local budget deficits intensified the debate over government spending, economic development and the physical growth of states and metropolitan areas.

Governments were then on the lookout, the report finds, for fiscally prudent ways to support their communities and simultaneously stimulate their economies.

One solution was to set up compact development patterns and invest in projects that improved urban cores. Smart local governments should promote the reuse of existing buildings, establish smart design features to reduce infrastructure costs and traffic congestion, and limit sprawl. These steps can save taxpayers’ money and improve regions’ overall economic performance, the report found.

It has been 30 years since a series of systematic fiscal impact studies began showing with specific dollar values that more compact, less sprawling development patterns can reduce the capital and operations costs that governments incur from new growth, the study said.

In addition to the fiscal benefits, the economic benefits of a smart-growth philosophy include enhanced property values. In terms of residential land and housing, the report found that when the supply of housing is spatially contained in a smart growth system, housing prices in those areas increase. The study also reported that contained growth results in higher housing prices.

“This is not due to limits on the supply of housing, but rather from the creation of benefits such as heightened convenience, enhanced public transit and lower service costs,” the study said. “These effects suggest that smart growth may also have significant positive effects on land and house prices, either by limiting the supply of developable land or increasing the overall desirability of the community.”

Some aspects of smart growth, such as urban containment or land conservation, may raise housing costs if they are not accompanied by increases in housing density and supply, the report said. They also may enhance a region’s tax base, create wealth through housing appreciation and boost property tax collections.

The surrounding suburbs also benefit when governments invest in urban cores.

“City income growth has been shown to increase suburban income, house prices and population,” the study said. “Reduced city poverty rates have also been associated with metropolitan income growth.”

The study also found that a city can be improved when urban areas are developed with community benefits in mind.

“Compact, mixed-use development fosters dense labor markets, vibrant urban centers, efficient transportation systems, and a high ‘quality-of-place,'” the study found.

While some of these findings may seem apparent to the casual observer, achieving them requires careful planning and a dedication to “move beyond obvious fiscal savings and continue to quantify the profound effects on economic competitiveness, equity and quality of life available through better planning and community design,” the study said. “In the end, these issues are at the crux of what better development is really all about.”

Broadly defined, “smart growth” is a relatively new way of thinking about how communities, cities, towns and metropolitan regions manage growth and development. The idea is that patterns of growth and decline harm communities, undermine urban economies and environmental goals, and worsen racial, ethnic and class divisions. Smart growth proponents argue that detrimental growth patterns result in part from governmental policies that distort market forces and facilitate excessive decentralization of people and jobs.


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