In metropolitan Atlanta, the city and suburbs are competing for new development and the economic opportunity that accompanies it. The suburbs are winning this competition and the result is sprawl and urban decay. This outcome is not simply a function of the free market. Government policy decisions have a pervasive influence on the market for land and its use. If we want to change land use patterns, we must change public policy.
Three economists from Georgia universities studied taxes and fees development regulations and procedures, redevelopment incentives and transportation policies, all of which have a strong influence on land use in Metro Atlanta. Based on an analysis of the internal rate of return of four hypothetical development projects at five urban and suburban locations, they concluded that public policies contribute to the greater profitability of all types of development at three suburban locations than at two locations within the City of Atlanta. The accuracy of these results is confirmed by how closely they mirror the kinds of development that are actually occurring in the region.
The cost of land, averaging 8 times higher in the city than in the suburbs, is the single most important factor favoring suburban development. Though its price is a function of market supply and demand, the demand for land for development on the suburban edge of the metro region has been greatly increased by the construction of highways. This policy decision has brought thousands of acres of remote rural land into competition with the city, while creating enormous wealth in the outskirts by increasing private land values by $10,000 per acre.
Higher city rental rates offset the land cost advantage of the suburbs to some extent, particularly for apartments. Development requirements like parking spaces, as well as the longer period it takes to receive permission to build in the city, also play major roles in giving the suburbs a competitive advantage. Taxes and impact fees give a smaller but still significant advantage to the suburbs. On the other hand, the abatement of taxes in urban enterprise and empowerment zones in the city is an important counterweight to the advantage conferred on the suburbs by other policies. These trends were corroborated by a survey of local developers.
The researchers’ analysis was reviewed by academic peers and discussed at a roundtable meeting of local private and public leaders. This report also contains a summary of their views. Based on the research and views of local leaders, this report recommends that consideration be given to a number of policy changes to level the playing field between the City of Atlanta and its suburbs and, thus, to curb sprawl and improve the quality of life in the entire metro Atlanta region:
– Augment tax incentives for enterprise zone development in the City of Atlanta, paying particular attention to attracting middle class housing to the downtown area. Accompany this with stronger “brownfield” development incentives and indemnities.
-Streamline the zoning and development approval processes in the city of Atlanta to reduce delays that add to developers’ costs, while maintaining adequate public input.
-Examine current city specifications for developer-provided infrastructure and make changes to lower developers’ costs while still meeting public needs. Pay particular attention to requirements for parking spaces, which are much more costly to provide downtown than in the suburbs.
-Consider a tax surcharge on downtown parking lots to encourage their development and lower overall city land costs. Study a two-tier property tax system like the one that has contributed to the revitalization of downtown Pittsburgh by encouraging development of vacant land.
-Recapture a portion of the windfall increase in suburban land values that has resulted from construction of highways and other infrastructure. Without this, the chances of revitalizing downtown and curbing the effects of sprawl on everyone in the region may be futile. Possibilities for windfall recapture include regional revenue-sharing like that adopted by Minneapolis-St. Paul, and a regional impact fee on new development that reflects the impact that sprawl has on the core of Adanta and, hence, the entire metro region. Reinvest the proceeds in downtown Atlanta and perhaps older suburbs that may suffer the same competitive disadvantage because of public policy decisions.
-Ask suburban development to pay more of its full marginal cost for public services. Begin by changing the rules on impact fees to allow one jurisdiction to recover costs caused by development in another.
-Adopt a more regional approach to land use planning and decisionmaking. A promising opportunity for starting this may be the pending proposal to harness state transportation funding as an incentive. All of these proposals are offered, not as a definitive policy agenda, but as a contribution to a more urgent and focused discussion on the future of land use trends and the quality of life in metropolitan Atlanta.