Housing and Community Development

Casey Dawkins, Jason Sartori, and Gerrit-Jan Knaap (2012)

Barriers to Development Inside Maryland's PFAs: Perspectives of Planners, Developers, and Advocates

This study presents a summary of stakeholder perspectives on the effectiveness of Maryland's Priority Funding Areas and barriers to growth within PFAs. It relies upon responses to a telephone survey of forty-seven representatives from three key stakeholder groups—planners, policy advocates and consultants, and developers.

Executive Summary

Passed in 1997, Maryland’s Smart Growth and Neighborhood Conservation Initiative took a novel approach to growth management, utilizing the power of the purse to encourage sustainable development. The initiative seeks to discourage suburban sprawl through a targeted spending approach, while also allowing local governments to retain their land use decision-making authority. It required local governments to designate Priority Funding Areas (PFAs) where state infrastructure funding would be focused. Through this tool, the State aimed to promote development and revitalization within Maryland’s urbanized areas, while limiting the urbanization of Maryland’s rural areas and green spaces.[i]

Data from the Maryland Department of Planning, however, suggests that PFAs are having limited impacts. The percent of single-family acres developed outside of PFAs has risen steadily over time.[ii] Development densities have declined in PFAs, with the average parcel size inside PFAs increasing from 0.25 acres in 1990 to 0.28 acres in 2004.[iii] Despite their disappointing performance, PFAs are anticipated to play key roles in future policies regarding development on septic systems and in PlanMaryland, the state development plan.

Given their growing prominence but questionable efficacy, PFAs warrant further examination. That is the purpose of this study, conducted by the Housing Strategies Group of the National Center for Smart Growth Research and Education at the University of Maryland, and funded by the Maryland State Builders Association and NAIOP Maryland chapters. The study relies upon responses to a telephone survey of forty-seven representatives from three key stakeholder groups—planners, policy advocates and consultants, and developers. HSG made every effort to obtain the perspectives of a variety of sources but it is important to note that the survey respondents could not be said to be randomly selected and the sample size is too small for rigorous statistical analysis.

While not presenting new empirical analysis of the influence of PFAs on development patterns across the State, the study does produce new information on how critical stakeholders view the efficacy of PFAs and the barriers to development inside PFAs:

  • Most respondents think PFAs are only somewhat effective or not effective at all. Of those responding to the question, “To what extent have PFAs been an effective urban growth management tool?” 78 percent responded either “not at all effective” or “somewhat effective.” When asked to comment on the effectiveness of PFAs, respondents from each of the three groups interviewed mentioned inconsistencies between state and local planning objectives as contributing to the ineffectiveness of PFAs. In theory, PFAs can provide the opportunity to reduce uncertainty and development costs by coordinating state and local infrastructure investments. There have also been examples of local governments reducing impact fees and providing expedited review processes within their PFAs, but these cases are generally more the exception than the rule. Most suggested that PFAs are either ignored in the local planning process or create additional impediments to local planning, because existing land use patterns and development rights predated the establishment of PFAs. In one jurisdiction, local growth areas are intentionally drawn to be larger than PFAs to create a “buffer” between existing urbanized areas and areas planned for future growth. In explaining continued growth outside PFAs, planners in particular pointed to legacy zoning and grandfathered permits. Others pointed to consumer preferences and the relative ease of development outside PFAs from the regulatory and community opposition perspectives. When development does occur within PFAs, state policy is often less a factor than the strength of the local market for PFA development.
  • Most respondents think it’s more difficult to develop land inside than outside PFAs. When asked, “Holding other things constant, do you believe it is more difficult to develop land inside or outside PFAs?” respondents citing “inside” PFAs outnumbered those citing “outside” by almost four to one. A large percentage (29 percent) also indicated that designation inside or outside a PFA had no impact on the difficulty of development. Several indicated that the difficulties arise not from spatial differences in regulations but in how they are applied. Citizen opposition, for example, can be more severe within PFAs, because the higher density of development implies satisfying a larger number of constituencies. The difficulty of assembling multiple parcels of land makes “staging” of development inherently more difficult. Parking must often be built as structured parking below-grade, increasing construction costs. Utility easement requirements (i.e. 10-foot right of way requirements) often inherently favor suburban development. Environmental regulations, while not directly designed to discourage development within PFAs, may be more difficult to satisfy due to the higher probability of soil contamination combined with additional requirements to achieve LEED certification. Satisfying APFO requirements can also be more difficult within PFAs where roads, schools, and other facilities are more burdened.
  • Citizen opposition, consumer preferences, APFOs, scarcity of zoned land, lack of infrastructure, and stormwater management regulations are the most commonly-cited constraints to developing inside PFAs. Respondents were asked to identify from a list of conditions, which were impediments to development or redevelopment inside PFAs and which were among the top three impediments. The most frequently cited impediments include stormwater management regulations and citizen opposition. Respondents from all categories suggested that recent changes in the State’s stormwater mitigation requirements make redevelopment within existing urban areas more difficult. When asked to prioritize the impediments, the most frequently cited items included citizen opposition, APFOs, scarcity of zoned land, and lack of infrastructure. Combined, these suggest that local regulatory processes requiring substantial citizen review, which are also tied to local infrastructure capacity constraints through APFOs, or ad-hoc moratoria can impose significant constraints to development within PFAs. Respondents also identified quality-of-life considerations, particularly schools and crime, as influencing market demand within PFAs. Developers remarked that inconsistencies between current soft-market realities combined with stringent regulatory constraints limit the feasibility of development within many PFAs. Inappropriate requirements for ground-level retail square footage, parking, stormwater management, and environmental standards are some examples of such inconsistencies.
  • High rise apartments and mixed use developments are viewed as the most difficult products to develop within PFAs. All three groups indicate that while the market for multifamily and mixed-use projects is strongest within many PFAs, these development types are also the most difficult to capitalize and bring to completion. When asked to elaborate, citizen opposition, land availability, economic return and infrastructure capacity were all frequently-cited constraints facing developers of these project types. Several respondents also pointed to a general lack of understanding among the public about mixed-use developments and their potentially beneficial community impacts.
  • Zoning and the adequacy of infrastructure are viewed as the most influential public policy tools. When asked, “Which of the following planning tools is the most important determinant of whether or not a development or redevelopment projects will be approved on a given parcel of land?” a parcel’s status vis-à-vis the PFA made little difference, according to the three groups interviewed. The most important determinants of development approval are the parcel’s zoning and the existence of adequate infrastructure. Policy advocates also point to the importance of local public support and political leadership.


Survey respondents identified a number of ways to improve development conditions in PFAs, ranging from limiting the length of APFO restrictions to reducing impact fees and lowering level of service requirements for certain types of infrastructure inside PFAs. Other recommendations included expediting the state agency review processes and lessening stormwater management and other environmental protection requirements for projects inside PFAs.

Based on the findings of this and previous studies, the HSG offers the following recommendations:

  • Require that PFAs be consistent with growth areas, incorporated into comprehensive plans and be reviewed as part of the comprehensive plan review process every ten years. Currently, PFAs are not required in comprehensive plans, which are reviewed every six years.
  • Require that PFAs contain sufficient development capacity for 20 years of residential, institutional, commercial, and industrial growth. Currently, PFA capacity criteria include only residential development.
  • Provide local governments with greater flexibility in constructing PFAs if they place greater restrictions on development outside PFAs. This recognizes that “one size does not fit all” when it comes to PFAs across the State and would provide local governments some flexibility on the size of PFAs if they restrict development outside PFAs.
  • Require local governments to include a housing element in their comprehensive plans that permits, but does not require, high density and mixed use development.
  • Establish minimum zoned density requirements that vary for urban, suburban, and rural PFA communities.
  • Enable local governments to reduce regulatory restrictions (e.g., road service standards, stormwater management and forest preservation requirements) inside PFAs, especially in transit station areas.
  • Limit development moratoria from adequate public facilities ordinances to four years. If moratoria cannot be lifted in four years, require local governments to increase development capacity elsewhere.
  • Target state infrastructure spending in areas within PFAs under adequate public facilities ordinances moratoria.
  • The State should work with local governments and other development stakeholders to further identify barriers to growth specific to the PFAs within each jurisdiction. Collectively they should work to identify options for overcoming these barriers.
  • The State should work with local governments to periodically conduct a statewide infrastructure needs assessment as well as a review of growth related capital funding approved and planned by the state and local governments.

 

[i] Knaap, Gerrit-Jan, and John W. Frece (2007). “Smart Growth in Maryland: Looking Forward and Looking Back.” Idaho Law Review 43, 445-473.
[ii] Sartori, Jason, Terry Moore, and Gerrit Knaap. Indicators of Smart Growth in Maryland. National Center for Smart Growth Research and Education, January 2011.
[iii] Lewis, Rebecca, Gerrit-Jan Knaap, and Jungyul Sohn (2009). “Managing Growth With Priority Funding Areas: A Good Idea Whose Time Has Yet to Come.” Journal of the American Planning Association 75:4, 457-478.

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Anna Alberini, Will Gans, and Daniel Velez-Lopez (2011)

Residential consumption of gas and electricity in the U.S.: The role of prices and income

We study the residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997–2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the − 0.860 to − 0.667 range, while the own price elasticity of gas demand is − 0.693 to − 0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.

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Robert Nelson (2010)

Community Associations at Middle Age: A New Bankruptcy Law and Other Proposals

Community associations represent a major American shift toward collective private
ownership of housing, following in the path of the rise of the private business corporation 100 years ago. The laws overseeing the chartering, organizing, governing, and other aspects of business corporation workings have been significantly revised many times. It has been a case of gaining experience with corporate forms of business ownership and then responding to the problems and opportunities as they have been discovered by businessmen, researchers, and other observers. As more and more community associations now reach middle age, it is time in this area of collective property ownership as well for a full retrospective assessment and new state laws and other institutional initiatives in response to the problems and opportunities as they are identified.

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Charles Towe and Chad Lawley (2010)

The Contagion Effect of Neighboring Foreclosures on Own Foreclosures

In this paper, we examine a highly localized contagion effect of foreclosures and find strong evidence that social interactions influence the decision to foreclose. We utilize a hazard model and a unique spatially explicit dataset documenting parcel level residential foreclosures in Maryland for the years 2006 through 2009. We combine these data with tax and assessment data, loan data, Census, and unemployment data. These data allow us to control for important factors influencing the likelihood of foreclosure within a given community, including the prevalence of subprime loans and the distribution of socioeconomic characteristics. Additionally, we use the tax data to construct variables describing individual homes, surrounding homes, and community. These variables include structural characteristics of houses, their price history, and length of ownership.

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Robert Nelson (2008)

Community Associations: Decentralizing Local Government Privately

The system of local government in the United States in being transformed by the rise of the private community association. Local government in the pubic sector is increasingly limited to large county and municipal governments--also sometimes large special districts--that assume responsibilities of a regional and metropolitan scope. The regulation of land to protect neighborhood environmental quality, and the delivery of small-scale services, is increasingly the responsibility of a private government. Previous studies have described these new patterns of governance, but little literatuer is available to understand the full reasons for such changes. This chapter offers several hypotheses relating to the magnitude of transaction costs under alternative forms of land tenure.

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Gerrit-Jan Knaap, Antonio Bento, and Scott Lowe (2008)

Housing Market Impacts of Inclusionary Zoning

Many communities across the country face affordable housing challenges. An increasing number of communities are considering inclusionary zoning as a response. Inclusionary zoning programs, which require developers to sell a certain percentage of newly developed housing units at below market rates to lower income households, are politically attractive because they are viewed as a way to promote housing affordability without raising taxes or using public funds. Standard economic theory, however, suggests that such programs act like a tax on housing construction. And just like other taxes, the burdens of inclusionary zoning are passed on to housing consumers, housing producers, and landowners. As a result, inclusionary zoning policies could exacerbate the affordable housing problem that they are designed to address.

Although debate over the merits of inclusionary zoning has continued for nearly three decades, there have been no rigorous studies on their effects on housing prices and starts. We offer such an analysis here, estimating the effects of inclusionary zoning policies on single family housing prices, single family and multifamily housing starts, and the size of single family housing units in California over the period from 1988 to 2005. In our analyses, we are able to isolate the impacts of inclusionary zoning programs by carefully controlling for spatial and temporal conditions, such as the neighborhood or school district within which the house is located, and changing market conditions over time.

We find that inclusionary zoning policies had measurable effects on housing markets in jurisdictions that adopt them: the share of multifamily housing increases; the price of single family houses increases; and the size of single family houses decreases. These results are fully consistent with economic theory and demonstrate that inclusionary zoning policies do not come without cost.

Overall, we find that inclusionary zoning programs had significant effects on housing markets in California from 1988 to 2005. Although cities with existing or new programs during the study period did not experience a significant reduction in the rate of single family housing starts, they did experience a marginally significant increase in multifamily housing starts. More specifically, we found that in municipalities with inclusionary housing programs, the share of multifamily housing starts increased seven percent. The reasons for this shift are relatively clear when viewed in the proper context. Housing markets in California expanded rapidly over the 1990s as pent up demand exploded following the 1991 recession. The imposition of inclusionary zoning requirements was not strong enough to slow the overall rate of housing production but did cause a measurable shift from single family to multifamily housing production. We further found that the magnitude of this shift varied with the stringency of the inclusionary requirements.

We also found that housing prices in cities that adopted inclusionary zoning increased about 2-3 percent faster than cities that did not adopt such policies. In addition, we found that housing price effects were greater in higher priced housing markets than in lower priced markets. That is, housing that sold for less than $187,000 (in 1988 dollars1) decreased by only 0.8 percent while housing that sold for more than $187,000 increased by 5.0 percent. These findings suggest that housing producers did not in general respond to inclusionary requirements by slowing the rate of single family housing construction but did pass the increase in production costs on to housing consumers. Further, housing producers were better able to pass on the increase in costs in higher priced housing markets than in lower priced housing markets.

Finally, we found that the size of market rate houses in cities that adopted inclusionary zoning increased more slowly than in cities without such programs. Specifically, we found that housing in cities with inclusionary zoning programs was approximately 48 square feet smaller than in cities without inclusionary programs. Further, most of the reductions in housing size occurred in houses that sold for less than $187,000. These findings suggest that inclusionary zoning programs caused housing producers to increase the price of more expensive homes in markets where residents were less sensitive to price, and to decrease the size of less expensive homes in markets where residents were more sensitive to price.

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John Frece, Jason Sartori, and Rebecca Lewis (2008)

Evaluating the Impacts of the Community Legacy and Neighborhood BusinessWorks Programs: A Review of Twelve Selected Communities

The Community Legacy program was established in 2001 through a bill introduced by the administration of former Maryland Governor Parris N. Glendening as part of the larger Smart Growth and Neighborhood Conservation Initiative.  The Community Legacy program and its companion effort, the Neighborhood BusinessWorks program, were specifically created to direct state resources to existing community-scale neighborhoods as part of the state’s broader effort to reverse a decades-long trend of urban disinvestment and abandonment. Considered somewhat unorthodox when they were started, these programs have since become readily accepted by local governments as mainstays of their revitalization strategies.

In this study, the National Center for Smart Growth, working with the Division of Neighborhood Revitalization at the Department of Housing and Community Development, conducted an analysis of randomly selected Community Legacy investments from the period 2002 to 2005.  The analysis provided an assessment of the impact and effectiveness of the Community Legacy program and the value of its awards to communities undergoing revitalization.

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Gerrit Knaap, Jungyul Sohn, John W. Frece and Elisabeth Holler (2003)

Smart Growth, Housing Markets, and Development Trends in the Baltimore-Washington Corridor

Maryland is a dense and rapidly growing state. For this and other reasons, Maryland has been a national leader in a movement known as smart growth. Smart growth has many objectives, but concentrating urban growth in well defined areas while protecting rural land from development are perhaps its primary goals. Though public support for smart growth continues to rise, so do concerns that policies used to promote smart growth could have adverse effects on land and housing markets. To evaluate these concerns, this study provides information on housing markets and development trends in the Baltimore-Washington corridor.

The study finds that housing demand in the nation and in Maryland is strong, as revealed by rising prices and homeownership rates as well as by falling vacancy rates and housing-to-jobs ratios. In general, the housing market in Maryland exhibits trends similar to those in comparable jurisdictions, such as neighboring Virginia. The performance of specific housing markets in Maryland, however, varies widely, with strong growth in the suburbs, variable growth in rural areas and persistent weakness in Baltimore City. Further, in the Baltimore and Washington suburbs, housing prices are rising rapidly while housing starts remain sluggish.

Though this study does not prove that housing markets and development trends in Maryland have been adversely affected by land use policies, there is evidence to suggest that state and local constraints on development are contributing to problems of housing affordability and deflecting growth to outlying areas. The result could be more, not less, urban sprawl. Moreover, neither the state government nor most local governments in Maryland currently have adequate policies in place to monitor or address this problem. While the Maryland Smart Growth initiative has been successful in protecting natural areas and agricultural lands from development, it has not had similar success in assuring a steady, future supply of affordable housing. Local governments, meanwhile, appear to have little incentive to address this problem.

To address this problem the state needs to assure that local governments address development capacity and housing affordability issues. This does not mean it should eliminate or immediately expand Priority Funding Areas. It does mean that the state should require local governments to include housing elements in their comprehensive plans, provide periodic estimates of housing and employment capacity, and develop modern and publicly accessible data on the location and capacity of developable land. Local governments must be active and willing participants in this process and the Maryland Department of Planning should provide whatever technical assistance may be needed.

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Gerrit Knaap (2002)

An Inquiry into the Promise and Prospects of Smart Growth

Prepared for Presentation at the International Workshop on Urban Growth Management: New Approaches to Land Management for Sustainable Urban Regions University of Tokyo, Tokyo, Japan, 29-31 October 2001

Smart growth is a term rising rapidly in use and ambiguity. The origin of the term is uncertain, though some credit Harriet Tregoning, former Director of the Development, Community and Environmental Division of the U.S. Environmental Protection Agency (USEPA) and now the smart growth Czar in the cabinet of Maryland’s Governor Glendening. Even if fiction, this story has a certain allure, since the USEPA and the State of Maryland have done much to make smart growth an agenda item of many states, local governments, and interest groups. Despite its popularity, however, the concept of smart growth remains ephemeral. Much has been written about smart growth in the popular press and newsletters of advocacy organizations, both pro and con, but little has been written about it in the academic literature (early contributions include Burchell et al. 2000, Downs 2001, and Nelson 2001). As the newly appointed Director of Research for the National Center for Smart Growth Research and Education at the University of Maryland, it will be my job to do just that -- not just with papers of my own, but with papers written by scholars with a variety of disciplinary backgrounds. This paper, therefore, represents a first step towards that end. But my goals for this paper are more ambitious; they include the articulation of an agenda for research on smart growth. This is a formidable task, since the ambiguity of the term leaves little in the realm of land use to eliminate as beyond the scope of the subject. To narrow my scope, therefore, I ignore all discussions about what constitutes urban sprawl and whether sprawl, however defined, is good or bad. Instead, I focus my analysis on smart growth policies adopted by the State of Maryland.

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Yan Song and Gerrit Knaap

Internally Connected, No Commercial, With a Touch of Open Space: The Neighborhoods of New Homes in the Portland Metropolitan Area

For many years, neighborhoods have been classified as either “suburban” or “traditional.” But new homes today are built in many different types of neighborhoods with many different design features. In this paper, we develop a quantitative method for classifying the neighborhoods of new homes in the Portland metropolitan area. We proceed in three steps.  First we measure urban form attributes of neighborhoods around newly developed homes.  We then use factor analysis to identify a small set of factors that capture essential differences in urban form. Finally we use cluster analysis on these factor scores to identify distinctly different neighborhood types. Applying these methods to neighborhoods around new single family homes in the metropolitan Portland, Oregon, we are able to identify eight factors of urban form and six neighborhood types. We then show that most new single family homes in metropolitan Portland are built in new suburban neighborhoods but a substantial portion is occurring in traditional urban neighborhoods. 

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