Economists' Outlook

Housing stats and analysis from NAR's research experts.

REALTOR® University Presentation: Cities & Suburbs Now and in the Future

Dr. Anthony Downs, Brookings Institution
Summary by Jed Smith
Managing Director, Quantitative Research

Most Americans agree that traffic congestion is a major problem in their communities, and congestion seems to be getting worse.  In a REALTOR® University presentation Dr. Anthony Downs, an Economist and Senior Fellow at the Brookings Institution, discussed how traffic congestion appears to be a long-term problem.  (Watch the highlights video.  Dr. Downs has written many books, including An Economic Theory of Democracy, Stuck in Traffic, and Still Stuck in Traffic).

Congested roads waste commuters' time, cost them money, and degrade the environment. Dr. Downs focused on three major issues—why congestion occurs, where future population growth is likely to develop, and whether walkable communities will dominate future housing choices.

Why traffic congestion arises, and is it possible to get rid of it?

Having everyone present at the same time is the most efficient way for businesses to operate.  In addition, businesses are more efficient when located near other businesses, whether competitors, suppliers, or customers.  There are substantial externalities associated with the gathering of stakeholders in one location.  This means that the participants  will all need to travel at the same time, thereby causing congestion.

Building more roads as a solution to congestion doesn’t work.  It is too costly to build enough roads.   In addition, railroads and other public transportation options tend to be very expensive and don’t pay their way.  In addition, mass transit does not provide door-to-door service, as does the automobile, so congestion is probably with us.  Congestion is the economic byproduct of efficiency.

Does the future favor population growth in large areas or in small areas?

Urban planners advocate high density, high rise population concentrations in analyses of urban planning.  Carried to the ultimate conclusion, everybody ought to live a New York lifestyle.  However, analyses of urban areas with population growth in recent years has shown that the majority of the growth has occurred and is likely to continue to occur in the suburbs.

Will walkable communities dominate future growth? 

The Millennial generation is reported as adverse to purchasing a car, preferring to walk, bike, or use public transportation. The example most frequently cited is San Francisco, with high tech firms and Millenials clustered in technology jobs, living in the central city.  It is appropriate to note that Sa Francisco is an “outlier”—it is the second most densely inhabited city in the country, right behind New York City.  There is an acute lack of space in San Francisco.  In addition, the Millenials have not yet reached two important facts or stages in life:  marriage and children.  These two events do not in general appear to be conducive to the walkable communities envisioned by urban planners, even though that is their story and they are sticking to it.  Small children need open space, monitored gathering places, playgrounds, and specialized facilities and services—not walkable open-air bars and great shopping experiences.

Conclusions

As noted, while there may be some measurable gains from increasing housing densities, most other land-use strategies have little effect. Indeed, the most powerful solutions, including higher gasoline taxes, increased public funding for transit, and highway tolls, are also the least palatable politically.  Large cities exist because of the substantial externalities they create.  As a result, congestion is a major by-product, which in general cannot be avoided.

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