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Federal Policies Work Against Mixed-Use and Encourage Sprawl

By John Norquist

Scale, building type, and financing are the ingredients of a housing market that serve the varied needs of citizens. When federal programs are built around specialized concerns, they can obstruct the beneficial complexity of urban places. Financial requirements that dictate a separation of use or discourage rent-based housing work against the interests of diverse urban areas and the people who live in them. They also severely limit the ability to bring homes, schools, stores, offices, and other important destinations within walking distance—a pattern shown to yield dramatic benefits in energy efficiency, public health, household transportation costs, and environmental impact.

infill project Montgomery, AL
At Left, an infill project in Montgomery, AL, features housing in buildings that are more than 20 percent dedicated to retail or commercial uses. Rules at Fannie Mae, Freddie Mac, and HUD discriminate against such projects.

Federal Restrictions on Mixed-Use
Federal housing policy disadvantages urban living by favoring home ownership over renting through subsidized mortgage programs (Fannie Mae, Freddie Mac, Federal Housing Authority) and by allowing tax deductions on mortgage interest. Also, Department of Housing and Urban Development’s (HUD) capital subsidy for rental housing obstructs mixed-use development, including housing and retail, by prohibiting more than 20 percent of the imputed value of a project to be non-residential. Fannie Mae and Freddie Mac impose similar restrictions on owner-occupied housing. Potential buyers in a new four-story building with three floors of housing and shops on the ground floor would find it difficult or even impossible to secure mortgage financing because rules at Fannie Mae or Freddie Mac bar the mortgage giants from involvement in buildings where non-retail uses exceed 20 percent. Likewise, developers of either for-sale housing under Fannie and Freddie or rental housing under HUD find it nearly impossible to get financing from banks, almost all of whom mimic and impose the federal restrictions on mixed-use.

Anti-Urban Bias
Midwest cities have especially suffered from federal and state programs and local policies that undermine urbanism and population density while subsidizing and encouraging decentralization—often referred to as sprawl. For example, the interstate highway program subsidizes grade-separated highways that facilitate fast long distance travel by motor vehicle. In densely populated cities, roads are expensive, weaken property value, and disrupt the efficiency of existing street networks. The large grade separated highway under-mines one of the fundamental assets of cities—location efficiency. If two people hold similar jobs and one person walks across the street to work and the other drives 25 miles, their value to the economy is the same, but their cost is not. The government rewards the longer, energy-consuming trip with a large subsidy and ignores the value of the short walk. Federal policy should support economic value without disadvantaging compact, energy-efficient, transit-served urban development.

Billions of dollars being spent on infrastructure across the nation provides an opportunity to plan for a better America, but politics-as-usual favors sprawl over city. This anti-urban bias of national policies must end.

Nathaniel Baum-Snow, an economist at Brown University, has documented that each new federally funded “highway passing through a central city reduces its population by about 18 percent.’’ Subsidizing transportation decreases the advantage of living close together in cities. The clear and often-stated goal of federal transportation policy is to reduce congestion. This narrowly focused objective clashes with the very purpose of cities as a gathering spot for commerce and cultural interaction.

Problems with Separate Use Zoning
Another example of a policy that undermines urbanism is the application of strictly separated use zoning to cities. The federal government started promoting such zoning in 1931 in an Executive Order issued by President Herbert Hoover. Hoover felt that U.S. cities, like those in Europe, were crowded and dirty and needed to spread out and separate commerce from housing. Although his order was more exhortatory than mandatory, its underlying intent remains embedded in many federally created policies and programs, including the two huge federal guaranteed secondary mortgage markets, Fannie Mae and Freddie Mac, as well as HUD’s capital subsidy program for multi-family rental housing. Separate use zoning has undermined the value of existing neighborhoods and had the effect of mandating new development be separated into pods with housing, retail, and office uses strictly separated. This confounds efforts to build a traditional Main Street with apartments built above storefronts.

Many federal and state policies have encouraged sprawl and undermined urbanism. But market and demographic forces have begun to favor urban places. As household sizes shrink, demand increases for urban forms such as apartments and town houses. Young adults prefer urban living, seeking greater social and job opportunities. Urbanism is more popular, so now would seem to be a good time to change rules and policies that discourage it.

Milwaukee Example
In Milwaukee, as mayor from 1988 to 2004, I set out to reform coding and zoning to encourage mixed-uses in commercial and retail corridors. The code reforms adopted in Milwaukee “legalized” urban forms, like apartments or offices above shops. Also, setback requirements for buildings were adjusted to encourage construction of buildings along sidewalks and closer to streets. In newer portions of the city, setbacks from streets had been set as deep as 100 feet, often with no provision for sidewalks.

More successful cities will, in turn, also help America. More compact, complete, and well-connected development will save energy and add efficiency to the American economy. Urbanism also brings social benefits to communities. As it says in our charter preamble, “The Congress for the New Urbanism views disinvestment in central cities, the spread of placeless sprawl, increasing separation by race and income, environmental deterioration, loss of agricultural lands and wilderness, and the erosion of society’s built heritage as one interrelated community-building challenge.”

John Norquist is the president of the Congress for the New Urbanism and has taught courses in urban planning and development.

Excerpted from Norquist’s chapter in the League’s book, The Economics of Place: The Value of Building Communities Around People, available on Amazon.com.

 

 

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