Stop Charging New Housing For Infrastructure; Make It "Free"

Seattle, USA - October 1, 2014: An empty bike lane on Pike street with cars gridlocked in the other lane during the six o'clock rush hour.

Getty

Recently I started riding my bike again and it got me thinking about pavement and right of way, especially the way that cities and communities generally think about infrastructure investments. Much of the pavement in cities is free for everyone to use whether it is sidewalk, bike path, or road, but that surface has a cost associated with it. Over the years, many cities have decided to impose impact fees on housing, something that all by itself indicates the way people in these cities see new housing – as an bad thing that needs to be mitigated. Often impact fees are used to pay for “free” use of things like sidewalks, roads, and other infrastructure. What if we didn’t see housing as an impact? 

I think there is a useful analogy between the way publicly funded right of way improvements work with private enterprise to increase certain behavior, and the way good housing policies could work with private enterprise to increase housing supply and lower prices. 

The analogy is this: if local government saw new housing production as a benefit rather than an impact, it would build infrastructure to incentivize more housing production rather than charge new housing fees to pay for that infrastructure. Imagine if instead of embedding the cost of sidewalks, drainage, water, sewer, and power in the price of new housing, local government – and tax payers – provided it to builders, and in the end to consumers, for free. 

The price system dictates that we generally avoid expensive things. When prices for a thing go up, people seek substitutes if they can find them or they learn to live without, or they earn more money. Producers have an incentive to provide competitive prices for that thing if they can, that ends up driving innovation and lowering costs as well, increasing consumer access. Government can weight this system by either taxing production, the thing itself, or do the opposite and subsidize the production or the thing being produced. 

We already subsidize in many places in cities, on-street parking. Pavement isn’t free, and public pavement provided to people who arrive at a parking spot first, has a cost in construction, maintenance, and opportunity. Yet cities all over the country provide car storage for free and often homeowners feel that the parking spot in front of their house belongs to them. This is almost never seen as “an impact” but as an entitlement of owning a single family home or just simply owning a car. 

Some cities are beginning to change this by reducing the amount of pavement in the right of way that is available to single drivers in private cars by building more pedestrian, bike, and bus infrastructure. This creates controversy and anger from some. A few years ago a reporter at the Seattle Times wrote a story about an elderly lady who had the loading zone in front of her building replaced with a bike lane. People fumed. But the wider community had decided that the benefits of purposing pavement for bikes would incentivize more bikes and fewer cars.

The argument over how publically accessible infrastructure is prioritized is as intense as arguments over housing, and they come together with impact fees. People who see housing as an infringement argue that new people add more cars, wheels, feet, and waste into public infrastructure and the people who build housing for them – builders and developers – should pay for it. But housing units and companies don’t pay for these things; people pay these fees, through the cost of the purchase price of their housing or rent. 

Giving public access to infrastructure means private enterprise gets to use those sidewalks, bike paths, and roads without charge as well. I used one of two competing bike share services recently to ride on “free” bike paths. If we treated housing in the same way, we’d invest our public resources to make it easier for producers of housing to compete by eliminating the costs of infrastructure. And that would mean no fees and publically funded infrastructure to support more housing. It’s what cities are doing to promote biking, riding, and use of transit whether it is public or private; expanding the use of “free” infrastructure. 

The reason that my bike share bike ride of two hours was only a few dollars is because the public subsidized everything but the bike, and competition between two private services ensures prices will stay low. If we subsidized infrastructure for housing by removing embedded costs for it and its use, we’d see housing prices fall to levels that would mean people earning even half of median income could find reasonable rents. Impact fees and other taxes on the production of housing ensure high prices. If we took the same approach to bike and scooter share, ride share, and transit, we’d see prices for those products “skyrocket” and more people would drive alone. 

">

Seattle, USA - October 1, 2014: An empty bike lane on Pike street with cars gridlocked in the other lane during the six o'clock rush hour.

Getty

Recently I started riding my bike again and it got me thinking about pavement and right of way, especially the way that cities and communities generally think about infrastructure investments. Much of the pavement in cities is free for everyone to use whether it is sidewalk, bike path, or road, but that surface has a cost associated with it. Over the years, many cities have decided to impose impact fees on housing, something that all by itself indicates the way people in these cities see new housing – as an bad thing that needs to be mitigated. Often impact fees are used to pay for “free” use of things like sidewalks, roads, and other infrastructure. What if we didn’t see housing as an impact? 

I think there is a useful analogy between the way publicly funded right of way improvements work with private enterprise to increase certain behavior, and the way good housing policies could work with private enterprise to increase housing supply and lower prices. 

The analogy is this: if local government saw new housing production as a benefit rather than an impact, it would build infrastructure to incentivize more housing production rather than charge new housing fees to pay for that infrastructure. Imagine if instead of embedding the cost of sidewalks, drainage, water, sewer, and power in the price of new housing, local government – and tax payers – provided it to builders, and in the end to consumers, for free. 

The price system dictates that we generally avoid expensive things. When prices for a thing go up, people seek substitutes if they can find them or they learn to live without, or they earn more money. Producers have an incentive to provide competitive prices for that thing if they can, that ends up driving innovation and lowering costs as well, increasing consumer access. Government can weight this system by either taxing production, the thing itself, or do the opposite and subsidize the production or the thing being produced. 

We already subsidize in many places in cities, on-street parking. Pavement isn’t free, and public pavement provided to people who arrive at a parking spot first, has a cost in construction, maintenance, and opportunity. Yet cities all over the country provide car storage for free and often homeowners feel that the parking spot in front of their house belongs to them. This is almost never seen as “an impact” but as an entitlement of owning a single family home or just simply owning a car. 

Some cities are beginning to change this by reducing the amount of pavement in the right of way that is available to single drivers in private cars by building more pedestrian, bike, and bus infrastructure. This creates controversy and anger from some. A few years ago a reporter at the Seattle Times wrote a story about an elderly lady who had the loading zone in front of her building replaced with a bike lane. People fumed. But the wider community had decided that the benefits of purposing pavement for bikes would incentivize more bikes and fewer cars.

The argument over how publically accessible infrastructure is prioritized is as intense as arguments over housing, and they come together with impact fees. People who see housing as an infringement argue that new people add more cars, wheels, feet, and waste into public infrastructure and the people who build housing for them – builders and developers – should pay for it. But housing units and companies don’t pay for these things; people pay these fees, through the cost of the purchase price of their housing or rent. 

Giving public access to infrastructure means private enterprise gets to use those sidewalks, bike paths, and roads without charge as well. I used one of two competing bike share services recently to ride on “free” bike paths. If we treated housing in the same way, we’d invest our public resources to make it easier for producers of housing to compete by eliminating the costs of infrastructure. And that would mean no fees and publically funded infrastructure to support more housing. It’s what cities are doing to promote biking, riding, and use of transit whether it is public or private; expanding the use of “free” infrastructure. 

The reason that my bike share bike ride of two hours was only a few dollars is because the public subsidized everything but the bike, and competition between two private services ensures prices will stay low. If we subsidized infrastructure for housing by removing embedded costs for it and its use, we’d see housing prices fall to levels that would mean people earning even half of median income could find reasonable rents. Impact fees and other taxes on the production of housing ensure high prices. If we took the same approach to bike and scooter share, ride share, and transit, we’d see prices for those products “skyrocket” and more people would drive alone. 

Follow me on Twitter. Check out my website.

For the past twenty-five years, I have been involved in public policy in the areas of education, health, and housing. Most recently I was housing director at a large reg...