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Density, Recession, and Taxes

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"Density, Recession, and Taxes"

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This article in the Post on country budget issues, falling home prices, and soon-to-be-rising tax rates in the DC area is quite informative. But near the end they get around to the fact that the situation is much worse in outer ring areas (Loudon, Prince William) than in inner suburbs (Arlington) or District, and I don’t think the piece offers a very clear explanation.

But one main factor is simply that values shouldn’t fall nearly as much in a place like Arlington as they will in a place like Prince William. Prince William County is the kind of place people move because it was too expensive to afford a house in Arlington. Thus, as prices in Arlington fall, buyers who during the boom would have bought in Prince William instead take advantage of the lower prices and buy in Arlington. That both cushions the fall in Arlington and accelerates the decline in Prince William. Nobody can be completely insulated from a broad, nationwide decline in home values that’s intertwined with a global recession but high-value downtowns and inner suburbs will weather the storm better than sprawly exurbs whose raison d’être was the unaffordability of the center.

The other slice of this is infrastructure. Per-home infrastructure costs are lower in more densely-built areas than they are in less-dense areas. It’s a basic efficiency/economy of scale issue. We have some misguided policies in place that lead to the greater cost of low-density living not being wholly internalized by residents of low-density areas. But the high-density to low-density subsidy is, thankfully, not so large (ideally it would be zero or even go in the other direction) as to wipe out this disadvantage. Consequently, when there’s a need to plug a hole in revenues you wind up having a higher per person burden.

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