October 13, 2005

Sacramento State study: Controlling
growth doesn’t mean higher housing prices

A new study from Sacramento State questions the notion that policies designed to control sprawl also increase housing prices.

Instead, researchers examining data on hundreds of urbanized areas in the United States found that if an area’s population in its central locations increases by 10 percent—which reduces the amount of sprawl—then the median price of a home in that area falls by 2.7 percent.

In the Sacramento region the median resale price of a home rose to $394,450 in August. This finding means that if 10 percent more of the Sacramento region’s population lived in Citrus Heights, Elk Grove, Folsom, Roseville or Sacramento—areas the Census defines as the Sacramento region’s “central locations”—home buyers in the county could be expected to pay about $10,000 less for a middle-priced home.

“An often-used argument against reducing sprawl is that it will drive up the cost of housing. Our findings show that smart growth policies designed to control sprawl in and of themselves do not raise housing prices in a region,” said Robert Wassmer, professor of public policy and administration at Sacramento State, who conducted the research with then-student Michelle Baass as part of her master’s thesis.

Wassmer and Baass, who now works for the California Legislative Analyst’s Office, found that housing prices can be expected to fall in an urban area that is reducing sprawl because homeowners are more likely to choose smaller homes on smaller lots. They also found that growth controls constrain the ability of urban dwellers to build larger homes on large lots at the fringe of an urban area, keeping prices down.

Their research, which will appear in a forthcoming issue of the Journal of Policy Analysis and Management, is believed to be one of the first studies to document this relationship between smart growth policies and housing prices.

The issue of planning for future growth has sparked fierce debate across the country. “Sprawl affects the way we live,” said Wassmer, who has done extensive research on the causes and consequences of urban sprawl in the United States. “Sprawl has been blamed for traffic congestion, air pollution, loss of open space, and economic, racial and ethnic segregation. But sprawl also enables people to buy the bigger homes they often desire in the suburban places they view as far away from the problems of the central locations.”

Many communities are adopting smart growth policies designed to limit future sprawl. For example, the Sacramento Area Council of Governments last year adopted what is called the Preferred Blueprint Scenario, a land-use and transportation planning document to centralize growth over the next 50 years.

Wassmer and Baass examined 2000 U.S. Census data from 452 urbanized areas across the country to determine how the degree of population centralization influences housing prices. “Our evidence shows that greater centralization in an urban area results in a reduced proportion of upper-priced homes in that urban area and a lower median-priced house for the entire area,” Wassmer said.

But Wassmer also added that more research on the issue is needed before he can say with certainty that cutting sprawl is always the most appropriate policy course. “Nevertheless, our research casts doubt on one commonly cited cost of efforts to reduce sprawl in urban America: that such a public policy necessarily raises urban housing prices,” Wassmer said.

Wassmer can be reached at (916) 278-6304 or rwassme@csus.edu. A copy of the complete study “Does a More Centralized Urban Form Raise Housing Prices?” is available at www.csus.edu/indiv/w/wassmerr. Media assistance is available from Sacramento State public affairs office at (916) 278-6156.

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