Dollars are Democrats
Highest and Best Use- A Guiding Philosophy for Neo-Urbanist Designers
Or Why Nimby'ites (Not-In-My-Back-Yard'ites) are Wrong to Oppose Higher Densities and Mixed Use
Also Negative Property Taxes- a Response to Nimby'itis and
Some Urban Design Principles that Could Lead to Community Consensus
Highest and Best Use
Since the beginning of civilization, there have been many experimental models developed as organizing principles for villages, towns and cities.
The first villages were probably founded by a handful of families joining together for mutual protection. Perhaps serendipitously, they may have discovered that a new division of labour could increase the well being of their village. Those who were better skilled at farming, hunting, gathering, flint knife carving, producing textiles could specialize in those tasks. The result would have been a marked improvement in the wealth of the village from intra-village trading. So much so that over time, we can postulate a surplus developing in one village would lead to trade with other nearby villages with their own specializations. Regional trading blocks could then emerge prompting the emergence of and faster growth of city-states. Eventually this would lead to the formation of nation-states.
As these cities and towns and villages grew, the problem of how to efficiently organize them became more pronounced. How to get rid of wastes, where to put dirty industry, how to bring products and services into and out of the town for growing numbers of artisans in their many guilds, how to best protect citizens, how to move people and their domesticated animals safely inside the city, how to gather people together for religious observances, markets and entertainment, where to put the courts and jails, where to locate government officials, judges, kings and queens, emperors, their subjects and nobles- these are some of the questions town governments have wrestled with for millennia.
Spatial organization of the city has been based on: a) religious or other forms of hierarchical systems, b) defense principles, c) royal edict, d) class or race based systems, e) guild based separation, f) fiat based systems (master planning and zoning, for example), g) FOB (Friends of the Boss - Mayor, Fire Chief, Chief of Police and so forth), or combinations of the above.
Structuring cities based on the principle that each individual parcel should be put to the highest and best use is an idea that has come into prominence over the last century. The highest and best use for a particular piece of land is that use or combination of uses that produces the highest land rents. It may be that the actual implementation or interpretation of this rule is modified by practioners of urban design to include both the costs and benefits of a project in the form of a calculation to determine which types of land uses produce the highest rates of return. This presumably also produces the highest land rents too.
This rule can also be thought of as the DAD rule- Dollars are Democrats rule. The DAD rule suggests that those persons or organizations that have the where-with-all to develop the parcel to its highest and best use will also be those willing to pay the highest price for the lands or the highest land rent. This means that: a) land supply will be rationed using a price mechanism, b) anyone can participate irrespective of race, gender or religion, and c) lands will be used efficiently at the greatest intensity and density of use.
That land is a limited resource and should be used efficiently seems self-evident. However, it is remarkable how often neo-urbanists run into the nimby mentality, the not-in-my-back-yard syndrome. Special interest groups often decry the spread of cities into the countryside (as 'urban sprawl') but react vociferously against the concept of higher ('build up not out') density which would result in more efficient use of expensive infrastructure (roads, water mains, sewers, schools, libraries, etc.)
Nimby'ites are afraid of both urban 'sprawl' and higher densities as well as mixed use development. Urban sprawl and urban growth are often thought to be synonomous. They are not. Urban sprawl is what results when zoners and master planners separate land use combined with the imposition of undue density limits. They seek to restrict 'organic' growth of cities; they impose order on an otherwise chaotic process. Mono-cultured, low density suburbs require a near total dependence on the private automobile for trips to school, work, theatre, store, gym, market, dance, arena, dentist, doctor, community centre, library, pub, concert, restaurant, soccer pitch, social, opera, ... It disenfranchises children and makes everyone without a car a second class citizen.
Nimbys fear that urban growth will create congestion and lower their property values. Nimbys oppose almost all development and such development as is permitted must conform to existing zoning codes and master plans or official plans. Nimby'itis is generated by two primal emotions- greed and fear. Their worst fears will be realized by applying most existing zoning codes to urban growth.
In contrast, allowing the highest and best rule to work in a de-regulated environment where a community consensus has been reached as to what constitutes sound, sustainable development should produce more variegated, interesting, pedestrian-friendly, efficient, public transportation-promoting communities. It will lower the decibel count at town hall public meetings and lead to a better understanding of what constitutes excellence in urban design.
Application of the highest and best use rule must be subject to the constraints of meeting building, health and safety codes.
Unfortunately, zoning codes and master plans are not only a straight jacket on urban growth but are also subject to arbitrary change by FOB. Zoning rules are often decided in a process distorted by competing interests, many of whom have no real expertise in the field of urban design. It is a travesty that politicians and municipal planners, who seem to know only how to interpret zoning codes, are in near complete control of this process. Architects have by and large left the field entirely. Many seem willing to accept a site without any reference to a larger urban context; they seem willing to let others determine setbacks, height limits, densities, types of uses and locations for access and egress, parking lots, signage, greenspaces and landscaping. They will design the 'great' building without understanding the wider urban context and the needs of the community.
That land use should not be based on discriminatory principles also seems self-evident as well. Civilizations that have privileged, gated communities based on income or other factors within their urban fabric into have and have-not zones are courting social unrest and longterm instability.
Perhaps it is possible to paraphrase Winston Churchill that the 'highest and best' rule for organizing towns and cities is the 'worst possible system, except for all the others"!
The 'modern' alternative seems to be to place all our faith in all-seeing, all-knowing master planners and zoners to dictate how cities can grow, change and develop. This is just another form of FOB, Friends of the Boss, because sophisticated developers and special interest groups can influence these plans and change them as it suits them through the exercise of power. In the case of the development industry, their power derives from the application of money to enlist the best lawyers and consultants. In the case of community groups, special interest groups and nimby'ites, this power derives from the application of grass roots lobbying techniques, picketing, protesting, harassing, heckling, anonymous letter writing, libeling, invocation of sacred shiboleths, creation of 'new' issues, problems and requests for further studies and extended process, review and appeal, reference to the courts, name calling, net-based scare mongering and employment of activist lawyers, professional protestors and 'instant' experts. All of this is done in the name of democracy but it really is an abuse of processor 'democratic abuse', if you will. They are at least as effective as the development lobby. Both are the wrong method to produce excellence in urban design.
The greatest world cities are 'walk-about' cities built for pedestrians with abundant mixing together of uses and reasonably high densities. These cities have grown 'organically' as layers of complexity are added over the decades and centuries as hundreds and thousands of individual decisions are made based (sometimes unconsciously, guided by Adam Smith's invisible hand) on the application of smart urban design principles, the existence of an underlying consensus as to what constitutes good design and the use of the 'highest and best use' philosophy.
The highest and best use principle will produce a city that yields the greatest good for the greatest number of people. What are our cities but survival machines that allow people to exchange goods, services and ideas that best utilize the individual skills of their citizens to greatest effect? It makes best use of scarce resources including land and infrastructure and if we put our trust in it subject only to fire, building and safety codes, we will produce better towns and cites that are more interesting places to live, provide more options and varying lifestyles at a higher level of efficiency and defeat the forces that would base city planning on either arbitrary and stultifying decisions of 'master planners' and zoners or the rule of the mob, whether it is financed or championed by the development industry or nimby'ites.
Nimbys are Wrong to Oppose Mixed Use and Higher Densities
Nimbys fear growth and sprawl; they also oppose densification. Highest and best use rules imply an increase in city density over time as urbanization increases and population grows. Rent curves, measured cross-sectionally at a point in time, tend to peak in the city centre and fall towards the urban/rural boundary, all else being equal. As the city expands outward over time, overall demand for all types of land uses and demands on the public room increase. Rent curves tend to secularily increase as demand for land, apartments, commercial and institutional space increases.
To meet such demand, land owners will be inclined to increase the density of built form. If they own a home, for example, they might add a granny flat in the rear yard or an above-the-garage apartment or an in-home apartment in the basement or attic. In the aggregate, total rents achieved will be greater. They might even add an in-home office, convert to a duplex or triplex or rooming house or add a 'corner store' type operation with apartments above. Rents for existing housing stock and commercial property will be secularily increased due to a combination of greater demand and densification. Creeping commercialization of residential areas, the addition of commercial uses to homes and more mixing together of various uses will, prima facie, also contribute to rising rents.
As long as public order and safety are maintained, home owners should not fear densification or mixed use coming to their neighborhood. Land rents will go up and property values will go up not down. If a new office tower is constructed nearby, more would-be potential homeowners or renters have just moved into the community. Demand for housing goes up, so do prices.
Densification and increased mixing together of different land uses make for more interesting communities; that better support public transportation and can be safer too. It makes no sense to construct single purpose suburbs of single family homes where no employment uses are permitted. Every weekday morning, homeowners depart for work leaving behind deserted, expensive suburban homes that easily fall prey to break and enter specialists. How much more sensible to allow people to work from their homes, start businesses there and provide increased daytime and weekday security. It also lowers traffic congestion.
Communities that are wistful that the corner store, neighborhood pub, local hardware store and such have given way to the megamall, the big box store and the burger franchise need to arrive at a consensus that pedestrain friendly, live close-to-work, vibrant neighborhoods require that they support mixed use and densification. They need to find a way to increase local demand to the point where these types of uses become feasible again.
Negative Property Taxes- a Possible Response to Nimby'itis
Nimby behaviour is not limited to exclusive residential areas and gated communities. It is surprising, perhaps, that nimby behaviour can manifest itself shortly after a neighborhood begins to ameliorate; people who see their lives improving in urban areas that are experiencing a renaissance can demonstrate the same impulses- to seek to limit the flexibility of land use to prevent the incursion of 'undesirable' types of built form. One of the greatest impediments to renewal of derelict urban spaces is the degree of difficulty in effecting zoning changes and the resistance to change- residents whose lives are improving want to 'gate' themselves off from change and development.
It has been suggested by planner, Lily Chi, that one way of addressing the impulse to nimby behaviour is to give the neighbors an ownership stake in the proposed 'undesirable' use; that is, to address the 'greed' part of the nimby motivation by giving the community a financial stake in the new development. The question she raised is how to accomplish this effeciently and fairly.
One way to effect this would be to create a special assessment zone (SAZs) in which a negative property tax would be levied on the immediate neighbors. Most municipalities have experience with the creation of SAZs often to levy additional property taxes on benefiting owners- land owners who, for example, benefit from a new piece of municipal infrastructure like a sewer line or new road. It would be a simple matter to create a SAZ to credit property taxes for lands which abut or are adjacent to or proximate to a new development. This could be at no cost to the municipality as the decrease in property taxes for nearby owners would be offset by a higher assessment on the 'non-conforming' use.
In this way, value is permanently transfered to the neighbors giving them a financial or 'ownership' stake in the outcome of a rezoning. For example, rezoning to allow a change of use from single family to, say, a rooming house or corner store would result in an increase in assessed value together with a special assessment. The latter would be redistributed to abuting lands. This tax credit would continue as long as the new uses and new zoning remain in existence. A $5,000 special assessment on, for example, a proposed rooming house would save, say, five neighboring properties $1,000 annually on their property tax bill. Capitalized at 10%, this would result in a $10,000 one time increase in each neighbor's property value. It is compensation for the 'intrusive' nature of the proposed use. It is a way to bring market discipline to the nimby problem.
Defining the watershed for the imposition of the negative property tax should be based on some simple formula and probably should be extremely localized. The amount of the special assessment levied against the proposed development should be determined as a function of the increase in rents caused by the proposed change in land use but should be set low enough so that the development does not become infeasible and yet high enough that it is meaningful compensation for the neighbors and sufficiently interesting to them to defuse nimby impulses. Let us leave it to some talented econometrician to derive a precise formula for this.
It may be, as argued above, that there will be no negative impacts from the proposed uses. Indeed, as we have already seen, uses that create higher densities can increase property values, all else being equal. One way to test for this could be to do a cross sectional regression analysis using MLS (Multiple Listing Service) data of house prices to see if we could measure the impacts of, say, introducing a group home into a micro neighborhood. If we could show no negative impacts, this in itself could serve to difuse nimby opposition without the necessity of introducing negative property taxes.
Over-Investment in Real Estate
The highest and best use rule constrained by building, health and fire safety codes should allow for the development of interesting, safe, 'organically' grown villages, towns and cities, which achieve a level of density and a mixing together of uses that are decided by the market rather than by fiat. A sound application of the highest and best use rule also requires that potential projects are put through a rigorous financial review.Too many developers and architects analyse their projects from a cost point of view only; they are constantly cutting their costs to meet the budget. This is a one sided approach- project analysis must take into account benefits as well as costs and a time dimension too. The most effective means to do this is using an internal rate of return calculation that can reduce the cost/benefit equation to a single number.
Thus, there is a feedback loop between design and costs and revenues so that the design program can be modified as required.
The objective is not to get as much development as possible on a given site but the right level of development and the right mix too.
It is interesting to note that many successful people do not apply this type of approach to their own homes; there are plenty of examples in nearly every city of people over-investing in their residences. They may not be able to sell their homes for anything close to their costs. Examples such as Bob Campeau's home in Toronto, Michael Dell's home in Austin and Bill Gates' home in Redmond come to mind. Indeed, both Dell and Gates have publicly argued that their (property) tax assessments should be lowered for exactly this reason. Clearly, this is not an application of the highest and best use rule.
Copyright. Dr. Bruce M. Firestone, Ottawa, Canada. 2000.
Refer also to Catalysts For Urban Growth and Development- Promoting the Health of Cities and Introduction to Architecture and Urban Design- Modernist Urban Design and Spatial Apartheid.
Ottawa Real Estate News.com
Manchester Development Corporation