Suburban Thrall

Commentary, Frontier Centre, Housing Affordability, Uncategorized, Urbanization (historic)

For various reasons, Montreal has been losing economic ground to Toronto and other North American urban areas over the recent decades. But this could be changing. Politics and infrastructure are combining to substantially improve the competitiveness of the Montreal region.

In the Montreal area, as in all other urban areas in Western Europe and North America, nearly all employment and population growth has occurred in the suburbs for decades and the automobile has become the dominant mode of transportation. Suburbanization (pejoratively called “urban sprawl”) has made it possible for unprecedented numbers of households to own their own homes and accumulate capital that otherwise would have simply enriched their landlords.

The automobile has greatly improved mobility and the ability of people to take jobs throughout urban areas. As a result, high-quality highways have been a major factor in driving the post-Second World War economic growth, which combined with suburbanization has created a widely spread, “democratized” prosperity.

What sets Montreal apart is that these two generators of better lives, suburbanization and the automobile, have not so far been the target of serious government restrictions.

In Canada and other high-income nations, some urban areas have adopted policies to limit suburbanization. They have, like Portland, Sydney and Vancouver, adopted land use restrictions to force all growth within a prescribed area. Regrettably, the proponents of such policies have not considered the disastrous economic consequences.

Limiting the supply of anything, in this case rationing land, drives up the price. And housing price increases have been unprecedented relative to household incomes. The result can be seen in the excessively high housing prices of Vancouver, Portland (Oregon) and Sydney (Australia). Anti-suburban policies have driven housing prices so far out of reach that the governor of the Australian Reserve Bank told a parliamentary committee that young households might have to find places other than Sydney to live.

Today, housing prices relative to incomes in Vancouver are approaching double Montreal’s. Portland’s urban growth boundary was a factor in driving up housing prices relative to incomes at a faster rate than in any other major U.S. metropolitan area during the 1990s.

Montreal’s principal competitor, Toronto, is the most recent convert to affordability destroying anti-suburban policies, with the McGuinty Ontario government’s decision to create a greenbelt where development will be prohibited.

The Montreal area, however, has resisted these overly restrictive land use policies. As a result, in Montreal, as in Winnipeg, and fast-growing Edmonton, Atlanta, Dallas-Fort Worth and Houston, housing prices remain at historical norms relative to incomes.

Late information from the U.S. Census Bureau indicates that the most unaffordable housing markets (all of which have anti-suburban policies) are now experiencing significant out-migration of residents. Moreover, the trend is accelerating. Further, U.S. Federal Reserve Bank economist Raven Saks has shown that metropolitan areas with more restrictive land use regulation tend to experience less than expected economic growth.

Many of the same urban areas have adopted anti-automobile strategies, seeking to attract people to mass transit. There is no disputing transit’s superiority for commuting to large, concentrated downtown areas, such as to downtown Montreal or downtown Toronto. But, downtowns contain, on average, one-fifth or less of urban employment. No urban area in Western Europe or North America provides the automobile competitive transit capable of providing mobility to the other four-fifths of jobs. Moreover, no urban major urban area in the high-income world has materially reduced the share, much less the volume, of travel by automobile at any level of transit expenditure.

The usual anti-mobility dogma needs to be recognized for its emptiness. For example, if all travel by car were stopped tomorrow, the greenhouse gas emission reduction would fall far short of what is required to meet the nation’s Kyoto objective. Not providing new highway capacity to accommodate the inevitable growth in travel actually increases greenhouse gases by slowing traffic and creating stop-and-go conditions. A new federal report outlines means by which greenhouse gas emissions can be substantially reduced without denying home ownership to the next generation or expanding poverty with less economic growth. Further, the idea that new highway capacity induces significant increases in car travel is like suggesting that building new maternity wards would increase the birth rate. The data indicate the opposite. Phoenix has built more new freeways than any other U.S. urban area over the past two decades, yet its driving per capita has risen at less than the national rate and considerably less than anti-automobile Portland.

This means more roadway capacity is necessary. This is much more than a matter of minimizing travel time to work. More freely flowing highways mean trucking costs are less and service vehicles can reach their destinations quicker. All of this brings lower prices and more discretionary income.

There is an increasing recognition of the importance of highways to economic growth. Recent studies in Vancouver and Portland have made a strong case for improving traffic congestion by additional highway investment. In Portland, a driving force has been the fact that businesses are beginning to locate in other urban areas because of the traffic congestion increases that have resulted from neglecting necessary highway expansions.

It is important to recognize that the choice is not between transit and roadways. The choice is rather between more and less traffic congestion. The choice is also between more and less economic growth.

Montreal already has one of the world’s best freeway systems. No urban area in Canada or the United States has more kilometres of freeway per square kilometre of urbanization than Montreal. Nonetheless, significant improvements are required. In response, Quebec has adopted a plan for important improvements, such as a freeway bypass of Montreal Island along through the south shore (Autoroute 30). This will remove material amounts of truck traffic from Autoroute 40 (Boulevard Metropolitain) through the middle of Montreal and improve air quality.

Montreal’s comparatively affordable housing market provides important competitive advantages. Housing costs are generally the largest household expenditure item and contribute significantly to differences in the cost of living. Lower housing costs and a lower cost of living make a metropolitan area more attractive for new businesses, business expansion and potential new residents. Montreal’s superior housing affordability, added to its high-quality transport infrastructure could help to attract new residents.

Montreal and provincial officials should not succumb to the pessimistic and alarmist reports calling for a crackdown on car use and regulations to prevent suburban development. While other urban areas compromise their futures with policies that restrict mobility and raise housing prices, Montreal’s competitive position is likely to improve. Other urban areas would be wise to follow.

Wendell Cox is principal of the consulting firm Demographia in metropolitan St. Louis and is a visiting professor at the Conservatoire National des Arts et Metiers in Paris. He is the author of a Montreal Economic Institute study on housing and transportation (www.iedm.org). This originally appeared in the Financial Post, June 22, 2006.