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Single-family development patterns were established in response to Federal Housing Administration guidelines for mortgage underwriting.

Suburban Sprawl Puts Financial Strain on Both Cities and Suburbs 

America’s suburbs are sprawling again, driven in part by migratory patterns brought on by the pandemic. Last year, single family housing starts rose to 1.123 million, the highest since 2006, according to the National Association of Home Builders. CNBC reported that this renewed sprawl is creating financial pressures for both cities and their surrounding suburbs, exacerbating long-term trends. 

Among other things, suburban streets are contributing to the nation’s $1.2-trillion surface transportation funding gap, according to a CNBC segment titled “How suburban sprawl weighs on the U.S. economy.” Local finances are also being strained by maintenance costs as suburbs grow, because the tax base of a city is expected to decline as the suburb grows. This also creates higher per capita costs in the suburbs. 

It’s a continuation of historic trends in the nation that has long led the world in suburbanization. “I think the U.S. is distinctive in that suburbanization has been particularly large in magnitude here in the United States,” Stephen Redding, economics professor, Princeton University, told CNBC. 

Experts told CNBC the problems of America’s housing market relate to past policy decisions. In particular, they say restrictive zoning codes are limiting housing supply.  

These codes are based on 1930s-era Federal Housing Administration guidelines for mortgage underwriting. That includes “no sidewalks and curvy dead-end streets,” according to Ben Ross, author of “Dead End: Suburban Sprawl and the Rebirth of American Urbanism.” The guidelines also specify minimum lot size requirements, which mitigate against density. 

“I think the way the suburbs were built was a mistake,” Ross, who chairs the Maryland Transit Opportunties Coalition, told CNBC. “The cities needed to get bigger, but they should have been built very differently.” 

Strict zoning laws favoring single-family homes have limited the supply of land available for multifamily construction and hampered production of more affordable housing, CNBC reported. With land limited for multifamily projects, the price of that land has jumped and made those projects unaffordable for builders. 

Within the suburbs, residential areas have been separated from industrial or commercial areas by local land-use regulations. In cities like Minneapolis and San Francisco, zoning has prevented workers from being able to buy homes near their jobs—because the homes aren’t being built there. 

Currently, U.S. population growth is the slowest on record at 0.1% in 2021. “That means the financial pressure on suburban towns is mounting,” CNBC reproted. 

Ross and others believe that more must be done to manage residential real estate development, CNBC reported. He lives in Montgomery County, Maryland, which recently revised its zoning code to bring more population density to the area. The county didn’t have many alternative options, though: 85% of build-worthy land has already been developed. 


Inside The Story

Maryland Transit Opportunities' Ross

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Development
  • ◦Economy
  • ◦Policy/Gov't
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