Suburban Ponzi Scheme

Abstract

The post–World War II American pattern of development is an experiment never before attempted in the history of human settlement. The financial ramifications of this experiment have not been seriously considered. The ways in which growth has been financed at the local level—with government transfer payments, transportation spending, and debt—are unique to the suburban experiment. With these mechanisms of growth, cities routinely trade nominal near-term cash advantages associated with new growth for far greater long-term financial obligations of maintenance. This imbalance has been covered up with a mix of robust growth and debt. Now that accelerating rates of real estate growth can no longer be sustained, America’s cities are experiencing enormous financial hardship. The key to solving this problem is not more growth but a more productive pattern of development, one that creates a positive return on investment at the local level.