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Development at the Urban Fringe and Beyond: Impacts on Agriculture and Rural
Land. By Ralph E. Heimlich and William D. Anderson. Economic Research Service,
U.S. Department of Agriculture. Agricultural Economic Report No. 803.

Abstract
Land development in the United States is following two routes: expansion of urban
areas and large-lot development (greater than 1 acre per house) in rural areas. Urban
expansion claimed more than 1 million acres per year between 1960 and 1990, yet is not
seen as a threat to most farming, although it may reduce production of some high-value
or specialty crops. The consequences of continued large–lot development may be less
sanguine, since it consumes much more land per unit of housing than the typical suburb.
Controlling growth and planning for it are the domains of State and local governments.
The Federal Government may be able to help them in such areas as building capacity to
plan and control growth, providing financial incentives for channeling growth in desir-
able directions, or coordinating local, regional, and State efforts.

Keywords: land development, sprawl, large-lot housing, land zoning, population

growth, housing, specialty agriculture, high-value agriculture, rural amenities, smart
growth

Contributors
Charles Barnard—Wrote sections on costs of use value assessment and purchase of
development rights, the effect of technology on employment location, and metropolitan
agriculture.
John Cromartie—Wrote sections on population and household trends, and technology
and employment.
Richard Reeder—Wrote the sections on local responses to growth, impacts on commu-
nity and quality of life, and planning capacity.
Peter Feather—Wrote the section on nonmarket benefits from preserving farmland,
including water quality impacts from reducing erosion from construction sites.
Cindy Nickerson—Wrote the section on State responses to growth and “smart growth.”
Robert Hoppe and Penni Korb—Wrote the section on metropolitan agriculture and tran-
sitions between metro farm types.
Marlow Vesterby and William Quinby—Wrote sections on trends in land use and hous-
ing development as a driving force.
Daniel Mullarkey—Wrote the section on rural amenities and the WTO agreements.

1800 M Street, NW.

Washington, DC 20036-5831 June 2001
 Dedication
This report is dedicated to the memory of Robert Otte, who died November 6, 2000. As
Chief of the Land Resources Branch of the Economic Research Service’s Natural
Resource Economics Division in the late 1960’s, Dr. Otte pioneered early research on
the urbanization of agricultural land. He authored Farming in the City’s Shadow in
1974, and was co-author of ERS’s first study of land use change in urbanizing areas,
Dynamics of Land Use in Fast Growth Areas in 1976. Dr. Otte was a gentleman, a gen-
erous colleague, and a mentor to many land economics researchers, in ERS and other
institutions, who followed in his footsteps.

William D. Anderson

Acknowledgments
The authors want to thank editor Thomas McDonald and designer Susan DeGeorge for
their tireless efforts in improving and presenting this report. The report benefited greatly
from peer reviews by Nelson Bills, Cornell University, David Holder, USDA-CREES,
Douglas Lawrence, USDA-NRCS, Lawrence Libby, Ohio State University, and Ann
Sorensen, American Farmland Trust, Center for Agriculture and the Environment. Any
remaining errors in fact and judgment are the authors’.

ii • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 Contents
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .iv

I. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II. Trends in Land Use: Two Kinds of Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

What is Sprawl? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Two Kinds of Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

III. Driving Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

U.S. Population Growth and Household Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Household Land Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Demand for Low-Density Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Metropolitan Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Employment, Economic Development and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

IV. The Costs of Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Costs Imposed by Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Infrastructure Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Impacts on Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Impacts on Landscape, Open Space, and Sense of Community . . . . . . . . . . . . . . . . . . . . . .31
Environmental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Other Quality of Life Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
An Economic Interpretation of the Demand for Low-Density Development . . . . . . . . . . . . .36

V. Consequences for Farming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Agriculture: Farming in the City’s Shadow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Working Landscapes and Rural Amenities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Benefits of Famland and Open Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

VI. Local Responses to Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

Playing Catch Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
How Local Governments Address Growth Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Planning Efforts to Control Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Capacity for Response in Relation to Urbanization Pressure . . . . . . . . . . . . . . . . . . . . . . . .52
Federal Assistance for Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Slow Growth, No Growth, and Smart Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Monetary Incentives for Conserving Farm and Forest Land . . . . . . . . . . . . . . . . . . . . . . . . .57

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • iii
 VII. Potential Federal Roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Helping Increase State and Local Planning Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Coordinating Local, Regional, and State Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Coordinating Federal Development Activities and Growth Management Goals . . . . . . . . . .67
Funding Monetary Conservation Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Conserving Rural Amenities As Part of Greater Agricultural and Trade Policy Goals . . . . . .69

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71

List of Figures
Figure 1—Schematic diagram of urban geography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Figure 2—Trends in developed land use, 1960-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Figure 3—Land base of the United States, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Figure 4—Annual additions to housing area, by lot size, 1900-97 . . . . . . . . . . . . . . . . . . . .14
Figure 5—Additions to U.S. population 1972-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Figure 6—U.S. population and household change 1982-97 . . . . . . . . . . . . . . . . . . . . . . . . .16
Figure 7—Household formation and housing completions, 1960-97 . . . . . . . . . . . . . . . . . .16
Figure 8—County typology, 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Figure 9—U.S. population change 1982-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Figure 10—Sewage disposal by lot size, 1994-97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Figure 11—Water supply by lot size, 1994-1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Figure 12—High-tech jobs grow more slowly in cities than in suburbs 1992-97 . . . . . . . . .24
Figure 13—Private and public capital costs by community type . . . . . . . . . . . . . . . . . . . . .27
Figure 14—Relative capital costs of public infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . .28
Figure 15—Ratio of community service costs to tax revenues (n=85) . . . . . . . . . . . . . . . . .29
Figure 16—Savings of agricultural and environmentally sensitive lands, compact
growth versus “sprawl” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Figure 17—Water quality impacts by community type . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Figure 18--Distribution of farmers’ markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Figure 19--Conceptual model of agricultural adaptation to urbanization . . . . . . . . . . . . . . .42
Figure 20--Farms in 1978 out of business by 1997, by farm category . . . . . . . . . . . . . . . . .44
Figure 21--Transitions between farm types, metro farms, 1978-97 . . . . . . . . . . . . . . . . . . . .45
Figure 22—Composition of land use change in urbanizing areas, 1970’s and 1980’s . . . . . .45
Figure 23—Degree of urban influence, 1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Figure 24—Comparison of estimated urban growth boundaries and percent
of area changing to developed uses, 1982-92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Figure 25--Actual and estimated easement value for cropland, by urban influence . . . . . . . .61
Figure 26—Costs of purchase of development rights and use-value assessment relative
to benefits for preserving cropland, by urban influence . . . . . . . . . . . . . . . . . . . . . . . . . . . .63

iv • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 List of Tables
Table 1—Trends in U.S. urban development, 1960-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Table 2—Growth-related issues, impacts, and possible solutions . . . . . . . . . . . . . . . . . . . . .32
Table 3—Metro and nonmetro farm characteristics, United States, 1991 and 1997 . . . . . . .38
Table 4—Estimates of the average amenity value of farmland . . . . . . . . . . . . . . . . . . . . . . .46
Table 5—Estimated nonmarket value of land under urban influence estimated to be
developed in succeeding decades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Table 6—Annual recreational water quality damages due to urbanization of farmland . . . . .49
Table 7—State implementation of smart growth strategies . . . . . . . . . . . . . . . . . . . . . . . . . .58
Table 8—Comparison of costs and benefits for protecting cropland, by
degree of urban influence, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Appendix table 1—Implicit tax subsidy attributable to tax expenditures in use-value
assessment programs, by State, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Appendix table 2—Estimated purchase of development rights expenditures for urban-
influenced cropland, compared with actual expenditures, acreage, and use-value assessment
tax expenditures, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • v
 Summary
In the early 1970's, bipartisan legislation was intro- large-lot housing development is occurring, generally
duced in Congress to establish a national land-use pol- beyond the urban fringe.
icy, but failed after extensive debate. In the decades that
followed, the urbanized area in the United States has Development imposes direct costs on the communi-
more than doubled. Public concerns about ill-controlled ties experiencing it, as well as indirect costs in terms
growth once again have raised the issue of the Federal of the rural lands sacrificed to it—A number of stud-
role in land-use policy. While anecdotes are legion, ies show that less dense, unplanned development
there are surprisingly few places to find a comprehen- requires higher private and public capital and operating
sive picture of land-use changes in urbanizing areas, costs than more compact, denser planned development.
relative to the rural landscape. This report describes the Residential development requires $1.24 in expenditures
forces driving development, its character and impacts for public services for every dollar it generates in tax
on agriculture and rural communities, the means avail- revenues, on average. By contrast, farmland or open
able to channel and control growth, and the pros and space generates only 38 cents in costs for each dollar in
cons of potential Federal roles. The report also provides taxes paid.
detailed, documented, objective evidence culled from
the literature and from original analyses. Continued demand for low-density development
despite negative consequences for residents can be
What Is Sprawl? understood as a market failure—Consumers, busi-
nesses, and communities fail to anticipate the results of
This report is about urban development at the edges of development because they often lack information on
cities and in rural areas, sometimes called “urban potential or approved development proposals for sur-
sprawl.” Because “sprawl” is not easily defined, this rounding land. Often, communities fail to plan and
report is couched in the more neutral terms “develop- zone to provide an institutional framework within
ment” or “growth,” without making implicit judgments which development can proceed. Real estate markets
about the quality or outcomes of that development or are based on many small decisions which, when taken
growth. Concerns about development around urban without an overall context, produce results that can nei-
areas are not new, but have arisen periodically during ther be envisioned by nor anticipated by consumers and
most of the last century, and certainly since automobile developers. Inaccurate judgments about future land-
ownership became widespread after World War II. scapes are locked in because development is irre-
What lessons have been learned about urban develop- versible.
ment and the Federal role in managing it?
Urban growth and development is not a threat to
The processes of land-use change are well under- national food and fiber production, but may reduce
stood and flow predictably from population growth, production of some high-value or specialty crops—
household formation, and economic development— Despite doubling since 1960, urban area still made up
Changes in land use are the end result of many forces less than 3 percent of U.S. land area in 1990 (excluding
that drive millions of separate choices made by home- Alaska). Developed area, including rural roads and
owners, farmers, businesses, and government. The ulti- transportation, made up less than 5 percent in 1992.
mate drivers are population growth and household for- The increase in urban area in the United States poses no
mation. Economic growth increases income and wealth, threat to overall U.S. food and fiber production, but
and preferences for housing and lifestyles, enabled by some crops in some areas are particularly vulnerable to
new transportation and communications technologies, development.
spur new housing development and new land-use pat-
terns. Metropolitan areas grow organically, following Agriculture can adapt to development, but does so
well-known stages of growth. by changing the products and services offered—
Low-density, fragmented settlement patterns leave
There are two kinds of growth, but both affect the room for agriculture to continue. Farms in metropolitan
amount and productivity of agricultural land and areas are an increasingly important segment of U.S.
create other problems—Our existing urban areas con- agriculture, making up 33 percent of all farms, 16 per-
tinue to grow into the countryside, and more isolated cent of cropland, and producing a third of the value of

vi • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
U.S. agricultural output. However, to adapt to rising The cost of effective land conservation incentives
land values and increasing contact with new residents, would be large, but if resources were redirected,
farmers may have to change their operations to empha- almost one-third of the cropland with the greatest
size higher-value products, more intensive production, development potential could be protected—Purchas-
enterprises that fit better in an urbanizing environment, ing the development rights to rural land effectively pro-
and a more urban marketing orientation. tects it from being developed, while continuing farm
use. We estimate the cost to purchase development
Benefits of conserving rural land are difficult to esti- rights on cropland most likely subject to urban pressure
mate and vary widely depending on the circum- over the next 30 to 50 years at $87-$130 billion. If tax
stances—Based on information and assumptions about expenditures currently devoted to use-value assessment
the number of acres likely subject to development in were redirected to purchase of development rights,
the future, and limited studies of residents’ willingness almost one-third of the cropland with greatest potential
to pay to conserve farmland and open space, we esti- for development could be protected.
mate that households would be willing to pay $1.4-
$26.6 billion per year to conserve rural lands. This There are neither clear requirements for nor restric-
equals $13.5 to $255.8 billion in present value. Con- tions on Federal roles in managing growth—Histori-
serving land for agriculture helps preserve farming in cally, authority over land-use decisions has been
the rural economy, and is often seen as a bulwark reserved to the States, which have delegated these pow-
against the worst effects of development. ers to local governments. However, the evolution of
environmental policy shows an expanding Federal
Local governments generally do not develop ade- involvement in site-specific, local circumstances that
quate capacity to plan for and manage growth until recur across the Nation. The Federal Government has
it is too late to effectively channel development— no constitutional mandate to take action on urban
Because urban growth processes are well understood, growth and development issues, but it can define an
strategically directing development to the most favor- appropriate role for itself.
able areas well in advance of urban pressures offers the
greatest hope for controlling growth. Local govern- Potential Federal roles include:
ments often fail to appreciate impending growth facing
them, and generally lack capacity to develop adequate • Helping Increase State and Local Planning Capacity
responses before growth overwhelms them.
• Coordinating Local, Regional, and State Efforts
State governments can do more to deal with growth • Coordinating Federal Development Activities and
strategically—Increasingly, States are realizing that Growth Management Goals
local governments cannot adequately address growth
pressures that transcend local boundaries. Some of the • Funding Monetary Conservation Incentives
more progressive States have adopted “smart growth”
strategies that actively direct transportation, infrastruc- • Conserving Rural Amenities as Part of Greater Agri-
ture, and other resources to channel growth into appro- cultural and Trade Policy Goals.
priate areas.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • vii
viii • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 Development at the Urban Fringe and Beyond
Impacts on Agriculture and Rural Land
Ralph E. Heimlich and William D. Anderson

I. Overview
In the early 1970's, bipartisan legislation was intro- What is Sprawl?
duced in Congress to establish a national land-use pol-
icy, but failed after extensive debate. In the decades that This report is about urban development at the edges of
followed, urban area in the United States has more than cities and in rural areas, sometimes called “urban
doubled. Public concerns about ill-controlled growth sprawl.” With no widely accepted definition of sprawl
once again have raised the issue of the Federal role in (U.S. GAO, 1999; Staley, 1999), attempts to define it
land-use policy. range from the expansive to the prescriptive.

Purpose of This Report Most definitions have some common elements, includ-
ing:
Although land-use issues have traditionally been the
prerogative of State and local government, policymak- • Low-density development that is dispersed and uses a
ers at the Federal level are increasingly urged to lot of land;
respond to concerns about development and growth, • Geographic separation of essential places such as
particularly with regard to their impacts on agriculture work, homes, schools, and shopping; and
and rural land uses. While anecdotes are legion, and
• Almost complete dependence on automobiles for
much has been written by commentators, advocates,
travel.
and experts, there are surprisingly few places to find a
comprehensive picture of land-use changes in urbaniz- Without an agreed definition, any growth in suburban
ing areas, relative to the rural landscape. This report areas may be accused of “sprawling.”
responds to that need in two ways.
Short of a return to a form of urban living not seen
This overview provides a summary of our findings since before World War II, it is not clear how growth
about the forces driving development, its character and can be accommodated at suburban densities without
impacts on agriculture and rural communities, the incurring the worst features of “sprawl.” Because
means available to channel and control growth, and the “sprawl” is not easily defined, this report is couched in
pros and cons of potential Federal roles. the more neutral terms “development” or “growth,”
without making implicit judgments about the quality or
The following chapters provide the details, presented in outcomes of that development or growth. See Trends In
a documented, objective way that make the case for the Land Use: Two Kinds of Growth p. 9.
arguments presented here. A consensus culled from the
literature supports some of the points, while original How To Think About Development
analyses presented in this report have not been pub-
lished elsewhere. Concerns about development around urban areas are
not new, but have arisen periodically during most of the
last century, and certainly since automobile ownership

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 1
became widespread after World War II. Amid the envi- million acres per year between 1960 and 1990. Devel-
ronmental concerns during the 1970’s, bipartisan legis- oped land, including residential and other development
lation was introduced in Congress to establish a that is not dense enough to meet urban definitions,
national land-use policy. Recognizing the primacy of increased from 78.4 million acres in 1982 to 92.4 mil-
State authority over land use, the legislation sought to lion acres in 1992, and was estimated to be about 107
provide Federal grants to States to strengthen their abil- million acres in 2000. The rate of increase in developed
ity to plan for development and channel growth. After 5 land grew from 1.4 million acres per year to about 1.8
years of debate, the legislation was passed in the Sen- million acres. See Two Kinds of Growth, p. 12.
ate, but narrowly defeated in the House on June 11,
1974. What lessons have been learned about urban The processes of land-use change are well under-
development and the Federal role in managing it in the stood and flow predictably from population growth,
26 years since then? household formation, and economic development—
Changes in land use are the end result of many forces
There are two kinds of growth, but both affect the that drive millions of separate choices made by home-
amount and productivity of agricultural land and owners, farmers, businesses, and government. The ulti-
create other problems—Our existing urban areas con- mate drivers are population growth and household for-
tinue to grow into the countryside, and more isolated mation. Economic growth increases income and wealth,
large-lot housing development is occurring, generally and preferences for housing and lifestyles, enabled by
beyond the urban fringe. new transportation and communications technologies,
spur new housing development and new land-use pat-
At the urban fringe—The urban “fringe” is that part of terns. Metropolitan areas grow organically, following
metropolitan counties that is not settled densely enough well-known stages of growth.
to be called “urban.” Low-density development (2 or
fewer houses per acre) of new houses, roads, and com- Almost alone among developed nations, the United
mercial buildings causes urban areas to grow farther States continues to add population from high fertility
out into the countryside, and increases the density of rates, high immigration, and longer life expectancy,
settlement in formerly rural areas. The extent of urban- increasing 1 percent per year, or another 150 million
ized areas and urban places, as defined by the Bureau people by 2050. Average household size has dropped to
of Census, more than doubled over the last 40 years 2.6 persons, creating about 1 million new households,
from 25.5 million acres in 1960 to 55.9 million acres in the unit of demand for new housing, each year in the
1990, and most likely reached about 65 million acres 1990’s.
by 2000.
Increased income and wealth increased the number of
Beyond the urban fringe—Another kind of develop- new houses constructed each year by 1.5 million units,
ment often occurs farther out in the rural countryside, faster than the rate of household formation. Two-thirds
beyond the edge of existing urban areas and often in of these houses are single-family dwellings. While
adjacent nonmetropolitan counties. Development of average lot sizes have been dropping near cities as
scattered single-family houses removes land from agri- owners turn to townhouses and condominiums, a paral-
cultural production and changes the nature of open lel growth in large-lot (greater than 1 acre) housing has
space, but is not “urban.” Large lots dominate this occurred beyond the urban fringe.
process, and growth in large-lot development has accel-
erated with business cycles since 1970. Nearly 80 per- Metropolitan expansion since 1950 has occurred
cent of the acreage used for new housing construction because rural people moved off the farms, and residents
in 1994-97—about 2 million acres—is outside urban of the densely populated central cities dispersed to sur-
areas. Almost all of this land (94 percent) is in lots of 1 rounding suburbs. Urbanized areas (excluding towns of
acre or larger, with 57 percent on lots 10 acres or 2,500 or more) increased from 106 to 369 and
larger. About 16 percent was located in existing urban expanded to five times their size. Population density in
areas and 5 percent was on farms. See Two Kinds of urbanized areas dropped by more than 50 percent, from
Growth, p. 12. 8.4 to 4 people per acre, over the last 50 years. Growth
is spilling out of metropolitan areas, as population dis-
Growth in developed areas is increasing, but at rates perses to rural parts of metropolitan counties and previ-
only slightly higher than in the past—Urbanized ously rural nonmetropolitan counties.
areas and urban places increased at about the same 1

2 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Enabling this dispersion are investments in new infra- requires higher private and public capital and operating
structure such as roads, sewers, and water supplies. costs than more compact, denser planned development.
New information and communication technologies, Eighty-five studies gauging the cost of community
such as the Internet and cellular telephone networks, services around the country have shown that residential
facilitate population in rural areas, and free employ- development requires $1.24 in expenditures for public
ment to follow. New retail, office, warehouse, and other services for every dollar it generates in tax revenues, on
commercial development follows in the wake of new average. By contrast, farmland or open space generates
housing development, to serve the new population and only 38 cents in costs for each dollar in taxes paid. See
to employ the relocated labor force. See Driving Impacts on Taxpayers, p. 28.
Forces, p. 15.
Finally, development can disrupt existing social, com-
There are benefits of low-density development that munity, environmental and ecological patterns, impos-
attract people—Living beyond the edge of the city is a ing a variety of costs on people, wildlife, water, air, and
lifestyle much sought after by the American people. soil quality. Agricultural production has its own nega-
While 55 percent of Americans living in medium to tive environmental impacts, but these are generally less
large cities preferred that location, 45 percent wanted to severe than those from urban development. See Impacts
live in a rural or small town setting 30 or more miles on Landscape, Open Space, and Sense of Community,
from the city (Brown et al., 1997). Of those living in p. 31.
rural or small towns more than 30 miles from large
cities, 35 percent wanted to live closer to the city. The However, does moving out into the “country” ulti-
urban fringe is thus under development pressure from mately destroy all the good things that prompt that
both directions. The most obvious benefit is that growth move? In the words of the National Governor’s Associ-
in rural areas has allowed many people, including those ation, “In the context of traditional growth patterns, the
who cannot afford city real estate, to buy single-family desire to live the ‘American Dream’ and purchase a sin-
homes because land costs are cheaper on the fringe gle-family home on a large lot in a formerly open space
than in the core. can produce a negative outcome for society as a whole”
(Hirschorn, p. 55).
The automobile imposes private and social costs in
exchange for the comfort, flexibility, low door-to-door Continued demand for low-density development
travel time, freight-carrying capacity (for shopping despite negative consequences for residents can be
trips), cheap long-distance travel, and aesthetic benefits understood as a market failure—Consumers, busi-
of extensive, automobile-dependent development. Air nesses, and communities fail to anticipate the results of
quality improvements may also result from decentraliz- development because they often lack information on
ing population and employment, because emissions are potential or approved development proposals for sur-
dispersed over larger rural airsheds and are reduced by rounding land. When communities fail to plan and
higher speeds. Automobile pollution is more strongly zone, there is no institutional framework within which
related to the number of trips than to the length of each development can proceed, and little information to help
trip, with a major part of auto pollution deriving from housing buyers anticipate their future landscape setting.
cold starts.
Spillovers from development include the loss of rural
Not everyone wants to live the rural lifestyle. The “new amenities, open space, and environmental goods when
urbanism” school of urban design is redesigning con- previously existing farms and rural land uses are devel-
ventional suburban developments as small towns and oped. Negative spillovers from increased housing con-
finding a market (Chen, 2000; Duany et al., 2000). In sumption in developing areas can include traffic con-
1992, 55 percent of those surveyed living in large cities gestion, crowding, and destruction of visual amenities.
(over 50,000) preferred that type of community (Brown If the landscape features that contribute to rural
et al., 1997). See Demand for Low-Density Develop- amenity were marketed in developments, housing
ment, p. 17. prices would be higher.

Development imposes direct costs on the communi- Real estate markets are based on many small decisions
ties experiencing it, as well as indirect costs in terms which, when taken without an overall context, produce
of the rural lands sacrificed to it—A number of stud- results that can neither be envisioned by nor anticipated
ies show that less dense, unplanned development by consumers and developers. Cumulative impacts

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 3
from this myriad of decisions can be large, but are not types are generally working farms. See Consequences
reflected in market prices until disamenities become for Farming, p. 38.
large. Inaccurate judgments about future landscapes are
locked in because development is irreversible. See An Benefits of conserving rural land are difficult to esti-
Economic Interpretation of the Demand for Low-Den- mate, and vary widely depending on the circum-
sity Development, p. 36. stances—Because there are no markets for some char-
acteristics of land, such as scenic amenity, there are no
Urban growth and development is not a threat to observable prices apart from the land’s value for devel-
national food and fiber production, but may reduce opment. Lacking prices, it is difficult to develop eco-
production of some high-value or specialty crops— nomic benefit measures for policymaking.
Despite doubling since 1960, urban area still made up
less than 3 percent of U.S. land area in 1990 (excluding Rural lands in a working landscape provide economic
Alaska). Developed area, including rural roads and benefits as resources for agricultural production, as
transportation, made up less than 5 percent in 1992. sources of employment, and through property and
Development affects local agricultural economies and income taxes. Working landscapes are defined as farm,
can cause other environmental and resource problems ranch, and forest lands actively used in agricultural or
in local areas, but the increase in urban area in the forestry production. While agricultural production can
United States poses no threat to U.S. food and fiber create environmental problems of its own, properly
production. Some crops in some areas are particularly managed farmlands provide nonmarket benefits from
vulnerable to development. For example, 61 percent of improving water and air quality, protecting natural bio-
U.S. vegetable production is located in metropolitan diversity, and preserving wetlands relative to develop-
areas, but vegetable production takes up less than 1 per- ment. They create aesthetically pleasing landscapes and
cent of U.S. cropland. See Consequences for Farming, can provide social and recreational opportunities. The
p. 38. rural landscape reflects and conserves rural culture and
traditions, and maintains traditions of civic leadership
Agriculture can adapt to development, but does so and responsibility in voluntary rural institutions, such
by changing the products and services offered— as fire companies and village boards. See Impacts on
Low-density, fragmented settlement patterns leave Landscape, Open Space, and Sense of Community, p.
room for agriculture to continue. Farms in metropolitan 31.
areas are an increasingly important segment of U.S.
agriculture. They make up 33 percent of all farms, 16 Based on information and assumptions about the num-
percent of cropland, and produce a third of the value of ber of acres likely subject to development in the future,
U.S. agricultural output. However, to adapt to rising and on limited studies of residents’ willingness to pay
land values and increasing contact with new residents, to conserve farmland and open space, we estimate that
farmers may have to change their operations to empha- households would be willing to pay $1.4-$26.6 billion
size higher value products, more intensive production, per year to conserve rural lands. In addition, another
enterprises that fit better in an urbanizing environment, $0.7-$1.1 billion in sediment and water quality dam-
and a more urban marketing orientation. ages would be avoided if the land were prevented from
being developed. Conserving land for agriculture helps
Development can be profitable for farmers who can see preserve farming as a part of the rural economy, and is
and take advantage of opportunities in the new situa- often seen as a bulwark against the worst effects of
tion. Forces of urbanization allow a variety of farm development. See Benefits of Farmland and Open
types to coexist. Farms in metropolitan areas are gener- Space, p. 44.
ally smaller, but produce more per acre, have more
diverse enterprises, and are more focused on high-value Local governments generally do not develop ade-
production than nonmetropolitan farms. Metropolitan quate capacity to plan for and manage growth until
agriculture is characterized by recreational farmers who it is too late to effectively channel development—
follow both farm and non-farm pursuits; a smaller Because urban growth processes are well understood,
group of adaptive farmers who have accommodated strategically directing development to the most favor-
their farm operation to the urban environment; and a able areas well in advance of urban pressures offers the
residual group of traditional farms that are trying to greatest hope for controlling growth. Planning and zon-
survive in the face of urbanization. Both of the latter ing have generally been upheld by the courts as valid
regulation so long as a reasonable basis for them is laid

4 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
out. If planning is not in place as development begins encourage voluntary adoption, they are generally sup-
to occur, property owners’ expectations about higher ported by a broad spectrum of interest groups. These
land values can exacerbate property rights conflicts and strategies also garner support because they direct,
complicate subsequent growth-control efforts. Local rather than inhibit, growth and development. There’s no
governments often fail to appreciate impending growth ‘one size fits all’: the specific smart-growth strategies
facing them, and generally lack capacity to develop that have been adopted vary by location but often share
adequate responses before growth overwhelms them. common elements. Smart-growth principles favor
investing resources in center cities and older suburbs,
Better planning and zoning is central to the ability to supporting mass transit and pedestrian-friendly devel-
respond to growth. A U.S. General Accounting Office opment, and encouraging mixed-use development while
survey found that 75 percent of the communities that conserving open space, rural amenities, and environ-
were concerned with “sprawl” were highly involved in mentally sensitive resources (Hirschhorn 2000). These
planning for and managing growth (U.S. GAO, 2000, p. strategies also typically remove financial incentives
99). provided by State funding to develop outside desig-
nated growth areas. In essence, smart growth encour-
However many cities and counties may be falling short ages development in designated areas without prohibit-
of what is needed to control and manage growth effec- ing development outside them. See Slow Growth, No
tively. A recent survey of Alabama’s mayors and county Growth, and Smart Growth, p. 55.
commissioners found that only a minority of the
responding officials (18 percent of the mayors and 19 Existing monetary incentives for conserving rural
percent of the commissioners) believed they currently land are not as effective as they could be—Use-value
had the necessary staff and resources to plan and man- assessment, enacted in every State, is one of the most
age growth effectively. High-growth communities were widespread public policies aimed at conserving rural
only somewhat more likely to have the capacity to land. Under use-value assessment, the owner is taxed
manage growth than were other communities. based on what the land could earn in agriculture, rather
than the higher developed value. We estimated the cost
Most of the smaller rural towns do not have a full-time of tax reductions under use-value assessment nationally
planner. To meet their planning needs, these communi- at $1.1 billion per year.
ties may be served by a circuit riding planner, or sev-
eral towns and a county may combine their efforts to However, most students of use-value assessment
set up one planning office to serve their joint needs. acknowledge that it is not effective at preventing devel-
Even at the county level, rural planners often must opment. use-value assessment spreads resources over
spend part of their time doing other duties. See Local all qualifying rural land, providing a small incentive to
Responses to Growth, p. 50. conserve land to all landowners. The size of the tax
reduction is insufficient to keep land with the highest
State governments can do more to deal with growth development potential from conversion, while tax
strategically—Our Constitution reserves control of expenditures to less developable land produce little
land use to the States, which usually have delegated the result. Redirecting tax expenditures on use-value
responsibility to local governments. Increasingly, States assessment could increase the resources available for
are realizing that local governments cannot adequately incentives to conserve the most developable land, but
address growth pressures that transcend local bound- could make some land currently getting the tax subsidy
aries. Some States have adopted “smart growth” strate- more vulnerable to urbanization and would face stiff
gies that actively direct transportation, infrastructure, opposition from property owners currently enjoying the
and other resources to channel growth into appropriate tax reduction. See Monetary Incentives for Conserving
areas. Farm and Forest Land, p. 57.

The term “smart growth” is a catch-all phrase used to The cost of effective incentives would be large, but if
describe a group of land-use planning techniques that resources were redirected, almost one-third of the
influence the pattern and density of new development. cropland with the greatest development potential
In general, smart growth strategies represent a move- could be protected—Purchasing the development
ment away from State-imposed requirements for local rights to rural land effectively protects it from being
compliance with State planning goals. Because smart developed. The landowner retains ownership and can
growth strategies tend to use financial incentives to continue to farm the land, but the deed restriction con-

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 5
tinues indefinitely. The implicit economic value of the across the Nation. The Federal Government has no con-
easement is the difference between the unrestricted or stitutional mandate to take action on urban growth and
market value of the parcel and its restricted or agricul- development issues, but it can define an appropriate
tural value. role for itself. See Potential Federal Roles, p. 65.

Nineteen States have State-level PDR (purchase of Federal activity in the potential roles identified below is
development rights) programs using public funds to described and pros and cons of expanding each role are
compensate landowners for the easements on otherwise enumerated.
private farm or forest land. In addition, at least 34
county programs in 11 States operate separate pro- Potential Federal Roles
grams. The American Farmland Trust estimates that,
nationwide, PDR programs have cumulatively protected Helping Increase State and Local Planning Capac-
819,490 acres of farmland with an expenditure of $1.2 ity—The Federal Government has had a long history of
billion. programs to improve the planning capabilities of State
and local governments. Perhaps the most notable of
We estimate the cost to purchase development rights on these efforts was the HUD 701 planning grant program,
cropland most likely subject to urban pressure over the established in 1954 (40 USC 461). As late as 1975, the
next 30 to 50 years at $88-$130 billion. If tax expendi- HUD 701 program spent $100 million per year paying
tures currently devoted to use-value assessment were as much as two-thirds of the costs of an “ongoing com-
redirected to purchase of development rights, almost prehensive planning process” required of all grant
one-third of the cropland with greatest potential for recipients. However, the budget was cut to $75 million
development could be protected. in 1976 and was gradually phased down until elimi-
nated in the early 1980’s.
Targeting funds to land under less development pres-
sure could protect the same amount of land at lower Within the U.S. Department of Agriculture, the Rural
cost. For example, development rights on the 25 mil- Development Act of 1972 established the Section A-
lion acres under medium urban pressure are estimated 111 Rural Development Planning Grants, also funded
to cost $25 billion, less than one-third the cost of the into the 1980’s. In 1996, the farm bill established new
33 million acres under heaviest development pressure. authority for the Rural Business Opportunity Grant pro-
Selecting land with lowest current development pres- gram (RBOG), which received $3.5 million in FY2000
sure would reduce costs to $18 billion. appropriations. RBOG provides money to nonprofits,
public bodies, Indian tribes, and cooperatives for plan-
Even if funds were available to purchase development ning and technical assistance to assist economic devel-
rights, it may not be desirable to do so. The develop- opment in rural areas. FY 2001 appropriations legisla-
ment pressure exerted on this land will not disappear if tion increased the funding for RBOG to $8 million.
this cropland is protected. While some growth might be Several other smaller USDA grant programs could
accommodated in existing urban areas, demand for potentially assist local communities with planning, but
other rural land would intensify, and growth could frag- they are not specifically directed at planning to guide
ment even more as development moves out farther into growth and development and are not integrated into a
the rural countryside. Purchasing development rights is coordinated program.
also no guarantee that the land will be used for working
agricultural enterprises. The perpetual deed restrictions Pros—Funding requirements for such programs would
could prevent future desirable adjustments in land-use be relatively small, and could potentially leverage sig-
patterns. See Monetary Incentives for Conserving Farm nificant impacts. Impacts from limited funding for such
and Forest Land, p. 57. programs could be increased by targeting them to the
areas most likely affected by growth in the medium
There are neither clear requirements for nor restric- term. Limiting program activities to those most directly
tions on Federal roles in managing growth—Histori- relevant to guiding new growth and development would
cally, authority over land-use decisions has been also increase the impact of the program.
reserved to the States, who have delegated these powers
to local governments. However, the evolution of envi- Cons—Failures in past programs were attributed to
ronmental policy shows an expanding Federal involve- wide use of consultants who provided little service for
ment in site-specific, local circumstances that recur the money spent, and who did little to add permanently

6 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
to local government planning capacity. Emphasis on from problems of growth and development are geo-
“paper plans” did little to actually direct growth. Tar- graphic ones, and are often exceedingly fine, and shift
geting funds to areas immediately affected by develop- over time. The Federal Government has had a long his-
ment wasted resources on efforts that were already too tory of programs to foster development, and less expe-
late, while spreading funding widely included areas rience at helping control it. The superficial dichotomy
with little development pressure in reasonable time- disappears when considered in the context of directing
frames. growth and development to appropriate places and
under an appropriate timetable, which serves both sets
Coordinating Local, Regional, and State Efforts— of interests.
Urban growth processes often create multi-jurisdic-
tional impacts. Federal coordination and integration Pros—A wide array of rural development and eco-
have been exercised in other areas of environmental nomic development activities in the Departments of
concern, such as water quality, water quantity, and air Agriculture and Commerce, abetted by less direct activ-
quality. In addition, the U.S. Office of Management and ities in the Departments of Housing and Urban Devel-
Budget Circular A-95 review process formerly guided opment, Transportation, and Defense, date at least to
Federal agencies for cooperation with State and local the War on Poverty and related efforts of the 1960’s.
governments in the evaluation, review, and coordination The existing institutional structure of these programs
of Federal assistance programs and projects. A-95 could be redirected to growth control and management,
review is no longer mandated by the Federal Govern- but would require new visions by leadership. Some
ment, although the process is still voluntarily practiced existing resources could be leveraged.
by some States. USDA has had a long history of area-
wide coordination, dating back to efforts like the Great Cons—These programs have become entrenched and
Plains Agricultural Council, the Resource Conservation rather balkanized and may be difficult to integrate into
and Development Council (RC&D), the Small Water- an effort of sufficient weight to effectively deal with
shed Program (PL-566), and various river basin plan- the problem. While pro- and anti-growth interests
ning processes. While these have generally been would hopefully recognize common ground in well-
focused on agricultural, resource, or rural development planned and appropriate development, extremes on
concerns, their extension to urban development and both sides may be difficult to persuade, and both sides
growth control issues would be reasonable. may be suspicious of Federal help.

Pros—Past Federal funding for transportation, water, Funding Monetary Conservation Incentives—The
and sewer construction and other major infrastructure Federal Government has often been enlisted as an ally
projects has been identified as a major driver in growth with deep pockets, and analogous programs for soil and
and development. Explicitly monitoring and reviewing water conservation, wildlife habitat acquisition, and
potential impacts on urbanization from such invest- other land resource issues have existed since the
ments could, at a minimum, defuse these accusations. 1930’s. USDA’s Farmland Protection Program was
Federal funding could serve as a rationale for efforts to authorized in the 1996 Farm Act for up to $35 million
coordinate State and local growth control activities, in matching funds for State programs over 6 years. The
especially where these cross jurisdictional boundaries. initial funding was $33.5 million and it was spent to
Such efforts would cost very little, but would leverage protect 127,000 acres in over 19 States. The goal of the
existing expenditures. program is to protect between 170,000 and 340,000
acres of farmland. An additional $10 million was
Cons—Without convincing resolution to reduce or appropriated in FY2000. Direct Federal acquisition of
deny funding to State and local governments that do easements is included in USDA’s Conservation Reserve
not cooperate, attempts at coordination could prove Program and Wetland Reserve Program, as well as in
futile and frustrating. Congressional attempts to obtain several of the U.S. Fish and Wildlife Service’s habitat
additional funding for local constituents can be at odds programs.
with Executive branch notions of coordination and inte-
gration. Pros—Limited Federal funding for farmland protection
easements could act as seed money for programs in
Coordinating Federal Development Activities and States with no current program, or as a bonus for States
Growth Management Goals—Lines between areas doing a particularly effective job. Utilizing existing
needing development assistance and those suffering State programs may be cost-effective because it both

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 7
avoids creating a new bureaucracy within the Federal vation Security Program in October 2000. While not
Government and provides an incentive to States that explicitly addressing farmland protection, eligible land
have not yet developed a program to do so. By care- in urbanizing areas could be included. This kind of pro-
fully specifying rules for matching State funding, such gram helps align U.S. agricultural support programs
a program could avoid discouraging State effort, and with legitimate purposes recognized in trade liberaliza-
could maximize the incentive for new programs. tion agreements.

Cons—As outlined above, the amount of land and Cons—The farmland conservation issues in Europe
resources subject to development is large and State pro- and the United States are fundamentally different.
grams are relatively small, posing questions about the While European efforts are largely aimed at keeping
effectiveness of a small Federal program and larger economically marginal farmland from abandonment,
questions about the ultimate size needed to make an U.S. concerns are with preventing otherwise viable
impact. While the marginal benefits of a small program farms from being developed. The latter is a far more
at this point are likely to be greater than the costs, the expensive proposition. Channeling large amounts of
wisdom of a larger program becomes problematic. assistance to farms in urbanizing areas risks losses if
Questions about the displacement of growth and the incentives are not sufficiently large to prevent develop-
longrun fate of protected land become more significant ment, and may be pyhrric if protected farms cannot
as the amount of land protected increases. viably continue in operation, despite protection. On
balance, preventing the environmental problems from
Conserving Rural Amenities as Part of Greater losing farms in urbanizing areas may not yield benefits
Agricultural and Trade Policy Goals—Conserving as large as correcting environmental problems from
the amenities provided by rural land is no longer a mat- farming in more rural areas.
ter of merely domestic concern. Proposals to direct
agri-environmental assistance are widespread in the Organization of the Remainder
European Union and other Organization for Economic of the Report
Cooperation and Development (OECD) countries. Such
efforts meet the “green box” requirements for accept- The remainder of the report provides a more in-depth,
able agricultural policies under agricultural trade documented discussion of this overview. The next two
reforms in the Uruguay Round of the General Agree- chapters describe trends in land use and the two kinds
ment on Tariffs and Trade (GATT). Some proponents of of growth that are occurring around cities, then enu-
greater Federal involvement in rural land conservation merate the driving forces behind these trends. The
believe that a larger share of Federal funding for agri- fourth chapter describes the costs of growth in rural
culture could be directed toward land conservation areas, including public and taxpayer costs, and the
through agri-environmental payments designed to pre- environmental and other benefits of conserving farm-
serve more of the multiple functions of agriculture in land. The fifth chapter outlines consequences for agri-
an urbanizing context. While not required by trade culture and looks at the problems and opportunities
agreements to date, such proposals are allowed by them presented by urbanization. A partial estimate of the
and may garner support from constituents in urbanizing nonmarket benefits of farmland conservation is derived
areas, the urban fringe, and among agricultural commu- from the literature on willingness-to-pay for farmland
nities. preservation. The sixth chapter looks at State and local
responses to urban development, provides information
Pros—Frameworks for agri-environmental payments on local capacity to deal with growth, and summarizes
have already been proposed in the form of the Conser- the new State initiatives characterized as “smart
vation Security Act of 2000 (S.3260/H.R. 5511), intro- growth.” The final chapter ends the report with an
duced by Senator Harkin and Congressman Minge, and assessment of potential Federal roles.
in the Clinton Administration’s proposal for a Conser-

8 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 II. Trends in Land Use: Two Kinds of Growth
In the early 1970’s, bipartisan legislation was intro- • Philadelphia’s population increased 2.8 percent
duced in Congress to establish a national land-use pol- between 1970 and 1990, but its developed area
icy. The proposals, recognizing the primacy of State increased by 32 percent (U.S. OTA, 1995).
authority over land use, would have provided Federal
grants to States to better manage growth and develop- While anecdotes are legion, and much has been written
ment. The bills were debated for 5 years and passed by by commentators, advocates, and experts, there are sur-
the Senate, but died on a narrow vote in the House on prisingly few places to find a comprehensive picture of
June 11, 1974. land-use changes in urbanizing areas, relative to the
rural landscape. This report responds to that need.
In the decades that followed, urban area in the United
States has more than doubled. Some of this growth has What Is Sprawl?
been at low densities, with little planning, and has frag-
This report is about urban development at the edges of
mented the rural landscape, prompting communities,
cities and in rural areas, often referred to as “urban
States, and the Federal Government to examine more
sprawl.” There is no widely accepted definition of
closely unplanned development and its consequences,
sprawl (U.S. GAO, 1999; Staley, 1999). Definitions
including the loss of productive farmland. Public con-
range from the expansive…
cerns about the consequences of ill-controlled growth
once again have raised the issue of the Federal role in
“When you cannot tell where the country ends
land-use policy.
and a community begins, that is sprawl. Small
towns sprawl, suburbs sprawl, big cities sprawl,
Anecdotes of uncontrolled growth across the Nation
and metropolitan areas stretch into giant mega-
abound:
lopolises—formless webs of urban development
• From 1950 to 1990, St. Louis experienced a 355-per- like Swiss cheeses with more holes than cheese.”
cent growth in developed land even though population U.S. House, 1980.
increased by just 35 percent (Missouri Coalition for “Cities have become impossible to describe. Their
the Environment). centers are not as central as they used to be, their
• Between 1970 and 1990, Kansas City’s population edges ambiguous, they have no beginnings and
grew by 29 percent while developed land increased apparently no end. Neither words, numbers, nor
by 110 percent (Missouri Coalition for the Environ- pictures can adequately comprehend their com-
ment). plex forms and social structures. …It’s almost as
if Frank Lloyd Wright’s 1932 tract against the
• Between 1990 and 1996, the Denver metropolitan metropolis, The Disappearing City, has been vin-
region increased by 66 percent. If each county in the dicated, and the diffusionary proposal of Broad-
Denver metro area grew based on its current compre- acre City has become the de facto ideology of
hensive plan, Denver’s urbanized area would swell to urbanism.”
1,150 square miles, an area larger than California’s Ingersoll, 1992.
major cities combined (Sierra Club, 1998).
to the prescriptive…
• The Chicago metropolitan area now covers over 3,800
square miles. Over the last decade, the population of “…a spreading, low-density, automobile depend-
the area grew by only 4 percent, but land occupied by ent development pattern of housing, shopping
housing increased by 46 percent and commercial land centers, and business parks that wastes land need-
uses by 74 percent (U.S. OTA, 1995). lessly.”
Pennsylvania 21st Century Environment
• From 1950 to 1980, population in the Chesapeake Commission cited in Staley, 1999.
Bay watershed increased by 50 percent, while land
used for commercial and residential activity climbed Burchell et al. (1998) devote the first chapter of their
180 percent (EPA, 1993). report, “The Costs of Sprawl – Revisited,” to defining
the elusive term. Commonly cited are several features

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 9
that are captured in urban economist John F. McDon- ticentered development, a type of compact devel-
ald’s characterization: opment by most people’s reckoning, is a fine one.
. . Equally elusive is the line between leapfrog
• Low-density development that is dispersed and uses a development and economically efficient ‘discon-
lot of land; tinuous development’, or between commercial
strips and ‘activity corridors’.
• Geographic separation of essential places such as
work, homes, schools, and shopping; and Ewing also suggests that his notion of compact devel-
opment—which is multicentered, has moderate average
• Almost complete dependence on automobiles for densities, and is continuous except for permanent open
travel. spaces or vacant lands to be developed in the near
Myers and Kitsuse (1997) point out that “the very lack future—is not all that different from Gordon and
of agreed definition about what constitutes density, Richardson’s (1997) definition of sprawl.
sprawl or compactness prevents any authoritative meas-
urement.” Any growth in suburban areas may be Short of a return to a form of urban living not seen
accused of “sprawling.” Planned developments at rela- since before World War II, it is not clear how growth
tively high densities can be accused of accelerating can be accommodated at suburban densities without
sprawl. As Ewing (1997) points out, being accused of being “sprawl.”

. . sprawl is a matter of degree. The line between Some people oppose any change in established land
scattered development, a type of sprawl, and mul- uses and react just as negatively to well-planned, rea-

Metropolitan, Urban, and Rural Geography

Statistics describing trends in land use are based on one or more places—central place(s)—and the adjacent densely
another geographic entities defined by the U.S. Bureau of settled surrounding area consisting of other places and terri-
the Census (see U.S. Census, Geographic Areas Reference tory not in defined places.
Manual), the USDA National Resources Inventory (NRI),
or the American Housing Survey (AHS). Urban Places Outside of UAs are any incorporated place or
Census-designated place (CDP) with at least 2,500 inhabi-
Census of Population (these concepts are shown tants.
schematically in figure 1) Rural Places and Territory not classified as urban are clas-
Metropolitan/Nonmetropolitan Area—a core area contain- sified as rural. For instance, a rural place is any incorpo-
ing a large population nucleus, together with adjacent com- rated place or CDP with fewer than 2,500 inhabitants that is
munities that have a high degree of economic and social located outside of a UA. A place is either entirely urban or
integration with that core. Metro areas are defined in terms entirely rural.
of entire counties (except in New England, where towns are
used). Metropolitan areas contain a mix of land uses, rang- Urban Fringe consists of rural areas in metropolitan coun-
ing from deserts, forests, and farms, to suburban land- ties. The part of the urban fringe nearest to existing UAs
scapes, and include the densest urban core. In 1990, there and urban places is likely to grow the fastest and eventually
were 274 metropolitan areas, containing 198.2 million peo- be absorbed when densities rise to urban levels.
ple (80 percent of the total U.S. population) and covering
Places—Census defines a place as a concentration of popu-
20 percent of U.S. land area.
lation, with a name and local recognition, that is not part of
Urban/Rural—Census defines urban as comprising all ter- any other place. A place either is legally incorporated under
ritory, population, and housing units located in urbanized the laws of its respective State or a statistical equivalent
areas (UAs), defined in terms of census tracts, and in places that the Census Bureau treats as a Census-designated place
of 2,500 or more inhabitants outside of UAs. In 1990, 187 (CDP). Not everyone resides in a place; in 1990, approxi-
million people (75 percent of the total) lived in 8,510 mately 66 million people (26 percent) in the United States
places of 2,500 or more covering 2.5 percent of U.S. land lived outside of any place, either in small settlements, in
area. the open countryside, or in the densely settled fringe of
large cities in areas that were built-up, but not identifiable
Urbanized Areas (UAs) are continuously built-up areas as places. Most Census places (19,289 out of a total of
with a population of 50,000 or more, comprised of one or 23,435 in 1990) are incorporated.

10 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Figure 1
Schematic diagram of urban geography

Nonmetro Metropolitan Area

rural area
Urban place
> 2,500 population Urban place
> 2,500 population
Urban place Urbanized area
> 2,500 population > 50 ,000 population
with a central city
Metro county 1 Metro county 2
Urban place
> 2,500 population Urban place
Metropolitan rural area > 2,500 population
Adjacent Urban place Adjacent
nonmetro > 2,500 population nonmetro
county 1 county 4

Nonmetro Nonmetro
Adjacent rural area Nonmetropolitan Area Adjacent rural area
nonmetro nonmetro
county 2 county 3

Metropolitan, Urban, and Rural Geography (continued)

National Resources Inventory (NRI) size for their house. Sample-based responses are expanded
Developed land in the National Resources Inventory con- to area totals.
sists of urban and built-up areas and land devoted to rural
transportation. Comparison
Due to differences in data collection techniques and defini-
Urban and built-up areas consist of residential, industrial, tions, the NRI estimates of “large urban and built-up areas”
commercial, and institutional land; construction and public are usually higher than the Census “urban area” estimates
administrative sites; railroad yards, cemeteries, airports, for nearly all States. The Census urban area series runs
golf courses, sanitary landfills, sewage plants, water control from 1950, while the NRI started providing a consistent
structures, small parks, and transportation facilities within series in 1982. Prior to the 1982 NRI, Census urban area
urban areas. was the only reliable national source of urban area data
Large urban and built-up areas include developed tracts of available.
10 acres and more. The American Housing Survey residential area is the sum
Small built-up areas include developed tracts of 0.25 to 10 of acres in lots used for housing units. While the data have
acres, which do not meet the definition of urban area, but limitations and are not available by State, the series does
are completely surrounded by urban and built-up land. allow compilation of two important estimates. First, an esti-
mate of the residential component of urban land shows how
Rural transportation land includes highways, roads, rail- much land is used for housing in urban areas versus land
roads and rights-of-way outside of urban and built-up areas. used for all other urban purposes, such as commercial and
industrial sites, institutional uses, urban parks, and all other
American Housing Survey (AHS) non-housing urban uses. Second and more important, an
The American Housing Survey, conducted every 2 years by estimate is made of land used for residences in rural areas.
the Bureau of the Census represents all housing units for Recently there appears to be a growing trend toward an
the entire Nation, including housing lots on farms. The increasing demand for more and larger housing lots outside
AHS started the current series in 1980. of urban areas. The AHS residential area does not include
non-residential areas shown in the Census and NRI, but
Residential area is land devoted to residential housing lots, does include a large area of rural residential land not found
both urban and rural, based on respondents’ estimates of lot in either the Census or the NRI.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 11
sonably dense and compact development as others do measured by the Census Bureau, as well as developed
to “sprawl.” Because “sprawl” is so hard to define, we areas as small as 10 acres outside urban areas, encom-
use it only when citing others and set it off in quotation passing some large-lot development. NRI urban and
marks. We couch our discussion in the more neutral built-up area increased from 51.9 million acres in 1982
terms “development” or “growth,” without making to 76.5 million acres in 1997, and likely rose to about
implicit judgments about the quality or outcomes of 79 million acres by 2000 (table 1 and figure 2). “Devel-
that development or growth. oped land” defined by NRI adds the area in rural roads
and other transportation developments. By this defini-
Two Kinds of Growth tion, developed area increased from 73.2 million acres
in 1982 to 98.3 million acres in 1997, and likely
Government officials, housing consumers, farmers, and reached 107 million acres by 2000.
other interest groups appear to be concerned about two
kinds of growth. First is the continuing accretion of Census-defined urban area has grown by about a mil-
urban development at the fringes of existing urban lion acres per year since 1960, an increase of about 4
areas in rural parts of metropolitan counties. A second percent per year. The rate of increase dropped from 3.5
kind of growth is the proliferation of more isolated percent per year in the 1960’s and 1970’s to 1.8 percent
large-lot housing development (1 acre or more) well per year in the 1980’s. NRI urban and built-up area
beyond the urban fringe and into adjacent nonmetropol- increased faster than Census urban area in the 1980’s,
itan counties. Growth at the edge of existing developed rising 2.9 percent. Much of the increase in NRI urban
areas gradually shades out into more and more frag- and built-up area is in less dense, extensive large-lot
mented developments, farther out in the countryside, so development beyond the urban fringe and in nonmetro-
there is no clear geographic dividing line between the politan counties. This kind of development will not
two kinds of growth. While related, these two forms of meet the population density criteria for Census-defined
growth have qualitatively different causes and have dif- urban area for many years.
ferent consequences, especially for agriculture and the
environment. Despite doubling since 1960, urban areas still made up
less than 3 percent of U.S. land area (excluding Alaska)
Trends at the Urban Fringe in 1990 (figure 3). Developed areas, including rural
Even low-density development (2 or fewer houses per roads and transportation, made up less than 5 percent in
acre) of new houses, roads, and commercial buildings 1992. Both kinds of growth (on the metro fringe and
at the fringe of existing urban areas can cause greater large-lot development) take land irreversibly out of
traffic congestion, loss of open space, loss of agricul- commercial agricultural production that might other-
tural land, and impacts on the natural environment. wise be available for use. Growth causes social and
environmental problems in local areas, but the increase
The amount of land in urban and developed land uses is in urban area in the United States poses no threat to
measured in different ways, all of which have specific U.S. food and fiber production capacity (Vesterby et
denotations (see box “Metropolitan, Urban, and Rural al., 1994; USDA, 2000).
Geography” and figure 1). The concept of “urbanized
area,” defined by the Bureau of Census, includes the Table 1—Trends in U.S. urban development, 1960-2000
densely settled areas within and adjacent to cities with
Year Census NRI urban NRI
50,000 people or more, while “urbanized places” urban and built-up developed
include populations of 2,500 people or more that are
Million acres
outside of urbanized areas. Urbanized areas alone
1960 25
increased from 15.9 million acres in 1960 to 39 million 1970 34
acres in 1990, increasing 2.5 times. Total Census urban 1980 47
area (urbanized areas and urban places) more than dou- 1982 52 73
bled over the last 40 years from 25.5 million acres in 1987 58 80
1960 to 55.9 million acres in 1990. These two cate- 1990 56
1992 57 65 87
gories of urbanization likely reached about 65 million 1
1997 62 76 98
acres by 2000 (table 1; figure 2; Daugherty, 1992). 2000 1 65 79 107
Sources and definitions: See box “ Metropolitan, Urban, and Rural
“Urban and built-up areas” counted in USDA’s Geography.”
National Resources Inventory (NRI) include those 1Census urban for 1997 estimated; all data for 2000 estimated

12 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Trends Beyond the Urban Fringe development of 4-6 houses per acre, exurban develop-
Another kind of development occurs beyond the exist- ment consists of scattered single houses on large
ing urban fringe, often far out in the rural countryside parcels (often 10 acres or more). Rural large-lot devel-
of metropolitan counties or adjacent nonmetropolitan opment is not a new phenomenon, although it may be
counties. Development of new housing on large parcels getting more attention than in the past. Growth in the
of land is growth with a different character than that area used for housing rose steadily throughout the last
occurring at the city’s edge. Instead of relatively dense century (figure 4, Peterson and Branagan, 2000).

Figure 2
Trends in developed land use, 1960-2000
Million acres
120,000

100,000

NRI developed

80,000

NRI urban and built up

60,000

40,000
Census urban Dotted lines =
estimates
20,000

0
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Figure 3
Land base of the United States, 1992

Ownership

Private 455 372 397 78 59

5
State/Indian 74 91 78
Total U.S. land area =
2.2 billion acres
0
Federal 145 249 260

0 500 1000 1500

Million acres
Cropland Pasture and range Forest Other Urban
Source: Daugherty, 1995.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 13
Large-lot categories dominate this process, and growth metropolitan areas. Almost all of this land (94 percent)
in large-lot development has accelerated with periods is in lots of 1 acre or larger, with 57 percent on lots of
of prosperity and recession since 1970. The largest lot 10 acres or larger.
size category (10-22 acres) accounted for 55 percent of
the growth in housing area since 1994, and lots greater The people who move into these new houses may be
than 1 acre accounted for over 90 percent of land for pioneers moving from cities that once seemed distant.
new housing. About 5 percent of the acreage used by They may be pioneers in another sense: Areas experi-
houses built between 1994 and 1997 is for existing encing this kind of development may be just starting on
farms, and 16 percent is in existing urban areas within a gradual process of infill and expansion that will grad-
Metropolitan Statistical Areas (MSAs) defined by the ually transform the once-rural countryside into subur-
Bureau of the Census. Thus, nearly 80 percent of the ban and urban settlements resembling the existing
acreage used for recently constructed housing—about 2 urban fringe.
million acres—is land outside urban areas or in non-

Figure 4
Annual additions to housing area, by lot size, 1900-97
Acres per year
1,800,000

1,600,000
10 to 22 acres
1,400,000
1 to 5 acres

1,200,000 5 to 10 acres

1/2 to 1 acre
1,000,000
1/4 to 1/2 acre
800,000
1/8 to 1/4 acre

600,000 0 to 1/8 acre

400,000

200,000

0
al ua
l al al al al al al al al al al
n nu nn nu n nu n nu n nu n nu n nu n nu n nu nu nu
n n n
9a a
9 a -49
a a
9a 4 a -79
a
4a 9a 4 a -97 a
-1 -29 0-3
9
0-5 60-6 0-7 0-8 5-8 0-9
9 00 9 20 3 9 40 9 5 9 9 7 9 75 9 8 9 8 9 94
1 1 1 9 1 1 1 1 1 1 1 1 9 19

Source: ERS analysis of American Housing Survey, 1997 data.

14 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 III. Driving Forces
Changes in land use are the end result of a variety of U.S. Population Growth and
forces that drive the millions of separate choices made Household Formation
by individuals and governments. In this chapter, the
driving forces behind the trends in land use are care- Almost alone among developed nations, the United
fully laid out in a way that shows the links between States continues to experience a high rate of population
them at each step in the development process. growth, adding 1 percent per year to a large base popu-
lation (Riche, 2000, p. 5). Population grew from 150 to
The forces that drive urban growth are well known and 250 million people between 1950 and 1990 and is
fairly well understood. The ultimate driver is popula- expected to add another 150 million by 2050 (U.S.
tion growth and household formation, which, when Census Bureau, 2000). The number of people added to
combined with growth in income and wealth, spurs the U.S. population during 1987-92 and 1992-97 (each
new housing development and consumption of land for over 12 million) was the highest of any recent 5-year
housing. Population growth in outlying areas is most period, and the rate is expected to stay high (figure 5).
often the result of redistribution of the metropolitan Increasing immigration and higher life expectancy have
population, but may result from new influxes of popu- helped maintain high growth levels. Immigration levels
lation from outside the area. Metropolitan areas grow today are similar to those in 1900. Then, as now, about
organically, like a living thing, with stages of growth a third of new population was due to movement from
that are palpable and predictable. After the new housing abroad. Fertility levels have declined since the 1950’s
developments are built and occupied, the new residents but remain higher than those in other developed coun-
realize they need new schools and improvements in the tries: on average, U.S. women are currently bearing
roads, sewers, and water supplies servicing the new close to 2.1 children, the number necessary for a popu-
housing; the expanded infrastructure then attracts more lation to replace itself, compared with 1.6 children per
housing at higher densities. When a critical mass is woman in Europe.
reached, shopping centers and businesses follow the
population, to serve them and to be closer to the labor Household formation (marriages, divorces, moving out)
force. and the demand for new land for housing is affected by
population growth, but is also strongly influenced by

Figure 5
Additions to U.S. population, 1972-2007

Million persons
14

12

10

0
1972-77 1977-82 1982-87 1987-92 1992-97 1997-2002 2002-07 2007-12

Intercensal estimates Middle series projections

Source: U.S. Census Bureau.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 15
social and cultural trends and economic conditions. adults and retirees creating a smaller pool of housing
Employment opportunities and increases in wealth consumers (reducing especially the number of new, sin-
affect how and when new families and individuals gle-person households), household growth dropped to
move into separate housing and when established fami- 5.5 percent during 1992-97 as average household size
lies upgrade to larger houses. Thus, the rate of house- stabilized. Household formation in the 1990’s averaged
hold formation, and consequently the demand for land less than 1 million per year, rising late in the decade.
for new housing, fluctuates with cyclical economic
conditions as well as long-term social and demographic Household Land Consumption
trends.
The total number of housing units completed mirrored
Changing household size can have a bigger impact on household formation, with peaks in the mid-1970’s, late
the housing market and the demand for land than over- 1970’s, and mid-1980’s (U.S. Census Bureau, 2000c;
all population growth. The rate of household formation figure 7). These data are from developers and largely
has been outpacing population growth as average reflect tract housing, primarily built at the urban fringe.
household size dropped from 3.7 in 1950 to 2.6 today; However, household formation in the 1990’s averaged
the same number of people now require up to 30 per- Figure 6
cent more housing (figure 6). U.S. population and household change, 1982-97
Percent change
Growth in household formation increased in the early 8
1960’s to a peak of 1.7 million per year in the late
6
1970’s. Factors contributing to this peak included a
downward shift in average household size in the 1970’s 4
when the baby boom generation entered the housing
market, and a rapid increase in the elderly population. 2
In the 1980’s, housing demand began to shrink with the
maturing of the baby bust generation (born during the 0
1982-87 1987-92 1992-97
low-birth years of the 1960’s and 1970’s); but during
Population Households
1982-87, household numbers grew by 7 percent, while
population grew by only 4.5 percent. With fewer young Source: U.S. Census Bureau.

Figure 7
Household formation and housing completions, 1960-97

Number, thousand
1,800
AHS total new construction
1,600
Households added
(4-year average)
1,400
AHS single-family
new construction
1,200

1,000

800
Single-family
housing completions
600

400

200

0
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Source: ERS analysis of U.S. Census of Population, Construction Series C-22, and American Housing Survey data.

16 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
826,000 per year, but total new construction averaged not urban, as defined by Census, but occurs beyond the
about 1.5 million units per year, with single-family new urban fringe in largely rural areas.
construction at more than 1 million per year.
Large-lot zoning is not entirely a matter of preference
Household formation and housing construction are or markets. Zoning laws are part of the land-use guid-
often out of sync when poor economic conditions pre- ance institutionalized by government and put con-
vent new households from purchasing new housing straints, either in terms of minimum or maximum lot
(such as 1968-1971,1974-78, and 1980-83 in figure 7), sizes, on developers and consumers (Haar, 1976).
followed by better times when pent-up demand is met Large-lot zoning, requiring a minimum lot size of 3 to
(1976-79, 1983-87, and since 1992). Data from the 20 or more acres, was an early attempt to limit devel-
American Housing Survey also show that total new opment (Coughlin and Keene, 1981, p. 21). Large-lot
construction (including apartments, condominiums, and zoning is now recognized as being ineffective in reduc-
mobile homes) followed the pattern of household ing development, and actually contributes to significant
change, and mirrored housing completions recorded in loss of farmland. However, setting minimum acreages
Census housing construction statistics (USDC, 1999). applying to subdivision control regulations that more
However, single-family housing reported in the Ameri- actively guide development has inadvertently resulted
can Housing Survey (AHS) rose from the mid-1980’s in de facto large-lot zoning since developers can choose
through the 1990’s. Thus, new housing outstripped a lot size just above the minimum and avoid the more
basic household formation, particularly in the kind of stringent controls. Subdivision control regulations are
housing likely to be built in exurban locations. Favor- limited to parcels of 5 acres or less in Ohio, 10 acres or
able economic conditions drove homeownership to a less in Michigan, and 25 acres or less in Colorado
record high of 66.8 percent in 1999, with over 8.7 mil- (Libby, 2000).
lion new home-owning households since 1992 (U.S.
HUD, 2000, p. 58). While central city homeownership Demand for Low-Density
also increased to 50.4 percent, many of the new homes Development
are in outlying areas.
There is an undeniable appeal of extensive single-fam-
Average lot size for new single-family houses has ily housing development for the American people. Sur-
decreased for much of the new housing built in urban veys ratify the prevailing U.S. consumer preference for
areas and the urban fringe, as new owners turn to con- single-family detached housing surrounded on all sides
dominiums, townhouses, and larger houses on smaller with yards (Fannie Mae, 1996). A 1988 survey showed
lots. The average lot size of tract housing dropped from that 70 percent of Americans preferred a rural or small
0.4 acre in the mid-1970’s to 0.3 acre in the 1990’s. town setting within 30 miles or more of a city over
50,000 in population (Fuguitt and Brown, 1990). And,
Median lot size in the American Housing Survey has 35 percent of those living in a rural or small town more
been about 0.5 acre, dropping slightly from the late- than 30 miles away from a city stated a preference for
1980’s. However, the average lot size has increased to the same type of setting within 30 miles. So pressure
almost 2 acres because of growth in large-lot housing on fringe development in the form of stated locational
of 5 and 10 acres or more. Much of this large-lot con- preferences comes from both ends of the rural-urban
struction has occurred beyond the urban fringe and far- spectrum. The survey was repeated in 1992-93 and
ther out in nonmetropolitan counties. Large-lot hous- confirmed the initial findings. While most people prefer
ing, as a proportion of new construction in rural areas, the residence situation they are living in, those who
rose from 40 percent in 1980-93 to 45 percent in 1994- would rather live elsewhere are more likely (by a 2 to 1
97. Median lot size of new construction in central cities margin) to prefer a less densely populated setting
was 0.23 acre, but averaged 0.78 acre, while median lot (Brown et al., 1997).
size outside Metropolitan Statistical Areas (MSAs) was
1.6 acres, and averaged almost 3 acres. While average Surveys undertaken by the Federal National Mortgage
land consumption per new housing unit decreased for Agency (Fannie Mae Survey of Residential Satisfac-
most new housing added at the urban fringe, the tion of Housing Occupants) during the mid-1990’s
amount of land consumed in relatively small numbers reveal that personal open space is highly desired by
of new large-lot housing units located beyond the most Americans. In terms of buying preference, single-
fringe grew. Most of the land developed for housing is family detached housing was more popular during the
mid-1990’s than it was a decade earlier. In the Novem-

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 17
ber 2000 election, anti-sprawl measures in Arizona and Low density and fragmentation, it is argued, are not
Colorado were opposed by 70 percent of voters (Wash- problems because leaving parcels of land undeveloped
ington Post, November 10, 2000). in the urban area in the short run will increase land
densities over the long term, as these parcels increase
As metropolitan areas grow in population, there are in value and, eventually, become developed for more
only two basic choices for urban form: grow outward at intensive use. Peiser (1989) examined this hypothesis
similar or lower densities, or grow upward at higher in Fairfax County, Virginia; Dallas, Texas; and Mont-
densities. Beyond a certain size, an urban form with gomery County, Maryland. Montgomery County did
multiple centers is more efficient than a compact, not show evidence of infill development because its
highly centralized monocentric form, because it allows land-use regulations do not allow higher densities on
the clustering of land uses to reduce trip lengths and the leapfrogged parcels. The infill parcels in Fairfax did
congestion (Haines, 1986; Steiner, 1994). What has generally conform to the hypothesis with higher densi-
been called the “New Urbanism” is a school of urban ties, and the results from Dallas were mixed.
design that counters conventional suburban develop-
ment in favor of design elements that mimic features of Residents may also enjoy air quality improvements
small towns (Chen, 2000; Duany et al., 2000). These from decentralizing population and employment. Bae
developments emphasize a more traditional grid layout, and Richardson (1994) note that greater automobile use
walkability, and more compact design. Some new does not necessarily lead to worsening air quality.
developments designed using these principles in Lower per capita emissions at high densities have more
Florida, Virginia, and Kentucky have been commer- environmental impact than higher per capita emissions
cially successful. in a low-density environment because of the ability of
local airsheds to absorb pollutants, and the fact that
Potential benefits from lower density development at pollution levels increase exponentially, not linearly, as
the city’s fringe include access to employment, access the percent of capacity absorbed rises. Automobile pol-
to open space amenities, lower crime rates, lower hous- lution is more strongly related to the number of trips
ing costs, better air quality, more flexible transportation and to the hours of driving, rather than to the length of
by auto, and preferred separation of residences from each trip in miles. A major part of auto pollution
commercial and industrial activities (Gordon and derives from cold starts. A recent study in San Diego
Richardson, 1997; Peiser,1989). found that by balancing jobs and housing, a 5- to 9-per-
cent reduction in miles traveled would reduce traffic
The most obvious benefit is that low-density develop- congestion by 31-41 percent, but vehicle emissions
ment in rural areas has allowed many people, including would be cut by only 2 percent (San Diego Assn. of
those who cannot afford city real estate, to buy single- Govts., 1991). The New Jersey State Planning Agency
family homes because land costs are cheaper on the found that a more compact urban development scenario
fringe than in the core. Many people are willing to pay did not significantly improve air quality over that in
both the private and social costs of such auto-dependent low-density development (Burchell, 1992). New Jersey
development in exchange for the automobile’s comfort, officials found that improvements in air quality from
flexibility of use, low door to-door travel time, freight- cleaner fuels, more efficient engines, more stringent
carrying capacity (for shopping trips), and cheap long- emission inspection, and more cars with anti-pollution
distance travel, as well as the aesthetic benefits of sepa- devices dwarfed any improvements derived from land
rated land uses associated with such development (U.S. use.
OTA, 1994). Benefits to society include increased loca-
tion options for businesses, greater consumer access to Metropolitan Expansion
shopping centers and superstores with greater
economies of scale and lower prices, and commuter The concentration of population into ever-expanding
freedom from dependence on the timetables of public urban centers was the most important development in
transit systems, allowing more flexible work schedules. population distribution in the first half of the 20th cen-
Decentralizing both homes and work may decrease tury. While rural people moved into metropolitan areas,
some commutes, saving both time and energy (Gordon the dense populations of central cities emptied out into
and Wong, 1995). So far there is no evidence this has the surrounding countryside. The automobile helped
happened, mostly because of increased cross-commut- trigger both a rural-to-urban migration, and a city-to-
ing between one suburb and another (Downs, 1994). suburb relocation, resulting in settlement patterns today
that conform more to commuting, recreation, and

18 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
retirement than to farming, mining, or logging. Many sion of the interstate highway system, the extension of
areas once entirely rural have been absorbed into thriv- public utilities, advances in telecommunications tech-
ing metropolitan regions. Retail centers and office nology, the availability of standardized consumer
parks have followed housing out to the urban fringe, goods, and life-style changes oriented toward lower
greatly expanding commuting patterns. Urbanized density settings laid the groundwork for expanded non-
areas, including the central cities and adjacent, densely metropolitan growth in the 1970’s. These advantages
settled territory at the core of metropolitan areas, have gave way temporarily under economic recessions, a
grown in number from 106 to 369, since 1950, nearly farm debt crisis, movement of manufacturing jobs over-
quintupling in area to 39 million acres (1.7 percent of seas, and other “period” effects in the 1980’s. The
total land area). The same number of people now 1990’s witnessed a rebound in growth outside metro-
require more land: Population density in urbanized politan areas, and rural experts once again are predict-
areas has dropped by more than 50 percent, from 8.4 to ing a permanent, gradual dispersion of the population,
4 people per acre over the last 50 years (U.S. HUD, brought about by improved transportation, telecommu-
2000; U.S. Bureau of the Census). nications, and other technological innovations (John-
son, 1999c).
Changes in the U.S. settlement pattern have combined
population concentration into metropolitan areas and The highest rates of population growth are occurring at
population deconcentration toward the metropolitan the edges of metropolitan areas, in the predominantly
fringe and nearby nonmetropolitan territory (U.S. rural counties that have already been absorbed into the
HUD, 2000). Metropolitan population grew at more metropolitan area through increased commuting (figure
than twice the rate of nonmetropolitan areas in the 8). Population growth at the metropolitan fringe
1950’s and 1960’s and again in the 1980’s. The expan- increased from 7.1 percent during 1982-87 to over 10

Figure 8
County typology, 1990

County type
Metro, core
Metro, edge
Nonmetro, adjacent
Nonmetro, nonadjacent

Source: USDA, ERS analysis of data from the U.S. Census Bureau.
ERS
E C O N O M I C R E S E A R C H S E RV I C E
R O O T S I N A G R I C U LT U R E , F U T U R E I N T H E W O R L D

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 19
percent during 1992-97, while growth in the metropoli- value to agriculture of proximity to urban markets (Sin-
tan core dropped (figure 9). Adjacent nonmetropolitan clair, 1967; Brooks, 1987). Transportation and commu-
counties now have a higher rate of growth than metro nication improvements in the 20th century transferred
core areas as people move even farther out in search of this same sorting to developed uses. The value of land
less expensive land for housing. Areas far removed declined with distance from the city center as people
from metropolitan influence lost population during the sought their own place on the continuum between rural
1980’s, but in the 1990’s entered a period of general amenity and urban access that plays out on every radius
population gain. leading from downtown (Sinclair, 1967; Alonso, 1968;
Brooks, 1987). The natural distortions of mountains,
Dynamics of land-use Change bays, and rivers, and those imposed by transportation
Urbanization of rural land is a dynamic process that, arteries, result in the zones of decreasing development
despite its chaotic appearance at any particular surrounding every metropolitan center (Fales and
moment, occurs in regular spatial and temporal patterns Moses, 1972).
that are clearly distinguishable to anyone who has
watched a city grow over time. Starting at the historical What may be less obvious in any snapshot of the city is
origin of any metropolitan area (New York’s battery, the dynamic element implied by this spatial pattern. As
Chicago’s lakefront, or Denver’s original pueblo), a city grows in population and spreads out seeking less
growth expands outward at the urban periphery. The dense and more amenable living arrangements, these
dense, inner city neighborhoods of today were the mar- zones also shift outward, creating Hart’s “perimetropol-
ket gardens and farms of the former city, and the inner itan bow wave” (Hart, 1976, 1991). Hart’s case study of
suburbs of any metropolitan city were rural lands the New York metropolitan area (1991) showed that
developed in the decades after the city’s initial growth these outward shifts of population and development roll
began. through the agricultural economy, affecting land rents,
the amount of land in agricultural production, and the
The German land economist Von Thunen recognized character of agricultural production. In the words of the
that rural areas surrounding cities arranged themselves U.S. Office of Technology Assessment (OTA, p. 99),
in concentric rings of decreasing development intensity “the historic dominance of the central city is giving
because of declining bid rent surfaces reflecting the way to a much more dispersed pattern of growth as

Figure 9
U.S. population change, 1982-97
Percent change for the period
15

10

1982-1987 1987-1992 1992-1997

-5
Metropolitan core Metropolitan edge Nonmetropolitan Nonmetropolitan
adjacent nonadjacent

Source: U.S. Census Bureau.

20 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
economic activity spreads unevenly throughout the require urban contact for long periods of time are free
metropolitan areas in other nodes and centers.” to seek living space rich in amenities. Knowledge-
based companies in the new economy bring this free-
Economic theory suggests a partial explanation for the dom to more and more employees.
increasingly diffuse settlement pattern that develops
from technological innovation. New technology lowers Infrastructure
the cost of communication and transportation, driving
higher land prices farther out into rural areas, and Investments in infrastructure, such as roads, sewers,
increasing the size of the urbanizing area. Advanced and water supplies, can be one of the most important
telecommunications capabilities, such as the Internet drivers of urbanization, since infrastructure provides
and cable, are already available in many areas of the the essential framework for development. There is,
country, but there are currently significant gaps in its however, a dynamic to infrastructure investment that
availability in some States and rural areas. However, affects land-use change. At the very edges of urban
these gaps are expected to diminish over time. Eventu- development in metropolitan areas, construction of new
ally, when access to the urban center through communi- homes depends on private wells and septic systems.
cation and transportation technology is nearly effort- Under these conditions, house lots may be required to
less, the development value of land completely over- be sufficiently large to ensure that wells are not con-
shadows the value for agricultural purposes. People taminated and that adequate area is allowed for septic
will then choose where to live based entirely on the drainage fields, thus consuming larger-than-average
amenities offered by the various locales. This is not amounts of land per household. New single-family
especially unrealistic: consider airline pilots (who fly house data from 1997 show that half the lots between
free on employing airlines) who may live in Seattle, but half an acre and 1 acre were not sewered, and nearly all
“commute” weekly to Dallas or other distant cities. lots greater than 1 acre were not sewered (figure 10).
Writers and others whose production process does not The percentage of lots on public water supplies

Figure 10
Sewage disposal by lot size, 1994-97

Percent of lots
90

80

70

60

50

40

30

20

10

0
0 to 1/8 1/8 to 1/4 1/4 to 1/2 1/2 to 1 1 to 5 5 to 10 10 to 22+
Lot size, acres

Public sewer Other or

Septic tank nonresponse

Source: American Housing Survey data in Peterson and Branagan, 2000.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 21
dropped below half for lots greater than 1 acre (figure next generation of complaints. Road building is, at the
11). interstate and primary highway levels, a joint effort of
local, State, and Federal transportation authorities.
As sufficient development occurs, one of the first Interstate highways, in and of themselves, offer little
demands of new rural citizens is for road improve- incentive for development. However, where there are
ments, which often fuel even more development. At numerous interchanges and a widening network of
another critical mass of development, public health feeder and tributary road construction, and growth is
pressures motivate replacement of private wells with not controlled, development is inevitable.
public water supplies. Sewer service, and especially
trunk sewer lines, are the last infrastructure investments Once again, there is a dynamic to this infrastructure
to occur. These facilitate full-blown developments, investment. In the most remote corners of the metropol-
often at density levels comparable to inner suburbs as itan area, existing, narrow, two-lane roads are the first
infill development occurs. channels for new development at low densities. At
some point, a critical mass of citizenry is in place to
A study in Maryland showed that highway construction demand upgraded and improved road systems, which
was a key factor in growth, with new roads preceding soon generate additional development pressure. The
migration outward from the cities (Heavner, 2000). pressure for new and improved interstate and primary
Extension and upgrading of automobile transportation highways can often propagate in reverse as focal points
networks is both demanded as the negative impacts of of development generate sufficient traffic to justify
growth become manifest in congested highways, and changes to these top-level systems.
contributes to the further growth that will spawn the

Figure 11
Water supply by lot size, 1994-97

Percent of lots
100

90

80

70

60

50

40

30

20

10

0
0 to 1/8 1/8 to 1/4 1/4 to 1/2 1/2 to 1 1 to 5 5 to 10 10 to 22+
Lot size, acres

Public water Private water Individual well Bottled water Other or nonresponse

Source: American Housing Survey data in Peterson and Branagan, 2000.

22 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Thus, while provision of infrastructure investment is choose where they locate, no longer as tightly tethered,
almost always a clear inducement to urban develop- economically and functionally, to the major metropoli-
ment, its absence is usually not enough to curtail devel- tan core. Just how “footloose” these businesses and
opment. “Adequate facilities laws,” which explicitly employees become depends on how many and which
stage infrastructure investments and simultaneously business functions are transformed into electronic
restrict unserviced development, may be the best way flows, how much activity still requires face-to-face
to use the leverage of infrastructure to control growth. interaction among suppliers, customers, and competi-
tors, and the path of future technological change.
Employment, Economic
Development, and Technology Although the new technologies will technically enable
firms and residents to disperse to rural areas, they are
Face-to-face contact has been the main factor behind more likely to relocate both to lower cost metropolitan
the attraction of the city center for employment (Sin- areas and to suburban and exurban locations within
clair, 1967; Alonso, 1968). Developments in informa- metros. The Office of Technology Assessment (OTA),
tion and communication technology have been a major in its comprehensive review of the impact of communi-
driver in the recent U.S. economic expansion. The cation and information technologies on human settle-
United States, like other industrial economies, is in the ment patterns, concludes that “a limited number of
midst of a technological revolution. In recent years, high-amenity rural areas and rural areas at the periph-
society has embraced cellular (wireless) phones, video ery of metropolitan areas may experience significant
phones, pagers, e-mail, call-forwarding systems, voice growth...”, but “at least in the foreseeable future, most
messaging, facsimile machines, the Internet, local and of the economy will be locating in metropolitan areas,
wide-area networks, optical scanners, barcode readers, perhaps not the largest, highest-cost metros, but the
fiber optics, data transfer protocols, digital switching, next tier of mid-sized metros” (U.S. OTA, p. 6).
satellites, and portable computers. Based on advances
in microelectronics, these innovations are directly alter- The concept of telework has obvious appeal, suggesting
ing telecommunications, information, and transporta- that large numbers of workers may be able to avoid the
tion technologies, and indirectly reshaping America’s negative aspects of urban congestion, while at the same
cities. An array of even more sophisticated microelec- time enjoying lower real estate costs, lower property
tronic technologies, including high-definition images, taxes, and more rural residential settings. Widespread
high-speed, high-capacity Internet connections, and adoption of telework would accelerate the trend toward
wireless computing and data transfer, already on the dispersed land-use patterns (U.S. OTA, 1995, p. 171;
consumer horizon, conceptually have the potential to Kunar, 1990; Horan et al, 1996). But OTA concludes
further reduce the importance of center cities. that “those who think of telecomuters living in idyllic,
remote locations are generally thinking of fulltime
Clearly, the Internet has not been widely available long telecommuters. Most experts expect that fulltime tele-
enough to change development patterns to any notice- work is unlikely to result in a widespread shift of
able degree . . . yet. Internet access and cable are not households to rural locations” (U.S. OTA, 1995, p.
currently uniformly available. This may change if wire- 172).
less Internet access is widely deployed, because high-
speed fiber optic wiring is currently a limiting factor in The trend in job growth on the urban fringe for much
many areas. Rapid adoption of these innovations can be of the last 50 years was strengthened by the preponder-
compared with earlier innovations including electric ance of high-tech job growth in the suburbs engendered
power, automobiles, and television (Levitt, 2000). The by the so-called “New Economy,” or high-technology,
new technologies may not only increase productivity, companies (figure 12). A recent HUD report finds that
but may transform how firms do business, the way they larger metro areas in all parts of the country lead the
compete, and the nature of work (Economic Report of Nation in high-tech jobs. High-tech jobs, including the
the President; Horan et al., 1996). New technologies occupational classifications of telecommunications, sci-
have changed the economics of locational decisions, ence, and research and technology, accounted for 9.3
both for consumers and businesses, and are facilitating percent of job growth in the suburbs, and increased at
the existing trend toward a more dispersed economy. twice the rate of 1992-97 overall job growth in the sub-
Because these technologies reduce the frictions of urbs. In 1997, 57 percent of metropolitan area jobs
space and time, businesses and people are freer to were located in the suburbs, a 17.8-percent increase
since 1992 (HUD, 2000). With access to more skilled,

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 23
college-educated residents, especially women ready to growth (Conference of Mayors, 2000). These high-tech
return to work, suburban firms can fill positions faster corridors have begun to spawn outlying employment
at lower wages. As technology plays an increasingly growth centers even farther out in the rural hinterland,
larger role, labor quality becomes more important for such as Loudoun County, Virginia, California’s Central
firms, and firms are more likely to meet their skill Valley, and southeastern New Hampshire.
needs in the suburbs. New technology enables greater
economies of scale by reducing the constraints of dis- In addition, many of the New Economy companies, no
tance on business operations, letting them serve more longer economically and functionally tethered to major
customers and a wider area from fewer locations. Busi- metropolitan areas, are locating in suburban areas of
ness service facilities have consolidated into fewer, small cities in less populated States. Long-distance and
larger service centers. Taken together, the decreasing 800-number services are examples, like Citigroup’s
need for physical proximity and the consolidation of back office credit card functions in Sioux Falls, SD.
activity into larger operations both favor suburban loca-
tions on the edge of fast-growing metro areas. The search for quality-of-life characteristics is of par-
ticular significance to the location decisions of knowl-
Confirming evidence of suburban job growth comes edge-based, New Economy companies. The relatively
from the U.S. Conference of Mayors 2000 survey small pool of highly skilled New Economy employees
showing high-tech jobs growing 20 percent faster in can perform their jobs nearly anywhere, providing
Northwest suburbs than in cities, 60 percent faster in unprecedented choice about where to live and work.
suburbs in the Midwest than cities, and 25 percent More traditional criteria, such as salary and cost of
faster in suburbs in the South than in the cities. Accord- housing now appear to be less important than quality of
ing to Hirshhorn (2000, p. 7), suburbs are now home to the environment (Hirshhorn, 2000, p. 23). To attract
60 percent of office space nationwide. That is an these highly skilled employees, companies must locate
increase of 25 percent since 1970. The rise of high-tech where many intangible amenities contribute to quality
corridors outside cities, such as Silicon Valley, Route of life. Fortunately, the knowledge-based nature of their
128 in Boston, and the Dulles Corridor near Washing- products also allows New Economy companies to
ton, DC, illustrates the phenomenon of new high-tech locate nearly anywhere they wish. These companies are

Figure 12
High-tech jobs grow more slowly in cities than in suburbs, 1992-1997
Percent change
50

45

40
Suburbs
35

30
Cities
25

20

15

10

0
All areas Northeast Midwest South West

Source: U.S. Department of Housing and Urban Development, State of the Cities, 2000.

24 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
among the most footloose, and are increasingly locat- Residential development reaches out earlier and farther
ing in rural suburban or exurban locations. than office and commercial development. In a 10-year
study of development in Columbus, Ohio, and sur-
Suburban job growth, while slower than suburban pop- rounding Delaware County, Hite et al. showed that resi-
ulation growth, is compounding the pressure on land dential development was largely completed before
far out in the countryside. The number of suburban jobs commercial and industrial development commenced.
has grown to satisfy employers’ needs to, first, exploit Almost all parcels that eventually were converted to
the labor force that now lives in suburban locations, commercial and industrial uses “survived” in rural uses
and, second, to provide services to the new suburban for nearly the entire period before being developed,
populations. The old central city/suburb commuting while more than 70 percent of the parcels converted to
patterns have been replaced with a web of commuting residential use were converted before nonresidential
between satellite city employment nodes and residential development began.
suburbs, and between outlying areas and these nodes.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 25
 IV. The Costs of Growth
Local, State, and Federal governments and the public ments, however, see Gordon and Richardson (Winter
they represent incur costs from development, some of 1997, Spring 1997) and Peiser (1989).
which are borne directly by the land uses replaced.
However, many of the costs of growth are apparent Infrastructure Costs
only after the development is in place. The conse-
quences of growth for the communities and the benefits The capital cost per dwelling unit of providing public
of retaining rural lands also need to be accounted for in services and infrastructure for new residential develop-
judging the need for measures to control growth. ment varies by density, lot size, type of dwelling unit
(single-family versus multifamily, detached versus
Poorly planned, extensive low-density, fragmented pat- attached), proximity to service areas, population char-
terns of settlement impose a variety of direct and indi- acteristics, and utility capacity utilization. In a land-
rect costs on individuals and society. These costs can mark study based on the characteristics observed in
be approached in two ways. First, it is important to numerous developments using different patterns, Real
enumerate the costs imposed by new development in Estate Research Corporation constructed hypothetical
previously rural areas—real impacts and their monetary communities of 10,000 housing units in patterns rang-
and nonmarket costs that accompany the replacement ing from low-density “sprawl” to high-density planned
of rural landscapes with more developed ones. Second, developments (RERC, 1974). They found that “sprawl”
urbanization has hidden costs because it causes us to created 74 percent greater capital costs than high-den-
forgo the benefits previously enjoyed from rural land- sity planned development, primarily due to higher land,
scapes. Because low-density development is so com- residential construction, road, and utility costs. Public
mon, we also examine possible benefits of low-density capital costs for streets and utilities were 120 percent
settlement patterns that may act as incentives or greater for “sprawl” than for high-density planned
motives for that kind of growth. development. Operating and maintenance costs were 13
percent higher with “sprawl.”
Costs Imposed by Growth
Windsor (1979) recalculated these impacts for stan-
There is a general consensus in the planning literature dardized 1,200-square-foot units in different housing
that low-density development costs more than compact types (figure 13). The RERC study has been criticized
development. For example, compared with more com- in part because assumptions relating to population and
pact forms of development, low-density “sprawl” can the sizes of dwelling units across community types
result in (Burchell et al., 1998): influenced the results. In a comprehensive review of
major studies conducted to determine the costs imposed
• Greater capital costs associated with building new by “sprawl” in various parts of the country, Burchell et
infrastructure; al. (1998) found that infrastructure costs for “sprawl”
development were 5 to about 25 percent higher than for
• Greater vehicle miles traveled and, consequently, compact development. (An exception is a study by
higher levels of automobile emissions; Peiser (1984), which found that road infrastructure
• More adverse fiscal impacts when annual tax rev- costs were lower with unplanned versus planned devel-
enues from residential uses are inadequate to cover opment.) Burchell et al. also found that school and
the annual costs of providing public services; municipal operating costs may be 2-5 percent less
annually under compact development.
• Higher rates of conversion of prime agricultural lands
and lands with fragile environments. These calculations capture the inevitable economies of
scale lost with low-density development: a fire hydrant
The following reviews key findings synthesized by serving a block with 20 families is more cost efficient
Axelrad (1998) from three major research investiga- than one serving a block with 5 families (U.S. House,
tions on this topic completed by Frank (1989); Duncan 1980, p. 6). A more subtle cost not included above is
(Florida Community Case Studies, 1989); and Burchell the opportunity cost of leaving existing urban capital
(NJ, Michigan, City of Lexington, Delaware Estuary, underutilized and losing support for maintaining exist-
South Carolina Studies 1992-1997). For counter-argu-

26 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
ing urban institutions like schools, public facilities, and That low-density development results in higher capital
churches. costs is not necessarily a public policy concern, unless
these costs are borne by all the citizenry, instead of just
In five studies of managed growth in New Jersey, the new residents of these developments. In a study of
Michigan, South Carolina, Lexington, KY, and the the incidence of costs from a 200-acre development
Delaware Estuary Region, low-density development near Lexington, KY, less than 1 percent of more than
generally resulted in greater public capital and operat- $100,000 in increased costs was paid by the new resi-
ing costs for infrastructure (Axelrad, 1998; figure 14). dents (Archer, 1973). Local governments are increas-
Costs of providing local roads were about 25 percent ingly using development exactions to force developers,
higher, new schools were about 5 percent higher, and and their eventual customers, to internalize infrastruc-
utilities were about 20 percent higher than for planned ture costs of roads, sewers, water supply, and other
development. Overall, capital and operating costs for investments, rather than pass them on to existing resi-
public infrastructure are from 5 to 63 percent lower dents (Fischel, 2000, p. 412; Altshuler et al., 1993;
with planned development than with “sprawl” (figure Babcock, 1987). However, such exactions have been
14). The annual costs required to provide services and imposed only on relatively large developments that are
infrastructure to a new dwelling unit are 20-30 percent subject to considerable planning and site review.
of total annual costs (annual capital plus annual operat-
ing and maintenance costs). Transportation
Low-density development incurs private capital costs, Quantitative data show a strong relationship between
both because it increases the cost of building housing, low-density development and increased transportation
and because demand for higher-density housing is and travel costs. Less compact development generates
reduced. Burchell found that private housing savings more vehicle miles traveled (VMT) than more compact
with more compact development ranged from 2.5 to 8.4 forms of development. HUD reports VMT nationwide
percent of costs under “sprawl” development. increased sixfold between 1950 and 1998 and by 25

Figure 13
Private and public capital costs by community type

Costs, thousands of 1996 constant dollars

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0
Land cost Residential costs Infrastructure Total

Planned mix "Sprawl" mix Low-density planned Low-density "sprawl" High-density planned

Source: Windsor, 1979.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 27
percent in the last 10 years (HUD, 2000). Daily trips associated with a 16-percent decline in vehicle miles
per household were up 35.2 percent between 1977 and of travel (Holtzclaw, 1994).
1995 and vehicle miles were up by 38.1 percent. Low-
density development creates longer distances traveled • A simulation comparing future growth patterns in
and increases dependence on the automobile—two of Portland, Oregon, found that a “growing out” pattern
the three primary factors behind the trend to increased (with new development continuing at current types
VMT nationally (the third is changing demographics). and densities) resulted in an estimated 15 percent
The expansion of commuter distances and traffic vol- higher average daily VMT than in a “growing up”
umes further taxes rural roads and leads to highway pattern that kept all growth within the existing urban
expansion. Some argue that new roads lead to “induced growth boundary by reducing lot sizes and introduc-
travel demand” and that a better solution to congestions ing more multi-family housing (Portland Metro,
is to shift travel behavior, travel mode, route, and time 1994).
of day (U.S. HUD, 2000). In addition, low-density • Between 1970 and 1994, under the prevailing low-
development leads to a less cost-efficient and effective density trends in development, the Chesapeake Bay
public transit. These findings are repeated across the area population grew by 26 percent while VMT
country: increased by 105 percent (Chesapeake Bay Commis-
sion, 1996, cited in Axelrad, 1998).
• Household transportation expenditures ranged from
17 to 22 percent of household spending in the 10 • An econometric study using 1995 data from the
most “sprawling” cities, according to a study by the Nationwide Personal Transportation Survey showed a
Surface Transportation Policy Project. Households in statistically significant 24- to 60-percent increase in
7 of the 28 cities studied that had the greatest household vehicle mileage in metropolitan areas com-
“sprawl” spent at least 20 percent more on transporta- pared with the central city (Kahn, 2000).
tion than households in the 7 cities with the least
“sprawl” (Surface Transportation Policy Project/Cen- Impacts on Taxpayers
ter for Neighborhood Technology, 2000).
Concern about development includes its relationship to
• Based on a 1994 study of 28 California communities taxes and the costs of providing services. New develop-
(controlling for levels of transit service and vehicle ment is a “shock,” whose effects ripple through the
ownership), a doubling of residential density was economic, fiscal, environmental, and social fabric of a
community, influencing employment, income, govern-

Figure 14
Relative capital costs of public infrastructure
Percent relative to sprawl
120

100

80

60

40

20

0
Local roads Schools Utilities (sewer and water) Police/fire stations

"Sprawl" Planned (Burchell, 1997) Planned (Duncan) Planned (Frank) Planned (Burchell, 1992)

28 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
ment tax revenues, quantity and quality of public serv- Further, COCS studies take a “cost theory” of taxation,
ices, and nonmarketed “public” goods related to the which does not consider how growth increases individ-
quality of life and the environment. Increasingly ual wealth through increases in property values. Given
sophisticated and expensive methods can be used to that the supply of land is fixed, increased demand for
estimate more or less of the fiscal and economic effects land due to growth increases land values, and thus the
of urban development. These methods include Cost of total property tax revenue. If growth brings increased
Community Service studies (COCS), fiscal impact public expenditures that increase services and the qual-
analysis, and cost/benefit analysis (see box, “Methods ity of life, then the benefits of this higher quality of life
for Estimating Growth’s Economic Impact”). will also be capitalized in land values. Of course, nega-
tive effects of growth (e.g., loss of landscape amenities
Costs of Community Services and sense of community, increased congestion, and
In recent years, COCS has been widely applied, in part reduced air and water quality) also change land values.
because of its relatively low-cost, straightforward
methodology, and the intuitive appeal and ease in Fiscal Impacts
understanding the results. The American Farmland Fiscal impact analysis focuses on the net cash flow to
Trust developed this approach in the early 1980’s and the public sector from new development, including
conducted a large number of studies (AFT, 1986 a and those indirect or secondary effects discussed above
b, 1991, 1992, 2000; Hartman and Meyer, 1997). (see box, “Methods for Estimating Growth’s Economic
Impact”). Fiscal impact analysis requires projections of
The more than 80 cost-of-community-services (COCS) changes in the local economy, tax revenues, and the
studies conducted across the country found that resi- cost of public services, which COCS studies do not
dential development provides less tax revenue than it make.
consumes in public service expenditures. According to
these studies, farm and open space lands contribute Studies find that for relatively low annual growth rates,
more to tax revenues than they use in public service local per capita government spending does not increase
expenditures, but contribute much smaller proportions rapidly (Kelsey, 1993; Kelsey, 2000, Lincoln Institute,
of total community tax revenues than does residential 1993; Esseks et al., 1998). For higher growth rates,
development (6.4 percent vs. 66 percent). however, per capita spending begins to increase dramat-
ically. Whether increases in per capita spending reflect
The ratio of service expenditures per dollar of revenue
generated by residential land is greater than 1 (figure
Figure 15
15). The studies conclude that farmland and open space Ratio of community service costs to tax
lands consistently make a positive net contribution to revenues (n=85)
community budgets, even though agricultural lands Ratio of expense to revenue
generate relatively little tax revenue. A large proportion 3.50
Maximum
of the disparity in service costs between residential and
3.00
farmland uses is attributable to the costs of educating
children. Public schools account for 60-70 percent of Mean
2.50
spending in typical communities, constituting the single
largest expenditure category (Prindle and Blaine, 1998). 2.00
Minimum
COCS studies do not provide a full picture of the costs 1.50
and benefits of urban growth, and consequently are Mean
1.24
subject to criticism (see box, “Methods for Estimating 1.00
Growth’s Economic Impact”). New residents do not
just pay taxes and demand services; they contribute to .50
the economic base of the community. Population 0.35 0.38
0.19 0.17
changes affect the local labor force, which in turn 0
changes employment, income, income taxes, business l al
tia rci ial ial
/ nd
iden e ustr ercl d ae
activity, and property and sales taxes. This economic es mm Ind m
m ia
n
la c
R Co Co dustr rm pa
multiplier effect, not captured in COCS studies, can Fa en s
in op
generate significant revenues in the form of additional
sales and services. Source: American Farmland Trust, 2000.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 29
 Methods for Estimating Growth's Economic Impact
Cost of Community Services—COCS studies allocate l Economies of scale ignored—The high fixed cost of
a community's current budget to the category of land use many public services means that spreading that cost over
that generated the tax revenues and consumed the public more residents will lower the per resident costs.
services. Revenues include taxes and nontax fees; costs
include the local share of expenditures for education, l Nature of public goods ignored—COCS treats public
social programs, public health and safety, highway goods (those with nonrival, nonexcludable characteris-
maintenance, other public works such as sewer and tics) as if they were private goods.
water, and local government. The local government's
income and expenses are allocated to various land use
Fiscal Impact Analysis—Fiscal impact studies take the
categories, usually residential, commercial/industrial,
perspective that residential developments create eco-
and farmland and open space, for a recent year. To trace
nomic changes that are not reflected in existing commu-
the flow of tax revenues and public service expenditures
nity budgets. New residents contribute to a community's
to their associated land uses, the analyst must reorganize
economic base in ways that are not captured by COCS
local financial (budget) records at a point in time. Con-
studies. In essence, fiscal impact studies attempt to
clusions drawn from COCS studies implicitly assume
incorporate the multiplier effect that is associated with
current infrastructure and services, thus the results are
any new economic activity generated by the new resi-
community-wide averages. Deller maintains that though
dential development. In general, fiscal impact studies are
the results are consistent, the implications drawn from
of two forms: one that is project specific, such as a new
the results may be wrong. Results can be affected by
housing development or new industry, and one that takes
allocation of costs between States (or other regional
an area-wide perspective. In either case, fiscal impact
authorities or the Federal Government) and the local
studies project public costs and revenues under alterna-
jurisdiction being studied. The size of the government
tive land development scenarios, but remain focused on
being studied and whether it includes commercial and
the local government budget, not the full social cost of
industrial enterprises that support the residential devel-
the new economic activity.
opment also affect the results. Timing of major capital
purchases is also important. Further, the ratios reflect Costs and Benefits—Fiscal impact analysis does not
average community revenues and expenditures at a point account for an array of nonmarket costs and benefits that
in time, not marginal costs and revenues, which are par- change when farmland is converted to urban develop-
ticularly affected by capacity and congestion considera- ment. These nonmarket effects are not reflected in
tions. Deller cites the following methodological and the- changes in government expenditures and revenues, nor
oretical flaws associated with COCS studies: in land values or other market price signals. Many of the
costs are related to externalities including environmental
l Aggregation across land use types—The residential
degradation, traffic congestion, and loss of open space.
group makes no distinction between important residen-
Other intangible costs include noise, crime, and changes
tial categories including mobile homes, single-family
in community character. If additional development
dwellings, apartments, or retirement homes.
changes the quantity or quality of these nonmarket char-
l Intensity of manufacturing—There is no distinction acteristics of the rural environment, then consumers’
between low-intensity manufacturing and large-scale willingness to pay to preserve positive characteristics
industrial uses. and avoid negative ones should be accounted for in a
complete analysis. Such complete cost/benefit analyses
l Basis measure bias—COCS uses a gross dollar basis depend on estimating nonmarket impacts so the cost of
to make comparisons, and thus predetermines the out- such studies is often prohibitive. Studies of this kind
come of the study. If the basis of ratio comparison was must rely upon expensive nonmarket valuation tech-
“per acre” rather than “per dollar,” commercial and niques, such as hedonic price analysis, travel cost mod-
industrial uses would advance in importance. els, or stated preference surveys. Sometimes results from
a limited study are “transferred” to other or broader
l Capacity to add development is ignored—Whether applications using what are called “benefits transfer”
existing public utilities have excess capacity is crucial to procedures.
determining the impact of any development.

30 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
purchases of higher quality services is not clear. Ladd space on the periphery can drain the vitality of the
(1994, p. 661) concludes that they do not: town’s center, or create center-less communities. Retail
restructuring has negative effects on some downtown
“Higher growth-related per capita spending pri- businesses, while creating congestion problems in the
marily reflects the combined effects of greater fringe. For example, Tim Sheldon, of the Economic
density and increased local spending shares. In Development Council of Mason County, Washington
sum, established residents in fast-growing areas (near Seattle), noted that “Wal-Mart and other national
may experience declines in service quality, as well chains had moved into the fringe area of new develop-
as rising local tax burdens.” ment, emptying the county’s downtown area, where
small businesses were hurting” (Reeder et al., 2000).
As described above, low-density development results in However, over time many town centers in growing
greater public capital and operating costs for local communities eventually redevelop with tourist and spe-
roads, schools, and utility infrastructure (Windsor 1979, cialty shops. Brenda Johnson, with the Gilmer County
RERC 1974). At typical urban-suburban densities, per Chamber of Commerce (north of Atlanta, Georgia) said
capita infrastructure costs fall as densities rise. At very “Gilmer’s new Wal-Mart in a strip mall on the fringe
low densities, the use of septic systems, open drainage, was causing incredible congestion at the existing inter-
and unpaved rural streets without curbs and sidewalks section; and the new retail on the fringe of town had
may result in low costs, but the equally low quality of killed a few downtown stores, but the county’s down-
such services becomes evident as development town area had become a thriving tourist and specialty
increases and these services prove inadequate. shop area with smalltown charm.”
Impacts on Landscape, Sense of Community—In extreme cases, development
Open Space, and can make it difficult to tell where one town ends and
Sense of Community another begins. When town boundaries are obscured,
the sense of community, which is important in generat-
Growth involves more than traffic congestion, infra- ing civic pride, volunteerism, and support for local pub-
structure costs, and altered public finances. It alters the lic services and community activities, may be dimin-
landscape, the natural environment, and other factors ished. The sense of community may also be impaired
important to quality of life. For example, low-density when developments are not open to the public. Gated
development consumes open space in the surrounding communities are often developed at low densities, and
countryside, so residents who once had pleasant views may be well-planned and provide some of their own
of nature now have views of other suburban houses and infrastructure and services. However, these communi-
shopping centers. In some cases, growth can destroy ties often differ in demographic characteristics from the
the very scenic amenities that once attracted people. outside community, typically wall out their neighbors,
This section draws, in part, on the comments of local and often think and act as if they are a community in
government and business representatives from eight themselves. This can create a significant divide with the
nonmetropolitan counties experiencing growth over the surrounding town on public policy issues such as
last two decades (Reeder et al., 2000). schools and economic development.

Community Spaces—The loss of open space can Environmental Changes

stymie local recreation and cultural activities. For
example, a publicly used lake or beach may become Growth poses numerous environmental challenges.
fenced off private property. A place known for hunting Because the environment is linked to other aspects of
or fishing may be closed off to public access. Many society, such as public health and the economy, envi-
communities use undeveloped lands for public activi- ronmental implications from growth can have various
ties, such as county fairs and other local festivals. Other adverse impacts on local communities and require
such open spaces may be the sites of historic events, many and diverse policies to prevent or mitigate these
such as civil war battlegrounds. The pressure of devel- impacts (table 2).
opment can consume these sites and, in the process,
obliterate local historical landmarks. Land Use and Soil Quality—Studies of land consump-
tion associated with low-density growth show that
Retail Relocation—The relocation of key retail busi- greater land consumption stems from three characteris-
nesses and services (such as the post office) to open tics:

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 31
Table 2—Growth-related issues, impacts, and possible solutions
Growth issue Environmental Impacts Possible solutions
issue

Haphazard expansion of Water runoff Increased pollution of streams, Coordinated land use planning
suburban communities rivers, and marine environments More compact communities
Increased flooding Greenspace buffers and preservation
Loss of biodiversity in streams Watershed protection
Soil erosion
Decreased recharge of aquifers
Lower drinking-water quality

Poor land use planning Consumption of Loss of contiguous greenspaces Land preservation
open spaces Loss of natural habitats for native Priority development areas
species Growth boundaries
Stressing of endangered species Purchased development rights
Loss of wetlands Urban revitalization and infill
Fragmentation and loss of forestland development
Increased flooding Higher impact fees for developers
Increased mountain mudslides and Expand open spaces in urban
slope collapses and suburban areas
Increased prevalence of non-native, Strengthened zoning
invasive species Consistency in zoning based on
Health impacts from proximity comprehensive plan
to wild animals and confined- Public education
animal feeding operations
Loss of open space
Less access to recreation areas
Higher temperatures or “heat islands”
in metropolitan areas
Reduced plant photosynthesis

Traffic congestion Air pollution Increased smog and other pollutants Improved transportation, land use
Increased health impacts, such as planning
asthma Mixed-use development
Noncompliance with Federal Urban revitalization
standards and limits on new road Mass transit
construction Telework

Public safety Increased response times for fires Traffic congestion relief efforts
and medical emergencies Public education
Road rage

Energy use Wasted petroleum Improved transportation planning

Flexible work hours and telework

Urban depopulation Contaminated land Increased human exposure to toxic Brownfields development projects
and buildings substances

Public infrastructure Decreased maintenance and Urban revitalization and increased

greater service interruptions for growth
water, sewer, road repair, and Revenue sharing with suburbs
waste disposal Stronger regional planning
After Hirschorn, 2000, p. 12

32 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
• low density of settlement; have significant negative effects on wildlife. In some
cases, Federal or State governments will cause commu-
• unlimited outward extension of growth; nities to restrict development and related activities to
• “leapfrog” or fragmented development pattern (Axel- protect wildlife. For example, Bob Fink, of Mason
rad, 1998). County’s planning office, noted that “because of a new
series of endangered species announcements covering
Low-density development results in a greater loss of several species of fish, his county may change its
agricultural lands than more compact development. development regulations.” However, not all wildlife
However, studies have shown that, nationwide, the effects are bad. For example, some types of develop-
amount of prime and class I-IV cropland lost in urban- ments provide protected green space or parkland that
izing areas was proportional to the amount of those creates mini-ecosystems where habitat-generalist
soils found in the area (Heimlich and Bills, 1997; species and those that can fly between fragments can
Heimlich and Krupa, 1994; Vesterby and Krupa, 1993; flourish (Lovejoy et al., 1984, Whitcomb et al., 1981).
Vesterby et al., 1994). Low-density patterns of develop-
ment result in a greater loss of sensitive environmental Growth seriously fragments wildlife habitats. Habitat
lands, including wetlands, flood plains, critical habitat, fragmentation is often singled out as a principal threat
aquifer recharge areas, stream corridors, and steep to the preservation of biodiversity (Harris and Gal-
slopes. lagher 1989; Wilcox and Murphy 1985; Noss and
Cooperrider 1994). The negative effects of fragmenta-
Better planned, more compact settlement patterns can tion on biodiversity are numerous, and can be grouped
often avoid converting such lands, incorporating them into four major categories:
into open space and environmental protection zones.
Studies by Burchell (1992-97) and Landis (1995), sum- • Reduction in total habitat area. Habitat remnants sup-
marized in Axelrad (1998), estimated such land con- port fewer species and smaller populations of the
sumption savings (figure 16). same species than larger swaths;
Wildlife Habitat—Development disturbs, pollutes, and • Loss of wide-ranging, low-density, and habitat-spe-
destroys the natural habitats for various native species cialist species. Mountain lions, which have ranges
when it consumes wetlands, forests, alpine, and desert that can exceed 1,000 square kilometers (Hemker et
terrain. Insecticides and fertilizers used on lawns can al. 1984) are now extinct in a recently isolated habitat

Figure 16
Savings of agricultural and environmentally sensitive lands, compact growth versus "sprawl"
Percent reduction relative to sprawl
60
New Jersey Lexington, KY Michigan
South Carolina Delaware Bay San Francisco Bay
50

40

30

20

10

0
Agricultural land Environmentally
sensitive land
Sources: Studies reported in Axelrad, 1998.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 33
 fragment in Orange County, California. Habitat inte- by hunters, poachers, and irresponsible visitors (Lit-
rior dwellers, such as some forest birds, may be man, 1999).
locally extinct from fragments of 1 square kilometer
as studies in eastern North American deciduous Water—Many of development’s health-related issues
forests have shown (Whitcomb, 1977; Wilcove et al., involve water. For example, much of the development
1986); in the countryside involves homes with on-site septic
systems, which often cause greater water pollution
• Increased “edge effects,” or the microclimatic problems than municipal sewage systems. While many
changes that occur along power line corridors, roads of the bigger developments are hooked up to municipal
and urban development which favor exotic species or county water and sewer systems, these systems can
often at the expense of native and interior species sometimes overflow, particularly during heavy storms,
(Newmark, 1987); and causing significant pollution problems. Some develop-
ers build their own wastewater treatment plants, and
• Increased extinction risk from demographic, environ- these systems sometimes prove to be inadequate.
mental, and genetic variances (Menges, 1992). “These private developer-built systems sometimes
prove to be unacceptable in quality. This happened
Urban development is one of the principal causes of recently in Lyon County (Nevada), and the county
wetland loss. In 1985, 85 percent of Maine’s wetlands ended up having to pay for upgrades and repairs to
were visible from a road or within 2,000 feet of a road, these systems to meet public standards,” according to
and thus of limited habitat value. Of Maine’s 2,700 Mark Clarkson, manager of Lyon County’s Utilities
lakes, 200 have been harmed by development, and 300 Division.
are at risk (Maine State Planning Office, 1997).
Between 1982 and 1992, the National Resources Inven- The type of land use, and particularly its density and
tory showed that 89,000 acres of wetlands were lost to the amount of impervious surface, affects the amount
urban uses per year, 57 percent of total gross wetland of pollutants in storm water runoff. More intense uses
loss (Heimlich et al., 1998). engender more pollutants, and large impervious sur-
faces lead to greater volumes of runoff and more pollu-
Development of roads in formerly rural areas creates tion. The original “Costs of Sprawl” report (RERC,
increased opportunities for collisions between wildlife 1974) estimated that low-density “sprawl” generated
and new urban residents. The Humane Society and the the most sediment, biological and chemical oxygen
Urban Wildlife Research Center estimate that more demand, nitrogen and phosphorus runoff, and sus-
than 1 million large animals are killed annually on U.S. pended solids and fecal coliform bacteria of any devel-
highways. Roadkills usually increase with traffic opment pattern.
speeds and volumes. Studies in the state of Florida
indicate that road kills are the primary cause of death A New Jersey study of different urban development
for most large mammals, including several threatened patterns found that compact development would gener-
species. Some animals have an aversion to roads, which ate significantly less pollution than low-density devel-
may affect their behavior and movement patterns. For opment for all categories of pollutants (Burchell, 1992).
example, black bears cannot cross highways with The reduction ranged from over 40 percent for phos-
guardrails. Other species become accustomed to roads, phorus and nitrogen to 10 percent for lead (figure 17).
and are therefore more vulnerable to harmful interac- The study noted that, in some places where develop-
tions with humans. By forming a barrier to species ment is particularly dense, water quality will deterio-
movement, roads and development fragment and isolate rate, but in general water quality will be better with
wildlife populations, preventing interaction and cross planned growth than with unplanned development.
breeding between population groups of the same
species. This reduces population health and genetic via- Another problem, particularly in the West, involves
bility. Development and road construction and use limited or declining water supplies. Many new homes
introduce a variety of noise, air, and water pollutants. in the countryside use on-site wells for water, and in
Loss of habitat, invasion of exotic species, alteration of some cases underground water supplies are declining.
watershed hydrology through changes in water quality This problem is exacerbated by less natural replenish-
and water quantity, stream channels, and groundwater ing of underground water due to increased water runoff
all accompany development, as does increased access caused by increased area of impervious surfaces, such

34 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
as roofs, roads and parking lots, and the building of Air Quality—Air pollution is sometimes an important
sewers. environmental issue in areas with high rates of com-
muting, where ground level ozone (smog) emitted from
Floods and fires can become more significant concerns autos creates significant health concerns. When the
as more people move to the countryside (Esseks et al., level of air pollution exceeds EPA standards, Federal
1998). For example, Rob Nesbitt, of the Lamoille law requires that planning be aimed at reducing air pol-
County Planning Commission (near Burlington, Ver- lution levels, or the State may be penalized by reduc-
mont) reported that “Lamoille County has had a history tions in Federal highway aid.
of floods. None of our water bodies have flood control
dams on them.” Development not only raises the stakes Other Quality of Life Issues
of life and property loss, it may also help cause or
aggravate floods and fires. For example, construction Aside from traffic congestion, other quality of life
often causes erosion which fills ups streams and in- issues affected by growth are the quality of education
creases the likelihood of floods, and the increased area and the affordability of housing.
of impervious surface increases flood peaks. Develop-
ment may add to heat retention, eliminate wetlands, Education—Many are drawn to these rapidly growing
and result in reduced forestland management, resulting areas by the perception that schools are of better qual-
in increased fuel and adding to the threat of fires. ity than those in the central cities. However, newcomers

Figure 17
Water quality impacts by community type

Percent of pollutant runoff relative to "sprawl" level

160

140

120

100

80

60

40

20

0
Sediment Volume Biological Chemical Nitrogen Phosphorus Suspended Fecal
oxygen oxygen solids coliform
demand demand bacteria

"Sprawl" mix Planned mix Combination mix Low-density planned

Low-density "sprawl" High-density planned New Jersey OPS Trend New Jersey OPS Plan

Sources: RERC, 1974; Burchell, 1992

New Jersey Office of State Planning Trend was for existing mix of development; Plan was for greater density.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 35
often demand improvements after they arrive. In addi- Despite these negative aspects, it would be wrong to
tion, the influx of new students is so rapid and conclude that the quality of life declines in all respects
unplanned that schools can quickly become over- for places experiencing low-density development. For
crowded. Even in places that plan well ahead for the example, the retail and commercial growth that follows
incoming school populations, some problems remain residential growth provides local residents with a
for schools in growing areas. For example, according to greater diversity of goods and services to purchase, as
Pete Kelly, school superintendent for Citrus County, well as a growing supply of jobs. While it is true that
Florida, “Many schools are already built in the develop- many of these jobs are low paying compared with some
ing areas, however there are too many developing areas traditional rural jobs (such as mining and manufactur-
to build high schools in every one. With the population ing), many provide part-time or seasonal employment
spread far and wide, long bus trips are required to that is critical for supplementing family income. For
transport students to the high schools.” example, farmers have come to rely on this form of off-
farm employment to maintain their standard of living in
While demands for schools and other services are the face of weak agricultural markets.
increasing, many growing communities experience
slower growth in tax base and expendable revenue, due
to the tendency of commercial and industrial develop-
An Economic Interpretation of
ment to lag behind residential growth. Without concur- the Demand for
rent growth in the commercial and industrial tax base, Low-Density Development
schools often must make cuts in current spending per
pupil. In addition, because most of these places find The worst consequences of unplanned, low-density
that their new student population is above the poverty development are not the result of some vast conspiracy
level, State and Federal aid does not grow proportion- by ruthless capitalists known as “developers.” Walt
ally with student populations. As a result, many school Kelly’s famous cartoon character Pogo correctly
systems in growing communities are constantly playing observed that, “We have met the enemy, and he is US”
catch-up in school construction, and are hard pressed to (Walt Kelly). Millions of individual choices by con-
come up with sufficient tax revenues to maintain edu- sumers and businesses which are aimed at creating a
cation quality. better way of life designed to garner the benefits of
low-density development outlined above instead result
Affordable Housing—Affordable housing is another in patterns of development that often have negative
issue of concern. Though single-family housing may be consequences for new and old residents alike in loss of
cheaper on the fringe than in central cities or the inner rural amenity, traffic congestion, and environmental
suburbs, not much housing is available at prices that degradation. How can consumers, businesses, and com-
low-income individuals or families can afford. In some munities so consistently fail to anticipate the results of
cases, local zoning provisions exacerbate this situation their actions with regard to development?
by requiring more expensive large-lot development. For
example, Comissioner John Metli of Elbert County, Economists usually attribute such unanticipated results
Colorado (near Denver), said “Elbert County’s average to market failure. While the markets for housing and
home costs $225,000—up from $150,000 just 5 years commercial real estate work efficiently, the market for
ago, and this lack of affordable housing is self- “lifestyles,” including landscape or rural amenities
inflicted, because regulations are more stringent on the either fails to exist or fails to deliver the anticipated
5-acre lots, making it more economical to buy and benefits. This market failure can be understood as aris-
build on a 60-acre lot than on a 5-acre lot in a high- ing from interactions among the following factors:
priced development.”
• Markets for positive externalities from agricultural
Although the lack of affordable housing may not be production, such as open space and rural amenities,
perceived as a problem by most local residents, it do not exist. Therefore, these attributes in the land-
becomes a problem for low-wage industries, including scape are neither permanent nor even necessarily
retail and services. It is also a problem for the children long-lived when development begins to occur. Hous-
of long-term residents who may lack the incomes to ing construction does not impose negative spillover
be able to afford new housing in the area. Conse- effects (externalities) in this regard, it removes posi-
quently, local governments often must require that tive spillovers that were in place from the previous
developers build some affordable housing. economic activity, farming.

36 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
• Negative spillovers from housing consumption, such seamlessly to small variations in supply and demand in
as traffic congestion, destruction of visual amenities, very short order. However, the cumulative effects of
and crowding, are not priced in the cost of the hous- similar decisions in land use can result in significant
ing or other development. If the cost of the landscape disamenity over time (CEQ, 1997; Spaling and Smit,
amenities were accurately included, “housing” costs 1993). Specifically:
would be much higher and demand lower. For exam-
ple, fully planned communities with carefully con- • Individual developers’ decisions, which produce nega-
trolled land uses and landscape amenities such as tive spillovers for existing land users, are generally
open space, lakes, and recreational facilities included small in scale relative to the entire landscape, occur-
are more expensive than nearby developments without ring subdivision by subdivision, or even house by
these amenities. house (Fischel, 1999, p. 411).

• Imperfect information creates a market failure • Consumers’ decisions on housing consumption, which
because consumers do not anticipate future develop- produce negative spillovers for each other from con-
ment patterns and do not weigh them perfectly in cur- sumption, are made one house at a time.
rent housing purchase decisions. • Both developers’ and consumers’ decisions are irre-
versible over time scales of a lifetime, providing little
• Absence or failure of planning and zoning in local
scope for adjustment except to move to a “clean can-
communities contributes to this failure because there
vas” in another rural setting (Tiebout, 1956; Hamil-
is no information about the institutional framework
ton, 1975).
within which future development can take place.
When future development is dealt with on a piece- • Efficiency in the real estate market increases property
meal or ad hoc basis, neither consumers nor develop- values as development proceeds in desirable new
ers can adequately anticipate what development will neighborhoods, creating greater incentives to develop
occur on surrounding parcels. (Lafferty and Frech, 1978; Burnell, 1985; Speyer,
1989).
• Developers, who generally have a good grasp of
future development potential, have no incentive to • Negative spillovers from development do not create a
inform housing consumers who value open space drag on property values in the real estate market until
and other rural amenities that they are likely to be disamenities are quite high.
developed.
In summary, there are substantial costs imposed by
Other sources of failure in the “lifestyle” market derive allowing low-density development, both at the fringe of
from the nature of development and land-use change. existing urban area and farther out in the rural country-
Development results from the cumulative impacts of side. People recognize substantial benefits from main-
many small decisions, with the rare exception of a taining and conserving rural land uses in farming, graz-
large, planned, “new town,” such as Columbia, Mary- ing, and forestry. While some communities actively
land, Reston, Virginia, or Irvine Ranch, California. address growth control issues, private market forces
Markets proceed on the basis of many small decisions, often operate with minimal intervention from fragmented
which when taken without an overall context, produce land-use control authorities at the State and local levels
results that can be neither envisioned by nor anticipated and cannot recognize and avoid these costs, nor capital-
by consumers and developers (Kahn, 1966). There is no ize on the benefits. land-use issues are primarily local
problem when consumers of corn or soap fail to antici- in nature, and, under our constitutional system, author-
pate the resultant changes in supply and demand that ity over them rests with State and local government.
result from their atomistic consumption decisions But the consequences of development are being felt all
because corn and soap producers respond quickly and across the Nation, in almost a third of the country.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 37
 V. Consequences for Farming

Through the entire process of development, farming GARMS, 2000). Nationally, farms in metropolitan
coexists with development and adapts, however areas are an increasingly important component of U.S.
uneasily, in the shadow of the city. Settlement patterns agriculture. In 1997, they made up a third of all farms
that create low-density development and fragmentation and controlled 39 percent of farm assets (table 3). Eigh-
across rural landscapes have both negative and positive teen percent of farmland operated was located in metro
consequences for agriculture. Increasing population and areas in 1997, roughly proportional to the total land in
employment provide some opportunities for farms, but metro areas (Barnard and Heimlich, 1993; Heimlich
also create problems. and Barnard, 1992, 1997; Hoppe and Korb, 2000). The
count of farms excludes service firms, such as horse
Agriculture: Farming in the boarders and landscape services that are not directly
City’s Shadow involved in agricultural production, but that contribute
to open space and economic activity.
Large and growing areas of U.S. agriculture are influ-
enced by proximity to urbanization and concentrations As urbanization proceeds, landowners may seek enter-
of population brought about by growth. Metropolitan prises and markets that offer returns to land more com-
Statistical Areas (MSAs), defined by the Bureau of the mensurate with those from development, in part to off-
Census, contain 20 percent of U.S. land area and 80 set the higher property taxes that are incurred as land
percent of the U.S. population (Bureau of the Census, prices rise to reflect the potential for future nonagricul-

Table 3—Metro and nonmetro farm characteristics, United States, 1991 and 1997
Metro
Characteristic Recreational Adaptive Traditional Subtotal Nonmetro Total
Number
Number of farms, 1991 372,689 97,024 226,704 696,416 1,390,607 2,087,023
Number of farms, 1997 283,776 74,522 199,569 557,867 1,181,349 1,739,216
Thousand acres
Acres owned, 1991 23,107 12,613 55,996 91,927 417,182 509,109
Acres operated, 1991 33,542 24,741 142,370 200,568 1,090,236 1,290,804
Acres operated, 1997 22,675 13,894 123,323 159,892 733,031 892,923
Million dollars
Sales of agr. products, 1991 910 18,877 17,647 36,900 69,975 106,875
Net cash farm income, 1991 -1,813 4,190 2,752 4,993 13,866 18,858
Total off-farm income, 1991 16,708 4,564 2,102 27,883 38,301 66,185
Assets, 1991 92,026 90,537 129,420 311,982 489,434 801,416
Net worth, 1991 85,251 79,328 116,207 280,786 424,312 705,098
Sales of agr. products, 1997 996 27,652 38,055 66,703 130,162 196,865
Sales per acre operated, 1991 27 763 124 184 64 83
Sales per acre operated, 1997 44 1,990 309 417 178 220
Percent of all farms
Number of farms, 1991 18 5 11 33 67 100
Number of farms, 1997 16 4 11 32 68 100
Acres owned, 1991 5 2 11 18 82 100
Acres operated, 1991 3 2 11 16 84 100
Acres operated, 1997 3 2 14 18 82 100
Sales of agr. products, 1991 1 18 17 35 65 100
Sales of agr. products, 1997 1 14 19 34 66 100
Net cash farm income, 1991 -10 22 15 26 74 100
Total off-farm income, 1991 25 7 3 42 58 100
Assets, 1991 11 11 16 39 61 100
Net worth, 1991 12 11 16 40 60 100
Sources: 1991 data from Heimlich and Barnard, 1996; 1997 data from Hoppe and Korb, 2000

38 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
tural development. Initially, this may involve innovative and the percentage is lower in metro areas (Sommer
marketing techniques, such as U-pick, community agri- et al., 1998, table 31).
culture, contracts with restaurants, or farmers’ markets.
At some point, successfully adapting farmers may • Expanding populations provide opportunities for
become more general rural entrepreneurs, not limiting farmers to grow new crops and to market them in new
themselves to farm activities at all. Landowners may ways, such as through farmers’ markets (figure 18;
also sell off less productive woodlots and pastureland, Price and Harris, 2000). High-value crops, such as
concentrating on more intensive production on remain- fresh fruits and vegetables, can be sold through
ing cropland. Other farmers attempt to maintain tradi- restaurants and gourmet grocery outlets or directly to
tional crops and practices, some merely waiting for the consumers in roadside stands or U-pick operations
perceived inevitable sale for development. Some farms (see box, “Urbanization and Vegetable Production”).
simply go out of business and the land remains idle, or U-pick farms may combine produce sales with value-
the land is divided and sold to hobby farmers, recre- added products like dried herbs or flowers, jams and
ational farmers, or part-time farmers whose primary use jellies, homemade breads or pastries, or other farm-
of the land is as a residence. related products. Recreational aspects of U-pick oper-
ations, such as hayrides, picnics, farm-pond fishing,
Many of the economic changes faced by farmers on the and special holiday features, such as old-fashioned
urban fringe have a dual-edged impact on agriculture, Halloween or Christmas activities, may also add value
bringing pressures to adapt, while simultaneously offer- to urban customers’ purchases. Horse boarding,
ing opportunities and rewards for doing so. On the breeding, and training facilities, cattle-breeding oper-
down side, proximity to urban areas can present obsta- ations or other specialty livestock operations may
cles to profitable farming operations. replace more extensive dairy farms and cow-calf
operations.
Positive Impacts on Farming
from Urbanization Negative Impacts on Farming
• Proximity to urban centers may provide a larger pool from Urbanization
of seasonal or part-time labor that is especially impor- • Suburban neighbors’ complaints about farm odors and
tant to harvest high-value crops. One reason metro chemical spraying may force farmers to turn to enter-
farms can adopt high-value crops is because local prises that produce fewer negative side effects. Some
sources of labor are available at peak periods (Jordon, of the alternatives will be more profitable and some
1989). will be less (Reynnells, 1987; Van Driesche et al.,
1987).
• Greater off-farm employment opportunities for the
farmer or his/her family may help support the farming • Conflicts can arise between growers and new subur-
operation (Stallman and Alwang, 1991). Off-farm ban neighbors over early morning noise, and
employment can also provide a transition to part-time increased traffic can hinder farmers’ ability to move
farming, particularly if enterprise changes are under- their equipment along overcrowded rural roads being
taken that reduce full-time labor needs on the farm. used as commuter routes.
Opportunities from urban employment run in both
directions. People in urbanizing areas may work part- • Markets for traditional dairy products or field crops
time on the farm or start recreational farms that even- may be reduced, as milk-collection routes are cur-
tually develop into full-time, part-time, or retirement tailed and grain elevators go out of business. In some
businesses. areas, farm input suppliers, machinery dealers, and
other forms of agricultural support may decline.
• Nationally, 90 percent of average farm household
income was from off-farm sources in 1999, including • Real estate taxes may rise as land prices rise to reflect
part-time employment, spousal income, and other the potential for nonfarm development.
business income. The percentage in recent years has
• Growers may face increased pressure from water- and
varied from 83 to 90 percent. Government payments
land-use restrictions.
are part of gross cash income, and cannot be com-
pared to net farm income or household income. Only • Farms may face deteriorating crop yields from urban
36 percent of farms receive government payments, smog, theft, and vandalism.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 39
The dynamic forces of urbanization create an urban vive in the face of urbanization (see box, “Categorizing
fringe in which a variety of farm types coexist, reflect- Metro Farms”).
ing different paths that farms have taken in adapting to
urban influence (figure 19; see box “Categorizing Recreational farms in metro areas accounted for 16-18
Metro Farms” for methods). These changes occur pri- percent of U.S. farms, but contributed only 1 percent to
marily through changes in the product and input mar- aggregate U.S. sales of agricultural products. Within
kets in which farmers buy and sell, and through the metro areas, recreational farms accounted for 51-54
actions of local government institutions, which by law percent of farms and controlled 29-30 percent of farm
and tradition exercise control over property taxes and sector assets and equity and 14-17 percent of the land
land use (Heimlich and Brooks, 1989). Farms in metro operated. These recreational farms have little viability
areas are generally smaller, produce more per acre, as economic enterprises and are essentially a consump-
have more diverse enterprises, and are more focused on tion activity that will become increasingly expensive
high-value production than nonmetro farms (Barnard for their owners as urban development continues. Tra-
and Heimlich, 1993; Heimlich and Brooks, 1989; ditional farms made up a third of metro farms, operated
Heimlich 1988; Heimlich and Barnard, 1992, 1997; 71-77 percent of metro farm acreage, and controlled
Hoppe and Korb, 2000). Metro agriculture is character- more than 40 percent of assets, sales, and net cash farm
ized by a relatively large group of recreational farmers income. When a farm hobby is no longer fun, or the
who are availing themselves of opportunities in both farming tradition finally yields too little profit to con-
farm and nonfarm pursuits, a smaller group of more tinue, development may soon follow.
adaptive farmers who have accommodated their farm-
ing operation to an urban environment, and a residual Adaptive farms accounted for 13-14 percent of metro
group of more traditional farmers who are trying to sur- farms and 9-12 percent of metro farm acreage operated,

Figure 18
Distribution of farmers' markets

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1 dot = 1 zip code centroid with a farmers' market #
# ##
#
#
#

Source: Price and Harris, 2000.

40 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
but they controlled more than proportional shares of defined to be “out of business” in a given year if it had
metro farm sales, assets, and net cash farm income. no sales that year, either because it had ceased opera-
These are the farms that have a better chance of contin- tion or had been sold to another farm. As shown in fig-
uing in an urbanizing setting. ures 20 and 21, the share of farms that went out of
business be-tween 1978 and 1997 varied widely among
Survival of Farm Types the farm categories.
in Metropolitan Areas
Longitudinal data from the 1997 Census of Agriculture Virtually all the farms classified as recreational in 1978
were used to follow farms existing in 1978 through were out of business by 1997, regardless of geographic
time (Hoppe and Korb, 2000; see box “The 1997 Cen- location. Data from the 1995 Farm Costs and Returns
sus of Agriculture Longitudinal File”). A farm was Survey (FCRS) indicate that small farm operators who

Urbanization and Vegetable Production

As the United States continues to urbanize, conflicts This effect implies that there is an economic advantage for
between agricultural and nonagricultural uses of land will production located close to concentrations of consumers.
intensify. These changes are particularly important for the Second, relative to other agricultural products, many veg-
vegetable industry. The agronomic characteristics of land etables produce high returns per acre, creating a compara-
that are key for vegetable production (warm temperatures, tive advantage for vegetable production in urbanizing areas.
especially in the winter; an adequate supply of water; and Substitution of vegetable production for other less intensive
level, well-drained soils) are also characteristics that are enterprises may cause vegetable production to increase, at
highly valued for urban development. Many of the major least temporarily, in many urbanizing areas. The counterin-
national production centers for vegetables and melons are tuitive result is that as urbanization proceeds, acres devoted
located in areas subject to intense pressure from urban to vegetable production may actually increase. This finding
development. A significant percentage of U.S. vegetable is consistent with research reported elsewhere (see Barnard
acreage (61 percent) is located in metropolitan areas. and Lucier; Lopez, Adelaja, and Andrews, 1988; Heimlich
and Barnard; Hart; Vesterby and Krupa, 1993).
Vegetable and melon production tends to be geographically
concentrated in California, Florida, Texas, and Arizona. Urbanization often has negative impacts upon agricultural
This regionalization of production is even more acute dur- production, including vegetable production. In urban/agri-
ing the winter months, with domestic production largely cultural fringes, conflicts between growers and new subur-
confined to a relatively few counties within these four ban neighbors occur with respect to issues such as farm
States. But, these States also rank high in population and odors, early morning noise, pesticide applications, and hin-
projected population growth. The Bureau of the Census drance of farmers' ability to move farm equipment along
projects 45- to 55-percent increases in population in these overcrowded rural roads being used as commuter routes.
States between 1995 and 2025. Seven of the top 10 veg- Growers also face increased pressure from water- and land-
etable-producing counties are in California. California's use restriction. Some farms on the urban fringe face crop-
Monterey County is the Nation's top vegetable area, with 6 yield deterioration from urban smog, theft, and vandalism.
percent of the harvested area. The fertile Salinas Valley,
which has been called the world’s salad bowl because of Land used for other crops dwarfs that needed for vegeta-
the concentrated production of green vegetables, is located bles and melons—all vegetable production in the United
in Monterey County. Does impending population growth States occurs on less than 1 percent of total cropland. In
pose a risk to domestic vegetable and melon production? 1992, the United States harvested 3.8 million acres of veg-
etables—about 0.9 percent of total cropland. There is wide
The interface between vegetable production and develop- geographic dispersion of the top vegetable counties, indi-
ment in urban fringe counties sets up competition for the cating that many areas of the United States can produce
use of farmland that has both negative and positive impacts vegetables on a commercial scale—although only a select
on vegetable acreage. Urban uses generate higher returns few can do so year round. The top 100 vegetable counties,
per acre than do agricultural uses, with the consequence which are dispersed across 20 States, account for only 62
that urban uses outbid agricultural uses and farmland is percent of vegetable acres. In addition, since 1959, more
directly converted to developed uses. But, as urbanization than 40 counties have moved into the top-100 list. The
proceeds, changes in the local economic environment for countervailing pressures of urbanization mean that veg-
agriculture act in a countervailing manner to increase the etable production is the last to go, and its high value means
suitability of urban-influenced farmland for vegetable pro- that when urban pressures prevail, vegetable production
duction. First, population growth in nearby urban areas cre- moves beyond the urban fringe, to wait for the next burst
ates increased demand for locally grown fresh vegetables. of development, if it can.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 41
do not report farming as their occupation gave “a rural Adaptive farms were much more likely than either
lifestyle” as their highest-ranking goal from farming recreational or traditional farms to survive the full two
(Hoppe, 2000). In contrast, farmers depending on farm- decades. In the case of adaptive farms, the percentage
ing for substantial portions of their income reported leaving business varied substantially by geographic
survival of the farm as their most important goal. How- area, with the percentage declining with distance from
ever, more than three-fourths of the 1978 traditional the metro core. Adaptive farms may have a survival
farms had also left business by 1997. Again, there was advantage over recreational or traditional farms in
little variation by geographic location. urban or metro areas, but they survive better where
there is less development.

Figure 19
Conceptual model of agricultural adaptation to urbanization

Population growth

Markets Local institutions

--Land --Growth control
--Labor --Farmland retention
--Commodities
--Other

Existing farms
Pressures Opportunities
--Higher land prices --Higher farm equity
--Nuisance problems --Off-farm employment
--Reduced farm labor supply --Niche markets
--Political support

Adaptations
--Enterprises
--Markets
--Occupation
--Assets

Metropolitan farm types

Recreational Adaptive Traditional
Farm size Very small Small Large
Intensity
Land Very low High Low
Labor High High Low
Capital High High High
Inputs Very low Very high High
Enterprises Either High-value Conventional
Occupation Nonfarmer Either Farmer

Source: Heimlich and Brooks, 1989.

42 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 Categorizing Metro Farms
Each farm was grouped into one of three categories in each sales of more than $500 per acre of land. Specializing in
census year, using the recreational, adaptive, and tradi- high-value products allows these farms to adjust to increas-
tional groups from Heimlich and Barnard (1992). The defi- ing land prices, population density, and continuing conver-
nitions developed in the earlier study could not be exactly sion of local agricultural land to nonfarm uses.
duplicated because the longitudinal Census data used here
are much less detailed than the data used earlier. The farm An alternative criterion is that the farm specializes in high-
categories are: value commodities, with those commodities accounting for
more than 50 percent of the farm’s sales.
Recreational—Includes any farm with sales less than
$10,000, defined in 1997 constant dollars. Farms with sales Traditional—All other farms fall in the traditional group.
this low are very small and have little ability to generate However, farms with sales greater than $500 per acre were
income for the farm family. Income from off-farm sources classified as traditional if they did not have high-value spe-
is common across farms today, but it makes up a large por- cializations. Traditional farms are most likely to remain in
tion of total income for these farm households. Dollar val- nonmetro counties, where there is less competition for land
ues for earlier years are adjusted with the implicit GDP and labor and fewer off-farm job opportunities.
deflator.
Other classifications of farms have been devised (see for
Adaptive—Includes farms that produce relatively high- example, Hoppe et al., 1999). However, the classification
value products, with sales of $10,000 or more and having presented here focuses on farmers’ reactions to development.

Although the 20-year survival rates were fairly low for

The 1997 Census of Agriculture
all farm categories in the metro counties, survival rates
Longitudinal File
for farms were similar to those for businesses in gen-
eral (Hoppe and Korb). Furthermore, the fact that indi- This data set contains information on individual farms
from the 1978, 1982, 1987, 1992, and 1997 Censuses of
vidual farms may go out of business does not mean that
Agriculture. Data from each census were merged for
farms and their land disappear into subdivisions. Metro individual farms. Thus, individual farms can be fol-
areas experience substantial entry of new farm busi- lowed for a 20-year period. Variables measured in dollar
nesses (figure 21). terms are defined in 1997 dollars. Values for earlier
years are adjusted with the implicit GDP deflator.
The different types of farms and the turnover in farms
have implications for metro areas’ attempts to preserve A farm is defined to be “out of business” in a given year
open space held by farms. Adaptive farms are the most if it had no sales that year. Farms are defined in terms of
likely to survive as farms. Programs to preserve farm- the operator, not the parcel of land. Consider a farmer
land through commercial farming may have minimal who sells his farm to a new operator just beginning to
farm. The file shows one farm going out of business
impact on traditional and recreational farms, because
(the farm operated by the exiting farmer) and one farm
these farms have difficulties generating enough rev- beginning business (the farm of the new operator). If the
enues to resist development. The turnover in farms of exiting farmer sold his farm to an established farmer, the
all types suggests that land-use planners concerned file would show one farm going out of business and one
with maintaining viable farm businesses will need to farm continuing in business.
monitor sales of land among farmers as well as sales
between farmers and developers.
it might otherwise be because the future pattern is more
Working Landscapes and haphazard and less certain than development guided
Rural Amenities through planned growth.

At the extreme, urbanization brings about the local Farming activities adapted to urbanizing areas can pro-
extinction of farming as an economic activity and as a vide rural amenities that are profitable for the landown-
working landscape. However, the transition from rural ers and operators, and desirable for the surrounding
to urban is not entirely negative, since some farming population. Inevitably, these activities differ from those
activities benefit from greater proximity to urban popu- that went before, and they may not be embraced by the
lation. Growth makes this transition more difficult than farm’s prior owners or operators. Different kinds of

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 43
Figure 20
Farms in 1978 out of business by 1997, by farm category

Percent out of business by 1997

120

100 97 98 98 98

78 76 78 80
80

64
60
46
40
40
34

20

0
Recreational Adaptive Traditional
Category in 1978

Metro core Metro edge Nonmetro adjacent Nonmetro nonadjacent

Source: Hoppe and Korb, 2000 from USDA, ERS and NASS, 1997 Census of Agriculture Longitudinal File.

products and services are produced, in different ways, That is, does moving into the “country” ultimately
for different markets that are better suited to an urban- destroy the good things that prompt that move? In the
izing environment. How permanent these adaptations words of the National Governor’s Association, “In the
can be in the face of development, and how much and context of traditional growth patterns, the desire to live
in what ways public support for these amenities should the ‘American Dream’ and purchase a single-family
be provided are questions that cannot yet be answered. home on a large lot in a formerly open space can pro-
duce a negative outcome for society as a whole.”
Farmland encompasses cropland, pasture, range, and (Hirschhorn, 2000, p. 55). Can the potential benefits of
farm woodlots, all of which serve some function in a lower density development, which accrue from a better
working farm and also provide rural amenities. Even if relationship between home place and work place, actu-
active farming as an economic activity is no longer ally come about without planning communities? What
profitable, conserving rural land uses may continue to benefits of rural landscapes do we destroy by growing
provide rural amenities that justify protection programs. out into previously undeveloped rural areas?
Other rural landscapes that may never have been in
farms (forestland, wetlands, barrens, etc.) or to which It is important to consider what is sacrificed for devel-
abandoned farmland may revert may also provide rural opment. Rural land is more than “vacant” building lots
amenities worth preserving. waiting for development. It is a working landscape of
functioning farms and forests that serve both economic
Benefits of Farmland and and environmental purposes. In a study of rapidly
Open Space growing counties during the 1970’s, cropland and pas-
ture provided about a third of the area for urban expan-
A question for thoughtful consumers and public policy sion, and rangeland and forestland each provided about
officials is: Do those who move to new suburban or a fourth (Vesterby, Heimlich and Krupa, 1994; figure
exurban developments actually get what they paid for? 22). About a sixth of urbanized land came from other

44 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Figure 21
Transitions between farm types, metro farms, 1978-97

Recreational 217,060
in 1978
(4,430 remained)
149,362
211,389 198,605
in 1997
251,165
Entered
business
526,320 11,512 707
Out of business 33,301
534 42,614 59,189

245,640

69,291
317,053 Traditional
113,751 in 1978
in 1978 23,057
(36,433 remained)
(9,891 remained)
54,718 119,386
in 1997 1,679 in 1997
Adaptive

Sizes of circles, boxes, and arrows proportional to farm numbers.

Source: ERS analysis of 1978 to 1997 Census of Agriculture microdata, Hoppe and Korb, 2000.

Figure 22
Composition of land use change in urbanizing areas, 1970's and 1980's

Other
Rangeland 2% Forestland
14% 24% Rangeland
Crop/pasture 23%
46%

Other
16%
Forestland Crop/pasture
38% 37%

1970-80 Fast-growth counties 1982-92 NRI

Sources: Vesterby et al.,1994; National Resources Inventory.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 45
land uses, including vacant land whose previous use asked individuals to state their willingness to pay for a
could not be determined. Based on the NRI data for change in farmland or asked them to vote yes or no to a
urban and built-up land for the 1980’s, 46 percent of set amount of money to preserve various amounts of
land converted to urban uses came from cropland and farmland. For purposes of comparison, the average
pasture, 38 percent from forestland, and 14 percent value of preserving 1,000 acres of farmland (converted
from range land. to year 2000 constant dollars) appears in the last col-
umn of table 4.
Aside from the direct economic use of these lands in
farming and timber production, they provide amenities The values reported in the six studies vary and are
that cannot be measured in the marketplace. Individuals likely affected by study location. Beasely et al. (1986)
may derive pleasure from the use of these lands for and Halstead (1984) studied areas with scarce farm-
recreational purposes, they may enjoy viewing these land, which is reflected by relatively high value esti-
lands from a distance, or they may derive pleasure from mates. Ready et al. (1997) focused on preserving horse
knowing that these lands are being protected from farms, which tend to be a more specialized type of land
development. Rural land provides nearby residents an than generalized agricultural land, and may thus have a
absence of congestion and scenic views for which they higher value than other farmland. The Bergstrom et al.
are willing to pay. In other words, rural land may be (1985), Bowker and Didychuk (1994), and Krieger
valued most for what it is not, namely, developed land. (1999) studies were conducted in predominantly agri-
For example, focus groups conducted by the American cultural areas, which is reflected in their lower esti-
Farmland Trust of residents in Kane, McHenry, and mates of willingness to pay.
DeKalb Counties in Illinois found that the most impor-
tant aspect of open space for these residents is its role We used the Bergstrom et al. (1985) and Krieger
in slowing growth and reducing development (Krieger, (1999) studies to estimate benefits as an illustration of
1999). This result is borne out by contingent valuation the potential nonmarket value for undeveloped farm-
studies used to estimate the amount people would be land and open space in the United States, based on con-
willing to pay to preserve land in agriculture. Halstead servative estimates that reflect the preferences of U.S.
(1984) and Beasley, Workman, and Williams (1986) residents. To estimate an aggregate value for land sub-
found that households were willing to pay about $150 ject to development, we first estimated how many acres
each to preserve an acre of average-quality farmland were threatened by development. Using the 1992 NRI
when the replacement for agriculture was hypothesized and a variable measuring urban influence, acres by use
to be high-density development, but only about $50 if class were identified in low, medium, and high urban
the alternative was low-density development. influence categories. Of 3,077 U.S. counties, 1,062
have some land in at least one of these urban influence
Nonmarket Values Associated With Preserving categories (figure 23). Comparing the areas of urban
Open Space influence with areas that changed to developed land
Previously published estimates give benchmarks for uses between 1982 and 1992 shows that the urban
estimating the total economic value of preserving open influence boundaries capture most of the area experi-
space. All of the six studies listed in table 4 directly encing development (figure 24).

Table 4—Estimates of the average amenity value of farmland1

Annual value per 1,000
acres per household
Study Geographic area Good valued (2000 constant dollars)
Bergstrom et al., 1985 South Carolina Prevent development of agricultural land $0.21-$0.54
Beasley et al., 1986 Alaska Prevent development of agricultural land $17.56
Krieger, 1999 Illinois Prevent development of agricultural land $2.93
Halstead, 1984 Massachusetts Prevent development of agricultural land $17.82-$49.80
Ready et al., 1997 Kentucky Prevent development of horse farm $4.34-$4.94
Bowker and Didychuk, 1994 New Brunswick, Canada Prevent development of agricultural land $1.08-$2.45
1Allestimates are determined using the contingent valuation method with exception of the lower Ready et al. value, which used the hedonic
property value approach. Values are average per household values inflated to year 2000 dollars using the April 2000 CPI.

46 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
We examined two potential development scenarios. In trated on farmland only. Accounting for all types of
the “low-density” scenario, we assumed that 10 per- land, residents of counties expected to face develop-
cent of the acres will be developed in the lowest urban ment over the next few decades across the Nation were
influence class over the next few decades, 20 percent in estimated to be willing to pay from $1.4 to $26.6 bil-
the medium class, and 60 percent in the highest class, lion per year, depending on which willingness-to-pay
an estimate of the potential development in these areas estimate and development scenario was considered.
is 50 million acres (table 5). In the “high-density” sce-
nario, we assumed that development is more weighted These estimates are subject to a great deal of qualifica-
to the high urban influence areas, with 90 percent of tion. Because the amount and location of open space
land there developed, 10 percent of the acres are devel- varies so much from site to site, better estimates would
oped in the medium urban influence area, and only 5 have to focus on the actual and potential settlement pat-
percent in the low urban influence area. terns in particular areas to account for local supply and
demand conditions, particularly the availability of alter-
Most of the studies, including the two selected, asked natives to existing farmland. Most valuation studies of
respondents to place a value on preventing development this type are valid for only marginal changes. Because
near their residence. To generalize the results of the we are estimating many years of development, the val-
two selected studies to the Nation, we assumed that the ues now held by residents would likely change as
public is willing to pay to preserve threatened open development proceeds. The likely direction of these
space only in their county of residence. We used the qualifications is not easy to determine. Thus, the esti-
lowest of Bergstrom’s willingness-to-pay estimates mates presented here serve more to illustrate the poten-
($0.21 per 1,000 acres) because Bergstrom concen- tially large value the public may place on preserving

Figure 23
Degree of Urban Influence, 1990

Urban influence
Rural
Low
Medium
High or developed

Source: USDA, ERS analysis of 1990 Census population data, by block group.
ERS
E C O N O M I C R E S E A R C H S E RV I C E
R O O T S I N A G R I C U LT U R E , F U T U R E I N T H E W O R L D

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 47
 Estimating Erosion Damages from Growth
To estimate erosion damages, we used a model developed for each selected NRI sample point (representing a parcel
by Feather and Hellerstein (1997) that estimates changes in of farmland being developed) was manipulated to predict
use values for water-based recreation associated with erosion that would occur during development. NRI data do
changes in ambient erosion, using the revealed preference not contain USLE erosion information on types of lands
method. To estimate the loss in use values, we estimated other than farmland. For this reason, only farmland could
average changes in soil erosion that are caused by develop- be considered in this portion of the analysis. This is done
ment at the NRI polygon level. The three urban influence by changing the USLE equation C and P factors to 1.0 (as
categories from the analysis above (low, medium, and suggested in USDA, 1978). Average erosion for the entire
high) were identified, with the same 10 percent, 20 per- polygon is then re-computed. This is the average erosion
cent, and 60 percent conversion factors. Since each NRI that would occur in the polygon during development. Best
polygon falls into only one urban influence category, a per- management practices (BMPs), which are mandated by
centage of farmland in each polygon was randomly many States during construction, lessen erosion to some
selected based on the proportion of total land expected to degree. The use of these practices is approximated by
be developed. The Universal Soil Loss Equation (USLE) reducing the C factor to 0.7 from 1.0.

Figure 24
Comparison of estimated urban growth boundaries and percent of area changing to
developed uses, 1982-92

Urban influence boundary

(high, medium, low)

Percent of area changing

to developed use
0.1-2
2.1-4
4.1-8
>8

Source: USDA, ERS analysis of Census of Population 1990 and 1992 National Resources Inventory data.
ERS
E C O N O M I C R E S E A R C H S E RV I C E
R O O T S I N A G R I C U LT U R E , F U T U R E I N T H E W O R L D

48 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Table 5—Estimated nonmarket value of land under urban influence estimated to be developed in succeeding decades
Degree of urban influence1
Low Medium High Total
Developable land Thousand acres
Cropland 30,179 30,690 33,840 94,709
Pasture/range land 28,424 25,077 21,299 74,800
Total developable land 58,603 55,767 55,139 169,509
Land assumed developed
Low-density scenario3 5,860 11,153 33,083 50,096
High-density scenario4 2,930 5,577 49,625 58,132
Estimated annual value of conserving rural land2
Billion dollars
Low-density scenario3
Proportion assumed developed 10% 20% 60%
Low-benefit estimate 0.1 0.1 1.2 1.4
High-benefit estimate .8 1.6 16.9 19.3
High-density scenario4
Proportion assumed developed 5% 10% 90%
Low-benefit estimate >0.1 0.1 1.8 1.9
High-benefit estimate 0.4 .8 25.4 26.6
1See box “Methods for Estimating Cropland and Farmland Purchase of Development Rights Cost” (p. 62) for a description of how urban influ-
ence is determined.
2Total willingness to pay (in year 2000 dollars) for preserving all land indicated in the row weighting scheme based on $0.21 per 1,000 acres for
the low-benefit estimate, $2.93 per 1,000 acres for the high-benefit estimate.
3Assuming development is distributed more broadly, 50.1 million acres are developed.
4Assuming development is more concentrated in the areas of highest urban influence, 58.1 million acres are developed.
Source: ERS analysis of 1992 National Resources Inventory and NASS June Ag Survey land value data.

open space under three hypothetical development causes significant erosion, beyond that experienced in
schedules than any prediction of development or how agricultural production. This increased runoff dimin-
residents value conservation. ishes the quality of nearby lakes and streams that are
used for recreation. Although these damages occur in a
The total benefit estimated also depends on the pattern short period (1-2 years), they are potentially significant
and level of development expected to occur, which can- and were estimated (see box “Estimating Erosion Dam-
not be predicted with very much accuracy. In the “low- ages from Growth”). The estimated annual losses due
density” scenario in table 5, arbitrary percentages of to erosion are $0.93-$1.06 billion without construction
the land in each urban influence zone are assumed to best management practices (BMPs) and $0.67-$0.79
be developed, totaling 50 million acres, resulting in billion with construction BMPs, depending on settle-
annual losses of nonmarket value of between $1.4 and ment patterns (table 6).
$19.3 billion. However, if more development occurred
and if it were more focused on the area of most heavy
urban influence, as in the “high-density” scenario, 58.1 Table 6—Annual recreational water quality damages due
million acres would be developed with annual benefit to urbanization of farmland1
losses ranging from $1.9 to $26.6 billion. This results Scenario Erosion damages
partly because of the increase in development level, and (percent of high, medium,
and low urban influence No BMP With BMP
partly because there are more households in the high assumed developed)
urban influence zone than in the other two, resulting in
Billion 2000 constant dollars
higher values. Low density (60, 20,10) 0.93 0.67
High density (90, 10, 5) 1.06 0.79
These willingness-to-pay estimates do not include off- 1Annual losses due to changes in erosion resulting from conversion
site damages that result from construction, such as the of farmland to urban uses. Losses are reductions in the enjoyment
(use value) of water-based recreation resulting from diminished water
reduction in surface water quality caused by erosion quality. Estimates are inflated to year 2000 dollars using the April
from construction sites. Clearing land for construction 2000 CPI.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 49
 VI. Local Responses to Growth
In all States, local governments have been delegated than other communities to place a high priority on
authority for control of land use and growth. Since enhancing their transportation systems.
early in the last century, planning and zoning have been
the principal tools for controlling growth and directing Planning priorities differed between more urban and
land-use change in local communities. Increasingly, more rural places. Metropolitan counties that identified
State governments are taking a more active role in themselves as “rural” (27 percent of the metro counties
attempting to strategically change incentives and disin- responding to the survey) placed a much higher priority
centives for development, without exerting direct con- than “nonrural” counties on increasing job opportuni-
trol over growth, a process known as “smart growth.” ties and attracting new development to areas with infra-
Because of strong interest in maintaining individual structure; “nonrural counties” were relatively more
landowners’ property rights, direct financial incentives interested in enhancing their transportation systems to
to keep rural land in agricultural uses have become deal with growth. Cities put a greater priority on revi-
important tools. These include preferential or use-value talizing downtowns, which are also affected by growth,
property taxation and direct purchase of development than did counties.
rights.
How Local Governments Address
Most rural communities experiencing growth have their Growth Problems
hands full simply trying to catch up with the growth in
demand for public services, such as education, water This section provides examples of some of the ways
and sewer, and police and fire. Some respond with local communities deal with problems caused by
actions aimed at limiting growth and mitigating its con- growth. The examples are based on information and
sequences. There is a fine line between rural counties at statements from local officials when ERS conducted its
the metropolitan fringe that are still trying to attract study of eight counties experiencing growth in the
development, and those that have been all too success- 1980’s and 1990’s (Reeder et al., 2000). Growth-related
ful at attracting growth and are now trying to control problems are often hard to address because they com-
development. pound each other. For example, growth control advo-
cates favor concentrating development in town centers.
Playing Catch-Up However, towns such as Shelton in Mason County,
Washington, cannot grow due to limits on infrastruc-
The need to play catch-up seems to be the most com- ture, which is constrained by an inadequate tax base.
mon response of local governments. A recent General Growth and development could increase the tax base,
Accounting Office (GAO) survey of almost 2,000 gov- but is constrained by lack of infrastructure in the town,
ernments in cities over 25,000 population (949 and so on.
responded) and all metropolitan counties (609
responded) found that 53 percent of the counties and 35 Some places have gotten around this conundrum by
percent of the cities claimed “sprawl” was a high or raising special sales taxes, imposing impact fees on
very high concern. GAO identified these respondents as developers, or creating special districts where taxes are
“communities concerned about sprawl” (44 percent of raised to pay for infrastructure and public services
rural counties were concerned about “sprawl,” com- needed for development. However, these efforts are not
pared with 56 percent of nonrural counties). As a always successful since local voter approval may be
whole, GAO found that the priorities of the sprawl-con- required. In some cases, State regulations constrain
cerned communities were fairly similar to the priorities local efforts to raise more revenues, such as in Monroe
of all communities. The most frequently cited priorities County, in the Pocono Mountains of Pennsylvania,
in planning for the future involved increasing the local where State rules make it difficult to use impact fees.
tax base to support better schools and roads, attracting
businesses, and enhancing transportation systems (U.S. Aggressive business recruiting is another approach to
GAO, 2000). But more sprawl-concerned communities add more to the tax base than to public spending on
(66 percent) were experiencing fast growth than non- infrastructure and services. Monroe County, Pennsylva-
sprawl communities (46 percent), which may explain nia, is using tax incentives together with industrial and
why sprawl-concerned communities were more likely business parks, to entice new businesses into the area.

50 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
However, such an approach is not without risk. Accord- growth management activities over the next 5 years
ing to John Woodling, of the Monroe County Planning (GAO, 2000). A common first step is to establish or
Commission, “Some of the local schools had a concern update the county’s comprehensive plan. Such plans
that the tax incentive program might give away too may envision ways to prevent or limit ill effects from
much tax revenue for the number of jobs it created. growth by employing land-use and zoning techniques
More important was the concern that new firms would that result in more concentrated development, such as
hire too many nonresidents who subsequently would encouraging mixed-use development within a desig-
move into the county, bringing their children with nated centrally located area, or encouraging cluster or
them, and that this could ultimately burden the school large-lot development on the fringe, or increased use of
system. However, Monroe County statistics suggest conservation easements to preserve open space. Infra-
these concerns are not justified, because most of the structure and public services, such as public transporta-
new employees of these firms are county residents at tion, may be planned and implemented to discourage
the time they are hired” (Reeder et al., 2000). “sprawl.” Plans may also provide for ways to address
growth-related problems, such as through encouraging
Many localities take advantage of Federal programs to the construction of local industrial or commercial parks
address their growth-related infrastructure, business- with incentives to attract businesses that can augment
attraction, and affordable-housing needs. For example, the tax base and reduce commuter-related transporta-
some communities attempt to combat growth-induced tion problems, or by identifying areas and incentives
transportation problems through public transportation, a for developing affordable housing.
federally subsidized activity. Public transportation has
the added advantage of strengthening central locations In some cases, States require or encourage their locali-
that are more readily served by public transit systems. ties to pursue comprehensive planning and growth
But funding is limited for these activities. The elderly management. For example, Florida’s growth manage-
and homebound in Wise County, Texas, use a State- ment legislation in the early 1980’s required localities
funded Para-Transit system. But according to County to prepare comprehensive plans that assured that ade-
Commissioner James Hubbard, “expansion and mainte- quate infrastructure, and a funding plan to finance it,
nance needs far exceed current funding levels.” was present. Gary Kuhl, former Administrator of Citrus
County, Florida (now the Water Resource Team Admin-
This is not an unusual problem for growing communi- istrator for Hillsborough County), said “Citrus County
ties. A GAO survey of local growth challenges found experienced a lot of sprawl issues during the rapid
that 40 percent of responding local governments sup- growth of the 1980’s, but with help from the compre-
ported more Federal assistance with “smart growth” hensive plan, growth was well-managed in the 1990’s.
programs (U.S. GAO, 2000). The U.S. Department of Citrus uses a variety of zoning and land-use provisions
Transportation’s Transportation and Community and that have the effect of limiting sprawl by targeting
System Preservation Pilot program is so popular that development in a central portion of the county that is
the demand for funding exceeded the program’s appro- well-drained and served by the county water and sewer
priations in fiscal year 2000. DOT funded 84 projects system and by discouraging development in more sen-
from 292 applications received. The program funds sitive wetland and coastal areas. Citrus also has been
projects that integrate transportation initiatives with the helped by Federal and State agencies, the water man-
goals of community development, environmental pro- agement district, and by private trusts, which have
tection, access to jobs and markets, and efficient land acquired and protected some environmentally valuable
development patterns. GAO’s survey showed that land in the county” (Reeder et al., 2000).
“sprawl” communities were more likely than “non-
sprawl” communities to complain about inadequate Although all States require at least some local plan-
Federal funding for public transportation. ning, many communities are not required to conform to
their plans, and even when conformance is required, it
Planning Efforts To Control Growth is often not enforced. A common problem is that
county plans capable of restricting growth are disre-
Rather than simply reacting to growth by addressing garded by municipalities, which actually control most
the problems it creates, communities are increasingly of the development. Due to this fragmentation of gov-
using planning to help prevent or reduce growth’s con- ernment responsibility, efforts to control growth are
sequences. GAO found that 34 percent of the counties often ineffective or, at best, piecemeal.
expected to increase their involvement in planning and

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 51
Michele Boomhower, Director of the Lamoille County enhancing county legal authority during the last ses-
Planning Commission, explained that “The State of sion, and the Assembly may add additional county
Vermont did not require growth management. A signifi- authority this year.” Local political barriers can be just
cant portion of zoning controls are at the municipal as formidable as legal or constitutional ones. A good
level, and every town is upgrading growth management example comes from Georgia. According to Brenda
in some way.” But according to State Senator Susan Johnson at the Chamber of Commerce in Gilmer
Bartlett, “Sprawl is overrunning the county as loose County, Georgia, “The last county commissioner who
local zoning laws allow strip-style development to tried to establish zoning in the rural portion of the
dominate the local landscape. Uneven development is county was recalled from office” (Reeder et al., 2000).
the rule, as all of the desirable development is going to
towns with good local planning, while unwanted devel- Growth control efforts can also run into problems in the
opment goes to poorly regulated towns” (Reeder et al., courts. Mason County established a new comprehen-
2000). sive county plan in 1996 in conformance with the new
State growth management requirements for rapidly
Despite its fragmentation problems, Lamoille has growing rural areas. According to Bob Fink of the
accomplished a great deal in farm and forestland pro- County Planning Office, “This included many ‘good
tection. According to Boomhower, “Farm and forest- planning’ requirements, including protecting environ-
land are most threatened by sprawl, so protection of mentally critical areas, preserving the rural character of
these lands is of great importance.” Using zoning to the land, and encouraging urban and cluster develop-
protect some working lands, limited use of large-lot- ment. This would have made for a great change from
size requirements, conservation easements, and pur- before, when growth was uncontrolled. But the plan
chase of development rights (PDR’s), Lamoille County has been challenged in court, nearly stopping all non-
now has the largest percentage of publicly and privately residential development in the rural portion of the
protected land in the State. county, including some desirable forms of development
such as agricultural buildings and fire stations, until the
In other places, land conservation efforts are just begin- legal issue is decided” (Reeder et al., 2000). Similar
ning. According to John Woodling of the Monroe legal challenges have resulted in a significant weaken-
County Planning Commission, “Pennsylvania’s Agri- ing of Florida’s growth management law in recent
cultural Preservation Program encourages the purchase years. In many newly developing areas, local capacity
of farmland conservation easements. And in Monroe to develop and implement such growth-directing plans
County, a bond issue was passed recently which will in the face of sophisticated challenges to their validity
provide money for the acquisition of open space and is limited. Either assistance from State and Federal
recreation areas. In addition, the county’s new compre- governments to develop the capacity to effectively plan
hensive plan encourages the transfer of development for growth is not authorized or funding has been inade-
rights (TDR). Recently, the Commonwealth allowed quate.
the transfer of development rights from one municipal-
ity to another, which should enhance the use of TDR’s” Some municipalities attempt to control development on
(Reeder et al., 2000). Mason County, Washington, also their fringe by annexing land adjacent to city limits.
authorizes the use of these conservation devices, and Such annexation can be used as a way to control or
the State provides some money for purchase of devel- limit growth. However, annexation can also be used to
opment rights (PDR’s), but as yet it is unclear whether encourage even more growth on a city’s edge. Annexa-
the voters will support local PDR bonds. tion is limited by State law, which varies from State to
State. This often requires the approval of the jurisdic-
Efforts to control growth sometimes run into significant tion that would lose the land. Nevertheless, the affected
constitutional and political obstacles. For example, rural residents outside city limits often feel powerless
many rural areas have been traditionally opposed to to oppose these annexation efforts.
zoning, and such traditions can be hard to overcome.
The big problem in Wise County, Texas, according to Capacity for Response in Relation
city administrator Brett Shanon, is that the county con- to Urbanization Pressure
stitution prohibits zoning in unincorporated areas,
resulting in uncontrolled growth outside town limits. A local government’s capacity to respond to growth
Wise County commissioner James Hubbard adds that pressures generally increases with the degree of urban-
“Some progress was made in the State Assembly in ization. Urbanization usually results in higher income,

52 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
wealth, and tax base, which translates into more public of the commissioners thought they could do the job
and private financial resources that can be devoted to effectively with modest increases in funding and staff
hiring more planners, offering incentives for mixed-use resources. High-growth communities were only some-
development, paying for public transportation services, what more likely to have the capacity to manage
or purchasing open space. Strong rural traditions of growth than were other communities.
property rights cause people to oppose planning and
zoning in some regions. Economies of scale in the pro- Seroka and Veal found that more than 80 percent of the
vision of many types of government services, including Alabama officials surveyed said that their local govern-
planning functions, means that planning is more eco- ment needed more powers to manage growth. They also
nomical and efficient in larger, more urbanized commu- found that counties were more likely than cities to face
nities that require more such work. Consequently, most significant opposition to growth management from
rural areas begin with relatively little capacity to rural residents, other constitutional officers, the elderly,
respond to urbanization pressures, and it may take and long-term residents of the county. Most local offi-
years of development before the community is able to cials looked to the State to provide leadership in this
develop capacity to control growth. area. Although these findings pertain only to Alabama,
they point to some of the potential obstacles that rural
Communities Affected by Growth Are Already growth management efforts face in other States as well.
Planning, but Capacity is Limited
Better planning and zoning are central to the ability to Rural areas often have very limited planning capacity.
respond to growth. GAO found that 75 percent of the Most of the smaller rural towns cannot afford a full-
communities that were concerned with “sprawl” were time planner. To meet their planning needs, these com-
highly involved in planning for and managing growth, munities may be served by a circuit riding planner;
which indicates a relatively high level of planning another alternative is that several towns and a county
activity, compared with 72 percent for cities and 59 may combine their efforts to set up one planning office
percent for metropolitan counties in general (U.S. to serve their joint needs (Lapping, Daniels, and Keller,
GAO, 2000, p. 99). Moreover, about a third of these 1989, p. 56). Shared service arrangements can suffer
counties expected to increase their planning involve- from conflicts between communities. Even at the
ment over the next 5 years. county level, rural planners often must spend part of
their time doing other duties. In addition, rural planners
GAO also found that the majority of “sprawl-con- may lack important technical tools (such as GIS, com-
cerned” counties were already using several key puter, and legal services) needed to do their job.
growth-management tools, including land-use planning,
zoning, mixed-use zoning, working with adjacent com- One result of this limited capacity for planning is that
munities, and targeting State infrastructure funding to rural counties tend to rely more on nongovernmental
areas where development is desirable (U.S. GAO, 2000, institutions—such as regional development organiza-
figure 19, p. 101). In addition, 78 percent of these tions—for planning. Planning for key functions driving
sprawl-affected communities use regional planning development, such as transportation investment, is car-
approaches—some focusing on specific functions, such ried out by separate special-purpose planning offices,
as affordable housing in Seattle and traffic congestion such as the highway department, that may ignore
and pollution in Atlanta. broader concerns affecting growth management.

Many cities and counties, however, are falling short of Planning for major roads and institutions in the more
what is needed to control and manage growth effec- rural, nonmetropolitan counties is often done at the
tively. A recent Alabama survey of mayors in 458 State rather than the local level, bypassing local gov-
municipalities and 358 county commissioners in 67 ernment. Rural places often are forced to compete with
counties found a general consensus in support of neighboring communities to obtain Federal and State
growth management or smart growth approaches transportation funding, leading to conflicts between
(Seroka and Veal, 2000). Despite their overall good jurisdictions. In urban areas, transportation planning is
intentions, only a minority of the responding officials done by multicounty Metropolitan Planning Organiza-
(18 percent of the mayors and 19 percent of the com- tions (MPO’s) which are capable of superior planning
missioners) believed they currently had the necessary and coordination through regional collaboration, but
staff and resources to plan and manage growth effec- may be too narrowly focused on transportation issues.
tively. Another 24 percent of the mayors and 17 percent However, the more fragmented rural planning process

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 53
adds to the difficulty of doing good comprehensive sarily raised planning costs, and that plans were stereo-
planning needed to control growth. typical, filled with boilerplate text, and overly elegant
for the situation (National Academy of Public Adminis-
Federal Assistance for Planning tration, 1998). Questions were raised as to how much
the plans were in fact used and what effect they were
The Federal Government has supported programs to having on land-use regulation. Reform, rather than
improve the planning capabilities of State and local elimination, was suggested as a cure.
governments in the past, but support was cut for both
ideological and practical reasons. The most well known The HUD Section 701 program and OMB Circular A-
of these efforts was the HUD 701 planning grant pro- 95 provided impetus for regional or areawide planning
gram, established as part of the Housing and Commu- and coordination, among other things. By 1976, there
nity Development Act of 1954 (40 USC 461). As late were 669 regional councils. In the 1980’s, the Federal
as 1975, the HUD 701 program spent $100 million per Government largely abandoned these efforts, and simi-
year, paying as much as two-thirds of the costs of an lar regional planning efforts with regard to water
“ongoing comprehensive planning process” required of resources and transportation, with the exception of met-
all grant recipients. However, the budget was cut to $75 ropolitan planning organizations linking transportation
million in 1976 and was proposed for elimination in with air quality (National Academy of Public Adminis-
1977 (NRDC, 1977, p. 334). Comprehensive planning, tration, 1998).
as defined in the 1954 law, included:
Within USDA, the Rural Development Act of 1972
• Preparation of guides for governmental policies and authorized Section A-111 Rural Development Planning
actions on the pattern and intensity of land use, the Grants (U.S. Senate, 1973). Grants under the program
provision of public facilities, including transportation, could not exceed $10 million annually. Outlays for A-
and development of human and natural resources; 111 in FY1980 were $6 million. However, the incom-
ing Reagan Administration budget for FY1981 severely
• Identification and evaluation of area housing, employ-
reduced, then eliminated Section A-111 assistance
ment, education, and health needs, and plans to meet
(Stansberry, 2000). In 1981, the National Agricultural
those needs;
Lands Study, begun in the Carter Administration, rec-
• Historical and architectural structure surveys; ommended that USDA “…assess the feasibility of pro-
viding small matching grants for ‘capacity building’ to
• Long-range physical and fiscal plans; state departments of agriculture (or other appropriate
state agencies) that seek to manage agricultural land
• Programming of capital improvements and infrastruc- issues” (NALS, 1981). No legislation was ever pro-
ture needs; posed or enacted.
• Coordination of all related plans and activities of the
State and local governments concerned; and Authority for Section A-111 continued, without fund-
ing, until the 1990 farm bill, which replaced it with
• Preparation of regulatory and administrative measures authority for some technical assistance and planning
needed to support the above plans. grants. These were also not funded, and regulations
were not even prepared to implement the grants. The
Stringent review of Section 701 followed amendments 1996 FAIR Act replaced this program with new author-
in the Housing and Community Development Act of ity for the Rural Business Opportunity Grant program
1974. HUD also required that each comprehensive plan (RBOG), first funded in 1999 with $3.5 million in
have housing and land-use elements, and that National FY2000 appropriations. RBOG provides money to non-
Environmental Policy Act (NEPA) environmental profits, public bodies, Indian tribes, and cooperatives
assessments, public participation, and nondiscrimina- for planning and technical assistance to assist economic
tion guidelines be followed in all plans prepared with development in rural areas, so it could potentially cre-
this funding. ate more growth than it combats (see Web site at
http://www.rurdev.usda.gov/rbs/busp/rbog.htm for
One early estimate of the impact of the Section 701 details). USDA’s FY2001 appropriations increased
program suggested that the business of planning con- RBOG funding to $8 million.
sultation had multiplied tenfold (ASPO, 1968). Criti-
cisms were that administrative requirements unneces-

54 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Other Federal agencies and programs provide some and a zoning map to guide parcel-by-parcel decisions is
support for planning in rural areas, particularly regional insufficient to control the cumulative impacts of
planning through the Department of Commerce Eco- growth, and applying inappropriate development stan-
nomic Development Administration’s support for local dards across the landscape may actually exacerbate
planning organizations. The Appalachian Regional “sprawl” (Chen, 2000). The American Planning Associ-
Commission, Tennessee Valley Authority, USDA’s ation recognizes six States as having substantially mod-
Rural Conservation and Development (RC&D) pro- ernized planning legislation to address growth manage-
gram, and HUD’s Rural Housing and Economic Devel- ment issues (Maryland, New Jersey, Oregon, Rhode
opment and Community Builder programs all provide Island, Tennessee, Washington), as well as 10 States
limited, fragmentary planning or planning assistance. that have not updated their land-use statutes or pro-
However, this piecemeal approach tends to focus on posed significant legislation or studies to address
more narrow, limited objectives particular to the pro- reforms (Alaska, Louisiana, Michigan, Nebraska, North
gram. They do not provide much increase in capacity Dakota, Ohio, Oklahoma, South Dakota, West Virginia,
for general-purpose land-use planning efforts needed to Wyoming).
understand and control growth.
Obtaining political support for updating land-use poli-
One can imagine how difficult it is for local govern- cies to address growth issues can be difficult, particu-
ments to become aware of this fragmented basket of larly in light of U.S. constitutional protections for prop-
programs, muster the effort needed to make application erty rights and the freedom to move. When the Califor-
to them, and overcome the variety of rules for different nia town of Petaluma responded to a surge of new con-
programs to effectively use the funds to develop plans struction in the early 1970’s by imposing a moratorium
for growth control. The ambiguity between rural devel- on extensions of public sewer and water services, and
opment objectives, which seek to foster growth and thus constraining the number of building permits issued
development, and planning for growth control in rural annually, the plan was challenged in court by a building
areas, may also pose problems for both the local com- trade association (Platt, 1996). The city of Livermore,
munities and the agencies seeking to provide assis- California, was similarly challenged when it imposed a
tance. In many situations, it is a fine line between needs moratorium on residential development until public
for economic development and needs for growth con- services (water and sewer provision, and schools) were
trol. updated (Platt, 1996). Although eventually upheld,
these policies are not permanent solutions, but rather
Slow Growth, No Growth, act to delay rapid growth and the problems it causes.
and Smart Growth
In efforts to tame growth, local governments subse-
Land-use planning and zoning authority has been dele- quently turned to policies such as “adequate public
gated to local governments by all 50 States (Meck, facilities” ordinances, impact fees, zoning changes to
1999). Historically, local governments have relied upon allow mixed-use developments, and working with
zoning regulations and subdivision requirements based neighboring communities to develop compatible growth
on the landmark Euclid case to manage the character management plans. However, obtaining political sup-
and density of new development (Village of Euclid v. port for even these milder policies can be challenging.
Ambler Realty Co., 272 U.S. 365, 47 S. CT. 114, 71 L. In Virginia, bills that would allow local governments to
ED. 303 (1926) in Haar, 1976, p. 194.). By the 1970’s, enact adequate public facilities ordinances died in
local and State governments in rapidly urbanizing areas House and Senate committees as a result of claims by
were learning that these techniques were inadequate to building industry lobbyists, and real estate and business
influence the character of growth (Platt, 1996). Across representatives that the bills would diminish property
the country, concerns about the impact of growth are rights (Smart Growth Network, 2000). Some of these
fueling a growing recognition that local land-use plan- policies, in fact, may have done little to control growth
ning efforts are in desperate need of updating. In some and may even have exacerbated growth’s consequences.
localities, land-use plans have not been updated since For example, if public water and sewer services were at
they were developed based on statutes enacted in the capacity, the bills proposed that developers could meet
1920’s; in others, such plans are nonexistent (Salkin, housing demands by building even more low-density
1999a). As HUD recognized in its scrutiny of Section development with septic systems in surrounding rural
701 planning assistance, simply having a land-use plan areas.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 55
Georgia’s Growth Strategies Reassessment Task Force eral, smart growth strategies represent a movement
recently concluded that comprehensive planning by away from State-imposed requirements for local com-
nearly all of its 700 local governments has done little to pliance with State planning goals. Because smart
direct development, and cited a need for a broader growth strategies tend to use financial incentives to
“vision” to guide local planning efforts (Hirschhorn, encourage voluntary adoption, they are generally sup-
2000). While local governments are increasingly chal- ported by a broad spectrum of interest groups. These
lenged to consider the impacts of their local land-use strategies also garner support because they direct,
policies beyond their own borders, they individually rather than inhibit, growth and development. There is
lack the authority to enact changes outside their juris- no “one size fits all”: the specific smart growth strate-
dictions. This is not a new phenomenon: Regional plan- gies that have been adopted vary by location but often
ning has attempted to provide coordination within areas share common elements. Smart growth principles favor
of a State and across several States since at least the investing resources in center cities and older suburbs,
1950’s, and 29 States had passed regional planning- supporting mass transit and pedestrian-friendly devel-
enabling acts by 1957 (Bossleman and Callies, 1971; opment, and encouraging mixed-use development while
Linowes and Allensworth, 1975; Healy, 1976; Pooley, conserving open space, rural amenities, and environ-
1961). To deal with these problems today, several mentally sensitive resources (Hirschhorn, 2000). These
States have adopted a substate regional or metropolitan strategies also typically remove financial incentives
approach to address problems where the geographic provided by State funding to develop outside desig-
extent of growth-induced impacts spreads over multiple nated growth areas. In essence, smart growth encour-
jurisdictions. For example, Georgia’s Regional Trans- ages development in designated areas, without prohibit-
portation Authority covers the 13 counties in the ing development outside them, while not threatening
Atlanta metropolitan area. Regional planning commis- individual property rights.
sions also exist in Florida, Vermont, and Maine. Vir-
ginia’s Regional Competitiveness Act, passed in 1996, The following land-use planning techniques imple-
provides for incentive payments to encourage regional mented by various States highlight the objectives of
planning and cooperation. Regional commissions work smart growth:
to identify resources of regional importance, develop
regional plans, review local plans for consistency, and • Urban growth boundaries—Oregon pioneered this
provide technical assistance to local governments. strategy in the 1970’s to discourage urban sprawl.
However, these commissions typically act as planning Oregon’s statewide plan mandated the designation of
coordinators and do not have statutory authority urban growth boundaries, within which urban devel-
(DeGrove and Metzger 1993). Implementation remains opment would take place. Although this policy has
the responsibility of local governments (U.S. GAO, not entirely curtailed development outside the bound-
2000; National Academy of Public Administration, aries, Oregon is recognized as being the most suc-
1998). cessful State in separating rural and urban uses
(DeGrove and Metzger, 1993). In 1998, Tennessee
State Responses to Growth adopted legislation that requires counties to establish
The last two decades have witnessed a growing but urban growth boundaries for municipalities and
gradual shift from reliance on local and regional plan- planned-growth areas.
ning to statewide strategies to counter the negative
impacts of growth. In the 1980’s, States began using a • Designation of priority funding areas—With this
coordinated planning approach to manage growth and strategy, local governments take the lead in designat-
its associated costs. Typically, States do not enact ing growth areas to concentrate development and
sweeping changes all at once. In a recent comprehen- direct State funding. In Washington, cities and coun-
sive study of planning statutes and legislative activity, ties exceeding a certain size or experiencing rapid
the American Planning Association found that States population increases are required to designate urban
have tended first to enact legislation that authorizes growth areas (Johnson, 1999b). This can apply to pri-
changes in land-use planning, then progress to legisla- vate financing, such as the Location Efficient Mort-
tion that requires it (Meck, 1999). gage (LEM) pioneered by banks in Seattle, Chicago,
and California and underwritten by Fannie Mae
The term “smart growth” is a catch-all phrase used to (Chen, 2000). LEM’s let homebuyers increase the
describe a number of policies that influence the pattern mortgages for which they can qualify by the amount
and density of new development (Chen, 2000). In gen-

56 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 of savings expected in compact versus low-density one of its 10 State-designated enterprise zones (Davis,
neighborhoods. 1999, in Finucan, 1999b).

• Farmland/environmental resource preservation— •Multi-jurisdictional planning—This strategy

The goal of these strategies is to proactively preserve involves State incentives for coordination of local
farmland and other environmental resources of local planning efforts. Wisconsin gives State funding prior-
importance, rather than trust their preservation to ity to its local governments that address the needs of
development controls. Maryland is one of several adjacent communities in their own development
States with a well-established State-level farmland plans, rather than follow a “beggar-thy-neighbor”
preservation program. In addition to its existing farm- strategy (Smart Growth Network, 2000).
land preservation program (administered by the
Maryland Agricultural Land Preservation Founda- • Coordinating transportation systems and develop-
tion), the smart growth initiatives implemented in ment—This strategy seeks to increase transportation
1997 included the Rural Legacy Program. In this pro- efficiency by linking development and transportation
gram, the State partners with local governments, land investments by locating transportation infrastructure
trusts, and citizens, aiming to protect an additional within designated urban growth areas. In 1998, Ten-
200,000 acres of farms and forestland by 2011 (Office nessee passed a law directing that funding under the
of the Governor, 1998). Washington’s Growth Man- Federal Transportation Equity Act for the 21st Cen-
agement Act requires localities to adopt land-use poli- tury (TEA-21) be reserved exclusively for localities
cies that protect commercially significant agricultural that have growth plans with identified urban growth
lands (WSCTED, 1997). boundaries for cities, planned growth areas, and rural
areas (Finucan, 1999c).
• Brownfields redevelopment—Brownfields (urban
redevelopment sites in older developed areas) pro- • Public/private partnerships—This strategy involves
grams limit the liability of redevelopers of old indus- representatives from multiple levels of government,
trial sites. In 1998, New Jersey enacted the Brown- non-governmental organizations, special interest
field and Contaminated Site Remediation Act, which, groups, and other stakeholders in the planning
in addition to limiting liability for redevelopers, pro- process. Utah’s Envision Utah partnership is working
vides financial incentives for remediation and redevel- to create a growth strategy based on informing citi-
opment of brownfields. It also includes brownfields zens about the causes of and implications of
re-use as part of its urban redevelopment programs unplanned growth, rather than government-imposed
(Finucan, 1999a). Another example at the local level requirements. The goal is to achieve reform and to
is the “Homerama” demonstration project, which shape future development based on citizens’ demands
builds affordable new homes on redevelopment sites for such changes. The partnership includes State and
in distressed neighborhoods of Detroit, begun by a local government officials, business people, develop-
dozen local developers in 1987 (Chen, 2000). ers, environmentalists, and citizens (Hirschhorn, 2000).

• Neighborhood business development—Through Table 7 identifies some of the State actions implement-
these programs, small businesses can obtain financial ing smart growth strategies. Many other States have
assistance in designated revitalization areas. Since legislation that allows, but does not require, adoption of
1993, the Illinois Main Street Program has provided smart growth strategies. Smart growth strategies take a
State support in the form of technical assistance to synoptic view of growth and attempt to marshall the
communities that are defining and implementing resources of the State to address growth. A larger view
plans to improve development and redevelopment. of the monetary resources deployed to control growth
The goals are to foster public and private support for and estimates of the magnitude of the problem are
the initiatives, enhance downtown areas through his- made in the next section.
toric preservation, develop strategies to encourage
downtown activity, and maintain the vitality of down- Monetary Incentives for Conserving
town areas. More than 50 communities are participat- Farm and Forest Land
ing in the program (Hirshhorn, 2000). Consistent with
Despite the benefits farmland provides to residents
State planning goals, a task force in South Providence,
beyond the urban fringe, and to society in general, and
Rhode Island, adopted a program that provides State-
despite adaptations farm operators can make to accom-
funded assistance to new small businesses locating in
modate an urbanizing environment, few landowners can

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 57
Table 7—State implementation of smart growth strategies
State Commission/task force to study smart growth in 1999 Enacted State-level smart growth legislation

Arizona Growing Smarter Commission (1998-99) Growing Smarter Act (1998) in part requires that municipalities’
and counties’ plans identify growth areas. The Growing
Smarter Plus bill (Senate Bill 1001, 2000) authorizes
municipalities to designate boundaries beyond which public
water, sewer and street service will not be provided.

Colorado Interim Legislative Committee on Development Governor’s Smart Growth Award Program awards matching
and Growth (1998) grants for measures that balance growth with community needs.

Delaware Shaping Delaware’s Future Act (1995).

Florida House Bill 17 (1999) offers financial incentives to local

governments to adopt plans for and to develop in urban infill
and redevelopment areas, by granting authority to issue bonds
or to engage in tax increment financing and by providing grants
for local public projects in these areas.

Iowa Commission on Urban Planning, Growth

Management of Cities, and Protection of
Farmland (1998-99)

Kentucky Legislative Subcommittee on Planning and

Land Use (1999)

Maine Passed legislation (2000) to direct State capital investment

projects to designated growth areas and areas served by public
sewer systems. State grants for capital investments are
awarded first to municipalities that have comprehensive plans
consistent with State smart growth objectives. Requires
adoption of rules that encourage siting of State office buildings
and schools in growth areas.

Maryland Smart Growth and Neighborhood Conservation The Neighborhood Conservation and Smart Growth initiatives
Sub-Cabinet to coordinate State agency actions (1998) (1997) rely on incentives to encourage local governments
to voluntarily adopt smart growth strategies. They direct State
funding for capital investments to designated “priority funding
areas,” preserve farmland and natural resources through the
Rural Legacy Program, encourage redevelopment of old
industrial sites, and provide financial incentives for businesses
to locate in priority funding areas. Also provides homebuyers
with financial assistance with purchasing a home in an older
neighborhood near their jobs.

Massachusetts Sustainable Development Act (proposed in 1999). Executive

Order 385 “Planning for Growth” (1996) in part requires
coordination of State agencies, and provides incentives for
local governments to engage in planning.

New Hampshire Land Use Management and Farmland Preservation House Bill 1259 (2000) requires State agencies to make
Study (1998); Cost of Sprawl Study (1999) decisions consistent with smart growth principles when funding
and siting infrastructure and public facilities.

New Jersey State Planning Commission (1985) The Commission adopted (1999) a revised State development
and redevelopment plan that includes financial incentives for
communities to engage in multijurisdictional planning through a
Smart Growth grant program.

New Mexico Legislative subcommittee on enabling

statutes (1999-2000)

Continued—

58 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
Table 7—State implementation of smart growth strategies (continued)
State Commission/task force to study smart growth in 1999 Enacted State-level smart growth legislation

New York Smart Growth Economic Competitiveness Task The Smart Growth Economic Competitiveness Act and several
Force (1999); Quality Communities Task Force (2000) other bills were introduced in 1999. The proposed Smart
Growth for the New Century Act would favor local governments
with smart growth plans when allocating State funding; State
financial assistance for public projects is limited to locally
designated “smart growth” or redevelopment areas. The
proposed New York State Smart Growth Compact Act would
authorize creation of smart growth compact areas and
governing councils, and gives funding priority for drinking water
and wastewater infrastructure projects to localities with certified
smart growth plans. AB 9080 and SB 5893 (1999, in
committee) would create the Smart Growth Planning Council,
which would provide incentive grants to local governments that
meet smart growth goals.
North Carolina Smart Growth Study Commission (1999)
Oregon The land-use plan enacted in 1973 (and subsequent
amendments) contains mandatory provisions for cities to
designate urban growth boundaries, for local plans to be
consistent with State planning goals, local governments to
coordinate planning efforts, and that counties use protective
zoning to help preserve farms and forestland. In the recent
“Smart Development” initiative, local governments are
encouraged to locate development near existing urban
services. S.B. 1128 (1999) promotes “sustainable development”
and helps economically distressed communities by providing
State assistance.

Pennsylvania 21st Century Environment Commission (1997)

Rhode Island The Comprehensive Planning and Land Use Regulation Act
(1988) requires cities and towns to adopt comprehensive plans
that comply with State plans, and that these local plans address
natural resources, farmland, open space, and economic devel-
opment. The Act contains incentives for “smart development.”
Tennessee Pub. Chap. 1101 (1998) requires counties to adopt and adhere
to growth plans that include urban growth boundaries for each
municipality, planned growth areas, and rural areas. Funding
provided by the State for economic development and infrastructure
projects is to be limited to counties with approved growth plans
after July 1, 2001.
Utah Quality Growth Commission (1999) formed to Quality Growth Act (1999) established the Quality Growth
identify growth areas and administer conservation Commission.
fund to purchase easements on agricultural and
open space land.
Virginia Joint Legislative Smart Growth Subcommittee (1998)
to identify smart growth areas where State infrastructure
funds are to be directed.
Washington The Growth Management Act (1990) in part requires cities and
counties (a) exceeding a certain population or population
increase to designate urban growth areas and to adopt
consistent comprehensive plans, (b) to protect environmentally
sensitive resources, and (c) to identify and design policies to
protect commercially important farmland.
Wisconsin The Smart Growth Law (1999) gives funding priority to local
governments that address the needs of adjacent communities
and identify planned growth areas for development or redevel-
opment. The Smart Growth Dividend Aid Program was
established to award funds to local governments that have
increased the amount of compact development and moderately
priced housing.
Sources: Finucan (1999a-c); Johnson (1999a,b); Hirschhorn (2000); NCSL (2000); Salkin (1999a,b) and references therein.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 59
continue to farm in the face of high competing returns Buying Development Rights
from development. Real resources are needed to pro- All States now have laws enabling conservation ease-
vide incentives for landowners to conserve land in agri- ments on agricultural land through voluntary donations
culture. The most widely enacted provision to provide from landowners, and about 19 States have programs
incentives for farmland preservation, use-value or pref- for purchase of development rights (PDR), purchase of
erential assessment, has been scrutinized very little, agricultural conservation easements (PACE), or transfer
while the most effective, purchase of development of development rights (TDR) (Buist et al., 1995; Wiebe
rights, is under-funded relative to the amount of land et al., 1996). With PDR’s and related programs, public
that could be enrolled. funds purchase permanent or specified-term restrictions
on the deeds of individual parcels, effectively prohibit-
Cost of Preferential Assessment ing future development or use of the parcel for nonfarm
Preferential or differential property tax assessment is uses. These programs are intended to retain parcels
the most popular farmland preservation technique and with high potential for continued, active agricultural
is authorized in all States (Aiken, 1989; AFT, 1997). use, and usually focus on cropland. The distinction
Preferential assessment removes a disincentive for con- between “cropland” and “farmland” is important: crop-
serving farmland in the face of development pressure land is a higher quality subset of all land operated in
by assessing the property at its value in agricultural farms, which can contain pasture, range, woodland, and
use, rather than the higher developed land values found other kinds of land.
near cities, often in exchange for an agreement not to
develop for some period. Penalties (called rollback pro- The restricted deed to the parcel, and all remaining
visions) can be imposed if the land is developed within property rights associated with ownership, are retained
the agreed term. While not widely recognized by the by the landowner, who can continue farming. Deed
public, tax reductions like this are a form of expendi- restrictions are binding not just on the current owner,
ture in disguise, called “tax expenditures.” We esti- but on all future owners. The implicit economic value
mated the implicit subsidy that farm operations receive of the easement is the difference between the unre-
through tax expenditures in preferential assessment stricted (market) value of the parcel and its restricted
programs by applying each State’s tax rate per $100 of (agricultural) value, as determined by modern appraisal
full market value against the difference between current methods or by easement valuation “point” systems.
land values and land values in rural areas without
development pressure (appendix table 1). Nationally, Nineteen States have State-level PDR programs, and at
the estimated tax subsidy is $1.1 billion annually. This least 34 counties operate separate programs in 11 States
annual flow of tax expenditures has a present value (AFT, 1997; 2000). The growing popularity of these
(from discounting the stream of annual tax expendi- programs nationwide is due to:
tures at 4 percent) totaling nearly $27 billion.
• The nearly unique ability of this public policy tool to
Evaluations of preferential assessment generally recog- permanently preserve farmland;
nize that, while it is a popular subsidy for farmland
owners, it has not provided a strong incentive for con- • The voluntary nature of the programs, which avoids
serving farmland (Tremblay et al., 1987; MacKenzie, the takings issues that cloud the outcome of regula-
1989; Lincoln Institute, 1993). With relatively minor tory techniques such as zoning; and
agricultural activity, developers as well as other • The ability of these programs to target funds toward
landowners can reap reductions in property taxes that parcels with the most important characteristics, an
reduce the cost of holding land prior to development. ability that is lacking in most other economic incen-
The rollback penalties are generally too small, relative tive-based farmland preservation techniques such as
to the potential rewards from development, to deter preferential assessment.
landowners from selling out for development if the
opportunity arises. At best, preferential assessment may PDR’s and related programs are a relatively new farm-
slow the transition from rural to developed uses, but it land preservation technique, although land trusts and
is not a permanent solution. Other tools, such as pur- other private conservation organizations have a long
chase or transfer of development rights, are more effec- history of obtaining conservation easements on valu-
tive in permanently preventing development. able or unique wetlands, wildlife or biotic habitat,
riparian areas, and scenic landscapes (Wiebe et al.,

60 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
1996). Until fairly recently, these easements were most Both of these features increase the cost of PDR’s and
often obtained from landowners as a donation to a related programs. An increased likelihood of develop-
charitable organization compensated by a Federal ment, for example, from proximity to roads or existing
income tax deduction under Section 170 (h) of the development, increases the cost of the easement to the
Internal Revenue Code (Ward et al., 1989). Conserva- program by further increasing the difference between
tion easements for agricultural land were first obtained the parcel’s market value and its agricultural value.
in Suffolk County, New York, in the mid-1970’s (AFT, Facing limited funds, programs must choose between
1998a, 1998b). Since that time, 21 States have based preserving more farmland acres of poorer quality under
conservation easement-enabling legislation on the less development pressure, and preserving fewer acres
National Conference of Commissioners on Uniform of higher quality under greater development pressure.
State Laws Uniform Conservation Easement Act
(1981). Another 23 States have enacted their own ver- Potential Cost of Development Rights
sions of enabling legislation. State PDR’s and related programs focus on protecting
cropland as the highest quality farmland that holds the
AFT estimates that, nationwide, PDR programs have most potential for long-term viability in agricultural
cumulatively protected 819,490 acres of farmland with use. We estimated the cost for voluntary easements on
an expenditure of $1.2 billion, slightly more in total all urban-influenced U.S. cropland (94.7 million acres)
than the annual tax expenditure on use-value assess- at $130 billion (figure 25; appendix table 2; see box,
ment. The average easement cost $1,519 per acre. Pub- “Methods for Estimating Cropland and Farmland Pur-
lic expenditures for PDR programs are reported from chase of Development Rights Cost”). The easement
20 States, with the most active programs existing in the cost of 36 percent of the acres subject to the highest
Northeast (AFT, 2000). Maryland, Massachusetts, New level of urban influence is $88 billion. Thus, expendi-
Jersey, and Pennsylvania account for 68 percent of tures nationwide for PDR’s and related programs
PDR expenditures to date (appendix table 2). Programs through February 2000 constitute just 1 percent of the
are usually funded through bond issues approved in estimated total easement cost to preserve all urban-
public referenda. The Conservation Fund compiled influenced cropland. Cropland acres protected to date
results of 35 referenda on funding for easement pro- through PDR’s constitute less than 1 percent of urban-
grams in States, counties, and townships around the influenced cropland acres nationwide.
country in November 2000 (Conservation Foundation,
2000). Seven proposals for $403 million were rejected Nationally, figure 25 indicates that it would cost $88
by voters. Another 28 for $1 billion were approved. billion to purchase easements on the 34 million crop-

An important advantage of PDR’s and related programs

Figure 25
as farmland protection tools is their ability to target Actual and estimated easement value for cropland,
funds to the highest quality land parcels or to parcels by urban influence
with the highest degree of development pressure. Pro- 150,000
grams choose the parcels on which to spend their lim-
Estimated cropland (Thousand acres)
ited funds from those offered by eligible landowners on
120,000
the basis of legislatively or administratively determined Total cropland estimated easement value
criteria, or on the basis of scoring systems that rank (Million dollars)
parcel and landowner characteristics. Some programs 90,000
combine the two procedures, awarding ranking “points”
only to parcels that meet a set of minimum criteria 60,000
(e.g., outside water and sewer service boundaries, or in
areas zoned for agricultural or rural uses). Most pro-
grams award progressively higher ranking points for 30,000
parcels with higher quality soils, proximity to existing
preserved parcels, or proximity to existing develop- 0
ment, with the progression heavily weighted toward Actual, Low Medium High Total
February
parcels consisting of “prime” cropland under imminent 2000 Urban influence
threat of development. Source: ERS analysis of National Resources Inventory land use and
NASS land values data.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 61
land acres most influenced by urbanization, at an aver- conservation could perhaps be obtained by reallocating
age cost of $2,595 per acre. However, purchasing ease- these expenditures.
ments only on the 31 million acres of cropland subject
to the medium level of urban influence preserves We estimated that by applying the annual expenditure
roughly the same number of acres for $25 billion, $806 on use-value assessment to PDR’s, State programs
per acre, or less than one-third the cost. Selecting crop- could cover 30 percent of the $88 billion easement cost
land parcels only in the low urban influence category, needed to conserve cropland in the high-urban-influ-
for which urban conversion might not be expected for ence category, or 63 percent of the cost of easements in
many years, would reduce current easement costs by an the middle- and low-urban-influence categories. Be-
additional third, to $592 per acre, or $18 billion. cause use-value assessment is generally provided to all
qualifying farmland, redirecting expenditures on it to
The chief obstacle to conserving more farm and forest- conserving cropland alone could cover a substantial
land through PDR programs is the high cost of pur- portion of the total cost of cropland easements, particu-
chasing easements. However, States already incur a tax larly in States with less urban pressure, or with a lower
expenditure in use-value assessment programs for all ratio of cropland to all farmland (appendix table 2). In
farmland of $1.1 billion annually, which equals a pres- other words, converting use-value assessment tax subsi-
ent value of $27 billion when amortized at 4 percent dies to PDR expenditures could fund permanent ease-
(figure 26; appendix table 1). The tax subsidy on use- ments on much of the cropland really at risk of devel-
value assessment dwarfs the $1.2 billion in cumulative opment.
public expenditures on PDR programs since the mid-
1970’s. Since use-value assessment is generally These estimates do not include costs associated with
acknowledged to provide far less certainty that farm- purchasing easements, which can be substantial. Direct
land will actually be preserved from development than costs—such as those incurred from settlement fees, title
PDR’s and related programs, more effective farmland work and insurance, and conducting appraisals—

Methods for Estimating Cropland and Farmland Purchase

of Development Rights Cost
USDA's National Agricultural Statistics Service annually tion for the set of totally rural tracts in the region (LRR)
collects information on farmland values via the national containing the parcel. Within each LRR, the urban-influ-
June Agricultural Surveys (JAS). Farmland values from the enced JAS sample points were sorted by their associated
JAS, pooled for 1994-96, consist of more that 75,000 population accessibility index number and the distribution
observations geo-referenced to the approximate parcel split into three categories, each containing equal numbers
location (latitude and longitude). Each parcel was classi- of JAS sample points.
fied as urban-influenced or not based on an index of prox-
imity to urban areas derived from Census tract population The statistical design properties of the JAS data can be
data using GIS-based statistical smoothing techniques. In used to estimate the number of acres and the average mar-
geographers’ terminology, the index is derived from a ket value per acre in the totally rural category and in each
“gravity” model of urban development, which provides of the three urban-influenced categories for each LRR.
measures of accessibility to population concentrations. The Because the average market value in the totally rural cate-
index accounts for both population size and location of the gory is assumed to approximate the agricultural value in
parcel relative to that population (distance within a 50-mile each of the three urban-influenced categories, the easement
radius). The index increases as population increases and/or value per acre can be estimated as the difference between
as distance from the parcel to population decreases, hence, average market values in the totally rural category and in
the “gravity” analogy. Census tracts were assigned to a each of the urban-influenced categories. We assume that
“totally rural” category based on 1990 commuting data and landowners would be willing to sell voluntary easements at
Census Bureau geographic definitions. “Totally rural” this price. Multiplication by the respective crop or farm-
means that the tract does not contain any part of a town of land acres in each category then determines the cost of pur-
2,500 or more residents and the primary commuting pat- chasing all the crop or farmland development rights in each
tern was to sites within the tract. JAS parcels were classi- urban-influenced category. Results were summarized at the
fied as urban-influenced if the population accessibility State and U.S. levels.
index exceeded the 95th percentile of the index’s distribu-

62 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
amount to several thousand dollars for each easement acres (the tax reduction) with a larger monetary incen-
purchased. Appraisals, which may be needed to estab- tive on fewer cropland acres (the easement purchase).
lish the market value of the property and hence the Owners who no longer receive the tax reduction will be
easement value, can cost $1,500 to $2,500 per property more inclined to sell land for development due to
(MALPF, 2000; Daniels, 2000). In the Lancaster higher taxes. However, tax revenues from the land on
County, Pennsylvania, program in 1993, administrative which development rights are purchased will likely rise
costs averaged $83 per acre (4 percent) on easements above agricultural use values, but will probably not rise
averaging over $2,000 per acre (Wiebe, 1996, p. 13). to full market value levels. This is because a market for
Administering agencies also incur indirect costs in the land with severed development rights has developed in
form of salaries, administrative expenses, and legal States with extensive PDR programs (Nickerson and
fees. On the other hand, the cost of administering use- Lynch, 1999; Blakely, 1991). There are potential buyers
value assessment programs is also not included in the of these parcels who are not primarily interested in
estimates of tax expenditures for use-value assessment. agricultural production. Politically, many property own-
Assuming a cost of $2,000 per acre, and a $2,500 ers will object to losing a property tax reduction, and
administrative cost, a 100-acre parcel would have addi- fewer of them will benefit from PDR purchase. There
tional costs of 1.27 percent, while a 10-acre parcel may also be difficulty in getting voter agreement to
would have costs of 14.3 percent. A generous estimate convert the annual and largely disguised tax expendi-
of additional administrative costs for easements would ture into a bond or other financing instrument for capi-
be 5 percent of the easement cost, averaged across all tal purchases of development rights.
transactions of different parcel sizes.
Targeting cropland with the highest urban influence for
Redirecting use-value assessment tax expenditures to protection may be a shifting target. Unless consumer
PDR’s is not without risks. Essentially, this replaces a preferences for single-family homes and low-density
small monetary incentive applied to many farmland development patterns are altered, or growth control

Figure 26
Costs of purchase of development rights and use-value assessment relative to benefits for
preserving cropland, by urban influence
Million dollars
300,000

250,000

200,000

150,000

100,000

50,000

0
Total Low Medium High
Urban influence

Estimated use-value assessment value (present value) Estimated benefit (low value/high density)
Estimated purchase of development rights cost Estimated benefit (high value/low density)
Estimated benefit (low value/low density) Estimated benefit (high value/high density)

See text for explanation of value/density scenarios.

Source: ERS analysis of National Resources Inventory land use and NASS land values data.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 63
policies pursued more vigorously, purchasing develop- hold ($0.21 versus $2.93) assumed from the literature,
ment rights on land currently under the most intense and on the development scenario assumed. If the lower
development pressure would likely shift developers’ value estimate and a relatively low-density develop-
attention to other land. The $27 billion that could be ment scenario are correct, the benefits from cropland
derived from current use-value assessment tax expendi- conservation probably will not justify the costs of a
tures is more than the estimated $18 billion cost of comprehensive PDR program. Not surprisingly, 87 per-
easements for cropland with middle and low urban cent of the benefits occur in the high-urban-influence
influence farther out from the urbanized areas, and area because more households are located there. Even
would put “greenbelts” totaling more than 30 million in that area, however, estimated benefits are only about
acres around existing urban areas and surrounding 13 percent of easement costs.
areas of high urban influence.
However, if the true per acre value is higher and devel-
Comparing Benefits and Costs opment follows the high-density pattern with the land
The costs of purchasing development rights easements targeted for conservation in the more populated high
on cropland estimated above can be compared with the urban influence area, then estimated benefits are much
benefits of conserving cropland (table 8). Because PDR greater than expected costs. Estimated benefits exceed
easements are essentially an up-front capital invest- costs in total and for the high-urban-influence area
ment, the annual stream of benefits estimated above in whenever the high value per household per acre is
table 5 must first be converted to a present value (using assumed.
a 4 percent discount rate consistent with that used to
analyze use-value assessment above). An estimate of Estimated costs are relatively certain, and likely have a
the benefits of conserving cropland, distinct from all fairly narrow band of confidence, simply because we
farmland, is made by assuming that the benefits are have market data on which to base these estimates. The
proportional to the amount of cropland in the land base. results must be tempered by the fact that the benefit
After these adjustments, the costs and benefits can be estimates cover only part of the benefits from farmland
compared (table 8). The benefits from not incurring conservation that can be estimated quantitatively. The
additional soil erosion during construction in table 6 literature provides a wide range of values from which
are not included in these estimates. to choose, and the site-specific characteristics and
preferences of areas across the country need to be fac-
The most important conclusion from this exercise is tored in. However, the exercise is a useful one to judge
that the relationship between costs and benefits the potential magnitudes and to provoke discussion and
depends heavily on the initial value per acre per house- further analysis.

Table 8—Comparison of costs and benefits for protecting cropland, by degree of urban influence, 1995
Degree of urban influence1
High Medium Low Total
Million dollars
Cost of PDR easements2
Cropland 87,803 24,741 17,894 130,438

Estimated benefits of conserving farmland3

High-density scenario
Percent developed 90% 10% 5%
Low value/acre/household 17,500 500 250 18,250
High value/acre/household 243,500 8,500 3,750 255,750
Low-density scenario
Percent developed 60% 20% 10%
Low value/acre/household 11,750 1,250 500 13,500
High value/acre/household 162,250 17,250 7,500 187,250
1See box “Methods for Estimating Cropland and Farmland Purchase of Development Rights Cost” for an explanation of urban influence.
2See appendix table 2 for details and box “Methods for Estimating Cropland and Farmland Purchase of Development Rights Cost.”
3Present value of estimated annual benefits capitalized at 4 percent. See table 5 for details of estimated annual benefits.

Sources: ERS analysis of NASS June Agricultural Survey and USDA National Resources Inventory data.

64 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 VII. Potential Federal Roles

The right to control land uses exists and lies in the sovereign
power of the state and may be exercised through the police
power, eminent domain, and taxation....
(Ely and Wehrwein, 1964)

The primary direct authority over land-use matters or local level has only rarely been attempted. Recent
under our constitutional system rests with the States. examples include the Coastal Zone Management Act
However, there have been issues raised throughout U.S. Reauthorization Amendments of 1990 and the Clean
history about what role in land use, if any, the Federal Water Act (U.S. EPA, 1996, 1993).
Government should play. In the early 1970’s, along
with a tide of other environmental legislation, bills With the costs and benefits of controlling growth being
were introduced in the Congress by both political par- largely local, States and the Federal Government may
ties to establish a national land-use policy (Anderson et be seen to have little rationale for involvement. The
al., 1975). The proposals universally recognized the expansiveness of modern metropolitan growth patterns,
primacy of State authority but approached policy as a however, makes it clear that problems of growth are not
matter of “process reform,” which would help the confined to local government boundaries. Increasingly,
States meet the challenges of urbanization more effec- States find it easy to rationalize a major role, on eco-
tively. In a foreshadowing of smart growth strategies, nomic and political grounds, to say nothing of constitu-
the proposals provided Federal grants to States to tional authority. The case for Federal involvement is
enable them to take back certain land-use control less clear. Growth control issues recur in nearly every
authorities historically delegated by them to local gov- metropolitan area across the Nation. In this sense, it is
ernments. Several States were already moving in this identical to other “local” problems ranging from water
direction, having adopted more comprehensive State quality to education that have been redefined as
and regional planning processes in several areas, “national” issues. There are no clear tests that divide
including Vermont, California, Hawaii, Florida, and Federal and local issues: If a majority in Congress
Massachusetts (Bosselman and Callies, 1971; Healy, decides that a Federal role is appropriate, the Federal
1976; U.S. Senate, 1974). The national land-use policy Government will act. The current outpouring of con-
bills were characterized as Federal enabling legislation cerns over land-use and growth control issues poses
to encourage States to exercise States’ rights (U.S. Sen- questions that have been raised before:
ate, 1973). Congress held hearings and debated propos-
als for 5 years. The Senate passed land-use policy bills • What, if anything, should the Federal Government do
in the 92nd and 93rd Congresses, but the issue died on about growth?
a very narrow vote in the House on June 11, 1974
• What role does farmland preservation play in control-
(Whittaker, 1976).
ling growth?
Against the backdrop of limited Federal land-use • What is the unique contribution of the U.S. Depart-
authorities has been the recognition that Federal Gov- ment of Agriculture?
ernment programs can be powerful, and have pervasive
influences on land-use decisions made by private and In this chapter, we examine the evidence for unintended
public actors (U.S. Senate, 1972). Federal income tax impacts on growth from Federal actions and the argu-
law, highway programs, sewer and water programs, and ments for Federal assistance to local governments to
environmental programs have exercised great influence indirectly and directly affect urban growth.
on land-use decisions. Most often, this pervasive Fed-
eral influence has been examined to see whether Fed- Helping Increase State and Local
eral policies aimed at other objectives are having unin- Planning Capacity
tended consequences for land use. Only occasionally
have positive impacts from Federal leveraging been Because of the way that metropolitan areas grow,
explicitly considered, and explicit leveraging of Federal expectations of development often long antedate the
spending to get land-use controls adopted at the State development itself. Planning for development and the

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 65
design of growth controls need to be in place to contain munities and State agencies on Federal Government
such expectations, to avoid potential conflicts with funding proposals for local communities. During the
property rights (National Commission on Urban Prob- 1980’s, the A-95 review and comment process was
lems, 1969; ASPO, 1968). However, the ability to pay transferred to the States. A recent report suggests that
for all kinds of government services, including plan- the process has deteriorated because most States have
ning, is limited in rural areas with limited tax base. not been committed to continuing the process (National
There is a disconnect between the time property trans- Academy of Public Administration, 1998).
fers, leading to development, and the time tax revenues
are available to pay for the planning capacity needed to While 36-42 percent of local governments responded
control growth. There may also be a disconnect that coordination with Federal agencies was good or
between jurisdictions approving development and those excellent (GAO, 2000, p. 27), over 40 percent of
bearing the consequences. For example, by locating a respondents to GAO’s survey wanted increased Federal
shopping center on its border, a county can shunt traffic incentives to pursue regional growth management
problems onto an adjacent county. strategies, such as smart growth. Increased technical
assistance from the Federal Government was favored
The conundrum regarding planning capacity and public by 29-37 percent of local governments. GAO also
responsibility for it in rural areas is longstanding. Rural points to Federal regulatory review authorities in the
residents have been antagonistic toward planning, and National Environmental Policy Act (NEPA) and the
politicians are understandably wary about taking a Farmland Protection Policy Act (FPPA) as opportuni-
stand on growth control, particularly well before it ties to consider the potential influence of their actions
occurs. on patterns of growth. Both NEPA and FPPA processes
focus on assessing the impacts of proposed development
In 1981, the National Agricultural Lands Study recom- that are influenced by qualifying Federal actions. For
mended that USDA “…assess the feasibility of provid- FPPA in particular, the decision regarding what lands to
ing small matching grants for ‘capacity building’ to protect is in the hands of State or local governments,
state departments of agriculture (or other appropriate and their planning processes presumably would deter-
state agencies) that seek to manage agricultural land mine how growth control is addressed in the decision.
issues.”
The National Environmental Policy Act (NEPA),
Before massive amounts of funding are made available passed in 1969, was the first step in a new suite of
exclusively for monetary incentives to preserve farm- national environmental protection laws (Stokes and
land, the case for a properly structured planning grant Watson, 1989). NEPA’s key provision is a requirement
program needs to be revisited as a potentially more for environmental impact statements (EIS’s) for pro-
cost-effective use of Federal funds. posed actions that might affect the environment. Land-
use changes are properly considered as impacts because
Coordinating Local, Regional, the guiding language of the act discusses irreversible
and State Efforts and irretrievable commitments of resources, relation-
ships between short-term uses and maintenance and
Another potential role for the Federal Government in enhancement of long-term productivity, and alternatives
controlling growth is coordinating efforts across Fed- to actions that can be avoided, all of which characterize
eral agencies and across State and local government land-use change. Private projects with major Federal
boundaries. U.S. GAO (1999) notes that there is funding are also covered by NEPA, in addition to
increasing coordination among Federal agencies on agency actions.
growth-related issues, including the President’s Council
on Sustainable Development, and the EPA Smart Growth The Farmland Protection Policy Act (7 USC 4201)
Network. GAO suggests that these efforts are too new, directs USDA to work with other Federal agencies to
and the research is too limited, to provide guidance on develop criteria for identifying the effects of Federal
how the Federal Government can better assist State and programs on the conversion of farmland to nonagricul-
local governments in managing growth. There is a long tural uses. Federal agencies are to:
history of Federal coordination through the Office of
Management and Budget A-95 review process, which • use the criteria to identify and take into account the
was designed to get feedback from surrounding com- adverse effects of their programs on the preservation
of farmland;

66 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
• consider alternative actions, as appropriate, that could upgrading of systems designed to address point source
lessen adverse effects; and water pollution concerns and concerns over safe drink-
ing water supplies (figure 11). There are potential con-
• ensure that their programs, to the extent practicable, flicts between social objectives of clean water, safe
are compatible with State and local government and drinking water, and rural development and the desire to
private programs to protect farmland (7 USC 4202). control urbanization and reduce problems from growth.
One of the beneficial features of the FPPA is that it is a Facilities greatly oversized for the current population or
potential source of information about conversions inappropriately located relative to existing development
resulting from Federal actions. centers contribute unduly to growth.

The White House Task Force on Livable Communities An oft-cited argument for a Federal role is the con-
required the establishment of a USDA task force to tention that powerful and pervasive influences on land-
identify actions for maintaining agriculture and forestry use decisions are inadvertently exercised by Federal
in rapidly growing regions (White House, 2000). programs aimed at other objectives (U.S. House, 1980;
Among the charges to the task force was the admoni- U.S. HUD, 2000). Most often identified as influential
tion to “…consider the extent to which actions by Fed- have been the interstate highway construction program,
eral agencies, such as construction, development grants tax deductions for interest on home mortgages, and var-
and loans and federal land management decisions, con- ious programs for infrastructure investments in sewers,
tribute to the loss of farm and forest lands and whether water supply, and schools. The U.S. General Account-
additional measures or policy changes can be taken to ing Office completed the most recent review of this
lessen their impact.” argument, focusing on Federal programs and policies
“reflecting decisions on spending, taxation, and the
In response, a USDA Task Force categorized an location of Federal facilities.” GAO concluded that so
impressive array of programs that “protect or convert many factors contributed to “sprawl,” and that the rela-
farm or forest land,” but concluded that the lack of tionships among factors were so complex, that
compliance with the Farmland Protection Policy Act by researchers have great difficulty isolating the impact of
other Federal agencies had resulted in a lack of infor- individual factors (U.S. GAO, 1999). Anecdotal evi-
mation about the impacts of Federal programs. dence supports the belief that the Federal Government
influences growth, but quantitative results showing the
magnitude or extent of influence is lacking. Program
Coordinating Federal Development agencies have responded to such criticisms over the
Activities and Growth years as well, building review and mitigation features
Management Goals into their programs that reduce unintended negative
impacts. GAO points out that the lack of evidence to
The Federal Government has had long experience in measure the influence does not mean that Federal poli-
stimulating economic growth and development in rural cies and programs have no effect.
and urban areas alike, but less experience in controlling
growth. If both roles are undertaken, potential conflicts A second GAO report surveyed local communities
between the roles, and between different Federal regarding the impacts of Federal programs (U.S. GAO,
agency goals could easily develop. In documenting the 2000). About half of the communities surveyed said
land development process, we noted the critical role of that the Federal impact was low, very low, or nonexist-
infrastructure investments in the growth process. Focus- ent, compared with only 17 percent that rated Federal
ing NEPA and FPPA review on Federal programs influence as high or very high. Many of the latter com-
involved in supporting infrastructure development, like munities had large Federal facilities located in them or
sewer and water programs, would permit tradeoffs to be nearby (GAO, 2000, p. 18). Local officials cited three
made between development and other quality-of-life areas in which Federal programs affect their growth
factors better served by conserving rural land. For management activities: programs to construct infra-
example, Section 201 Municipal Facilities Construction structure or other physical improvements; programs for
grants for wastewater treatment facilities and the Rural infill development or urban redevelopment; and pro-
Housing Service’s waste disposal and water supply sys- grams to preserve or protect farmland or open space
tem grants and loans help State and local governments (GAO, 2000, p. 17). Local complaints about Federal
finance sewer and water investments. These programs programs are generally not that the programs exist, but
provide incentives and financing for construction and that there is insufficient flexibility to tailor the pro-

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 67
grams to local needs. In the case of farmland preserva- total. Annual tax expenditures for State use-value
tion, local officials sought more assistance (GAO, assessment programs are an additional $1.1 billion
2000, p. 26). per year.

Past Federal programs may have inadvertently con- • However, current efforts are only a small fraction of
tributed to problems with urban growth. However, it is the $130 billion cost of easements to protect all
unlikely that new programs will be developed of a scale urban-influenced cropland.
similar to the interstate highway construction program
• There are substantial tradeoffs between relatively
or the EPA Section 201 sewage treatment program.
weak instruments like preferential assessment versus
While tax deductions, like that for mortgage interest,
purchasing development rights through a conservation
are used in areas with new residential construction,
easement. The annual expenditure on use-value
short of abandoning a competing goal of increased
assessment would cover a significant part of the cost
homeownership, it is unlikely that these provisions will
of purchasing easements on cropland most heavily
be repealed. Tax breaks for home mortgages could
influenced by urban pressure. Purchase of develop-
work just as effectively to subsidize new residential
ment rights is the preferred tool in terms of effective-
construction in compact suburbs or as infill develop-
ness, but such programs have a higher up-front cost.
ment in cities.
• To be used effectively, public funds for purchase of
Funding Monetary development rights should be used strategically. There
Conservation Incentives are substantial tradeoffs between saving more acres
under less development pressure, versus using avail-
The Federal Farmland Protection Program (FPP) was able funds to purchase development rights on those
established in the 1996 Farm Act to provide funding to fewer acres that are under more immediate pressure
State, local, or tribal entities with existing farmland for development.
protection programs for purchase of conservation ease-
ments or other interests. The goal of the program, run Federal direct support for farmland protection is
by USDA’s Natural Resources Conservation Service, is arguably modest, amounting to less than 3 percent of
to protect between 170,000 and 340,000 acres of farm- State and local expenditures to date (American Farm-
land. Priority is given to applications for perpetual land Trust, 1998). However, a clear rationale for a more
easements, although a minimum of 30 years is expansive program is similarly lacking. The total
required. FPP was funded at $35 million (NRCS, amount of expenditures needed to acquire development
2000), and it was spent to protect 127,000 acres in over rights on all cropland or farmland that could be
19 States. FPP funding to date represents just 2.5 per- expected to be developed over the next several decades
cent of total State funding on PDR, and less than 1 per- ranges from $87 to $130 billion. Purchase of develop-
cent of potential PDR expenditures in highly urban ment rights should likely be done strategically, in con-
influenced areas. Given these small percentages of past junction with other growth management tools, rather
and potential PDR effort, the ultimate goal of Federal than rely solely on monetary incentives. Absent some
assistance to PDR programs is unclear. clear, mutually exclusive, Federal interest, the role the
Federal Government can play in providing monetary
The Farmland Protection Program is the only Federal incentives to preserve farmland is uncertain. The case
program that provides direct financial incentives to for Federal involvement may simply rest on the argu-
address the farmland conversion issue through conser- ment that seed money is needed to persuade States to
vation easements. The Federal Government also sup- act. If that is the rationale, funds should be targeted to
ports farmland protection indirectly through Section States with a demonstrable urbanization problem that is
170 (h) charitable deductions under the Internal Rev- not being addressed by State programs. Another ration-
enue Code. ale could be that some Federal cost share is appropriate
to support successful State initiatives. In this case,
Several observations emerge from our analysis: funding should go to States that can demonstrate a
degree of effort in addressing farmland conservation,
• Collectively, the amount spent by the public to pre- perhaps leavened by objective evidence on the scope of
serve farmland through State and local purchase of the problem occurring in each State.
development programs and Federal contributions to
these programs amounts to more than $2 billion, in

68 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 Conserving Rural Amenities There is a desire, both in the United States and Europe,
Part of Greater Agricultural to keep farmland in farming, as evidenced by the
“Working Lands” concept in the United States. Some
and Trade Policy Goals degree of agricultural production is critical to achieving
Policies that support agriculture could be tools for con- this policy objective. These objectives do not require
trolling growth. Agricultural land provides various pub- trade-distorting subsidies, however, because there is a
lic benefits, such as open space and scenic amenities. range of policy alternatives available that do not fall
Many countries are actively trying to increase the sup- into the amber box. In the United States, purchase of
ply of these benefits, and to reduce the negative by- development rights programs and the Federal Farmland
products of agriculture, such as soil erosion. However, Protection Program to assist State programs are exam-
a word of caution is required when considering agricul- ples. Other options include cost-share payments for
tural policy in what is increasingly a global trade con- adopting best-management practices, and support for
text. As part of the 1994 Uruguay Round Agreement on metropolitan agriculture through research, training, and
Agriculture (URAA), member countries of the World extension.
Trade Organization (WTO) agreed to limit policies that
cause trade distortions in international agricultural mar- The European Community is discussing many policies
kets. These limits are not focused on policy objectives. that can help provide open space and other amenities
Rather, countries have agreed to restrictions on the pol- (see Potter, 1991). Hodge (2000) discusses a range of
icy instruments used to achieve domestic objectives. policy options that are not linked to agricultural pro-
duction. For example, European Conservation, Amenity
Policies that cause minimal or no trade distortions are and Recreation Trusts (CARTs), and U.S. conservation
considered to be part of what is called the “green box” groups like Ducks Unlimited and The Nature Conser-
(Vasavada and Warmerdam, 1998). The URAA places vancy, purchase and manage lands in order to provide
no restrictions on how much green box support can be and protect various public benefits. These types of land
given to farmers. Policies that do create trade distor- purchases and management are facilitated by Federal
tions are placed in the “amber box.” WTO members and State laws granting tax-exempt status to nonprofit
have agreed to limit the amount of support provided by organizations (Wiebe et al., 1996). Other green box
amber box policies, and to work to reduce amber box policies include agricultural zoning, urban growth
support levels in subsequent rounds of trade negotia- boundaries, agricultural use taxation, and programs like
tions. Policies that directly target agricultural produc- the Conservation Reserve Program and Wetlands
tion may cause trade distortions by affecting relative Reserve Program.
international prices. Thus, agricultural price supports
and production subsidies are likely to be subject to the While there are some parallels between rural amenity
amber box restrictions. goals in Europe and the United States, there are impor-
tant differences. Farmlands provide a much larger per-
In general, policies that are not linked to production are centage of the total landscape in Europe than in the
likely to be considered part of the green box. Fortu- United States, and thus are a much more important
nately, it is also the case that many policy objectives component of wildlife habitats and ecosystems. Devel-
can be more efficiently met by directly targeting the opment restrictions in Europe are generally more severe
desired amenities than by targeting agricultural produc- than in the United States, and property rights prohibi-
tion (Bohman et al., 2000). In fact, for many desirable tions against regulation less stringent. Agricultural
agricultural byproducts, there is no consistent relation- landscapes in Europe are generally threatened more by
ship with increased agricultural production. For exam- abandonment to less intensive uses, compared with
ple, a scenic landscape may be no more lovely with 40 pressures for urbanization in the United States.
cows than it is with 30 (Mullarkey, Cooper, and Skully,
2000).

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 69
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78 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA
 Appendix table 1—Implicit tax subsidy attributable to tax expenditures
on use-value assessment, by State, 1995
State 1995 tax rate Total Amortization of
per $100 of full tax tax subsidy at
market value subsidy 4 percent
Dollars per $100 Dollars Dollars
California 0.85 218,227,211 5,455,680,283
Illinois 0.99 122,342,509 3,058,562,728
Arizona 2.03 90,664,131 2,266,603,272
Pennsylvania 0.99 72,228,470 1,805,711,746
Ohio 0.81 59,040,192 1,476,004,790
New Jersey 0.99 45,305,354 1,132,633,850
Massachusetts 0.68 38,472,196 961,804,901
Wisconsin 1.86 37,244,494 931,112,347
Texas 0.61 36,385,104 909,627,596
Nebraska 1.59 30,957,149 773,928,732
Michigan 1.32 29,795,084 744,877,098
Iowa 0.94 28,800,328 720,008,205
New York 1.60 26,911,431 672,785,784
Florida 0.80 26,696,426 667,410,662
Indiana 0.56 23,745,892 593,647,303
Connecticut 0.64 18,791,742 469,793,544
North Carolina 0.50 16,839,904 420,997,609
Oregon 0.51 15,235,621 380,890,519
Minnesota 0.88 13,781,163 344,529,075
Colorado 0.67 13,250,874 331,271,862
Tennessee 0.43 12,201,871 305,046,787
Maryland 0.41 10,003,056 250,076,402
Utah 0.36 8,566,680 214,167,008
Virginia 0.56 7,921,353 198,033,835
Missouri 0.37 7,547,210 188,680,256
Washington 0.74 7,411,916 185,297,907
Idaho 0.40 7,283,765 182,094,128
Montana 0.50 6,102,508 152,562,690
Kentucky 0.28 5,462,798 136,569,958
Georgia 0.52 4,182,142 104,553,558
North Dakota 0.62 4,029,474 100,736,841
Louisiana 0.26 3,888,120 97,202,988
Kansas 0.45 3,868,966 96,724,139
South Carolina 0.46 2,569,992 64,249,802
Maine 1.08 2,292,155 57,303,864
Alabama 0.14 1,744,730 43,618,262
Rhode Island 1.11 1,365,195 34,129,864
New Hampshire 1.04 1,130,948 28,273,688
South Dakota 0.74 1,097,834 27,445,847
New Mexico 0.17 1,081,109 27,027,732
Mississippi 0.27 1,048,629 26,215,718
Vermont 1.27 995,566 24,889,155
Nevada 0.36 940,808 23,520,188
West Virginia 0.21 930,258 23,256,450
Oklahoma 0.37 878,075 21,951,885
Arkansas 0.40 589,568 14,739,205
Delaware 0.09 253,888 6,347,189
Wyoming 0.47 25,467 636,675
U.S. total na 1,070,129,357 26,753,233,926
Source: ERS analysis of farm real estate tax and NASS June Agricultural Survey land value data.

Economic Research Service/USDA Development at the Urban Fringe and Beyond /AER-803 • 79
Appendix table 2—Estimated purchase of development rights expenditures for urban-influenced cropland, compared
with actual expenditures, acreage, and use value assessment tax expenditures, 1995
State Urban sprawl potential Actual PDR Total PDR funds Actual PDR
Low Medium High Total expenditure, spent as a acres protected
February 2000 percentage of February 2000
total farmland
easement value
Million dollars Percent Thousand acres
Maryland 764 668 1,008 2,440 303 12.4 207
Pennsylvania 1,311 1,558 4,427 7,296 269 3.7 166
Colorado 359 330 1,289 1,978 24 1.2 84
Vermont 1,054 26 335 1,415 42 3.0 83
New Jersey 152 144 341 636 169 26.6 59
California 3,623 2,595 19,456 25,674 54 0.2 55
Massachusetts 203 9 0 212 109 51.4 44
Delaware 11 230 41 282 40 14.2 37
Connecticut 0 893 2,043 2,936 76 2.6 26
Washington 19 504 479 1,002 61 6.1 16
New York 358 31 261 650 48 7.4 11
New Hampshire 0 722 3,854 4,576 11 0.2 9
Michigan 85 645 1,528 2,257 15 0.7 6
Virginia 45 34 0 78 2 2.6 4
North Carolina 506 404 1,037 1,947 3 0.2 3
Rhode Island 0 68 55 123 15 12.2 3
Maine 598 593 4,467 5,658 2 0.0 2
Kentucky 568 225 1,157 1,951 1 0.1 1
Wisconsin 411 0 32 443 1 0.2 1
Alabama 64 329 854 1,246 0 0.0 0
Arkansas 0 1,197 3,269 4,466 0 0.0 0
Arizona 29 25 93 147 0 0.0 0
Florida 954 1,352 1,031 3,337 0 0.0 0
Georgia 169 363 273 804 0 0.0 0
Iowa 182 40 1,599 1,821 0 0.0 0
Idaho 1,068 1,948 9,342 12,358 0 0.0 0
Illinois 620 1,589 2,031 4,240 0 0.0 0
Indiana 125 537 2,402 3,064 0 0.0 0
Kansas 116 317 427 860 0 0.0 0
Louisiana 62 212 1,220 1,495 0 0.0 0
Minnesota 449 497 620 1,566 0 0.0 0
Missouri 37 0 351 388 0 0.0 0
Mississippi 141 251 1,648 2,040 0 0.0 0
Montana 547 497 176 1,221 0 0.0 0
North Dakota 216 0 45 261 0 0.0 0
Nebraska 3 94 13 109 0 0.0 0
New Mexico 459 421 803 1,682 0 0.0 0
Nevada 322 888 2,158 3,368 0 0.0 0
Ohio 242 379 6,667 7,289 0 0.0 0
Oklahoma 40 110 88 237 0 0.0 0
Oregon 214 1,254 1,520 2,987 0 0.0 0
South Carolina 13 139 408 559 0 0.0 0
South Dakota 62 53 33 148 0 0.0 0
Tennessee 717 754 1,366 2,838 0 0.0 0
Texas 440 973 4,553 5,965 0 0.0 0
Utah 344 369 1,666 2,380 0 0.0 0
West Virginia 195 472 1,336 2,002 0 0.0 0
Wyoming 0 5 0 5 0 0.0 0
Total 17,894 24,741 87,803 130,438 1,245 1.0 819
Sources: ERS, USDA; American Farmland Trust, 2000

80 • Development at the Urban Fringe and Beyond / AER-803 Economic Research Service/USDA