Which Values in Value per Acre?

Before diving into this blog post, I ask you to take a minute to sit with these two images and ask yourself: Which place has greater value?

Did you feel any sense of inner conflict? Did your inner environmentalist, conservationist, and nature lover tussle with your inner urbanist? If so, chances are that that turmoil was caused by the fact that we have different definitions for the word “Value.” Webster’s Dictionary offers these two definitions first:

1) The monetary worth of something, market price2) A fair return or equivalent in goods, services, or money for something exchanged.

When it comes to this definition of value in regards to the built environment, I have to give a lot of credit to Joe Minicozzi and his team at Urban3 who developed a method of analyzing a city’s development pattern through the lens of a financial value per acre analysis by mapping its ratio of property value to acreage.  Here, one finds that older downtown areas have a higher financial value per acre, and therefore a higher tax base return per acre, then traditional suburban style development. If one starts pealing the layers of the onion, this higher financial value per acre correlates most directly to properties with a higher floor to area ratio, just as in the Empire State Building example.  Put another way, if any given site is made up of building, parking, and green space – of those three components, the building is what adds the most financial value. The higher the square footage to area, the greater the financial value.  From a real estate perspective this value is directly tied to the ability to receive rent or mortgage payments, cash flow positive, as well as the possession of an asset to sell (thank you John Anderson and the Incremental Development Alliance for helping me understand this aspect of real estate).

But now let’s consider Webster’s next two definitions of value:

3) Relative, worth, utility or importance.

4) Something (such as principle or quality) intrinsically valuable or desirable.

Here is where our inner environmentalist feels vindicated: with these definitions there’s a strong case that can be made for the greater value of the forest, the Grand Canyon, riparian areas, and our other green spaces and natural wonders. These areas may not yield rents or produce cash flow, and yet I believe few would seriously argue that natural areas don’t add value or are not worth protecting. In fact, I think most of us would agree that as people we would be a lot poorer if we were a world fully developed with no room for the wild. In a very real way, one of the great challenges of our times is the question of how do we value what is important and intrinsically valuable (our land and natural resources) in the face of financial pressures to make that same land yield financial benefits.

To make the above point I’ve so far used two extreme examples: the Empire State Building and an undisturbed forest. The reality is that most places where people live fall somewhere in-between as what the New Urbanists have illustrated in the below “Transect”. Here, we see how financial value (money green) and the intrinsic, natural value (environment green) interact over an area.

Transect

Adding the Value of Accessibility to the Mix

If one understands the transect as different shades of black, white and grey to balance the financial and natural values of development then where do our fierce debates about creating places people love come from? After all, aren’t these just two good values in which we’re finding the right combination in different contexts? Here, I would like to argue that most of our planning debates and shortcomings are over-balancing these previously mentioned values with values related to making properties accessible and useable for people.

In terms of land use planning, accessibility comes in a few different forms. The first and most obvious is transportation accessibility. In order for buildings to yield their financial value and for people to enjoy a piece of land’s natural intrinsic value, they need to get there – literally have physical access.  While transit and bicycle facilities can help us make efficient use of this space particularly in denser, urban environments, for most other places in the era of the automobile, whether we like it or not, that has meant carving out dedicated space for parking. The ironic reality, bemoaned by planners, is that this space in itself is neither financially productive nor inherently, naturally beautiful. Compared to those two values, parking lots seem like a waste of space. Yet,  it too has its own value: it’s useful – it allows people from long distances to access and therefore, take part in the activities of the building or natural area. As failed pedestrian malls have shown us, not providing enough physical access means that there’s not enough visitor density to financially support the development. Put another way, if there’s the perception that a place is hard to access then it builds in the perception that, “No one goes there anymore, it’s too crowded” and alternatives such as shopping on-line become all the more attractive.

The second type of accessibility that is a little bit more discreet is affordability. If I can’t afford the price of admission, the price of the goods and services, the payments to rent or to own, etc. then for all intents and purposes, the place itself is inaccessible to me.   Here, people have a funny relationship with this type of accessibility. As advertisers bombard us with images of “luxury living” and “luxury cars” they reveal this weakness in our human nature of the desire to feel special and better that others. – that we are part of some exclusive club not available to everyone else. At the same time, people loath being excluded, in the position of being on the outside looking in and will often jealously demonize others that have these special privileges. Reconciling this form of accessibility within the land use context is not only difficult, it all too often gets ugly and embarrassing. Take a look at that transect again, and ask yourself where in each T-zone, is there a place for the poor?  How do we reconcile a well-documented unfair past with the financial reality of making the numbers work?  More on this in a future post.

The origins of this post started when I started diving into what we mean by “value per acre.” In many cases, I found we are implicitly speaking of financial value, which while important and worth measuring is only one form of value that comes into play with real estate and planning.  This post highlighted two others in an area’s natural/intrinsic value and an area’s ability to be physically and affordably accessed by people. Of course, there are still countless other values such as perceived safety and the quality of the school district, proximity to a community of faith or friends, and distance from polluters and nuisances. It’s the balancing of all these different form of values with circumstances of people and land that by their nature are unique with financial realities which makes planning and development for a flourishing people and environment such a worthwhile endeavor.

2 thoughts on “Which Values in Value per Acre?

  1. It’s fine to value other things and I, for one, certainly place many things above financial value.

    That being said, as a matter of public policy for local governments, none of those other values override the essential prerequisite to be financially solvent. Joe’s work doesn’t attempt, or presume, to compare the value of the Grand Canyon (or even Central Park) to a skyscraper in Manhattan. It contrasts different options that cities are routinely confronted with.

    We can and must make things beautiful, affordable, functional, etc… but to do that, our cities have remain financially solvent. To state it another way: there has to be enough value there to support the place or all the good intentions in the world will come to naught.

    Liked by 1 person

    • Chuck – I agree that places have to be financially solvent and I myself am a big fan of Joe’s work. I hope nothing in this piece would indicate otherwise. With that said, I would argue that the assessed value per acre analysis, in that it compares only the financials is just one perspective, not a holistic view of “value”. In particular, by design, it is not well-suited to reflect the true value of a city’s green/rural spaces or puts value on affordable units that would allow someone to build longterm wealth. While these other type of “value” don’t flow into the city’s tax rolls, it still contributes to quality of life.

      As for the financials, as a former budget analyst turned city planner, I feel like I have a unique perspective on municipal financial sustainability. While assessed value is one component of financial sustainability, it’s by no means the only. The fact is property tax revenue is a function of the assessed value multiplied by the property tax rate. Year after year, a city’s assessed value usually goes up, and usually year after year, the city will respond my lowering it’s property tax rate. Why? Because during the budget process it has determined it’s cost for services, backs into the revenue it believes it needs for the year to develop a mill rate that it believes will be affordable for its citizens. In other words, even cities were to deliberately raise their net assessed values, they would just respond by then lowering their property tax rate. In fact, what the city budget process is is an exercise in balancing the assessed value, tax rate, and cost of services in a way that’s affordable for people. The fact that cities tend underestimate its maintenance obligations is a fair point that is a major contribution of the Strong Towns movement. But again, rectifying this would be done through a combination of its tax rate and the assessed value.

      I say all this to say that in general, I have concerns that my fellow new urbanists, strong towns advocates focus on built environment forms that emphasize financial performance per acre at the expense of other values of green spaces and affordability for people to live and themselves to build wealth. At the same time being just dismissive of the practical demand for transportation access when we’re already all spread out. The reality is that city budget and planning processes, in which these movements constantly poke fun at, are constantly trying to balance all these values tensions in which there are no easy answers – particularly in the era of the automobile. .

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