What is the right density for a Strong Town?
Think about the most common terms you hear in city planning. Near the top of the list is one that likely comes to mind: density. People often use the term density to reinforce various points. A housing advocate will say density creates more affordable housing; a planner will say density means more financially solvent neighborhoods.
They’re not wrong, exactly. More units means households that the developer can spread out the cost of land and construction; more development in a neighborhood means more tax revenue.
However, to use density as a catch-all solution to creating a financially solvent place disregards an essential point: the ratio of public and private investment determines financial solvency—not the amount of development on a street (in other words, density).
Example of Financially Insolvent Density
Density generally focuses on the number of units or people in a given area. Therefore, you’ve likely seen several “dense” developments in your own town or region. For example:
A new town square developed on the edge of town with dozens of shops and restaurants.
A new mixed-use development with apartment buildings and the infamous “live, work, play” tagline, subsidized with decades of tax incentives.
These developments meet all the criteria for density: they pack a lot of people and activity into a relatively small area. Large apartment buildings to house hundreds of residents? Check. Mixed-use development so residents and visitors alike can walk to all of the shops? Check.
Because this land houses more units and people (compared to a conventional suburban development), can we assume that it contributes positively to the town’s financial solvency? No, we cannot. Such development can still require an unsustainable public:private investment ratio.
On the flip side, development at very low densities can be financially solvent if the infrastructure and service obligations are light enough. As an example, consider a rural or exurban neighborhood with unpaved roads, no streetlights, and no sewer or water hookups for the residences.
Understanding the Public:Private Investment Ratio
The more revenue that new development is bringing in to your city's government, the more it has to spend on improved services, infrastructure, and amenities. What's important is that private investment and public expense be in proportion. Low density, low level of services? Fine. Higher density, higher level of services? Fine. High density, but even more exorbitant expenses? You have a problem.
Let’s revisit the example we gave above: a developer builds a new town square on the edge of town, which includes dozens of shops and restaurants. Compared to a suburban development, it uses the land far more efficiently—this is a plus.
This, however, is where we introduce the public:private investment ratio—and where the term “density” loses its luster.
As the developer prepares to build that dense development on the edge of town, consider the amount of brand new infrastructure required to service it: all of those new roads, new sewer pipes, new electrical lines. Who’s required to pay for the maintenance of that infrastructure? You likely guessed it: the city. Who's responsible for police and fire service to the edge of town? The city.
In the worst case scenario, the city overbuilds infrastructure in anticipation of future development that won't come for years—and may never be finished. This is particularly common with water systems, which are often extended out into the countryside to areas that are expected to suburbanize. Even zoning for density is unlikely to make this a solvent approach.
Fast forward a few years and the mixed-use development is complete: it has the shops, the restaurants, and the people. But because of the tax subsidy that was required to make it happen, their contribution to the city’s budget—the one out of which infrastructure maintenance costs will eventually be due—is limited.
As Chuck Marohn writes in The Density Question, time and time again, these “dense” developments prove, upon examination, to not generate the necessary tax revenue to have a reasonable public:private investment ratio.
Now, it’s important to understand that Strong Towns is, of course, not against density. Quite the contrary. Instead, we encourage readers to not use it as the sole metric of success; and, instead, ask themselves the following question: Will the tax revenue generated cover the upfront cost and maintenance of the infrastructure?
Financially Resilient Density
What make a dense development financially resilient? Simple: it has a reasonable public:private investment ratio. That ratio will vary by project. We’re in no position to determine the perfect ratio for financially resilient developments.
We can, however, share tips on how city leaders can contribute to the tax base while creating little to no new infrastructure:
Focus on infill development: infill development means a develop builds on land that the city already services. This could take the form of, for example, an accessory dwelling unit (ADU) behind a home or a new development on a vacant parcel downtown.
Revisit zoning codes: zoning codes such as parking minimum requirements, large mandatory setbacks, and mandatory minimum lot widths or lot areas can force developers to build on rural land rather than fill in unused pockets within the urban area, meaning the city will have to create new infrastructure.
Loosen standards that require very expensive infrastructure where more frugal options would do, such as wide street widths even for lightly-trafficked residential streets. Read this article by Jeffrey Jakucyk on how suburban infrastructure has become much more expensive over time due to requirements like these. Check out this article by Daniel Herriges on the virtues of narrow streets.
In closing, remember: if a new development—no matter how many apartment, shops, and restaurants it offers—requires more public infrastructure than tax revenue generated, it’s not a financially resilient development.