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Comment by ch4s3 | Hacker News Reader

Another way to put it would be that roads, sewers, and mortgages aren't heavily subsidized in other places.

StrongTowns has a great article on this, "The Growth Ponzi Scheme," describing the effect that debt-fuelled, suburban city growth can have on municipal finances: https://www.strongtowns.org/the-growth-ponzi-scheme/

I strongly disagree with the core claim that the reason is "unproductive growth". That's not the reason. The reason is municipal debt and gross mismanagement of the townships at every level. The municipalities are taking on debt by the truckload because they have failed to 1) manage their resources and personnel properly and 2) tax accordingly to what they need to actually maintain all services, which is why they take on the debt.

If they instead were unable to take on the debt they would be forced to either raise taxes, cut services, or some combination thereof. The past ~40 years have seen an ever decreasing interest rate environment, which allows municipalities to borrow money by issuing bonds, pay only the interest, then when the principal comes due, they roll it into a new bond that borrows even more. That new bond pays the old one off and then they have some more borrowed money to work with. And because interest rates have gone down more in the years since the previous bond issuance, they can pay the same interest. Basically, they just keep rolling debt over so that the principal is never paid down. Example - in 2000, bond rates were around 6%. In 2010 they were around 4%. In 2000, if a municipality took out $100M to build schools or whatever, they need to pay $6M a year in interest. Ten years later it comes due. Uh oh, they now need $106M this year but only budgeted for 6 of it. Our bureaucrats spend every penny of tax revenue over the last decade and never made allotments of $10M a year to pay back this loan. So what do they do? Thankfully the rate is 4%, so they can borrow a whopping $150M and still pay the same interest! So that's exactly what they do. Now they get to pay the same $6M every year and also have an additional $50M to spend on "growth" and "sustainability". This has happened across the board in nearly every municipality (city, suburb, etc.) across the nation. This is why the Fed hasn't raised rates. It's the same reason why Japan is in the situation they are in...for 30+ years.

I have in fact read that article :). It's quite a good overview.

Also, it costs more to build and maintain a house (compared to a flat), and most of the other countries, even the developed ones, aren't as affluent as the US.

But after 15 years my house is paid off. With renting, you're paying for the rest of your life. After my mortgage I only pay taxes and upkeep which is a fraction as much.

Sure, but you could buy something that isn't a detached, single family house.

When I moved from my apartment I bought a house (no mortgage). When I add up extra utilities costs, taxes, insurance, and maintenance it comes up to about 75% of what I was paying for rent.

If your house was converted to cash, and that cash invested at, say, 7%, that is what the "paid off" house is costing you.

It's not a matter of renting vs buying. In many other countries, just paying off the mortgage for a flat will take 15-30 years.

That's true, but you still find higher rates of urban living in similarly rich countries with lower subsidies on sprawl.

Roads, sewers, and mortgages aren't subsidized in my suburb. We pay for all of it.

If you live in the US that can't be true. The Interstate Highway System, state highways, etc. are government funded infrastructure that isn't funded locally. The mortgage market is also distorted/subsidized nationwide by the federal government. I'm not sure about sewers.

You can only count the highway system as a subsidy if you pretend a highway between, say, San Francisco and Los Angeles is there to benefit the people of the Central Valley. And it's not.

Certainly the mortgage market is distorted by the federal government, but I have yet to see any evidence of subsidy for suburban borrowers.

The home mortgage interest deduction is effectively a subsidy for suburban borrowers.

Why would you think that? Are people who buy million dollar shacks in SF forgoing their deduction? It's hard to imagine.

It's a subsidy for all mortgages. More people would rent if not for this subsidy. Also any roady that connect your suburb to anywhere are heavily subsidized, to the tune of greater than 60%. If your suburb build its sewers with bonds, they too end up receiving various forms of subsidy. It would be truly unique in the whole of the US if your community's property taxes covered the full cost of local services and weren't partially covered from the state's general fund.

>t's a subsidy for all mortgages. More people would rent if not for this subsidy.

Well, okay. You still haven't made the case it disproportionately benefits the suburbs. People who buy houses in the city pay a lot more money, and presumably get to write off a lot more interest.

>Also any roady that connect your suburb to anywhere are heavily subsidized, to the tune of greater than 60%.

So what you're saying is cities benefit enormously from a subsidy that allows companies to employ people who don't work in the city and import products from other places?

>If your suburb build its sewers with bonds, they too end up receiving various forms of subsidy.

Oh? Do you have some evidence this is true?

>It would be truly unique in the whole of the US if your community's property taxes covered the full cost of local services and weren't partially covered from the state's general fund.

Well, sure, but we pay state taxes. I would expect some of that money to come back.

I expect you'll find that your city core pays for it. Every calculation I've ever seen about the expenses of suburbs ends up with downtown paying for suburban development. It's cheaper to service a downtown property, more expensive to service a suburban one; and the suburban properties are typically paying lower property taxes, not higher. Heavily subsidized suburban residents then go to their city council meetings and complain about property taxes going to mass transit and similar uses. shrug

How much has downtown Detroit paid for Auburn Hills the past 20 years or so?

Or, in another way: are these just recent calculations? There are a lot of places where downtown cores hollowed and had most of the big-financial-impact businesses move out to the suburbs a few decades ago, and now that reversed more recently, and will probably cycle around a few more times in the future.

>I expect you'll find that your city core pays for it.

I expect you're wrong about that.

> Every calculation I've ever seen about the expenses of suburbs ends up with downtown paying for suburban development.

It all depends on who is doing the accounting. Much of the infrastructure built outside cities isn't built for the local residents at all, but it's there to service the cities. As I pointed out above, you can't count a highway between San Francisco and Los Angeles as a subsidy for the Central Valley, and yet that's exactly what academics in at places like CUNY do. How convenient.

>Heavily subsidized suburban residents then go to their city council meetings and complain about property taxes going to mass transit and similar uses. shrug

I mostly see complaining by people who live in cities. People who state confidently how much more efficient cities are and then can't explain why everything they buy is more expensive. Shrug.

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