Regional Urban Growth Boundaries

Note: The Twin Cities in Minnesota have a Metropolitan Services District boundary and Atlanta has a Regional Transportation Authority. These examples are not strictly regional urban growth boundaries but are similar to them.

Description of Technique
Under this technique a state legislature requires planning officials in each metropolitan area, or perhaps each such area over a given total population, to draw an urban growth boundary (UGB) around the periphery of that region in order to direct as much future growth as possible in that region within that boundary. The purpose of this technique is to limit future “sprawl” development around the periphery of the region. The way this technique is actually applied can vary along the following significant dimensions:

Who Draws the Boundary?
The boundary may be drawn by a Council of Governments, by a specially elected metropolitan body (as in Portland, Oregon), by a body appointed by the state governor (as in the Twin Cities area of Minnesota), or by an agency of the state government (as in New Jersey).

The Amount of Vacant Developable Land Included Within the Initial Regional UGB
In Portland, the initial regional UGB was supposed to encompass enough vacant, developable land to accommodate 20 years of projected population and related growth. Other regional UGBs have used different but similar targets. The larger the amount of land included within the initial regional UGB, the less will be the regional UGB’s constraining impact upon “sprawl.” But the smaller that amount, the more of a monopolistic market position is conferred upon the owners of the vacant land within the regional UGB—hence the higher the price of that land is likely to be to developers.

How Often the Boundary Can be Changed
Almost every regional UGB has some arrangements so it can be changed over time. Review every five years is practiced in Portland; other areas have different rules. Some may make changes at any time that the governing body approves of them.

How Stringently Growth Outside the Boundary is Limited
A critical feature of every regional UGB consists of the strength of the prohibitions against developing outside the regional UGB line. In Florida, developers who are willing to pay for all the required infrastructure can develop new projects outside the regional UGB (if they receive local planning permission). In Oregon, most new development outside the regional UGB is proscribed, and most future growth in the region is directed to within the boundary. This in turn: even if developers are willing to pay the costs of all the additional infrastructure required. If there are no stringent limits on growth outside of the boundary, it will not have much impact upon future development patterns. The most difficult issue concerning such limits is how much to curtail the expansion of developments outside the regional UGB that were already there when the regional UGB was adopted.

What Elements of Growth Are Controlled by the Agency Running the Regional UGB?
In Minnesota, the Metropolitan Council controls major transportation improvements and sewer and water system improvements, and limits their implementation to sites within the Municipal Improvement District boundaries. In Portland, the Metro agency has similar powers. Developers who wish to create any new developments outside the areas within the regional UGB that are supplied with sewer and water under the auspices of the Metropolitan Council must pay for all the required infrastructure without public funds.

Potential Benefits of Technique From General Public Point of View
The use of regional urban growth boundary potentially has the following advantages, if the boundary is accompanied by effective prohibitions of new development outside that boundary:

• A regional UGB prevents developers from creating new subdivisions far from existing built-up areas through a process of “leap-frogging” so they can use cheaper land. Therefore it reduces the public costs of supplying such far-out subdivisions with infrastructure, especially long trunk lines for highways, water systems and sewer systems. This keeps tax burdens on existing citizens and on purchasers of new homes lower than they would be if such “leap-frogging” was permitted.

• A regional UGB reduces the total amount of land needed to accommodate a given total regional population. This helps preserve high-quality agricultural land around the periphery of the built-up areas from being converted to urban uses, and environmentally sensitive land there from being degraded by similar conversion.

• Because a regional UGB shows clearly what land can be developed in the near future, it can more easily be accompanied by land-use regulations that increase the certainty with which developers can plan and develop parcels with residential or commercial zoning. Therefore, a regional UGB can make the entitlement process more orderly and faster than is typical where there are no spatial limitations on new development. That has happened in the Portland area.

• A regional UGB tends to increase the average density of new development, and to reduce the average size of individual lots. This reduces the infrastructure costs of serving a given total population within the region.

• By increasing the price pressure on land within the boundary, a regional UGB increases home values in inner-city neighborhoods. This encourages people with good incomes to move into such neighborhoods, thereby helping offset concentrations of poor persons there.

Potential Drawbacks of Technique from General Public Point of View
The potential drawbacks are as follows:

• The price of land within the regional UGB rises relative to that outside the boundary, and this may cause the price of housing in the region to increase rapidly if growth pressures are significant. This makes homeownership more difficult for low-and-moderate income households, and increases the rent burden on some of them.

  1. From 1990 to 1998, median prices of existing single-family homes sold rose faster in the Portland, Oregon, region (101.4 percent) than in any other of the 111 major metropolitan areas for which National Association of Realtors data are available (the average increase was 40.2 percent). This evidence is suggestive, but it does not prove conclusively that the regional UGB was responsible for this price increase. Thus, from 1982 to 1990, during which time the regional UGB was also in force in the Portland area, median home prices rose only 3.6 percent per year there, which ranked it 53rd among 92 areas for which comparable data are available (the average increase among all 92 was 4.5 percent per year). So the mere presence of a UGB in a region where housing prices have risen does not necessarily mean the UGB itself has caused home prices there to rise faster than elsewhere.

  2. Moreover, at least some of the increase in home prices within a UGB may arise because the value of the land has risen due to its higher desirability and other benefits generated by the UGB itself.

  3. It is possible for a state to partly offset the housing-cost impacts of a UGB (or of con-currency requirements) by simultaneously adopting a statewide tax (such as a slight increase in the property transfer tax, as in Florida) and earmarking its proceeds to finance additional low-and-moderate income housing in areas where home prices have risen significantly.

• Even if the regional UGB is initially drawn so that there is enough vacant, developable land within it to permit competition among developers so as to hold down land prices, certain types of land may become extremely scarce within the regional UGB long before the overall supply becomes tight. For example, land in areas where high-priced homes are located may become used up faster than all land in general, resulting in shortages of the former that drive up home prices in those areas.

• By increasing the price pressure on land within the boundary, a regional UGB increases home values in inner-city neighborhoods. This may cause poor households to be displaced from such areas because they cannot pay required taxes, subjecting them to the social hardships of moving to far-out neighborhoods—if they can find decent affordable housing at all.

Practical Lessons from Application of Technique
If the regional UGB legislation includes stringent limits on growth outside the UGB, then growth outside the UGB slows down sharply, and most future growth in the region is directed to within the boundary. This in turn:

1. Preserves more open space outside the UGB than would otherwise have occurred, and reduces the rate at which the developed portions of the region expand outward.

2. Raises average residential densities inside the UGB, partly by reducing average lot sizes for new homes and partly by raising the percentage of all new housing built as units in multi-family (but usually not high-rise) structures. Higher densities have involved more in-fill development and more neighborhood rehabilitation than would otherwise have occurred.

Note: In Portland, the UGB legislation was accompanied by rules speeding up the development permission process, which reduce development costs, thereby permitting lower per-unit housing costs than would otherwise have occurred.

One likely impact of this technique—assuming the UGB has the effects mentioned above—is to increase land prices within the UGB, both absolutely and in relation to land outside the UGB. Whether high land prices result in higher housing prices is not clear, because housing densities tend to rise too—creating more units per acre of land. Higher land prices have many consequences, both positive and negative, as set forth in remaining sections below.

Portland has also experienced lower property taxes, and more permissive local legislation concerning accessory apartments in single-family homes, thereby permitting homeowners to earn supplementary incomes. These two developments may have caused part of the increase in housing prices that occurred there after 1990.

Strategic Considerations for NAIOP Members Faced with Technique
A regional UGB tends to increase land prices within the boundary, thereby putting economic pressure on residential, commercial, and industrial developers to create higher-density projects than they might prefer if there were no regional UGB.

Advantages from NAIOP’S Perspective
Adoption of a regional UGB, if accompanied by appropriate land-use regulations, may increase the speed and predictability of the land entitlement process, thereby reducing costs for developers.

Disadvantages from NAIOP’S Perspective
A regional UGB greatly constrains, or may entirely prohibit, developers from searching for new subdivision sites on far-out, low-priced land. This restricts their entrepreneurial options.

Sources of Further Information
Arthur C. Nelson, “The Urban Growth Boundary as a Growth Management Tool,” in Richard D. Bingham, et al, editors, Planning the Oregon Way: A 20-Year Appraisal (New York: Sage, 1993).

Arthur C. Nelson, “Improving Urban Growth Boundary Design and Management,” in Real Estate