The question of public service cost and efficiency is an important one for debates over
suburbanization. If low-density residential development were inefficient, an argument
could be made for restricting it. But the empirical evidence on infrastructure costs is
mixed. Even the SEMCOG study, which represents one of the more ambitious attempts to
restrict development by imposing a particular urban form on Michigan residents, can claim
only modest improvements over existing development trends. Moreover, the SEMCOG study is
fundamentally flawed because it ignores the benefits of families living on larger lots.
The problem is that while some infrastructure costs decline as density increases,
(e.g., street maintenance), other costs increase. Cities provide more than just one public
service. As densities increase, cities tend to get larger and the level of general
spending tends to rise (as do tax rates). Thus, while infrastructure costs may go down,
administrative inefficiencies increase as cities get bigger and provide a broader array of
non-infrastructure related programs such as housing and welfare. The net effect is an
increase in general government costs.
The comments of Reid Ewing, a proponent of higher-density compact development, are
worth repeating: "Having said all this, it turns out that density may not be the most
important land-use variable after all. Density largely pays for itself, in the sense that
developers pay for on-site infrastructure and successive property owners pay for public
services through their property taxes."
As communities develop and commercial and industrial properties crop up around
residential development, sufficient "cross-subsidization" of costs and benefits
occurs to minimize negative fiscal impacts on local communities. In other words, surplus
revenues from commercial and industrial land offset the fiscal drain of residential areas.