How Unwise Infrastructure Investments Makes St. Louis Metro Poorer

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As we consider our infrastructure needs and how to pay for them, we should take a look at the results of our previous behavior and decide whether a course correction is in order or if we should keep doing more of the same.

Supply and Demand Curve Shifts - Ray BromleyLet’s consider housing supply and demand in the region. When we build new infrastructure that opens new areas to housing development, the housing supply curve shifts to the right. When new households are created or move to the region, the demand curve shifts to the right. So if supply exceeds demand, housing prices go down (St. Louis); if demand keeps up with supply, prices are stable, and if demand out-paces supply, prices go up (San Fransisco).

New housing to New household ratio

Let’s examine real numbers from Metro St. Louis. Over the last decades the supply of new housing units has far exceeded the demand by new households. Zooming in this can look great. Downtown has seen a lot of new housing units and has become a thriving neighborhood. O’Fallon’s population has quadrupled in the last 20 years.

AGI Leaving St. Louis

AGI Leaving St Louis OCunty
{IRS data compiled and presented by How Money Walks – Travis H. Brown}

But large areas are declining. Let’s zoom out a little bit. A lot of wealth has been leaving St. Louis City, not a big surprise. What’s shocking is how much is leaving St. Louis County. A canary in the coal mine is the county’s three dead malls. A significant portion of this can be attributed to the conveyor belts of sprawl that we have built. No doubt a lot of what St. Louis County has lost is made up for by the gains in St. Charles and other counties, but we’ve saddled ourselves with much more infrastructure to maintain. The combined population of St. Louis City, St. Louis County, and St. Charles County has only grown 1.2% since 1970 (That’s not 1.2% per year) yet we are on the hook for much more infrastructure. This represents a future liability- to what end?

Empty Neighborhood Jefferson in 1968

{This place can pay for the streets, trash pickup, support neighborhood businesses, etc. It has an economy that creates wealth and opportunity. It is an asset to the region.}

What’s truly tragic is when an area goes from just being an affordable one to one where there are few job opportunities, education quality is declining, and property values fall so much that it is not worth basic maintenance, let alone rehabilitation or new construction. Social collapse and abandonment ensue and murder and mayhem follow. These areas go from producing wealth to being a liability for the region and state.

Empty Neighborhood Jefferson Today

{This place cannot – it’s a liability. It was undermined by infrastructure and housing policies of the 20th century. Let’s learn from those mistakes.}

The above image is in the Northside Regeneration project area. The biggest threat to its success is continuing to build under-priced housing in the outskirts which only incorporates the little bit of infrastructure needed to access the new land, not what will be needed when things get busy out there (Hello Page Ave Extension, phase II, III, IV and beyond). That’s why it takes a $390M TIF for Northside. It is in competition with the development on the edges. McKee recognizes that he needs new jobs there to attract new people, moving the demand curve. If the region wants this area to stop being a liability, we need to slow the effects on the housing market by easy growth on the edges.

We’re a slow growth population region. To the extent that government spending and regulations undermines our property values, it should be changed. Instead of using resources to hurt ourselves, we should use them to enhance existing productive places and shift the demand curve by nurturing economic activity that makes us wealthier.

Neighborhood Change in the St. Louis Region Since 1970: What Explains Success? by nextSTL.com

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  • John R

    Speaking of McKee’s Northside Regeneration, I wonder where the project with the different homebuilders to do 79 homes in Saint Louis Place stands…. here is the Oct 12th article in the Post-Dispatch:

    http://www.stltoday.com/business/local/mckee-lines-up-five-homebuilders-for-northside/article_90bdaf03-4a63-5284-803f-b7c8e81b0a15.html

  • moe

    While I don’t disagree with the facts mentioned, I feel that one can’t place all the blame at the feet of Government. Believe it or not, despite the economic collapse of the decade, here is still societal and family pressures to do better, to have more than the last generation. The age of McMansions is far from over. Sure, the size may have dropped a few hundred sq feet, but they are still extra large compared to even just 30 years ago…and there is that whole “I’ve got to have new, because old is too much to maintain” attitude.
    As with the role of Government…that is an entire argument in and of itself. I’m a liberal, but even I think that there are some things that Government should have minimal involvement with…such as property rights. When we start saying Government should do more in areas like this…it can often turn into a very slippery slope.

    • rgbose

      Agreed there is the desire for new, but should we use public policy and spending to encourage and subsidize it? There’s plenty of space in St. Louis County for bigger houses. And now with so much empty land int he city there’s space there too for bigger new houses (many of the old ones are big, plus 2-1 and 4-2 fam conversions), albeit not always on an equally big lot (there are some big ones in the West End neighborhood, but that’s, egad, north of Delmar).

      I’m always floored by how much people are spending for housing elsewhere. A lot of those places had just as bad policies and spending, but they had some geography (ocean, lake, mountain) to buffer them. We don’t; the rivers are easily conquered. We need to adjust our infrastructure spending in magnitude, type, focus, and goals. And it’s not just roads. Think of how many more schools, libraries, city halls, police depts, fire stations, sewer lines, gas lines, water lines, electrical lines, municipal maintenance faculties, etc that we’ve burdened ourselves with. This makes us poorer through higher taxes and utility bills in addition the neg effects to property values.

  • Brad Fratello

    But moe, building toll-free freeways IS government activism. Removing infrastructure IS government activism. It subsidized the “musts” you point to for decades. Government, by nature is totalitarian/sovereign. Choosing what to do and what to stay out of is always going to promote and dissuade certain actions. It’s naive to think there is only agency when government doesn’t act, and passivity when it does.

  • Brian

    What makes what is currently happening in St Louis County really scary is the in county migration to Chesterfield that demands new infrastructure. Large parts of St Louis County are being abandoned and declining resources are having to be used to build new infrastructure in Chesterfield. Just a complete waste of money.

    • moe

      That may be but ask the voters and the taxpayers out in Chesterfield and those moving out there, and they will say it’s their money, they deserve it, or we need it, why continue to maintain the old when the new is better?

      • brian

        It isn’t really their money. The County ends up selling bonds to fund a large part of these infrastructure projects.

        • moe

          And where does the County get the money to pay bonds? The taxpayer. And let’s face it, it’s pandering to the voters.