My topic today is the impact of smart growth upon the nation's and state's economy. It is easy to describe that as of today: smart growth has had no impact on the national economy at all, and very little in any state. Why not? Because few places have actually adopted policies that might achieve smart growth's goals. New Jersey is closer than anywhere else.

Therefore, I should rephrase my topic as: what impact would smart growth have if it were actually carried out --and what is the probability that it will be carried out?

Just what is smart growth? In general, smart growth is a set of ideal goals about how future urban development should be implemented. These goals have been formulated in response to the perceived ill effects of continuing suburban sprawl. Therefore, to understand smart growth, it is first necessary to examine suburban sprawl and its effects.

Suburban sprawl is one possible form of metropolitan-area development. It has been the dominant form in the U.S. for the past 50 years. Sprawl has the following traits: (1 ) unlimited outward expansion of growth, (2) relatively low density residential and commercial development, (3) leap-frog development into far-out sites, (4) heavy reliance on private automotive vehicles for travel, (5) spatial segregation of different land uses, and (6) fragmented policy control over land-use among many localities.

Sprawl's opponents claim it causes these ills: (1) traffic congestion from too much use of automotive vehicles, (2) excessive consumption of open space, (3) rising taxes to pay for infrastructure, (4) air pollution, (5) absence of choices among housing types,(6) absence of mixed-use developments, and (7) weakened sense of community.

Some of these conditions would result from any large population growth within a region. So some of the hostility towards sprawl is really opposition to all growth. However, no region can control the rate at which its population grows. That is determined by its basic traits, such as its location in the nation, its climate, its topography, its history, and the nature of past investments made their by businesses and governments. So insofar as opposition to sprawl is really opposition to growth, it is doomed to fail, because growth cannot be stopped.

But many opponents of sprawl claim they are not against growth, but against the form of growth embodied in sprawl. So they propose smart growth instead.

If you listen to sprawl's opponents, you would think sprawl is an unmitigated evil. But in reality, sprawl also produces significant benefits for a lot of people. In fact, that is why it has been the dominant form of growth for 50 years.

Sprawl's benefits include (1) low-density living, which most Americans prefer, (2) lower-cost housing made possible by low land prices on far-out sites --housing prices fall from 1 to 1.5% for every mile out farther from a region's center, (3) an immense range of choices about where to live and work made possible by the flexible use of private automotive transport, (4) good quality schools and neighborhoods free from big-city problems, and (5) the ability of middle-class residents to segregate themselves from the poor. You may not think that last item is a benefit, but many Americans do. Not many people explicitly defend sprawl, but millions support it by continuing to move into neighborhoods built on sprawling principles.

Opponents of sprawl advocate smart growth. There is no standard definition of this concept, but most proponents advocate certain elements. These include (1) limiting outward expansion through more compact development, (2) increasing densities in both new-growth areas and built-up areas, (3) shifting transportation emphasis from automotive vehicles to more public transit, (4) preserving more open space, (5) creating more mixed-use growth patterns, and (6) revitalizing older built-up areas. Creating more affordable housing is not usually a primary smart growth goal.

These elements are all goals, not concrete policies. They all sound quite sensible as goals. But the problems begin when advocates try to devise specific policies that might actually put those goals into practice.

The theory of smart growth is that higher-density, more compact settlement patterns will (1) absorb less open space, (2) make use of transit more feasible, (3) result in more walking in mixed-use neighborhoods, (4) shorten commuting distances and reduce travel, (5) offer households more varied choices of housing types, (6) reduce infrastructure costs, and (7) reduce traffic congestion.

How large would the cost savings from smart growth be in the next 25 years if it could be applied on a national scale? The study Costs of Sprawl 2000 estimated the difference in certain costs between continued sprawl and a more compact form of development in which 12-14 percent of future household growth is redirected inward.

More compact growth would reduce the costs of roads, sewer and water systems, housing, and some other infrastucture elements. The total saving vs. sprawl over 25 years was about $600 billion, or $24 billion per year. This does not count externalities like reductions in air pollution.

That is a lot of money. But in an economy with a real annual GDP of about $11 trillion now, rising to $20.4 trillion in 2025, $24 billion per year is 0.22 percent of that GDP today. In comparison, Americans spend about $900 billion each year buying homes. Thus, the saving from smart growth equals less than 3 percent of that total. So this gain is not very big in relative terms.

Admittedly, these are crude and incomplete calculations. But they show that switching to smart growth would produce cost savings that are large in relation to state budgets, but not in relation to overall national output. However, advocates say there would be many intangible gains that are not measurable.

Smart growth's list of benefits sounds so impressive it seems that every region would rush right out and pursue smart growth goals. However, the opposite is the case. Very few areas are pursuing the entire set of smart growth goals because doing so would require that they adopt certain policies that are highly unpopular in most U.S. suburban areas.

The first such policy is shifting a significant amount of authority over development from local governments, which now control all land uses, to state or regional levels. That is because certain smart growth goals cannot be achieved by only local policies.

Commissioner Levin said regional planning was needed --but she did not say that such planning requires reducing some of the authority of local governments over land-use decisions. Few politicians are willing to admit that is necessary.

Limiting outward expansion is an example. This requires both adoption of growth boundaries across an entire region, and prohibition of most new housing outside those boundaries. Local governments can adopt individual boundaries, but they never do so in a coordinated fashion that would stop leap-frog moves in an entire region. And only the state government can prohibit housing growth outside urban boundaries. If that is not done, new growth jumps over local growth boundaries to farther out sites, thereby making sprawl worse.

New Jersey is one of the few states which has a statewide land-use plan worked out over many years and coordinated with both county and local plans. If the new state administration can succeed in even partly implementing this plan, that would be a huge achievement.

The goal of reducing traffic congestion also requires regional actions because traffic is a regional phenomenon. Road systems and transit systems have to be built and run across local boundaries. However, I do not believe any feasible policies can reduce future traffic congestion. New Jersey's population is supposed to rise by one million people in the next two decades. Since 1980, whenever the U.S. population has risen by one person, the vehicle population in the nation has risen by 1.2 vehicles. I do not believe New Jersey could absorb even "merely" one million more vehicles in the next two decades without an intensification of existing traffic congestion. So congestion will get worse, no matter what you do about it --though you might help make it a bit less worse!

Also, preserving open space requires some type of regional plan to decide what to preserve and where.

But in most regions, local governments bitterly resist shifting basic control over land development away from themselves. Local residents are willing to accept regional coordination of purely technical aspects of life --such as roads, sewer and water systems, and air pollution. They understand the economies of scale.

But they want to retain local control who lives next to them, who goes to school with their kids, and how fast their taxes will rise. Above all, they want to protect the market values of their own homes by blocking any kind of development they think might reduce those values --like affordable housing nearby. They believe that if they permit any weakening of local powers, they would no longer be able to maintain their desired exclusion. So they pressure local governments to adopt exclusionary zoning policies.

New Jersey has already shifted some power over housing location from local governments to the state through its affordable housing program, its use of inclusionary zoning, and its builder initiative programs.

The second unpopular policy needed to achieve smart growth goals is raising housing densities --in both new-growth areas and existing neighborhoods. Higher densities are critical to slowing outward movement of growth and --in theory --to reducing traffic congestion. But almost all existing residents oppose higher densities near them. And most prospective residents of new growth areas want low density too.

Consequently, most attempts to raise residential densities significantly are blocked by local opposition --the triumph of NIMBYism. But only if densities are raised very significantly can travel distances be reduced and the need for more land for future growth be notably decreased.

When entrenched local citizen opposition blocks both regional approaches and higher densities, just what is left of smart growth goals? The only smart growth goals that have attained broad enough support to be widely adopted are those which have two traits. They can be done by localities acting alone, and they don't require increased density. The main such policies are local limits on growth --quantitative or spatial --and allowing mixed-use projects and walkable communities --as in New Urbanism.

These policies were formerly known as local growth management. Thus, in most regions, attempts to achieve smart growth wind up as local growth management. But that aggravates sprawl by keeping growth at remain low densities but forcing much of it to jump beyond local boundaries.

Moreover, local growth management tends to raise housing prices by both limiting the supply of land for housing and blocking higher densities. So when smart growth becomes growth management, housing gets less affordable.

The widespread ineffectiveness of attempts to create smart growth has prevented all but a very few places from even trying it. Only one --Portland, Oregon --has put all these goals into practice on a comprehensive scale over 23 years. Its attempt succeeded in raising average densities, limiting outward growth, and slightly increasing the use of public transit. But its traffic congestion has grown worse and its housing prices have risen sharply, though not necessarily because of its growth limits. And Portland has not built much new affordable housing; in fact, Oregon just prohibited inclusionary zoning.

How about New Jersey's experiences with sprawl and smart growth? New Jersey's policy has focused more on affordable housing because of court decisions that pressured each local government to provide space for lower-cost units. Until recently, attempts to limit low-density growth have been feeble. But the governor has now made this a high priority. He has "red-zoned" a majority of New Jersey's land as out of bounds for development, and created some tools to help localities to preserve this land as relatively open space.

In the 1990s, New Jersey's population rose by 684,162, (8.9 percent). That is lower than the average U.S. growth rate of 13%. New Jersey had an average gain of 27,366 households per year in the 1990s, and built an average of 31,500 new housing units each year. Your production was thus keeping pace with demand. Yet the governor complains that too much land was developed and he wants to reduce that absorption.

Concerning affordable housing, there are at least two types. One type is housing affordable to very low-income households, who need the most help with their housing. This type should be mostly rental units. It also requires large subsidies because poor households have incomes too low to allow them to occupy standard-quality housing units. But such subsidies are not widely available, so little housing has been either built new or rehabilitated for this group, even in New Jersey.

There are three main purposes for creating housing affordable to the poor. One is to help them live in decent units without being forced to spend too much. Another would be to help many move out of big-city concentrated poverty areas to suburbs near more jobs and better schools. A third would be to promote racial and economic integration in the suburbs. Because we don't provide many subsidies deep enough to aid these households, we are not succeeding very well at achieving any of these goals, even in New Jersey.

A second type of affordable housing is housing affordable to moderate-income and working-class households, who have higher incomes than the very poor. New units can be built inexpensive enough for this group by using inclusionary zoning, which requires developers to build a certain fraction of new units in such price ranges. This does not require public subsidies, so it is more popular.

This tactic has been widely used in New Jersey. As a result, 44,000 units of this type have been created here since 1985. That is about 10 percent of all housing units built in that period. Many of these affordable units have been built in the suburbs. However, most occupants of these units are whites who formerly lived in the suburbs. So we are not deconcentrating city poverty.

However, inclusionary zoning has succeeded in expanding the supply of this type of affordable housing significantly. Builders in New Jersey suburbs have also helped pay for many affordable units built in older cities in fulfillment of suburban affordable housing targets. So this program has worked quantitatively. It has even improved older housing in big cities where the very poor live, providing some aid to members of that group.

New Jersey's approach to affordable housing for moderate-income and working-class residents has been far more effective than any programs adopted in most other regions, except in Montgomery County, Maryland.

The main reason for New Jersey's success --as compared to much less success in most other areas --has been the implicit threat by the state's courts that if local governments don't do something significant to meet regional needs for housing for all groups, the courts will force them to do so. That is what caused the state to adopt its affordable housing approach. The lack of such "teeth" has made attempts to create affordable units in other areas mainly voluntary and ineffective.

Unfortunately, smart growth has no intrinsic linkage with affordable housing. In most areas, proponents of smart growth do not promote affordable housing much. They fear doing so would arouse opposition from suburban homeowners trying to maintain the values of their homes by blocking lower-cost homes nearby. On the other hand, smart growth proponents have not been very successful at achieving most smart growth goals either.

Smart growth goals cannot be achieved without shifting more authority over land uses to some type of regional entities. And more affordable housing cannot be built in the suburbs without a similar regional approach. So it would be logical for advocates of both smart growth and affordable suburban housing to join forces in order to create conditions in which their goals could be achieved simultaneously.

The New Jersey Governor's desire to check sprawl presents an opportunity to enlist his help in pursuing at least some type of regional approach to both smart growth and affordable housing. And state governors --and legislators --are the most important movers and shakers in creating support for such an approach. They have the power.

There is some controversy over whether future policy here ought to be based on the new colored map or implementation of the previously-developed state plan. I believe there is no reason why these two concepts cannot be merged into a single strategy furthering both smart growth and affordable housing, supported by proponents of both the new map and the prior plan.

If New Jersey follows such a strategy, could it achieve smart growth's major goals? Let me speculate about how much progress you might make. I believe you could reduce the spreading out of future growth to at least some extent, thereby saving some infrastructure costs and preserving more open space than with pure sprawl. I do not believe this policy would have much effect on future traffic congestion or commuting distances, even if use of public transit were expanded. I am also skeptical that average densities could be raised much across the whole state, though they might be within certain sub-regions. However, New Jersey could surely create more mixed-use land uses and more walkable neighborhoods --if the market desires them. But those goals do not require a whole smart growth strategy, only a few planning rule changes.

Thus, the long-range impact of smart growth on the state's economy would be a mixed bag --better than pure sprawl, but far short of what smart growth's strong proponents hope for. Whether that is worth the effort to get it is up to you.

In conclusion, New Jersey has gone farther than any other state towards developing and carrying out long-range planning to both cope rationally with future growth and provide more affordable housing. (Oregon does not do the latter.) I commend your courage and initiative. I urge you to pursue both planning and housing goals together as you grapple with your future growth through at least some region-wide policies. Whether you call it smart growth or not, you are at least moving towards exercising more intelligent control over your future than just "letting it happen"as in the past. Good luck.