23 December 2008

Cityscapes and recession

Over at Ockham's Razor, Peter Newman makes a case for urban sprawl being a contributing factor to the current financial recession. Really interesting, one of my favourites on this show for a while.

Briefly, he argues that people will only spend about an hour commuting to work on a daily basis, regardless of whether they walk, take trains, drive, or what have you. The current city design -- expanding circles around a core central business distract -- was made possible by cheap fossil fuels. The far edges of cities were all about cheap housing, so people who moved there were often more economically vulnerable to start with. Now, combine people with mortgages (especially those sub-primes we hear about) with increases in fuel costs. The rise of fuel prices disproportionately squeezed on people who were already struggling to make ends meet, and suddenly a lot of mortgages don't get paid. And that may have helped collapse the whole thing...

1 comment:

Steve-o, aka "Ignatius J. Reilly" said...

It's an interesting idea, but the numbers show a problem.

Let's say one commutes for 1 hour per day (1/2 per trip). Let's say the trip takes 30 miles. That would then be 60 miles per day, and with an average of 20 mpg fuel efficiency, would consume 3 gallons of gasoline.

Let's say this commute happens 20 times per month (four 5-day weeks). That equals 60 gallons of fuel purchased per month for commuting. At $2.00 per gallon, this would be $120; at $3.00 per gallon, this would be $180. So a big fuel cost rise equates to an additional expense of $60 per month.

Mortgages for homes here in California typically range between $3000-4000 per month. $60 represents only 1.7% of the average of these mortgage payments. So the fuel cost rise is relatively trivial compared to the mortgage payment increases arising from fluctuating interest rates.