Over at CEOs for Cities you can read economist Joe Cortright’s Driven to the Brink: How the Gas Price Spike Popped the Housing Bubble and Devalued the Suburbs (PDF, 30 pages), read the press release (PDF, 2 pages), or watch a video on the subject (3:50).

The argument, much more carefully phrased in the actual study, is that high gas prices are shrinking suburban housing values and boosting city housing values. The actual numbers are a little squishier. Check out the bubble charts on page 13: the pattern is more obvious in LA and Tampa than in Chicago or Pittsburgh, and it’s not clear if the results will hold up when you change your precise definition of city and suburb. For that matter, it’s not clear how the pattern holds up over time — if, just to take a wild example, an economic panic should reduces gas prices and everybody’s incomes at the same time.

That hasn’t stopped Peter Katz from proposing that official Washington should “get tough”:

Washington, he writes, is “emerging as lender of last resort, asset manager for the wounded American taxpayer, assuming the responsibility for thousands of toxic mortgages on property that more diligent local planners might never have allowed to be built. So why could Washington not advocate — maybe even require as a price for the potential subsidies and loan insurance it may offer — compliance with planning rules aimed at promoting more economically robust, resource-efficient communities? Indeed, with solid place-based, home price data like Cortright’s, we now have information one could ‘take to the bank’ in the form of ‘smart growth’ underwriting standards to push qualified projects to the front of the line for speedy loan approval.”

This would be a conscious attempt to do the opposite of what the Federal Housing Administration did in the post-World-War-II era, favoring homogeneous greenfield suburbs over diverse city properties and rentals. (See Kenneth Jackson’s Crabgrass Frontier: The Suburbanization of the United States, pp. 204-8.)

And it might be a good idea if the data hold up. But beware the sleight-of-hand. The now-toxic mortgages weren’t questionable because they were out in exurbia. And they didn’t become a financial time bomb until financial wizards mixed good and bad mortgages together in such complicated ways that no lender wanted to touch anything.

Even so, the design question actually remains. In a high-gas-price future, can just any suburb, anywhere, no matter how far away, be made as desirable as an infill location in Chicago with existing transit and retail connections? The large-scale pattern matters as much as the small-scale one. Assuming the Obama-Biden administration wants to get into this issue, those hypothetical smart-growth underwriting standards may not be as easy to devise as it looks from a distance.

#