This is what kills me about the form-based coders and transect enthusiasts. Yes, when land values go up, people substitute capital for land. Yes, densities gradually fall as you move away from the CBD, generally speaking. But these trends don't justify any design regulation.
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I think this is a genuinely difficult issue right now in the US. The car dependance created by the overall land use pattern has a strong imprint on what emerges without intervention ("naturally" is misleading)
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So you're picking (2)? That doesn't mean (2) is wrong, but (1) and (2) are indeed mutually exclusive.
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“Traditional neighbourhoods”, the ones we love, developed before cars. Regulation needs to compensate for negative externalities of modern technology, but be light enough to allow organic growth. I think this is a false dilemma.
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