$5000 subsidy per suburban new build lot? Simple solution, remove the subsidy and the builders/developers will just pass the cost onto the consumer. What is an extra $5k on the mortgage on a typical $500k new build, or whatever they are going for right now? If they do this all the yuppy/hipsters/dinks/doinks can shut up there mouths.
As for sprawl? The city should annex further, implement a 'green belt' perimeter and then control growth through zoning. Allow single family detached but reserve larger sections for building up and future transit zones.
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