How to Obscure Reality to Make Planners Seem Important

Regular reader, Bill forwarded this article from the New York Daily News calling it an “outstanding collection of anti-density and anti-market propaganda presented (as always) as objective journalism.” The article is riddled with misconceptions (aka Urbanism Legends) about zoning and development and is a perfect example of the quality of journalism that touches on city development issues referenced in today’s earlier post, Journalists and Cities.

Let’s spot the more egregious statements from City and residents aim to keep Rockaway low-density:

“The hope is to spur investment by maintaining low-scale development that fits into the area’s historic character. Similar zoning changes in Bay Ridge, Park Slope and the West Village along the Hudson River inspired great growth.”

hmmm, restrictions inspire growth?

Rockaway’s last zoning change came in 1961, allowing multifamily homes to be built where single-family homes once stood. The results were rapid development and streets butchered by an ungainly mix of large and small apartment buildings and homes.

Wait, growth is bad?

We don’t have the space to be densely populated, and the owners of these big buildings don’t even live here”

more space :: more density? not the equation I learned

“Home prices should begin a steady increase if this zoning gets us better transportation.”

This “zoning” that brings transportation sounds even nicer than the tooth fairy, and just as real.

“I don’t know if the new upzoning of 116th St. will work, but I do know that the old, low-scale zoning on 116th St. did not bring in the amount of new businesses and investment required to improve the area.”

Then again, density is good for retail…

To ensure that parking does not become a problem, Gaska worked with Burden’s city planners to ensure that each new development has parking for at least 85 percent of the residents, not the usual 50 percent.

They want walkable neighborhoods, but more importantly parkable neighborhoods.

“This is the case where the city representatives are supporting developers, not the community. I personally think gentrification would have taken care of itself.”

By “community”, they mean the ones who want to exclude other people from the community to boost their own home values.

“The old zoning was like the Wild West, with people putting up anything they wanted anywhere,” says city planner Burden

The good ‘ole Wild Wild West analogy… People who are willing to pay for it should not have what they want, Burden knows whats best for you.

Predictability creates value… …That’s our plan citywide.

Does predictability really “create value” or does it release value by not obscuring what someone can do with their property? And if you really want to release value, let people build as they please like the “Wild Wild West” of the old zoning.

I guess by confusing the reader with a bunch of contradictions, it makes planners seem like real geniuses. Wow, how could they take all that information, process it and come out the best solution for all of us? Amazing minds, those planners – what would we do without them?

Journalists and Cities

Here’s a link to an interesting article by Scott Page at Planetizen called A Journalistic View of Cities
Scott discusses how mainstream journalists are poorly equipped to write appropriately on urban issues aside from than architecture.

I was reading the New York Times Magazine special architecture issue a few weeks ago when something jumped out at me. On the intro page to the issue of the “Mega-Megalopolis” one of the by-line says “How does an architect plan for a city with no history? Or a city that just keeps growing?” Interesting questions particularly given the fact that to charge architects with the task of planning our cities is affording too much power to a profession that simply doesn’t have it.

Nor do planners for that matter. I’ve made it no secret in this blog that cities are the product of thousands of decisions made by individuals, organizations, leaders, businesses among others. We have the opportunity to guide some of those decisions and make more informed choices but the days of Hausmann and Napoleon who transformed Paris in the span of a few decades are coming to a close. Yes, yes, I know that China and a handful of other places are building cities ridiculously fast today and I also know that starchitects are generally charged with the task of creating large master plans to guide this government-sponsored development. I think we also know how unique a situation that is. Architects are flocking to build in China and Dubai precisely because of this unique opportunity. Where else can you feel like Robert Moses or Albert Speer, able to shape a city in a single bound?

But what struck me most about the architecture issue is that the public’s perspective on cities today is written primarily by architecture critics.

(emphasis mine)

What’s ironic about this is that the current identity of our profession was largely shaped by a journalist – Jane Jacobs. The Death Life of Great American Cities was read by planners and residents alike.

I agree, and most of the journalists are even more clueless when it comes to the economics of cities and the effects of planning on society as a whole.

Social Networking With Market Urbanism

Last week, a reader submitted a Market Urbanism post to Reddit, a social networking site. The submission generated quite a bit of traffic from the economics category on Reddit.  It was #3 on the hot list for economics for a while that day.

Seeing what kind of traffic that can be generated from Social Networking, I created accounts at the main sites I am familiar with:

Here are links to connect with Market Urbanism at Reddit, DIGG, and del.icio.us.

I am not so well versed in the best ways to do this type of social networking, so leave a comment of you have any advice on how make the best use of social networking…

Urban[ism] Legend: Zoning Creates Density

This post will be the first of many of an ongoing feature at Market Urbanism entitled Urbanism Legends. (a play on the term: “Urban Legends” in case you didn’t catch that) In many public forums and in the blogosphere, I consistently encounter myths about land development and Urban Economics. These myths typically look at how policies may benefit or harm a specific person or groups of people. However, as with many popular economic misconceptions, these viewpoints fail to look at how a particular policy may affect other, less visible people. These less visible people are the ones who William Graham Sumner called “The Forgotten Man” in a famous 1883 lecture. These myths are plentiful, and I expect the feature to be stocked with myths to dispel well into the distant future.

In many different contexts, I have heard people argue that liberalizing zoning restrictions will cause “over development” or high density development filled with low income people. Even in relatively low density areas, people make the sensationalist argument that if zoning restrictions were lifted, high rises would be built in their community, creating congestion and overburdening infrastructure.

On the other end of the spectrum, I have even heard free-market advocates argue against Smart Growth and other urbanist concepts using several Urbanism Legends. They argue that Smart Growth goes against the market and causes density to increase in urban areas. They are correct when they refer to Urban Growth Boundaries that restrict development in outlying areas. Strangely, these market advocates rarely applaud Smart Growth proponents advocacy for loosening zoning restrictions in infill areas. They have argued that the upzoning discourages single family homes, which is the desired living arrangement for most people. And that the market should allow for more single family homes.

The reality is that zoning can not create density. Zoning only restricts density. Loosening zoning restrictions only allows market forces to meet the demands of the marketplace.

So, if there were no zoning would skyscrapers go up in quiet single family neighborhoods? Most likely not, unless zoning restrictions have serious hampered redevelopment or something drastic has caused demand to skyrocket in an area.

There’s the simple reason why: Construction costs (per square foot) rise as height and density increases. This is because more expensive construction materials and systems are necessary to build densely. So, building a 50 story building in a quiet suburban neighborhood rarely makes economic sense for a developer. Construction costs would be so high that the developer would not be able to sell the space in the tower at a high enough price to justify the construction costs, since space in single family homes would be significantly cheaper.

Other than construction costs, the other main variable driving density is land prices. Higher density development does allow for the cost of land to be shared by more constructed space. However, in typical suburban areas the land cost is relatively low, and has a very negligible affect on the cost of building densely.

In order for a higher density development to be feasible, it must be in a location desired by many more people. The land prices are likely higher in such a location. However, demand is sufficient enough to charge more money per square foot for that location. The developer will be willing to build more expensive, high density construction which spreads the high land costs over more units.

A rational developer would likely not be willing to build single family homes on very expensive land in normal circumstances. By the same rationality, if developers were restricted from building densely on desirable property by zoning, land values are held artificially low. This helps values of already built homes, but hurts the value of the land under them.

There are even instances where zoning has no effect on density since zoning restriction may be so loose that a developer could build the highest and best use as-of-right. In such cases, loosening density restrictions have not effect.

In microeconomics terms, zoning is a supply ceiling, which behaves almost inversely to a price ceiling. As the market is not allowed to optimally meet full demand, prices are forced higher by the shortage. These measures are regressive in that wealthy homeowners can afford to remain in the area, while middle class people are forced to look elsewhere for housing. Often, those middle class residents are displacing poorer residents from their low cost housing.

Wealthy municipalities, such as Beverly Hills use zoning to protect it’s wealthy home owners from more optimal higher densities. Beverly Hills is proud of their market distortions, and use the “Zoning Creates Density” legend (among other legends) to deceive people in their own propaganda video called, It’s a Wonderful City.

The bottom line is that zoning itself cannot determine density. Construction costs and desirablity are the main factors that determine density. Zoning can only restrict market forces from meeting demand, artificially driving up housing prices, while driving down land prices, thus pushing people to more affordable, yet less desirable locations.


To receive future Urbanism Legends posts, subscribe to the Market Urbanism feed by email or RSS reader here. If you come across an interesting Urbanism Legend, let me know by email or in the comments and I’ll make a post debunking the myth. Of course, I’ll give you credit for the tip and any contributions to the post you make…

NYC 20-Somethings’ Stagnant Wages and Higher Cost of Living

I need help with this one. Is this a phenomenon of statistical cherry-picking or a true trend that should worry us?

New York Observer – A Yoke for the White Collar
New York’s college grads now hustle for jobs paying 1970s wages. Meet their coping mechanism—massive debt!

A younger New Yorker could be forgiven for running up debt: Real wages for 20-something professionals in New York haven’t changed since the early 1970s. At the same time, the number of college grads competing for white-collar jobs has increased—as has the cost of everything from real estate to beer to MetroCards.


image from article: Nigel Holmes: Source: Gotham Gazette, June 19, 2007

In 1970, 19.5 percent of New Yorkers in their 20s had college degrees, according to the analysis. By 2005, that percentage had more than doubled. By 2006, roughly one in three New Yorkers 25 and older had at least a college degree, according to N.Y.U.’s Furman Center for Real Estate and Urban Policy.

For younger college grads, the job market has become ever more competitive and the monetary rewards stagnant.

And yet they come.

Something doesn’t seem right and I can’t put my finger on it. The statistics seem a little cherry-picked, but I have suspicion that some important demographic trend is being neglected. Sure, I can see where wages are stagnant, but as more college educated young people have moved to New York?

Have shifts in immigration trends caused this? Or perhaps loss of manufacturing jobs that paid relatively well for young native New Yorkers?

I think it’s safe to say that many more college students have flocked to New York in the past decade, and many college students are taking longer to graduate. Could part of it be that more 20-somethings in New York are spending more time in the classroom and not yet earning money?

Any thoughts?

Subsidies and Taxes Favor Owning Over Renting

Paul Krugman asks a question that has been addressed at Market Urbansim:

But here’s a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?

Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner. “If you own something,” Mr. Bush once declared, “you have a vital stake in the future of our country.” Presumably, then, citizens who live in rented housing, and therefore lack that “vital stake,” can’t be properly patriotic.

Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn’t let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing. On top of that, government-sponsored enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — provide cheap financing for home buyers; investors who want to provide rental housing are on their own.

(Krugman neglects to mention that landlords also deduct mortgage interest, passing some of the savings to tenants. However, landlords pay taxes on income and gains, which the homeowner usually does not.)

Krugman then gives 3 downsides to society of encouraging ownership:

First of all, there’s the financial risk. Although it’s rarely put this way, borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake.

I agree, sometimes these risks are better absorbed by the capital markets if the risks cannot be properly diversified through an individual’s portfolio.

Owning a home also ties workers down. Even in the best of times, the costs and hassle of selling one home and buying another — one estimate put the average cost of a house move at more than $60,000 — tend to make workers reluctant to go where the jobs are.

Finally, there’s the cost of commuting. Buying a home usually though not always means buying a single-family house in the suburbs, often a long way out, where land is cheap. In an age of $4 gas and concerns about climate change, that’s an increasingly problematic choice.

(Krugman’s third drawback has become nearly irrelevant as condos have been built in urban areas and apartments have been converted to condos during the past decade. )

Arnold Kling notes that homeowner subidies are regressive and adds:

Traditionally, one positive externality of home ownership is thought to be that owners maintain their properties better, and this helps maintain property values for others.

However, I would counter there are positive externalities of rental buildings. As I mentioned in a past post on the mortgage interest tax deduction that rental developers have the financial incentive to construct a more energy efficient, and more easily maintainable property than a build-and-flip developer.

Also, by raising the cost of moving, ownership helps stabilize a neighborhood. Seeing the same people year after year helps people feel more secure. Also, more home ownership might mean that more people will have an interest in long-term public goods, including roads and schools.

But this cuts both way. Look at Detroit or any city that suffered from loss of manufacturing jobs. When jobs leave an area, market frictions such as rent control, public housing, moving costs, and emotional attachment keep people from relocating to where jobs are more plentiful, exacerbating the local economic problems.

Similar to what Bill commented in Mortgage-Interest Deduction: The Unseen Costs Kling concludes:

The problem is that the value of the subsidy has been capitalized into the prices of existing homes. If you take away the subsidy, then people will take capital losses.

Similar to what I had argued in the comments of the past Market Urbanism post:

Part of the value of the deduction ends up baked into the value of the property, which is a part of why there is a premium value of owned property vs rented. So, in the long run, the net effect of the deduction is smaller. The short term effect of eliminating the deduction would hurt, but in the long-run housing prices would lower slightly.

Should Government Own Wilderness?

I found a link to a great article at FreeColorado.com. It doesn’t apply to urbanism specifically, but conceptually deals with privatization of publicly owned land.

Free Colorado – Should Government Own Wilderness?
The original article was from Grand Junction Free Press – Armstrong Column: Should the government own, manage wilderness?

here’s a few quotes I enjoyed:

Just how far do we want to push our free-market agenda? The short answer is all the way. A free market means that people’s rights to control their resources and associate with others voluntarily, so long as they don’t violate the rights of others, are consistently protected. It means that the initiation of force is outlawed. The alternative is coercion: taking people’s resources by force and and threatening them with jail for not doing what you want.

We refuse to sanction the mixed economy, the current blend of some liberty and some socialist controls. We advocate liberty, all the time, without exception.

Politically, of course, it’s usually easier to stop the government takeover of something new (such as a recreation facility) than to restore a government-controlled entity to the free market. Even though there’s no reason whatever for the national government to run trains or deliver the mail, the National Railroad Passenger Corporation (Amtrak) and the United States Post Office have resisted market reforms. Trains and mail remain largely socialized industries.

It seems that organizations like the Sierra Club complain most loudly about federal wilderness management. Therefore, we suggest simply giving many federal lands to the Sierra Club or similar groups. We’re confident they would do a good job managing the land, and they’d be more open to charging fees for use and even drilling to pay for land management. The rest could be transferred to a privatized Forest Service or sold, with the proceeds used to pay down the national debt.

I agree. Why not just give the land to the Sierra Club or other environmental groups, and let them take responsibility for protecting the wildlife. Since they have a vested interest, I trust them more than I do the government.

Could a Private Street Look Like This?


photo at Brooklyn Paper was attributed to Montague Street Business Improvement District

Stephen at rationalitate occasionally brings up that truly privatized streets could be converted to other uses. I think it would be inevitable that on streets with many shops and cafes, such as Montague Street in Brooklyn, the shops may get together to form some sort of association to own the street. Perhaps on weekdays, the association who own the street would allow commercial traffic which benefits their businesses, and on nights and weekends close off the street for seating and pedestrians. I guess we’ll never know until some city is bold enough to try it.

Brooklyn Paper – Montague on grass!

The grassy plazas would not cut off traffic on the busy side streets. As such, the bike advocacy group Transportation Alternatives said that the plan would not wreck havoc on car traffic. In fact, it would bring more people to the street, mostly by subway, foot or bike.

“It will also encourage Sunday sales for our merchants,” said BID Executive Director Chelsea Mauldin. “People can come out, pick up a coffee, read the paper, and enjoy the sunshine.”