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Month March 2012

More on Parking Prices

At Wabi-sabi, Sandy Ikeda (former Market Urbanism writer) has a great analysis of San Francisco’s pricing for parking. He points out that assigning prices to spots is not equivalent to allowing a market to determine a price. For a real price to emerge capital (the parking space) cannot be state-owned. Sandy points out that the “shortage” of parking arises because no one owns street parking, so the appropriate incentives are not in place for someone to charge an equilibrium price for parking. While the San Francisco programmay be a step in the right direction, he explains that “more intervention usually doesn’t solve the problems that were themselves the result of a prior intervention.” In this case, the city is trying to set a price for something that it could instead auction off to eliminate the original intervention. On yesterday’s post, two commenters pointed out other parking reforms in Austin and in Long Beach that go a step further than charging higher prices for parking. These cities have allowed businesses to lease parking spots for outdoor restaurant seating or retail. San Francisco has also tried turning parking spots into mini parks. This has several benefits, including allowing for land to be better-utilized by permitting a form of street narrowing. However, as long as curbside parking remains city-owned, prices for either parking or land leases will be determined arbitrarily, preventing the actual highest-value use from being discovered.

Spring Fever Links

1) Nate Berg at The Atlantic Cities covers new research on the world’s earliest cities. The findings would make Jane Jacobs happy as researchers have uncovered evidence that the earliest urbanization was a case of spontaneous order. Their construction wasn’t directed by kings as some historians previously thought, but rather by bottom-up decision-making. 2) Alex Block had two interesting pieces a while back on the politics of increasing urban density. He points out that the vested interests in urban development complicate the policy prescriptions that we often advocate here of loosening regulations. 3) Charlie Gardner at Old Urbanist points out that we shouldn’t get carried away with hopes for housing prices dropping in expensive cities with increased housing supply. While land use restrictions that Matt Yglesias, Ryan Avent, Ed Glaeser and others have written on force urban housing prices higher than they need to be, infill redevelopment is inherently a costly, slow process. It’s much easier for the price of housing in, say, Houston to stay closer to costs of construction because Houston has available land to build on cheaply and easily. Housing in New York is expensive in large part because of market fundamentals, but density restrictions make it more expensive than it has to be. 4) The case of the successful parking pricing in San Francisco that continues to receive opposition reminds me of this passage from Murray Rothbard’s For a New Liberty: The libertarian who wants to replace government by private enterprises in the above areas is thus treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax-financed monopoly from time immemorial. If the government and only the government had had a monopoly of the shoe manufacturing and retailing business, how would most of the public treat the libertarian who now came along to […]

The Tyranny of Zoning: Exhibit A

The Washington Post reports that the redevelopment of the Giant grocery store at Wisconsin Ave and Idaho Ave will finally be getting underway. Through the sick humors of the real estate gods, I live pretty close the this grocery store and can attest that it is an eyesore in bad need of a renovation: It is one of the most belabored Washington development projects in recent memory, but on April 12 the Giant grocery store at 3336 Wisconsin Ave. NW will finally close, making way for construction of a $125 million housing-and-retail project that will feature a much bigger new store. Giant began discussing plans to replace the out-of-date, 18,500-square-foot Giant almost a decade ago, but questions about what the company ought to build in its place grew to monstrous proportions in the Cleveland Park neighborhood. Eventually, the debate reached the point that some neighbors on opposing sides of the issue ceased speaking to one another. Last week I attended one of the Urban Land Institute’s Real Estate 101 courses about this project and learned about this project from the land use attorney’s perspective.  Phil Feola with Goulston & Storrs shared the story of the entitlement process for this project, going back to the first ANC meeting in 2005. Part of the property that Giant wanted to develop as retail is zoned residential, so rather than attempting to amend the code, they sought approval of a Planned Unit Development. Typically a PUD is easier to achieve than blanket upzoning for a parcel because with a PUD both city planning and the project’s neighbors know what they will be getting with the redevelopment. The neighbors initially requested 32 changes to the PUD, and after making some adjustments, Giant’s proposal received near-unanimous support from both the Zoning Commission and the National Capital Development Commission.   […]

Book Review: The Rent Is Too Damn High

Matt Yglesias’ new Kindle single, The Rent Is Too Damn High, is a quick and engaging read on the reasons that much of the conventional wisdom about housing markets is wrong. While Yglesias has many progressive views, with regard to land use he takes a classical liberal stance. He explains that the “rent is too damn high” because land use regulations restrict housing supply, keeping prices above the free market equilibrium. My favorite part of the book was Yglesias’ discussion of unbundling the supply and demand for land from the supply and demand for buildings. He provides a very clear explanation of the differences between the two, explaining that rising land values benefit land owners, but rising housing prices serve only to decrease everyone’s real income. Under a system where land use is regulated to constrain the supply of buildings, landowners earn long term rents (higher than they would otherwise earn) that cannot be eroded by other landowners building more densely. In the chapter “The Virtues of Density,” Yglesias offers a powerful counter-argument to “market suburbanists” who argue that land use deregulation amounts to forcing density on people: People worry that a denser neighborhood will have more traffic and more noise. Generally speaking, they’re correct. But all this means is that allowing higher density will be a self-limiting process. Balancing the different costs and benefits involved in denser building is, after all, precisely the sort of thing that relatively free markets are good at. Different people have different preferences about noise, commuting mode, lawn size, amenities, and employment possibililties. . . . To say that some of America’s neighborhoods — especially in coastal cities with strong economic opportunities and limited space — should be denser is not an argument for infinite density. Nor is it an argument for central planning […]

Maryland realtors fight to protect their subsidy

This post originally appeared at Neighborhood Effects, a Mercatus Center blog where we write about the economics of state and local policy. We’ve already explored Governor O’Malley’s proposal for the Maryland budget here and here, but recently, a perhaps unintended consequence of the budget came to light. By limiting the deduction that residents earning over $100,000 can make on their state income taxes, the proposed budget would limit the size of the mortgage interest tax deduction for many taxpayers. I stand by my earlier argument that reducing deductions for only one group of people is not a step in the direction of fairness, but a reduction in the mortgage interest tax deduction may be a positive side effect of an otherwise bad policy. From a limited-government perspective, the obvious downside of a reduction in the mortgage-interest tax deduction is that this represents a revenue-positive change in Maryland’s tax code in a state that already has one of the highest tax burdens in the country. Overall though, I think reducing this tax expenditure is a positive change because the policy has many negative consequences. While the causes of the financial crisis were many, by subsidizing investment in homes, the mortgage interest tax deduction played some part in the overvaluation of housing stock. Aside from the poor incentives that this tax expenditure creates in financial markets, it amounts to favoritism of suburbs over cities. In Triumph of the City, Ed Glaeser argues that the deduction leads many people to abandon renting in a city center for homeownership in the suburbs. However the Federal Reserve Bank of Boston provides evidence that the policy is more likely to lead people to buy larger homes than they otherwise would rather than trading renting for buying a home. Richard K. Green and Andrew Reschovsky write: If one set out to design a policy to encourage homeownership, […]

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