Has The Urban Planning Profession Declined? (Like Planners Claim)

As readers know, Market Urbanism has for several years had a strong homepage and Twitter presence. And thanks to Adam, it is getting a stronger Facebook one, both on MU’s official Facebook page, and its chat group. If you enjoy reading substantive things, I recommend following both, but especially the chat group, which is available for anyone to join.

Many of its updates feature links from around the web posted by MU readers, informing us about the world’s biggest urban issues, with everything from mainstream news clips, to esoteric working papers and book chapter pdf’s. We would love to have more of you join and begin posting! This doesn’t mean the group is open to trolls; we don’t want to hear your grammatically-tortured vitriol. But we do like potential skeptics who ask questions and start debates, as they have received strong responses in the past.

All that said, here are some of my recent favorite links shared by the group, and let’s raise a Friday night glass for the many more to come.

1. Robert Moses’ 23-page response to The Power Broker. Like the man himself, the letter was angry, rambling, irrational, and condescending, yet had moments of rhetorical flash:

The current fiction is that any overnight ersatz bagel and lox boardwalk merchant, any down to earth commentator or barfly, any busy housewife who gets her expertise from newspapers, television, radio and telephone, is ipso facto endowed to plan in detail a huge metropolitan arterial complex good for a century.

I wonder which “busy housewife” he could have been referring to…

2. Richard Sennett comes from a school of sociological thinking–alongside academics like Saskia Sassen and Mike Davis–who criticize global capitalism and urbanization. But here is his rather balanced review in 1970 of Jane Jacobs’ The Economy Of Cities (you can access the review through a Facebook post via Anthony Ling).

3. This is an old Economist article that aims to define “rule of law.” It cites a study arguing that “a country’s income per head rises by roughly 300% if it improves its governance by one standard deviation,” with the efficiency and reasoning ability of its legal system playing a huge factor.

4. Here’s yet another article, this time from PlacesJournal, claiming that the growth of conservative economic theory in the 1940s, followed by the failures of 1950s urban renewal, led to the death of central planning and rise of “market urbanism” (his usage) in America. “By the ’70s and ’80s,” writes architect Anthony Fontenot, “the discipline of planning had come under such sustained attack that in many design schools the planning programs were jettisoned altogether and relocated — banished — to schools of policy and administration.”

I read this charge about the decline of American city planning frequently from architecture/planning writers. But can anyone please tell me what the hell they are talking about? The fact is that land use regulations–the most essential planning tool– have grown substantially in America in the last century, and even more so in recent decades. Zoning has transformed from merely separating incompatible uses to policing the design, coloration, placement, shape, density and “form” of buildings. Lots that years ago would have been subdivided in suburbia, or built upwards in cities, are now, respectively, preserved. Practically every city of minor significance has a planning department (not to mention an urban development corporation and design review board). Whereas America’s great legacy cities–New York, San Francisco, DC, Chicago, Boston, Philadelphia–adopted their built pattern during the relatively laissez faire industrial era, and thus in a manner that was dense, walkable, and attractive, land use controls often prevent them from furthering these goals today–and prevent newer cities from mirroring the old ones.

I thus can’t agree with Fontenot and similar-thinking architects and planners. Their profession has not declined in the U.S.; it has metastasized, only to inhibit many of the outcomes that they seem to want. Market Urbanism, meanwhile, is still an ideology confined to the internet, and not even close to being practiced today in any major U.S. city.

Chicago’s Bonds Turn To Junk–As Could Be Expected

1. The article I wrote this week for Forbes makes the connection between post-WWII urban renewal, and today’s tax increment financing. I realize that the two redevelopment policies aren’t identical, most notably not in scale. Urban renewal was a nationwide policy during an era of extreme central planning; TIF is funded at local and state level to bring redevelopment to targeted sites. But during its four-decade rise, TIF has reflected urban renewal’s flaws, perpetuating waste, cronyism, and property confiscation.

2. Another article I liked was by City Journal contributing editor Aaron Renn, called “Libertarians of Convenience.” It is about how urban progressives resist government regulations for their preferred activities, while calling for more regulations overall. It seems that the group hasn’t connected certain dots: while advocating for government growth outright, they become shocked when said governments impose regulations upon them that are pointless and arbitrary, not grasping that this is often the natural course of bureaucracy.

What explains these contradictions? A charitable explanation is that urban progressives—typically on the younger side—are just beginning to experience how excessive regulations can suffocate life in the city…But it’s hard to avoid thinking, too, that some of the inconsistency reflects elite biases. The things that liberal-minded city residents like and want to do—eat from hip food trucks, smoke dope, and other “bourgeois bohemian” pursuits—should be left as free as possible, consequences be damned…Those that they consider déclassé—Big Gulps, Marlboro Lights, McDonalds—should be restricted or even shut down. It’s regulation for thee but not for me.

What the urban Left doesn’t recognize is that the regulatory mind-set is nearly impossible to turn on or off, depending on what you like or don’t like. Many of the bans and rules that progressives impose on cities not only make life difficult for muffler shops, hardware stores, plumbing firms, bodegas, and other unglamorous operations; they also harm the enterprises that they love.

3. But perhaps the most noteworthy urban news story was one that many have anticipated: Chicago’s bonds reached junk level. On Tuesday, Moody’s downgraded city bonds backed by property, sales and fuel tax revenue from Baa2 to Ba1, or just below investment grade.

The move came in direct response to an Illinois Supreme Court decision which found that the state constitution prevents the legislature from restructuring pension obligations for government employees. This could prevent the necessary reforms to the very debt that first caused the city’s ratings to drop so low. The state of Illinois has an estimated $167 billion in unfunded retiree pension and health care obligations. Various government entities within Chicago and Cook County, meanwhile, have an estimated debt of $87 billion, and two-thirds of this is for unfunded employee liabilities. Taxpaying Chicago households will eventually be on the hook to cover much of both. Yet, as the court decision showed, officials at multiple levels of government have proven unwilling to reform these burdens, so beholden are they to public employee unions. The problem forced Moody’s to downgrade Chicago’s bonds in 2014, and now again.

But I would argue that outside forces informed Moody’s decision also. Earlier this year, I wrote in the American Interest about the legal dubiousness of the bankruptcies in Detroit and Stockton. These cities, too, had run up massive debts because of unfunded pension liabilities, and filed for bankruptcy to shed them. But rather than following traditional bankruptcy proceedings by paying back their creditors, they made almost full guarantees to their retired employees, while giving some bondholders mere cents on the dollar (or in the case of Stockton, less than one penny). These cases represented a reversal of the normal order in which creditors are paid in bankruptcy. They were driven in both cities by a populist impulse to protect unionized government workers and give large financial firms the finger. But for the article, I interviewed a half-dozen financial and legal experts who thought the deals could set a bad precedent. If indebted cities can just file for bankruptcy and then use it to shirk payments to financial firms, the mere threat of future ones doing so could increase borrowing costs. Chicago has long seemed next in line to file for bankruptcy, and its liberal politics mirror that of Detroit and Stockton. So perhaps by lowering the city’s bond rating, Moody’s is taking necessary precautions.

 

The Many Shades Of Public Pension Mismanagement

1. My two Forbes articles this week were about how Miami’s liberalized culture and economy have made it an international banking center; and how reducing medallion requirements for taxis would level their playing field with Uber.

2. About a month ago, I asked readers whether they thought cities would be smarter to invest their pension funds using “in-house,” government-hired money managers, or outside private ones. I haven’t been able to address the issue, but last night rediscovered in my notes the story that sparked the question.

On April 8, the New York Times ran a report about how, in the last 10 years, New York City’s five pension funds—for police, fire, teachers, board of education, and general employees—missed out on an estimated $2.5 billion in returns because of high fees and poor investments by their Wall Street advisors. The Times cited a press release by city comptroller Scott Stringer, who had ordered an analysis of the $160 billion fund. Here’s a quote from Stringer’s release:

Wall Street managers of private asset classes such as private equity, hedge funds and real estate fell $2.6 billion short of target benchmarks after fees. Over the same period, managers of public asset classes exceeded the benchmark slightly. However, those managers gobbled up more than 95 percent of the value added—over $2 billion—leaving almost no extra return for the Funds…The poor performance of private asset classes ($2.6 billion below benchmark), combined with the marginally better performance in public markets, has cost the City pension funds nearly $2.5 billion in lost value over the past ten years.

The story didn’t get much press, because of its complicated nature, but there was some commentary from Bloomberg media. This is fitting given that during his NYC mayoralty, Michael Bloomberg tried to bring the city’s pension fund investing more in-house, to no avail.

A. Bloomberg View’s Matt Levine estimated that the expense ratio the city spent for firms to manage its public assets was .2%, which doesn’t much exceed the .17% expense ratio of the Vanguard 500 Index Fund’s small-investor shares. That said, he still thought the city had gotten a (somewhat) raw deal, since large investors can usually hire managers at discount.

B. Bloomberg View’s Barry Ritholtz gave a cautioned endorsement for in-house management of the city’s fund, as an antidote to the $2.5 billion loss.

C. He linked to a 2013 Bloomberg Business report that described how this would work. The report noted that New York City is “the only one of the 11 biggest U.S. public-worker pensions that refuses to manage any assets internally.” Doing so would be cheaper, since publicly-hired money managers usually earn 6-figure salaries, not the exorbitant 8-figure salaries common on Wall Street. But this cheaper route can also mean lower returns:

The California Public Employees’ Retirement System, the largest U.S. pension, manages almost two-thirds of its assets, including 83 percent of stocks and 91 percent of bonds. Chief Investment Officer Joseph Dear received $522,540 in compensation in 2011. Yet its 6.1 percent average annual return for the 10 years ending June 30, 2012 is 1.1 percentage point less than that of the Pennsylvania Public School Employees’ Retirement System. The Pennsylvania fund manages only 26 percent of assets internally and paid Chief Investment Officer Alan Van Noord $269,302 in 2011. New Jersey’s $75.3 billion pension manages 73 percent of its assets in-house, the most among the 11 biggest U.S. public funds. The system returned 6.4 percent for the 10-year period ending June 30, 2012.

These low returns don’t surprise me. In fact, I have a hard time believing that public management of pensions is desirable, for the reasons I described last month. In-house managers earn salaries that are abnormally low for their profession, and that are fixed. They also work for debt-prone corporations (aka cities and states) who have no need to profit immediately, or even in the long term. This sounds like a poor set of incentives for producing high returns. Public managers may also be overruled by a broader political climate of “social divestment,” in which governments steer their funds away from politically-incorrect companies, even if that means lower returns.

Of course, what goes unstated is that respective tales of public and private mismanagement of government pensions make an even stronger case for converting employees to 401(k)s. The main argument for doing so is that it would shift pensions from defined-benefit to defined-contribution, thus absolving taxpayers from the need to fully fund them. But it would also finally allow workers more investment autonomy. Rather than having all their savings tied up in one large fund, to be managed at their government’s discretion, employees can decide for themselves what to do with their money.

 

 

 

Happy Birthday Jane Jacobs! (Now Let’s Have A Debate)

Jane Jacobs

1. This week I wrote three articles: one for Governing Magazine about how to make pedestrian malls successful; and two for Forbes—about how Syracuse is squelching a driveway-sharing app, and the latest attempts from San Francisco NIMBYs to stop a Warriors arena.

2. Today would have been Jane Jacobs’ 99th birthday, and I know many of you celebrated by attending (or hosting) Jane’s Walks in your cities. Because of other obligations, I wasn’t able to attend the Miami one, which was hosted in Little Havana by local realtor Carlos Fausto Miranda. If any of you did, tell me how it went.

3. I hate to use Jacob’s birthday as an excuse to seem divisive, but there’s something about her writings—and the way they’re interpreted—that I want to explore:

The thing that’s always made Jane Jacobs’s work so refreshing is that it has ideological crossover appeal. But this has also caused different schools of thought to emerge about her.

The left-leaning among Jacobs’ fans emphasize her work on urban form. Jacobs’ favorite neighborhood was her home base of Greenwich Village, and living there inspired her vision for other neighborhoods. As she brilliantly explained throughout The Death and Life of Great American Cities, the ones that functioned best had traditional street grids, human-scale buildings and parks, a mix of old and new architecture, and pedestrian accessibility. These elements of her teaching have been embraced by New Urbanists like Andres Duany, who have built entire neighborhoods on her principles; and by “smart growth” planners, who take the next step by imposing historic overlays and “form-based codes” on urban areas. These latter moves are done to stave off modernization, which they see as threatening Jacobs’ aesthetic vision for cities.

But the right-leaning side of Jacob’s followers focus less on design, than on her economic teachings, many of which came in later works. They adore the woman who loathed central planning and land use controls, and who thought that the “organized complexity” of city life was best tackled through organic growth. Rather than advocating for new layers of regulation, then, conservatives view Jacobs as an early advocate of market-based solutions. This side is led by people like Edward Glaeser, a proponent of more skyscrapers. Although skyscrapers might be taller than Jacobs’ ideal neighborhood, he argues, they would be a Jacobian response to many cities’ housing shortages, and if designed properly, would generate the street life she described.

I’m not here to say that one side is right or the other wrong. Both Jacobs’ economic and design teachings—and the way they’ve been interpreted—have been mostly beneficial for cities. But I will say that the New Urbanist side has gotten more representation. If you think today of what someone means when referring to a “Jane Jacobs-style neighborhood,” you picture a medium-density area with historic character, pocket parks, and niche coffee shops—places like Greenwich Village, The Haight in San Francisco, Capitol Hill in Seattle, Wicker Park in Chicago, or Boston’s Back Bay. Meantime, large-scale neighborhoods—such as a typical downtown business district—are considered antithetical to Jacobian urbanism, and are frowned upon by planners.

I wish this perception would change, though, because high-rise neighborhoods play a role in cities that Jacobs would have appreciated. As I wrote on this site several weeks ago, the Miami neighborhood of Brickell—which is an overnight skyscraper zone that would have Glaeser beaming—is essential to the city’s economy, providing housing, offices, and recreation for the ever-important banking industry. It has also helped preserve surrounding downtown neighborhoods, by containing the city’s banking wealth to a small area, rather than having it inflict gentrification elsewhere. While Brickell doesn’t yet have great pedestrian infrastructure, the neighborhood’s sheer density has made it (as Glaeser would have predicted, and Jacobs would have liked) one of the city’s most active around the clock.

Yet I can’t imagine Brickell ever being the subject of a Jane’s Walk. There is something about the neighborhood’s sensibility—corporate, wealthy, glossy, neo-liberal—that doesn’t gel with Jacobs’ left-wing faction. However, Brickell and other skyscraper neighborhoods are essential in helping cities grow and stay competitive in a global economy. True fans of Jacobs should see the value of encouraging (or at least allowing) such neighborhoods, as a compliment to the more traditional-style ones.

 

I’m Traveling Cross-Country to Write a Book on Market Urbanism

batman-hitchhiker-gotham-city
Ever since Adam founded this blog, it has become a great forum for describing how free-market economics intersect with urban issues. But the term Market Urbanism itself has remained under the radar, especially compared to ones that encourage more government intervention for cities, like “Smart Growth.” I’ve always thought that Adam’s term deserved more mainstream cache. So I’m traveling cross-country to write a book about it.

My name is Scott Beyer, and I’m a 29-year-old urban affairs journalist from Charlottesville, VA. This week, I began a 3-year trip that will include month-long stays in 26 major cities, and visits to hundreds of smaller ones. Part of this is to continue work as a columnist for Forbes and Governing Magazine. But mainly it is to write a book that I’ve tentatively titled The Sparks From Within—How Market Urbanism Can Revive U.S. Cities.

My inspiration for this trip dates to my late teens, when I moved to New York City. I quickly become so enthralled with the fast-paced culture and diversity of urban life that I saved up some money to backpack the nation’s other cities. This continued on and off through my twenties, as I visited the nation’s 100 largest, burning through several Greyhound “Discovery Passes,” hitchhiking dozens of rides, and even once hopping a freight train from Jacksonville to New Orleans.

I had first expected that these cities would be as dynamic as New York, but was surprised to find otherwise. On one hand, numerous ones had declined despite decades of U.S. population growth, and now had neighborhoods that would embarrass a Third World country. And even many successful ones lacked a certain gravitas, with downtowns that hollowed out after 5pm.

Why were so many cities like this? That question inspired a research period after I returned home that extended for several years. My main conclusion was that U.S. urban failure did not result only from global forces like deindustrialization, but because of counterproductive government policies. This began with post-WWII federal policies that encouraged suburban flight, such as slum clearance, highway subsidies, and loan programs favoring single-family homes. When this caused industry to leave, many cities, feeling desperate, adopted their own aggressive policies, and have maintained this heavily-centralized model ever since. In most large cities today, powerful bureaucracies—bolstered by regulatory authority and gobs of federal money—dictate where and how growth happens. Rather than enlightened decision-making, this administrative model has produced a comedy of errors, as America’s cities are dominated by high taxes and regulations, political machines, rent-seeking, cronyism, property confiscation, and sometimes plain corruption.

What I also learned through research, though, was that this model had inspired numerous pro-market, small-government reforms for cities. These have included charter schools, defined contribution pensions, one-stop shops for business permits, zoning deregulation, and whatever else liberalizes economies and reduces the dead weight of government. These reforms have been explained in depth by various commentators—mostly on the right—but have always floated around separately. I would like to combine them into a single policy blueprint that would make U.S. cities more competitive in the 21st century. I thought the term “Market Urbanism” was catchy, and because Adam’s blog advocates for these policies, I asked him about expanding the concept into a book.  He told me to go for it.

During the trip, I plan to write about 26 different reforms, using each as a chapter for a given city. These chapters will be divided into 5 sections, dealing with housing, transportation, business climate, public services, and finance. This localized, case-study format will help me explore the details of how each reform would help a specific city—and who now opposes it.

What do I hope to accomplish from this project? I would like to bring the term Market Urbanism into public consciousness, and into direct competition with the moldy prevailing wisdom of America’s cities. For decades, this wisdom—moving from academia on through city hall—is that urban problems must be solved through more government. The point of my book is to explain why market alternatives would solve them better—while making cities denser, faster-growing, more affordable, and more livable.

I would encourage the readers of this blog to follow my project, either through my website, BigCitySparkplug.com, or my Forbes profile. I should also note that every Friday, I’ll be providing updates on MarketUrbanism.com from the road, including links to articles I’ve written that week, research I’ve encountered, or whatever else may be on my mind. I hope over these three years that I can connect with my fellow Market Urbanists, and if I happen to be in your city, please don’t be shy about reaching out, as I prefer learning about places through the locals. But at very least, I hope to bring America’s cities alive for you via the web, as I report on them directly from the streets.

Reach out to Scott about his travels:

Urban[ism] Legend: The Free Market Can’t Provide Affordable Housing

Over at Greater Greater Washington, Ms. Cheryl Cort attempts to temper expectations of what she calls the “libertarian view (a more right-leaning view in our region)” on affordable housing.  It is certainly reassuring to see the cosmopolitan left and the pro-market right begin to warm to the benefits of liberalization of land-use.  Land-use is one area the “right,” in it’s fear of change, has failed to embrace a widespread pro-market stance.  Meanwhile, many urban-dwellers who consider themselves on the “left” unknowingly display an anti-outsider mentality typically attributed to the right’s stance on immigration.  Unfortunately, in failing to grasp the enormity of the bipartisan-caused distortion of the housing market, Ms. Cort resigns to advocate solutions that fail to deliver widespread housing affordability.

Yes, adding more housing must absolutely be a part of the strategy to make housing more affordable. And zoning changes to allow people to build taller and more usable space near transit, rent out carriage houses, and avoid expensive and often-unnecessary parking are all steps in the right direction. But some proponents go on to say relaxing zoning will solve the problem all on its own. It won’t.

Well, if “relaxing” zoning is the solution at hand, she may be right – relaxing will only help a tad…  While keenly aware of the high prices many are willing to pay, Cort does not seem to grasp the incredible degree to which development is inhibited by zoning.  “Relaxing” won’t do the trick in a city where prices are high enough to justify skyscrapers with four to ten times the density currently allowed.  When considering a supply cap that only allows a fraction of what the market demands, one can not reasonably conclude “Unlimited FAR” (building density) would merely result in a bit more development here and there. A radically liberalized land-use regime would deliver numbers of units several times what is permitted under current regulation.

Ms. Cort correctly concludes that because of today’s construction costs, new construction would not provide housing at prices affordable to low income people.  This will certainly be the case in the most expensive areas where developers would be allowed to meet market demands by building 60 story skyscrapers.  Advocates of land-use liberalization who understand the costs of construction would not claim that dense new construction will house the poor.  But if enough supply is allowed to come to market today, today’s new construction will become tomorrow’s affordable housing.  And this brings us to the more meaningful discussion: filtering.  Here’s where Ms. Cort’s analysis completely falls apart.

It is true that increasing supply eases upward pressure on all prices. But the reservoir of naturally cheaper, older buildings runs out after a while.

Tragically, Ms. Cort is using the current radically supply-constrained paradigm to analyze a free-market counter-factual.  If development at levels several times the current rate were allowed over the past few cycles, the reservoir of cheaper, older buildings would have remained plentiful and affordable.  If the market were allowed to meet demand for high-end units in the form of dense new construction, there would be little or no market pressure for unsubsidized market-rate units to be converted into luxury units.  The 1400 Block of W Street NW example she gives would almost certainly still be affordable.

On a larger scale, the increased supply of housing in the area helps absorb demand for more housing, but it’s not enough to stem the demand for such a sought-after location. Between 2005 and 2011, the rental housing market’s growth added more than 12,500 units. But at the same time, $800/month apartments fell by half, while $1000/month rentals nearly doubled. Strong market demand will shrink the availability of low-priced units. That’s what has happened over the last decade as DC transformed from a declining city into a rapidly growing one.

But, 12,500 units is the amount of supply added under the current over-regulated regime.  This amount of development is minuscule in a large city. (see diagram below)  What if DC allowed as much supply growth as Austin or Miami?  The 12,500 figure would triple.  Further, since Austin and Miami are far from free-market, the development rate in a truly free-market DC would certainly exceed a tripling.  If you consider the amount of supply that would have been added over the last several decades in an unlimited FAR DC, Ms. Cort’s position starts to sound quaint.  Conservatively assuming 50-100,000 units of rental housing would have been developed over the last few decades of DC’s growth, rents certainly would not have doubled.  I’ll go out on a limb and estimate that average rent growth would be close to inflation.

Chart by the Citizens Budget Commission (via NYYIMBY)

Chart by the Citizens Budget Commission (via NYYIMBY)

Ms. Cort wants housing to be less than 30% of gross income for nearly all residents.  Will the market provide new housing affordable to minimum wage earners at the most expensive intersection in Georgetown?  Probably not, and I hope she isn’t setting the bar that high.  While nobody is wise enough to know whether a free-market in land use would accomplish this, a free-market DC could be affordable to 50-100,000 more people than the zoned-to-death DC of today.  Will stock of units deemed affordable to low wage earners be of the quality, location, and size acceptable to Cort?  The necessity for further intervention is a subjective preference.

While acknowledging the validity of liberalization in her critique of supply-and-demand denialism, Cort’s conclusion fails to look at supply and demand wholistically:

Supply matters, but it’s not the whole story

Wrong. Supply really must be part of the whole story.  A city is only affordable to the number of residents it houses affordably.  Failure to recognize this only shifts the burden from one demographic to another. (and it won’t be the rich who pays the price)  If a zoning-plagued city fails to provide 1,000 units demanded, 1,000 people can no longer afford to live there.  Even if that city chose to subsidize housing for 2,000 people at 50-80% of AMI, that doesn’t change the fact that 1,000 people who wanted to live in that city must leave.  Any viable solution (free-market or otherwise) must involve increasing supply significantly, either through creating supply directly or subsidizing demand through vouchers, which induces new development.  But, this simply can’t happen if overall supply is capped through zoning.

The Right to the City

This post draws heavily from Tom W. Bell’s “Want to Own a City?”  and would not have been possible without his prior writing and research

The “Right to the City” is an old marxist slogan that’s as catchy as it is ill-defined. Neither the phrase’s originator Henri Lefebvre, nor David Harvey, a more recent proponent, seem to have articulated the idea in any meaningful way. Even the Right to the City Alliance stops short of explaining what the right actually is. When it comes up, it’s typically alongside a claim that something is being stolen or taken away from long-standing communities, as if neighborhoods were sovereign territory suffering from an invasion. For practical purposes, no one has any right to reside in any place beyond their ability to pay. But if the desire is for a way in which communities could actually own the places they call home, perhaps the Right to the City should be a property right.

San Francisco. Ground zero for the debate over who gets to live where and why.

San Francisco. Ground zero for the debate over who gets to live where and why.

Public Ownership through Private Property

What’s the difference between a private company and a municipal corporation? You can own the former but not the latter. Investors have clearly delineated property rights in their corporations. Residents have no equivalent ownership rights in their cities. But what if living in a city meant owning a piece of it as a legal entity as well?

Imagine that a city issued shares to its residents. Shares would vest over time and long-time residents would have more equity than new arrivals. Now assume that this city took in all of its revenue through land value taxation and that land revenues were used to pay dividends to the city’s resident-shareholders. Instead of facing displacement, incumbent residents would benefit from rising demand to live in their city.

Shares might also be used to weight the voting system. More shares could mean extra say in electing representatives, city-wide ballot measures, neighborhood level participatory budgeting, or perhaps even corrective democracy. Again, the point would be to formally privilege long-time residents over newcomers in deciding how the city is run.

All of this should be taken as more of a thought experiment than a policy proposal. For one, policy reform would go a long way in solving the problem of displacement without having to favor incumbency. There are also plenty of blanks to fill in when thinking about how a shareholder system would work. And, of course, there’s a lot that could go wrong. The devil’s in the details and given the wrong details the devil might look like hyper-nativist parochialism. But, given the right arrangement, privileging tenure through ownership could tie together the fortunes of residents with the fortunes of their city as a whole. It could encourage long-time residents to welcome newcomers with open arms. And it could offer political and economic enfranchisement beyond what the status quo is able to provide.

Only 2 Ways to Fight Gentrification (you’re not going to like one of them)

Tompkins Square Riots in 1988

Gentrification is the result of powerful economic forces. Those who misunderstand the nature of the economic forces at play, risk misdirecting those forces in ways that exasperate city-wide displacement.  Before discussing solutions, it is important to accept that gentrification is one symptom of a larger problem.

Anti-capitalists often portrays gentrification as class war, painting the archetypal greedy developer as the culprit:

Gentrification has always been a top-down affair, not a spontaneous hipster influx, orchestrated by the real estate developers and investors who pull the strings of city policy, with individual home-buyers deployed in mopping up operations.

Is gentrification a class war?  In a way, yes.  But the typical class analysis mistakes the symptom for the cause, and ends up pointing the finger at the wrong rich people.  There is no grand conspiracy concocted by real estate developers, though its not surprising it seems that way.

Real estate developers would be happy to build in already expensive neighborhoods where demand is stable and predictable.  They don’t because they are typically not allowed to.  Take Chicago’s Lincoln Park for example.  Daniel Hertz points out that the number of housing units there actually decreased 4.1% since 2000 and the neighborhood hasn’t allowed a single unit of affordable housing to be developed in 35 years. The affluent residents of Lincoln Park like their neighborhood the way it is and have the political clout to keep it that way.

Given that development projects are blocked in upper class neighborhoods, developers seek out alternatives. Here’s where “pulling the strings” is a viable strategy for developers. Politicians are far more willing to upzone working class neighborhoods. These communities are far less influential and have far fewer resources with which to fight back. The end result is that rich, entitled, white areas get down-zoned, while less-affluent, disempowered, minority areas are up-zoned. Politicians appease politically influential neighborhoods through limited growth, and then appease developers who see less influential neighborhoods as the only viable place for new construction.

Too often, the knee-jerk response is to fight development in these gentrifying neighborhoods. The consequences of this are two-fold. First, economics 101 tells us that capping supply will only cause prices to rise. Instead of newcomers filling newly-constructed units, they will quickly flood the existing stock of housing, quickening gentrification. Second, thwarting development shuts the release valve that alleviates housing price pressures that caused gentrification in the first place. Since not building is not an option, politicians would prefer to funnel new construction into disadvantaged neighborhoods instead of letting it happen where there is market demand. Development suppressed, gentrification swiftly captures the neighborhood and moves on to the next neighborhood in its path.

When considering gentrification, we must accept the fact that rich people don’t just vaporize by prohibiting the creation of housing for them.  If housing desires cannot be met in upscale neighborhoods, the wealthy can and will outbid less affluent people elsewhere.  With that in mind, there are only 2 solutions to stem the tide of gentrification.  The first solution is widespread liberalization of zoning.  This is particularly needed in already desirable locations where incumbent residents have effectively depopulated their neighborhoods over several decades.  The only other solution is to eradicate rich people altogether. This, I hope, is not what people have in mind when they declare class war.

Whether you are a class warrior or Market Urbanist, here are some tips to more effectively fight gentrification:

  • The battlefield is not in the gentrifying neighborhoods.  It is in the more wealthy neighborhoods where empowered residents fight to keep new people out.
  • The enemy is not the gentrifiers or developers trying to serve them.  It is the rich people who use their influence to thwart development in their neighborhoods.  The more they fight to depopulate desirable neighborhoods, the more people are left seeking alternative neighborhoods.
  • The mechanism of gentrification is not development.   It is zoning, and other regulations that thwart development in currently desirable areas.
  • The solution is not to fight development in currently gentrifying areas.  It’s to call for radical liberalization of zoning in already wealthy areas, and to stand up to neighborhood groups who try to abuse zoning to prevent that.
  • The reason people gentrify is not to disrupt ethnic or economically-challenged neighborhoods.  It is likely because they have been priced out of the neighborhood they desire.