White House Issues Report On Occupational Licensing Barriers

1. My two Forbes articles this week covered Chicago, including how the Illinois courts are hindering the city from pension reform; and how a new Taco Bell in Wicker Park will cater to young urban barhoppers.

2. This week, the White House Council of Economic Advisors published a report about the rise of occupational licensing in the U.S. It was a refreshing look by those in power at a lightly-covered issue that harms millions of people. The 77-page paper takes a cursory state-by-state view at the measures required to enter various professions. It found that nearly a quarter of the U.S. workforce now requires a license to do their jobs, a five-fold increase since 1950, and “about two-thirds of this change stems from an increase in the number of professions that require a license.” Meanwhile, the requirements for obtaining licenses have increased in time and costs, with many states requiring years of experience to enter rudimentary professions like landscaping and hair-styling.

This is thought to ensure quality and safety. But the report found that it is often excessive, harming both entrepreneurs and consumers. Occupational licenses harm entrepreneurs by creating large upfront costs to start even modest businesses, which discourages many from doing so (or pushes their operations under the table, a phenomenon I documented last year for the Wall Street Journal). Along with disproportionately impacting the poor, licensing requirements in some states exclude those who have been convicted of any crime, or those who have defaulted on student loans. Occupational licensing also harms immigrants, who are generally more entrepreneurial than natives.

Immigrants must often complete duplicative and costly requirements in order to acquire a U.S. license in their chosen career. In many cases, the training or experience that these immigrants acquired overseas does not count toward fulfilling the relevant licensing requirements. For example, in Illinois, if an engineer earns a degree from most universities abroad, she must submit proof that she worked under a U.S. engineer for four years; other work experience abroad will not suffice.

And this hurts consumers by decreasing competition and raising prices.

The report was part of President Obama’s initiative to review and weed-out counterproductive federal regulations. But because occupational licensing is a state and local thing, the feds can only address it through education efforts, and by offering grant money to reform-minded states. On Monday, when Obama unveils his budget, one anticipated item will be $15 million to study occupational licensing in the 50 states.

I first heard about the CEA report via Matt Yglesias, who called occupational licensing one of the nation’s “most underrated economic problems.” But the real credit for bringing attention to the issue goes to the Institute for Justice, a libertarian think tank that for years has covered occupational licensing’s growth. Here is their 2012 study that is even more comprehensive than the CEA’s (and that probably didn’t cost $15 million to produce), and a summarizing WSJ editorial by the authors.

Who Are America’s Progressive Developers?

Miami, FL

1. I delved into finance this week for Forbes, writing articles about how Chicago’s junk-bond rating is already causing higher borrowing costs; and about how Dodd-Frank, 5 years after passage, is killing community banks.

2. Starting in a few weeks, and continuing for as long as I’m on the road, I will occasionally add to a new Market Urbanism series called “America’s Progressive Developers.” This will profile different developers who have either built, or are planning to build, interesting projects that enliven their city. The articles will include interviews, renderings, photos and perhaps video tours of each project, so that MU readers can get an inside look at the urban construction process.

One purpose of this series is to help change the negative perception towards developers. As readers know, anti-development sentiment within U.S. cities has for decades created numerous problems, including high housing prices, poor job growth, and environmental harm. These are problems that even liberal urban activists, who have driven the sentiment, are starting to recognize. For example, Gabriel Metcalf—president of the San Francisco-based planning think tank SPUR—wrote a CityLab essay yesterday about how NIMBYism has pushed out the city’s poor. But this does not mean that attitudes towards developers themselves have changed. Many are still seen as greedy and imposing, and their buildings as monuments to crass consumerism, by the very residents who benefit from proximity to such buildings.

It was not always this way; many large-scale developers were once seen as visionary city builders. For example, Coral Gables, the Miami suburb where I’ve stayed, is a master-planned community that was built in the 1920s by real estate mogul George Merrick. Its downtown became a tasteful mixed-use neighborhood that turned him into a local celebrity, and now one outside area has been named after him. Other developers during this period in America were lauded for building advanced skyscrapers, mansions, shopping centers and civic spaces. Many developers still build such things, but are nonetheless vilified because of the altered public sentiment, which is often rooted in class and racial conflict. This is something that I would like to change, by documenting how America’s developers have helped cities.

So what do I mean by developers who are “progressive”? This is a word that has become loaded, but I will use it to describe those who are forward-thinking, innovative, and whose work demonstrates an appreciation for cities. In this respect, almost anyone who develops in a city is somewhat progressive, by creating jobs and improving lots. But my column aims to profile those who are taking the extra step. This could include developers whose structures are architecturally interesting, integrate well with public space, emphasize historic preservation, present a new consumer option, or have advanced environmental technology. I could also cover projects that have had an outsized impact in revitalizing neighborhoods, even including large corporate ones. And I am not above profiling suburban developers, if they are doing something interesting. All of these development types can play important roles in any metro area.

Along with hopefully changing the perception about developers, I am also doing this series simply because I like meeting city builders. There have been countless times when, like other urbanists, I have walked through a city, seen an interesting project, and wondered—“how did this get here?” I aim to answer this by having the developers behind such projects explain how they did market research, attained financing, overcame political hurdles, and ultimately got something built.

This series will be interconnected with my cross-country trip, so I’ll seek out these progressive developers in every place I visit. If you are following my travels, and know of someone I should meet, drop me a line!

Philadelphia Has A Poor Land Use Record–Why Expand It?

1. My Forbes article this week is about Mamey, a delicious tropical fruit that is popular in Miami but unknown around the U.S.

2. This week I requested interviews with the executives of Philadelphia’s Redevelopment Authority and its Housing Authority—Brian Abernathy and Kelvin Jeremiah. I said that I was writing an article about both agencies’ recent eminent domain zeal. In case you’re unfamiliar, I’m referencing the PHA’s mass overhaul of the Sharswood neighborhood, and the PRA’s multiple recent attempted takings, all plans that have been documented on this site (here and here). Neither agency has responded—which means I’ll try again Monday. But in preparation, I’ve been reading literature about the land management history of Philadelphia’s government. Here are links:

a. It would be hard to understand Philly’s history without knowing of Edmund Bacon, the city’s chief planner for two decades. He was described by architectural critic Paul Goldberger as a more tasteful Robert Moses, mixing “the bulldoze-and-rebuild philosophy of urban renewal with the tentative beginnings of the historic preservation movement.” But in these articles, you’ll notice that he followed many of the past and present follies of the planning profession–by advocating for height limits; out-of-date transportation modes; and large, ugly, white elephant projects. Most telling were his attempts to lure the World’s Fair, a decade after it had proven disastrous in New York City.

b. The paper “Urban Politics and the Vision of a Modern City: Philadelphia and Lancaster after World War II,” gives a more detailed look at Bacon’s vision. He had grown disturbed by the white middle-class exodus from Philly, and wanted pet projects that would draw them back, in defiance of the city’s fiscally-conservative Republican establishment. This vision included saving historic Center City neighborhoods, while severely altering the surrounding black ones:

Rehousing the thousands of families uprooted by renewal—many of them poor African Americans—posed a problem for Philadelphia’s redevelopment authority, as did the white, often violent opposition to any effort by the city to relocate uprooted black families into small public-housing complexes secreted amid white neighborhoods…But, in the glow of the 1950s modernist vision, Philadelphia’s progrowth business, civic, and planning coalition hoped that…high- and low-rise public housing, ideally scattered amid rehabilitating white neighborhoods, would soften the social impact of downtown rebuilding. Alas, as the North Philadelphia riots of August 1964 attested, this did not happen.

Both the PRA and the PHA, founded before Bacon, were instrumental in executing his plans.

c. Here’s a telling of that same history on the PRA website–without, of course, the tales of displacement.

d. Several decades later, the PHA housing where many were steered was found by HUD to be substandard.

e. Such findings–along with extreme corruption and mismanagement–have inspired HUD on two occasions to temporarily take over the PHA: in 1992 and 2011.

f. Before Jeremiah became the PHA executive, the two previous ones had been forced to leave because of improper sexual relations with staffers (Carl Greene and Michael Kelly).

g. The PHA has a habit of building affordable units for well over $300k per head, suggesting that an enormous level of waste is entering the construction process.

h. In 2006, an official with the Penn’s Landing Corporation—working in partnership with the PRA—was sentenced to 30 months in prison for receiving kickbacks during the bidding process for a proposed waterfront project.

i. Another PRA/PHA policy has been to seize abandoned, tax delinquent properties and then auction them off. But because they are slow bureaucracies, they have failed to quickly transfer these properties back onto the private market, while leaving them under-maintained.

j. Perhaps one of the stronger ideas to emerge from this dysfunction was the Philadelphia Land Bank. This was approved in 2014 to consolidate Philly’s 30,000 vacant lots–8,000 of which are government-owned (including by the PRA and PHA)–into a single database. This will mean that developers looking to buy several lots on the same block won’t have to negotiate with multiple agencies, like they do now. Will the Land Bank streamline things, or just become another archaic Philadelphia system? Here’s an article that suggests the latter.

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If there is a common thread behind Philadelphia’s land use approach–from Bacon to today–it is that when faced with capital flight, the answer has been for government agencies to control property instead. This has encouraged policies like mass eminent domain, subsidization of large public-private projects, widespread public housing construction, and seizure of tax delinquent lots. Yet this has hardly produced better outcomes, as the agencies have been mired in waste, bureaucracy, corruption, abuse and mismanagement. It should be noted that in the half-century since Philly expanded its land use footprint, the city has further declined, enjoying a slight population increase only last decade, for the first time since 1950.

These are points that I will bring up to Abernathy and Jeremiah when discussing their agencies’ recent takings. Of my two main questions, the first will be logistical—given that Philadelphia owns 8,000 abandoned lots, why does it need to seize already-functioning private ones? My second will be more general—if Philadelphia has such a porous land use record, what justifies the expanded role now? I’ll look forward to hearing the officials’ answers…assuming they agree to speak.

 

Philadelphia’s Eminent Domain Addiction

1. My Forbes article this week draws parallels between the world’s three most notable recent cases of economic collapse–Detroit, Greece, and Puerto Rico.

2. The subject of eminent domain in Philly has been hot recently on this blog, with both Emily and I discussing plans by the city’s housing authority to seize 1,330 properties for a redevelopment plan in the blighted Sharswood neighborhood. We both–along with reader Adam Lang–noted the irony of a government authority wanting to expand its footprint in a neighborhood that it had already destroyed with public housing and property neglect. Yet during research, I found out that the Sharswood plan was just the start of Philadelphia’s eminent domain policies. There have, in fact, been several other recent takings by the city, and it’s possible that I don’t even know of them all. If any of you who are familiar with local politics can add to this below list, please inform me in the comments section:

a. in December of 2012–just four days before the Pennsylvania state legislatures’ legal protections against eminent domain abuse would go into effect–the Philadelphia Redevelopment Authority tried to seize an artist’s studio in the struggling Mantua neighborhood. The city ultimately lost, but not before dragging owner James Dupree through two years of litigation. The rationale was to build a grocery store.

b. in the gentrifying Kensington neighborhood, the Philadelphia Redevelopment Authority seized 35 properties–including several from one owner–to build affordable housing. The project has broken ground, and was overseen by the Arab-American Community Development Corporation, a bureaucracy whose overt racial pandering appears remarkable even for a left-wing U.S. city.

c. in Point Breeze, a developing neighborhood just south of Center City, 17 private lots were condemned to build affordable housing, some of which were already slated for private development.

d. and then there’s the Sharswood plan, which far exceeds any of these in scope

One shared trait of these neighborhoods, as noted in the above links, was that they each had a litany of abandoned, government-owned property. This, in fact, is common throughout all of Philadelphia (as anyone who has visited knows). According to Grounded in Philly, a group that turns some of these lots into gardens, the city has over 40,000 abandoned lots, and owns over a quarter of these.

This means that there is plenty of room for new construction, without having to take private property. So why do Philadelphia’s agencies for housing and redevelopment continue doing this? Perhaps I’ll give the staffers for both a call this week, because I really am growing curious.

The Key Word In Conservative Urban Reform: “Openness”

1. I published two articles this week. The first was a Governing Magazine piece about how Miami’s pro-development policies have delayed downtown gentrification. The second was an update, published by Forbes, on Philadelphia’s mass eminent domain scheme for a blighted neighborhood. That issue first became public for this audience when reader Adam Lang posted in the Market Urbanism Facebook group that he was one of many residents whose property would be seized. Emily followed with a description of the plan on this site, and my Forbes piece provides an update following the June 18th approval by city council. Far as I can tell, my article was the first mainstream national press coverage of the issue, and we can only hope from here that the floodgates open…

2. For America’s urban conservatives, it has been frustrating to see the indifference shown towards cities by the Republican Party. Even as the nation continues urbanizing, and election results are increasingly tied to the city vote, the GOP continues to identify with suburban and rural constituencies. This causes them to take positions which offend city voters, like opposing immigration reform and gay rights, while flat ignoring other principally urban issues like public transit and homelessness. And while there have been some conservative urban reforms, like charter schools and data-driven policing, there has not been a unified agenda. So it was exciting to see a recent article—reposted, naturally, on the MU Facebook group—advocating for this.

National Affairs, a quarterly journal that is associated with “reform conservatism,” published “An Urban Agenda for the Right.” The article was written by Michael Hendrix of the Chamber of Commerce, in collaboration with NA editor Andrew Evans. While it did not list every possible reform, it mentioned many of the macro-level ones long discussed on this site. What I liked even more, though, was that it suggested a change in messaging, wherein the Democrat establishments that have long controlled cities are described as “closed,” while conservative reformers are portrayed as “open.” This, wrote the authors, would create a more accurate perception of modern U.S. cities.

As a result of decades of Democratic governance and misplaced priorities…American cities do not offer the opportunities for success and growth that they should, especially for those looking to climb the socio-economic ladder. In many cases, city governments are utterly dysfunctional. And the reason for this dysfunction is that our cities are too often closed—closed to businesses and closed to outsiders. For the middle class and those striving to make it up the ladder, the taxes, housing, and other costs leave cities simply too expensive to afford—especially with a family. Excessive regulation makes it difficult, if not downright impossible, to get the permits necessary to start a business. Cronyism and a lack of transparency make it difficult to know whether anyone is trying to fix the situation.

In response to this restrictiveness within cities, “conservatives should seek to make them open.”

What I found interesting about their wording was that it inverted how most Americans view the political parties. At the national level, Democrats are portrayed as the open and tolerant ones, and Republicans as the reactionary ones trying to uphold the status quo. These distinctions have been established largely because of the parties’ differing approach to social issues.

But this is hardly applicable to cities, where issues are rooted more in economics and quality-of-life. A large number of urbanites—whether they want to call themselves liberals, progressives, or Democrats—are in fact quite reactionary themselves, a point emphasized by the authors. Housing regulations have been used by the urban left to restrict new construction, as if city neighborhoods are gated country clubs that should never allow change or new people. The liberal business elite have fortified the business permitting process so much that, in many cities, it is nearly-impossible for competing entrepreneurs to enter basic professions like hair-styling. And to carve out a voting bloc, the left has defended unionized public monopolies that deliver services at far higher cost, and less efficiency, than is necessary.

To the authors, making cities more “open” would mean embracing economic and administrative liberalization. They call for housing deregulation, so that cities can accommodate growing populations; one-stop shops for business permitting; and civil service reform, so that bureaucracies are either held to better standards, or replaced through privatization. They also call for better online data, so that residents can easily view info on their cities’ spending and debt, and gain access to officials.

All these measures would, in fact, open up cities in the technical sense–by allowing in more people, and granting them more options once there. If such openness regarding cities was promoted more by Republicans, it might change the perception about which party best embodies this core urban value.

Havana, Cuba–Stagnation Doesn’t Preserve Cities, Nor Does Wealth Destroy Them

[My second in a two-part series on Havana, Cuba. Here’s the first article.]

Havana, Cuba

Before taking my trip to Havana, one thing that I was curious about was how a half-century of Communism had affected the built fabric. While there are obvious disadvantages to economic stagnation, I figured that it would have at least created a charming-looking city. There are, after all, a handful of U.S. cities, and numerous European ones, that have resisted growth, modernization, and the automobile, only to remain quaint and historic. But it didn’t take even a 10-minute cab ride from the airport to realize that my assumption about Havana had been naïve—even if it is still held by many of the city’s blissfully uncurious tourists.

In fact, very little about Havana has been “preserved.”  Instead, everything in the city is merely old, and because little gets produced, nothing is replaced. This applies to the automobiles, furniture, hand tools, manufacturing equipment—and most certainly the buildings. Collectively, this stagnation has destroyed the look of the city, with a physical blight that stretches nearly every block from downtown to the outer slums.

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If I could define in one statement what Havana looks like, after four days of extensively biking and walking through, I’d call it the Latin American Detroit. It was a once-great city that declined because of bad policies, and its pervasive ruination serves as a constant reminder of this. The houses themselves, while large and ornate, are almost uniformly inadequate by U.S. standards. If they have not crumbled to the ground altogether, many are caving in. The foundations are crooked, full of holes, and marred by broken windows and doors. Because of Havana’s European roots, stucco is a common material, but on most buildings is falling off, or in some cases has disappeared. Almost every building has dirt and grime, while some are covered in it.

And this is for Havana’s nice parts. Once I began biking out of the central neighborhoods and into the slums, I found that symbols of past wealth disappeared altogether, and were replaced with what in the U.S. would be considered shacks. These structures were usually patched up with knotted wood, metal scraps, and thatching. One gentlemen who lived in the poor neighborhood of Cerro, and who I spoke with at length, described his area as akin to a Brazilian favela—which I found believable. The two pictures I took below were from his front porch, and mirrored the aesthetic of such areas.

So what is it like to live and work in these buildings? As one might expect, the outside decay permeates to the inside. The best access I got was through a 24-year-old working-class woman named Indira. I met Indira on my first night in Havana when stopping to ask directions, and after noticing that she spoke good English, took her to dinner. We became friends, and she invited me into her downtown apartment, where she lived with her mother and father-in-law. The apartment was roughly 150 square feet—far smaller than a typical New York City micro-unit. Because it had a high ceiling, the family had built a horizontal wooden floorboard halfway up the wall that served as the second floor, and built a makeshift staircase leading up. This upstairs “room” was for the mother and father-in-law, while Indira lived in the main room below, sleeping crammed against the kitchen.

Even in such a small space, there were numerous malfunctions. There was no hot water, either for cooking or showering. In fact, the shower did not even work, meaning that the family instead took scrub baths. Because the toilet didn’t flush, they had to pour water into it each time after use to accelerate the draining. The built-in wooden floorboard was clearly sagging under the weight of the upstairs furniture, raising concerns that it would one day collapse. As for the actual roof—it had been crumbling for years, and was fixed recently by a neighborhood handyman. To pay for the work, the family had to spend over a year saving up $150.

 

The main story of Indira's apartment.

The main story of Indira’s apartment.

 

The second story, upheld by a wood board

The second story, upheld by a wooden board

 

Public Infrastructure

Just as peoples’ private houses were crumbling, so too was the public infrastructure—again, much like Detroit. The public spaces, while well-used, were typically full of trash, overgrown weeds, and broken objects. Many parks, for example, were defined more by concrete than grassland. Streets, if they were even completely paved, were filled with potholes and had such poor drainage that, after it rained, they would gather huge puddles.

A water-less pool

A water-less pool

 

I wasn’t able in my short time there to analyze the underground infrastructure. But if it is like everything else in Havana, I would assume that it, too, is crumbling. For example, contrary to what tourist brochures say, Havana’s tap water is considered undrinkable by locals, and I was routinely offered bottled water to avoid catching chlorida.

Indeed, the substandard nature of Havana’s built entities were so common that after awhile I stopped noticing. For example, when I attended a rainy futbol match at a renowned Havana stadium, I sat underneath a roof that leaked constantly, getting soaked alongside other fans. Can anyone imagine this being tolerated at a U.S. arena? When I used bathrooms even in nice establishments, I would find that there often weren’t toilet seats, door locks, or (you guessed it) toilet paper. Schoolyards had swimming pools without water and basketball hoops without rims. And on it went.

This is how life is in Havana. And I soon realized, given this, how buffoonish it would have been to go around looking for examples of “historic preservation.” Such preservation is an aesthetic notion from the First World, driven by those who are willing to pay more to retrofit attractive old housing. But in a city of extreme poverty, preservation is the pragmatic steps people take to prevent their roofs from caving in.

a public park...

and a public waterfront

So How Does Havana Compare To…San Francisco?

Have you ever read an article that was so hilariously wrong that you wanted to pick your laptop up and chuck it across the room? This was my reaction to one article I read several days after returning from Havana, with the city’s horrific conditions still on my mind. On June 8, MarketWatch.com published an article by columnist Therese Poletti called “New Tech Money Is Destroying The Streets Of San Francisco.” Poletti explained that a flood of wealthy executives were moving into San Francisco, buying old homes, and altering the interiors.

It is now hard to find a Victorian home for sale that has not been gutted, its architectural details stripped and tossed. And owners or developers — looking to sell at a premium in the frenzied real estate market to “techies with cash” — hope to appeal to the tastes (or lack thereof) of current buyers, by turning once-charming homes with detailed woodwork, built-ins and art glass, into clones of Apple’s minimalist retail stores.

This trend has been developing for several years, but it seems far more prevalent today, with construction sites sprouting across the Bay Area and especially in San Francisco. And in addition to the remodeling frenzy, older buildings appear to be disappearing at a scary pace.

Before even addressing Poletti’s point, let me just set the record straight: San Francisco is not being “destroyed.” I can testify from having lived there in 2012, and visiting several times more, that the city is an architectural gem that has largely stayed in character since being rebuilt after the 1906 earthquake. Much of the city—including almost the entire northeast portion—is an oasis of historic Italianate, Queen Anne, Craftsman, and Art Deco construction. These buildings roll along the hills flanked by clean, well-paved streets, and small, impeccably-landscaped yards. From a purely aesthetic standpoint, San Francisco surpasses any other major U.S. city, and perhaps any European one.

The reason for this is two-fold. San Francisco has expansive historic preservation laws that make it difficult or illegal to alter thousands of structures. Compelling arguments have been made that the city takes this preservationist impulse too far, to the detriment of adding new housing supply–although such laws help maintain its unique character. But the other factor—to which Poletti seems oblivious—is that the city has a large professional class with the financial wherewithal to maintain these homes.

I would argue that this second factor, more than the first, has preserved San Francisco. You could put a historic overlay designation across Detroit, and it wouldn’t change much. The Motor City suffers from decay because it has undergone six decades of depopulation, and this has left no one around to preserve its own large historic stock. But the Bay Area has been flooded with capital during this period, and this has strengthened its culture of preservation. Maintaining a historic home, after all, can be an expensive endeavor that requires ripping out floorboards, replacing pipes, and other structural changes. It is usually done by educated, well-off households who have either the money to fund repairs, or the time to dedicate sweat equity. Perhaps not every family preserves their homes precisely to Poletti’s specifications, and I don’t blame them, since it is difficult to live in a floor plan that was laid out a century ago. But she should not miss the broader point, which is that San Francisco has remained as it is because of the demographics it attracts.

Instead, she claims that these groups are “destroying” the city. She is thus spouting the same myth that is advanced about historic preservation by urban progressives, who seem to think that wealth and gentrification works against preservation. But a fair-minded look at U.S. cities demonstrates the opposite. If one looks at America’s most notable historic neighborhoods–the Back Bay in Boston; Capitol Hill in DC; the French Quarter in New Orleans; much of northern San Francisco; much of Manhattan and northern Brooklyn; downtown Savannah; and downtown Charleston–a unifying feature is that they have great residential wealth. Meanwhile, there are numerous cities—Baltimore, Philadelphia, Detroit, St. Louis, Cleveland—that have a similar number of historic structures. But many of them sit hollowed-out because of decline.

The same could be said when comparing Havana with Poletti’s San Francisco. Both cities have similar architecture and planning, but their differing economic histories have led to opposite preservationist destinies. Wealthy and growing San Francisco is a city where thousands of structures remain in superb shape, and where people grieve over minor alterations. Havana’s system has produced a crumbling city where the desire for preservation gets lost in a sea of basic needs. If Poletti really wants to see a “destroyed” city, she should visit the latter.

a public housing complex from the outside...

a public housing complex from the outside…

 

and from the inside.

and from the inside.

 

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Havana, Cuba–The City Of Scarcity

[My first in a two-part series on Havana, Cuba. Here’s the second article.]

Havana, Cuba

1. I’m now a week removed from my Cuba trip, where I spent 4 days in Havana biking through the city’s near-hourly mix of high heat and torrential rainfall, returning to my bed & breakfast each night covered in soot. My first few days back in Miami I spent sick and exhausted in a hotel, but managed in the latter half to pump out a Forbes article on Miami’s inequality. The piece was slammed the next morning by the Miami New Times–a local alternative rag–for making arguments that staff writer Kyle Munzenrieder found “structurally racist.” I sent an email asking him to elaborate on the racism charge (since he didn’t in the article), but haven’t heard back.

2. That said, my mind mostly remained in Cuba. It would be hard to summarize on this page everything that I learned there, since the nation has a complex history, and enforces a dizzying array of Communist-inspired regulations that would mystify Americans, and that has impoverished average Cubans. In coming weeks, I’ll explore these economic policies–and the effects of the U.S. embargo–in depth for other publications. But I’ll say a quick word here about Havana’s living conditions, peppered with a few of the more than 300 photographs I took.

While exploring Havana’s neighborhoods, the thing that jumped out was not the city’s poverty (although there was plenty of that), but its scarcity. Because Cuba’s government does not value or comprehend mass production–namely not for agriculture–there are shortages of everything. In America, we take for granted that any basic convenience is but a short drive away. But in Havana, running errands isn’t that simple. City residents have limited mobility: the bus system is cheap but unreliable, the newly-private taxi system is efficient but costly, and for most Cubans, owning a bicycle–much less an automobile–requires years of savings. So they must stick to neighborhood stores with minimal inventory, and even if they did all have cars, there would still be few outside options.

To understand why, just imagine a city where every store is literally 1% of what it would be in America.

A typical bakery in Havana.

A typical bakery in Havana.

 

While a U.S. pharmacy like Walgreens or CVS sells not only drugs, but numerous foods, beverages, household goods, etc., the average Havana farmacia has a few shelves with maybe 100 drugs–and that’s it. Modern U.S. grocery stores often exceed 50,000 square feet, and sell thousands of products. In Havana, different food types are sold separately in small, rickety stores that often contain one or two items. Mercados sell fruit and veggies; carnicerias sell meat; and many panaderias (pictured above) sell a low-nutrition roll that would be served as a side at a crappy American road diner. The typical gas station had not even one-tenth of what you would find in a 7-Eleven.

A mercado that sold only mangos and potatoes.

A mercado that sold only mangoes, plantains and potatoes.

 

Half of the available meat supply at a downtown carniceria

Half of the available meat supply at a downtown carniceria

 

This isn’t surprising, since most Cubans earn about $20/month, and thus have minimal spending power. But the scarcity effects all income groups. For example, as an American tourist, I was considered massively wealthy by Cuban standards. That said, my expenditures were mostly limited to my B&B, my bike rental, bottled water, cheap cafes, and cab fares. My one splurge was taking a local couple who I had befriended out to a restaurant that, by Cuban standards, was exquisite, but that didn’t exceed the quality or cost of an Applebee’s. Over 4 days, all this cost $360. Compared to the few other U.S. tourists I met, this was an extremely economical budget–but was still more than what many Cubans spend annually.

Yet despite this, I found myself unable to buy basic things. For example, during my first night in Havana, I didn’t realize–until it was too late–that the B&B landlord had not provided toilet paper. In America, this would be a glaring oversight, but in Havana, I would discover, is normal. This forced me to navigate my neighborhood at 3am, offering pesos to the many teenage boys still standing outside, to bring out “papel higienico” from their houses. Every time I tried this, they would each explain, in rather comical fashion, that none was available. Finally I found a teenager who spoke passable English, and asked him how this could be. After sending his little brother in to find something, he explained that “in Havana, toilet paper is a delicacy–like chocolate,” and that most residents don’t just have any sitting around. So how did people cope?

“Here in Havana, we have a saying,” he quipped. “We say, ‘Cubans have a good ass. Our asses work for all kinds of paper. Toilet paper, newspaper, book paper–any kind of paper’.”

When his younger brother reemerged from the house, he was holding for me a single sheet torn from his school journal. I would later learn while interviewing impoverished Cubans that other “delicacies” included soap, meat, milk, cheese, and ice cream, not to mention the hundreds of gadgets and appliances found in a typical American home.

3. One thing I mentioned before leaving for Havana was that I wanted to see how urban street life functioned in a city suffering from 50 years of stagnation. I found much that was good and bad, but for the sake of brevity, will describe this week what was good.

Havana, both in downtown and the neighborhoods, offers a scintillating street culture dominated by people, music, and commerce (spartan as it may be). In many ways, it is an urban flaneur’s dream, as one can spend hours weaving through crowded streets full of friendly people who will spill their life details to a stranger. There are, in fact, few places one can go without finding numerous people on each block, and rather than ignoring one another, many are in perpetual communication, often yelling to each other from adjacent buildings.

Just blocks from the Capitol building.

 

A busy street in the southwestern Havana slum where I stayed.

A busy street in the southwestern slum where I stayed.

 

This atmosphere continues well into the early morning, as mostly teenagers stand on corners to laugh, drink and sing. For them, a rich gringo passerby is not a target, but a source for amusing dialogue, especially since they will bend over backwards to try overcoming the language barrier.

But this street life seems less rosy when you consider that it is rooted in hardship. Many Cubans are forced by poverty to live cramped together–sometimes 10 to a house, according to one person I spoke with–so naturally they would escape to the street. Because some cannot afford front doors and windows, much less advanced security, there is little privacy, and people treat sidewalks like their extended living rooms. Because so few people own cars–and because those cars run slower than in America–traffic is less menacing, allowing pedestrians to linger in roadways. Because parks are in such disrepair, sporting children instead compete in the streets. And the built fabric itself is so narrow because modern buildings are seldom constructed.

An equally fascinating aspect of Havana’s street culture, to be covered next week, was the physical decline. It was not difficult to tell that Havana was once a very advanced society indeed, defined by a merchant and governing class who had sophisticated urbanist sensibilities. At times while biking through Havana’s mild hills, I would get these weird flashbacks of San Francisco, when observing large, elaborate Spanish architecture that interspersed gracefully alongside pocket parks, public stairways and boulevards. But imagine if San Francisco had undergone 50 years of Detroit-style decline and neglect, and you’ll get an idea of the blight that pervades Havana. Many of the photos I provide next week will alarm you.

4. I could go on and on about other aspects of Havana’s street life, but here are a few tidbits that readers will find interesting.

– As might be expected from a Communist dictatorship, there were few religious symbols, but numerous political insignia celebrating the Revolution’s enduring strength. Ironically, many of these signs were in disrepair.

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Translation: "study, work, rifle."

Translation: “study, work, rifle.”

 

A celebration of CDRs, the network of neighborhood watchdogs tasked with upholding the Communist order

A celebration of CDR, the network of neighborhood watchdogs tasked with upholding the Communist order

 

– Cuba’s many old automobiles might be charming, but are terrible for the environment. Old age and poor maintenance mean that many spew out toxic exhaust that blows into pedestrians’ faces. In the central parts of Havana, where streets were narrow and buildings taller, the stench lingers, making life unbreathable.

They also frequently break down; it’s hard to bike 10 blocks without finding some car on the side of the road, hood popped.

– In America, farmer’s markets have become boutique destinations that sell products of greater quality and expense than what is found in a supermarket. Tables are often run by “gentlemen farmers” who view their activity as a hobby. In Havana, by contrast, such markets expose the desperation of the Cuban people, as many tables offer screws, dishes, spare auto parts, and whatever else a family may have scavenged.

– Street drainage is terrible after it rains.

– And more:

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Here I am with my host family

Here I am with my host family

 

 

Market Fundamentalism in the Mission?

There’s a proposal to place a moratorium on all market rate construction in the Mission District, one of San Francisco’s most rapidly gentrifying neighborhoods. Needless to say the proposal has sparked a debate. And Dan Ancona’s Putting Market Fundamentalism On Hold is another rock hurled into that particular fray. But in trying to take the anti-moratorium/pro-supply camp to task, it falls into the same unproductive bomb hurling we’ve been watching now for years. The following are a few thoughts on some of the points Mr. Ancona makes in his recent piece.

Talking Past Each Other

The first point is about a fundamental misunderstanding of the motivations behind the moratorium. Mr. Ancona makes this mistake, but so do the exasperated anti-moratorium/pro-supply advocates he quotes at the beginning of his piece.

Hint: The moratorium is not about lowering housing prices.

To be sure, the anti-moratorium camp wants lower aggregate housing prices throughout San Francisco and the entire region. The indisputable way to accomplish this goal is by building more housing. And as far as the anti-moratorium camp is concerned, this includes plenty of  below market rate (BMR) construction to mitigate some of the distributional effects of development.

For the pro-moratorium camp, however, this doesn’t cut it. Lower aggregate prices are not their goal. Their goal is keeping the existing population of the Mission intact and in place. Even a 70/30 ratio of market rate development to BMR construction wouldn’t do that. There would still be demographic churn and this is specifically what they want to avoid. For the pro-moratorium camp, lower housing prices are all well and good, but not if that means the dispersal of the existing community in the process.

The Mission District

Searching for the Endgame

The second issue is that there’s no endgame for the pro-moratorium camp. Mr. Ancona seems to think there is, but doesn’t go into detail. Here’s what I see.

Pressuring developers for a larger percentage of BMR housing is a no-go. 35% BMR is about where a project’s commercial viability dies and it’ll take way more than that to prevent demographic churn. And without the market rate development that the moratorium would stop, it’s not clear where funds to buy up the available properties and develop exclusively BMR housing would come from.

Now, if you were to put the moratorium into effect…and massively urbanize San Francisco’s western neighborhoods as well as all the peninsula cities…and skimmed the cream off of all that construction to massively develop the Mission with BMR infill…then maybe you have a shot.

But herein lies the problem. Not only do those two areas have no reason to go along with such a plan, they have every reason not to. The higher housing prices climb, the wealthier homeowners in either area become. And because of Prop 13, property owners don’t pay more in taxes even when their holdings appreciate. Why would homeowners accept unwanted change in their neighborhoods when they not only don’t have to but get wealthier by fighting for what they prefer anyway? If demand stays high and wealthier areas aren’t forced to build, relatively poorer areas get gentrified. And with the state’s peculiar tax laws and the region’s insane land use policies, we see this dynamic on steroids.

Addressing Inequality

There’s a third argument that Mr. Ancona makes which I thought warranted a response. Regarding inequality, he writes:

If California was some godforsaken European socialist hellscape (you know, where lots of people make roughly $70k a year and people take month long vacations and have time off to take care of their kids and are basically just happy), we wouldn’t be having this problem at the scale we are. Landlords are able to jack rents and developers are building luxury-everything because there’s a large-ish group of people who are willing to pay for it. If we were taxing marginal income above, say, $200k at 80% or something, there’d be a lot fewer people willing to throw this kind of rent around.

This, I must say, is a fascinating policy prescription. It’s essentially a call for active demand management via marginal income tax. It’s a terrible idea. But it’s still genuinely fascinating that someone would see a particular industry being too productive as the problem.

The issue here isn’t that tech people make too much money. It’s that as they create more wealth, real estate becomes infinitely more expensive because the supply of built space is so inelastic. The more wealth that the industry creates, the more it has to pay in rents for the privilege of being in the Bay Area. This puts everyone else in the unenviable position of being in a bidding war for housing with the most dynamic sector in the economy.

If we were serious about addressing material inequality–and we’re not–we would allow the housing supply to become more flexible. We’d focus taxation on land rents and away from productive labor and capital. And we’d directly subsidize individuals in need instead of trying to price fix away all of society’s ills.

The Likely Future

Last night, the San Francisco board of Supervisors voted down the moratorium. That means the pro-moratorium camp will try to put it on a city wide ballot for an up or down vote in November. If they succeed, it’ll be that much less development in San Francisco, but more significantly, other neighborhoods may follow suit in establishing similar bans.

To the extent that these measures slow down construction, prices will continue to climb. The only hope for a real reprieve would be a general slowdown in the tech industry. And with the Fed talking about hiking interest rates, that’s a possibility. But if that happens, it’ll be like giving a drug addict one more hit. Insane prices are the only thing that’s changing land use policy. If that impetus goes away, we’ll slide right back into blissful complacency. And it’ll just be a matter of time till the economy heats up again and we’re right back where we started.