Seamless Transit: Thoughts on the new report from SPUR

SPUR_Seamless_Transit

Seamless Transit is the new transportation policy report from SPUR. Main author Ratna Amin proposes integrating the Bay Area’s balkanized transit systems to improve lackluster ridership. Given that the region has 23 separate transit providers–more than any other metropolitan area in the country–she may have a point.

The report proposes standardizing service maps, fare structures, and payment systems; eliminating inter-system coverage gaps as well as redundant coverage; and reforming transit governance so that the different agencies actually make plans together instead of working at cross-purposes or not at all.

The recommendations are sound and the report includes historical footnotes for context. These are helpful for understanding region’s complicated institutional arrangements. Seamless Transit is a fine piece of work and well worth the read for anyone interested in Bay Area transportation.

But while organizational efficiency is important, it’s not the only thing to discuss. If we want to improve the region’s mass transit systems, we have to consider the physical environment in which those systems are embedded. To get transit right, the region needs to embrace density.

Denser development around transit nodes would increase ridership substantially. When people live, work, and play in smaller geographic areas, more people travel between a fewer number of points. Mass transit, especially fixed rail transit, becomes more effective the denser development becomes.

Hong Kong’s Metro Transit Railway (MTR) might be the quintessential example of urban density begetting mass transit success. The city is home to over 7 million inhabitants. It has a population density of over 18,000 residents per square mile. And of this population, 41% live within a half mile of an MTR station. The result? The MTR has a farebox recovery ratio of 186%–the highest in the world.

Because of legal as well as political differences between Hong Kong and the Bay Area, copy/pasting the MTR’s Integrated Rail-Property Development approach probably isn’t  feasible. But the general lesson remains the same. Increasing ridership means accepting density. And accepting density means reforming the region’s anti-growth, anti-urban land use policies.

None of this is a critique of Ms. Amin or her co-authors. They set out to address a specific set of issues and they did it well. But in the wider conversation about regional transportation, we’d do well to remember the importance of land use. And we’d do well to recognize the necessity of reform. Ultimately, getting mass transit right may have as much to do with embracing urban levels of density as it does with making sure the trains show up on time.

 

 

 

Why Money for Schools Means No Permits For Housing

Housing has a lot going against it in the California. But amidst all the legal, political, and regulatory roadblocks, there’s one law that sneaks by largely unnoticed: Prop 98.

Prop 98 guarantees a minimum level of state spending on education each year. Sacramento pools most city, county, and special district property taxes into special education funds to meet this commitment. The localities only get to keep a small part of the property tax revenues for their own general budgets.

This system creates a disincentive for cities to permit housing. New housing brings in new residents who need city services. But it doesn’t bring in a commensurate increase in property taxes since most of that revenue gets scooped up by Sacramento.

Commercial development, though, brings in taxes a city gets to keep. Sales and hotel taxes are significant revenue streams. And they don’t cause the kinds of strain on city services that new residential does.

Reforming Prop 98 might be low hanging fruit. Changing the formula to appropriate a broader stream of city revenues might help ease the bias against housing. And it might even be possible to amend the law without having to fight the California Teachers Association. As long as there’s no net decrease in education funding, of course.

stack_of_books

For those not acquainted with California politics, the California Teacher’s Association (CTA) is the most potent lobby in Sacramento. If the CTA doesn’t like a bill, it doesn’t become a law.

 

It’s tough to say exactly how much new housing Prop 98 actually prevents. Different cities get to keep different amounts of their property taxes, so the disincentive differs case to case. And there are plenty of other things like CEQA and Prop 13 which put a drag on new construction as well. But where CEQA and Prop 13 make it easier for residents who are already NIMBYs to gum up the works, Prop 98 is a reason in itself for a city to avoid residential development. So while we can’t do much to change the aesthetic preferences of our neighbors, we can do something to change the law. And if tweaking one law makes cities see new housing as a financial boon instead of a burden, it might be worth the effort.

 

Travel Update: Recent Articles On Housing

I wrote a housing-related article this week for Forbes, and in the process of research, came across several other interesting recent ones. Here’s the roundup:

1. My article discussed the connection between rent control and high housing prices. To my surprise, only 6 of America’s 50 largest cities still have rent control, as numerous others ended what they saw as a counterproductive policy. But those six remain among the nation’s most expensive, and I argue that rent control is a big reason why.

2. This didn’t prevent Seattle from trying to revive the policy this week, led by Socialist Party councilor Kshama Sawant.

3. While rent control is seen today as antiquated, this hasn’t stopped the rise of its close cousin, “inclusionary zoning.” Steven Greenhut writes for Reason about a California state court case that could determine the policy’s constitutionality. The case, he says, is “about whether cities have unlimited power to extract concessions from homebuilders for things that are not ‘impacts’ from the project. In other words, it’s legitimate for government to require new developments to pay to mitigate the effect of the new residents on local infrastructure (roads, sewers, fire service), but is it OK for cities to require affordable housing just because officials want to see more of it built?”

4. Michael Lewyn challenges the notion that Airbnb hurts housing affordability by taking units off the market.

5. Recently the New York Times published a short time-lapse video of lower Manhattan’s various developmental stages over 500 years. Daniel Bier at Newsweek points out something strange about the video’s last few decades: “The pace of change slows dramatically toward the end…because the city government has deliberately calcified New York City, encasing the city’s structures in a legal state of suspended animation.”

6. Emily Badger writes on Wonkblog about the rise of urban adult singles, and the way that cities’ housing stocks have failed to adapt–thanks to government regulation. Her piece is worth quoting at length.

Our housing stock wasn’t built for a society full of singles. Our communities instead are full of homes meant for the traditional nuclear family — two-bedroom starter homes, three-bedroom houses, apartments with more bathrooms than a singleton needs, full-service kitchens when 25-year-old bachelors now primarily dine by microwave….In New York, Austin and Denver, nearly 57 percent of adults were single in 2010 (although not necessarily living alone). In Washington, D.C., that figure is a whopping 71 percent. But none of these cities have anywhere near enough small-sized housing to accommodate them. That means that a lot of people are probably living with unrelated adult roommates who’d prefer to live alone (half you people in D.C. group homes?). And it means that some people who do live alone are likely paying more for space they don’t want in a large one-bedroom because there aren’t enough alternatives in studios and efficiencies.

Changes in demographics and social norms invariably occur faster than changes in the built world around us…[But] a lot of cities are also actively making it hard for the housing supply to adjust. The rise of singles calls in particular for more micro housing: apartments the size of studios or even smaller, and “accessory dwelling units” (think in-law cottages or garage apartments) that might be built in the back yard of existing homes. It also calls for a different model of housing where, for instance, four singles might share a communal living space adjacent to their separate units instead of each having their own living room. Neighborhood opposition and existing regulation make this kind of housing hard to build in most cities, though. Parking requirements, for example, often mandate that new housing come with new off-street parking spots, too. But that rule is impractical for someone who wants to rent a cottage in her backyard. And it makes projects financially unworkable for a developer who wants to build an apartment full of micro units next to a train stop for residents who don’t own cars. Other laws set minimum standards for how small a housing unit can be — in much of New York, it’s 400 square feet — making micro units effectively illegal.

 

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:

Gentrification in Reverse

Co-authored with Anthony Ling, editor at Caos Planejado

Gentrification is the process through which real estate becomes more valuable and, therefore, more expensive. Rising prices displace older residents in favor of transplants with higher incomes. This shouldn’t be confused with the forced removal of citizens via eminent domain. Ejecting residents by official fiat is a different problem entirely.

Greenwich_Village,_1900

Greenwich Village circa ~1900

 

A classic example of gentrification is that of Greenwich Village, New York. Affluent residents initially occupied the neighborhood. It later became the city’s center for prostitution, prompting an upper-middle class exodus. Low prices and good location would later attract the textile industry. This was the neighborhood’s first wave of gentrification. But after a large factory fire, the neighborhood was once again abandoned.

Failure, however, would give way to unexpected success: artists and galleries began to occupy the vacant factories. These old industrial spaces soon became home to one of the most important movements in modern art. In Greenwich Village, different populations came and went. And in the process they each made lasting contributions to New York’s economic and cultural heritage. This was only possible because change was allowed to take place.

Greenwhich Village circa 2014

Greenwich Village circa 2014

But change isn’t always easy.

As a neighborhood becomes more popular, it also becomes more expensive. Tensions run high when long-time residents can’t afford rising rents. Some begin to call for rent controls or other measures to prevent demographic churn.

But rent control is a temporary fix at best; in the longer term, its effects are negative. By reducing supply, it tends to actually drive up the cost of housing. And in the face of price controls, landlords may seek to exit the rental market entirely, further exacerbating any housing shortage.
What, then, does this mean for urban development? How can cities evolve without completely displacing their middle and working class residents? By embracing gentrification’s opposite: filtering.

Buildings, like anything else, are expensive when they’re new but depreciate over time. Architectural styles change. Wear and tear accumulate. Buildings become harder to update with the newest amenities. Here is where we find filtering; aging units, originally built for the wealthy, become more affordable over time. What’s difficult to see is that filtering occurs simultaneously with gentrification. Every “gentrifier” frees up their former unit for someone slightly less well-off. That person, in turn, also frees up a unit and so on down the line. The process is akin to a game of musical chairs.

But for the game to work for everyone, chairs must be added, not taken away. Cities must allow additional units to be built so that the housing stock expands over time. Research suggests that this is a necessary condition for filtering to take place.

While filtering is not some panacea that cures all housing ills, it’s an important part of how housing markets work. Allowed to take place, it contributes to providing housing at all levels of income. The more a city impedes the process by restricting growth, the more its poorest areas will gentrify without the offsetting creation of less expensive housing over time.

How to Fix San Francisco’s Housing Market

Want to live in San Francisco? No problem, that’ll be $3,000 (a month)–but only if you act fast.

In the last two years, the the cost of housing in San Francisco has increased 47% and shows no signs of stopping. Longtime residents find themselves priced out of town, the most vulnerable of whom end up as far away as Stockton.

Some blame techie transplants. After all, every new arrival drives up the rent that much more. And many tech workers command wages that are well above the non-tech average. But labelling the problem a zero sum class struggle is both inaccurate and unproductive. The real problem is an emasculated housing market unable to absorb the new arrivals without shedding older residents. The only solution is to take supply off its leash and finally let it chase after demand.

Strangling Supply

From 2010 to 2013, San Francisco’s population increased by 32,000 residents. For the same period of time, the city’s housing stock increased by roughly 4,500 units. Why isn’t growth in housing keeping pace with growth in population? It’s not allowed to.

San Francisco uses what’s known as discretionary permitting. Even if a project meets all the relevant land use regulations, the Permitting Department can mandate modifications “in the public interest”.  There’s also a six month review process during which neighbors can contest the permit based on an entitlement or environmental concern. Neighbors can also file a CEQA lawsuit in state court or even put a project on the ballot for an up or down vote. This process is heavily weighted against new construction. It limits how quickly the housing stock can grow. And as a result, when demand skyrockets so do prices.

To remedy this, San Francisco should move from discretionary to as-of-right permitting. In an as-of-right system, it’s much more difficult to stop construction. As long as a project meets existing land use requirements, city planners have to issue a permit. And although neighbors can sue based on nuisance, they don’t have any input in the actual permitting process. As-of-right permitting would go a long way toward defanging NIMBYs and overzealous planners.

Yellow equals a height limit of 40 feet or less than 5 stories.  Credit Mike Schiraldi

Yellow equals a height limit of 40 feet or less than 5 stories. Credit Mike Schiraldi

 

But even if San Francisco opened up the permitting floodgates, height limits, floor-to-area ratios, zoning designations, and minimum parcel sizes all prevent land from being put to its best use. Land use restrictions like these can increase the price of housing by as much as 140% over construction costs. Relaxing–if not abolishing–these types of restrictions would be hugely beneficial.

But for as much as regulatory reform would help, there’s another way of encouraging supply to catch up with demand. And, interestingly enough, it involves raising taxes.

Tax the Land

The more you tax something, the less of that something society produces. Raise taxes on income and you discourage labor. Raise taxes on capital and you discourage investment. Raise taxes on property and the same logic applies; the higher the tax rates the greater the burden on new construction. But property taxes aren’t just a tax on buildings, they’re a tax on the land underneath as well. Separate the two in favor of taxing land alone, and construction is not only unburdened, it’s encouraged.

A pure land tax would amount to fixed overhead for each assessment period. This would encourage landlords to use their holdings as intensely as the market would bear. Holding a valuable parcel vacant or underused would become prohibitively expensive.

In San Francisco, where land is incredibly valuable, a land tax would encourage  denser development.

In San Francisco, where land is incredibly valuable, a land tax would encourage denser development. Credit Ascher, Kate. (2011).

 

There are a few different proposals for implementing land taxation. The most aggressive approach calls for a 100% fee on land values and the abolition of all other taxes. A slightly more moderate proposal favors an 80% land tax to allow for some margin of error in assessment. The most realistic plan would be to retire San Francisco’s property tax in favor of a land tax and make the change revenue neutral. Considering the city’s property tax rate is barely over 1%, a revenue neutral land tax probably wouldn’t deliver the sun, the stars, and the moon like it would at much higher levels. That said, it would still be an improvement over the existing property tax.

Fix the Market, Not the Price

Neither rent control nor inclusionary zoning will fix the housing crisis. Both amount to price controls. Both drive up the price of market rate construction. Both create a gap between subsidized and unsubsidized housing. And as long as San Francisco can’t set its own immigration policy, there will never be enough subsidized housing to go around. It’s simply not a scalable solution. But that doesn’t mean there’s no room for a safety net.

Housing vouchers are like food stamps for….well, housing. They put resources directly in the hands of those who need them while avoiding the negative side effects of price fixing. It’s welfare that doesn’t try to mandate a price, but instead ensure that the least well off can pay whatever that price might be.

Funding via a land tax would tie the amount of revenue available for vouchers to the state of the housing market. When housing costs increase, it’s not the buildings themselves that are becoming more expensive, it’s the land that they’re sitting on. Houses aren’t wine, they don’t typically improve with age. The actual ground they sit on, however, can become more valuable if more people want to move into a neighborhood. If a sudden surge in demand sends land prices through the roof, a land tax would ensure that funding for vouchers would increase as well.

Funding through a land tax would also prevent vouchers from becoming a subsidy for landowners. Pumping other sources of revenue into housing might simply make the market more competitive and allow landlords to charge higher rents. A land tax would limit this by moving resources from landlords on one end of the market to tenants on the other end without increasing the total amount of dollars chasing housing. Regulatory reform would also limit any price increases from a voucher system since an increase in demand would better stimulate an increase in supply. The extra supply would then put downward pressure on prices.

Slowing down–let alone turning back–the rising cost of housing will require a massive amount of new construction. Relaxing land use rules will clear the path. Changing the tax code will hurry things along. And rethinking the social safety net will ensure that no one gets left behind.

BART, Josefowitz, and Mass Transit in the Bay

Lake_Merritt_BART

Last week, Nick Josefowitz unseated a multi-decade incumbent for a spot on the BART board of directors. Normally I don’t pay too much attention to elections, but Mr. Josefowitz might actually have some good ideas.

For everyone outside the Bay Area, the BART (Bay Area Rapid Transit) system is a commuter rail line that constitutes the vital transportation link between the East Bay and San Francisco. On a typical weekday it provides 400,000 rides and that number is increasing as the regional economy continues to boom. Suffice it to say that BART is a big deal to a lot of people who rely on it every day (myself included).

While Josefowitz’s campaign website talks about cleaning up dirty stations and increasing late night train availability, I had the privilege of hearing him outline an interesting proposal during a private, small group discussion some months ago.

According to Josefowitz, BART sits on a substantial amount of real estate in the form of station parking lots. His proposal was to repurpose some of this space as high density housing. This would help with the region’s housing shortage and support BART ridership by clustering population around the system’s stations and the lost spots could be offset by building parking structures on the remaining lot space (many BART parking lots are ground level only as opposed to multi-level parking structures). This sounded a lot like Hong Kong’s integrated rail-property development approach which has proven to be an unqualified success, so my interest was definitely piqued.

As always, there’s plenty of which to be skeptical. The fact that the proposal was brought up in a private discussion, but isn’t listed on the campaign website may say something about where it falls in Josefowitz’s priorities. Also, it’s difficult to tell how effective the incoming director will be in pitching new ideas to the incumbent directors on the board. And finally, any plan to build housing on BART property will be sure to include some kind of “affordable” housing requirement, the beneficial effects of which remain questionable to say the least.

But, if Josefowitz is serious about the proposal and he manages to find support amongst the other members of the board, it could be a step in the right direction. More housing would be better than less in the supply constrained Bay Area and allowing for greater density around BART’s stations could contribute to a more sustainable regional transit system.

For the record, I did not vote in this election and this post does not equate to a political endorsement of any kind.

 

Planned Manufacturing Districts: Planning the Life Out of Districts

Chicago’s Goose Island and surrounding Planned Manufacturing Districts

They are called different things in different cities, but they are similar in form and intent among the cities where they are found.  For simplicity’s sake, a Planned Manufacturing District (PMD), as they are called in Chicago, is an area of land, defined by zoning, that prohibits residential development and other specific uses with the intent of fostering manufacturing and blue-collar employment.

Proponent of PMDs purport to be champions of the middle-class or blue-collar workers, but fail to consider the unintended consequences of prohibiting alternative uses on that land.  At best, PMDs have little effect on changing land-use patterns where industrial is already the highest-and-best-use.  At worst, they have the long-run potential to distort the land use market, drive up the costs of housing, and prevent vibrant neighborhoods from emerging.

A Race to The Bottom

Before getting into it further, it is important to examine the economic decisions industrial firms make in comparison to other uses.  Earlier in the industrial revolution, industry was heavily reliant on access to resources.  Manufacturing and related firms were very sensitive to location.  The firms desired locations with easy access to ports, waterways, and later railways to transport raw materials coming in, and products going out.

However, the advent of the Interstate Highway System and ubiquitously socialized transportation network have made logistical costs negligible compared to other costs.  Where firms once competed for locations with access to logistical hubs and outbid other uses for land near waterways in cities, they now seek locations with the cheapest land where they can have a large, single-floor facility under one roof.  This means sizable subsidies must be combined with the artificially cheap land to attract and retain industrial employers on constrained urban sites.

Additionally, today’s economy has become much more talent-based rather than resource based, and patterns have shifted accordingly.  In contrast to industrial, residential and office uses are still very sensitive to location.  In fact, residential preference for urban locations are increasing.  Likewise, most office and other commercial firms seek to locate where they can best attract talent or customers, or simply put, convenient to residential.  To the dismay of the politicians, blue collar jobs are destined to leave cities to seek cheaper land in less desirable locations.  We should expect industrial firms to prefer exurbs and sites close to negative externalities, such as near highways and airports where noise and air pollution drive out residential uses.  Efforts to stem the tide of these realities will surely incur dead-weight losses.

In a race to the bottom, prohibition of housing and other uses in PMDs drives the value of that land down to the point it can compete on price with the most undesirable suburban locations. That is, until a non-manufacturing use compatible with the wording of PMDs emerges to crowd out industrial.

We are are in an interesting time, and are witnessing the first cases where the long-term consequences of PMDs are beginning to emerge for us to witness.

Google and Chicago’s Fulton Market

Over the past two decades, Chicago’s West Loop has become one of the most desirable neighborhoods in the City.  Developers flocked to the neighborhood to take advantage of the neighborhood’s proximity to Chicago’s Loop, and abundance of underutilized warehouses waiting to be converted to hip lofts.  However, Fulton Market and meatpacking district on the northern part of the West Loop remained immune to the radical transformation.  Neighboring West Town, River West, and West Loop blossomed during the housing boom.  Was Fulton Market less desirable?  Far from it – meaningful redevelopment was forbidden.

As developers began converting West Loop buildings in the 90’s, the Randolph Fulton Market Merchants Association proposed the formation of the Kinzie Street Industrial Corridor.  The Association ultimately triumphed in their lobbying for the district, which formed a PMD to protect them from the encroachment of competing land uses.  They also won a Tax Increment Financing district to fund subsidies, and other programs aimed at enriching incumbent and new businesses in the area.

Then, along comes Google.  According to the wording of the PMD, “High Technology Office” is a permitted use in the Kinzie Street Industrial Corridor.  Google, in search of an office with large floor plates for its Chicago headquarters, chose to move into a former cold storage building in the Fulton Market that is being converted into office.

As a result of Google’s impending arrival, Fulton Market has attracted a flurry of speculative real estate investment as other technology firms, hotels, restaurants, and entertainment venues flock to the area.  Land prices have been driven up to extent that no matter how much the subsidy, Fulton Market is no longer an economically viable location for industry or manufacturing.  We should expect politicians to scramble to fight this over coming years, but extinction of Fulton Market industry is imminent.  Efforts to hamper market-forces, millions of dollars of wasted subsidies, and unnecessarily higher housing costs were sacrificed to achieve nothing of lasting value.

i3xnk4

Vibrancy Thwarted

Possibly the biggest victim of the vast prohibition on uses of land in Planned Manufacturing Districts are the neighborhoods in which they are located.  In her treatise, The Death and Life of Great American Cities, Jane Jacobs discusses the ingredients of what makes urban districts flourish or fail.  Jacobs makes the case that great urban districts typical have a diversity of primary uses, short blocks, diversity of the age of buildings, and sufficient concentration of people.  Districts aimed at preserving and fostering limited uses, such as PMDs, stand in the way of all of these factors necessary for the emergence of vibrant city life.

Most obviously, if residential and other uses are prohibited, a diversity of primary uses and sufficient concentration of people are impossible.  Since the optimal sites for today’s manufacturing and logistics firms are very large, single-story buildings, firms are likely to demolish older multi-story buildings otherwise desired by residential loft-lovers.  They are also prone to spread their facilities over several blocks, sometimes incorporation what was once a street into their property.

Clybourn Corridor, Elston Corridor and Goose Island PMDs

Inspired by Fulton Market’s sudden success, some developers have begun to set their sights on other well located PMDs.  These developers intend to snatch up the preserved land at artificially low prices and entice technology companies to come.  One such developer, South Street Capital intends to do just that in Goose Island, straddled between River North and Lincoln Park to the east, and River West and Wicker Park to the west.  Developers also have also been eyeing the nearby site of the former Finkl Steel Plant.

Ironically, it was Finkl who successfully lobbied for the formation of Chicago’s first PMD, the Clybourn Industrial Corridor.  In the debates leading to the formation of the PMD, light manufacturing firms and developers were opposed to protections.  Light manufacturing wanted to keep the option to sell their land to developers and move to the suburbs.  As reported by the Chicago Reader:

On the other side were a handful of industrial-property owners from the area and their battery of lawyers, who argued that Eisendrath was offering them protection they do not want. Someday they may want to move, they say, because their buildings are too small, old, or obsolete. And they want the right to sell to whomever they choose–builders of shopping malls, condos, town houses, it doesn’t matter–at the highest dollar the market will bear.

“I like doing business in Chicago,” says David Schopp, chairman of U.S. Sample Company, the second-largest manufacturing employer in the area. “But I don’t want to be restricted. I don’t think it’s government’s role to say who I can and cannot sell to.”

Now, it is Finkl who wishes for that option.

The southern part of Fulton Market, as much as zoning hampers it’s potential, should enjoy some vibrancy as adjacent uses spill over into the district. (further, we do expect the city to begin allowing more residential in it’s latest plans for the district)  However, without lifting the PMDs altogether, there is little reason to be optimistic about the Goose Island and Elston Corridor PMDs.  Unfortunately, development of the PMDs in line with current prohibitions will result in a large area devoid of residential uses and other essential ingredients needed to become vibrant districts.  The area currently lacks transit alternatives, so employees will get to work by car or bike, exasperating traffic on roads connecting Lincoln Park to the expressway. We cannot expect the area to be rescued by spillover from nearby residential areas, as the river acts as a border vacuum preventing interconnection and transit access is minimal.  Failure to remove the PMD before further development takes place will condemn the area to eternal dullness.

Chicago’s Goose Island, protected by PMDs

Other PMDs

There are a total of 15 PMDs in Chicago.  The PMDs mentioned above, in addition to the Chicago/Halstead PMD, are the PMDs that have successfully thwarted residential encroachment.  Because of their undesirable locations, the remaining PMDs are impotent at altering land use patterns.  Impotent PMDs only serve as a mechanism for politicians to pay lip service to manufacturing jobs, and window dressing that goes hand-in-hand with subsidies.

I often hear urbanists defend PMDs, repeating the Urban[ism] Legend that we need them to keep manufacturing jobs in the city.  We urbanists can do much to make these districts vibrant if we overcome our nostalgia for urban manufacturing and come to terms with how dangerous PMDs actually are.  Economically speaking, PMDs can only serve the purpose of keeping land prices low enough to compete with undesirable suburban locations for industry. PMDs nonetheless do little to overcome the enormous economic forces repelling industry out from desirable locations in cities.  At worst, PMDs permanently plan the life out of otherwise desirable areas in the long run after serving their purpose temporarily.  At best, PMDs are impotent to drive down land prices in already undesirable places any further than they already are.

At a time when housing affordability is a major issue affecting cities, one way to remove barriers to increased housing supply is to abandon our counter-productive nostalgia for urban manufacturing.  PMDs abolish urban vibrancy, and it’s time for cities to abolish PMDs before it’s too late.

See also:

2005 Study by the University of Wisconsin-Milwaukee on the performance of the Clybourn Corridor PMDs