Urban[ism] Legends – Market Urbanism http://marketurbanism.com Liberalizing cities | From the bottom up Thu, 31 May 2018 20:23:23 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.6 https://i2.wp.com/marketurbanism.com/wp-content/uploads/2017/05/cropped-Market-Urbanism-icon.png?fit=32%2C32 Urban[ism] Legends – Market Urbanism http://marketurbanism.com 32 32 3505127 Is Zoning Popular? Reevaluating the Evidence http://marketurbanism.com/2018/01/25/zoning-popular-evidence-weak/ http://marketurbanism.com/2018/01/25/zoning-popular-evidence-weak/#comments Thu, 25 Jan 2018 17:09:02 +0000 http://marketurbanism.com/?p=9555 In my regular discussions of U.S. zoning, I often hear a defense that goes something like this: “You may have concerns about zoning, but it sure is popular with the American people. After all, every state has approved of zoning and virtually every city in the country has implemented zoning.” One of two implications might be […]

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New Brunswick, NJ Zoning Map

In my regular discussions of U.S. zoning, I often hear a defense that goes something like this: “You may have concerns about zoning, but it sure is popular with the American people. After all, every state has approved of zoning and virtually every city in the country has implemented zoning.”

One of two implications might be drawn from this defense of Euclidean zoning: First, perhaps conventional zoning critics are missing some redeeming benefit that obviates its many costs. Second, like it or not, we live in a democratic country and zoning as it exists today is evidently the will of the people and thus deserves your respect. The first possible interpretation is vague and unsatisfying. The second possible interpretation, however, is what I take to really be at the heart of this defense. After all, Americans love to make “love it or leave it” arguments when they’re in the temporary majority on a policy.

But is Euclidean zoning actually popular? The evidence for any kind of mass support for zoning in the early days is surprisingly weak. Despite the revolutionary impact that zoning would have on how cities operate, many cities quietly adopted zoning through administrative means. Occasionally city councils would design and adopt zoning regimes on their own, but often they would simply authorize the local executive to establish and staff a zoning commission.

Houston was among the only major U.S. city to put zoning to a public vote—a surefire way to gauge popularity, if it were there—and it was rejected in all five referendums. In the most recent referendum in 1995, low-income and minority residents voted overwhelmingly against zoning. Houston  lacks zoning to this day. Meanwhile, the major proponents of early zoning programs in cities like New York and Chicago were business groups and elite philanthropists. Where votes were held, as in cities like St. Louis, support for zoning was often openly predicated on the idea that zoning would implement and preserve racial segregation. Needless to say, the poor, immigrants, and African Americans were often prevented from voicing their opposition to zoning and other racial segregation programs at the ballot box.

Yet the puzzle remains: if zoning was never popular, why did nearly every state and adopt it? Here it might help to clear up the actual origins of US zoning policy. Contrary to the popular view of zoning as a ground-up phenomenon, zoning was in fact developed, promoted, and heavily incentivized by the federal government.

Zoning as it exists today was developed by the federal Department of Commerce under future president Herbert Hoover. In 1924 and 1928, the department published the Standard Zoning Enabling Act and Standard City Planning Enabling Act, respectively, and distributed copies of each to every state legislature in the country. These acts aimed to accomplish three goals: First, to popularize the policies among legislators and provide a clear federal seal of approval. Second, to provide a model for zoning enabling legislation—legislation whereby the state allows municipalities to undertake certain police powers—and make it easy for state legislatures to quickly pass it. Finally, to secure court approval of zoning. At the time, the constitutionality of zoning was very much in doubt. Many zoning advocates both feared that poorly drafted zoning would prompt the courts to declare the policy unconstitutional nationwide and hoped that the widespread adoption of zoning would leave the courts hesitant to overturn it. Their strategy clearly worked: before 1920, just over a third of states had adopted any kind of zoning enabling legislation. By 1930, nearly three quarters of states had adopted the legislation. In 1926, a divided Supreme Court ruled in favor of zoning.

Over the next 90 years, the federal government would continue to promote and in many cases require zoning, particularly during the New Deal. In 1936, the USDA published rural zoning enabling legislation, designed to push zoning into small towns and rural hamlets. Whether or not towns and cities needed or even wanted zoning, waves of grants and technical experts were forthcoming to nudge municipalities to draft zoning ordinances.

Often, these zoning ordinances were shoddily crafted by non-locals to help municipalities meet federal mandates. After all, as the federal government played a larger role in financing state and local infrastructure projects, zoning came to be expected. Likewise, as the government entered into housing finance in 1934, low-density, racially segregated residential zoning became a necessary prerequisite to secure funding for residential projects or mortgages. Today, the expectation that towns and cities have zoning continues to show up in applications for everything from infrastructure funding to emergency relief. Under such a regime, regardless of popular support, it would be downright weird if most towns and cities didn’t adopt zoning.

None of this is to say that there were never popular constituencies for zoning. A handful of states and cities had clearly adopted zoning by their own volition, as unsavory though their motives often were. But even if we were agree that the popularity of zoning in any way excuses the program—an argument which I am highly skeptical of, see postscript—the purported popularity of early zoning remains far from settled.  

On the one hand, we have strikingly little evidence from democratic public referenda for the popularity of US zoning. On the other hand, we have a century of the federal government drafting, promoting, incentivizing and mandating zoning. Where mass movements in favor of zoning are missing, we find only xenophobic business groups and progressive technocrats in favor. All of this casts serious doubt over the idea that zoning is in the result of popular movements or enjoys mass support today. Meanwhile, Eucludean zoning’s incredible costs become clearer every day.


Postscript: Let’s take the defense that Euclidean zoning is popular on its own terms, contrary to the historical evidence. It’s not obvious that popularity qualifies as an overriding merit in all or even most cases. Sure, we live in a republic, where policy is meant to operate with the consent of the public. But we also live in a liberal republic, where all citizens enjoy certain basic rights regardless of the whims of majorities. Until quite recently, nearly every city in the country enforced some form of school segregation. When unelected judges, after much hemming and hawing, finally cracked down on school segregation—against the wishes of majorities—they did the right thing. A policy that violates basic rights, or arbitrarily expropriates property, or abuses vulnerable populations isn’t made right for being popular in this country. Even if zoning were popular, its tendency to do all of these things should make us deeply skeptical of the policy.

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Urban[ism] Legend: The “Geographically Constrained Cities” Fantasy http://marketurbanism.com/2017/10/22/the-geographically-constrained-cities-fantasy/ http://marketurbanism.com/2017/10/22/the-geographically-constrained-cities-fantasy/#comments Sun, 22 Oct 2017 23:42:03 +0000 http://marketurbanism.com/?p=8854 One common argument against building new urban housing is that cities are geographically constrained by their natural and political boundaries, and thus can never build enough housing to bring prices down.  This claim rests on a variety of false assumptions. The first false assumption is that the amount of land in a city limits the […]

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One common argument against building new urban housing is that cities are geographically constrained by their natural and political boundaries, and thus can never build enough housing to bring prices down.  This claim rests on a variety of false assumptions.

The first false assumption is that the amount of land in a city limits the amount of housing in that city.  If you assume that every bit of residential land must be occupied by single-family houses on 1/5 of an acre on land, I suppose this assumption makes sense.  But in reality, you can always put more people on a block of land.  Where today you have big houses, tomorrow you could have small houses.  Where today you have small houses, tomorrow you could have small apartment buildings.  Where today you have small apartment buildings, tomorrow you could have large apartment buildings.  Even in midtown Manhattan, where I live, there are lots to two-to-four story buildings that could be knocked down and replaced with larger buildings.     If Manhattan had the density of Mongkok (a popular Hong Kong neighborhood with 340,000 people per square mile), it could accommodate almost 7 million people- about 80 percent of the city of New York’s population.*  And if Manhattan had enough housing to accommodate Mongkok-type densities, a whole lot of housing units (either outer borough units or older Manhattan units) would become vacant, causing rents to plunge.

The second assumption is that a city’s built-up core is its entire housing market.  But this is wrong, because Manhattan landlords compete not just with each other, but with landlords in the outer boroughs and the suburbs.  So if enough housing units were, for example, built in New Jersey, demand for housing in Manhattan would eventually decrease.

 

*A common counteragument is that demolishing and rebuilding housing is expensive.  This argument fails tor two reasons.  First, the differences between high-cost cities and low-cost cities have far more to do with land costs than with construction costs.   For example, metro San Francisco’s construction costs per housing unit are only 1.7 times higher than those of Atlanta, but its metro land costs are more than fifteen times higher (data here).

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NIMBY Contradictions http://marketurbanism.com/2017/08/14/nimby-contradictions/ http://marketurbanism.com/2017/08/14/nimby-contradictions/#comments Mon, 14 Aug 2017 16:14:18 +0000 http://marketurbanism.com/?p=8733 Ever since zoning was invented in the 1920s, homeowners have argued that limits on density and on multifamily housing are necessary to protect property values.  But today, urban NIMBYs seek to prevent new housing on the ground that new housing will lead to gentrification, which will in turn lead to increased property values, which in […]

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Ever since zoning was invented in the 1920s, homeowners have argued that limits on density and on multifamily housing are necessary to protect property values.  But today, urban NIMBYs seek to prevent new housing on the ground that new housing will lead to gentrification, which will in turn lead to increased property values, which in turn will lead to rising rents and displacement.

Similarly, I often read that cities and suburbs shouldn’t have any new housing because they might become “too dense” or “overcrowded.” (Never mind that when there’s not enough housing to go around, excluded residents respond not by leaving the city, but by sleeping on the streets, thus making the city feel even more crowded).

But at the same time, I also read that building new housing is futile, because it will all be bought up by foreign oligarchs, who (because they aren’t quite greedy enough to rent out their property) cause the housing to be lifeless and unoccupied.  It is not quite clear to me how the city can be overcrowded and undercrowded at the same time, but evidently this view seems to be common.

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More on “Empty Houses” http://marketurbanism.com/2017/07/18/more-on-empty-houses/ http://marketurbanism.com/2017/07/18/more-on-empty-houses/#comments Tue, 18 Jul 2017 15:05:10 +0000 http://marketurbanism.com/?p=8678 I recently saw a Facebook post asserting that San Francisco has 30,000 vacant units, so therefore no market-rate housing should be built.   So I looked up Census data on these allegedly empty units. It is true, according to the Census Factfinder website, that there are 30,000 or so unoccupied housing units in San Francisco. […]

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I recently saw a Facebook post asserting that San Francisco has 30,000 vacant units, so therefore no market-rate housing should be built.   So I looked up Census data on these allegedly empty units.

It is true, according to the Census Factfinder website, that there are 30,000 or so unoccupied housing units in San Francisco. Does this mean that they are completely idle?  In fact, no.  More than half of these units were (as of the 2010 Census) currently for sale or for rent. 18 percent for for seasonal use (presumably, second homes).  Only 5 percent are rented or sold but unoccupied.  The rest are “other vacant”. whatever that means.

Bottom line: half the vacancies were in the process of being sold or rented.  A little under a fifth were second homes.  About a third we don’t know much about.

 

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The “Empty House” Theory http://marketurbanism.com/2017/05/26/the-empty-house-theory/ http://marketurbanism.com/2017/05/26/the-empty-house-theory/#comments Fri, 26 May 2017 22:22:56 +0000 http://marketurbanism.com/?p=8510 One common argument against new urban housing runs as follows: “If we build new housing, it will all be bought up by rich investors who will sit on it.  So new supply doesn’t restrain housing costs.”  This argument (at least as I have phrased it) strikes me as absurd.  Here’s why: for the argument to […]

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One common argument against new urban housing runs as follows: “If we build new housing, it will all be bought up by rich investors who will sit on it.  So new supply doesn’t restrain housing costs.”  This argument (at least as I have phrased it) strikes me as absurd.  Here’s why: for the argument to justify restraining supply, the argument presupposes that if you build 100 new condos/houses/apartments, every single one of them will be bought by an investor, and every single investor will irrationally choose to sit on the unit rather than renting it out.   I can’t prove this is wrong, but it seems really hard to believe.*

Even leaving aside the logical weirdness of the argument, it seems to have a questionable factual basis.

If there was really a wave of nonresident investors in expensive cities, we might find (1) that the most expensive markets had the highest housing vacancy rates and (2) that these vacancy rates have been rising as housing costs rose.  But Census data suggests otherwise.

Here’s some data: (all for central cities, not metros)

Expensive 2010 2015
Manhattan 12.7% 13%
San Francisco 9.8 7.9
Los Angeles 6.7 6.5
San Diego 7.8 7.1
Boston 9.1 8.0
Not so Expensive 2010 2015
Dallas 12.8% 10.6%
Houston 14.0 12.1
Philadelphia 14.1 13.3
Chicago 13.8 13.2

By and large, the expensive cities have lower vacancy rates- exactly what you would expect in a free market.  The only exception is Manhattan.  But it seems to me that if pied-a-terres led to higher rents, Manhattan’s empty-house rate would have climbed as rents did- which does not seem to have been the case.

The only way to save the “empty house” theory is to suggest that expensive cities’ empty houses are different from everyone else’s – that is, they are especially likely to be prime properties held by investors, while Chicago’s empty houses are more likely to be rotting-out houses in tough neighborhoods.  But I do not know of any way of proving or disproving such a theory.

*I note, however, that there is a much more reasonable version of the argument- that even though new supply does some good because some people buy the housing units and live in them, the supply would do even more good if cities did something to discourage investment by nonresidents.  This argument would not justify restraining supply, but might justify policies to discourage investment by nonresidents.   I am not going to address such policies in this blog post.

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Urban[ism] Legend: A Home Is A Good Investment http://marketurbanism.com/2016/09/13/urbanism-legend-a-home-is-a-good-investment/ http://marketurbanism.com/2016/09/13/urbanism-legend-a-home-is-a-good-investment/#comments Tue, 13 Sep 2016 21:02:56 +0000 http://www.marketurbanism.com/?p=6799 Despite its poor track record, homeownership is the bad investment idea that never seems to die. Even though the financial crisis revealed the risks that homeowners take on by making highly leveraged purchases, policymakers are still developing new programs to encourage home buying. Both the Clinton and Trump campaigns are continuing the political support for homeownership […]

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homeowners-insuranceDespite its poor track record, homeownership is the bad investment idea that never seems to die. Even though the financial crisis revealed the risks that homeowners take on by making highly leveraged purchases, policymakers are still developing new programs to encourage home buying. Both the Clinton and Trump campaigns are continuing the political support for homeownership that dates back to the Progressive Era. Since the New Deal, homeownership has been touted as a tool to reduce poverty and as a route to wealth-building for the middle class.

Even before the subprime-lending crisis revealed the risk that low-income borrowers took on with homeownership, researchers have explained the problems with using homeownership programs as a poverty reduction tool. Joe Cortright recently pointed out that homeownership is a particularly risky bet for low-income people who may only have access to credit during housing market upswings, leaving them more likely to buy high and sell low.

Even for middle- and high-income households, homeownership is a weak investment strategy. Politicians across the political spectrum tout homeownership as key to a middle-class existence, but homeownership will make many buyers poorer in the long run compared to renting. The real estate and mortgage industries have popularized the claim that “renting is throwing your money away,” but owning a home comes with a steep opportunity cost. Renters can invest the money that they would have spent on a down payment in more lucrative stocks, and they don’t take on the risk of home maintenance.

The New York Times created a popular calculator designed to determine whether renting or owning makes better financial sense. The calculator’s defaults assumptions are overly optimistic in favor of homeownership as the better strategy for most households. They include a 1% rate of house price increases after accounting for inflation, but the historical average is just 0.2%. Similarly, the calculator defaults to a 2% inflation-adjusted rate of return on savings that are not spent on a down payment, while the real rate of return of the S&P 500 has historically averaged 7%. After selecting more realistic appreciation rates and investment returns, 2.2% and 9% under the assumption of 2% inflation, a household should rent rather than buy if rental housing comparable to a $250,000 home is available for $1,287 or less. In many cities where $250,000 homes are widely available, they can be rented for much less than the Times break even point. Expensive cities tend to have price-to-rent ratios that are much higher than in lower-cost areas, so for people in high cost of living places, renting makes even more financial sense.

A general problem with rent-versus-buy calculators is that they ask users to set parameters for economic trends that they have little information about. Plenty of homeowners will see their asset grow much faster than the average annual rate of 0.2% after inflation, but forecasting which neighborhoods in which cities will see rapid price increases is a skill. The house flippers who lost their shirts in 2008 demonstrate that picking winning real estate investments in a complex economy isn’t easy. People who can enter accurate information into the calculator don’t need this tool, and it offers little financial help to those who can’t.

When making the switch from renting to buying, many people do not purchase equivalent housing that the calculator is based on. They are likely to move from an apartment with inexpensive utilities and no yard to a single-family home that is much more expensive to maintain. The new home may make its owner much happier than a small apartment, but from this perspective homeownership is luxury consumption rather than a sound investment.

For some people homeownership does have behavioral benefits from a personal finance standpoint. Some people may be able to break a cycle of living paycheck-to-paycheck by saving up for a down payment. Additionally, the portion of a mortgage payment that goes toward building equity is a mechanism of forced saving, albeit savings with a low rate of return. But from a policy perspective, does it make sense to encourage people to save up for a poor investment, or would those resources be better spent on financial literacy programs?

In addition to the relatively straightforward risk of an individual losing money on a leveraged asset, homeownership introduces systemic risk by reducing workers’ mobility. Research from the European Central Bank demonstrates a correlation between rates of homeownership and the size of boom and bust cycles. This data provides support for the hypothesis that homeownership exacerbates recessions by reducing workers’ ability to leave depressed areas for more promising job markets.

In some cases skill or luck will lead buyers to purchase a home that beats historical trends and pays off as an investment, and homeownership certainly offers consumer benefits such as the freedom to customize and a sense of permanence. But pursuing policies that encourage homeownership at the expense of other investment vehicles leaves people of all income levels worse off. Often, home ownership simply leads to higher levels of housing consumption rather than wealth-building. The consequences of buying a home may be dire for low-income families, and for the middle-class the decision should be based on rational calculations rather than the homeownership cheerleading that both parties offer.

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What is wrong with “How to Make an Attractive City” http://marketurbanism.com/2015/05/12/what-is-wrong-with-how-to-make-an-attractive-city/ http://marketurbanism.com/2015/05/12/what-is-wrong-with-how-to-make-an-attractive-city/#comments Tue, 12 May 2015 21:56:11 +0000 http://www.marketurbanism.com/?p=4597 “How to Make an Attractive City”, a video by The School of Life, recently gained attention in social media. Well presented and pretty much aligned with today’s mainstream urbanism, the video earned plenty of shares and few critiques. This is probably the first critique you may read. The video is divided into six parts, each […]

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critica

How to Make an Attractive City”, a video by The School of Life, recently gained attention in social media. Well presented and pretty much aligned with today’s mainstream urbanism, the video earned plenty of shares and few critiques. This is probably the first critique you may read.

The video is divided into six parts, each with ideas the author suggests are important to make an attractive city. I will cover each one of them separately and analyze the author’s conclusion in a final section.

1 – Not too chaotic, not too ordered

The author argues that a city must establish simple rules to to give aesthetic order to a city without producing excessive uniformity. From Alain Bertaud’s and Paul Romer’s ideas, it can make sense to maintain a certain order of basic infrastructure planning in to enable more freedom to build in private lots. However, this is not the order to which the video refers, suggesting rules on the architectural form of buildings.

The main premise behind this is that it “is what humans love”. But though the producers of the video certainly do love this kind of result, it is impossible to affirm that all humans love a certain type of urban aesthetics generated by an urbanist. It is even less convincing when this rule will impact density by restricting built area of a certain lot of land or even raising building costs, two probable consequences of this kind of policy: a specific kind of beauty does not come for free.

Jane Jacobs, one of the most celebrated and influential urbanists of the modern era, clearly argued that

“To approach a city, or even a city neighborhood, as if it were a larger architectural problem, capable of being given order by converting it into a disciplined work of art, is to make the mistake of attempting to substitute art for life. The results of such profound confusion between art and life are neither art nor life. They are taxidermy.”

The video also makes a factual mistake when it states that London skyscrapers are carefully planned. Their location, in fact, is based on preserving specific viewing corridors established almost 200 years ago. As The Economist reported last year, views of these landmarks have completely lost its relevance in contemporary London.

2 – Visible Life

The video argues that cities full of street life are more desirable. That is observably apparent, as people’s preference is observable in their chose to be drawn to these spaces. Nevertheless, the video makes a contradiction: first saying that Hong Kong is an example of a city with street life, then claiming cities full of skyscrapers aren’t conducive to street life.  Cities with “anonymous commercial towers” do not necessarily lacks street life: New York, Hong Kong, Tokyo and City of London are examples of cities full of skyscrapers that have active street life.

3 – Compact cities

Suburbanization and sprawl has been vigorously incentivized by public policy, most massively in the United States. United States policy featured an Interstate Highway System with massive investment in large road projects; education funding that favored good public schools in the suburbs; subsidies that favored owning larger-and-larger homes such as Mortgage Interest Deduction; zoning restrictions such as minimum lot areas and setbacks, as well as state support for the auto and oil industry. These programs fueled a form of urbanization we’ve come to know as suburban sprawl. Compact cities, which the videos celebrate have typically grown spontaneously without significant interventions.

The historic European and Brazilian downtowns typically have shorter commute distances, an intensive street life and a smaller dependency on the automobile.

4 – Orientation and mystery

It is true that people have diverse preferences for urban form, and that an attractive city can supply a greater variety of forms. However, it is dangerous for a city to dictate a certain kind of urban form for the city as a whole, even if it is a mix between different models. Although we can control form within a neighborhood or a large-scale development, municipal norms with these goals in mind can generate distortions exactly because of the infinitely varying  preferences of the citizens. Incapable of catering to all the subjective preferences of everyone that participates in the city environment, planners inherently lack the capability to determine ideal quantities of orientation and mystery the video suggests. In a truly organic and complex city, orientation emerges in a truly spontaneous and decentralized way that brings more “mystery” than any planner can fathom.

5 – Scale

Here the author quotes Joseph Campbell: “If you want to see what a society really believes in, look at what the biggest buildings on the horizon are dedicated to”, and deduces that we don’t actually collectively value sports shoe corporations, tax specialists, the oil industry and pharmaceuticals, as a few examples. But is that in fact true? A certain citizen may even say that he does not value these corporations and services, but he is a daily consumer of shoes, he pays his taxes, burns fuel and uses plastic products. And when he gets sick, he relies on pharmaceutical drugs. In the behaviors of each person, a preference for these goods and services is in fact revealed.  The video misunderstands how the complexity of the economy actually works and how preferences in society are be manifested.

What happens within tall commercial buildings is never as simple as their appearance. They often house the companies that produce or support the computers we use, the planes we fly in or the milk we have with our everyday breakfast. Such a city reflects the social valuation of a complex network of voluntary action that generates the products and services that make our lives better.

Soon the author argues for preserving views and limiting building heights to five stories. The rule itself is a paradox, as a four story building will have its view blocked by a five story building. Going even further with this reasoning, we can infer that a single-story house can block the view of another single-story house. Arguing for the preservation of views is, in fact, a direct contradiction with what it means to live in a city.

In any case, it is not reasonable to limit buildings within a city to five stories. The height of the old cities the video refers to was not defined by planning norms, but by practical necessity of walking up and down stairs in an era before the elevators we now take for granted. In contrast to today, top floors in pre-elevator buildings were always the cheapest as they were the hardest floors to reach. Limiting building heights to five stories suggests an artificial and arbitrary limit to real estate supply, a tangible side effect of the “sense of insignificance” the producers of the video talk about.

6 – A local city

The video says that buildings must not look alike everywhere in the world, as his trips get boring and because each city has a specific climate, needs and different positive and negative attributes. It argues for a strong local character and for the use of local forms and materials.

This is very true with commercial real estate in Latin America, where developers have built several glass towers which are totally inadequate for a tropical climate. These designs are intended to copy temperate climate buildings in developed countries, where the “greenhouse effect” within glass-enclosed buildings is conducive to indoor working environments. Smart builders will certainly learn from these mistakes and develop more adequate local solutions instead of imitating inefficient and inadequate forms.

The use of local forms and materials, however, is a major problem. Aesthetic and architectural form – trying to separate it from building technology – were always globalized, being influenced by different cultures and ideas. The same argument goes for materials: locally available materials will hardly be the best for every specific building.  This principle can be applied to any object. It is impossible to imagine a pencil, a single and relatively simple object, to be produced only with local materials, much less an entire city. The historical examples given in the video were built that way mainly by lack of options, not by an aesthetic or functional preference. The only contemporary example given, architect Glenn Murcutt, does not use local materials and whether he designs are distinctly “Australian architecture” is a very subjective interpretation.

Conclusion

In the last section, the author asserts that the greatest challenges to implementation of these ideas are a lack of political will and intellectual confusion about aesthetics. This was one of the most dangerous ideas the video communicates. In saying that it is possible to affirm what is inherently beautiful or ugly, is realistically impossible as these are not universal truths. I personally know people who find the glass towers the author hates beautiful. Others think the Brazilian favelas or the shantytowns in Bangkok are the most amazing and spontaneous expression of humanity. Some even think Paris is not the romantic city travel guides tell us, but instead a repetitive and boring vision of the past. The stand the video takes is worrying, as it argues for a correct and universal aesthetic enforced by increasing political power.

The tourism statistics used in this argument is simply false. Dubai, Singapore, New York and Hong Kong are part of the top ten most visited cities in the world and represent urban aesthetics and form opposite to the one argued in the video. For example, my personal experience of Frankfurt does not align with what the video says: I had the opportunity to spend a few days there on vacation and thought the city was amazing.

The final conclusion is an attack on real estate developers, who apparently greedily fight to make the city an ugly unattractive place. Unfortunately not everything is easy in this world. Some developers invest in renowned architects to serve niche clients and citizens that are willing to pay a premium for aesthetic extravagance. However, those who build for the masses cannot budget for extravagance, as real estate is usually the largest expenditure in someone’s life – and the burden of housing costs ever growing in most part because of very regulations the video is promoting. The given example of New Town, Edinburgh is actually perfect, as it is one of the most expensive neighborhoods in town.  Ironically it’s probably the neighborhood with the least amount of street life because of it’s strict residential zoning.

Another contradiction is when the video argues a city cannot be shaped by a free real estate market.  However, most of the cities the video uses as good examples were, in fact, built by within extremely deregulated real estate market compared to today’s standards. This is true for almost all medieval cities, old London neighborhoods, the Marais in Paris (what was untouched by Haussmann’s renovation) with the additional examples of Hong Kong, New York and even the historical centers of Brazilian cities.

By understanding the city as a complex, emergent environment, we should let go of the urge to impose our personal interests in urban form. The video’s final conclusions, calling for an increase in government control and a rigid regulation of the urban environment is as dangerous and has the same mindset as the failed plans of Brasilia.  And as dangerous as modern urbanism theory in general, which sees the city as built physical space that can be modeled by what planners want to achieve. Cities must be the result of spontaneous and voluntary action by all its citizens, not of a committee that decides what is right, wrong, beautiful or ugly.  Restraint from imposition by those who arrogantly proclaim they know what’s best for the extremely complex organisms we call cities will eventually lead to what I like to call planned chaos.

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Urban[ism] Legend: The Free Market Can’t Provide Affordable Housing http://marketurbanism.com/2015/03/13/urbanism-legend-free-market-affordable-housing/ http://marketurbanism.com/2015/03/13/urbanism-legend-free-market-affordable-housing/#comments Fri, 13 Mar 2015 12:22:41 +0000 http://www.marketurbanism.com/?p=4397 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 […]

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“Relaxing” zoning 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

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.

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