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Emergent Order in Cities and Markets

Last week at The Atlantic Cities, Allison Arieff posted a Q&A with Alex Marshall about what Marshall asserts are Jane Jacobs misunderstanding of how cities work. Marshall says: Human interaction takes place, but it shouldn’t obscure what makes it possible, which is government. As much as I admire Jacobs, I suspect her experiences fighting Robert Moses, the master builder and destroyer of New York City, turned her off to government. So much so that I suspect she began to ignore it. Jacobs described how urban economies, such as say the computer ecosystem in the Silicon Valley, emerge in an organic way. I argue that these business ecologies emerge only within the containers that government builds. Both cities and economies emerge as overt political acts. They are constructed things. Here Marshall completely eschews the historical evolution of both cities and markets in making his assertions. Both cities and markets are vehicles for human exchange, but neither is built by a person or a government. Populations, not infrastructure, are cities’ most important assets. Population changes, much like prices in a market, are a product of human action but not of human design. Historians have found evidence that the emergence of cities was not the result of ancient leaders’ direction but was rather the result of individuals acting in their own best interests. Likewise, we see both historical and current examples of trade emerging without government. States have much more power to limit trade or initiate plunder than they do to facilitate successful trade. Jacobs identified that the spontaneous order that allows prices to direct trade likewise leads city streets to serve their residents’ commercial and civic needs when they are not restricted from doing so. Marshall asserts that Silicon Valley didn’t emerge organically because it came about within the legal and infrastructure “containers” that government provides. While it’s true that government […]

The Renewed Debate on Inclusionary Zoning

Stephen Smith and I co-wrote this post. In case you haven’t been following Stephen elsewhere, he’s also been writing at The Atlantic Cities and Bloomberg View.   This year, some of the first apartments and condos subject to inclusionary zoning laws in DC are hitting the market, stoking debate over development laws that the city adopted in 2007. The inclusionary zoning requirement is currently stalling the city’s West End Library renovation with Ralph Nader leading efforts to include an affordable housing aspect with the library project. Inclusionary zoning advocates often base their support on the desirability of mixed-income neighborhoods, while challengers argue that inclusionary zoning is an inefficient way to deliver housing with unintended consequences. Heather Schwartz, who studies education and housing policies at the RAND Institute, says that one important feature of this policy tool is that it gives low-income families access to high-income neighborhoods while at the same time limiting the number of low-income residents in a neighborhood. She said, “Since IZ is a place-based strategy that tends to only apply to high-cost housing markets, it can offer access to lower-poverty places than housing vouchers and other forms of subsidized housing have historically done.” David Alpert, editor-in-chief of Greater Greater Washington, a local urban planning blog, offers another argument in favor of inclusionary zoning, “a policy that builds support for both greater density and affordable housing,” he said in an email. “Much of the opposition to greater density involves a feeling that it is just a ‘giveaway’ to developers who make the profit and impose some collateral burden on a neighborhood, but many people are more supportive of the density if it serves an affordable housing goal.” While inclusionary zoning proponents may see its ability to introduce just a few low-income residents to a higher income neighborhood as an […]

From the experts on charter cities

After my post on charter cities, I received some interesting feedback from Michael Strong, CEO of MGK Group, the company investing in Honduras’ charter cities and Brandon Fuller, a Research Scholar at NYU’s Urbanization Project. The Urbanization Project is headed by Paul Romer who is no longer involved with the Honduras effort. Both stressed that their visions of charter cities do not rely on heavy-handed urban planning or much initial infrastructure. Brandon, speaking from his own perspective rather than on behalf of the Urbanization Project, said that he views the role of charter city investors as building arterial roads and providing some open space. The charter city government would not set any parking requirements or height limits, so the market would drive urban form at the block level. He writes: For planning, we favor a decidedly light touch approach. Our thoughts on planning are influenced by our colleague Solly Angel, an adjunct at NYU and one of our principal researchers at the Urbanization Project. Michael explained that the charter cities where MGK is investing will draw more from LEAP zones than from Romer’s charter city model. One important distinction is that MGK is purchasing land where these zones will be located whereas Romer suggests charter cities should be built on land donated by the host country. He writes: The Honduran government is not designating a specific location for us.  The current proposal is for them to designate fairly large regions within which we can identify specific parcels and sub-regions that are most appropriate for getting started. While Brandon might support a larger role for city leadership in building a street grid than Michael does, both made clear that urban development should fall to entrepreneurs rather than charter cities’ initial investors or governments. Both envision that a change in the rules governing the sites of charter cities […]

The High Cost of Free Parking Chapters 16 – 18

This post follows on the earlier discussion of Donald Shoup’s The High Cost of Free Parking. Chapter 16 — Turning Small Change in Big Changes Here Donald Shoup gets to the idea of using Business Improvement Districts to manage street parking as Brandon Smith mentioned in the last post’s comments. When parking revenue goes to municipalities’ general funds, drivers see it as a fee with questionable benefit. Contrarily, when parking revenue stays in the neighborhood, it can provide tangible benefits in the form of neighborhood improvements. This may make drivers more willing to pay for parking. More importantly, it creates an interest group in favor of charging a rate for parking that provides an funding source for neighborhood improvements. Seen from this angle, paid street parking benefits businesses from multiple angles. He uses to Los Angeles neighborhoods to demonstrate the potential benefits of parking revenues. In the 1980’s, Old Pasadena was suffering from a vacant building problem because historic buildings did not include onsite parking. As a result, they could not be repurposed. In 1993 the city introduced parkign emters and gave the revenues to the neighborhood to finance public improvements. Additionally, building owners were given the right to pay a fee for parking in a public garage rather than providing parking onsite, allowing existing buildings to be repurposed. These policy changes have created an environment where drivers can easily find parking and a streetscape that is more inviting for pedestrians. Shoup contrasts Pasadena with Westwood Village which has been in decline since the 1980s. In 1994 a parking study revealed that curb parking was 96 percent occupied, meaning the neighborhood had a significant cruising problem. As a response to the neighborhood’s decline, though, the city decreased hourly parking rates from $1 to 50 cents, worsening the parking shortage. This revenue goes to […]

Why do condos even exist?

It sounds like a dumb question – they exist because people like the security of owning a home combined with the services and lower costs that apartments offer, duh! But upon further reflection, condominium-style tenure can be a bit problematic. The main problem, as I see it, is that a building that’s been carved up into condo units can almost never be redeveloped. So much so that preservationists have been known to cheer on developers doing condo and co-op conversions of historic properties: Indeed, sometimes preservation advocates look to condo developers as white knights. Since the Bialystoker Center for Nursing and Rehabilitation on East Broadway closed last year, Laurie Tobias Cohen, the executive director of the Lower East Side Jewish Conservancy, has been “extremely eager” for a developer to buy the historic building and convert it to co-ops or condos. The closing of the nursing home was a great loss, she said; the goal now is to prevent the demolition, or further deterioration, of the building. “What we don’t want,” she said, “is to lose any more of the built historic fabric.” This is no doubt an elegant solution to the problem of unprotected historic buildings, but what about the less-than-stunning condos and co-ops that have been built in the US – and pretty much every where else in the world! – since the end of World War II? Why are condo buildings impossible to redevelop? Simple: gravity! You can’t keep your apartment on the 17th floor while someone demolishes their 5th floor unit. In Canada, Australia, New Zealand, and Singapore, they call condos “strata” apartments, which reflects what they really are: floors of apartments layered inseparably atop each other. To redevelop a condo or co-op building, you have to buy every single unit, after which you can dissolve the condo structure […]

Rent control by any other name

Earlier this week, David Alpert wrote a piece at Greater Greater Washington on the benefits of inclusionary zoning and why economists should support it. I would counter that IZ as designed in DC is not an efficient program for providing affordable housing, and to the extent that it does provide significant numbers of price-controlled housing units, it will necessarily have many of the negative attributes of rent control. IZ works by requiring developers to provide below-market cost units in addition to market rate housing, and providing them with “density bonuses” in exchange. The problem with this is that building more units in itself makes housing more affordable. Obviously I understand the many political obstacles to allowing more residential development, but I don’t think that introducing units that are permanently price-controlled is the appropriate price to pay for this political concession. As Walter Block writes at the Library of Economics and Liberty: Economists are virtually unanimous in concluding that rent controls are destructive. In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.” Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement. The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners Milton Friedman and Friedrich Hayek on the “right” to their fellow Nobel laureate Gunnar Mydral, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” Consumers and producers in the IZ market will face the same […]

Market Urbanism vs. Market Suburbanism smackdown at Cato: “The Death and Life of Affordable Housing”

The debate you’ve been waiting for! Randal O’Toole, Matt Yglesias, Ryan Avent, and Adam Gordon participated yesterday in a discussion at the Cato Institute moderated by Diana Lind from Next American City/Forefront. (How had this never happened before??) Randal O’Toole did not disappoint, arriving in top form in his shoestring necktie and armed with a surprisingly interesting Powerpoint, but I think New Jersey-based attorney Adam Gordon stole the show with his discussion of inclusionary zoning and the Mt. Laurel doctrine (probably because he was on the only one on stage who hasn’t already spewed hundreds of thousands of words on the subject). You can download the 90-minute discussion as an MP3 from Cato (much easier to scroll through), or watch the video streaming:

Walk Score Regression Results

Thanks for the comments on my Walk Score model! Per a few reader requests, here are the full results. I should have thought to provide them initially but didn’t realize there would be interest. Also, I don’t know a good way to put STATA or Excel charts here, so apologies for the screenshots. Here are the results from the OLS model. The 259 datapoints represent all cities with population greater than 100,000 for which there is Walk Score data, except for two or three for which I couldn’t find the MSA data The unemployment is the 5-year January moving average at  2010.   And here are the results of the IV regression, where the instrument is the year that the city was founded. First stage: And the second stage:  

Some Empirical Evidence on Preference for Cities

This semester I took an econometrics class because I got an MA with the bare minimum of quantitative classes. For the class, I wrote a paper asking the question, “Are consumers willing to pay a premium to live in dense urban areas?” It’s easy to see that urban density is correlated with higher housing prices, but this could come from many factors such as people having to live in dense cities to find jobs or to earn higher salaries or from supply restrictions that impact dense cities more than suburbs. As a proxy for cities’ urban qualities, I used Walk Score. Walk Score is based on residential distance to amenities, block length, and road connectivity and ranks cities on a scales of 100. It is designed to test the feasibility of living in a city without a car, but it excludes some factors that are often considered relevant to facilitating pedestrianism, including street width, sidewalk width, and population density. Still, I think Walk Score provides a pretty good measure of a city’s urbanist quality. The correlation between Walk Score and median house price is pretty striking: To test demand for urban living, I wanted to control for the economic factors that drive demand to live in a given city. I tested the impact of Walk Score on median house prices controlling for household income, unemployment, and cost of living. The sample includes 259 cities for which I had Walk Score data and house price data from Kiplinger. The results suggest that for a one-point increase in Walk Score, we can expect a .5% increase in a cities’ median house price, and this result is statistically significant. In another way of measuring the same question (an IV regression using the year the city was founded as the instrument), I found that a one-point […]

Brookings Study Ties Exclusionary Zoning to Gaps in School Performance

Last week the Brookings Institute released a study by Jonathan Rothwell on the relationship between exclusionary zoning and school performance. He points out that this is the first study linking zoning to educational outcomes. The findings demonstrate that cities with stronger exclusionary zoning policies have larger differences in test scores across schools. This finding makes sense, as exclusionary zoning policies segregate households by income, and household income is strongly correlated with children’s educational outcomes. This research is important because school district quality is a key factor in families’ decisions of where to live. I think that school quality is likely an important factor behind many NIMBY efforts too, as parents in a neighborhood may be afraid that lower-income residents moving into the school boundary will bring down the quality of education. Whether or not this is a valid concern on NIMBYs’ part, perception is all that matters. Rothwell’s dependent variable is called the school-test score gap, or the difference between a school’s test results and the state’s test results. So his results don’t tell us whether reducing exclusionary zoning will improve individuals’ outcomes or merely bring schools’ averages more in line. Of course what we would like to see is improved absolute educational outcomes, particularly for those students with the poorest performace. Theory does suggest some reasons that more equal schools could improve absolute student results, one being that more experienced teachers typically do not work in a city’s worst-performing schools. Another is that students may do better when they are surrounded by higher-achieving classmates. Through those channel and perhaps others, reducing disparities across schools could improve low-income students’ results. In developing the case for why it’s important for children of all income levels to attend schools with higher median test scores, Rothwell cites studies that demonstrate that “the quality of […]

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