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Shell Games in NIMBYism

Yesterday the Cato Institute hosted an event featuring William Fischel’s discussion of his new book Zoning Rules! with commentary by Mark Calabria, Matt Yglesias, and Robert Dietz. Fischel explained his theory that zoning was an effective tool for minimizing nuisances between land uses through the 1970s. Until that time, he asserts that city planners did a good job of separating incompatible land uses, such as industrial and residential uses, benefiting residents and protecting home values in the process. His theory is that in the 1970s, inflation increased the value of homeownership relative to cash savings, leading homeowners to increasingly view their houses as investments. At the same time, the rise of environmentalism provided the policy justification for using zoning as a tool to limit the growth of housing supply. According to his theory, homeowners then began using their power to lobby for downzoning to protect their large, undiversified asset, and valued minimizing any potential downside risk in their home value. In his discussion of Fischel’s book, Matt Yglesias pointed out that today, NIMBYism has gone far beyond keeping out polluting land uses and low-income neighbors. For example, some residents in San Francisco’s Mission District are supporting a moratorium on luxury housing development, and some Brooklyn residents are fighting to keep vacant industrial properties in place on the waterfront. Permitting high-end residential development in these neighborhoods would be more likely to raise than lower nearby homeowners’ property values. This opposition to development is at odds with Euclidean zoning in these neighborhoods where expensive housing now abuts abandoned warehouses. It’s also demonstrates that NIMBYs are not motivated by narrow profit interests, but have complex preferences that are not easily understood by observing the policies that they advocate for. In the private sector, profit is measured in money, and it’s generally safe to say that both parties to a transaction […]

Systemic bias against small scale development

In recent years, some of the country’s largest mixed-use real estate developments involved disposition of government-owned land directly to developers. For example, Atlantic Yards in Brooklyn and DC’s City Center and Marriott Marquis came about when municipal governments issued requests-for-proposals for underutilized land that they owned. Last week, Mid­Atlantic Realty Partners and Ellis Development Group closed on a deal to purchase 965 Florida Avenue NW from the District of Columbia. In 2012 the Office of the Deputy Mayor for Planning and Economic Development (DMPED) issued an RFP for this 1.45 acre at the intersection of the Shaw, U Street, and Columbia Heights neighborhoods. The RFP specified that any development on the site include affordable housing. Ultimately two developers submitted proposals. The winning developer purchased the land for just $400,000, at least $5 million less than appraisers estimated the land’s value to be, even after factoring in the affordable housing provision and needed environmental cleanup. By choosing to allocate very large parcels of land through this process rather than auctioning off small parcels of city-owned land, municipal officials favor large developers not only because smaller developers can’t afford such large parcels, but also because the RFP process favors established developers with political connections. In DC, large development firms provide some of the largest contributions to local campaigns. Not only does the sale of large parcels of public land exclude small developers who have less financial capital, it also reduces the pool of potential buyers to include only those with the political capital needed to navigate the RFP process. In the case of a private owner selling off a large tract of land, we would expect him to list the property for sale, accepting the best price he could get. If he thought smaller parcels would sell for more, the owner would likely try to subdivide before selling, expanding […]

San Francisco Turned Sisyphus: Why the City Can’t Fix the Housing Crisis On its Own

Housing prices in San Francisco are obscene. And, in large part, that’s because the city hasn’t permitted enough new construction. But that’s not the entire story. For as hard as San Francisco has resisted development, the Peninsula cities have resisted it even more. And in so doing they’ve pushed the responsibility of development onto their Northern neighbor. If San Francisco’s housing crisis is to be resolved, the Peninsula cities will have to quite literally grow up. Bad Neighbors San Francisco is synonymous with tech, but there’s plenty going on just down the road. Menlo Park has Facebook. Mountain View has both Google and Linkedin. These two cities alone are home to over 1,300 other tech companies and the story’s much the same elsewhere on the Peninsula. But where firms have sprung up and jobs have become abundant, housing has remained in short supply. Tech companies bus an estimated 7,500 workers from San Francisco apartments to Peninsula offices every day. They don’t do this for fun. There’s simply not enough housing near major employers. And what is available is often unaffordable, even for tech workers. But if housing prices are as bad or worse on the peninsula, one might ask why we only hear the word “crisis” in San Francisco. The reason is simple. What makes for crisis in San Francisco is nothing but windfall to the South. According to the U.S. Census, San Francisco’s homeownership rate is 36.6%. Mountain View’s is 41.8%, San Mateo’s is 53.6%, Palo Alto’s is 55.4%, Menlo Park’s is 56.2%, and Cupertino’s is 63.7%. Homeowners in these cities aren’t faced with skyrocketing rent. And thanks to Prop 13, they also pay almost nothing in property tax–no matter how much their homes appreciate in value. They not only face no downside from the anti-development status quo, they […]

Trickle-Down Housing Economics? Laying Reagan’s Ghost to Rest

In a recent 48 Hills post, housing activist Peter Cohen aimed a couple rounds of return fire at SPUR’s Gabriel Metcalf. The post comes in response to Mr. Metcalf’s own article critiquing progressive housing policy. Mr. Cohen bounces around a bit, but he does repeat some frequently used talking points worth addressing. Trickle-down economics Mr. Cohen calls the argument for market-rate construction ‘trickle down economics’.  Trickle down economics actually refers to certain macro theories popularized during the Reagan years. These models assumed a higher marginal propensity to save among wealthier individuals. And given this assumption, some economists concluded that reducing top marginal tax rates would result in higher savings. This would then mean higher levels of investment which would, in turn, have a positive effect on aggregate output. And from there we get the idea of a rising tide lifting all ships. Note that none of that has anything to do with housing policy. Labeling something ‘trickle down’ is a way to delegitimize certain policy proposals by associating them with Ronald Reagan. It’s somewhere between rhetorically dishonest and intellectually lazy. Though to be fair, it’s probably pretty effective in San Francisco. The concept Mr. Cohen is trying to critique is actually called filtering. In many instances, markets do not produce new housing at every income level. But they do produce housing across different income levels over time. Today’s luxury development is tomorrow’s middle income housing. The catch, however, is that supply has to continually expand. If not, prices for even dilapidated housing can go through the roof. For a more thorough explanation, see SFBARF’s agent based housing model.   If you build it, they’ll just come But even accurately defined, Mr. Cohen still objects to the concept of filtering. He cites an article by urban planning authority William Fulton to make […]

The History of Progressive Housing Policy

Maya Dukmasova recently published at Slate an interesting piece about the potential for current trends in affordable housing policy to tear apart the social capital of low-income people. She makes the Ostromian point that policymakers’ lack of understanding of the informal institutions that govern communities makes it likely that government housing policies are likely to have unintended consequences. While Dukmasova aptly characterizes some of the problems with American anti-poverty programs to date, she gets some key history wrong. In particular, she writes: Part of the liberal establishment’s failure to address this problem stems from its inability to embrace truly progressive understandings of poverty. Those advocating for solutions to poverty rarely speak about the way our economy and social infrastructures entrench it. Rather, much of liberals’ efforts have been crippled by unexamined and unchallenged beliefs that the spaces where poor people of color live are morally compromised, beliefs summed up by one well-intentioned but ultimately damaging term: concentrated poverty. In fact, the programs that she criticizes directly grew out of progressive scholarship and politics. Nineteenth century progressives set their sights on demolishing tenements occupied by low-income, immigrant populations with the goal of relocating residents to suburban homes deemed healthier and better for the morals of their inhabitants. Jacob Riis’ influential work in How the Other Half Lives fueled a progressive movement to eradicate tenement housing, with activists motivated both by altruism toward the poor and by a fear of disease and cultural changes that immigrant-dominated neighborhoods brought. Riis became one of the first reformers demanding that “light and air” be a key consideration in new construction. While he used this phrase to campaign against unventilated tenements that actually did create unhealthy indoor conditions indoors, it ultimately provided the policy rationale for the the New York 1916 Zoning Resolution that would limit building height and massing to protect outdoor light and air, as if shade is […]

Urban Renewal in Philadelphia

The Philadelphia Housing Authority will seize  nearly 1,300 properties for a major urban renewal project in the city’s Sharswood neighborhood. The plan includes the demolition of two of the neighborhood’s three high-rise public housing buildings — the Blumberg towers — that will be replaced with a large mixed-income development. The new buildings will increase the neighborhood population tenfold with the majority of the new units to be affordable housing. The majority of the 1,300 lots slated for eminent domain are currently vacant. At a City Council hearing on Tuesday, Philadelphia Housing Authority CEO Kelvin Jeremiah testified that the redevelopment plan furthers the agency’s efforts to replace high-rise housing projects with lower-density units. However, PHA’s plan misses the forest for the trees. The benefits of demolishing the two towers are immediately undone by creating an entire neighborhood of public housing, effectively increasing the concentration of poverty in Sharswood. Adam Lang has lived in Sharswood for 10 years, and he posted about the plan in the Market Urbanism Facebook group. Adam has raised concerns that the PHA does not have an accurate number of how many of the 1,300 properties in the redevelopment territory are currently occupied. Adam’s primary residence is not under threat of eminent domain, however he owns four lots that are. He uses two lots adjacent to his home as his yard. The other two are a shell and a vacant lot. He purchased them, ironically, from the city with the plan to turn them into rentals. Adam’s concern about the inaccuracy of PHA’s vacancy statistics stem from the method that PHA employees used to create their estimate: driving by homes to see if they look occupied or not. Adam’s own property was on the list of vacants, and he said that he’s aware of other properties in the neighborhood […]

Market Fundamentalism in the Mission?

There’s a proposal to place a moratorium on all market rate construction in the Mission District, one of San Francisco’s most rapidly gentrifying neighborhoods. Needless to say the proposal has sparked a debate. And Dan Ancona’s Putting Market Fundamentalism On Hold is another rock hurled into that particular fray. But in trying to take the anti-moratorium/pro-supply camp to task, it falls into the same unproductive bomb hurling we’ve been watching now for years. The following are a few thoughts on some of the points Mr. Ancona makes in his recent piece. Talking Past Each Other The first point is about a fundamental misunderstanding of the motivations behind the moratorium. Mr. Ancona makes this mistake, but so do the exasperated anti-moratorium/pro-supply advocates he quotes at the beginning of his piece. Hint: The moratorium is not about lowering housing prices. To be sure, the anti-moratorium camp wants lower aggregate housing prices throughout San Francisco and the entire region. The indisputable way to accomplish this goal is by building more housing. And as far as the anti-moratorium camp is concerned, this includes plenty of  below market rate (BMR) construction to mitigate some of the distributional effects of development. For the pro-moratorium camp, however, this doesn’t cut it. Lower aggregate prices are not their goal. Their goal is keeping the existing population of the Mission intact and in place. Even a 70/30 ratio of market rate development to BMR construction wouldn’t do that. There would still be demographic churn and this is specifically what they want to avoid. For the pro-moratorium camp, lower housing prices are all well and good, but not if that means the dispersal of the existing community in the process. Searching for the Endgame The second issue is that there’s no endgame for the pro-moratorium camp. Mr. Ancona seems to think there is, but doesn’t go […]

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.   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 […]

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

Over at Greater Greater Washington, Ms. Cheryl Cort attempts to temper expectations of what she calls the “libertarian view (a more right-leaning view in our region)” on affordable housing.  It is certainly reassuring to see the cosmopolitan left and the pro-market right begin to warm to the benefits of liberalization of land-use.  Land-use is one area the “right,” in it’s fear of change, has failed to embrace a widespread pro-market stance.  Meanwhile, many urban-dwellers who consider themselves on the “left” unknowingly display an anti-outsider mentality typically attributed to the right’s stance on immigration.  Unfortunately, in failing to grasp the enormity of the bipartisan-caused distortion of the housing market, Ms. Cort resigns to advocate solutions that fail to deliver widespread housing affordability. Yes, adding more housing must absolutely be a part of the strategy to make housing more affordable. And zoning changes to allow people to build taller and more usable space near transit, rent out carriage houses, and avoid expensive and often-unnecessary parking are all steps in the right direction. But some proponents go on to say relaxing zoning will solve the problem all on its own. It won’t. Well, if “relaxing” zoning is the solution at hand, she may be right – relaxing will only help a tad…  While keenly aware of the high prices many are willing to pay, Cort does not seem to grasp the incredible degree to which development is inhibited by zoning.  “Relaxing” won’t do the trick in a city where prices are high enough to justify skyscrapers with four to ten times the density currently allowed.  When considering a supply cap that only allows a fraction of what the market demands, one can not reasonably conclude “Unlimited FAR” (building density) would merely result in a bit more development here and there. A radically liberalized land-use regime would […]

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

gentrification

Gentrification is the result of powerful economic forces. Those who misunderstand the nature of the economic forces at play, risk misdirecting those forces.  Misdirection can exasperate city-wide displacement.  Before discussing solutions to fighting gentrification, it is important to accept that gentrification is one symptom of a larger problem. Anti-capitalists often portray gentrification as class war.  Often, they paint the archetypal greedy developer as the culprit.  As asserted in jacobin magazine: Gentrification has always been a top-down affair, not a spontaneous hipster influx, orchestrated by the real estate developers and investors who pull the strings of city policy, with individual home-buyers deployed in mopping up operations. Is Gentrification a Class War?   In a way, yes.  But the typical class analysis mistakes the symptom for the cause.  The finger gets pointed at the wrong rich people.  There is no grand conspiracy concocted by real estate developers, though it’s not surprising it seems that way. Real estate developers would be happy to build in already expensive neighborhoods. Here, demand is stable and predictable.  They don’t for a simple reason: they are not allowed to. Take Chicago’s Lincoln Park for example.  Daniel Hertz points out that the number of housing units in Lincoln Park actually decreased 4.1% since 2000.   The neighborhood hasn’t allowed a single unit of affordable housing to be developed in 35 years. The affluent residents of Lincoln Park like their neighborhood the way it is, and have the political clout to keep it that way. Given that development projects are blocked in upper class neighborhoods, developers seek out alternatives. Here’s where “pulling the strings” is a viable strategy for developers. Politicians are far more willing to upzone working class neighborhoods. These communities are far less influential and have far fewer resources with which to fight back. Rich, entitled, white areas get down-zoned. Less-affluent, disempowered, minority […]

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