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1) Nate Berg at The Atlantic Cities covers new research on the world’s earliest cities. The findings would make Jane Jacobs happy as researchers have uncovered evidence that the earliest urbanization was a case of spontaneous order. Their construction wasn’t directed by kings as some historians previously thought, but rather by bottom-up decision-making. 2) Alex Block had two interesting pieces a while back on the politics of increasing urban density. He points out that the vested interests in urban development complicate the policy prescriptions that we often advocate here of loosening regulations. 3) Charlie Gardner at Old Urbanist points out that we shouldn’t get carried away with hopes for housing prices dropping in expensive cities with increased housing supply. While land use restrictions that Matt Yglesias, Ryan Avent, Ed Glaeser and others have written on force urban housing prices higher than they need to be, infill redevelopment is inherently a costly, slow process. It’s much easier for the price of housing in, say, Houston to stay closer to costs of construction because Houston has available land to build on cheaply and easily. Housing in New York is expensive in large part because of market fundamentals, but density restrictions make it more expensive than it has to be. 4) The case of the successful parking pricing in San Francisco that continues to receive opposition reminds me of this passage from Murray Rothbard’s For a New Liberty: The libertarian who wants to replace government by private enterprises in the above areas is thus treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax-financed monopoly from time immemorial. If the government and only the government had had a monopoly of the shoe manufacturing and retailing business, how would most of the public treat the libertarian who now came along to […]
This post originally appeared at Neighborhood Effects, a Mercatus Center blog where we write about the economics of state and local policy. We’ve already explored Governor O’Malley’s proposal for the Maryland budget here and here, but recently, a perhaps unintended consequence of the budget came to light. By limiting the deduction that residents earning over $100,000 can make on their state income taxes, the proposed budget would limit the size of the mortgage interest tax deduction for many taxpayers. I stand by my earlier argument that reducing deductions for only one group of people is not a step in the direction of fairness, but a reduction in the mortgage interest tax deduction may be a positive side effect of an otherwise bad policy. From a limited-government perspective, the obvious downside of a reduction in the mortgage-interest tax deduction is that this represents a revenue-positive change in Maryland’s tax code in a state that already has one of the highest tax burdens in the country. Overall though, I think reducing this tax expenditure is a positive change because the policy has many negative consequences. While the causes of the financial crisis were many, by subsidizing investment in homes, the mortgage interest tax deduction played some part in the overvaluation of housing stock. Aside from the poor incentives that this tax expenditure creates in financial markets, it amounts to favoritism of suburbs over cities. In Triumph of the City, Ed Glaeser argues that the deduction leads many people to abandon renting in a city center for homeownership in the suburbs. However the Federal Reserve Bank of Boston provides evidence that the policy is more likely to lead people to buy larger homes than they otherwise would rather than trading renting for buying a home. Richard K. Green and Andrew Reschovsky write: If one set out to design a policy to encourage homeownership, […]
Several bloggers have already provided reviews of The Gated City by Ryan Avent, including Aaron Renn at The Urbanophile, Rob Pitingol at Greater Greater Washington, and Lloyd Alter at Tree Hugger. I’ve finally had a chance to read it and would thoroughly recommend it. I often support increased density on the grounds that this is what the market wants. To me, that’s still reason enough to support the repeal of many land use regulations, but Avent offers a vision of density that is perhaps more compelling to more people. Because the division of labor is limited by the size of the market, cities offer many amenities that are not supported in less dense places. The diversity of food, art, shopping, sports, and movies is all much greater in cities than in small towns because larger markets allow for more specialization. Of course taste is subjective; many people prefer the quiet of the suburbs to the chaos of the city. However we can see that currently, many people want to move to cities but are unable to by looking at vacancy and rental rates. Avent also points out that cities provide a sort of employment “insurance.” He uses the example of a Vietnamese chef losing his job. If the restaurant where he worked is in a large metropolitan area, he will be able to find another job in a Vietnamese restaurant. On the other hand, if he lives in a small town, he will likely have to seek employment in a more generic restaurant where he won’t be able to charge a premium for his specialized skills. This is true for jobs in many industries. If I were to lose my job in economics research, I’d much rather be searching for a new job here in DC than in a state with one think tank, for […]
I was catching up on posts over at The Old Urbanist, and came across his astute analysis of setbacks that many of you probably saw a while back. Focusing on the requirement for large front lawns in many towns across the country, Charlie Gardner writes: Whether this reflects a continuing market preference is unclear, since nearly all municipal zoning codes in the United States require large setbacks (see, e.g.,Charlotte), depriving homeowners of any choice in the matter. The pattern has been replicated so relentlessly across the North American continent that alternative single-family residential designs may simply have been scrubbed from the collective imagination. Gardner and others attribute this bland landscape in large part to Frederick Law Olmsted, and he certainly did support increased greenery in urban areas and lawns that run seamlessly across property lines. However, I think it’s important to distinguish between Olmsted’s vision and the land use regulations that have imposed some version his ideal on American suburbs. Olmsted did promote planned communities, but only local governments have had the authority to make his vision law. In thinking of Olmsted’s planned communities of communities built in Olmsted’s style, Baltimore’s Roland Park immediately comes to my mind. This turn-of-the-century neighborhood was one of the country’s first suburbs. Of course Roland Park is far from an urbanist neighborhood, and it’s easy to fault Olmsted for overlooking the crucial civic aspect of drawing neighbors to the sidewalks and streets for spontaneous interaction. However, (and I realize this may be a minority opinion), I think that it is a lovely neighborhood, and it’s even relatively pedestrian friendly. Clearly, it has little in common with the “snout house” suburbs that Gardner discusses in relation to setback requirements. Part of Roland Park’s charm is that it achieves the feeling of being a green enclave because it lies among denser […]
In New York, lawmakers are currently debating a compromise between New York City and upstate interests to change the policies that shape residents’ housing costs. New York City lawmakers are fighting for an extension and expansion of current rent control laws, while Governor Cuomo wants to tie this extension to a two percent cap on yearly property tax rate increases. Legislators voted against a temporary extension of the current policy on Wednesday. The Wall Street Journal reports: The Senate Democrats had been urged by tenant advocates to reject even a short-term extension in an attempt to ratchet up attention on their efforts to expand protections for existing tenants. “Our members have said from the start: extension is not enough—we need to strengthen regulations,” said Austin Shafran, a spokesman for the Senate Democrats. Senate Republicans, meanwhile, blamed the Democrats for the defeat, noting that they are acting against a bill pushed by Gov. Andrew Cuomo, a Democrat who supports expanding regulations. City lawmakers ignore that in fact rent control laws make housings costs more expensive for many residents and would-be residents in order to appease the fervent interest group of tenants who currently live in apartments priced below market rates. In 1972, the Swedish socialist economist Assar Lindbeck famously wrote, “In many cases rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.” Why then, are New York City politicians — politically to the right of Lindbeck — fighting to protect rent control today? Rent control policy is detrimental to all those unable to find housing at rent stabilized or controlled prices as well as landlords. Rent control has not had the dire impact in New York that it has in other cities because the number of apartments that are fully rent-controlled is […]
In the Washington Post Brad Plumer editorializes on the choice of many Americans to accept longer commutes by car in exchange for larger homes far from their workplaces. He says that consumers are unable to accurately calculate the cost of their commutes, including time spent driving, leading them to make “irrational” choices about where to live. However, Plumer downplays the policies that encourage consumers to buy homes rather than rent and that allow them to partially externalize the costs associated with driving. Plumer asserts that when buying a house, consumers think they will value additional space more than they do, but he gives no convincing reason that their subjective valuation of home size is incorrect. If in fact if consumers did undervalue the time they spend commuting in relation to home size when they purchased a home, he gives no reason why they would not eventually realize this error and improve their situation by moving to a smaller home closer to a city center. His piece is written in response to Congressman Earl Blumenauer’s recent report on the topic of shielding Americans from volatility in the oil market. Blumenauer does credit the policy environment dating back to the 1944 Federal Highway Act for shaping the car-centric culture that many Americans live in today, and he supports policies that provide incentives for decreased reliance on cars. Blumenauer asserts, “For too long, the Federal government has disproportionately subsidized highways at the expense of other modes, reducing consumer choices.” Rather than moving away from determining transportation and urban development through legislation, he provides policy prescriptions at the federal, state, and local level to decrease consumers’ dependence on oil. For example, Blumenauer suggests that mortgage lenders should be encouraged to take transportation costs into account, making it easier for those living close to their […]
Current policy evolution in Los Gatos, CA demonstrates the power that urban planners have to alter property rights. The Silicon Valley municipality is currently debating whether or not to upzone a parcel where a developer would like to build 550,000 square feet of office space, replacing 250,000 square feet of an older office park. The lots, located near the Netflix headquarters, are thought to be the potential site for the company’s needed expansion. However, the Bay Area is already home to ample vacant office space, so the developer would like the alternative option of building multifamily housing in the location. In response to this request for a change in zoning that would allow either use, the planning commission chairwoman said she was “blindsided” by the owner seeking permission for options to use the land in various ways. In today’s world of master plans that dictate acceptable uses for each parcel of a city’s land, asking for the freedom to build different types of buildings, rather than approaching a commission with a plan in place for a specific zoning change, may seem out of line. In reality the owner is simply seeking permission to put his land to its most efficient use given future uncertainties. Entrepreneurs profit by seeing through these uncertainties to put resources to their most profitable uses, but in the market for land, policies limit their ability to do so. In curent conditions, in which developers are not building much new office space unless it is pre-leased, the planning commission has the power to determine the land’s expected value by requiring the owner to commit to a plan before moving forward with redevelopment. This is a classic Coasean case of the care that policy makers must take in assigning property rights. Russ Roberts and Richard Epstein did a […]
In the past I have not been kind to affordable housing programs. I have a lot of deeper problems with them that I’ll get to in a minute, but I think the extraordinarily high upper income limits on some of the projects are indicative of the broader problem of the essentially arbitrary and random (literally – they’re usually decided by lottery!) nature in which they’re doled out. In a way, even when the beneficiaries are blatantly undeserving, everybody wins – politicians get votes, and affordable housing advocates get paid. Everybody, that is, except market-rate renters, but when’s the last time they ever voted somebody out of power for sabotaging their interests? Anyway, your latest affordable housing outrage story comes from New York City (where else?) – specifically 138th Street in Harlem, where the 73 units at Beacon Towers are almost all under contract, and Curbed claims that most of the remaining units are income-restricted “up to $192,000”!!! Oh yeah, and they can’t even find enough people who qualify. Which brings me to another point: the Beacon Towers are not towers, and are certainly not any kind of beacon. They’re eight stories tall, and considering we’re talking about new construction in Manhattan, I’m going to take a wild guess and say they built right up to the zoning envelope. The immediate neighborhood is a mix of turn-of-the-century five- and six-story walkups (but little in the way of even cornice lines), some post-war towers-in-a-park-style buildings that reach up to 15 (!!) stories, along with a smattering of parking lots and other woefully underused lots. As Robert Fogelson wrote in Downtown, the New Yorkers of 1900 fully expected that by 2000, the whole island of Manhattan would be a river-to-river block of commercial skyscrapers. Perhaps that was unrealistic even if there had been no zoning code, […]
Affordable housing and inclusionary zoning are complicated subjects and it’s hard to sum up all my thoughts and objections to the schemes in one post, so I’m going to take the death-by-a-thousand-cuts approach. Today’s installment: income eligibility levels. Now, the stated intent of affordable housing set-asides has always been a bit unclear to me. The cynic in me thinks it’s just a way for politicians to buy votes with public money by essentially randomly redistributing from the many (market-rate renters and buyers) to the few (the lucky handful to win the lotteries for coveted subsidized units). The stated motivation, though, seems to range anywhere from a combination of helping the poor find housing to having a little bit of housing diversity, even if that “diversity” means upper-middle class alongside upper class. In my experience, though, the programs end up overwhelmingly fulfilling the latter goal. The latest example I’ve come upon, which doesn’t seem too out of the ordinary, is from a project called Tivoli Square in the Columbia Heights neighborhood of DC, which looks like it’s associated with the big development corporation-driven DCUSA project (As an aside, DCUSA was basically a huge urban mall in what was an obviously gentrifying neighborhood. The city ended up spending a large amount of money on a parking garage that now mostly sits empty, and they’ve been having trouble renting the retail spaces set aside for local businesses. It’s also architecturally pretty ugly, and houses way more national chains than the rest of the neighborhood. Politicians hail it as a success, but in my opinion it’s the worst thing to happen to Columbia Heights since urban renewal.) Anyway, the zipcode’s median household income in 2009 was $57,393, and the project had a 20% set-aside for some combination of low- and medium-income. The upper limit for “low income” ranges from $50,000 for […]
Reading about a new ultra-luxury Far West Side rental project going up where over 40% of the apartments are going to have controlled rents (“affordable housing”), I’d like to pose a question to supporters of affordable housing mandates in the planning blogosphere (which includes pretty much the whole planning blogosphere): How high is too high? I’d also be interested to know why exactly the developers included so much affordable housing. I’m pretty sure there’s no program that requires that much affordable housing (the 80/20 state program obviously only requires 20%), but I think commenter Alon Levy is probably right when he suggests that various subjective review processes pressure developers into including more subsidized units than the government officially asks for. Tom Duane, a State Senator, has some testimony up on his website about the project that gives us a look into the mind of what seems to be a typical (at least for New York City) affordable housing-type NIMBY. Back in 2009, when he gave the testimony, the plan was for 50% of the 1,200 units to be kept at below-market rents “permanently,” but even that wasn’t enough for Duane. He was upset that “only” 40% of those units will have two or more bedrooms, and also wanted the amount of commercial space scaled back from two floors (i.e., an FAR of 2.0) to just one (1.0 FAR). Oh yeah, and he doesn’t like the 31-story tower and he wants the developer to really promise not to transfer the unused development rights elsewhere. Obviously, I oppose setting aside this much of new developments for affordable housing. People tend to think of different segments of the real estate market as distinct – how on earth could limiting the number of rich people on Far West Side make prices rise in Bed-Stuy? […]