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Liberalizing Cities
From The Ground Up
Desire for Density is a new framework explaining how market prices form a desire path showing where the market could deliver more affordable housing than it presently is.?
Some commentators are slightly agog over an academic paper by Andres Rodrieguz-Pose and Michael Storper; Richard Florida writes that they shows that ” the effect of [housing] supply has been blown far out of proportion. ” Most of this paper isn’t really about the effect of housing supply on prices at all. Instead, the first 80 percent of the paper seems to argue that it makes no sense for low-skilled domestic workers to live in cities, because “Several decades ago mid-skilled work was clustered in big cities, while low-skilled work was most prevalent in the countryside. No longer; the mid-skilled jobs that remain are more likely to be found in rural areas than in urban ones.” (p. 20). The authors’ attack on upzoning is in the last few pages, and is based on broad, sweeping generalizations rather than actual data. First, they say that upzoning “would very likely involve replacing older and lower-quality housing stock in areas highly favoured by the market, effectively decreasing housing supply for lower income households in desirable areas.” (p. 30). They cite no source or data for this assertion- just pure conjecture. What’s wrong with their claim? First, such gentrification happens without upzoning; for example, in Chicago’s Lincoln Park, gentrification occurred through renovation of existing structures, rather than new, taller buildings- and of course places where new construction is politically difficult (such as San Francisco and Manhattan) are notorious for gentrification. Second, it assumes that new housing inevitably replaces older housing, rather than, say, vacant lots- an obvious overgeneralization.. Second, they rely on the “but we’re already building new housing!” argument. They cite a paywalled newpaper article to support this statement: “rents are now declining for the highest earners while continuing to increase for the poorest in San Francisco, Atlanta, Nashville, Chicago, Philadelphia, Denver, Pittsburgh, […]
One common argument against tall buildings is that they reduce street life, because the most expensive high-rises have gyms and other amenities that cause people to stay inside the buildings rather than using the street. Because Manhattan has plenty of high-rises and plenty of street life, I have always thought this was a dumb argument. But until recently I’ve never thought of any way to prove or disprove the argument empirically- until now. It seems to me that if high-rises were bad for street life, places with expensive high-rises would have lower Walkscores than other neighborhoods; I reason that if high-rise residents stayed inside rather than going outside, they would be surrounded by fewer businesses than low-rise neighborhoods. So do high-rises generally have lower Walkscores? Not in dense areas; for example, 432 Park Avenue, one of Manhattan’s most expensive buildings, has a Walkscore of 98. Similarly, Boston’s Millenium Tower, a 60-story residential skyscraper, has a Walkscore of 96.
Elizabeth Warren’s housing bill has received a lot of love from those who favor of land use liberalization. Like Cory Booker’s housing bill, the Warren bill would seek to encourage state and local land use reform using federal grants as an incentive. Warren’s bill would significantly increase funding for the Housing Trust Fund and provide a small increase in allocations for public housing maintenance. However, Warren’s bill also includes new subsidies to homeownership and policies that could reduce the production of new renter-occupied housing relative to owner-occupied housing. There’s a trade off in housing policy between promoting homeownership as a wealth-building tool and promoting affordability that politicians, including Warren, have failed to confront. Rather than promoting housing affordability by rolling back policies that subsidize homeowners at the expense of renters, Warren’s bill seeks to reduce exclusionary, suburban zoning at the same time it introduces new policies to incentivize homeownership. First, Warren’s bill would require most foreclosed homes to be sold to new owner-occupants, rather than to landlords who would rent them out. The intention of the bill is to prevent institutional investors from profiting from foreclosures, but this approach has a strong anti-renter bias. When changes in economic conditions, demographics, or preferences lead to an increase in the proportion of Americans who want to rent rather than own, this policy would stand in the way of homes being adapted to meet new needs. Second, the bill would provide down payment assistance to first-time homebuyers who live in, or were displaced from, historically redlined neighborhoods. All levels of government have played horrific roles in excluding minorities from white neighborhoods and subsidizing wealth-building through home equity for white households alone. The victims of these policies deserve to be compensated for this unfairness. The Justice Department and the Department of Housing and Urban […]
While reading someone else’s work, I recently ran across an article by David Cay Johnston of the New York Times, claiming that overseas oligarchs turning apartments all over the world into unused “ghost apartments”. In this article, Johnston writes: “In Paris, for instance, one apartment in four sits empty most of the time.” This claim struck me as so astonishing that as to be implausible, for the simple reason that in other “global” cities vacancy rates are much lower. For example, in New York only 9 percent of housing units are vacant, and most of those units are currently for sale or rent.* Even this vacancy level should not be particularly astonishing, since cheaper American cities often have higher vacancy rates. For example, Houston has an 11 percent vacancy rate, and Atlanta has an 18 percent vacancy rate. After googling “one in four paris apartments vacant” I found an article claiming that 26 percent of apartments in four Paris arrondisements (neighborhoods) is vacant- a much narrower claim, comparable to an assertion that one in four midtown Manhattan apartments is vacant. One would think that a journalist as distinguished as Johnston would know the difference between “Paris” and “some parts of Paris.” A more recent article claims that only 7.5 percent of Paris apartments are vacant- a lower vacancy rate than that of New York. Moreover, we don’t know what the local media means by “vacant.” Does this category limited to apartments that are unused 365 days a year? What about units that are rented out now and then through Airbnb? Or units that are currently being advertised for rent or sale? I suspect that the true number of “ghost apartments” is far lower than 7.5 percent, since in London (another “global city”) less than 1 percent of housing units are […]
A common argument against Airbnb and similar home-sharing companies is that they raise rents, because every apartment used for short-term rentals could be used for long-term rentals. A recent paper by a Spanish Ph.D. candidate suggests otherwise. The paper focused on Santa Monica, California where, in 2015, the city adopted an ordinance restricting home-sharing. This city’s ordinance was successful in reducing Airbnb listings- especially listings of complete apartments, which cities are most likely to regulate (as opposed to spare rooms in a residence used by an Airbnb host). If the anti-home sharing argument was valid, rents should have gone down. Instead, rents rose in Santa Monica by the same amount as they rose in other Los Angeles suburbs that do not regulate home-sharing to the same extent.
Five years ago everything in California felt like a giant (land use policy) dumpster fire. Fast forward to today we live in a completely different world. Yimby activists have pushed policy, swayed elections, and dramatically shifted the overton window on California housing policy. And through this process of pushing change, Yimbyism itself has evolved as well. Learning by Listening Yimbys started out with a straightforward diagnosis of the housing crisis in California. They said, “…housing prices are high because there’s not enough housing and if we want lower prices, we need more housing”. And they were, of course, completely right…at least with regards to the specific problem-space defined by supply, demand, and the long run. As Yimby’s started coalition building, though, they began recognizing related, but fundamentally different concerns. For anti-displacement activists, the problem was not defined by long-run aggregate prices. It was instead all about the immediate plight of economically vulnerable communities. Increasing supply was not an attractive proposal because of the long time horizons (years, decades) and ambiguous benefit for their specific constituencies. Yimbyism as Practical Politics Leaders in the Yimby movement could have thrown up their hands and walked away. But they didn’t. Instead they listened and developed a yes and approach. The Yimby platform still embraces the idea that, long run, we need to build more housing, but it now also supports measures to protect those who’ll fall off the housing ladder tomorrow without a helping hand today. Scott Weiner’s SB50 is a great example of this attitude in action. If passed, the bill will reduce restrictions on housing construction across the state. It targets transit and job rich areas and builds in eviction protections to guard against displacement. At a high level, it sets up the playing field so that renters in a four story […]
Believe it or not, the YIMBY movement won a lot in 2018. It kicked off with January’s high of California State Senator Scott Wiener’s introduction of SB 827, which would have permitted multifamily development near transit across the state, but fell to a low after its eventual defeat in committee, invariably followed by a flurry of think pieces about how the pro-development movement had “failed.” At the time, I made the case for optimism over on Citylab, but that didn’t stop the summer lull from becoming a period of soul searching within the movement. And then, a strange thing happened: YIMBYs started winning, and winning big. In August, presidential-hopeful Senator Cory Booker released a plan to preempt exclusionary zoning using Community Development Block Grant funds, quickly followed by a similar plan from Senator Elizabeth Warren in September. Also in August, Housing and Urban Development Secretary Ben Carson unexpectedly outed himself as a YIMBY. Then, in December, things really got crazy: two major North American cities, Minneapolis and Edmonton, completely eliminated single-family zoning. States like Oregon soon started talking about doing the same. In the same month, California kicked into overdrive: San Francisco—ground zero for the YIMBY movement—scrapped minimum parking requirements altogether. State Senator Wiener introduced a newer, sharper version of SB 827. And rolling into 2019, elected officials at every level of California government—from the state’s new Democratic governor to San Diego’s Republican mayor—are singing from the YIMBY hymn sheet. All in all, it wasn’t a bad year for a movement that’s only five years old. But what really made 2018 such an unexpected success for YIMBYs? Focus on Citywide Reform Over Individual Rezonings Showing up and saying “Yes!” to individual projects that are requesting a rezoning, variance, or special permit is bread-and-butter YIMBY activism. And while YIMBYs should still […]
One reason for California’s high housing costs might be Proposition 13. This law, passed by referendum in the 1970s, may discourage housing production in two significant ways. First, under Proposition 13, all housing- even vacant land- is taxed at its original purchase price rather than its current value. By artificially capping taxes on vacant land, this part of Proposition 13 ensures that a landowner does not suffer as much from keeping land vacant as it would under another tax system. Second, by reducing local property taxes, Proposition 13 forced municipalities to rely on other sources of revenue, such as sales taxes. Because retail shops bring in more sales tax revenue than residential uses, this law gave California towns an incentive to favor the former. * New York’s Gov. Cuomo has recently proposed a tax cut that buys popularity for state lawmakers on the backs of municipalities. In 2011, the state passed a law to limit local governments’ property tax increases to 2 percent or the rate of inflation, whichever is lower. This cap was originally temporary, but Cuomo now proposes to make it permanent. A bill implementing Cuomo’s proposal was recently passed by the State Senate, but has yet to be voted on by the State Assembly. Historically, the cap has not included high-cost New York City, but that may change. If the cap does include New York City, will it have the same results as Proposition 13? Probably not, for two reasons. First, the tax cap, unlike Proposition 13, does not artificially favor property purchased long ago, and thus does not discourage people from selling their property. Second, New York State has to consent to sales tax increases, so municipalities don’t have as much of an incentive as their California counterparts to favor land uses that bring in lots […]
This book is an attack on current city planning and rebuilding. This is how Jane Jacobs opened her 1961 classic “The Death and Life of Great American Cities”. It wouldn’t be an inappropriate opener for Alain Bertaud’s upcoming “Order Without Design”. While Jacobs was an observer of how cities work and a contributor to new concepts in urban economics, Bertaud goes a step further. His book brings economic logic and quantitative analysis to guide urban planning decision-making, colored by a hands-on, 55-year career as a global urban planner. His conclusion? The urban planning practice is oblivious to the economic effects of their decisions, and eventually creates unintended consequences to urban development. His goal with this book is to bring economics as an important tool to the urban planning profession, and to bring economists closer to the practical challenge of working with cities. Maybe you have not heard about Alain Bertaud before: at the time I am writing this article, he has only a few articles published online, no Wikipedia page or Twitter account, and some lectures on YouTube – and nothing close to a TED talk. The reason is that instead of working on becoming a public figure, Bertaud was actually doing work on the ground, helping cities in all continents tackle their urban development problems. His tremendous experience makes this book that delves into urban economics surprisingly exhilarating. As an example, Bertaud shows a 1970 photo from when he was tracing new streets in Yemen using a Land Rover and the help of two local assistants who look 12 years old at most, a depiction of a real-life Indiana Jones of urban planning. In this book, mainstream urban planning “buzzwords” such as Transit-Oriented Development, Inclusionary Zoning, Smart Growth and Urban Growth Boundaries are challenged with economic analysis, grounded on […]
