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ReasonTV on SF’s YIMBY Movement

Last week, Reason.tv (the multimedia outlet of Reason Magazine) published a video about San Francisco’s YIMBY movement.  The video describes the decades of underdevelopment in San Francisco as the result of community activism intended to limit the supply of new construction.  As a result, San Francisco’s housing market is severely supply-constrained, and outrageously expensive.  The problem has gotten so bad that pro-development, “YIMBY” organizations such as SFBARF and Grow San Francisco have sprung up to counter the anti-development forces. It’s great to see Reason taking notice of the YIMBY movement, and we’d love to see more attention paid to urbanism at libertarian sites.  Three of us at Market Urbanism attended the first nationwide YIMBY conference in Boulder that the video mentions, and we’ll be sharing our thoughts on the conference soon. (h/t Jake Thomas at the Market Urbanism facebook group)

Exclusionary Zoning and “Inclusionary Zoning” Don’t Mix

Inclusionary Zoning is an Oxymoron The term “Inclusionary Zoning” gives a nod to the fact that zoning is inherently exclusionary, but pretends to be somehow different.  Given that, by definition, zoning is exclusionary, Inclusionary Zoning completely within the exclusionary paradigm is synonymous with Inclusionary Exclusion. What is Inclusionary Zoning? “Inclusionary Zoning” is a policy requiring a certain percentage of units in new developments to be affordable to certain income groups.  Sometimes, this includes a slight loosening of restrictions on the overall scale of the development, but rarely enough loosening to overcome the burden of subsidizing units. Many cities, particularly the most expensive ones, have adopted Inclusionary Zoning as a strategy intended to improve housing affordability.  Often, demand for below-market units are so high, one must literally win a lottery to obtain a developer-subsidized unit. Economics of Exclusion We must first acknowledge the purpose of zoning is to EXCLUDE certain people and/or businesses from an area.  Zoning does this by limiting how buildings are used within a district, as well as limiting the scale of buildings .  These restriction cap the supply of built real estate space in an area.  As we know from microeconomics, when rising demand runs into this artificially created upward limit on supply, prices rise to make up the difference. As every district in a region competes to be more exclusive than its neighbors through the abuse of zoning, regional prices rise in the aggregate. Since the invention of the automobile, and subsequent government overspending on highways, sprawl has served as the relief valve. We’ve built out instead of up for the last several decades and this sprawl has relieved some of the pressure major metropolitan areas would have otherwise felt. In fact, it’s worked so well–and led to the abuse of zoning rules for such a long time–that exclusionary zoning has become the accepted paradigm. Zoning is the default flavor of […]

Are Billionaires To Blame?

One common argument I have read in various places is that the high rent of New York and other large cities is a result of globalization and inequality (English translation: rich foreigners).  According to this theory, rich people have created a surge of demand so overwhelming that no amount of construction could possibly meet it. It seems that if this argument were true, rent would be growing most rapidly in rich neighborhoods full of super-expensive skyscrapers, such as New York’s Upper East and West Sides. This week, NYU’s Furman Center helpfully came out with its latest report on housing in New York City. Page 6 of the report reveals that between 1990 and 2014, rent in the Upper East Side rose by 23 percent- about the same as the citywide average. Upper West Side rent rose by 38 percent- more than the citywide average, but less than ten of the city’s 50-odd other neighborhood clusters, including not only hipstery Greenpoint, but also not-so-nice areas like East Harlem. So this bit of data, although not conclusive, seems inconsistent with the “rich foreigners” theory.

9 Barriers To Building Housing In Central City Austin

The Austin area has, for the 5th year running, been among America’s two fastest-growing major metro areas by population. Although everybody knows about the new apartments sprouting along transportation corridors like South Lamar and Burnet, much of the growth has been in our suburbs, and in suburban-style areas of the city. Our city is growing out more than up. How come? The desire for living in central Austin has never been higher. But Austin, like most cities, has rules that prevent new housing from getting centrally built. That makes it easier to buy and build on virgin land in the suburbs. Here are some of those rules. 1 MINIMUM LOT SIZE Historically, expensive houses were built on expensive, large lots; cheaper homes were built on smaller, cheaper lots. Austin decided that new houses can’t be built on small lots. Even if you want to build a small, cheap house, you still need a lot with at least 5,750 square feet. In central Austin, that costs a lot of money, even without the house! If somebody owns a 10,000 square foot lot, they aren’t allowed to split it into two 5,000 square foot lots and build two medium-sized houses, let alone three 3,333 square foot lots with three small houses, let alone three 3,333 square foot lots with triplexes! In 1999, Houston reformed its minimum lot size laws. Since then, environmentally-friendly central-city urban townhomes have flourished.         2 MINIMUM SITE AREA For areas that are zoned for apartments and condos, there is a cap on the ratio of number of apartments to lot size known as “minimum site area.” 3 IMPERVIOUS COVER MAXIMUMS Impervious cover is any surface that prevents water from seeping into the ground, including buildings, driveways, and garages. There is a cap on the ratio of impervious cover to lot size. 4 FLOOR-TO-AREA RATIO MAXIMUMS Floor-to-area ratios (aka FAR) maximums are a cap on […]

Vouchers, Sprawl and Trade-Offs

Currently, the American public school system is a sprawl-generating machine: urban public schools are less appealing to middle-class parents than suburban public schools, causing parents to move to suburbia. This result arises from school assignment laws: because students must attend school in the municipality of their residence, residents of the most diverse municipalities (usually central cities) must attend diverse schools.  By definition, diverse schools have lots of children from disadvantaged backgrounds.  Because children from disadvantaged backgrounds often learn less rapidly than middle-class children, these schools quickly get a reputation as “bad” schools, causing middle-class parents to flee to suburban schools that are more socially homogenous. The common progressive answer to this problem is to fund urban schools more generously: this strategy has not, when tried, succeeded in bringing middle-class parents back to urban schools.  For example, in 1990s Kansas City, federal courts forced government to fund urban schools far more generously than suburban schools: nevertheless, test scores barely budged and urban schools continued to lose middle-class and white parents.  Even successful urban charter schools (such as New York’s Harlem Success Academy) have failed to bring back middle-class parents. A more market-oriented solution to the problem of sprawl-generating school systems is to break the link between residence and schooling, so that city residents would not be limited to urban neighborhood public schools. One possible option is some form of a voucher system.  Under the purest form of a voucher system, parents who choose to avoid public schools would be given public funds to pay the cost of private schools. Under such a system, parents would have little reason to avoid city neighborhoods: they could stay in the city, and their children could attend private schools for the same amount of money that they would spend on public schools (that is, zero).  Such voucher systems […]

Protectionism Is Already Harming American Workers And Cities

Both Vermont Senator Bernie Sanders and New York reality television personality Donald Trump have based their presidential campaigns in part on the issue of trade. Both of them oppose free trade policies like the North American Free Trade Agreement and the pending Tran Pacific Partnership, arguing that free trade has resulted in American jobs going overseas, leaving American workers worse-off. To remedy this situation, Trump has proposed declaring China a currency manipulator and imposing duties on Chinese-made goods, while elsewhere he’s advocated a 35 percent import tax on items made in Mexico and a 20 percent tax on all other imported goods. Sanders has also advocated imposing tarrifs on countries that manipulate their currencies to subsidize exports. To counter both candidates’ narratives of heartless corporations offshoring American jobs or unscrupulous foreigners “stealing” jobs that belong to American workers, economists and commentators from across the political spectrum have compiled impressive arrays of statistics proving that free trade actually benefits everyone. But they didn’t have to do so much. There are already examples, right now, of protectionist legislation that explodes the myths of the Trump and Sanders crowds. Since 1978, the “Buy America” provision of the Surface Transportation Assistance Act has forced transit agencies and passenger railroads like Amtrak and commuter rail services to have around 60 percent of the equipment and structural components manufactured in the United States if they want federal funding for their projects, unless they apply for and receive a waiver. Has this provision protected American workers? Does the United States now have a thriving rail equipment industry capable of competing with European, Japanese and Chinese companies, bearing out Alexander Hamilton’s “infant industry” argument? No. According to Metro Magazine, the Buy America provision makes “significant supply-chain disruptions” likely because the American market share for bus and train components […]

Reforming Zoning in a Kludgeocracy

To market urbanists and many others, it’s clear that there is a positive relationship between high housing costs and land-use restrictions and that liberalizing zoning would lower housing costs relative to what they would be in a more regulated environment. Given this relationship, reducing zoning would improve efficiency in the housing market by allowing consumer demand to drive the amount of resources that are put into housing development. However, land-use reform would also affect other policy areas such as public schools, transportation infrastructure, and sewer and water provision. Predicting how a liberalizing reform in one policy area will affect the complete public policy landscape is as impossible as predicting how one private sector innovation will affect other markets. Political scientist Steven Teles coined the term “kludgeocracy” to describe the complexity of contemporary American policy. For example, zoning has become a tool to make high-performing public schools exclusive, even though land-use policy and education policy are seemingly unrelated areas governed by different agencies. Because providing zero-price quality education to every child in the country may be impossible, zoning is a kludge that allows policymakers to provide this service to their high-income and influential constituents. Teles describes this policy complexity: A “kludge” is defined by the Oxford English Dictionary as “an ill-assorted collection of parts assembled to fulfill a particular purpose…a clumsy but temporarily effective solution to a particular fault or problem.” The term comes out of the world of computer programming, where a kludge is an inelegant patch put in place to solve an unexpected problem and designed to be backward-compatible with the rest of an existing system. When you add up enough kludges, you get a very complicated program that has no clear organizing principle, is exceedingly difficult to understand, and is subject to crashes. Any user of Microsoft Windows will immediately grasp the concept. […]

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 […]

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 […]

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