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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 […]

What is wrong with “How to Make an Attractive City”

“How to Make an Attractive City”, a video by The School of Life, recently gained attention in social media. Well presented and pretty much aligned with today’s mainstream urbanism, the video earned plenty of shares and few critiques. This is probably the first critique you may read. The video is divided into six parts, each with ideas the author suggests are important to make an attractive city. I will cover each one of them separately and analyze the author’s conclusion in a final section. 1 – Not too chaotic, not too ordered The author argues that a city must establish simple rules to to give aesthetic order to a city without producing excessive uniformity. From Alain Bertaud’s and Paul Romer’s ideas, it can make sense to maintain a certain order of basic infrastructure planning in to enable more freedom to build in private lots. However, this is not the order to which the video refers, suggesting rules on the architectural form of buildings. The main premise behind this is that it “is what humans love”. But though the producers of the video certainly do love this kind of result, it is impossible to affirm that all humans love a certain type of urban aesthetics generated by an urbanist. It is even less convincing when this rule will impact density by restricting built area of a certain lot of land or even raising building costs, two probable consequences of this kind of policy: a specific kind of beauty does not come for free. Jane Jacobs, one of the most celebrated and influential urbanists of the modern era, clearly argued that “To approach a city, or even a city neighborhood, as if it were a larger architectural problem, capable of being given order by converting it into a disciplined work of art, […]

Seamless Transit: Thoughts on the new report from SPUR

Seamless Transit is the new transportation policy report from SPUR. Main author Ratna Amin proposes integrating the Bay Area’s balkanized transit systems to improve lackluster ridership. Given that the region has 23 separate transit providers–more than any other metropolitan area in the country–she may have a point. The report proposes standardizing service maps, fare structures, and payment systems; eliminating inter-system coverage gaps as well as redundant coverage; and reforming transit governance so that the different agencies actually make plans together instead of working at cross-purposes or not at all. The recommendations are sound and the report includes historical footnotes for context. These are helpful for understanding region’s complicated institutional arrangements. Seamless Transit is a fine piece of work and well worth the read for anyone interested in Bay Area transportation. But while organizational efficiency is important, it’s not the only thing to discuss. If we want to improve the region’s mass transit systems, we have to consider the physical environment in which those systems are embedded. To get transit right, the region needs to embrace density. Denser development around transit nodes would increase ridership substantially. When people live, work, and play in smaller geographic areas, more people travel between a fewer number of points. Mass transit, especially fixed rail transit, becomes more effective the denser development becomes. Hong Kong’s Metro Transit Railway (MTR) might be the quintessential example of urban density begetting mass transit success. The city is home to over 7 million inhabitants. It has a population density of over 18,000 residents per square mile. And of this population, 41% live within a half mile of an MTR station. The result? The MTR has a farebox recovery ratio of 186%–the highest in the world. Because of legal as well as political differences between Hong Kong and the Bay Area, […]

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 […]

Filtering: Gentrification in Reverse

Co-authored with Anthony Ling, editor at Caos Planejado Gentrification Gentrification is the process through which real estate becomes more valuable and, therefore, more expensive. Rising prices displace older residents in favor of transplants with higher incomes. This shouldn’t be confused with the forced removal of citizens via eminent domain or “slum clearance.” Ejecting residents by official fiat is a different problem entirely. A classic example of gentrification is that of Greenwich Village, New York. Affluent residents initially occupied the neighborhood. It later became the city’s center for prostitution, prompting an upper-middle class exodus. Low prices and good location would later attract the textile industry. This was the neighborhood’s first wave of gentrification. But after a large factory fire, the neighborhood was once again abandoned. Failure, however, would give way to unexpected success: artists and galleries began to occupy the vacant factories. These old industrial spaces soon became home to one of the most important movements in modern art. In Greenwich Village, different populations came and went. And in the process they each made lasting contributions to New York’s economic and cultural heritage. This was only possible because change was allowed to take place. But change isn’t always easy. As a neighborhood becomes more popular, it also becomes more expensive. Tensions run high when long-time residents can’t afford rising rents. Some begin to call for rent controls or other measures to prevent demographic churn. But rent control is a temporary fix at best; in the longer term, its effects are negative. By reducing supply, rent control tends to drive up the cost of housing. And in the face of price controls, landlords may seek to exit the rental market entirely, further exacerbating any housing shortage. What, then, does this mean for urban development? How can cities evolve without completely displacing their middle and […]

How to Fix San Francisco’s Housing Market

Want to live in San Francisco? No problem, that’ll be $3,000 (a month)–but only if you act fast. In the last two years, the the cost of housing in San Francisco has increased 47% and shows no signs of stopping. Longtime residents find themselves priced out of town, the most vulnerable of whom end up as far away as Stockton. Some blame techie transplants. After all, every new arrival drives up the rent that much more. And many tech workers command wages that are well above the non-tech average. But labelling the problem a zero sum class struggle is both inaccurate and unproductive. The real problem is an emasculated housing market unable to absorb the new arrivals without shedding older residents. The only solution is to take supply off its leash and finally let it chase after demand. Strangling Supply From 2010 to 2013, San Francisco’s population increased by 32,000 residents. For the same period of time, the city’s housing stock increased by roughly 4,500 units. Why isn’t growth in housing keeping pace with growth in population? It’s not allowed to. San Francisco uses what’s known as discretionary permitting. Even if a project meets all the relevant land use regulations, the Permitting Department can mandate modifications “in the public interest”.  There’s also a six month review process during which neighbors can contest the permit based on an entitlement or environmental concern. Neighbors can also file a CEQA lawsuit in state court or even put a project on the ballot for an up or down vote. This process is heavily weighted against new construction. It limits how quickly the housing stock can grow. And as a result, when demand skyrockets so do prices. To remedy this, San Francisco should move from discretionary to as-of-right permitting. In an as-of-right system, it’s much […]

BART, Josefowitz, and Mass Transit in the Bay

Last week, Nick Josefowitz unseated a multi-decade incumbent for a spot on the BART board of directors. Normally I don’t pay too much attention to elections, but Mr. Josefowitz might actually have some good ideas. For everyone outside the Bay Area, the BART (Bay Area Rapid Transit) system is a commuter rail line that constitutes the vital transportation link between the East Bay and San Francisco. On a typical weekday it provides 400,000 rides and that number is increasing as the regional economy continues to boom. Suffice it to say that BART is a big deal to a lot of people who rely on it every day (myself included). While Josefowitz’s campaign website talks about cleaning up dirty stations and increasing late night train availability, I had the privilege of hearing him outline an interesting proposal during a private, small group discussion some months ago. According to Josefowitz, BART sits on a substantial amount of real estate in the form of station parking lots. His proposal was to repurpose some of this space as high density housing. This would help with the region’s housing shortage and support BART ridership by clustering population around the system’s stations and the lost spots could be offset by building parking structures on the remaining lot space (many BART parking lots are ground level only as opposed to multi-level parking structures). This sounded a lot like Hong Kong’s integrated rail-property development approach which has proven to be an unqualified success, so my interest was definitely piqued. As always, there’s plenty of which to be skeptical. The fact that the proposal was brought up in a private discussion, but isn’t listed on the campaign website may say something about where it falls in Josefowitz’s priorities. Also, it’s difficult to tell how effective the incoming director will be […]

Planned Manufacturing Districts: Planning the Life Out of Districts

They are called different things in different cities, but they are similar in form and intent among the cities where they are found.  For simplicity’s sake, a Planned Manufacturing District (PMD), as they are called in Chicago, is an area of land, defined by zoning, that prohibits residential development and other specific uses with the intent of fostering manufacturing and blue-collar employment. Proponent of PMDs purport to be champions of the middle-class or blue-collar workers, but fail to consider the unintended consequences of prohibiting alternative uses on that land.  At best, PMDs have little effect on changing land-use patterns where industrial is already the highest-and-best-use.  At worst, they have the long-run potential to distort the land use market, drive up the costs of housing, and prevent vibrant neighborhoods from emerging. A Race to The Bottom Before getting into it further, it is important to examine the economic decisions industrial firms make in comparison to other uses.  Earlier in the industrial revolution, industry was heavily reliant on access to resources.  Manufacturing and related firms were very sensitive to location.  The firms desired locations with easy access to ports, waterways, and later railways to transport raw materials coming in, and products going out. However, the advent of the Interstate Highway System and ubiquitously socialized transportation network have made logistical costs negligible compared to other costs.  Where firms once competed for locations with access to logistical hubs and outbid other uses for land near waterways in cities, they now seek locations with the cheapest land where they can have a large, single-floor facility under one roof.  This means sizable subsidies must be combined with the artificially cheap land to attract and retain industrial employers on constrained urban sites. Additionally, today’s economy has become much more talent-based rather than resource based, and patterns have shifted accordingly.  In contrast to industrial, residential and office uses are […]

How Hong Kong Pulls Off Transit Oriented Development

Integrating rail and property development is the cornerstone of the MTR’s success. In the U.S., coordination between transit authorities and developers tends to be mediocre at best. In Hong Kong, however, the MTR is both the transit authority as well as the property owner, and this makes all the difference. Coordination Problem Most attempts at transit-oriented development in the U.S. involve multi-party negotiations. The agency responsible for the transportation system haggles with different developers interested in undertaking projects along the line. Instead of implementing a unified plan, the transit agency has to negotiate specific agreements with each developer. And, because the priorities of the transit agency and the developers are never perfectly aligned, development agreements become subject to second-best compromises. Further, any disputes that arise once significant capital has been committed are costly to resolve. This arrangement makes leveraging land values difficult as well. Developers frequently get tax breaks as an incentive to undertake projects. Whether abatements on property tax or straight-forward rate reductions, tax incentives typically preclude the use of land values to help fund transit. And, even without special incentives, major property owners who stand to benefit from proximity to a transit system have every reason to resist tax increases of any kind if there’s a chance of free-riding. The MTR, on the other hand, uses the integrated rail-property development  approach which combines the two roles of landlord and transit developer. The MTR owns the right-of-way as well as the surrounding properties. This removes the necessity of extended negotiations, having to settle for second best solutions, and the potential downside of disagreements partway through a project. By combining the functions of landlord and transit developer, the MTR is also able to internalize land values. The rail line drives up the value of the MTR’s properties and that value covers […]

Shortfalls in non-profit disaster rebuilding

After receiving years of praise for its work in post-Katrina recovery, Brad Pitt’s home building organization, Make It Right, is receiving some media criticism. At the New Republic, Lydia Depillis points out that the Make It Right homes built in the Lower Ninth Ward have resulted in scarce city dollars going to this neighborhood with questionable results. While some residents have been able to return to the Lower Ninth Ward through non-profit and private investment, the population hasn’t reached the level necessary to bring the commercial services to the neighborhood that it needs to be a comfortable place to live. After Hurricane Katrina, the Mercatus Center conducted extensive field research in the Gulf Coast, interviewing people who decided to return and rebuild in the city and those who decided to permanently relocate. They discussed the events that unfolded immediately after the storm as well as the rebuilding process. They interviewed many people in the New Orleans neighborhood surrounding the Mary Queen of Vietnam Church. This neighborhood rebounded exceptionally well after Hurricane Katrina, despite experiencing some of the city’s worst flooding 5-12-feet-deep and being a low-income neighborhood. As Emily Chamlee-Wright and Virgil Storr found [pdf]: Within a year of the storm, more than 3,000 residents had returned [of the neighborhood’s 4,000 residents when the storm hit]. By the summer of 2007, approximately 90% of the MQVN residents were back while the rate of return in New Orleans overall remained at only 45%. Further, within a year of the storm, 70 of the 75 Vietnamese-owned businesses in the MQVN neighborhood were up and running. Virgil and Emily attribute some of MQVN’s rebuilding success to the club goods that neighborhood residents shared. Club goods share some characteristics with public goods in that they are non-rivalrous — one person using the pool at a swim club doesn’t impede others from doing so — but club […]

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