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New York State’s Property Tax Cap

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 […]

Morton’s Fork and land use issues

I recently discovered a new logical fallacy: the “Morton’s Fork” fallacy.  This argument is one in which contradictory observations lead to the same conclusion.  For example, if I argue that new housing near public transit is bad because it (1) spurs gentrification by bringing rich people into the neighborhood and (2) increases crime by bringing poor people into the neighborhood, I am engaging in this fallacy.  Similarly, I have heard arguments that new housing is bad because it (1) brings down property values and (2) increases property values. In such situations, it is sometimes possible that one of the two claims could be true, but it is unlikely that both claims could be true.

Book Review: The Public Wealth of Cities

The Public Wealth of Cities by Dag Detter and Stefan Fölster proposes a series of reforms to improve municipal finances. The authors lay out guidelines for creating urban wealth funds (UWFs) and argue that financial stability is key to societal success.   Detter and Fölster first call for basic financial competency. According to the authors, most cities don’t even know what they actually own. Real estate and equipment are often owned directly by individual departments with no central record to provide a bird’s eye view of a city’s assets as a whole. When this is the case, good asset management becomes impossible because no one knows what they’re managing.   The authors also point out the need for cities to decide what is and is not a commercial asset. Where administrators designate an asset as commercial, maximizing ROI should supersede all other objectives. That doesn’t mean everything a city owns has to be managed to turn a profit, but where a piece of real estate or a facility is meant generate income, it ought to be managed explicitly to that end.   Professional financial planning is Detter and Fölster’s third major prescription. They argue that cities should hire professional asset managers to oversee their portfolios and that these managers should be shielded from the democratic process. They go on to make a very public choice argument that elected officials have inappropriately short time horizons and that pressure to please constituents can lead to decisions at odds with the long term sustainability of municipal finances. After developing that line of reasoning, they provide Singapore as an example of a municipality that does this pretty well.   In terms of the ideas presented, I loved the book. It touches on the organizational challenges of getting municipal finance right while speaking to what execution has […]

Liberty Machines™

During an urbanist twitter free-for-all last week, the thoroughly awesome term “liberty machines” was used to describe the virtues of the car. The claim was made that cars let individuals go wherever they want, whenever they want and are therefore a ‘freedom enhancing’ form of transit.  This isn’t the first time I’ve heard this argument in libertarian(ish) circles. But it doesn’t tally with my experience and I’m not sure it makes any sense even within its own premise. A Personal Anecdote and a Couple Thoughts When I learned to drive way back when, it was in the great state of Texas where driving is basically a necessity. In that context, getting my license (and being economically fortunate enough to have access to a car) was certainly liberating for me after a fashion. Thinking back, though, I enjoyed far less mobility as a car bound teenager in suburban Houston than I do now living in Oakland, California. I walk to the grocery, take BART to work, bike to the gym, catch a Lyft to go out, and/or drive myself when the occasion demands. Most of my trips are multimodal and the integration of transit modes affords me far more freedom of movement than car use alone ever could. The biggest reason for this is that single occupancy vehicle use doesn’t scale as a stand alone system. Unpriced roadways are prone to hitting congestion points and, as readers of this blog are probably aware, adding lanes doesn’t help. When roads become clogged, and there are no viable alternatives, a reliance on cars becomes a constraint. And to respond to the idea that mass transit relies on government subsidies and car use does not…the technical term for that would be factually incorrect. Mass transit is more than capable of paying for itself and let’s just say highways don’t […]

The Role for State Preemption of Local Zoning

Urbanists have increasingly turned to state-level preemption as a tool for reducing the barriers to new housing supply, recognizing the improved incentives for land-use policy relative to the local level. In a piece for the Atlantic Cities, Nolan sums up the potential for preemption to address current inefficiencies in urban policy. In addition to being a pragmatic tool to increase the supply of housing where it’s needed most, state-level preemption of local land-use rules is grounded in the American system of federalism that relies on higher levels of government setting limits on the extent to which lower levels of government can legislate or regulate away individuals’ rights. As legal scholar Michael Greve explains in The Upside-Down Constitution, American government is designed to rely on the threat of residents (and their tax base) leaving jurisdictions that enforce exploitative policies. When residents are free to enter and exit jurisdictions, the places that provide the policy environment, business opportunities, and quality of life can expect to gain residents at the expense of those that don’t. The opportunity for residents to “vote with their feet” by choosing to live and work in the places where they can best pursue their own version of the good life is essential to the American system of competitive federalism. When jurisdictions must compete with each other for residents and wealth, they tend to enact policies that support broad-based prosperity. Absent this competitive pressure, policymakers are more likely to implement policies that privilege special interests because they face a diminished threat of their tax base leaving the jurisdiction. Preemption can play an important role in supporting competitive federalism as opposed what Greve calls cartel federalism — when special interests and policymakers benefit at others’ expense. For example, with the 14th Amendment, the federal government restricted the potential for state governments to […]

old posts

Before there was a Market Urbanism blog, I posted short thoughts on the Congress for New Urbanism group blog.  I am in the process of recovering as many of the posts as possible through the Internet Archive (archive.org).  My 2015 posts are here.  I hope to gradually recover the earlier posts as well.

The Color of Law: A Forgotten History of How Our Government Segregated America

Richard Rothstein’s “The Color of Law: A Forgotten History of How Our Government Segregated America” should be required reading for YIMBYs and urbanists of any ideological stripe. Rothstein argues that housing segregation in the US has been the intentional outcome of policy decisions made at every level of government and that the idea of segregation as phenomenon driven by spontaneous self-sorting is largely a myth. Two major themes permeate the book: (1) the ways in which government has consistently intervened in the housing and land markets and (2) how these interventions were designed to pick winners and losers. The federal policy of underwriting loans for specific kinds of development (single family detached housing) and for specific people (whites) is an example that the author explores in depth. And after reading his account, I can safely say that I have a far better understanding of how nearly a century’s worth of policy interference has distorted markets and doled out privilege and oppression in equal measure. Throughout the book, Rothstein brings in the stories of specific people and places to add depth to his account. This both keeps things interesting and serves to humanize the story in a way that many tracts on policy fail to do. When he’s describing the lives of black Americans who were forced into soul crushing commutes because they were legally prohibited from living near their jobs, or families who had their houses firebombed for daring to move into a segregated neighborhood while police stood on their front lawns and watched…you remember that policy matters because it affects real people. And that real people suffered terrible wrongs for no other reason than the accident of their birth. Again, if you care about US housing policy, you must read this book. It’s impossible to understand where we are […]

People Over Process: Why Democracy Doesn’t Justify Exclusion

Some people accept the idea that restrictive land use policy is just as bad as all the research suggests, but persist in supporting the status quo. They argue that if a community chooses to regulate its built environment, that choice should be respected as having moral weight because it’s the outcome of a democratic process. This argument, though, is as logically confused as it is normatively problematic. And in the following few lines, I intend to demonstrate exactly why. No decision making process is value neutral. Whatever way we choose to go about collective decision making, we will always privilege certain voices over others. Institutions beget outcomes and the internal logic of our institutions will always favor some outcomes (and therefore voices) over others. The same individuals with the same preferences asked to make the same decisions through different procedures will produce wildly different outcomes. Imagine a U.S. Presidential election based on the popular vote or representation in the U.S. Senate proportional to state population and you should begin to see how the public will is as much a product of procedure as it is aggregated individual preference. Taking the Bay Area as a land use specific example, our system heavily favors the voices of incumbent homeowners to the detriment of everyone else. Land use decisions take place at the municipal level which–given the fact that we have 101 different municipalities–is a hyper local affair. When a new development is proposed, it only takes a handful of angry neighbors to impact decision making. Were land use set at a higher level of government, the typical number of people that get angry over an individual project would be far less effective at killing new housing. Fifty angry homeowners might matter to the Palo Alto City Council, but they’d be quite a […]

A Guide to Urban Development [Guia de Gestão Urbana]

Caos Planejado, in conjunction with Editora BEI/ArqFuturo, recently published A Guide to Urban Development (Guia de Gestão Urbana) by Anthony Ling. The book offers best practices for urban design and although it was written for a Brazilian audience, many of its recommendations have universal applicability. For the time being, the book is only available in Portuguese, but after giving it a read through, I decided it deserved an english language review all the same. The following are some of the key ideas and recommendations. I hope you enjoy. GGU sets the stage with a broad overview of the challenges facing Brazilian cities. Rapid urbanization has put pressure on housing prices in the highest productivity areas of the fastest growing cities and car centric transportation systems are unable to scale along with the pace of urban growth. After setting the stage, GGU splits into two sections. The first makes recommendations for the regulation of private spaces, the second for the development and administration of public areas. Reforming Regulation Section one will be familiar territory for any regular MU reader. GGU advocates for letting uses intermingle wherever individuals think is best. Criticism of minimum parking requirements gets its own chapter. And there’s a section a piece dedicated to streamlining permitting processes and abolishing height limits. One interesting idea is a proposal to let developers pay municipalities for the right to reduce FAR restrictions. This would allow a wider range of uses to be priced into property values and create the institutional incentives to gradually allow more intensive use of land over time. Meeting People Where They Are Particular to the Brazilian experience is a section dedicated to formalizing informal settlements, or favelas. These communities are found in every major urban center in the country and often face persistent, intergenerational poverty along with […]

Only In California: Twisting an Anti-Exclusionary Law To Rationalize Exclusion

As a Market Urbanism reader, you are hopefully fluent in the problems of exclusionary zoning.  If you’re new to the term, there are some good pieces on the topic here and here.  Basically: exclusionary zoning is the use of zoning to price people out of a community.  The classic example is minimum lot sizes or minimum unit sizes: cities only zone parcels big enough to ensure low-income families cannot afford the housing.  When subsidies for affordable housing require specific unit attributes, like reduced parking ratios, a community can simply require parking ratios above that threshold (although states can move swiftly to stamp out such practices). States have also responded to exclusionary zoning practices with a wide array of policy interventions known collectively as “anti-snob laws.”  One key component of California’s anti-exclusionary efforts is called the Regional Housing Needs Allocation (RHNA).  The law requires each jurisdiction in the state to produce a Land Inventory (or Adequate Sites Inventory, or Sites Inventory, or Buildable Land  Inventory) that demonstrates the jurisdiction possesses space to accommodate anticipated housing needs at adequate densities.  Read “adequate densities” as dense enough to produce affordable units. Scott Wiener, the state senator representing San Francisco, is pushing to give the RHNA some real teeth. The most contentious component of the process is the definition of “need” for each jurisdiction.  The state calculates anticipated need based on population and jobs projections for each region.  Regional councils of government (COGs) are then empowered to distribute the regional need to each jurisdiction within that region.  Need is quantified in terms of units, and these needed units are further categorized into four groups: units affordable to Very Low Income, Low Income, Moderate Income, and Above Moderate Income households. Regional agencies had some flexibility in making these allocations in the past.  Thanks to SB 375, which passed in […]

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