Two teams of researchers recently released estimates of the U.S. housing shortage – and they differ by a factor of five. Is the national shortage 20 million homes or just 4 million? With a range that big, both published by pro-housing groups, you’d be forgiven for thinking this is an exercise in futility.

But look under the hood and each estimate is asking and answering a different question. Together they offer a useful parallax on the current cost crisis. To oversimplify, here’s how I’m thinking about the studies:

• America needs to find space for about 4 million more households.
• City housing deficits add up to about 20 million dwellings, but the total is less than the sum of the parts.
• If we deregulated everywhere, high-priced places would build much more housing than Up For Growth predicts. And moderate-priced places would build much less housing than the JEC predicts.

JEC: 20 million

The easier report to understand is that produced at the Joint Economic Committee by the classically-named duo Kevin Corinth and Hugo Dante, the latter a GMU/Mercatus alumnus. They use a straightforward supply and demand framework with some simple, defensible assumptions about the housing production function and the demand curve within each county.

If I were going to calculate a housing shortage, I would do it along these lines. In this framework, the shortage tells us the gap between the number of houses that exist and the number that would be demanded at the cost of construction plus a modest land cost. 

Pros: The JEC model gets the geography right. The biggest housing shortfalls are in high-cost, high-regulation (and/or land-constrained) places: Hawaii, DC, California, and Massachusetts. The magnitude of the shortages there – 30 to 35 percent of the housing stock – are believable given the magnitude of the problem.

Cons: The model treats counties as closed markets. This runs into two problems. A minor one is that they overstate the impact of the proposed HOUSES Act – which would imitate the excellent Southern Nevada Public Land Management Act for other regions – because some flat federal land in urban counties is too far from employment centers to be worth developing. That’s easy to fix. The bigger problem is that housing demand in one county is measured holding all other counties fixed. If Los Angeles built a million new homes, housing demand in Las Vegas, Phoenix, and San Bernardino would drop. That means – thankfully – that the national shortage is less than the sum of all the local shortages.

Up For Growth: 4 million

Up For Growth, the most effective pro-housing organization in Washington, branded its novel approach to the homes gap: Housing Underproduction. The name points to the policy solution. But the model’s guts are on the demand side. As its helpful graphic below shows, Housing Underproduction is an estimate of how many households there ought to be. Like JEC, Up For Growth’s researchers, including Michael Wilkerson of ECONorthwest, used reasonable assumptions to estimate a gap between how households currently match up to the housing stock and how a healthier distribution of household sizes and vacancy rates would look.

Pros: Because it counts people, not prices, Up For Growth’s local estimate add up to a national number without double-counting. And its methodology identifies housing need on a more sociological basis. Notably, low-income places with large Hispanic populations, such as San Antonio, have very high rates of Housing Underproduction, because crowding is so high. (That’s an area for further research).

Cons: Up For Growth’s local estimates miss the places where housing needs are blatantly enormous. They reflect the places where people who need more housing are, not the places they would like to be. Up For Growth finds bigger gaps in San Bernardino and McAllen than San Jose and Austin. That’s not because people love low wages and scorching summers; it’s because crowding and moving to cheaper cities are coping strategies that people pursue in tandem.

A general equilibrium thought experiment

Both methodologies ultimately fall short on two sides of the same coin: people and prices are linked across the country. Up For Growth identifies shortages of housing where people are (and calls it Housing Underproduction); JEC identifies the underproduction of housing where prices are high (and calls it a Housing Shortage).

What would actually happen if we unleashed a massive, deregulated building boom?

• Places with the highest prices, like Los Angeles, would build the most & densest housing.
• Vacancies would rise and rents would fall.
• At lower rents, crowded Angelenos would move into bigger homes, happily sliding down their demand curve.
• Some residents of other cities, like San Bernardino, would also move to Los Angeles.
• In San Bernardino, building would have also commenced. But before long, the combined effect of declining rents in LA and at home would staunch demand for new housing.
• LA would build much more housing than Up For Growth estimates; San Bernardino would build much less housing than JEC estimates.
• Some of the people who Up For Growth identified as needing houses in San Bernardino will satisfy that need in LA (or play musical chairs in a way that accomplishes the same thing).
• Some of the housing demand that JEC observes in San Bernardino would evaporate in a world where rents are lower in Los Angeles.

This mental model also hints at an aspect of Full YIMBY that we don’t like to think about: stagnant cities would lose population. If construction were instantaneous, you might see 7 million new homes built, mostly in high-demand cities, and 4 million new households formed. The excess would be made up by 3 million new vacancies in declining cities.

(Declining cities’ defense mechanisms are that construction takes time and housing supply is extremely inelastic in decline. Thus, prices fall much more in Rochester than they rise in Raleigh when people move south.)

An academic paper that comes close to reconciling the two sides is Duranton and Puga’s. It features sci-fi levels of depopulation in small cities. Unfortunately, given what we’re learning about the modest gains from moving to a high-wage city, Duranton and Puga’s powerful agglomeration effect is probably too strong. A version of their model sans agglomeration might come closer to the truth.

The post How big is the housing shortage? appeared first on Market Urbanism.

One common counterargument is that because Tokyo is a population-losing city in a population-losing city, it simply lacks the demand to have high housing prices, and is thus more comparable to the low-cost Rust Belt than to high-cost cities like New York.

But a short look at my World Almanac suggests otherwise. On page 730, it lists the world’s largest urban areas. It shows that between 2000 and 2021 , Tokyo actually grew by 8.4 percent. By contrast, metropolitan New York-Newark grew by 5.7 percent, and Los Angeles by 5.6 percent. In other words, Tokyo’s population actually grew more rapidly than high-cost U.S. cities.

The post Is Tokyo comparable to U.S. cities? appeared first on Market Urbanism.

If short-term rents were always as high as those of fancy hotels, this argument might make sense. But in fact, some Airbnb rents are comparable to rents in the long-term market, and some Airbnb landlords in fact will rent property for months.

I discovered this while playing around with Airbnb listings in New York City. In particular, I looked at rentals for the entire month of August. I found rents as low as $827 per month (for a furnished room in Hollis, Queens).

Even after limiting my search to full-fledged apartments (as opposed to sharing a room in someone’s house) I found some listings that were comparable to those in the long-term rental market. I found a listing for $1800 in Staten Island, and $1826 in Midwood (in southern Brooklyn) – far less than what I pay. The cheapest Manhattan listing (a walk-up in Murray Hill) was $2400, about what I paid before I got married. I did another search for 3-month tenacies (from Aug 1-Oct 1) and found comparable results: the cheapest fully private space rented for $1752 (in East New York) and the cheapest Manhattan listing rented for $2453. The cheapest roommate arrangement was $736- in Bensonhurst.

In sum, it appears that if you can afford a traditional apartment, you can probably afford a low-end Airbnb listing- despite the regulatory obstacles that government uses against the latter. It logically follows that the distinction between “long-term renter” and “short-term renter” might actually be pretty blurry.

The post Long-term renters ARE short-term renters (maybe) appeared first on Market Urbanism.

In particular, the book’s third section on reforms is outstanding. It starts with a slate of policy proposals typical to this kind of text, but quickly goes much farther afield. After suggested policy changes, we’re invited to consider a world without zoning via an in-depth look at Houston’s land use regime. Here we’re treated to both an explanation of how it works and the unique political history that left the city unsaddled with zoning. Nolan goes on to close his recommendations with a call to reimagine what a city planner could be in a post-zoning American city; a call that, as a former New York City planner, he is uniquely fit to make.

Aside from the content, this book deserves points for prose. Arbitrary Lines is blessedly readable. The writing flows and the varied anecdotes interspersed throughout the book make it feel less like a policy tract and more like a conversation with your favorite professor during office hours.

For those already initiated, buy the book and enjoy nodding your head and learning a couple new things. And for those trying to share the good news of land use reform, consider making Arbitrary Lines that one thing you get friends or family to read. It’s among the most accessible books on land use I’ve ever read, and it’s a great addition to the growing arcana of the YIMBY cannon.

The post Book Review: Arbitrary Lines – How Zoning Broke the American City and How to Fix It appeared first on Market Urbanism.

If you read one book about Japan this year, it should be the beautiful, new Emergent Tokyo: Designing the Spontaneous City by Jorge Almazan and his Studiolab colleagues, including Joe McReynolds. But if you read two books about Japan, as you should, the second one should be André Sorensen’s essential The Making of Urban Japan.

And readers responded – buying both books:

Now we get to delve into Emergent Tokyo. Here is my extended discussion with Professor Almazán, edited for length.

Salim Furth: I love your chapter on “yokocho”, alleys lined with tiny bars and restaurants like the one Americans see in the show Midnight Diner. Yokocho look a little like medieval Middle Eastern souks, but you point out that they originated as an orderly relocation strategy for postwar black markets, dictated and built by national authorities. Then proprietors took over, adding upper stories, changing uses, and personalizing. Is there enough space in 21^st-century building codes and business models for continued physical evolution of yokocho? How is that occurring?

Jorge Almazán: The yokocho that were created to relocate post-war black marketeers are in fact still evolving. But let me address building codes and business models separately. In terms of physical evolution, it is true that current regulations would make it very difficult to add new floors, and therefore we cannot expect additional vertical growth. But the regulation allows owners to retrofit, reinforce and renovate current buildings. Many of the young owners, for example, are transforming their bars into more open and community-oriented configurations.

Building codes are not the result of allegedly pure and innocent building science. Like any other law, they are the result of ideological assumptions, political struggle, and lobby pressure (from the real estate construction industries). We can imagine future building codes responding to current social demands towards a more human-scale approach to urbanism, allowing more proactive preservation of historical yokocho and even the creation of new ones. We have already seen legal changes in Japan pointing in this direction (as new laws or deregulation of existing ones).

But beyond the physical evolution, yokocho potential to evolve is more interesting as an urban model. That is the realm where the restaurant industry is finding creative advantages and business opportunities. Many of the latest large-scale redevelopment projects have included commercial floors with yokocho-like arrangements of small bars and restaurants, like the Toranomon Yokocho or Shibuya Yokocho, offering the diversity of atmospheres, the ease of interaction among customers, and the intimacy of the historical yokocho. That said, most of these new pseudo-yokocho only reproduce the physical arrangement of the historical yokocho. What they lack is precisely the greatest urban and business potential of the authentic yokocho: a surprisingly rich and adaptable emergent urban entity created by a multiplicity of independent actors. In [true] yokocho, independent operators engage with each other in a non-hierarchical relation of cooperative competition, creating a localized economy of agglomeration that results in an urban place much greater than the sum of its tiny parts.

Salim Furth: In the first chapter, you draw a sharp distinction between “chaos” and “emergence”. Why is emergence a better concept than chaos for understanding Tokyo?

Jorge Almazán: “Emergence” is a property of “complex systems,” which are distinct “chaotic systems” (See Stephen Wolfram’s work.) Roughly speaking, complex systems’ behavior is not regular, but it isn’t chaotic either. Complex systems have structure, even if it is difficult to define. In this formal sense, cities (including Tokyo) are closer to emergent complex systems than purely chaotic systems.

At a more popular level, “chaos” is always mentioned when talking about Tokyo, especially outside Japan. “Chaos theory” was popularized among architects in the late 1980s, and it allowed Japanese architects to see Tokyo in a more positive light. But this narrative of chaos is a dead-end. It left many architects without critical tools to analyze the city and charter a vision for the future.

In the popular discourse, “chaos” is often understood as a complete lack of planning or design. That is a dangerous conclusion. We all like the vital and energetic disorder of Tokyo, but we should recognize the underlying structures that produced it over time. Disorder needs to be designed. The idea of emergence (the spontaneous creation of order and functionality from the bottom-up) is a promising approach for all cities in general, especially for cities with a heavy top-down planning tradition. Tokyo’s light urban planning combined with the small scale of land plots, and the creativity of many of its citizens produced a particularly fertile ground that accelerates bottom-up emergent urban phenomena.

Salim Furth: Some of the spaces in Emergent Tokyo benefit from well-placed trees or potted plants. Those are almost always delightful in a city, but there’s a tension between providing space and sunlight for plants and allowing for narrow passages and tall buildings. In the U.S., the Garden City movement’s love of greenery has led to a lot of dead, oversized urban spaces. What can we learn from Tokyo about including trees in small spaces?

Jorge Almazán: This is not only an American problem. The Modernist obsession with expansive open spaces left many European post-war recent developments with too large and too ill-located parks.

Tokyo does not excel in the creation and protection of public greenery. What is really intriguing is Tokyo’s informal greenery. In many neighborhoods, even the most densely built, each neighbor maintains a tiny garden, sometimes with trees but most often small greenery and potted plants. This is a bottom-up practice, there is no local ordinance forcing owners to maintain them. In spite of their tiny size, their presence throughout the whole neighborhood creates an overall sense of greenery. 

This phenomenon has cultural roots. But it serves contemporary functions beyond visual refreshment. It is a gentle way to demarcate property boundaries and create visual barriers to keep privacy, without aggressive elements like fences and walls.

It is a way to signify a commitment to embellish the neighborhood and express the individual personality of the homeowner. Some use a Victorian style with many flowers, some use bonsai and other Japanese elements, and some cover the whole building with ivy. Recently I see many Mediterranean greenery, even olive trees, and very often potted herbs for cooking.

In our interviews, we found that small greenery triggers conversations and interactions between neighbors too. Strangers and even neighbors are more likely to talk if there is a third element or stimulus that connect them. Using Holly Whyte’s terminology, greenery is this “triangulation” device that provides a social bond between people.

Salim Furth: In Chapter 6 you convinced me that “dense, low-rise neighborhoods” are the most natural urban form in Tokyo. That is, this urban form tends to emerge from a variety of initial conditions, including planned garden suburbs (Higashi-Nakanobu), gridded artificial land (Tsukishima), and unplanned sprawl (North Shirokane).

Does this form dominate because of its intrinsic advantages or because land use institutions favored it? Several times, you describe these neighborhoods as a “delicate balance”, but it seems to me they’re more of a hardy weed.

Jorge Almazán: The reasons for the domination of this urban form are mixed. Low-rise construction has the intrinsic advantage that can be easily and cheaply designed and built, especially in wood (the dominant structural material of these neighborhoods). There is also a clear intention by planning authorities to create low-rise areas, at least in those many areas zoned as “low-rise exclusively residential areas,” with maximum heights of 10 or 12 m. What authorities probably did not foresee is the high ground coverage and population densities that many neighborhoods reached over time, as a result of disparate influences, like land subdivision to pay the high inheritance taxes, or the deregulation in FAR calculation methods.

This largely unintended result is a unique urban fabric that often strikes a balance between preserving a village-like small scale with the advantages of a metropolitan context. You are right that these urban fabrics grow and expand rapidly as weeds. But they are delicate because their best qualities can be easily damaged by internal dynamics (like the invasion of parking spaces replacing gardens); or external forces (like road widenings or large-scale redevelopments), turning them characterless and unwelcoming. Our book is a call to understand, cultivate, and harvest the beneficial effects of this native weed, rather than insisting on bulldozing and razing it.

Salim Furth: You and your colleagues are releasing a Japanese language edition later this year. How does the book serve Japanese and foreign audiences differently?

Both editions are practically identical, with a difference in framing. The English edition contextualizes Tokyo in the global discourse, emphasizing lessons that we can extract for other cities around the world. The Japanese version is framed within the internal discussions in Japan.

[Within Japan,] the relative attractiveness of Tokyo has decreased due to the recent wave of large-scale redevelopments, and there is a search for alternatives. Our book is a call to pay attention to the value of Tokyo’s own vernacular urbanism.

As foreigners, you and I are mesmerized by zakkyo buildings or yokocho, but within Japan, scholars, and authorities often ignore and neglect them as urban subproducts. In spite of their conspicuous presence and popularity, the official discourse still considers most of Emergent Tokyo as unsightly, dangerous, or underdeveloped. The book offers the Japanese readership a fresh view of their own everyday life environment as a valuable social, spatial, and even aesthetic legacy from which they could envision alternative futures.

Finally, the book uses one language that needs no translation: the lingua franca of graphics. We believe that new knowledge can be produced not only verbally or numerically, but also graphically. The discipline of scrupulously drawing all the case study areas obliged us to discard vapid rhetoric and focus on tangible aspects that can be mapped, drawn, and eventually designed. We also included numerous photographs, selected after years of fieldwork, building trust with locals, and obtaining rare permission to take bird’s-eye views and intimate interiors shots.

Salim Furth: I would ask where people should buy the book, but I think I know the answer. After reading Emergent Tokyo, one is more convinced than ever that it’s worth supporting local merchants. Small bookstores might need to special order. But the book is so visual, it deserves to be on display racks so people can touch it and flip through. It’s also available via Oro Editions and Amazon.

Jorge Almazán: Yes, and on the way home from your local bookseller, you might find a cozy café to read in.

The post Unpacking Emergent Tokyo with author Jorge Almazán appeared first on Market Urbanism.

American (and European) YIMBYs point to Tokyo as an icon and model – proof that nationalized zoning and a laissez faire building culture can protect affordability even when demand is very strong. But this body of work is over-reliant on a classic 2014 Urban Kchoze blog post. As the YIMBY movement matures, it’s time to go deep – books deep – into the fascinating details of Japan’s land use institutions.

Essentials

As with any complex social phenomenon, we are tempted to essentialize Japanese zoning. It works because it’s top-down. It works because Douglas MacArthur imposed strong property rights. It works because of Japanese traditions of impermanence. (If you’re a planner rather than a YIMBY, replace “it works” with “it’s broken”).

Sometimes – often – essential simplifications are useful. And there’s no type of book more boring than the one that promises to tell you how “everything you know about X is wrong,” and then proceeds to offer a bunch of minor caveats to the basically-correct narrative you already knew. Thankfully, this isn’t that kind of book.

Instead, what you come away with is an appreciation for how wrong each of these narratives is: Japanese land use is a delicately-balanced synthesis of centralized and scattered power. If you take away an essential story or lesson, it should be the contingency of outcomes. It works because the central planners were powerful enough to preempt local government but not powerful enough to sideline landowners. It works because local governments encouraged modernization but never had enough funding to execute urban renewal. It works because otherwise strong property rights coexisted along with Land Readjustment. It works because the postwar US and Japanese authorities did not fully enforce their own edicts. It works because of the mini-kaihatsu loophole.

It works because a very specific sequence of institutions rose and declined over a very eventful century, and none of them had the time, power, or money to fully execute its vision.

In the next sections I will draw four notable episodes or themes from the text. This is not a synoptic review – the closest you’ll get to a full narrative is the “it works” section above.

The MacArthur Myth

First off, let’s go all Harry Truman on Douglas MacArthur. One of those essential stories is that the postwar U.S.-written constitution imposed strong property rights. This isn’t just incomplete-wrong, it’s wrong-wrong.

As Tsuru (1993) carefully explains…the American draft of the article on land rights was strongly resisted by the Japanese government. The original Article 28 in MacArthur’s draft read, “The ultimate fee to the land and to all natural resources reposes in the State as the collective representative of the people.”

Wait, what? “Reposes in the state”? Did the Soviets get there first?

This approach of the MacArthur draft was eventually replaced by the following wording suggested by the Japanese side which is now Article 29 of the Japanese constitution: “The right to own or to hold property is inviolable. Property rights shall be defined by law, in conformity with the public welfare…” Tsuru (1993:27) suggests that this wording is basically identical to the old Article 27 of the Meiji constitution, and is much more conservative in its protection of the rights of landowners and its weak conception of the public interest than the initial American draft.

Sorensen, p. 156.

Inviolable!

Land Readjustment

A country with inviolable property rights wouldn’t let a two-thirds majority of landowners force the minority to give up their land for a joint development scheme, would it?

¯\_(?)_/¯

I told you it was a delicately balanced synthesis.

The basic structure of LR is that two-thirds of owners representing two-thirds of land can vote to pool a specified area of land, overriding holdouts. Public ways and land are then laid out and the remaining land is redivided among the original property owners.

Planned growth in Japan has relied on Land Readjustment (LR) to an extraordinary degree. With no need for up-front funding and landowner votes as a check on bad ideas, LR may well be superior to eminent domain or land assembly for laying out new neighborhoods.

Sorensen characterizes suburban Japan as a patchwork of planned spaces, where LR succeeded, and “sprawl”, where uncoordinated rural development preceded planning via loopholes and political meddling.

Mini-kaihatsu, here and there

One American myth of Japanese land use is that national bureaucrats keep local planners on a leash, preventing them from zoning more strictly. Where that’s correct, it’s almost accidentally so. National bureaucrats, in Sorensen’s telling, have consistently pushed for greater regulation. But when prefectures had the choice of setting a key regulatory threshold at 500 or 1,000 square meters, “only a few” took the stricter option (p. 236).

That 1,000 square meter threshold became the “mini-kaihatsu loophole”. In rural fringe areas, a development below 1,000 square meters did not need development permission.

A typical mini-kaihatsu development consists of 12 houses fronting on a narrow 4 metre lane running at right angles from an existing road.

Sorensen, p. 238

A common size for rice paddies was, “conveniently”, one tan, or 992 square meters.

Here’s a picture of a typical mini-kaihatsu:

Oops, wrong photo. That’s Houston. Here are some Japanese examples from Google:

The concept is the same, and it’s no coincidence that both arise in places with light regulation, strong demand, and little public streets funding. As I wrote about Houston:

Houstonians achieve privacy by orienting many new townhouses onto a share courtyard-driveway, sometimes gated, which creates an intermediate space between the private home and the public street…
The courtyard-driveways also provide a shared play space, as evidenced by frequent basketball hoops. Despite what Jane Jacobs may have told you, city streets are not viable play spaces for 21st-century children. But cul-de-sacs can be. Houston’s courtyard-and-grid model may be the ideal blend, unlocking the connectivity of a city while delivering the secure sociability of a cul-de-sac to a large share of homes.

Ancient alleys

Cul-de-sac alleyways played an important role in pre-modern urban Japan. Sorensen calls them “back-alley nagaya” (shacks or tenements) and notes that the “landowner would often manage and live above a shop fronting the street,” while their employees, or poor artisans lived in the rear areas accessed by a narrow covered lane.”

Other authors have put a more romantic gloss on the alleys. Jinnai Hidenobu says that “designs displayed a sensitivity to what Maki Fumihiko has called ‘hidden depth'”.

[New] groups of urban dwellers, such as factory workers and low-wage white-collar workers, also made their homes in the backstreets. At the entrance to the alley, a wooden wicket was placed, clearly demarcating the main street (public) from the backstreet (semi-public) spaces… In such backstreets, not only could landlords and tenants form a trusting relationship, but tenants themselves lived with one another on the most neighborly terms.

…In Edo, it was in such micro-spaces that a certain degree of self-government took shape; it was in these same back alleys that the foundation of stable society was laid.

Jinnai, Tokyo: A Spatial Anthropology, pp. 124-125.

Jordan Sand’s Tokyo Vernacular: Common Spaces, Local Histories, Found Objects includes a chapter on how alley exploration and appreciation helped form one neighborhood’s identity in 1980s Tokyo.

Most recently, Almazan and Studiolab’s Emergent Tokyo profiles Tsukishima, a modern neighborhood “famous for its narrow roji alleyways.”

[Roji] are often used almost as an extension of the domestic space. As in so many Tokyo neighborhoods, in Tsukishima one sees subtle transitions along the spectrum of public to private space rather than a hard division between the two.

Almazan & Studiolab, p. 172

American urbanists generally hate cul-de-sacs, which prevent connectivity. But residents, especially those with children, love them. And even New Urbanists have re-invented them, calling them “cottage courts.” The “Houston mini-kaihatsu” is a proven economic model for an urban form too universal to be dismissed.

The planner’s gaze

It isn’t just alleys that Sorensen judges more harshly than other writers do. In fact, he has a hard time finding anything good to say about Japan’s land use.

Sorensen’s virtue is his stolid Canadian insistence on presenting facts clearly and with a minimum of emotion. As a reader, one senses that Sorensen’s prejudices seep into the text against his will. (And one trembles to think what unreadable diatribes would have been produced by someone with his sensibilities but not his restraint).

A key example comes on pp. 222-223, where Sorensen nets up the effects of Japan’s zoning code, which allows very mixed uses. He has a long paragraph noting the positive effects – but the words are all in others’ mouths. He cites Jane Jacobs, Jinnai, and six others who point out “very positive consequences of Japan’s radically inclusive approach to land use zoning.” In the next two paragraphs, however, he provides the counterpoint – in his own voice, with only one citation.

It is hard not to feel that Sorensen is favorably disposed toward anything planned and skeptical, if not hostile, to anything unplanned. To Sorensen, “sprawl” denotes unplanned, “haphazard” growth (p. 326). Planned growth, at the same densities, in the same areas, is not sprawl. The same bias pervades his (otherwise excellent!) 2001 article, Building Suburbs in Japan.

He rarely defends his planner’s-eye view. He doesn’t holistically compare planned to unplanned areas and find the latter lacking. Nor does he define key metrics of urban success (e.g. pollution levels, commute times, and housing costs). Instead, he seems to have an intuitive desire to see plans made and brought to fruition, regardless of the merits.

In an era when Tokyo stands as “humanity’s greatest urban achievement,” the institutions that created it deserve a little more credit. But even if Sorensen doesn’t like them, he reports their workings faithfully – and that makes his book a must-read for Tokyophile market urbanists.

The post Book Review: The Making of Urban Japan appeared first on Market Urbanism.

They find that only two factors are significant: 1) overall rents and 2) rental vacancy rates. Where housing is scarce and rents are high, lots of people are homeless. Where rents are lower, fewer people are homeless, even in very poor places. (In fact, high city incomes correlate positively with homelessness, because more and better jobs lead to higher demand for housing).

By contrast, many other factors that one might think are related to homelessness in fact are not correlated on a citywide basis. For example, since homeless people are generally poor, one might think that places with high poverty rates or high unemployment rates have lots of homelessness. The authors show that this is not the case. Where most people are poor, there is less demand for housing, which translates into lower rents and less homelessness.

One might also think that places with warm weather have lots of homelessness, because homeless people might be attracted to them. But high-rent cold cities like Boston have above-average levels of homelessness, while cheaper warm-weather cities like Orlando and Charlotte do not. However, homeless people are more likely to have temporary shelter in cold cities than in expensive warm-weather cities like San Diego- either because city governments are less motivated to build homeless shelters when no one is at risk of freezing to death, or because the homeless themselves are less eager to use shelters. I suspect that if the authors focused only on highly visible unsheltered homelessness, they might have found a stronger correlation with weather).

It might be argued that shelters themselves (or other social services) attract the destitute. However, the authors find that “a region’s proportion of in-migrants with incomes below the federal poverty line … is entirely unrelated, statistically speaker, to per capita rates of homelessness.”

What about drug use and mental illness? The authors were unable to unearth any city-level data on the frequency of either- but state-level data do not show a strong correlation between the amount of drug use or mental illness and homelessness rates. I didn’t find this surprising, because even if half of homeless people are mentally ill and/or addicted, even some people in these categories might be functional enough that they could find cheap housing if such housing existed. (Having said that, it seems to me possible that unsheltered homeless people might be more severely impaired- so I wonder if the authors would find similar results if they focused on the number of unsheltered homeless).

The last chapter, on policy responses, mentions in passing that reducing zoning regulations might increase housing supply. However, the authors are more focused on infusing money into local governments to support lower-income housing. As a result, their treatment of land use regulation is a bit shallow; they criticize single-family zoning, but housing supply is constrained by a much wider variety of regulations. For example, even in areas zoned for multifamily housing, government limits housing supply by limiting the number of units that can be built on a parcel and requiring land to be used for parking that could otherwise be used for more housing.

The post Review: Homelessness is a Housing Problem appeared first on Market Urbanism.

I think the story about incentives is correct. But I question whether pulling development forward in time is definitionally more efficient. In a world with transaction costs, tradeoffs abound and it’s worth thinking through the implications of an LVT.

A Tale of Two Cities 

Picture a growing local economy with increasing land values and an LVT. Now suppose we split the time stream and create two parallel universes with different tax rates. In scenario A, we apply an LVT at 75%; in scenario B the LVT is set at 25%.

There are two important questions here:

1) When will a given parcel be forced into development?

2) What intensity of development will the parcel support at the moment it’s put into productive use?

To answer our first question, we look at the tax curves and make some assumptions. Suppose carrying costs push land into productive use at $250 psqft in LVT costs, scenario (a)’s parcel goes into development around year 9 at a $331 psqft. Scenario (b)’s parcel doesn’t see development until year 20 and a ~$1K psqft value.

Given the delta between year 9 and year 20’s psqft valuations, we could expect to see different intensities of development. We’re now left with the question of whether a duplex in nine years is better than a mid-rise in twenty.

Appropriating the full rental value of land would pull development forward, but that doesn’t definitionally lead to it being put to its highest and best use. Highest and best is contingent upon what time scale we’re optimizing for and that choice of time scale is an inherently normative decision.

Terms & Conditions

Now the caveats. This is a simplified thought experiment and all the numbers are completely arbitrary. I’m not making the case that there’s a specific choice between development densities at particular tax burdens. The case I am making, though, is that in a world with transaction costs an LVT would force us to make important tradeoffs.

Also, several things that exist in the real world – but not in this fictional account – complicate our story.

• Carrying costs are impacted by more than taxes. An aggressive LVT might very well become the lion’s share of carrying costs, but factors like interest rates would matter as well.
• Liquidity preferences aren’t uniform. There wouldn’t be one psqft LVT cost at which all landholders are pushed to develop parcels. Differences in access to capital and risk appetite would make for a range of values.
• Land use regulations limit options. Being limited to commercial or varying types of residential or whatever’s specified in zoning would impact potential return and likely developer behavior.
• Technology could make the tradeoff disappear. If we were able to incrementally densify a parcel without losing the value of the existing structure, there’s not really any intertemporal tradeoff. To my knowledge, this only (kinda sorta) applies to informal developments in Latin America.

All said, I remain a fan of Georgist ideas. Capturing land rents for common infrastructure – whether through an LVT or by other means – is still an idea I support. But when we think about policy prescriptions, we need to recognize their limitations and that tradeoffs always and everywhere abound.

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