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.

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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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Creating Demand for Density

Belong is an early stage startup making it easier for homeowners to rent out their single family home. The main use case is that of a homeowner renting (instead of selling) after a move.

A lot goes into becoming a landlord and Belong’s elevator pitch is that they simplify the process. The company’s customers access insurance, connect to contractors for repair and renovation, get help with listing, and find anything else they need all in one place.

To the extent they’re successful, they’ll be creating a class of small scale landlords with every reason to develop missing middle housing. Transforming the family home from a speculative asset to one producing a monthly stream of revenue makes ADUs and duplexes more attractive. More units mean more tenants and therefore better monthly returns. And once an owner is no longer an owner-occupier, “neighborhood character” concerns become less salient as well.

That said, this is admittedly speculative. Whether single property landlords will be as YIMBY as I suspect is an empirical question for the future. More immediate, though, are the incentives another new startup is creating for homeowners across California.

Densification as the Path to Homeownership

Homestead is a property developer that’s using legislation like California’s SB9 and SB10 to build housing. They work with homeowners interested in the upside of doing a lot split and adding housing like a duplex or an ADU. They also market to prospective homebuyers. California home prices being that they are (obscene), doing a lot split to offset the initial purchase cost is attractive.

While Homestead is a developer, a lot of what they do is reduce cognitive overhead. California permitting processes are byzantine at best and while reforms like SB9 and SB10 have made them better, it’s still like playing snakes and ladders. Making it easier for people to take advantage of hard fought legislative victories is great. Showing a new generation of homeowners that density can be good may be even better.

Short Circuiting NIMBYism

No startup is going to unilaterally fix the housing crisis. That was always going to take major legal, regulatory, and political reform. Still, companies like Homestead and Belong could help shift homeowner attitudes in favor of density. Giving homeowners the personal financial incentive to develop missing middle housing in low density residential neighborhoods would be great for increasing supply. It would also help normalize densification, clearing the way for further development and greater reforms.

Convincing people to support housing on policy grounds is good and necessary. But not everyone spends their Friday night reading Vox explainers. For normal folks who neither know nor care what housing twitter is, creating opportunities to benefit from a pro-supply housing regime will matter. And although we all understand supply elastic housing markets will make society better off on the whole, anything that makes that upside more immediate and tangible for folks just living their lives is only going to help.

The post Entrepreneurs and the Changing Political Economy of Housing appeared first on Market Urbanism.

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I suspect not, for a variety of reasons. First of all, Census Department estimates have, in recent years, tended to underestimate urban populations, at least in some cities. For example, in 2019 the Census estimated Manhattan’s population as 1.628 million, while the actual count of 2020 showed 1.694 million residents- an underestimation of over 65,000 people. The Census estimated Brooklyn’s population at 2.559 million, but the actual count showed 2.736 million- an underestimate of over 150,000. (On the other hand, the 2020 population count was actually a bit lower than the 2019 estimates for Washington and San Francisco).

Second, even the 2020 Census probably undercounted cities more than it undercounted suburbs. How do we know this? Because according to the Census Bureau itself, it undercounted Blacks by 3 percent and Hispanics by 5 percent, while slightly overcounting whites. These groups tend to be more urban than suburban (at least compared to whites) – so if the Census undercounted these groups, it probably undercounted urban population generally.

Third, the timing of the Census Bureau’s estimates does not quite make sense to me. By July 2021, rents had already began to rise in Manhattan; the low rents of February and March were already disappearing. This suggests that by July, population (and thus demand) was increasing.

Fourth, even if the Census Bureau’s population estimates were valid for the summer of 2021, they certainly aren’t valid any more. How do we know? It seems pretty obvious that in New York City, rents have skyrocketed to pre-COVID levels and beyond. According to streeteasy.com, rents in New York City bottomed out in January 2021, reached pre-COVID levels in December 2021, and have continued to rise. If rent is rising, it seems likely that demand is rising as well.

The post Reasons to be a Census skeptic appeared first on Market Urbanism.

The relationship between blacks and whites in the residential subdivisions out beyond the suburban ring suggests that middle-class people of both races recognize each other as equals. Among middleclass Americans, at least in the special circumstances of these Pennsylvania communities and others like them around the country, the terrible burden of race has been lightened greatly.

We know there are large and persistent gaps between the principal racial and ethnic groups in the U.S. Those gaps feel especially stark to people who live in gentrifying neighborhoods, which punch above their weight in national discourse.

But are there diverse places in the U.S. where racial differences among residents are small enough to be undetectable to a typical resident? Places where Roger Starr’s ideal of “integration without tears” might be a reality, where people of different races socialize as equals, share culture and priorities, and work in the same range of occupations?

I don’t have enough data to drill down to neighborhoods. But the American Community Survey allows a comparison of Public Use Microdata Area (PUMAs). Here are the national results:

I investigate white, Black, and Latino heads of households (HH) in PUMAs in which at least 20% of HH are white and at least 25% are Black or Latino. I measure inequality as the sum of log differences between whites and nonwhites across several dimensions:

• Income at the 25th and 75th percentiles, for HH age 30-65
• High school-or-less education, for HH age 30-55
• Homeownership share, for HH age 40-70
• Home value, for all homeowning HH
• Median age, for all HH

These were intuitive choices to me, and the age cutoffs are intended to avoid compositional effects driven by age differences. The final dimension, age, differs much less than the others across racial groups.

At 100,000 people or more, most PUMAs are big enough to contain several towns and many neighborhoods, some of which might be quite diverse and others monochromatic. But the results can at least tell us where we might be likely to find diverse-and-equal neighborhoods. The rest of this post zooms in on a few regions.

Atlanta

There’s only one PUMA in the nation that qualified as fully “equal” according to my rubric, the area around Stockbridge, Georgia, in the southern Atlanta exurbs. There are some differences among the races here, but they cancel each out. Whites have higher incomes and homeownership rates than nonwhites, but lower educational attainment and home values.

Because Atlanta has a large Black population, it has many diverse PUMAs, including 3 (out of 15 nationwide) that I rated as “nearly equal”. Atlanta shows the pattern I expected to find in many metros: highly unequal centers, relatively equal exurbs.

Texas Triangle

Texas cities are similar to Atlanta in some ways – diverse Sunbelt cities with rapid exurban growth. But in Texas, Latinos are the principal minority. And the central-exurban pattern breaks down. The “extremely unequal” sections of Houston and Dallas are not downtown; they’re the elite neighborhoods stretching west and north of downtown, respectively for quite a distance. Unlike in Atlanta and most other U.S. cities, though, those elite neighborhoods allow plenty of cheap multifamily housing at their edges. As a result, they have large enough nonwhite populations to get onto the map. What shows up as a concentration of extreme inequality could be reframed as extreme diversity.

San Antonio is quite unlike Dallas and Houston. It has a wide swath of nearly-equal northern suburbs. A potential reason is that white San Antonians are less affluent. The Houston-San Antonio median income difference is $16,000 for whites but only $2,000 for Latinos.

The great white North

This analytical approach also highlights how little diversity exists in northern cities, relative to national averages. Another map, showing white population share, can be a useful reference. But in cities from Boston to Seattle, this exercise is not very useful. Instead, it’s a reminder that “diversity” is contextual.

Bringing it home

This exercise was partly inspired by my children’s rarified experience of race in America. Their playmates, at church and our homeschool co-op, are racially diverse but appear relatively equal in other regards. So I was chagrined to learn that our home PUMA is 26th highest for inequality among the 803 diverse PUMAs.

The District of Columbia is even more extreme, and it shows the age inversion common to affluent urban cores. In most PUMAs, white HH are slightly older than Black and Latino HH, but the difference is small. In central D.C., Baltimore, and similar cities, the pattern is inverted: white HH are substantially younger (median age 38) than their Black neighbors (57) in the Northeast DC PUMA.

Integration without tears?

Since diversity and equality have strongly positive connotations, it would be easy to identify the green areas on the map as “good” and the brown areas as “bad.” But the kind of equality profiled here implies a lack of diversity across non-racial dimensions.

Reducing national inequality implies lifting people up; reducing local inequality implies keeping them out. I began this article with a Roger Starr quote. It’s worth noting that his praise of woodsy Monroe County, Pennsylvania, came in the context of his increasing pessimism about integration in urban neighborhoods.

Whatever Starr’s other faults, he knew what he was looking at. In this exercise, I found that his Monroe County has the greatest similarity between races of any PUMA in the country.

The post Are there places in America with diversity *and* equality? appeared first on Market Urbanism.

It seems to me that this argument has some weak links. The most obvious is that it is not clear that the correlation he points out really exists. Admittedly, northern and midwestern states have fewer HOAs than the rest of the nation. In the Northeast, only 29 percent of new homes are part of HOAs, as opposed to 47 percent in the Midwest, and 2/3 in the South.

But not all southern and western states are the same- and if we go state-by-state, the correlation between HOAs and strict zoning starts to disappear. In particular, California metros are notorious for strict land use regulation and high housing costs. But 64.9% of California homeowners belong to an HOA, well above the national average. In fact, only three states (Vermont, DC and Florida) have higher HOA participation rates than California.

On the other hand, Texas metros tend to be less restrictive, but only 1/3 of Texas homeowners belong to a HOA. Similarly, only 15 percent of Tenneseee homeowners belong to an HOA. So its not quite clear that metros with lower housing costs and/or less zoning have higher HOA participation rates. ( On the other hand, this data would be more useful if we were able to a) distinguish between new subdivisions and the rest of the housing market, b) distinguish between HOA participation rates for owners of houses and of condos, and c) get metro-by-metro data).

But let’s assume for the sake of argument these percentages were reversed: that high-growth, low-regulation Sun Belt metros consistently had higher HOA participation rates than more restrictive metros like those of coastal California. Would this mean that homeowners preferred HOAs as a substitute for weak zoning? Not necessarily, for two reasons.

First, it might be the case that in states with lots of unused suburban land, there are more big new subdivisions, and that developers may have more of an incentive to create HOAs in such subdivisions. (By contrast, I’m not sure a builder would have much incentive to create restrictive HOA rules for a subdivision of five or ten homes, since any positive effect of these rules might be canceled out by whatever happens a block or two away). Thus, the HOAs would be a result of the new housing rather than a result of zoning policies.

Second, HOAs aren’t necessarily a result of pure consumer preference. Municipalities, especially in low-tax states, may have an incentive to favor HOA subdivisions because HOAs might pay some expenses that, in older neighborhoods, are paid for out of tax revenues (e.g. street design).

A final note: even if HOAs a) did increase housing prices in low-regulation metros and b) were more widespread in those metros than in high-regulation metros, the lower hosing costs in the low-regulation metros suggest that HOAs are not as harmful as zoning.

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