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Chapter 9 Links

1) Ed Glaeser writes at the Boston Globe on Detroit, “Sensible people don’t incur debts during their peak earning years and then expect to pay the bills when their income starts to fall. Detroit did just that. Detroit’s debt overhang doesn’t just impose overly high costs on the city’s now modest tax base. It also scares off new businesses. What firm wants to own part of that obligation?” 2) I’m on the Cato Daily Podcast talking about Detroit and municipal bankruptcy and writing about how creating a charter city could help the city’s population and economic growth challenges at The Umlaut. 3) Ilya Somin points to the role of eminent domain in slum clearance and urban renewal efforts as a key contributor to the city’s decline. 4) Cost overruns aren’t just for transit. Construction on a Wayne County jail was halted after costs went 30-percent over budget, and the county is now seeking proposals from developers to buy the seven acre site. This is a fortunate development from an urban development perspective because anything a private investor builds will be better for downtown Detroit than a prison. 5) On an uplifting note, Sandy Ikeda writes at Wabi Sabi about the role of cities in the market process: Living cites and successful markets bring intellectually and culturally diverse people together to their mutual advantage, but they also create conditions in which vast amounts of novel information—about science, technology, religion, music, the arts, and lifestyles—get dispersed very rapidly. That in turn allows all kinds of people, the ordinary and the extraordinary, to experiment and to make new connections among all that information, generating even more diversity and attracting even more people. In this way, cities become “incubators of ideas” and economic growth. The process is highly dynamic, but also very messy and, yes, in a sense inefficient. […]

Urban-Rural Political Alliances Hurt Cities

While House Republicans have stripped food stamp benefits from the farm bill to get enough votes to pass the bill’s agricultural supports,  the Supplemental Nutrition Assistance Program may be added back into the bill in conference with the Senate. The farm bill get its strength because it aligns the interests of urban Democrats and rural Republicans in Congress, facilitating log-rolling where the majority of congressmen are willing to support the bill because it directly benefits their districts. While the food stamp program has in the past made up a large portion of the bill’s costs, with these these funds flowing primarily to urban residents, urbanists should be leery of the urban-rural alliance that facilitates continued support for the farm bill. Aside from the primary cost drivers including nutrition programs and farm supports, the bill also includes measures like rural broadband and rural utilities services loans designed to subsidize living in areas where providers do not find it profitable to provide services. Unlike SNAP benefits, which are available for rural and urban residents based on income, rural infrastructure support is allocated to locations rather than individuals. Providing subsidies based on location is hugely attractive to Congress because it allows members to provide concentrated benefits directly to their constituents. However, subsidizing individuals’ choices to live in areas where building infrastructure is inefficient limits economic growth potential. Cities provide better job opportunities and are centers of innovation, so policies that subsidize rural living don’t make sense. While the farm bill is a clear example of an urban-rural alliance that facilitates these subsidies, many programs similarly subsidize infrastructure in rural areas from USPS providing flat-rate delivery to the Essential Air Service program that subsidizes service to 163 airports that would otherwise not be profitable. Because all senators represent states with rural post offices and most […]

Book Review: What Killed Downtown?

Michael Tolle’s book, What Killed Downtown? Norristown, Pennsylvania from Main Street to the Malls, details the rise and fall of Main Street in one American small town. His case study relies on interviews with many Norristown residents who lived through the growth and decline of downtown alongside detailed analysis of downtown retail statistics. Tolle paints a picture of Norristown dating back to the time of William Penn through 1975, at which point he pronounces downtown dead. The depth of history in this case study including both economic trends and urban policy dating back to the town’s Colonial origins puts the story of the city’s street grid in a historical context that is not often available in urbanist literature. Of particular interest, Tolle details the policy debates in Norristown surrounding traffic and parking dating back to the 18th century. This includes a description of Norristown’s location near the intersection on the Native American trails fanning out from Philadelphia, to the transition from turnpikes and toll bridges, to free, public roads. He explains the origins of the town’s original street grid, with 50-feet wide streets and 24-feet wide alleys and covers in detail the Borough Council’s more recent debates on parking meters and the move to making downtown streets one way. Even having never been to Norristown, I was engaged by Tolle’s descriptions of Norristown’s retail, restaurants, hotels, and personalities. In the first chapters, Tolle explains that downtown Norristown grew increasingly successful with the advent of railroads and streetcars that made it easier to travel to and within Norristown. While the growth of highways in the following decades increased the ease of automobile travel passing by Norristown, frustrations with traffic and parking on Main Street mounted. The Borough Council implemented parking meters as a step toward managing parking supply. Initially their revenue […]

Detroit’s art is not the key to its revival

Detroit’s art assets have made news as Emergency Manager Kevyn Orr is evaluating the city’s assets for a potential bankruptcy filing. Belle Isle, where Rod Lockwood recently proposed a free city-state may be on the chopping block, but according to a Detroit Free Press poll, residents are most concerned about the city auctioning pieces from the Detroit Institute of the Arts’ collection. I’ve written previously about the downsides of publicly funding art from the perspective of free speech, but the Detroit case presents a new reason why cities are not the best keepers of artistic treasures. Pittsburgh’s Post-Gazette contrasts the Detroit Institute of Art’s situation with the benefits of a museum funded with an endowment: As usual, Andrew Carnegie knew what he was doing. The steel baron turned philanthropist put the City of Pittsburgh in charge of operating the library he gave it in 1895, but when he added an art museum to the Oakland facility just one year later, he kept it out of city hands. “The city is not to maintain [the art gallery and museum],” Carnegie said in his dedication address. “These are to be regarded as wise extravagances, for which public revenues should not be given, not as necessaries. These are such gifts as a citizen may fitly bestow upon a community and endow, so that it will cost the city nothing.” Museums and other cultural amenities  are a sign of a city’s success, not drivers of success itself. The correlation between culturally interesting cities and cities with strong economic opportunities is often mistakenly interpreted to demonstrate that if cities do more to build their cultural appeal from the top down, they will encourage job growth in the process. Rather, a productive and well-educated population both demand and supply these amenities. While an art museum may increase tourism on the margin, […]

Homeownership and Financial Well-being

Adam, Stephen, and I have previously written on some of the downsides of homeownership from an urbanist perspective; owner-occupied units are biased toward being single family homes, and when owner-occupied units are condos, they carry many detrimental characteristics for redevelopment. Despite the negative outcomes of homeownership from a market urbanist perspective, the pervasive conventional wisdom remains that an owning a home is a path to financial well-being. Even including the government policies designed to improve homeownership as an investment, from the mortgage interest tax deduction, to subsidized home loans, to the capital gains tax break for homes, owning a home is still not the fool-proof investment that many people seem to believe it is. A recent Times Dispatch article reveals this commonly held belief. The reporter quotes the CEO of the Richmond Association of Realtors without noting that her profession depends on the buying and selling of owner-occupied homes: “Homeownership always trumps rental when it comes to the accumulation of equity and wealth over time,” Lafayette said. Given that interest rates remain near historic lows, a monthly mortgage payment for many households makes more sense than paying rent, she said. While it is true that paying down mortgage principal is a form of forced saving, this analysis does not take into account the opportunity cost of what else households could be doing with their home equity, such as investing it in the stock market in a tax-advantaged retirement account. For example, this New York Times rent vs. own calculator does not take into account an accurate opportunity cost of making a downpayment. In the default example, the owner pays a $34,400 downpayment, but the calculator does not take into consideration the renter’s potential return on investing $34,400 over the same time period in a tax-advantaged retirement account. While many people believe that […]

Chief Resiliency Officers Versus Antifragility

This post originally appeared at Neighborhood Effects, a Mercatus Center blog about state and local policy and economic freedom. At The Atlantic Cities, Emily Badger writes about a new program from the Rockefeller Foundation called 100 Resilient Cities, focused on equipping cities with a new employee called a Chief Resiliency Officer. The program states its goals as follows: Building resilience is about making people, communities and systems better prepared to withstand catastrophic events – both natural and manmade – and able to bounce back more quickly and emerge stronger from these shocks and stresses. [. . .] There are some core characteristics that all resilient systems share and demonstrate, both in good times and in times of stress: Spare capacity, which ensures that there is a back-up or alternative available when a vital component of a system fails. Flexibility, the ability to change, evolve, and adapt in the face of disaster. Limited or “safe” failure, which prevents failures from rippling across systems. Rapid rebound, the capacity to re-establish function and avoid long-term disruptions. Constant learning, with robust feedback loops that sense and allow new solutions as conditions change. In his book Antifragile: Things that Gain from Disorder, Nassim Taleb defines antifragile as something that not only recovers from shocks, but becomes stronger after recovery, in line with the stated objectives of 100 Resilient Cities. Following its Great Fire of 1871, Chicago demonstrated antifragility. It rebounded rapidly from a disaster that killed 300 people and left one-third of city residents homeless, many without insurance after the fire bankrupted local insurers or the blaze destroyed their paperwork. Despite this great loss, residents of Chicago quickly rebuilt their city using private funding and private charity that was small relative to the amount of damage, but without any government funding. In rebuilding, Chicago developed safer building techniques both through entrepreneurship and with new insurance requirements and  new municipal […]

Newest Offering from Fundrise Goes Live on Monday

On Monday, Fundrise will make their newest offering at 906 H Street NE in DC available to investors. Many real estate journalists have covered this innovative investment company’s crowdsourcing strategy, with Urban Turf naming Fundrise a top real estate trend of 2012. This development is the company’s second crowd-sourced project and their third property on H Street. Without special approval, publicly advertised offerings can only seek funding from accredited investors, but Fundrise has has gone through a cumbersome process through DC, Virginia, and federal securities regulators to permit any individual to invest in their newest offering with a $100 minimum investments. Because of the high regulatory hurdles standing in the way of marketing public offerings to a broad audience, Fundrise is currently the only group in the country doing so. Daniel Miller, Co-Founder of Fundrise, explained that he thinks crowdfunding has significant potential to improve incentives for focusing on the long run in development. From an urban development perspective, one benefit of crowdsourcing is that small companies do not face the same pressure to post quarterly profits that larger, publicly-traded firms do. Because real estate is a long-term investment that doesn’t always demonstrate profits on a timetable that’s attractive to Wall Street investors, crowdsourcing provides an opportunity for development financing that will not have a short-term bias. The difficulty in getting legal approval for small investors, however, demonstrates the regulatory bias in favor of large firms. Daniel said: When you’re invested in a broader portfolio like a REIT that owns 400 or 500 malls, it’s very difficult to measure success because there are only financial indicators. But if you’re invested in a single property — the tenant is open, he’s paying rent, he has good sales — it’s much easier to measure success. There’s transparency in reporting. A lot of these big companies […]

Thoughts on The Power Broker and Government Roads

I recently finished The Power Broker by Robert Caro after many months of Metro reading. I loved the book, and can’t recommend it enough. Caro provides an overview of Robert Moses’ policies here. If you don’t want to invest in reading the full 1162 pages, I would particularly recommend the chapters that explain the impacts of Robert Moses’ policies on what were cohesive neighborhoods: “Changing,” “One Mile,” and “Rumors and the Report of Rumors.” While reading The Power Broker, I was repeatedly reminded of the massive coercion involved in road building despite the commonly held belief among many advocates of limited government that road provision is one of the least offensive government practices. Oftentimes the small government tolerance of road building seems to stem from the relatively small subsidies that roads require. Randal O’Toole has often demonstrated that automobile travel is cheaper per passenger mile than mass transit and that the bulk of these costs are born by drivers. While he advocates moving to a vehicle mile tax that would more closely tie road costs to their users and allow for the devolution of transit funding, he does not challenge that road building is a legitimate state and local government function. However, as Stephen, Adam and others have previously pointed out, these accounting costs of road building don’t take into consideration the opportunity cost of the land dedicated to roads, which in areas with high real estate prices is considerable. Moses notoriously bulldozed valuable developments for highways and while he made operating profits on tolls, he put land to lower value use in the process. For example, Moses used eminent domain and government funds to transform what was once a privately operated elevated rail system into an elevated highway on Brooklyn’s Third Avenue, destroying property values and a neighborhood in the process. We have no way of […]

NYC Market Urbanism Meetup Sunday, April 21

Anthony Ling of Rendering Freedom fame will be visiting New York from Brazil this weekend.  We’ve planned a meetup in Williamsburg Brooklyn at 5:30 pm this Sunday, April 21.  (venue to be determined)  Come meet Anthony and some of the Market Urbanism crew.  All are welcome. Hope to see you Sunday, Adam Update:  Per Stephen, we’ll meet “outside of Crif Dogs at Driggs & North 7th…it’s a specialty hotdog place (very Williamsburg).:

Ranking State Land Use Regulations

Yesterday, the Mercatus Center released the third edition of Freedom in the 50 States by Will Ruger and Jason Sorens. The authors break down state freedom among regulatory, fiscal, and personal categories. At the study’s website, readers can re-rank the states based on the aspects of freedom that they think are most important, including some variables related to land use and housing. The available variables include local rent control, regulatory takings restrictions, the Wharton Residential Land Use Regulatory Index, and an eminent domain index. Using only these “Property Rights Protection” variables, Kansas ranks as the freest state, followed by Louisiana, Indiana, Missouri, and South Dakota. Texas, sometimes cited as the state without zoning, comes in at 18th. The least free state is New Jersey, with Maryland at 49th, followed by California, New York, and Hawaii. This result — states with some of the most expensive cities being the most regulated — is unsurprising. In the places with the freest land use regulations, where a developer would be able to build walkable, mixed-use neighborhoods without going through a burdensome entitlement process, there isn’t demand for dense development. This may be one reason why the Piscataquis Village project, an effort to build a traditional city, is happening in a sparsely populated Maine county because new development of this sort is simply not permitted near any population centers. As Stephen recently pointed out, public opinion in New York tends to see city policies as wildly pro-development: In spite of the popular impression of New York as a builder-friendly city that’s constantly exceeding the bounds of rational development, the city’s growth over the past half-century has been anemic, and has not kept pace with the natural growth in population. This ranking of New York near the bottom of the index demonstrates what urban economists already know — new development […]

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