What City Observatory did this week

1. More evidence on the “Dow of cities.” We’ve argued before that evidence of shifting demand for urban real estate can be read as a sort of “stock” in cities—and that cities’ stock has been rising. A new report from Zillow underscores this trend. It finds that for the first time, the average urban home is worth more than the average suburban home—a major reversal of decades’ worth of demand for more suburban living. On a square foot basis, urban homes have been ahead for some time, and now enjoy a 25 percent price premium compared to suburban homes, and the gap is widening.

2. Why the first-time homebuyer is an endangered species. The percentage of all homebuyers who are purchasing their first home is at a historic low—30 percent. We look at a number of economic and demographic factors that are behind this trend, including lower incomes, more debt, and higher home prices. While homeownership isn’t going away, it is experiencing “gerontrification,” as a larger and larger percentage of homeowners are in late middle age or older.

3. Report: Market-rate housing construction is a weapon against displacement. For years, a large body of research has shown that regions that build more housing have lower home prices. But now, a report from the California Legislative Analyst’s Office has directly linked market-rate housing construction with lower rates of displacement. The study, which looks at neighborhoods in the San Francisco Bay Area, finds that those with “high” levels of housing construction had a 26 percent chance of experiencing displacement, while those with “low” levels of construction had a 46 percent chance. Importantly, inclusionary zoning policies played little if any role in reducing displacement—the effect was nearly the same in areas without such policies.

4. Inclusionary zoning has a scale problem. While much of the debate over local policies to promote affordable housing has focused on inclusionary zoning—the practice of requiring market-rate developers to sell or rent some proportion of their units at below-market prices—a look at the record of such policies in addressing major affordable housing shortages suggests that they are working at simply too small a scale to be really effective. This isn’t a matter of tweaking existing laws, but a basic shortcoming in the approach. The most successful IZ policy in the country, in Montgomery County, MD, has produced 14,000 units in nearly 40 years, a quantity only possible because it has nearly doubled in population over the same period—and even then, by its own count, at least 78,000 households remain burdened by housing costs. More ambitious approaches to solving our affordability problems are needed.

The week’s must reads

1. In Texas, state legislators have effectively given themselves the power to single-handedly veto affordable housing projects in their districts. A feature by the Texas Observer examines how this system ends up segregating low-income housing into already low-income neighborhoods, exacerbating economic and racial segregation, and limiting low income Texans’ access to jobs and high-quality public resources. Although the focus is on state policy, the practice of giving vetos to individual state legislators, and its exclusionary consequences, reflects what we know about giving power over development only to local decision-makers.

2. President Obama has released his ambitious, $98 billion 2017 Department of Transportation budget proposal. At CityLab, Eric Jaffe covers many of its ambitious provisions: a doubling of public transit funding, to nearly $20 billion; more than doubling funding for the popular TIGER grant program; and $7 billion for high-speed rail. Beyond dollar figures, the budget would empower metropolitan planning organizations by passing funds directly to them, rather than through more highway-favorable state DOTs. It would also add a $10 a barrel tax on oil, raising revenue and pricing in some of the social costs of that polluting energy source. Oh yeah: and it’s all dead on arrival at the Republican-controlled Congress. But for an argument that it matters anyway, check out Robert Puentes and Joseph Kane at Brookings.

3. For decades, official policy in most US cities has been to dedicate large parts of the public way for private car storage, an effective subsidy to drivers and blow to other uses, both transportation-related as well as social, commercial, or artistic. Justin Fox of Bloomberg View takes a look at a rising backlash to that practice, with urban leaders taking a page from Donald Shoup’s groundbreaking The High Price of Free Parking and charging car owners for their use of valuable public land. He also notes the decline of another kind of automobile land use subsidy: the practice of requiring new buildings to include off-street parking spaces.

New knowledge

1. According to a new report from the Center for Budget and Policy Priorities,many state job creation programs are misguided. While many such policies are targeted at luring firms from other states, or lowering corporate taxes across the board, CBPP argues that more than 80 percent of job growth is actually driven by companies already within a state, and by startups and other small companies with little taxable income. In fact, while startups created nearly 3 million jobs per year from 1990 to 2009, businesses older than a year shed as many jobs as they created.

2. Research suggests that diversity and immigration can increase innovation and entrepreneurship. But a new study from Abigail Cooke of the University of Buffalo and Thomas Kemeny of the University of Southampton suggests that those benefits depend on “inclusive” institutions (like voluntary business and civic organizations, “third places,” and pro-immigrant ordinances) that help connect immigrants to the economy. In some cases, cities with fewer inclusive institutions see no statistically significant benefits from immigrant diversity, even as other cities with such institutions see strong economic benefits.

3. Housing Choice Vouchers (aka Section 8) provide low-income renters with a wider set of housing and neighborhood choice than conventional public housing—a feature that earns praise from affordable housing advocates (and from us at City Observatory). At The American Prospect, Jake Blumgart examines some of the barriers voucher holders still face in the Philadelphia region, and finds that they are numerous: from outright discrimination to a lack of guidance for voucher holders unfamiliar with many parts of the region. As a result, less than four percent of all vouchers were used in neighborhoods of “maximum opportunity,” and the program has done much less to mitigate patterns of segregation than many had hoped.

The Week Observed is City Observatory’s weekly newsletter. Every Friday, we give you a quick review of the most important articles, blog posts, and scholarly research on American cities.

Our goal is to help you keep up with—and participate in—the ongoing debate about how to create prosperous, equitable, and livable cities, without having to wade through the hundreds of thousands of words produced on the subject every week by yourself.

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