What City Observatory did this week
1. Economist Paul Romer Joins the World Bank. Paul Romer, a leading exponent of the New Growth Theory has been hired as chief economist for the World Bank. We explore how his thinking about the role of knowledge-driven growth and the key role of cities in fostering institutional and technological innovation might influence the Bank’s strategies. The good news here is that Romer is one of the most plain-spoken economists around, illustrating his theories with play dough and a children’s chemistry set (Really!).
2. Housing Cost Calculators. There’s a growing array of web-based tools that let you dig into the cost components of housing construction and development to better understand why the rent is, as they say, “so damn high.” We review four different housing cost calculators, including the latest entry from the Urban Institute, plus models from UC Berkeley’s Terner Center and the Cornerstone Partnership. Our verdict: while the models are useful at illustrating some of the key variables and tradeoffs in the development process, there’s a huge amount of complexity here, and many critical assumptions built into the models are not readily apparent, especially for casual users.
3. The Party Platforms on Housing. Housing and housing affordability are top of mind for local governments, but where do they show up in the national political agenda. We take a close look at what the Republican and Democratic party platforms have to say about housing. The parties both express support for homeownership, but seemingly part company on zoning. The Republican platform lambastes the Affirmatively Furthering Fair Housing Rule as “social engineering” (an epithet which could easily be applied to most zoning). The Democratic platform makes a vague call for easing local barriers to building affordable rental housing.
4. The Triumph of the City and the Twilight of the Nerdistans. The big news in San Francisco this week is that Facebook is exploring a major expansion in the city. The center of gravity of the Bay Area’s tech sector is decidedly shifting north, propelled by the desire of tech workers to live in great urban neighborhoods–and the fierce competition by tech firms to hire these workers. The wave of corporate expansions in downtown areas, and the growing flow of venture capital to startups in city centers signals the ebbing of the suburban nerdistan model of development.
The week’s must reads
1. After a century is zoning obsolete? This past week marked the 100th anniversary of zoning in the US, dated from the adoption of New York City’s first zoning code. At BloombergView, Justin Fox notes that, as it has been applied, particularly since the 1970s, zoning has been implicated as a contributor to segregation, inequality and housing unaffordability. He looks back at the historical roots of zoning, unearths some of the archaic views on which it is based, and concludes that if its not time to kill zoning altogether, then a radical overhaul is probably in order.
2. Cities Alive: Towards a walking world. London-based ARUP architects have produced a colorful, encyclopedic guide that builds a strong case for promoting more walkable cities, along with case studies of 80 successful projects. This compendium draws from the work of Jan Gehl, Janette Sadik-Khan, Jeff Speck and others, to explain why walking is beneficial to health, communities and the economy, and to demonstrate the practical steps toward promoting walking. That said, the report is primarily about tactics and projects; it only briefly touches on how we might make strategic changes to the policies and institutions that lead to auto-dominated urban landscapes. While there’s copious detail on parklets, there’s only passing mention of pricing and economic incentives, and no reference to eliminating or reducing parking requirements.
3. More evidence for Portland’s Green Dividend. At BikePortland, Michael Andersen shows that per capita car ownership in Portland has declined, taking nearly 40,000 cars off the roads, compared to the rate of vehicle ownership in 2007. He estimates that less driving is saving Portland residents $138 million annually in vehicle operating costs, money that mostly gets re-spent in the local economy.
1. The Outlook for the Homeownership Rate. In the aftermath of the collapse of the housing bubble, homeownership has fallen to rates not seen in decades. The University of Pennsylvania’s Susan Wachter and Arthur Acelin conclude that a combination of demographics and economics likely may continue to depress homeownership rates going forward. Homeownership is down most for young adults, who will represent a growing share of the population over the next two decades. The report also points to tougher lending standards as a brake on homeownership.
2. The impact of Seattle’s minimum wage on earnings, employment and business activity. A team at the University of Washington, led by economist Jake Vigdor, has been using employment tax records to track the impacts of the City of Seattle’s minimum wage, which rose to $11 per hour for many employers. They find that since the wage increased, hourly earnings for low wage workers are up by more than $1 per hour, but much of the effect is attributable to the strong local economy, rather than the wage law. There’s been a small reduction in hours worked: the employment rate for low wage workers in Seattle declined about 1 percent. Despite fewer hours of work, average worker earnings are up. The study finds no net impact on business success: the failure or exit rate of businesses hasn’t changed appreciably, and the closure of local businesses has been more than offset by new business starts.
3. Has the Great Recession depressed the rate of productivity growth? A new paper from the National Bureau of Economic Research shows that in the face of weak demand, businesses have limited incentives to incur the up-front costs associated with developing R&D, and deploying new ideas and technology. The result is that the state of the macro-economy lowers the rate of productivity growth and decreases the total capacity of the economy–something economists call an “endogenous” effect, which is a key reason why recovery from financial crises is so slow.
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.
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