The difficulty of applying inequality measurements to cities

Earlier this year, our friends at the Brookings Institution released a new tabulation of Census data on levels of inequality in the nation’s largest cities. Inequality, in this case, is measured by dividing the income of a household at the 95th percentile of the population by the income of a household at the 20th percentile. The higher the ratio, the greater the degree of income inequality.

The post has generated a lot of interest in the urban policy world: Some cities, it appears, have a lot more inequality than others.

But a closer look at this data suggest that it paints a misleading picture of the nature of inequality, and some important respects, gets the role of cities in fighting inequality—and, importantly, in reducing concentrated poverty—exactly backwards.

Inequality is a big, national problem

First let’s stipulate a central point: inequality is a big and growing problem in the United States. By virtually any measure, income inequality is as high as it’s been at any time since 1929—the high water mark following the last Gilded Age. The chief aspect of the growth of inequality has been the prodigious gains realized by the top one percent, and among their number, the top tenth, and even one hundredth of one percent. We should further stipulate that Brookings has accurately reported the data that have been tabulated by the Census Bureau. There’s nothing wrong with the math here.


But does computing an income disparity ratio for every city in the United States add anything to our understanding of the extent, geography, or underlying causes of inequality? Is our national inequality problem merely the sum of a vast series of local inequality problems? If a city has a large number of people at the high end and at the low end of the income distribution, does that mean that the city is contributing to the nation’s inequality problem?

In some respects, these data lead us to exactly the wrong conclusions about the nature and geography of inequality. They mute what is the true geographic aspect of inequality: income segregation.

Cities don’t cause poverty

As Ed Glaeser has pointed out, poor people concentrate in cities precisely because they have good transit systems and plenty of jobs. Even if their current income is lower (not necessarily in absolute terms, but relative to the rich people who skew the income distribution) than in smaller places, the lower cost of transportation coupled with job opportunities means that they have a better chance to improve their economic condition over time:

It is critical to recognize that cities rarely make people poor. Rather, cities attract poor people, with economic opportunity, a better social safety net, and the ability to get around, usually without owning cars.

But concentrated poverty does create real problems. Most recently, the major studies released by Raj Chetty and his colleagues have shown how poor neighborhoods reduce the likelihood of economic mobility for their residents. Our own work, including Lost in Place, has shown how durable these neighborhoods can be.

A major contributor to this kind of economic segregation is driven by the secession of the rich. The latest research from Stanford’s Sean Reardon and his colleagues shows income segregation is being driven by the decisions of higher-income families to increasingly isolate themselves in higher-income enclaves, often in exclusive suburbs and established high-income areas.

National inequality is not the sum of local inequality

Moreover, the commonly-cited reasons for growing income inequality have little to do with local policies: Falling value of the minimum wage, R>G, falling effective tax rates on the highest income households, skill-biased technological change, superstar payment, crony-compensation setting, financialization of the economy. Aside from subsidies for sports franchises owned by billionaires, and restrictive zoning that tends to drive up housing prices, there’s precious little cities have to do with generating income inequality per se.

What cities do influence, however, is who lives within their boundaries.

The way this measure is constructed, however, describes places where people have very similar incomes as having lower rates of inequality: if everyone in your community is very low income (i.e., Gary, Indiana), you have income equality. Likewise, if everyone in your community is very high income (i.e., Beverly Hills) you have income equality. The cities in the United States with the highest levels of income equality are exclusive, high income enclaves, and cities of unrelenting poverty.

But if your community contains a mix of high income and low income people, your community will be scored by the 95/20 ratio as having a high level of income inequality. Another word for this might be “diverse and inclusive.”

Are localized inequality statistics a good guide to policy?

From a policy standpoint, the question ultimately has to be whether the measured inequality in cities is susceptible to any meaningful policy solution at the city level. Here it’s helpful to remember that one can attack income inequality at either end of the economic spectrum. City policies that raise the incomes and wages of lower income households (or which lower their cost of living) could clearly ameliorate at least some of the inequality in a city. But it’s a dubious proposition to suggest that cities can (or should) look to address income inequality by reducing the incomes of the well-off. The primary problem is practical: the rich are generally under no obligation to live in a given community, and so easily have the option of simply moving away if faced with effective re-distribution.

The irony here is that policies that encourage the rich to leave your city (or to not live there in the first place) invariably reduce measured inequality. It’s worth noting that Detroit has one of the lowest levels of measured inequality of any large city in the United States.

The lesson here is that for cities, a focus on inequality, while distinctly in rhythm with a serious and growing national malaise, is poor guide to municipal policy. On the other hand, cities ought to have a laser like focus on poverty, especially concentrated poverty.

Is there are “right” geography for localized inequality measures?

In our view, cities are plainly the wrong geography for thinking about inequality. Municipal boundaries of the nation’s largest cities are widely variable; sometimes they cover a majority of a metropolitan area (Jacksonville, San Antonio) and in other cases they are barely 10 percent or more (Atlanta, Miami). Comparing different sized fragments of metro areas can lead to misleading conclusions.

So while Atlanta has the highest 95/20 ratio of any US city, the Atlanta metropolitan area has a level of inequality that is actually below the national average. Atlanta’s high score is influenced by the fact that its municipal boundaries include only about eight percent of the metropolitan area population, and has a bigger share of both high-income and low-income households than the metropolitan area as a whole.

But more fundamentally, the problem is not simply the choice of the optimal geographic units for analysis.

Even at the metropolitan level, the policy implication of the variations in equality is that one ought to have a very, very expensive metro housing market. The metropolitan areas with the most expensive housing in the country (San Jose, Washington, Boston, San Francisco) have some of the lowest levels of inequality. Why? Because poor people can’t afford to live there. At the metro level—as at the municipal level—one way to improve one’s measured equality is simply to exclude the poor. If anything, when measured at the local level, income equality is an indication of income segregation.

And that’s bad on both ends. Having more high income people in your city may increase measured inequality, but it doesn’t make the poor people who live in your city poorer. In fact, at the extremes, having some higher-income people is important to having a tax base that can support the kinds of services that low-income residents rely on. As Alan Berube has acknowledged: “Detroit does not have an income inequality problem—it has a poverty problem. It’s hard to imagine that the city will do better over time without more high-income individuals.”

On the other end, when the rich secede to their own gated suburbs and cities, whether Grosse Pointe or, increasingly, San Francisco, they’re creating relatively “equal” municipalities—but the low-income people left behind are hardly benefiting.

Local inequality measures may be a classic case of “drunk under the streetlight”—we’re looking at the problem because the light shed by the data is good, but it turns out that its not where the problem, and more importantly, the solution can be found.

The Week Observed: July 31, 2015

What City Observatory did this week

1. Our old planning rules of thumb are “all thumbs.” Joe Cortright argues that many of the heuristics that have guided urban planning for decades, such as “wider streets are safer streets,” and “faster traffic flow is always better,” have long outlived their usefulness. We offer five of these outdated rules of thumb, and four new ones in their places, including “closer is better” and “slower is safer.”

2. How cutting back on driving helps the economy. While earlier predictions saw oil consumption climbing throughout the early 21st century, it turns out that oil use has flatlines, even as population continues to climb. What’s going on? Joe Cortright shows that less driving, more than any other factor, is leading to the difference. In addition to having positive benefits for the environment and urban safety, it’s also helping to balance out our macro-economy.

3. The difficulty of applying inequality measurements to cities. The Brookings Institution is perhaps the most high-profile of several outlets to try to discuss income inequality at the local level. But is that the right way of looking at it? Joe Cortright points out that measuring income inequality at the city or even metropolitan level rewards cities that have managed to push out the poor through a lack of services or high housing prices. On the flip side, if a city like Detroit adds some well-needed middle- and upper-income residents to help support its tax base, its inequality will appear to worsen.

The week’s must reads

1. One step back, one step forward: The Urbanist reports that Seattle’s Mayor Ed Murray has walked back some of the more aggressive proposals for zoning reform produced by his own affordable housing task force, including allowing duplexes in single-family zones. The other sixty-plus recommendations may still go forward. Meanwhile, Chicago is moving forward with its own proposal to eliminate parking requirements up to half a mile from rapid transit stations, and give extra density bonuses for affordable housing. The Metropolitan Planning Council has put together an interactive display to show the proposed ordinance’s effects.

2. Lawrence Schall, the president of Oglethorpe College in Atlanta, spent some time as an Uber drive to understand the new “sharing economy.” One of his major discoveries: most of his fares weren’t young professionals taking a ride back from a bar – they were often lower-income people taking routine trips that in another city might have been served by transit. Many of his riders, in fact, were going to or from MARTA stations – spending an extra $5 on his fare in addition to the $2.50 transit cost. Several even used Uber to commute. Schall’s experience hits home how stranded many Atlantans are without transit – and that Uber, though it can fill some gaps, isn’t as affordable or reliable for routine trips as a good public transit system.

3. Announced plans for a vastly improved LaGuardia Airport in New York City have met with major pushback from transit advocates, reports CityLab. In particular, groups like the Riders Alliance object that the new plans prioritize access to the airport by car, rather than transit — and that characterizations of LaGuardia as “third world” are inappropriate given the much more dire conditions in much of the New York subway and bus service.

New knowledge

1. New research on how cities dispose of vacant properties reveals a clear tradeoff: while auctions allow municipalities to make some financial gain quickly, often within 24 hours of sale, there are downsides. Because of the more difficult conditions for buyers — a lack of time to inspect the properties, for example — the land often ends up in the hands of flippers who aren’t interested in making investments. Managed sales, on the other hand, allow both planning staff and buyers more time to understand the deal, encouraging new owners who are interested in long-term investments. The study, by Margaret Dewar of the University of Michigan, found that properties sold via managed sale were in much better condition afterwards than properties sold via auction.

2. A study from UC-Berkeley’s Transportation Sustainability Research Center shows that about 40% of ZipCar customers either sell their car or don’t make a car purchase they would have otherwise. That suggests that carsharing services like ZipCar or Enterprise CarShare could have dramatic effects on overall car ownership patterns in neighborhoods where they’re heavily used, reducing parking needs and encouraging other kinds of transportation. The same study finds that 41% of ZipCar customers take transit more than they did before and 22% bike more.

3. Comparing cities in five countries, a paper from the OECD looks at what characteristics might help drive urban productivity. Among those: larger populations, as well as larger populations of nearby cities. On the flip side, cities with more governmentally fragmented metropolitan areas — that is, more sub-regional units of government — are generally less productive.

Note: Last week, we wrote that a study found that “project-based affordable housing does not improve ‘neighborhood quality’ for residents, compared to voucher-based housing subsidies.” That was a misleading description — both Housing Choice Vouchers and LIHTC projects performed better at locating recipients in high-quality neighborhoods than traditional public housing, but neither HCV nor LIHTC consistently outperformed the other.

Our old planning rules of thumb are “all thumbs”

We all know and use rules of thumb. They’re handy for simplifying otherwise difficult problems and quickly making reasonably prudent decisions. We know that we should measure twice and cut once, that a stitch in time saves nine, and that we should allow a little extra following distance when the roads are slick.

What purport to be “standards” in the worlds of transportation and land use are in many cases just elaborate rules of thumb. And while they might have made sense in some limited or original context, the cumulative effect of these rules is that we have a transportation system which is by regulation, practice, and received wisdom, “all thumbs.”

How we feel about bad rules of thumb. Get it? Credit: Jesper Ronn-Jensen, Flickr.
How we feel about bad rules of thumb. Get it? Credit: Jesper Ronn-Jensen, Flickr.


One of the problems with rules of thumb (or the more academic term, “heuristics”) is that while they may work well in many cases, they may work very poorly in others – and they may be subject to important cognitive biases that lead us to make bad decisions.

Here are five rules of thumb that have led to a distorted view of our transportation problems and their appropriate solutions.

Old rule of thumb #1: We should have a high “level of service” on our streets. Around the country, traffic engineers have long assigned one of six letter grades A through F to describe traffic flow on streets. (A is free-flowing traffic, F is highly congested.) Many planning decisions emphasize the need to maintain high levels of service, which means that roads are designed to be much bigger (and more expensive) than they need to be most of the time. And level of service only measures car travel time on a particular road, ignoring non-car travelers, and – importantly – the effect of more roads on sprawl and overall trip lengths. These flaws have lead California to eliminate level of service as a factor in environmental analyses of traffic impacts.

Old rule of thumb #2: Wider streets are safer streets. It’s long been an engineering axiom that wider roads are safer, because they give cars and others more space to avoid collisions. But the behavioral effects of wider roads overwhelm the supposed safety advantages. Wider lanes encourage vehicles to drive faster, and higher speeds produce deadlier consequences—especially for cyclists and pedestrians. New research shows that the optimal lane width for minimizing crashes and injuries is something like 10 or 11 feet, not the 12-14 feet of many travel lanes in streets around the country.

The wider the lanes, the easier it is to speed. Credit: Pier-Luc Bergeron, Flickr.
The wider the lanes, the easier it is to speed. Credit: Pier-Luc Bergeron, Flickr.


Old rule of thumb #3: We should require “enough” off-street parking for every use. As Donald Shoup has shown, parking requirements spelled out in zoning codes—often based on formidably inaccurate estimates prepared by the ITE (Institute of Traffic Engineers) lead to a situation where every business’s parking lot is sized for the peak hour of the peak day of the year (holiday shopping season at the Mall, example). Not only does this produce more parking than is needed the rest of the year, it turns out that parking “requirements” grossly overstate demand even in peak periods, and especially for urban uses where more people arrive by other means, and park for shorter periods of time. The product of this rule of thumb is that parking is over-supplied, destinations are further apart than they would otherwise be, and walking, transit and cycling are non –functional.

Old rule of thumb #4: We should plan for a certain number of car trips to be generated by every land use, no matter where it is. Another rule of thumb for planning is that every land use “creates” or generates a certain number of trips. But it isn’t necessarily so: the studies used to make these esimates are drawn from large-scale suburban development where proportionately more trips are by auto. A careful analysis of the data shows that trip generation estimates for most uses are overstated by a factor of 2, leading local governments to require even more transportation capacity than is needed—driving up development costs, and inducing additional travel.

Old rule of thumb #5: We should have a hierarchy of streets. The street hierarchy makes an explicit analogy to the human circulatory system. Just as we have an increasingly fine array of arteries, veins and capillaries, so too does the transportation system have freeways, arterials, collectors and local streets. And we’ve abandoned the traditional street grid for a dendritic pattern. It turns out that these hierarchical street systems are less resilient to disruption and have less capacity than the old-fashioned grids they replace, and are especially hostile to non-automotive modes of travel (pedestrians and bikes are forced to take circuitous routes and are hard to accommodate at the intersections of major arterials that have limited “green” time to accommodate cross=traffic and turning movements. The hierarchal system of “arterials, collectors, and local roads that we’ve adopted in place of the traditional street grid has had the effect of making the average trip between any two points longer. Over the past two decades the “circuity” of trips has increased by 3.7 percent in the nation’s 50 largest metropolitan areas. This increase is on top of the increase in trip distance due to sprawl and decentralization.


Our “all thumbs” approach to transportation planning leads to a specific pattern of development that is as inefficient for cars as it is hostile for persons traveling on foot, via bicycle and on transit.

What is needed are a new set of rules of thumb. Like all heuristics, this isn’t meant to be taken as a final set of “standards” to fit every situation – but there are some emerging ideas about what we might emphasize.

New rule of thumb #1: Closer is better. Having more different destinations close at hand facilitates a wide range of mode choices, especially walking and cycling. Mixing uses, which is often anathema under traditional zoning codes turns out to be desirable for consumers and expeditious for transportation.

New rule of thumb #2: Slower is safer. When cars and people on foot and on bikes interact, safety comes from slow speeds even more than separation. Local streets that move traffic slowly are friendlier—and safer—for non-auto modes of transportation.

Source: NYC DOT, Flickr.


New rule of thumb #3: Sharing is efficient. Rather than require every use to provide parking for the peak hour of the year, arranging uses so people can park once, and walk mostly leads to less traffic, greater safety and more congenial, fine-grained development patterns.

New rule of thumb #4: Our objective should be accessibility, not mobility. Many transportation heuristics emphasize speed: how do we make things move faster. But what we really care about is getting to (or being at) our destinations, not rapidly traveling among them. Speed should be secondary to choice.

Of course, these new “rules of thumb” are just a beginning. There’s a lot of work to be done to un-learn and re-think the unfortunate heuristics we’ve employed in thinking about transportation planning and land use. But as these examples illustrate, re-thinking these issues isn’t a purely technical matter: it depends critically on re-imagining the way we visualize and tell stories about how our transportation system works.

Measuring housing affordability: What about homeowners?

Over the past two posts, we’ve argued that the most common measure of housing affordability – whether someone is paying more than 30% of their income – has a lot of serious problems. For one, housing costs are only one facet of overall location costs: if you move from the city to the suburbs for cheaper housing but end up having to buy a car, you might not be saving any money at all. On top of that, the 30% metric ends up telling us that lots of wealthy people who choose to spend lots of money on luxury housing are “burdened,” while a lower-income person who spends less than 30% of their money on housing but still doesn’t have enough left over for other necessities is not.

We also suggested that a “capabilities-based” approach to housing affordability – one that’s focused on whether the price of a given location allows people to have access to the basic building blocks of modern American life – might end up with something very much like the “residual income” approach advocated by Michael Stone of Boston University. With that measure, you subtract the location-based costs a household pays from their total income, and compare what’s left over – the “residual” – to what they need to spend on other necessities like food, clothes, and telecommunications.

Both of those posts focused mainly on renters. In this post, we’ll look at owner-occupied homes – where the situation is even more complicated.

Why is trying to grasp what “affordability” means to someone who owns their own home complicated? Probably the biggest issue is that unlike rent, your mortgage payments are really buying two products: a place to live, and an investment vehicle. For the vast majority of homeowners, a home is a wealth-building engine that they hope will appreciate in value, so that one day it can be sold at a profit, either for themselves or their children. In principle, the idea isn’t terribly different from buying a stock portfolio.

Housing wealth makes up close to half of total American household wealth, and can help pay for college tuition, retirement, and other important life events. In other words, it’s very important – but it’s not exactly as necessary as having a roof over your head. As a result, it doesn’t really make sense to include home-as-investment-vehicle in basic measures of affordability. At the very least, it may make sense to discount the potential profit a homeowner can expect to earn from their investment against their mortgage payments.

But there are several complications to doing that. For one, we can’t necessarily know how much a home is going to appreciate in value, or whether it will appreciate at all. On top of that, the profit that a homeowner enjoys comes at a different time than their house payments – in other words, they have a cash flow problem. Imagine a retiree on a fixed income whose home value increases dramatically: she is now much wealthier on paper, but may not be able to actually make her property tax payments because she can only access that wealth by selling her home.

On the other hand, because homeowners expect this payoff – and because many homeowners expect to live in their homes for many years – a buyer may decide to spend more money on their home than they would otherwise be willing to spend. Buyers may also take into account that their incomes are likely to rise over the time they are living in their home. Imagine a 30-year-old buying his first home, and planning on living there for up to ten years. By the time he’s 40, his income will probably be higher – and knowing that, he may be willing to pay more for a home than he would be willing to spend on rent.

In practice, it still makes sense to use the same residual income method to measure owner-occupied housing affordability. But when it comes to looking at particular policies, taking into account the dual shelter/investment nature of homeownership is important. For example, homeowners in neighborhoods where housing values are rapidly appreciating may find that their property tax bills are higher than they anticipated when they bought – and higher than their income allows them to pay without making unreasonable sacrifices. While some advocates have suggested property tax forgiveness in these cases, property tax delay may actually make more sense. After all, a homeowner’s rising tax bill is a sign that they are becoming wealthier – just in a way that doesn’t change their immediate cash flow. Rather than giving a tax break to someone experiencing a windfall, and denying local governments revenue for essential services, it may be better to simply collect them if and when the homeowner actually sells their home and experiences the gains from their investment.

But either way, using a 30% ratio of housing costs to income isn’t going to give us a good idea of who is really burdened by unaffordable housing and who isn’t. For both renters and homeowners, we need something new. The residual income approach does a much better job of indicating when a given household is capable of paying both for housing and the other necessities of a modern American life. It deserves a more prominent role in our ongoing affordability debates.

Residual income: a better way of measuring affordability

This week, we’re running a three-part series on the flawed way that we measure housing affordability. Yesterday, we looked at exactly what’s wrong with one of the most common ways we determine what “affordable” means. Today, we’re looking at an alternative measure, “residual income.” In the final part, we’ll examine the particular challenges of understanding “affordability” for owner-occupied homes.

Yesterday, we investigated some of the shortcomings of the most common index of housing affordability. Most measures rely on a 30% threshold, and suggest that someone is housing-burdened if they pay more than 30 cents per dollar of income on their rent or mortgage. But that figure obscures a lot of other important information: how much money someone has left to pay for other necessities; how much someone will have to pay in other location-related costs, like transportation; and whether the housing purchased is of acceptable quality.

So how might we improve on that?

Well, what the 30% (or 45%) threshold is trying to capture – what the concept of “affordability” really means – is “ability to pay.” What we really want to know, when we ask if housing is affordable, is whether a given person or family can buy themselves acceptable housing without sacrificing any other necessities, from decent food to work-appropriate clothing, child care to retirement savings. We want to know whether the price of housing – including the transportation options that go with that housing – makes you more or less financially capable of living a reasonably comfortable life.

Two-flats in Chicago. Credit: Jeremy Atherton, Flickr.
Two-flats in Chicago. Credit: Jeremy Atherton, Flickr.


So what would a capability-based housing affordability measure look like? Fortunately, there’s already a good proposal. The “residual income” approach, promoted most notably by University of Massachusetts-Boston professor Michael Stone, looks explicitly at non-housing costs – either for real individual households or an imagined “typical” household meant to represent a particular demographic – and subtracts those from total income. What’s left over – the “residual” – is how much you can afford to spend on housing without sacrificing other necessary payments.

Unlike the 30% threshold, the residual income approach actually measures your ability to pay, which means that it won’t spectacularly fail “tests” like the one in Part 1 of this post. It acknowledges that different people have different spending needs, and that affluent people who choose to buy expensive housing are indulging in a luxury, not suffering from an affordability crisis.

In addition to addressing equity concerns, the residual income approach automatically adjusts for other location-based costs. If choosing to buy a home in a particular place means that transportation costs go up by $300 a month, then the residual income method will require that there be an extra $300 budgeted outside of housing costs in order for that home to be “affordable.”

It’s less clear how to incorporate housing quality. If access to education, for example, is one of the “capabilities” we think is essential, then you might say that anyone whose housing location doesn’t give them access to decent public schools – and who can’t afford to send their children to private schools – doesn’t have access to affordable housing of acceptable quality. But what sorts of cutoffs to use, and what else counts towards “acceptable housing quality,” is obviously up for debate. How to integrate those sorts of concerns into the housing affordability conversation is a difficult question, but one that needs to be acknowledged.

New housing in Dallas. Credit: Matthew Rutledge, Flickr.
New housing in Dallas. Credit: Matthew Rutledge, Flickr.


Another issue is that “residual income” is a bit harder to calculate than the 30% threshold, since it requires knowing much more about a given household than just their total income. But it’s far from impossible, and is already being employed at scale by the Department of Veterans Affairs, which uses a version of the residual income approach to qualify veterans for mortgages.

Michael Stone has also worked out how the national affordable housing landscape changes if you use residual income, rather than income ratios, as your yardstick. It turns out that the number of people suffering from unaffordable housing stays roughly the same – it’s just that they’re different people. As in our example above, residual income sees far less of a problem for wealthier, smaller households, and far more of a problem for poorer, larger households.

And when it comes to deciding who to target with affordable housing policies – and how much help they need – that can make a big difference. As affordable housing becomes one of the defining issues for many of our largest, most economically successful cities, making sure we understand what “affordable” really means is crucial. The 30% standard, though sometimes useful as a rule of thumb, is too blunt to be our main tool. It makes sense to shift to an approach that measures whether or not people can afford the makings of a stable life in America, which requires going beyond a simple cost-income ratio. The residual income metric is a good candidate.

The Week Observed: July 24, 2015

What City Observatory did this week

This week, we ran a three-part series on what we mean by “housing affordability.”

1. In The way we measure housing affordability is broken, Daniel Kay Hertz writes about the problems with the most common way “affordable housing” is interpreted: as housing costs that make up no more than 30% of household income. Three major problems include a) equity issues, because lower-income households may be less able to spend 30% of their income on housing than higher-income households; b) a failure to include other place-based costs, like transportation; and c) a failure to consider the quality of housing purchased – including the characteristics of the surrounding neighborhood.

2. In Residual income: a better way of measuring affordability, we suggest an alternative to the 30% ratio. The “residual income” approach, championed by University of Massachusetts – Boston professor Michael Stone, suggests that a household’s “housing budget” should be determined by subtracting their other necessary expenses from their income. We like this method because it takes a “capabilities approach” – it asks what we want people to be able to do, like be able to buy healthy food or work-appropriate clothing, and then builds an affordability standard around that level of quality of life.

3. Finally, we ask: What about homeowners? It turns out that owner-occupied housing creates some complications for “affordability” that rental housing doesn’t. In particular, when people buy rather than rent, they’re getting two kinds of goods: shelter and an investment vehicle. That suggests that we need to make some adjustments when we apply affordability questions to homeownership.

The week’s must reads

1. This week, Politico released a special issue on America’s transportation problems. The entire thing is worth reading, but we would highlight “Overpasses: A love story,” which zooms in to Wisconsin to examine how departments of transportation prioritize massive, incredibly expensive new highway projects over maintenance of existing infrastructure, or more efficient transit.

2. Sticking with transportation, the New York Times‘ architecture critic Michael Kimmelman reviews the city’s experience with its enhanced bus routes, called Select Bus Service, and declares the initiative a success. SBS generally involves some combination of bus lanes, off-board fare collection, and more widely-spaced stops – which can all be bought for pennies on the dollar of a major urban rail (or, for that matter, highway) project. SBS routes have seen faster service and increased ridership, but Mayor Bill de Blasio has been slow to expand them across the city.

3. While Marietta, Georgia is tearing down low-income housing in a rerun of the bad old days of urban renewal, Colorado is moving in the opposite direction. The Denver Post covers how municipalities across that state are questioning the powers given to redevelopment authorities, including eminent domain. Littleton has already passed a referendum reining in its RDA; a similar measure is on the ballot in Wheat Ridge this fall.

New knowledge

1. San Jose State University’s Mineta Transportation Institute released a report looking at transit from a cost-benefit perspective. Among the findings: the benefits of transit projects can vastly exceed costs in small towns, not just large cities; transit can pay for itself in congestion relief in medium-sized and large cities; and many cost-benefit analyses understate the benefits of transit from increased safety and fewer car crashes.

2. Researchers from the University of Kansas find that project-based affordable housing does not improve “neighborhood quality” for residents, compared to voucher-based housing subsidies, and can actually make things worse. They consider the implications for federal and local housing policy.

3. In CityLab, Richard Florida writes about a new study on the link between public transit and gentrification in New York City. While transit-accessible neighborhoods tend to be wealthier than those with less access, the study did not find a strong link between transit access and change in average neighborhood income – suggesting that the connection between transit service and gentrification is less robust than is sometimes argued.

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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How cutting back on driving helps the economy

There are two kinds of economics: macroeconomics, which deals in big national and global quantities, like gross domestic product, and microeconomics, which focuses on a smaller scale, like how the prices of specific products change. Macroeconomics gets all the attention in the news cycle, as people talk about the unemployment rate, the money supply, inflation, and the monthly payroll reports. Micro-economists usually labor in obscure corners, studying things like commodity prices, wage rates and industry trends.

The President’s Council of Economic Advisers (CEA) is the nation’s leading group of economists, focused heavily on understanding–and explaining big macroeconomic trends.

A new CEA report, “The surprising decline in US petroleum consumption,” highlights an important decades-in-the-making trend in the US economy: we’re consuming a lot less oil that everyone thought we would. Obviously, oil consumption is a big deal in the macro economy. Oil imports are the biggest factor in the nation’s long running balance of trade deficit (we imported 2.7 billion barrels of oil in 2014, at an average cost of $91), and from the first energy crisis of the early 1970s onward, there’s been a strong recognition of the critical role that oil supplies and oil prices played in shaping global and national economic conditions.

While all of the models constructed by the experts, including the Energy Information Administration at the Department of Energy, predicted that US petroleum consumption would grow from 18 to 30 million barrels per day between 1970 and 2030, something very different is happening: US oil consumption has leveled off at about 21 million barrels per day. Even though population is increasing, and the economy is still growing, petroleum consumption has been essentially flat.

What’s keeping consumption down? According to the CEA analysis, transportation explains 80-90 percent of the trend. While industrial, commercial, and residential energy use have generally followed predictions, energy use for transportation is far below where it was predicted.

From the CEA's report.
From the CEA’s report.

And within transportation, the big savings have come from a surprising source. While many people focus on improved fuel efficiency of cars, that actually turns out to be a negligible factor in cutting energy use. Better gas mileage accounts for only about 15% of the difference in 2014. The big factor is that Americans are driving less: vehicle miles traveled are far below projected levels.

Clearly, a combination of demographic, technological, social and price factors are at work. The big run up in gas prices after 2004 has played a role in reducing driving (and prompting people to buy more fuel-efficient vehicles).

This highlights a couple of things. For one, simple-minded projections based on past relationships are likely to be wrong. Big demographic changes, and shifts in tastes (toward urban living, and away from time spent driving) can dramatically change

And, as the CEA report signals, these have big macroeconomic effects. The decline in petroleum consumption dramatically improves our international trade position compared to what was projected, and means US consumers have about $150 billion annually to spend in the American economy (and their local economies) than if they drove more.

Although CEA characterizes the decline in petroleum consumption as surprising, for those of us who have been following the microeconomics of demand for transportation closely for the past decade, this is old news. But it’s also big news that bodes so well for the macroeconomy and the environment.

The way we measure housing affordability is broken

This week, we’re running a three-part series on the flawed way that we measure housing affordability. This post looks at exactly what’s wrong with one of the most common ways we determine what “affordable” means. Tomorrow, we’ll look at an alternative measure, and on Wednesday, we’ll examine the particular challenges of understanding “affordability” for owner-occupied homes.

Given how much time media outlets, policy shops, and community groups have spent talking about America’s affordable housing crisis over the last few years, you might think that we’ve at least settled on a pretty good way to define what housing affordability actually is. After all, how can we talk about solving a problem if we don’t have a reliable way of determining who’s suffering, and where, and why?

Unfortunately, you’d be wrong.

As an illustration, picture yourself as an employee of a local supermarket, making $1,500 a month. You live with a friend in an outlying neighborhood, and your share of rent is $400, plus $300 a month for car expenses. After all that, you have $800 a month left over – which dwindles pretty quickly between child care, groceries, and prescriptions. When you get sick or your car breaks down, you can’t avoid racking up some credit card debt.

The front page of Craigslist for apartments in San Francisco.
The front page of Craigslist for apartments in San Francisco.


Across town, a man who works as a VP in marketing makes $8,000 a month. He pays $3,000 in rent for a brand new loft apartment near downtown. Because he can walk to work and takes public transit most other places, he buys a monthly pass for $100 and doesn’t own a car. After those costs, he’s got $4,900 to spend every month, which buys lots of nice meals out and international vacations while leaving room for healthy retirement savings.

You’re having trouble making rent, and the marketing VP can make their payments easily. But according to our most common standard of housing affordability, it’s the VP who’s rent-burdened, and you’re doing fine.

That’s because those standards rely on a simple ratio: if you pay more than 30% of your income in housing costs, your housing is unaffordable. If you don’t, it’s not. And the supermarket worker pays just 27% ($400 of $1,500), while the marketing VP pays 38% ($3,000 of $8,000).

The supermarket/VP story is an extreme example, but it demonstrates several of the fundamental problems with the 30% threshold as a measure of housing affordability.

1. Equity. Most obviously, it doesn’t take into account that, depending on how much money you start with, leaving 70% of your income for all non-housing expenses may be plenty – or not nearly enough. Affluent people have the luxury of deciding whether to spend relatively large proportions of their incomes to buy housing in a better location, or with particular amenities, without sacrificing other necessities like food or clothing. Low-income people generally don’t. In that way, comparisons between people with different earnings can turn out misleading or unfair, as in the example above.

Craigslist apartments in Boston.
Craigslist apartments in Boston.


But it can also fail in analyzing the burden of housing costs on people with similar incomes. Not everyone, after all, has the same non-housing obligations: for a healthy, childless twentysomething, a salary of $40,000 might easily cover housing, food, insurance, and other necessities. But someone who has to do much more non-housing spending – because of a chronic medical condition, say, or children with special needs – might struggle on the same income.

2. Other location-based costs. On top of that, there’s increasing recognition that housing choices are closely tied to other costs, which need to be considered part of the package. In other words, the cost of housing is less relevant than the total cost of a location. By far the most important of these other costs is transportation. While housing closer to the center of a metropolitan area is often more expensive, it also requires less driving – and often no driving at all, thanks to public transit – which saves a lot of money. According to Harvard’s Joint Center for Housing Studies, low-income people who manage to spend less than 30% of their income on housing actually end up paying $100 a month more on getting around, which eats into their savings, and sometimes erases them entirely.

Some organizations, like Chicago’s Center for Neighborhood Technology, have tried to take this into account. CNT’s H+T Index shows the total housing and transportation costs for various locations, set against a combined affordability standard of 45% of income. That’s a major step forward – but using a ratio like 45% still has all the other problems of the 30% ratio we’ve already covered.

3. Quality of housing. The 30% threshold can’t tell us anything about what a given household is getting for their money. Few of us would say that affordable housing needs are met by homes that are low in cost but lacking in basic modern amenities like heating or indoor plumbing. While those problems are now relatively rare in major metropolitan areas, many cities have a stock of affordable housing that is predominantly located in neighborhoods with high crime rates, failing schools, few options for fresh food, or other major quality of life issues. Do that housing satisfy our need for affordability?

Craigslist apartments in Memphis.
Craigslist apartments in Memphis.


This is an especially important question if we care about housing for its effects on opportunity and mobility. As recent research from Raj Chetty has reinforced, the kind of neighborhood you live in can dramatically change your prospects for living a comfortable middle-class life. It seems odd, in light of those findings, to measure housing access without taking into account whether that access includes communities that offer a shot at economic stability in addition to cheap rent.

In conclusion, the way that we currently measure housing affordability – a simple 30% ratio of cost to income – is simply inadequate to the task. It fails to give us an equitable picture of who is in need and who isn’t; fails to consider the total cost of a location, missing housing-dependent payments, like transportation, that can add a significant burden to low-income households; and fails to consider questions of housing and neighborhood quality that exert significant influences on the life chances of the people who live there.

(Why, then, do we use it? This Bloomberg piece from last year, also pointing out the 30% ratio’s flaws, is probably correct that its durability has to do with simplicity.)

Tomorrow, we’ll look at an alternative way to measure housing affordability that addresses some of these problems.

What can conservatives do for cities?

Imagine an urban policy agenda defined by simplifying business regulations and promoting entrepreneurship as the key to prosperity. Add to that an attack on overly restrictive zoning laws that hold back housing construction, inflate real estate prices, and keep high-opportunity cities closed to low-income people looking to improve their lives. Round out the party platform by promoting regionalism and metropolitan-level decision-making.

According to National Affairs, this is what American conservatives have to offer their increasingly urban-centric countrymen. In an article published in the magazine’s most recent issue, Michael Hendrix of the U.S. Chamber of Commerce Foundation and National Affairs editor Andrew Evans lay out the case that the political dominance of liberals and leftists in nearly every big city in the country is a bad thing, and not just for conservatives.

The first part of their premise, at least, is undeniably correct. Large American cities are overwhelmingly left-of-center: Hendrix and Evans point out that of the top ten cities by population, only one has a Republican mayor, and he only got there because the previous Democratic incumbent had to resign in a sexual harassment scandal. Nor is National Affairs the first to notice: cities’ one-sided voting patterns are a regular subject of angst, both by Republicans who loathe surrendering the nation’s major economic and cultural hubs and Democrats who wonder if they’re missing something.

(Forgive, for now, the conflation of left-right ideology and party identification, which also appears in the National Affairs piece.)

The problem seems to have two parts. Politically, modern American conservatism is built around a particular brand of social conservatism popular among white evangelicals, and small-government libertarianism. The first seems in direct opposition to cities’ role as places of social experimentation and cultural cosmopolitanism. As for the second, to paraphrase Ed Glaeser, just as there are no atheists in foxholes, there are no libertarians in cities. Living in close quarters with hundreds of thousands or millions of other humans makes “rugged individualism” sound like a kind of joke: from noise complaints to traffic to “unsavory” businesses, it’s hard to find an urban resident who doesn’t favor some suite of strong government regulations.

So many externalities. Credit: Matt Baran, Flickr.
So many externalities. Credit: Matt Baran, Flickr.


But it also seems to be the case that, speaking broadly, conservatives don’t like cities, and don’t want to live in them. There are some exceptions, of course. The relatively young Smart Growth for Conservatives blog has been making a vigorous right-of-center case for pro-urban policy, and the traditionalists at The American Conservative have long appreciated the communitarian aspects of city living.

And yet, when explicitly asked to weigh the tradeoffs between more space and more walkable amenities, the ideological split is massive: a Pew survey found that “consistent liberals” will choose the dense, walkable neighborhood three out of four times, while “consistent conservatives” are equally likely to choose the more classically “suburban” neighborhood. And as Slate’s Will Oremus pointed out a few years ago, even where conservatives live in large cities, they tend to be among the country’s least dense and walkable.

Screen Shot 2015-07-13 at 11.42.57 AM


Hendrix and Evans seem to think they’ve found a way around these issues by appealing to the self-interests of otherwise liberal city dwellers: more prosperity, more opportunity, better governance.

The problem is that Hendrix and Evans have simply repackaged what are already planks in the liberal urban platform. While it’s true that getting a permit from a big city bureaucracy can be a terror, major Democratic mayors like Rahm Emanuel and Ed Lee have made streamlining regulations and creating a more business-friendly environment a top priority. (And in the process, they’ve frequently received a good deal of blowback from their urban constituents, a fact which doesn’t bode well for National Affairs’ campaign strategy.) I suppose they could argue that “real” conservatives would do a better job, but that’s a debate over administrative competence, not ideology.

The last two points of their “urban agenda for the right” are even more dubious: not only have they already been adopted by portions of the urban left, they are vociferously opposed by conservatives. President Obama’s new HUD rules specifically take aim at the kind of exclusionary zoning laws that Hendrix and Evans say are keeping cities “closed” – and, far from being welcomed as a move towards less government intervention in the economy, has been blasted as a disaster comparable only to the hated Affordable Care Act. Where Obama’s HUD has previously attempted to loosen zoning controls in Westchester County, just outside New York City, the Republican country executive protested vigorously, vilifying the order and energetically defending low-density zoning regulations.

How Republican County Executive Robert Astorino responded to Hendrix and Evans' "conservative" proposals, which were actually proposed by Obama's HUD. Credit: Wall Street Journal
How Republican County Executive Robert Astorino responded to Hendrix and Evans’ “conservative” proposals, which were actually proposed by Obama’s HUD. Credit: Wall Street Journal


As for regionalism, one of the most prominent cases in the country is the Twin Cities area in Minnesota, where the “Metropolitan Council” holds a much greater than normal amount of power over land use decisions. One of the greatest proponents of its regional influence is Myron Orfield, who spent several years as a state legislator in the Democratic-Farmer-Labor Party. On the flip side, Minnesota Republicans have launched a campaign to weaken the Metropolitan Council and devolve power to municipalities – exactly the opposite of Hendrix and Evans’ proposals.

To be clear, the vast majority of American cities, regardless of ideology, fail miserably on all of these counts. Anyone who’s been reading the news out of San Francisco knows that liberals are perfectly capable of viciously opposing open zoning laws. But where some political leadership has staked out a position in favor of the changes National Affairs wants – particularly on the issues of exclusionary zoning and regional planning – it is almost always left of center. Meanwhile, the Obama Administration’s new HUD rules appear to have convinced the conservative establishment that setting extreme land use regulations is an inviolable right of local government.

Screen Shot 2015-07-15 at 11.17.37 AM
Fox’s coverage has been less than positive.


Does conservatism have nothing to offer cities, then? I wouldn’t go that far. More than liberalism, whose philosophical roots are based on the primacy of individual rights, certain strands of philosophical conservatism understand that complex webs of relationships, rather than simply individuals, are the buildings blocks of society. When we use the language of community, of ties to people, places, and institutions that should be valued not because they promote any tangible good but because they are part of the traditions that give our lives meaning, we are arguably borrowing from a conservative vocabulary. We need that vocabulary to fully understand what cities offer us, and what we lose when communities are displaced, whether by rising home prices, low quality of life, urban renewal, or some other force.

Conservatism also offers a skepticism of ambitious, top-down planning that fits very well into a certain kind of urbanism. Jane Jacobs’ The Death and Life of Great American Cities is all about how successful urban spaces depend on a respect for gradualism and the kind of organic changes that can’t be planned. The critique of Robert Moses’ “meat ax,” of his plans to create a blank slate on which to build his own version of utopia, relies more than a little bit on an Edmund Burke-style understanding of the problem with sweeping away old institutions that may appear irrational but are in fact of tremendous value.

Unfortunately, none of that appears in the National Affairs piece. Instead, we get a series of policies that have already either been adopted by liberals or to which conservatives have proven themselves openly hostile. When the next conservatives-in-cities essay appears – as it certainly will – there will hopefully be a bit more on offer.

The value of walkability across the US

One of the factors that seems to be propelling the resurgence of cities around the nation is the growing demand for housing in walkable locations. One of the best sources of evidence of the value of walkability is home values, and some new evidence confirms that walkability adds to home values, and also shows that walkable homes have held and increased their value more even in turbulent real estate markets.

The latest insight on this question comes from a new book, Zillow Talk, by Zillow’s CEO Spencer Rascoff and Chief Economist, Stan Humphries, explain what they call “The New Rules of Real Estate.” Zillow has emerged as one of the leading web-based real estate information companies, tracking the sales of millions of housing units around the country, and building sophisticated econometric models to provide regularly updated “Zestimates” of the likely sales price of almost all of the nation’s housing.

We’re big fans of Zillow’s work – and its data, which they’ve made freely available on their website – its a terrific resource for tracking important trends in local housing markets. We used it, for example, to look at the growth of prices in close-in urban neighborhoods in Portland relative to houses in surrounding suburban counties.

There’s a lot to read about in Zillow Talk – you can learn about the best time to sell your home, clever pricing strategies, and which descriptors tend to drive consumer interest. But our attention was drawn to Chapter 23, which explores the question: “What’s Walkability Worth?” The authors use Zillow’s copious data about home prices coupled with Walk Score’s measure of walkability to estimate how improving access to walkable destinations affects a home’s market price. (Walk Score is the innovative web-based tool for measuring the walkability of homes and apartments assigns a score from zero to 100 representing the proximity to common destinations like stores, parks, schools and restaurants.)

Zillow Talk estimated the effect of a 15 point improvement in walkability on Walk Score’s hundred-point scale across a number of metropolitan markets. They found that a 15 point increase in walkability would increase home values by an average of about 12 percent, with the actual values ranging between 4 and 24 percent depending on the metropolitan area. Chicago had the greatest effect of increases in walkability, and New York the least. The author’s also found that the positive effects of an increased walk score weren’t felt in car dependent neighborhoods.

Zillow Talk tracked home values in several major markets from 2000 through 2014, and reported average sales values for the most walkable neighborhoods (“Walker’s Paradise” and “Very Walkable”) and the less walkable places (“Somewhat Walkable” and “Car Dependent.”) In every market they examined, home values in more walkable neighborhoods outperformed those in less walkable neighborhoods in the same market – particularly in recent years. In New York and Chicago, for example, homes in the most walkable neighborhoods increased in value 160 percent more than homes in car-dependent neighborhoods. Even though all these neighborhoods and markets showed the effects on the housing market cycle (with declines after 2006), Rascoff and Humphries report that more walkable areas are more resilient: they recovered their values faster after the collapse of the housing bubble.

The findings presented in Zillow Talk confirm my own earlier work examining the connection between walkability and market values. In 2009, I published a study for CEOs for Cities – Walking the Walk – that used home sales data from 15 markets to assess the impact of walkability on home values. I found that after controlling for the effect of home size, age, number of bedrooms and bathrooms, the overall income of the neighborhood, and its proximity to the region’s urban center and to employment opportunities, that walkability had a significant impact on home values in 13 of the 15 markets we studied. On average, in the markets we examined, going from an average level of walkability to an above average level (from the market median to the 75th percentile) was associated with a $10,000 to $30,000 increase in home values.

For those of us interested in urban places and walkability, Zillow’s data shows that walkability is a major contributor to housing values in urban locations and that houses with high levels of walkability, as measured by Walk Score, have maintained and increased their value relative to housing in car-dependent locations. This is clear evidence that consumers attach major economic value to walkability.

The devilish details of getting a VMT fee right

At City Observatory, we’re big believers that many of our transportation problems come from the fact that our prices are wrong – and solving those problems will require us to get prices right. While we desperately need a way to pay for roads that better reflects the value of the space we use, just moving to a new model isn’t enough. If we don’t get the new pricing system right, it could make many of our transportation problems worse. As the old adage goes, the devil is in the details.

In short, American cities have too much traffic today for the same reason that the old Soviet Union always had bread lines: we charge too little for a scarce and valuable commodity. As a result, people consume too much, and we end up rationing access by making people wait.

Similar ideas. Top: Oran Viriyincy, Flickr. Bottom: Jake, Flickr.
Similar ideas. Top: Oran Viriyincy, Flickr. Bottom: Jake, Flickr.


The main way we price road travel today is the gas tax, but it doesn’t send the right signals to travelers about how much different kinds of travel, in different places, at different times, actually cost. In contrast, the proposal to replace the gas tax with a vehicle miles traveled (VMT) tax – directly charging people by how much they drive – is clearly a step in the right direction.

With great fanfare, the State of Oregon announced its road pricing demonstration program, OReGO, on July first. Under this voluntary program, up to 5,000 motorists will sign up to pay a per mile fee of 1.5 cents rather than the current 30 cent state gas tax. Motorists will have two different options for monitoring their mileage: one that periodically reads the vehicle’s diagnostic data port, and another that uses GPS technology.

Over at CityLab, our friend Eric Jaffe is enthusiastic about this kind of mileage-based road fee, listing 18 reasons why they’re a good idea. While the concept of charging more for the roads, and charging in a way that reflects the cost of use – including contributing to congestion, road damage, and pollution – is essential, Oregon’s proposed road use system does exactly none of these things. The crux of the problem is that 1) it raises no more money than the current gas tax, and 2) it ends up subsidizing heavier, more polluting vehicles while actually punishing lighter, more fuel-efficient ones.

For many, the primary reason to favor a VMT tax is, as Eric Jaffe puts it, to “raise a gargantuan amount of money.” That would replace the gas tax, which, according to accepted political wisdom, is a dying revenue source. But VMT may not be a revenue panacea.

For one thing, total driving in the US is declining. Moreover, if we tied the tax to VMT—and set the tax at a high enough level to produce the “buckets” of revenue that proponents want–we’d expect that people would do what they normally do when something gets more expensive: do less of it. From a transportation perspective, this is a feature, not a bug. In Oregon, for example, even with increasing population, people are driving less now than they did a decade ago. As a result, a VMT tax would also have stagnant revenue growth–one of the same problems that plagues the gas tax. The data come from the Oregon Department of Transportation:

Credit: Oregon DOT
Credit: Oregon DOT


It also turns out that the gas tax is more proportional to the physical damage vehicles cause to the roadway and to the environment. A gas tax functions very much as a carbon tax (albeit a very low one): the more you pollute, the more you pay. But shifting to a tax based solely on mileage, without regard to how much pollution a vehicle creates, would essentially tax hybrids to subsidize hummers.

The flat, undifferentiated VMT fee would be like a butcher that charged a single price per pound for every cut of meat in the shop. You’d quickly find that you would have long lines of people lining up to buy steak and you’d end up throwing out over-priced hamburger that no one would buy. A key part of a VMT fee should be its ability to signal to users how much travel costs to society as a whole, depending on when, where and how they do it. A flat fee per mile, whether it’s in Manhattan, New York or Manhattan, Kansas, or at 5am or 5pm, will do nothing to encourage people to use cars at more efficient times or places, or to choose to take transit, bike, or walk instead.

Getting a VMT fee right is going to become increasingly important, because the problem of mis-pricing and under-pricing road use is going to become much worse in the years ahead. The business models of Uber and other “ride-sharing” services are predicated on very low-cost access to the public right of way.

Already, there is evidence that the growth of Uber and other for-hire vehicles is putting further strains on the very limited street capacity of New York. The number of for-hire vehicles in the city has grown 63 percent since 2011, and traffic speeds on Manhattan streets have fallen 9 percent since 2010. Slower traffic has resulted in slower rush hour bus service, and contributed to declining Manhattan bus ridership, which fell 5.8 percent last year.

The problem will mushroom if, as many expect, someone figures out how to build and deploy fully autonomous vehicles. If they aren’t charged for their use of the public right of way – both when carrying paying passengers, or when hovering in high volume locations – we’ll likely see even greater congestion of the roadway. Under-priced roads signal to road users–and innovative transportation companies–to over-use them, with potentially negative effects for the entire system.

We had a preview of this problem with the short-lived parking App, Monkey Park, which set up a way for people to auction off public, on-street parking spaces as they drove away. Unlike with Uber and Air BNB, San Francisco successfully imposed a cease-and-desist order, based on the premise that it’s illegal to sell public space. Monkey Park’s business model was predicated on extracting profit from an under-priced public resource—which is exactly what is at work with Uber and other businesses providing traffic in public streets.

It’s tempting to treat road pricing as just a way to raise more money for construction and maintenance. But that would be a huge mistake. If we get the prices right, we can make a significant dent in congestion by signalling to travelers how to make more efficient use of the roads we have, avoiding the need for expensive new capacity.

Already, we have good models of how this works with congestion pricing systems that vary by place and time of day in London, Stockholm and Singapore. San Francisco has implemented variable pricing for parking and has explored proposals to charge for vehicle miles traveled–based on time of day. And the evidence from earlier experiments in Oregon is clear, while a flat VMT fee has very little impact on peak hour travel, a fee that ranges from .4 cents a mile (off peak) to 10 cents per mile during peak hours in the central city would reduce vehicle miles traveled by more than 20 percent.

Our transportation problems are–at their root–a product of getting the prices wrong. If we adopt some kind of VMT fee, we have a once in several generations chance to get the prices right. Let’s not blow it by failing to make sure that the way we price roads and travel sends the right signals to everyone about how, and when to use the roads. The devil is in the details here.

The Week Observed: July 17, 2015

What City Observatory did this week

1. Why aren’t we talking about Marietta, Georgia? Joe Cortright covers a Robert Moses-style case of “slum clearance” in suburban Atlanta. The city of Marietta is demolishing a complex of apartments that, over the last few generations, have transitioned from upper-income and homogeneously white to relatively high-poverty and mostly people of color. While plans to relocate the residents are vague, the city knows what it wants to build in their place: a private retail and office development. Given the intense coverage of the displacement of low-income people of color in places like San Francisco and Brooklyn, we ask: Why aren’t we talking about Marietta?

2. What can conservatives do for cities? Daniel Kay Hertz considers the conservative urban policy agenda put forth by a recent National Review essay, but finds something odd: Two of its major ideas have already been proposed or enacted by left-of-center decision-makers, and are vociferously opposed by the conservative establishment. Still, conservatism does have something to offer city dwellers – you can find it in Jane Jacobs.

3. In The value of walkability across the US, Joe Cortright digs through some numbers in the newly-published book Zillow Talk, from the online real estate company. Using their own extensive data sets and Walk Score, Zillow’s authors reinforce earlier research by Cortright showing a strong link between walkability and home prices. On average, a 15-point increase in a neighborhood’s Walk Score increases home values by 12% – though it ranges from 4% in New York City to 24% in Chicago.

The week’s must reads

1. NYU’s Furman Center hosts a discussion on place- and people-based economic development strategies from some of the smartest thinkers on issues of urban inequality. Harvard sociologist Robert Sampson argues that while mobility vouchers can be effective, they may be difficult to scale, and need to be combined with durable investments in low-income communities across the country – including cash transfers to people living in “compounded deprivation”: low-income residents of high-poverty neighborhoods. Roseanne Haggerty, the CEO of Community Solutions; professor and author Richard Florida; and professor Michael Stoll respond with their own ideas.

2. What is the political cost of supporting fair housing? At CityLab, Kriston Capps explores what kind of backlash we might expect from the Obama Administration’s move to more aggressively enforce the 1968 Fair Housing Act. He cites Westchester County, just outside New York City, where a Republican won back-to-back elections for County Executive, partly by campaigning against a HUD lawsuit that would have required more affordable housing and looser zoning laws.

3. Was one of the fathers of modernism in urban planning a humanist visionary or a fascist? The New York Times covers a new exhibition on Le Corbusier in Paris that has reignited a debate on one of the most famous architects of the 20th century. Although Le Corbusier’s airy, minimalist designs helped revolutionize postwar construction, he also had ties to far-right groups in the years leading up to World War Two, and his grand plans, including “Contemporary City” and “Radiant City,” were open about designing cities around class stratification. If nothing else, the controversy serves as a reminder that urban planning has always been about social planning as well.

New knowledge

1. Why is American zoning so different from the rest of the developed world? Planning Perspectives reviews a new book by Sonia Hirt, Zoned in the USA, which seeks to answer just that question. Hirt notes the discrepancy between the US reputation for extreme attachment to property rights and its land use law, which stands alone in its aggressive regulation of the built environment. She takes on William Fischel’s “homevoter hypothesis,” which speculates that zoning was created by homeowners looking to increase their property values, and instead turns to cultural factors and available land to explain legally mandated low-density housing.

2. In “Transportation Access, Rental Vouchers, and Neighborhood Satisfaction,” Casey Dawkins, Jae Sik Jeon, and Rolf Pendall examine the effect of transportation access – both in terms of private vehicles and public transit – on the neighborhood satisfaction of Housing Choice Voucher recipients. They find that greater access to both kinds of transportation increases neighborhood satisfaction – but that the importance of private vehicles depends on whether there is good public transit access.

3. In 2012, the state of California ended its Redevelopment Areas (RDA) program, a kind of tax-increment financing. In Economic Development Quarterly, Charles Swenson finds that RDA had not led to significant positive economic impacts in the areas where it was implemented, and that the state was probably correct to end the program.

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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The Week Observed: July 10, 2015

What City Observatory did this week

1. In More evidence on the changing demographics of American downtowns, Daniel Kay Hertz looks at a recent study from the Cleveland Fed on growing high-income neighborhoods in city cores. While there has been dramatic growth in “upper-third” areas near American downtowns – with New York, Chicago, and Portland leading the pack – most city cores are actually still disproportionately poor. And tying this new data to our own Young and Restlessreport, the number of “upper-third” neighborhoods in city centers is highly correlated with the number of young, well-educated residents.

2. In The devilish details of getting a VMT fee right, Joe Cortright picks apart the latest proposal for a vehicle miles tax in Oregon. The heart of the problem is that road use costs society a lot of money in congestion, road maintenance, and pollution, but road users don’t see those costs when they drive. A successful VMT should charge drivers what their use actually costs, which means it should be higher for larger, less fuel efficient vehicles. Unfortunately, the Oregon law charges a flat rate – which means it will essentially be punishing fuel-efficient vehicles to subsidize ones that are more polluting.

The week’s must reads

1. This week, HUD announced its final rule on requiring local governments to “affirmatively further” fair housing based on the 1968 Fair Housing Act. At theWashington Post, Emily Badger explores what this means for American cities. One of the main new requirements is periodic reports from local governments on conditions of segregation within their jurisdiction, and what may be preventing greater integration. HUD will also create a clearinghouse of fair housing data for the entire country, allowing people to see concentrations of public housing, poverty, and racial groups.

2. In 65% of Seattle, building apartments – or any kind of multi-family housing – is illegal. But as the Seattle Transit Blog explains, a mayoral panel has broached whether it makes sense to continue to mandate low-density, higher-cost housing at a time when the city is growing rapidly. STB also covers some of the panel’s other interesting ideas, including eliminating parking requirements that raise construction costs and subsidize car ownership at the expense of those who have fewer vehicles; and increasing height limits across the board in multi-family neighborhoods to allow more homes to be built, increasing access to the city and giving supply a better chance to catch up to housing demand. You can also read more at The Urbanist.

3. It’s stunning coming from a Department of Transportation head, but Iowa’s DOT chief Paul Trombino said this week that his state’s road network has been overbuilt and needs to shrink to a more reasonable size that’s easier to maintain. CityLab‘s Eric Jaffe backs Trombino up, pointing out that per capita driving in Iowa has been falling since 2004, and the state is already struggling to keep its existing highways in good condition. Iowa’s recognition of the problem comes after Washington State’s DOT finally changed its official travel predictions to acknowledge that driving there is falling as well. These are examples for other state and local DOTs to be following.

New knowledge

1. The Census’ Longitudinal Employer-Household Dynamics data doesn’t get a lot of love, but it’s one of the best sources of information about the geography of jobs and work that exists. This week, LEHD updated its “On the Map” web app with the results of its 2012 origin-destination employment statistics, giving access to another year’s worth of information about how the locations of jobs and workers are shifting in American cities.

2. Sound pollution – from airplanes, heavily-trafficked high-speed roads, or other sources – is a major issue for urban quality of life. Now a new company, HowLoud, is looking to be the WalkScore of sound pollution, giving people a quick look at how it varies from one neighborhood to another. The website currently has data only for Los Angeles and Orange County, but is looking to expand to the entire United States and Canada.

3. Does faster Internet access improve student productivity and learning? A new NBER paper looks at random variation in Internet speeds among English households to see whether students who had faster Internet access had better educational performance than kids with lower speeds. Their finding: Internet speed had “exactly zero” impact on educational attainment. They also found that improvements in Internet speed had no effect on the amount of time students spent online or offline.

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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The Week Observed: July 3, 2015

What City Observatory did this week

1. Three more takeaways from Harvard’s “The State of the Nation’s Housing” report. Daniel Kay Hertz picks out three important but overlooked findings from the massive study released last week:

  • a nationwide shortage of rental housing is pushing up prices
  • for many black and brown homeowners, home prices are too low, holding down household wealth
  • in the next ten years, more than two million subsidized homes will lose their subsidies

2. Climate concerns crush Oregon highway funding bill. Joe Cortright looks at an important precedent: a transportation package that was voted down because of its effect on global warming.

3. Paving Paradise. Joe Cortright puts the defeat of the Vancouver transit funding referendum in the surprisingly disappointing context of recent Pacific Northwest transportation policy decisions.

The week’s must reads

1. Transportation for America breaks down the Senate’s draft transportation bill, the DRIVE Act, and suggests three improvements. One of them: create a new way for local communities to apply for federal funds directly for smart, high-quality projects.

2. CityLab has an interactive history of the rails-to-trails movement, with lots of photos and maps to ogle.

3. In “Revisiting Black Urbanism,” the Chicago-area planner Pete Saunders asks an important question: Where are the black urbanists?

New knowledge

1. In “Spillovers from Immigrant Diversity in Cities,” Abigail Cooke and Thomas Kemeny ask whether a immigrants can make native-born workers more productive. The answer: yep.

2. University of Illinois professor David Albouy quantifies “quality of life” in over 2,000 sub-metropolitan areas around the country. What do people like? Density, sun, and good schools. (Non-paywalled version here.)

3. The Washington Post has compiled a database of every fatal police shooting so far this year.

Why aren’t we talking about Marietta, Georgia?

Imagine this: A city government takes $65 million in public money and buys up more 1,300 units of aging but affordable housing, which is home mainly to low income and minority residents. It demolishes the housing, and plans to sell the land to private developers for office and retail development.

A pretty cut-and-dried case of gentrification and displacement, wouldn’t you say?

Or maybe it’s a tale from the bad old days of “urban renewal” when cities fought poverty by bull-dozing “blighted” neighborhoods?

Actually this story is unfolding now, in one of the nation’s largest metro areas.

But while it seems that every move in the gentrification battles in Brooklyn and San Francisco is broadcast nationally, this egregious case of direct government displacement is being ignored. Maybe if it happens in the suburbs and doesn’t involve hipsters, it isn’t worthy of media attention.

Here are the details: Last month Mayor Steve Tumlin of Marietta, Georgia sat at the controls of an excavator and took the first swipe at knocking down the Woodlands Park Apartments. The city of Marietta, just outside Atlanta, has acquired – and demolished, or plans to demolish – four apartment complexes on Franklin Road containing more than 1,300 apartments. The demolition is funded by a bond issue approved by city voters in November 2013 by a 2,740 to 2,307 margin. The city has additional bond money and is in the process of acquiring more apartments, with plans to demolish them as well.

(Top: The entrance to Woodlands Park Apartments as it appeared in 2011. Bottom: The shuttered complex in May 2015. Source: Google Maps.)

Marietta officials take a dim view of the apartment complexes on Franklin Road on the city’s southeast side. They describe it as a blighted, high crime area. US Senator Johnny Isaakson said: “I go by Franklin Road as fast as I can every day.”

(If Marietta is a familiar name as a flashpoint for the problems of low income citizens living in suburbs, it should be. You may recall the case of Raquel Nelson, a single mother of three, who was convicted of manslaughter when she and her children were hit by a drunk driver when crossing a suburban highway from a bus-stop to their home.)

One Atlanta commentator described the project as removing ten “ancient” apartment complexes and “ushering” the residents to different locations. Most local citizens echo this view. The mayor sees it as clear cut opportunity to assemble land and develop new business. The city feels that it spends a disproportionate share of its tax revenues providing services to the neighborhood. One “benefit” of the demolitions, then, is lower enrollments at local schools. In just the past year, school officials reported a decline of 250 students from the Franklin Road area.

The project has produced little outcry. One of the few outspoken opponents is a local resident, Marty Heller, who argues that the demolitions are “class warfare”: “The people who voted for it want to eliminate the population on Franklin Road and raze the apartment complexes and replace it with commercial development. They want to eliminate the poor people on Franklin Road, they want to get the Hispanics out of the school system so that their test scores will go up, and it will make it easier for the school system.” The bond measure’s proponents respond that they are helping the poor who are now “trapped in high density crime-ridden slum like apartment complexes.”

What happens to the former residents of these apartments is far from clear. They will have to find housing elsewhere, and their children will have to be educated somewhere else. The demolitions are substantial, amounting to about 10 percent of all the multi-family housing in Marietta. The city says it will help relocate residents, but in press accounts at least, details are scant. Whether residents can continue to afford to live in Marietta, and whether students will end up in some other school district, doesn’t seem to be the city’s chief concern.

The apartments in question date from the 1960s, and when they were constructed were a desirable location for young couples and singles in suburban Atlanta. But as the region has sprawled and the the apartments have aged, they’ve gradually moved downmarket. reports that the Marquis Place complex – which the city plans to acquire and demolish – offers 1 to 3 bedroom apartments for rents of $660 to $940 monthly.

It’s interesting to look back at the history of the neighborhood along Franklin Road. We’ve assembled some data from Brown University’s Longitudinal Tract Database that tracks Census data from 1970 through 2010. We examined data for Census Tracts 304.11, 304.12, and 304.14, which include the apartments in question. In 1970, when the apartments (and most of the housing in the surrounding areas) were still quite new, this was a high income, predominantly white area. The poverty rate was just 4 percent, and the median household income was about 70 percent higher than the national average. In each successive decade, the economic status of the area has slipped. Today, the poverty rate in these tracts has increased to 28 percent – just shy of the 30 percent threshold we use to define neighborhoods of concentrated poverty and median household incomes are about 25 percent below the national average.

Over past four decades, the racial and ethnic composition of this neighborhood has changed even more dramatically. In 1980, the residents of these three Census Tracts were nearly 95 percent white. Today, only 14 percent of the residents are non-Hispanic whites. The area’s population is now four-fifths persons of color: about 52 percent black and about 30 percent Hispanic.

As we’ve pointed out before, public interest in gentrification seems to be highly focused in just a few large – and generally liberal – metropolitan areas. The poster children of gentrification are hipster neighborhoods in Brooklyn, Washington, San Francisco and Portland. The data and scholarly research on the subject show that even in these areas, displacement is far less than imagined, and previous residents are less likely to move away from gentrifying neighborhoods than non- gentrifying ones, and benefit from neighborhood improvement.

Still, the narrative about urban gentrification is full of vitriol and conspiracy theories: city officials, in league with banks and developers, look to exploit poor neighborhoods. Often these theories overlook, or entirely discount, the growing demand for urban living, and the shortage of housing and neighborhoods created by restrictive single-family zoning. So it’s a bit surprising that no one calls it “gentrification” when the demolition of affordable multi-family housing and the displacement of low income residents is the explicit, stated strategy of a local government.

That no one uses the term “gentrification” to describe Marietta’s plan to purposefully de-populate the low income residents of the Franklin Road apartments says a lot about how we think about poverty, class and place in urban areas. It’s apparently acceptable for suburbs to actively discourage – and in this case, actually relocate – low income renters. This is may be a by-product of our obsession with neighborhood change in just a handful of neighborhoods in New York, San Francisco and Chicago: we don’t even notice when the absolute worst-case scenario of low-income displacement for private development takes place in a major metropolitan area, because it doesn’t fit the sexy narrative we’re used to. By pretending this sort of thing only happens in Brooklyn or the Mission, we leave the low income households who used to live in these now-demolished Marietta apartments vulnerable to very real displacement.

What’s next for Franklin Road? Marietta officials are hoping to persuade the Atlanta Falcons to build a new practice facility for their professional soccer team on 50 acres formerly occupied by hundreds of apartments.

Paving Paradise

Vancouver and Seattle are regularly rated among the most environmentally conscious cities in North America. The Economist Intelligence Unit ranked them among the top five greenest cities in 2012. The State of Washington has enacted a law setting a goal of reducing greenhouse gas emissions by 25 percent from 1990 levels by 2035 (RCW 70.235.20); British Columbia’s government actually imposed a carbon tax. Clearly, this part of the world has a reputation for progressive environmental leadership. But is it deserved?

Even in Vancouver. Credit: Mark Woodbury, Flickr
Even in Vancouver. Credit: Mark Woodbury, Flickr


If we dig deeper, the reality is that when it comes to transportation policy, there’s a lot of asphalt in this part of Ecotopia. Both Washington State and British Columbia are bent on major highway building binges – while at the same time forcing investments in transit to go through a tortuous and uncertain approval process.

Two developments this week demonstrate that in spite of stated goals and sweeping rhetoric about climate change, when it comes time to lay their money down, policy decisions by state and provincial governments mean that Seattle and Vancouver are roaring ahead with investments in a car-centric, carbon-intensive transportation system.

This week, Washington’s legislature is on track to pass a $16 billion dollar state transportation package that provides $8.8 billion for new highways – plus an additional $2.8 billion to pay off debt on highways already under construction. The bill widens a major highway bridge connecting Seattle to its eastern suburbs, widens the I-5 and I-405 freeways in the Seattle area, builds a “Puget Sound Gateway” and widens roads to the airport. The environmental consequences are clear. As our friends at the Sightline Institute have documented, wider roads translate directly into greater carbon emissions: each additional lane mile of freeway produces an estimated 100,000 tons of carbon over fifty years.

To be sure, the Washington legislation also contains a transit component, but it takes a very different form than the highway spending authorization. The bill authorizes “Sound Transit” – the regional transportation agency for Seattle — to go to local voters and ask for a $15 billion local tax and fee increase over a 15 year period to expand the region’s light rail system. So highway projects get statewide funding without a vote of the people, but transit projects will be funded only from local revenue and only if local voters approve. What’s more, the legislature has ended the sales tax exemption of transit projects, meaning that the transit agency will end up paying some $500 million to the state in sales taxes, which – you guessed it – will end up subsidizing highways. In a final slap to the environment, the bill includes a so-called “poison pill” provision, prohibiting Washington’s Governor from promulgating regulations to lower the carbon content of fuels used in Washington State. As the Seattle Transit blog summarizes it: full speed ahead with highway expansion; transit will have to wait on another vote of the people to tax themselves.

And Seattle. Credit: SounderBruce, Flickr
And Seattle. Credit: SounderBruce, Flickr


A similar scenario is playing out just north of the border in Canada. It was just announced that local voters turned down a proposed increase in the half cent sales tax to fund a proposed 7.5 billion transit package. British Columbia’s provincial government forced local leaders in the Vancouver region to campaign for a tax increase to expand local rail and bus service. Voters rejected this measure by a margin of 62% to 38%. Votes were nearly evenly divided in the city of Vancouver, but the measure lost by a lop-sided margin in the suburbs.  (Detailed election returns are shown at Elections BC.)

As In Washington state, while transit has to be funded locally, and conditional on a referendum, the provincial government is more than happy to pour money into the highway system without a popular vote. On top of that, in BC’s case, they’re going into debt to do so. British Columbia has just finished a new $3 billion dollar crossing of the Fraser River. The new tolled 12-lane Port Mann Bridge replaces an 6-lane 1970s vintage predecessor, but so far carries less traffic. As a result, the new bond-financed bridge is losing about $80 million a year.  The new Golden Ears bridge nearby, facing the same issues, is losing about $45 million.  Both bridges had overly optimistic projections of traffic and toll revenues that haven’t come close to being realized.

And the provincial government is moving to double-down on its costly Fraser River bridge building spree, proposing to replace the existing George Massey highway tunnel 15 miles from the new Port Mann bridge with yet another $3 billion ten-lane bridge. This project would not be subject to popular vote, and will likely be financed by borrowing and tolls, too, running the same risks that have plagued the Province’s other projects.

Finally, as we mentioned earlier this week, Oregon’s own proposed highway expansion package failed after it was shown that the carbon reduction estimates for operational improvements (ramp metering, signal timing and the like) were overstated by a factor of five.

Even in Ecotopia, there’s a profound disconnect between the high-minded rhetoric of public leaders and the way that deals actually get done when it comes to allocating transportation investment. As Seattle Transit Blog editorialized: “Our allegedly climate-focused Governor either doesn’t grasp or doesn’t care about the link between highways and carbon emissions, and therefore fought hard for the highways.”  It’s one thing to take a pledge to reduce greenhouse gas emissions at some point in the future, its another to take the hard decisions that will change the path we we’re on.


More evidence on the changing demographics of American downtowns

Earlier this year, Daniel Hartley of the Cleveland Fed and Nathan Baum-Snow of Brown University published a novel analysis of what has been called the “Great Inversion”: the shift of higher-income people from the periphery of American metropolitan areas towards the center. (Previously, we covered another excellent visualization of this phenomenon from the University of Virginia.)

Essentially, Hartley and Baum-Snow broke down every Census tract in over a hundred metro areas into thirds, based on their income. Then they measured what percentage of people within three miles of their city’s central business district lived in a Census tract that was in the top third. Unsurprisingly, in almost every city, that percentage increased dramatically between 1980 and 2010.

Pay particular attention to cities that crossed the 33% threshold, which we’ve highlighted with a dotted line in the chart above. If high-income neighborhoods were evenly distributed across a metropolitan area, you would expect exactly 33% of downtown residents to live in a top-third tract. But in 1980, these tracts were underrepresented in all but two of the 49 largest American cities’ downtowns. By 2010, in many of these regions, they were overrepresented, reflecting the increased desirability of dense inner-city areas.

Still, despite all the progress American central cities have made in economic development, it’s important to note that most of these areas remain disproportionately poor. Even in 2010, cities where upper-income neighborhoods were underrepresented in central areas outnumbered those where upper-income neighborhoods were overrepresented by 32 to 17. And in two cities – Detroit and Indianapolis – there are no upper-income Census tracts within three miles of their respective downtowns.

Although the phenomenon is complex, we were also struck by how much overlap there was between the Cleveland Fed’s data and our findings from City Observatory’s Young and Restless report late last year. We looked just at a small slice of central cities’ demographic change – the growth in the number of young adults with at least a bachelor’s degree – but there’s a strong relationship between that indicator and Hartley’s indicator of central city prosperity:

Of course, it’s likely that a big part of this effect is about college-educated residents in general, not just the young ones. Still, juxtaposing the Cleveland Fed study with Young and Restless underscores the linkages between highly-educated residents and more prosperous central cities – as well as just how dramatically many American metropolitan areas are changing, and how far many of them have to go.