It’s the hardiest perennial in the real estate business: “Now,” your realtor will tell you, “is a great time to buy a home.”

Back in 2006, just as the housing market was faltering, that’s exactly what the National Association of Realtors (NAR) was telling us. In fact, in November of that year, the NAR launched a $40 million advertising campaign claiming boldly that it was a great time to buy or sell a home.

The campaign’s central message, according to the New York Times, was that “historically low interest rates, a large supply of homes on the market and the group’s forecast of rising prices next year make now an ideal time to buy a home.” By then, the message met a highly skeptical audience. Financial commentator Barry Ritholtz of “The Big Picture” reviewed point-by-point NAR claims about the housing outlook and concluded “EVERY SINGLE STATEMENT IN THE AD IS MATERIALLY FALSE OR MISLEADING.” (Shouting caps in the original.)

Anybody who relied on the NAR’s advice then is probably regretting it. The NAR ads claimed that “homeownership is a safe, secure way to build long term wealth.” But as millions of homeowners learned to their chagrin when the housing bubble collapsed—to the tune of $7 trillion in lost value—the folklore about homes being a safe investment was just that: folklore.

And just this week, with the benefit of hindsight, the perennial cheerleaders at the National Association of Realtors now concede that those who went house shopping during the height of the housing bubble—2005 to 2007—maybe that wasn’t such a good time to buy after all. According to a story reported in Marketwatch:

Those who bought their homes 8 to 10 years ago — 2005 to 2007, at the height of the real estate bubble — have gained almost no equity in that time, an average of just $3,000 or 1%, said Jessica Lautz, the NAR’s managing director of survey research and communication.

 

If anything, estimates that 2005-07 buyers are ahead by one percent are almost certainly overly optimistic. These are NAR’s calculations, and don’t account for the fact that many of those who bought during the 2005-07 period lost their homes to foreclosure. Since 2006, more than 16 million homes have had foreclosure actions filed against them.  Excluding those who were wiped out creates an upward “survivorship” bias in the estimated returns for those who still managed to hang on to their homes. And even for the survivors, the one percent return is actually an overstatement, for two reasons. First, it’s a total return of one percent over six to eight years, not one percent per year. And second, it doesn’t reflect the fact that the costs of liquidating their “investment” would more than wipe out this tiny amount of appreciation. It’s also important to remember that the one percent figure is an average for all buyers. While homes in some are markets, like San Francisco or New York, have fully recovered, millions of others are still underwater and buyers owe more on their mortgages than their homes are worth. These buyers have sustained a net loss on their investment.

According to Zillow, roughly 14 percent of all mortgage holders—about 7 million households—have this kind of negative equity. The largest share of these underwater homeowners bought during the height of the bubble. And when you add in the cost of selling and moving—including the commissions that go to the realtors—it’s even worse. Zillow estimates that just less than a third of mortgage holders (31.4 percent) are in a situation of effective negative equity because they don’t have enough equity to sell their home, pay closing costs, move, and make a down payment on an equivalent home.

Even as early as 2005, there were plenty of warning signs that we were in the midst of a housing bubble. Princeton economist Robert Shiller—and subsequent Nobel laureate in economics—warned for years about “irrational exuberance” in the housing market. And post-mortems of the housing crisis—including those by Atif Mian and Amir Sufi—showed how the structure of home mortgage finance encouraged buyers to take on risky, highly-leveraged bets on housing that had devastating financial and economic consequences when the day of reckoning finally came.

As tragic as the repercussions of the bubble’s collapse were for homebuyers—and all of us, really, because this triggered the Great Recession—the deeper policy question here may be whether it makes sense to position home ownership as the principal means of wealth-building for American households. If housing is a volatile, risky investment, and if returns vary so much over time and across space—which is decidedly the lesson of the housing bust—should we really be encouraging people to incur debt (mortgages) and stake their financial well-being to real estate markets? This is a question we’ll investigate further in the weeks ahead at City Observatory.

So the next time you hear someone telling you it’s a good time to buy a home, you might want to remember the old latin phrase Caveat Emptor, which today we might want to revise to read “Nam tempus nunc ut caveat emptor”: “Now is a good time for the buyer to beware.”

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Here’s how “survivorship bias” works.  For many calculations, you get very different statistics depending on when you sample a population. If you look at the statistics for just the cases that were still extant at some later date, you get an upwardly biased estimate. For example, in 2009, the sole survivor of the sinking of the Titanic—Milavina Dean—was 97 years old. If you looked only at the sample of Titanic passengers who survived to 2008, you could say the average life expectancy of Titanic passengers was 97 years.

What City Observatory did this week

1. Ways forward to more equitable land use law. Following up on last week’s posts about William Fischel’s new book, Zoning Rules!, and its arguments about how America got into its current housing crisis, we look at what Fischel, one of the country’s foremost scholars on land use law, thinks can be done to smooth out some of the current system’s problems. His focus is on ending some of the policies that privilege housing as an investment over other financial vehicles—which is a worth goal. But we’re a little skeptical it’ll have the effect on zoning policy, and ultimately housing affordability, that he imagines.

2. It’s a good time for buyers to beware. Back in 2006, the National Association of Realtors launched an advertising campaign telling Americans: “It’s a great time to buy a home.” Nearly ten years later, most people who believed them has suffered as a result. According to MarketWatch, people who bought their homes between eight and ten years ago have, on average, earned practically zero equity in all that time. And many, as we know, are deep underwater on their mortgage, or fell victim to foreclosure. Given the experience of the last decade, it’s time to ask whether we really want to tell people that such a huge, high-risk investment as a home is their best path to middle class wealth and financial security.

3. Zoning and cities on the national economic stage. Cities are usually not on the radar of national macroeconomists. But last week, the Chairman of the President’s Council of Economic Advisers gave a speech focusing on the barriers to national economic growth and mobility posed by local zoning regulations. It’s extremely encouraging to see attention paid to this at the highest policy levels—but we’re less impressed by the proposed solutions.

4. Happy Thanksgiving! We’re thankful for a lot here at City Observatory, and hope you’re having a lovely holiday.

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The week’s must reads

1. At The Century Foundation, Jacob Anbinder takes on the dysfunction of federal transportation policy. The problems are several, including the funding of dubious projects (the well-regarded TIGER grant program gave Rhode Island $9 million for a glorified gas station, in one particularly glaring example)—but the broader issue is that DC pays for capital expenditures, but not service. That means local agencies are building new lines and stocking up on new vehicles, even as the frequency of those lines falls below reasonable levels. Anbinder calculates that an increase of just 6.2 cents per gallon on the gas tax could on its own provide a major boost to local transit agencies.

2. At The Atlantic, Alana Semuels tells the story of Syracuse, New York—which has, according to the magazine, “the worst slum problem in America.” Semuels traces the story of urban renewal, highways that tore apart communities, segregation, and abandonment, especially by whites. It’s a story that’s familiar around the country, but grounding it in one city allows a level of detail and specificity that’s often lacking in conversations about urban poverty.

3. Today! Concerned urban residents around the country are using #blackfridayparking to share photos of underused parking lots—even on the day that should have some of the highest parking demand all year. The point is to demonstrate how parking minimum laws way overestimate the amount of parking people actually use, raising the cost of construction and forcing developers to create more sprawl. Read more at Strong Towns.

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New knowledge

1. Music to our ears: Jason Furman, the Chairman of the President’s Council of Economic Advisers, gave a speech explicitly connecting overly restrictive local zoning laws to economic issues of national importance—including inequality, mobility, and productivity. While Furman broke no new research ground in his speech, it represents a major political victory for these issues to be discussed at the highest level of policymakers—and the narrative he lays out is a clear, concise, and compelling argument on its own.

2. How affordable is affordable housing? While HUD-backed rental assistance programs cannot force renters to pay more than 40 percent of their income for housing, the location of subsidized units can have a major impact on transportation costs. Reid Ewing of the University of Utah looks into those costs using estimates from the Center for Neighborhood Technology, and finds that location-based affordability—the total costs of housing and transportation—is highly correlated with location in the metropolitan area. Residents of centrally-located affordable housing pay relatively small amounts for transportation; those in more sprawling areas, or farther out in the suburbs, are much more likely to pay more than they can afford for transportation.

3. “Good drivers living in predominantly African American ZIP codes are charged significantly higher premiums than similar drivers in largely white communities, even after accounting for population density and income levels,” according to anew report on car insurance from the Consumer Federation of America. And the difference is huge: about 60 percent, or more than $600, in the densest neighborhoods, for example. In upper middle income ZIP codes, blacks are charged nearly three times whites’ rates: $2,113 versus $717.

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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.

If you have ideas for making The Week Observed better, we’d love to hear them! Let us know at jcortright@cityobservatory.org, dkhertz@cityobservatory.org, or on Twitter at @cityobs.

Even we at City Observatory believe in taking a break from all things urban on Thanksgiving. But in the spirit of the holidays, we wanted to take just a minute to share some of the things we’re thankful for.

To begin with, we’re thankful for cities themselves: the places we live in and explore, that create the spaces where we try new things, meet new friends, and build communities.

We’re thankful for all the people who join us in the work of making cities even better and spreading their benefits to all—from the planners in City Hall, to the drivers of our buses and trains, to the researchers shining a light on urban problems and their potential solutions, to the community activists rallying our neighborhoods.

We’re thankful for you, our readers, who make all of our work worthwhile.

And finally, we’re thankful for the leadership and support of the Knight Foundation, without whom we would not be able to do this work.

Thanks to everyone! Have a great Thanksgiving.

What City Observatory did this week

1. The high price of cheap gas. While many economists emphasize the positive effects of low gas prices—more disposable income in consumers’ pockets, which can act as a stimulus—it’s also important to acknowledge the costs. Reducing the price of driving, shockingly enough, makes people drive more—leading to more traffic congestion, more pollution, and more injuries and deaths as a result of vehicle crashes. But the changes in behavior we see as a result of fluctuating gas prices also serve as a kind of proof of concept that many of these driving-related problems can be mitigated by getting prices right. We don’t have to wait for gas to get more expensive; we can choose to enact congestion charges, dynamic parking fees, and other measures to show drivers the true costs of using their cars.

2. The shopkeeper: A zoning parable. How did American cities get the way they are? What kinds of regulations existed before zoning, and what motivated people to change them? Jumping off of arguments made in a new book by the highly influential academic William Fischel, we tell this story as, well, a story, following a shopkeeper from the early 20th century through the postwar decades as he navigates our changing urban form—and lobbies for laws that allow him to control it.

3. The origins of the urban housing crisis. We examine Fischel’s arguments about why the 1970s were a pivotal time for American housing policy, and why our current crisis can be traced to changes made in that decade. Before the ’70s, the high-housing-price metro areas were about twice as expensive as the national average; by 2000, that gap was doubled. Fischel blames a newly restrictive crop of zoning laws, driven both by a fear of newly “encroaching” low-income and non-white residents to the suburbs, and the rapid increase in the proportion of homeowners’ wealth accounted for by their homes.

4. The Aspen Institute named “The high price of cheap gas” one of its “Five Best Ideas of the Day.” Not to brag or anything, but we were actually number one.

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The week’s must reads

1. The Obama Administration’s Rental Assistance Demonstration program, or RAD, has the potential to transform American public housing more deeply than any reform since HOPE VI in the 1990s sought to replace midcentury towers with lowrise mixed-income developments. In the latest issue of Planning (warning: paywall), Jake Blumgart takes a closer look at RAD and another Obama program, Choice Neighborhoods, which grew out of HOPE VI. RAD responds to rapidly declining funding for public housing by allowing local housing authorities to transfer public housing units to project-based Section 8 units, which have a better shot at government funding and can leverage private investment. While the program requires one-for-one replacement and a right of return for tenants displaced by RAD-related rehabilitation of older units, Blumgart talks to some people who are concerned that current public housing residents will be made more vulnerable.

2. Are we in the midst of another housing bubble? The Federal Reserve of San Francisco suggests that the answer might be no. In contrast to the housing boom of the 2000s, which featured an extremely rapid rise in the ratio of housing prices to rents and household mortgage debt, the real estate cycle that began in 2011 has had a slower rise in prices and has actually seen a decline in the ratio of mortgage debt to personal income.

3. When we talk about “density,” we’re usually referring to a place’s residential population—but Simon Vallée at Urban Kchoze points out that the density of commercial establishments is also an important part of a complete urban neighborhood. He argues that “urbanizing” suburbs won’t work until the problem of dense commercial corridors has been solved, since they serve as major destination centers—and as we’ve written about at City Observatory, the density of destination centers is one of the most important factors in allowing public transit and other non-automobile-based transportations to be efficient ways of getting around town. “Currently,” Vallée writes, “commercial centers [in suburban areas] tend to be both extremely low-density and far from residential areas. Both of these need to be reversed.”

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New knowledge

1. An economic impact analysis conducted for WMATA in the Washington, DC area finds that the growth in office rents has been much stronger close to 15 new Metro stations built since 1999 than in non-transit-served locations. While we often talk about demand for transit-served locations in terms of housing, this is additional evidence that the trend applies to office and employment centers as well.Increasing office rents are a sign of the growing value that employers place on being in the transit-served locations that appeal to workers who want to live in and near cities. Employers want access to workers; workers want travel choices and convenience.

2. A team of Columbia University researchers has provided even more evidence for the “great inversion” of demand towards city centers, rather than suburban peripheries. They find that while in 1980, housing got more expensive as you traveled further from American downtowns, by 2010, that pattern had reversed. They propose that a large part of this trend is that high-skill, high-earning workers have a lower tolerance for longer commutes than previously, leading them to seek housing closer to their jobs. At the same time, this trend is self-reinforcing, as more high-skill jobs are moving to city centers to take advantage of the growing talent pool there.

3. At the Urban Edge blog at Rice University’s Kinder Institute for Urban Research, Andrew Keatts investigates some of the research about why liberals tend to favor denser, more urban neighborhoods than conservatives. As he points out, there isn’t necessarily any obvious reason why that should be so—but Arizona State University professor Paul Lewis has some ideas. His research suggests that there may not be any conscious ideological chain from political beliefs to urban planning preferences, but that both sets of ideas come from certain emotional intuitions: whether people feel a lot of in-group loyalty, for example.

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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.

If you have ideas for making The Week Observed better, we’d love to hear them! Let us know at jcortright@cityobservatory.org, dkhertz@cityobservatory.org, or on Twitter at @cityobs.

It’s hard to think of an issue that is more quintessentially local than zoning. It’s all about what happens on the ground on a specific piece of property in a particular neighborhood. It’s the bread and butter of local governments and neighborhood groups. Zoning and land use seem about as far removed from national economic policy as just about any issue you can imagine.

Or so you might have thought until last week.

 

On November 20, Jason Furman, Chair of the President’s Council of Economic Advisers delivered a speech at the Urban Institute that is required reading for all city leaders. In it, he spells out why zoning—and by extension, how we build cities—matters vitally to tackling national problems ranging from accelerating economic growth to broadening opportunity to reducing inequality. The Furman speech has already drawn media attention: Matt Yglesias, who’s been on the zoning beat for a while, wrote in Vox that Furman’s speech demonstrated that “regulations mandat[ing] single-family homes” are “a disaster” for “younger people, for renters, and for the overall cause of social and geographic mobility.”

The Atlantic, in its story, emphasized that Furman “isn’t alone in his belief that the growing prevalence of economic rents are one of the root causes of inequality today.” It also related some of the history about how zoning became such a powerful force in metropolitan economies—much of which overlaps with what we published here last week.

This is a big deal. For the most part, macro-economists don’t much concern themselves with cities. Sure, they’ll focus in on housing starts—because housing construction and finance are so closely related to the economic cycle and so sensitive to changes in monetary policy. But most of urban economics is generally treated by these national economic modelers as a quiet backwater of applied microeconomics. So having the Chair of the Council of Economic Advisers weigh in on urban issues, especially zoning, is significant.

In his remarks, Furman links what’s happening in cities to two big macroeconomic problems: the slowdown in productivity growth, and the rise of income inequality.

 

The argument on productivity is this: By bringing people together, cities facilitate the formulation and application of new ideas that propel innovation, creating new products and lowering costs. These so-called “agglomeration economies” are a major factor in lifting productivity. For a variety of reasons, some cities are more productive than others. Historically, people have moved from less-productive regions to more-productive ones, because places with higher productivity tend to have better wages. In the process, they increased the productivity of the country as a whole.

But since the 1970s, many of the most productive cities have greatly limited the expansion of their housing supply, and thus the number of people who can move there. In other words, they hold back population growth in the very places that are the biggest contributors to economic opportunity. Fewer people end up living and working in the most productive cities, and more people end up living in somewhat less productive cities. Two Berkeley economists have estimated that the total value of lost output due to this lower efficiency because some highly productive cities aren’t as large as they might be over a trillion dollars annually.

The constrained housing supply argument recognizes that a major source of upward economic mobility is the ability of Americans to physically relocate to places with greater economic opportunity. Furman notes that physical mobility has decreased in the US over the last several decades, and that in-migration has been suppressed in exactly those places with the highest levels of productivity. That means fewer opportunities to move up the income ladder, especially for the lowest income segments of the population, who are most sensitive to housing costs in their decisions about moving.

The argument on inequality is based partly on this observation about the constrained housing supply in highly productive cities, and partly on the work of Raj Chetty and his colleagues at the Equality of Opportunity project. Intergenerational economic mobility—measured as the likelihood that children born to families in the lowest income quintile will see a substantially different economic outcome as adults—varies substantially among metropolitan areas. Chetty found that one of the important correlates of this kind of economic mobility was whether a metropolitan area had a high level of economic segregation: having high income and low income people live in widely different parts of the metropolitan area. Again, local zoning plays a key role in determining whether housing opportunities are widely available within metropolitan areas for persons of all income levels.

Although he didn’t mention it in his speech, Furman could also have pointed to the work of Matthew Rognlie. Rognlie has shown that capital gains from housing—that is, the money homeowners earn in part by using zoning to increase the price of their property—are a major component of rising inequality between the upper end of the income distribution and everyone else. All of the net increase in capital’s share of income has been in the form of returns to housing. Given the important role of housing in driving income inequality, it’s important to pay attention policies—like local land use restrictions—which can drive up housing costs.

To us at City Observatory, these observations show the pervasive and powerful effects of what we’ve called the nation’s shortage of cities. The high and rising demand for urban living is daily colliding with our limited ability to rapidly expand the supply of great cities, great urban neighborhoods, and housing within those cities and neighborhoods. Part of the problem is just that demand can—and has—changed much more rapidly than supply—people’s tastes change quicker than we can build new houses, much less neighborhoods and cities. And a key factor impairing our ability to meet this demand is local land use regulations.

As Furman calls out, all the things that impede increments to housing supply including density restrictions, parking requirements, prohibitions on mixing different uses in a single neighborhood—contribute to higher prices, less mobility, lower economic growth and greater inequality.. In fact, the “modern” approach to planning has made the most desirable, most valuable most in demand kind of neighborhood—walkable, dense, mixed use urban development—actually illegal in most places.

While Furman’s speech is a welcome acknowledgement from the most authoritative economic voice in the federal government of the importance of cities, his suggested federal actions for dealing with the problems he identifies are pretty small bore.

Furman sketches out three federal initiatives: the administration’s new rule on Affirmatively Furthering Fair Housing), which would block local policies that locate new public housing in ways that reinforce patterns of segregation; a new $250 million loan fund for affordable multi-family housing projects; and a proposal—probably doomed—by the administration to make grants to local governments to overhaul their zoning ordinances. While these are steps in the right direction, they are just the tiniest of baby steps.

Furman does little to acknowledge the prodigious federal role in promoting and reinforcing the local status quo that he recognizes is so damaging. For decades, federal tax, expenditure, and financial policies have made home ownership the de facto preferred means for American households to build wealth. The efforts have been buttressed by everything from policies of the FHA which discouraged multi-family housing in established neighborhoods, and highways that subsidized sprawling, low-density single family owner occupied housing developments. Even the nationwide adoption of zoning traces its roots back to Herbert Hoover’s efforts at the U.S. Department of Commerce in the 1920s to develop and propagate model zoning codes. As long as homeownership remains effectively the only federally sanctioned vehicle for wealth accumulation for lower- and middle-income families, is it any wonder that they devote enormous energy to protecting their investments?

It’s definitely fair to say that local zoning is a major factor in shaping our shortage of cites. But it’s equally important that local zoning is underpinned by a web of federal policies that make it difficult to do anything different from what we’ve done. Now that CEA has puts its finger on this problem, we hope that it will keep working and come up with a set of policy recommendations that is fully commensurate with the scale of the issues involved. This high level federal interest is long-overdue and well-warranted, but there’s much more work to be done.

This year, William Fischel, a professor at Dartmouth and one of the country’s leading scholars of land use policy, published a new opus on zoning: Zoning Rules! There’s far too much in the book to do a comprehensive review, but we’re going to pick out some of the most interesting and important arguments for posts over the next week or so.

The chapter with perhaps the broadest interest answers a basic question: How did we get here? While many people who follow urban issues, especially housing, are familiar with some of the basic arguments about how zoning acts as an exclusionary policy that keeps home prices higher than they ought to be, few are familiar with where these issues came from, and why they have become so much more prominent in recent years.

Fischel describes the evolution of land use law from a series of somewhat ad hoc regulations imposed by people with mixed interests in neighborhood development, to the creation of zoning and all-residential suburban neighborhoods protecting themselves against residential “overdevelopment” and industry in the 1920s and 30s, and finally the land use revolution of the 1970s, in which the growing financial importance of homeownership and new powers to stymie developments changed “exclusionary zoning” from something that happened on the level of the municipality to something that happened on the level of the metropolitan area—with wealthy coastal regions beginning to pull away from the rest of the country in their cost of living.

Instead of simply summarizing Fischel’s narrative, we’ve turned it into a “zoning parable,” following one (long-lived) shopkeeper as he experiences (and takes advantage of) the twists and turns of local land use controls. This parable is meant only to reflect Fischel’s arguments—we’ll comment on and critique them in a follow-up post.

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You’re a 20-year-old shopkeeper. It’s 1900. You live close to the middle of a large American city, in an apartment above your shop. The city is growing rapidly, and new apartments are going up all around your neighborhood, replacing smaller two-flats and single family homes. It’s a lot of change, and you remember when you were a child and the neighborhood was quieter, when there were more yards—but you also can’t help but notice that every time a new development is completed, the stream of customers to your shop gets a little bit bigger, and your cash register gets a little fuller. So you don’t complain.

 

A few years later, you move out to one of the new bungalow subdivisions in a newly-incorporated suburb just outside of town. You take a streetcar to work, so you can separate your life between the quiet of your residential neighborhood and the busy, densely-packed district that keeps business steady at your shop. But you notice almost immediately that they’re starting to build city-like apartments near the streetcar stops; within a year or two, a stretch of blocks that were all single-story single family homes, or even empty fields, are converted into a newer version of the neighborhood you left.

As the community grows, your tiny municipality’s ability to provide basic services is strained. It seems like the best solution is to accept annexation into the center city—just like your old city neighborhood had once been a suburb, and was swallowed up by the metropolis as it developed.

Several years later, your business is doing so well that you can afford to buy one of those newfangled cars. With the car, you move out beyond the city limits again—but this time, you don’t move next to a streetcar line. You know that that’s where developers build apartments. You move a mile or so away, to another new subdivision, from which you can drive to work. When the streetcar company requests permission to build a new line near your house, you and your neighbors organize to stop it, and keep away the apartments and density you know would come along with it.

 

But overnight, it seems, trucks begin appearing on the streets around your neighborhood. Businesses, freed from the need to locate along rail lines, have been building small factories and plants all over the suburban periphery. You’re not just worried about the noise and pollution—you’ve invested quite a bit of your savings into your new house, and you’re concerned that new businesses might affect your property value. Plus, you don’t live anywhere near your shop now, and you’ve got nothing to gain from new development that might bring more people to the area.

Fortunately, there’s a new legal mechanism your neighbors and city leaders are talking about: zoning. With zoning, you can make it illegal to build industry anywhere near your residential neighborhood. You can also make sure that no one builds apartments on your block of bungalows, which you worry might cast some shadows, add too much traffic, and reduce the value of your home.

Since growth in your community is now capped, when representatives from the big city come along asking about annexation, you’ve got no good reason to say yes. You don’t need their help with services, and you’d like to maintain control over the zoning process locally. Your community will stay a suburb.

 

This state of affairs works for a while. Jobs stay in the central city, and your suburban neighborhood remains mostly single-family residential, although it allows pockets of industry and apartments within certain districts. Some suburbs are even more restrictive, protecting their large homes on large lots; others are more open to development, according to their political balance and neighbor preferences.

But in the years after World War Two, things begin to shift. They start building highways from the suburbs to the city, which brings much more pressure for development. It seems way more people have cars now—including people who never would have been able to afford them before, people you might have wanted to stay in the city—and they start looking for housing outside in the suburbs. Traffic gets worse.

Over the coming decades, there are other issues, too. Civil rights organizations involved in the “open housing” movement begin talking about taking on suburban “exclusionary zoning”—places that use zoning in a discriminatory way to allow only high-end residential development, out of financial reach for most black households. It looks like only allowing high-end development might get you in trouble with the courts; some towns decide that not allowing any development is a safer course.

 

Moreover, over the course of your retirement, your home has made up a bigger and bigger part of your wealth—and the same is true of your neighbors. Although you don’t know it, this is a nationwide phenomenon: the proportion of household wealth owed to homeownership will increase by almost 50 percent from the 1960s to the end of the 1970s. That makes homeowners like you even more sensitive to any changes in the neighborhood that might affect the value of your largest investment.

At the same time as you and your neighbors have more reason than ever to be wary of neighborhood changes, there are new tools to help you exert control over those changes. You’ve heard of nearby towns using the National Environmental Policy Act, passed in 1970, to sue to stop development on environmental and conservation grounds. And the creation of a new regional planning body means that there are now at least two levels of government you can appeal to with the authority to stop development—and you just need one of them to agree with you to win.

This revolution in land use planning in the 1970s means that your metropolitan area no longer has a mix of pro- and anti-growth towns. Almost anywhere homeowners live, they’re demanding a stop to almost all development, worried about their massive investments in their homes—and most of the time, they have the ability to win.

But you’re not too worried about that. Sure, individual towns have been able to use zoning to keep their home prices high—that’s the whole point, right?—but there’s no way that could happen to an entire region. You can’t imagine a whole metropolitan area becoming so expensive that it forces people to move not just to a cheaper suburb, but a cheaper part of the country.

That probably won’t happen.

Last week, going off a recent book by William Fischel, we published a parable that explained the evolution of American zoning over the 20th century, from non-zoning land use in the early years to the introduction of true zoning in the 1910s and 20s, and the “land use revolution” of the 1970s that helped create the current crisis of high housing prices. Then we dove in more detail in Fischel’s theories about why that land use revolution happened in the 1970s—and what its impacts were on the country.

Today, we’ll look at his proposed solutions to what he sees as the problems created by zoning: the exclusion of residents based on class and race, both at the level of the neighborhood or suburb and, increasingly, at the level of the metropolitan area; and excessively low-density development that encourages environmentally and economically costly sprawl.

For Fischel, “the key to reform is understanding that zoning is not the product of top-down policies.” Rather, he sees it as a bottom-up demand from homeowners to protect the value of their property, which is usually the single largest asset they have—and which stands to cause them serious financial hardship if its value declines. In his view, any reform that doesn’t address this fundamental concern is bound to fail in a political system where homeowners wield large amounts of power, particularly at the local level. (He details a series of such losses: from professional planners’ attempts to demolish “nonconforming” buildings in the early years of zoning regulations, to court-led efforts to rein in exclusionary zoning during the “open housing” era of the Civil Rights Movement.)

One of the things that makes housing a more attractive investment than, say, stocks, is that the federal government subsidizes the purchase of housing through policies like the mortgage interest tax deduction. In fact, this is a key part of Fischel’s argument about why zoning became more severely restrictive in the 1970s: in an era of relatively high inflation, tax exemption becomes even more attractive because the nominal gains from any given investment are larger.

So a central part of Fischel’s proposal is to curtail the mortgage interest tax deduction. Ending a subsidy to large numbers of relatively influential voters, of course, is unlikely to get far in a democratic political process, so his reforms are somewhat more targeted:

• First, allow the deduction only for one principal residence. After all, if the reason for subsidizing homeownership is that we believe owning a home makes people and society better off, then subsidizing second and third homes doesn’t really make sense to begin with.
• Second, cap the amount of subsidy per household. At the moment, the mortgage interest tax deduction pays the vast majority of its subsidies to high-income owners of extremely expensive homes. Again, if the goal is simply to promote homeownership, it seems unnecessary to give very large subsidies to already high-income households.

In addition to reforming the mortgage interest tax deduction, Fischel proposes restoring the capital gains tax for housing. This would also make housing a much less attractive investment, and reduce the incentive for homeowners to lobby for regulations that increased their home’s value, since they would now have to pay a tax on any increase in that value.

How promising are these reforms? It’s not totally clear. The two changes to the mortgage interest tax deduction seem underwhelming. After all, according to Fischel, what’s important about the mortgage interest tax deduction is not the total amount of money spent by the government on subsidies; it’s that it distributes enough subsidy to enough homeowners to create a broad political coalition with a strong incentive to push for zoning regulations that increase home values. Ending the subsidies to very high-income homeowners, even if it reduces the size of the program significantly, is unlikely to affect the majority of people in this coalition. (Of course, freeing up all that money for more deserving programs is a benefit on its own.)

Moreover, it seems unlikely that even existing homeowners affected by these changes would be more amenable to threats to their property value. The heart of the problem is that housing is an undiversified, unhedged investment—homeowners have put all their eggs in one basket, so to speak, and so are reasonably very, very cautious about anything that might affect its value. The real lever here, to the extent there is one, might be that prospective homebuyers would stay in the rental sector longer, reducing the size of the “homevoter” coalition.

By contrast, ending the exemption for housing in capital gains taxes would affect the entire coalition, dampening the demand for housing, and interest in it as a financial investment, across the board. That seems much more promising.

But there are still big problems. First is an issue that Fischel himself identifies: increasing zoning regulations seem to work as a one-way ratchet. In fact, that’s part of the point: if the goal is to give homeowners assurance that their property values will be protected, then the laws that do the protecting need to be hard to undo. But it’s also an empirical observation: the end of high inflation after the 1970s does not seem to have undone the more extreme zoning restrictions created in that period. In the same way, Fischel notes that during the housing bubble of the mid-2000s, there was a sudden rise in “neighborhood conservation districts,” which imposed even more development restrictions on the communities where they were adopted. After the housing crash, the number of new conservation districts plummeted—but there was very little evidence that those that had already been established were discontinued.

So even if these measures are successful in ending the demand for increasingly strict zoning laws, it seems far from obvious that they would clear the way for reducing the stringency of existing laws—which, as we’ve established, are already strong enough to have serious effects in raising housing prices and promoting segregation and sprawl.

Moreover, as we alluded to before, the idea that people demand strict zoning primarily for financial reasons is not undisputed. As Sonia Hirt argues in Zoned in the USA, it may be that Americans are culturally invested in the ideal of low-rise, single-family housing. And it does seem to be true that many people who oppose higher-density homes argue based on cultural values—even if the stories they tell about the virtues of single family homes are demonstrably untrue. Moreover, maintaining “community character” clearly often has a social status element that racial and economic diversity directly attacks. That issue would be left untouched by Fischel’s recommendations.

Fischel also has some institutional changes that are less about changing political incentives than limiting their power—for example, removing the double-veto system in which both local and regional government bodies have the ability to block development independently. But in many cases, single veto points at the local level seem more than sufficient to create problematic growth controls.

Zoning Rules! is not only one of the most comprehensive explanations of how zoning works in American cities today, but also of why it is so widespread in its modern form. But partly because it is so convincing in its description of the political justifications for zoning, it makes the task of designing realistic but meaningful reforms daunting. We may still be waiting for the book that offers them.

Yesterday, we published a “zoning parable,” based on William Fischel’s arguments for why and how zoning regulations developed in American cities over the 20th century. Today, we’ll expand a bit on one of the book’s major arguments in non-parable form.

The 70s: What happened?

For people who care a lot about housing but aren’t ready to read 430 pages about zoning, perhaps one of the most interesting and important arguments in the book is that our current crisis of high housing prices has its roots in the land use revolution of the 1970s.

Prior to that decade, Fischel writes, zoning had certainly been effective in creating exclusionary communities—since the 1920s, many critics (and some proponents) had argued that that was the whole point. It did so by creating legal districts where only high-cost housing could be built. But these exclusionary communities existed at the scale of the neighborhood or the suburb: other municipalities in the same metropolitan area acted as a kind of housing development safety valve, accepting higher-density development and keeping the regional housing market more or less in balance.

But in the decades after World War Two, something changed. Suburbs that had been pro-growth amended their zoning laws to shut the door on higher-density housing—and sometimes any housing at all. As a result, exclusionary zoning was transformed from something that constrained development in individual communities to something that could operate on the level of an entire metropolitan area.

The results have completely changed the economic geography of American cities. Before the zoning revolution of the 70s, the highest-cost metropolitan areas had home prices that were about twice the national average; by 2000, that gap had doubled to four times greater than the national average. The chart below shows this dramatic change in another way. It compares the number of metropolitan areas (along the y axis) by their median home price (along the x axis). In 1950, there wasn’t a ton of variation: some places were more expensive than others, but the gaps were relatively small. By 2000, there were many fewer “normal” metro areas around the peak, and a very long tail, representing the extremely high housing prices in elite regions.

 

As a result, migration to these high-cost, high-productivity regions has slowed significantly. All of a sudden, one of the major ways that low-income people had improved their economic status—moving to a place with more and better-paying jobs—became impractical in the face of steeply rising home prices. For many years, high-income states had seen the country’s highest levels of in-migration; but in this period, that pattern came to an end, as the high cost of living more than offset higher incomes for many people.

As these high-cost metro areas became more and more exclusionary, the gaps in average income between regions, which had been declining for a century, suddenly reversed course. In 1940, median income in Connecticut had been 4.37 times greater than that of Mississippi; by 1980, that figure had declined to 1.76. But in the next thirty years, it ticked back up to 1.77. The end of regional income convergence appears to have played a significant role in rising levels of national income inequality, which began to increase at around the same time.

Zoning Rules! is not the first or only place this story has been told. Fischel’s novel contribution is in trying to explain why this change took place. He identifies several major factors, including:

1. The construction of the interstate highway system allowed industrial and commercial development to move into the suburbs. In addition to threatening the residential character of the suburbs, this development meant that lower-income people, who may previously have wanted to stay close to central cities for better access to jobs, had reason to move out to suburbs in pursuit of decentralized employment centers. Many suburbs reacted by increasing restrictions on new housing.
2. The challenge to “exclusionary zoning” as part of the Civil Rights Movement. In the 1970s, a series of lawsuits challenged suburban zoning that favored single-family home districts on grounds of discrimination, and some of them, including the Mt. Laurel case, appeared to have a credible chance of overturning existing regulations. In response, Fischel argues, many suburbs adopted the “seemingly neutral policy of restricting all development, not just that for low-income people.
3. The granting of legal standing to opponents of development. Laws like the National Environmental Policy Act gave neighbors the ability to sue to stop developments on environmental grounds, which were more sympathetic than previous arguments based on property values or “community character.” (More sympathetic and also, Fischel admits, sometimes actually legitimate.) Previously, “neighbor suits” against development had generally failed; they became much more successful starting in the 1970s.
4. The creation of multiple veto points. In the 1970s, metropolitan areas began to create regional governments with some planning power. But rather than giving them the ability to overrule local regulation, the new bodies created a “double veto” system in which an objection at the local or regional level could derail a development project.
5. The rapid growth of home values as a part of homeowner wealth. Between the 1960s and 1979, housing increased from 21 percent of net household wealth to 30 percent. Rising inflation and the mortgage interest tax deduction combined to make housing a much more attractive investment than more heavily taxed capital gains, like stocks. This made homeowners much more sensitive to development that might affect their property values.

 

Of these, Fischel puts by far the most weight on the last. One of the major themes of the book is that zoning, which is often portrayed as a technocratic, top-down set of regulations spearheaded by professional planners, is actually driven by grassroots—more specifically, homeowners’—demands to protect their home values. (Though that explanation isn’t uncontested—scholars like Sonia Hirt, for example, privilege arguments about the cultural appeal of single family homes in America.) Over and over, “elite” efforts to enact zoning changes against the wishes of these voters have been defeated. Notably, this is true both for efforts to make zoning more severe, as in the campaign to demolish “nonconforming” homes; and to loosen it, as in the case of court-driven attempts to break exclusionary zoning.

So increasing the incentives for these “homevoters” (to use Fischel’s term) to clamp down on new construction is hugely important—and, crucially, self-reinforcing, as successfully protecting property values makes homes an even larger part of homeowners’ financial portfolios, so people are even more sensitive to their price fluctuations, and so on. It also means that efforts to reform zoning laws to reduce their exclusionary effects (and their role in promoting sprawl by limiting density) need to address this demand for zoning.

Monday, in our last post on Zoning Rules!, we’ll talk about what Fischel proposes to do about that.

What City Observatory did this week

1. What filtering can and can’t do. In most cities, the majority of homes that are affordable to people of modest or low incomes don’t receive special affordability subsidies—they’re just cheap market-rate housing. But since very little housing is built for people of below-average income, how does it get that way? The answer is “filtering”: the process of housing becoming cheaper, and occupied by lower-income people, as it ages. We look at a groundbreaking study on exactly how filtering happens to shed more light on the issue. Rental housing filters much more quickly than owner-occupied, and both only “filter down” (become cheaper) for the first half century or so of their existence. Most importantly, in regions where housing prices are rapidly rising—including much of the East and West Coasts—the filtering process is held back, eliminating a major source of “naturally occurring” affordable housing.

2. A helicopter drop for the asphalt socialists. A popular idea to stimulate the economy among macro economists is a “helicopter drop”: simply crediting every American with a certain amount of extra money in their bank account. Not surprisingly, this has not caught on with politicians—especially the advocates of free markets and personal responsibility in Congress. But now, those same legislators have passed just such a helicopter drop for drivers, bailing out the Highway Trust Fund with money from the Federal Reserve to avoid raising gas taxes, or any other funds that would cause drivers to pay something closer to the actual cost of using public roads. It’s long past time to drop the charade that our transportation system is anything like a free marketplace, and recognize that when it comes to driving, we’re governed by asphalt socialists.

3. Journalists should be wary of “median rent” reports. Some real estate outlets have received media coverage recently for reporting median rents in cities across the country based on their listings. But these reports are often extremely unreliable. We look at one of the more prominent outlets, Zumper, and its “National Rent Reports” to see if the numbers hold up—and they don’t. Instead, because Zumper’s listings are heavily concentrated in high-end neighborhoods, its reports likely significantly overestimate true median rents. Rising housing costs are an important story, and should be covered—but they’re also worth getting right.

4. The Atlantic published another City Observatory piece this week. Under the headline “Are Food Deserts to Blame for America’s Poor Eating Habits?”, Joe Cortright explores recent research about to what extent breaking up “food deserts”—pockets of urban neighborhoods without full-service grocery stores—leads to healthier food consumption in those neighborhoods. The evidence suggests that low incomes are a much bigger impediment than “food deserts,” perhaps because neighborhoods can be considered “deserts” if there are no grocery stores within as little as a mile or half-mile radius.

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The week’s must reads

1. In tony Park Slope, Brooklyn, eight cyclists were cited between 2008 and 2011 for riding on the sidewalk. In Bedford-Stuyvesant, a poorer, blacker neighborhood nearby, that figure was over 2,000. The New Yorker explores the extremely uneven application of “quality-of-life” policing more than three decades after the introduction of the extremely influential “broken windows” theory of crime, which suggested that tolerance for low-level infractions emboldened criminals to commit more serious, and violent, offenses. Despite the fact that some of the country’s most respected researchers have failed to find any evidence that this theory is true, it remains conventional wisdom in many police departments.

2. While we criticized Congress this week for continuing to shield drivers from the true price of using the road, Washington, DC, is making progress on that front.Greater Greater Washington reports on a new initiative there to change parking prices by location and time—raising them in places where parking is in high demand, and lowering them where it’s not. The idea is that by allowing parking prices to respond to demand, higher prices will keep people from occupying spaces on very busy streets for too long, making sure that newcomers have somewhere to park. On the flip side, reducing prices will encourage people to go where there are many open spaces.

3. A reminder that making progress on integration and affordable housing goes beyond passing laws: Chicago’s WBEZ investigates the Housing Appeals Boardcreated by Illinois’ Housing Planning and Appeal Act of 2003, and finds that it has yet to hear a single case. The state law was meant to be a potential override to exclusionary local zoning laws, allowing the state to override municipalities that rejected affordable housing developments. But although many municipalities remain below the 10 percent affordability threshold established by the state, home rule exceptions, and a general lack of faith in the board’s ability to enforce its decisions, have rendered it essentially defunct before it could even begin.

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New knowledge

1. Via CityLab, the California Department of Transportation officially cited a UC-Davis policy brief concluding that “induced demand” is real: that is, building more highways and roads causes more people to drive. According to the brief, “a capacity expansion of 10 percent is likely to increase [vehicle miles traveled] by 3 to 6 percent in the short run and 6 to 10 percent in the long run.” Importantly, this doesn’t just mean that the expanded roads see more driving because people shift there from other routes: the total amount of driving in the whole system increases.

2. At Planetizen, Jennifer Evans-Cowley writes about research on the use of helmets by bike share cyclists. In general, bike share cyclists use helmets less often than other cyclists, though there’s lots of variation by place and demographics. And while the proportion of bicyclist injuries that are head injuries increased in five cities that introduced bike share systems, the total number of head injuries (and total injuries) decreased, probably because of some combination of the “safety in numbers” effect and improved bicycling infrastructure.

3. Nick Revington of the University of Waterloo writes about the “youthification” of North American urban centers, showing how people between the ages of 25 and 34 are increasingly likely to live in relatively high-density urban neighborhoods, even as the home locations of older cohorts become increasingly correlated with lower density. This sort of “age segregation” is becoming more pronounced in many metropolitan areas, with potentially important implications for planning—both in how to accommodate young people in city centers, as well as how to accommodate older people in currently low-density, auto-oriented communities. (You may also be interested in reading a City Observatory take on this phenomenon, “Young and Restless.”) Below: maps showing the concentration of young people in Seattle, and the relative lack of young people in central Detroit, one of the few cities to buck the trend (as of 2010).

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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.

If you have ideas for making The Week Observed better, we’d love to hear them! Let us know at jcortright@cityobservatory.org, dkhertz@cityobservatory.org, or on Twitter at @cityobs.

Trying to measure average housing costs for neighborhoods across an entire city—let alone the whole country—is an incredibly ambitious task. Not only does it require a massive database of real estate listings, it requires making those listings somehow representative at the level of each neighborhood and city.

For a number of reasons, just taking the average of all the listings you can find is likely to produce extremely skewed results, with numbers much higher than true average home prices. For one, many apartments, especially on the lower end of the market, aren’t necessarily listed in places that are easy to find—or at all. Instead, landlords find tenants with a sign on a fence or streetlight pole, local (and not necessarily English-language) newspapers, or just word of mouth. On top of that, if you have two homes of similar quality but even slightly different prices, you would expect the cheaper one to rent or sell more quickly. As a result, it would spend less time listed than the more expensive home; any given sample of listings, then, would tend to over-represent those more expensive, harder-to-rent homes. (If this doesn’t make sense, read the “visitors to the mall” example here, explaining a similar statistical problem with attempts to measure prison recidivism.)

So we’re sympathetic to anyone taking on this challenge. But that doesn’t mean that organizations who take it on but fall short should be given a pass.

Take, for example, Zumper. Zumper is a relatively new website that features rental listings in cities around the country. So far, so good. Zumper has also made a name for itself through its “National Rent Reports”—more or less monthly press releases that claim to track median rental prices around the country. These reports have received copious media coverage, from the Bay Area to Seattle to Nashville to Chicago to Boston to LA to Miami to Denver, and so on.

Unfortunately, Zumper’s reports also appear to be severely affected by the problems we listed above, and possibly others. I first noticed this in its report for my hometown, Chicago. Back in August, Zumper’s National Rent Report declared that the median one-bedroom apartment in Chicago cost $1,920—a number that would raise eyebrows among anyone who has actually looked for one-bedroom apartments in that city. A cursory glance at Zumper’s neighborhood-level data reveals issues that should call the entire report into question. 

 

“Median,” of course, means that half of Chicago’s one-bedroom apartments ought to cost more than $1,920, and half ought to cost less. But according to Zumper’s own data, just three of the city’s 77 neighborhoods had median one-bedroom rents of over $1,920. While apartments are definitely not distributed evenly over the city, so you wouldn’t necessarily expect an even split in terms of neighborhoods, it’s simply not plausible (or supported by, say, the Census) that half of the city’s apartments are in just three of its neighborhoods.

It seems more likely that half of Zumper’s listings are in just three of the city’s (wealthiest) neighborhoods. As of the writing of this article, Zumper claims to have over 4,000 apartments listed in the Near North Side—the most expensive part of the city—and just 11 in Jefferson Park, five in West Garfield Park, and zero in South Lawndale, three of the cheaper neighborhoods.

Nor does it appear that Chicago is the only city with this problem. In Los Angeles, it appears that about 25 neighborhoods have median rents above the supposed citywide median—and about 70 have ones below. In Philadelphia, Zumper’s map shows just 11 neighborhoods with median rental costs at or above the supposed citywide median, and over 40 below; the proportion is similar in San Diego. The skewed distribution of Zumper’s listings is also apparent in these cities: the relatively more expensive Philadelphia neighborhoods of Rittenhouse Square, Center City East, and University City have 99, 219, and 94 apartments listed, respectively, while the less-expensive communities of Elmwood, Kingsessing, and Mill Creek have 19, 25, and 8.

These comparisons likely understate how inaccurate Zumper’s numbers are. After all, if its listings skew towards the higher end of the market, they likely not only oversample wealthier neighborhoods, but also more expensive properties in those neighborhoods, meaning that the true median rent in each neighborhood, not just the city as a whole, is below what Zumper reports.

Comparing Zumper’s citywide medians to estimates from Zillow, which is generally regarded as one of the more accurate estimators of real estate prices, reveals a mixed bag. (We looked at numbers for September, the latest month Zillow has reported listed prices.) In some cities, the two sources give roughly similar numbers: Zumper estimates the median listed one-bedroom apartment cost $2,110 in Washington, DC, versus Zillow’s estimate of $2,149; the estimates for Los Angeles are $1,830 and $1,850, respectively. But in many places, they’re quite different. In New York, it’s $3,160 versus $2,300; in Chicago, $1,920 and $1,550.

Zumper responded to our inquiries over Twitter and email. A spokesperson said that Zumper “stands firmly behind [its] rental data.” He added: “We have some of the strongest inventory from which to analyze…. We are reporting on true, asking rents seen in the market, and do not create an algorithm to estimate value.”

Of course, put another way, this is largely our point: Zumper takes the median from its listings, without compensating at all for the fact that its listings are disproportionately concentrated in higher-end neighborhoods. While it may be true that Zumper has a relatively large inventory of rental homes in its database, that’s akin to an online pollster saying that their polls must be accurate because they got so many votes. While quantity matters, at a certain point, quality—representativeness—matters much more.

On Twitter, Zumper’s CEO also told us that the National Rent Report focuses on the median apartment available for rent, and doesn’t claim to take into account apartments that are currently occupied. But as an explanation for Zumper’s concentration of listings in high-end neighborhoods, that doesn’t really pass the smell test: differences in housing turnover between wealthier and less-wealthy communities are several orders of magnitude too small to account for, say, the gap between the number of listings in the Near North Side and Jefferson Park. (Note that the Zillow estimates we described above are also for listed apartments.) Nor are claims that that gap is “in proportion to how many people move” to each of those neighborhoods plausible.

We should note that none of this is really a problem for Zumper’s main business, which is being a database for people looking for a place to rent. But it does mean that they should not be used as a reliable source for rental data, just as journalists shouldn’t report on real estate trends by simply adding up every listing on Craigslist.

Housing affordability issues are real, as we’ve written about here extensively, and the media absolutely should be reporting on home price trends, both locally and nationally. But precisely because these issues are so important, it’s crucial that the data that gets reported is reliable. Until it addresses the problems we’ve brought up here, Zumper’s rent reports are not, and journalists should be aware of that.

Fortunately, there are other organizations doing excellent work on the thorny, difficult task of finding true median housing costs. We’ll talk more about them in the near future.

At least on the surface, the big declines in gas prices we’ve seen over the past year seem like an unalloyed good. We save money at the pump, and we have more to spend on other things, But the cheap gas has serious hidden costs—more pollution, more energy consumption, more crashes and greater traffic congestion. There’s an important lesson here, if we pay attention.

US macroeconomic forecasters are usually very upbeat about any decline in gasoline prices.

Because the US is a big importer of petroleum, a decline in oil prices benefits the US economy. Lower oil prices reduce the nation’s balance of trade deficit, and effectively put more income into consumer’s pockets, which helps stimulate the domestic economy. In theory, declining gas prices should have the same stimulative effect as a tax cut. Whether that’s true in practice depends on how consumers respond to changing gas prices. Some of the positive effect of the decline has been muted by consumer disbelief that price reductions are permanent. Earlier this year, surveys by VISA showed that 70% of consumers were still wary that prices could rise.

 

But cheaper gas has does free up consumer budgets to spend more in other industries. Using data on credit card and debit card purchases of households, and looking at variations in spending among households that spent a little and a lot of their income on gasoline, and observing how spending patterns changed as gas prices fluctuate led the JP Morgan Chase Institute to predict that the bulk of savings from lower gas prices go to restaurant meals, groceries and entertainment.

Locally, the effects can be different. In oil-producing regions, as the saying goes, your mileage may vary. Declines in oil prices have produced a sharp fall off in revenue, drilling activity, and jobs in places like Texas, Oklahoma, North Dakota, and Alaska. Recently, Shell Oil shelved its plans to drill for oil in the Arctic because it couldn’t justify the expenditure based on the current (and expected future) price of oil.

But while the macroeconomic news is mostly good, the microeconomic news is quite different. As we noted earlier, the demand for driving—and therefore gas consumption—is sensitive to the price of gasoline. Declines in gasoline prices encourage increases in driving. And more driving has all kinds of negative consequences that end up imposing costs on all of us: more traffic congestion, more injuries and deaths from crashes, and more pollution.

What’s happening now is the flip-side of the big declines in driving we experienced when gas prices went up. We haven’t tend to overlook the silver-lining associated with higher gas prices. For example, the reduction in vehicle miles traveled (VMT) that followed the advent of $3 and $4 a gallon gas prices was far more effective in reducing congestion than any highway expansion program. In large part, that’s because traffic congestion is highly non-linear, meaning that a small drop in the number of vehicles on the road can produce a proportionately much larger drop in congestion. According to travel tracking firm Inrix, in 2008, the 3 percent decline in VMT traveled led to a 30 percent decline in traffic congestion. As gas prices fall and driving increases, those gains may disappear.

Much more serious is the toll of deaths and injuries from crashes. Traffic fatalities, which had steadily decreased as driving ebbed, have recently been on the uptick as well. In Oregon, traffic fatalities have jumped to levels not seen in seven years—before the big run up in gas prices in 2008. In the first seven months of 2015, Oregon traffic fatalities were up 44 percent over the first seven months of 2014 (the period immediately prior to the decline in gas prices). Nationally, a 14 percent rise in crash-related fatalities has surprised insurers and pushed up car insurance premiums. A detailed study of gas prices and crashes in Mississippi found that a 10 percent increase in gasoline prices was associated with a 1.5 percent decrease in crashes per capita, after a lag of about 9-10 months.

Lower gasoline prices also mean we’re burning more gas and creating more pollution. Overall US gasoline consumption, which had been trending down for years, bounced back up in 2014 just as gas prices collapsed:

 

Gasoline sales increased by about 10 million gallons per day over the past year, since each gallon contributes about 19.6 pounds of carbon dioxide, that means increased driving has led to about 35 million additional tons of carbon per year emitted into the atmosphere. This surge in driving has contributed to a reversal in the steady declines in total CO2 emissions the nation recorded in the years after 2008.

On top of it all, cheaper gas is prompting drivers to buy less fuel-efficient vehicles. Sales of of light-duty trucks are up sharply, and average fuel economy of new cars, which had been steadily improving, has fallen noticeably in the past year. According to researchers at the University of Michigan, the average new car today is rated at 25.0 miles per gallon, down from a peak of 25.8 miles per gallon in August 2014. Cheap gas today gets “locked in” to higher fuel consumption over the 15 or 20 year life of these less efficient vehicles.

There’s plenty of downside here, but if we pay attention, there’s also something we can learn: gas price fluctuations represent a terrific natural experiment in the efficacy of using pricing to manage traffic and its negative effects.

Of course gas prices are a fairly crude way of reflecting back to drivers the costs of their behavior. Gas prices don’t reflect the time of day traveled or whether the road is congested, and have far less impact on the behavior of owners of high-efficiency vehicles. But as blunt as the incentives are, they show that discouraging just a small amount of travel at the peak hour can result in big reductions in time lost to congestion and in lives lost to crashes.

The uptick in driving—and all its associated costs—resulting from the decline in fuel prices is powerful evidence of the effectiveness of pricing and demand management strategies in addressing the nation’s transportation problems. Our conventional approach to transportation consists almost entirely as “supply-side” measures: we build more roads, expand transit, and so on. But there’s another way to bring supply and demand into balance: to reduce demand.

 

TDM—travel demand management—is the neglected stepchild of US transportation policy. We have a few, fragmentary efforts, that are tried mostly in the breach: such as HOV (high occupancy vehicle) and HOT (high occupancy toll) lanes on a few congested urban freeways. In practice, they’re overwhelmed by cheap gasoline—and similar policies, like parking subsidies, which encourage more driving and actually make congestion—and pollution and crashes—worse.

Ultimately, there’s an important lesson here: prices matter. We neglect the most powerful and direct ways of managing demand—raising the price of driving, particularly on congested roadways and at the peak hour. Our recent experience with $3 and $4 gallon gas shows that we can reduce the demand for travel in ways that reduce traffic congestion, decrease the number of crashes and improve the air. Maybe it’s time to make that a conscious aim of transportation policy, rather than the by-product of oscillations in the global oil market.

In the meantime, enjoy your cheap gas: you’ll be paying for it in the form of more clogged roads and more crashes and deaths, less efficient cars and more pollution.

What City Observatory did this week

1. More doubt cast on food deserts. The concept of a “food desert”—typically low-income urban neighborhoods where a lack of nearby grocery stores leads to poor nutrition—is widely accepted. But a new study adds to the evidence that in most cases, poor nutrition isn’t a result of food deserts; it’s a result of too little income. Part of the issue is that food deserts are often defined in relatively small areas, sometimes as little as a mile or half-mile, so even people who live inside them may not be too far from another neighborhood with a grocery store.

2. City Observatory on the Knight Cities podcast. Our own Joe Cortright sat down with the Knight Foundation’s Carol Coletta to talk about the relationship between neighborhood inequality and national inequality; why we make desirable neighborhood illegal; and what City Observatory is planning for the future. Check it out!

3. Do the rich (neighborhoods) get richer? While conversations about neighborhood change focus on relatively poor communities, it’s not necessarily the case that income growth is concentrated in those neighborhoods: In fact, evidence from studies like “Lost in Place” and research on growing economic segregation suggests that upper-income neighborhoods may be seeing faster income growth. We look at five cities—Chicago, Detroit, Miami, Philadelphia, and Portland—and check out the relationship between neighborhood income growth and how wealthy a neighborhood was to begin with. Only in Miami were poor communities consistently growing faster.

4. Election results for urbanists. This Tuesday, voters in several parts of the country went to the polls for off-year elections—and many of them voted on referenda or city council races with important implications for sustainable and equitable housing and transportation. In San Francisco, the “Mission moratorium”—which would have placed a hold on all market-rate housing development in the neighborhood—went down to defeat, while a bond issue for affordable housing was passed overwhelmingly. In Seattle, voters approved more funding for transit, and elected pro-housing growth council candidates in most races. And in Boulder, one of the most exclusionary zoning reforms in the country failed.

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The week’s must reads

1. The Vision Zero movement has made lowering car speeds in urban areas a part of the urban policy conversation, and for good reason: while a pedestrian hit by a car traveling 20 mph has a 95 percent chance of surviving, those odds decrease to just 15 percent if the car is moving at 40 mph. But getting drivers to operate at safer speeds isn’t just a matter of putting smaller numbers on signs: As Eric Jaffe writes at CityLab, street design, more than anything else, determines how fast people will drive. Narrower lanes, curbside trees, and tighter turns all influence people to slow down—and a 20 mph sign on a wide open street is unlikely to accomplish its goal.

2. At TechCrunch, Kim-Mai Cutler investigates the people on both sides of the fight over AirBnB rentals in San Francisco. (Proposition F, the proposed regulations, were voted down on Tuesday, hours after this piece came out.) The campaign reveals some of the odd politics of housing in the Bay Area—including the fact that many of the people leading the charge for affordable housing are in fact the benefactors of policies their opponents argue have been inflating home prices in San Francisco for decades. But neither the status quo nor the (failed) reforms of Proposition F come off looking good in Cutler’s piece.

3. In cities as different as Chicago and Houston, Chicago Magazine‘s Whet Moser points out that the numbers just don’t support the stereotype of the urban cyclist as a beareded twentysomething hipster. In fact, while people with upper-middle-class incomes are disproportionately likely to bike, so are people with incomes below $25,000. Research Moser cites from Rice University, as well as his own data, should dispel concerns that efforts to make biking safer on American streets is only about catering to relatively affluent white residents. Biking is a low-cost transportation alternative that’s valuable to all kinds of people. Moser’s table from Chicago is below.

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New knowledge

1. You’ve probably heard about America’s sky-high prison recidivism rate—that more than half of people in state prisons will return to jail within five years of being released. Except it turns out that estimate is wildly inflated because of a statistical mix-up. Researchers at Abt Associates, using a wider data set, discovered that earlier estimates had over-sampled repeat offenders by a substantial margin—and the real recidivism rate is closer to 30 percent, with just 11 percent of offenders returning to prison more than once. While those numbers aren’t exactly great, they’re a far cry from older studies, and suggest that anti-recidivist efforts could be much more targeted than previously thought.

2. In a worthwhile Canadian initiative, that country’s Ecofiscal Commissionreleased a report on the importance of road pricing for reducing congestion. The Commission points out that congestion pricing (charging vehicles more money as roads become busier) can help by getting drivers to internalize the full cost of their choice to drive—including the congestion costs imposed on other drivers. (This is a theme we’ve taken up at some length before.) The study goes on to give examples of successful congestion pricing policies in Stockholm, Minnesota, and elsewhere, and then make recommendations for their implementation in Canadian cities—which could easily be applied to American metropolitan areas.

3. New research serves as a useful reminder that while “physical” aspects of walkability matter—things like frequent intersections and crosswalks, wide sidewalks, and mixed-use neighborhoods—that’s not all it takes to create a community where people actually walk. Hee-Jung Jun of Sungkyunkwan University in Seoul shows that elevated levels of social capital—the kind of community-building social ties that are one of the goals of creating neighborhoods where people can interact outside of their cars—are correlated with “perceived”walkability, but not necessarily “physical” walkability. As Jun writes, “socioeconomic disadvantage is often high in the neighborhoods where physical walkability is high in the US”—that is, central city neighborhoods—and that disadvantage can translate to things like crime that make people warier of walking. Both community development that fights these issues and physical design are crucial parts of building a walking neighborhood.

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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.

If you have ideas for making The Week Observed better, we’d love to hear them! Let us know at jcortright@cityobservatory.org, dkhertz@cityobservatory.org, or on Twitter at @cityobs.

“Affordable housing” can seem like a hopelessly vague term. First of all, affordable to whom? (Follow the link to a description of an “affordable” program targeting people making 40 percent more than the median income in San Francisco.) And even assuming we know who’s paying, what is a reasonable amount for them to pay?

But “affordable housing” also suffers from an ill-defined relationship to the market. Typically, the phrase “affordable housing” means “below market rate,” as in a home that receives some sort of subsidy, private or public, to be cheaper than what the owner could otherwise charge. (Of course, even this distinction—subsidized versus unsubsidized—is problematic, or just plain incorrect, given the massive subsidies to middle- and upper-income homeowners through mechanisms like the mortgage interest tax deduction.) But in most of the country, the vast majority of homes that are actually “affordable” to lower-income people are sold or rented at market rate. They just happen to have some characteristics—size, appearance, or location in a less-desired neighborhood—that make their market prices relatively low.

Homes that receive no special low-income subsidy, but are nevertheless relatively affordable, in Chicago’s Little Village neighborhood.

 

But very little private housing in the United States was originally built for low-income people. Instead, homes built for the middle or even upper classes gradually became cheaper as they aged, as people with high purchasing power moved into trendier, more modern homes in “better” neighborhoods. As higher income households move on, the now somewhat older homes or apartments they formerly occupied are sold or rented to people with more modest incomes.

This process is called “filtering.” While the evidence that filtering is a real phenomenon has been around for a long time—the core of nearly every American city contains neighborhoods with once-luxurious homes now occupied by people of modest incomes—the first study to provide a rigorous measure of how it happens was published only in 2013. In it, Stuart Rosenthal of Syracuse University uses nearly 40 years of data from the American Housing Survey to figure out the average pace of filtering across the country, and what makes housing filter more quickly in some places than others.

Rosenthal uses the AHS to compare the incomes of people living in the same units of housing over time. He estimates that nationwide, housing “filters” by roughly 1.9 percent a year—meaning that a 50-year-old home is typically occupied by someone whose income is about 60 percent lower than that home’s first occupant. (All of these numbers are adjusted for inflation.) You might think of this process as something like “reverse displacement.”

But that average nationwide figure obscures a lot of important variation. For one, owner-occupied homes filter much more slowly: just 0.5 percent per year, compared to as much as 2.5 percent for rentals. (Though homes that begin as owner-occupied are often converted to renter-occupied as they age.) Moreover, filtering doesn’t happen evenly over time: it’s much more dramatic over the first 40 years or so of a home’s life. That means the difference between a house that is brand new and one that’s 20 years old is much bigger than the difference between one that’s 60 years old and one that’s 80 years old. In fact, once a home hits the half-century mark, it’s as likely to “filter up” (become occupied by wealthier people) as filter down.

 

Perhaps the most important nuance, however, is that strong regional housing price inflation—that is, metropolitan areas where home values grow much more quickly than the cost of other goods—can make filtering happen much more slowly, or not at all. That helps explain why homes in New England and the West Coast filter about 35 percent more slowly than homes in the Midwest or South. In those coastal regions, severe restrictions on new housing construction since the 1970s have created a “shortage of cities,” driving up home prices and preventing the kind of filtering that has historically produced the lion’s share of affordable housing—and which still does in much of the rest of the country.

 

This makes a lot of intuitive sense: Filtering is driven largely by upper-income people who leave their aging homes for new ones. But if housing construction is restricted, there won’t be “enough” new homes, and some of those upper-income people will have to settle for older ones that might otherwise be occupied by people with less money. This is exactly the process that the apartments we wrote about in Marietta, Georgia went through. In the 1960s they were higher-end housing for middle-class singles and young couples; 50 years later, they were home to the city’s least prosperous citizens.

The lesson, then, is twofold. First, in normally-functioning housing markets, filtering really can produce a large amount of housing that’s affordable to people of modest incomes without special subsidies. One of the most common refrains in the housing affordability debate is that little to none of today’s newly-built housing directly serves low- or moderate-income households. And that’s true—but Rosenthal’s paper shows that that new housing is nevertheless crucial to making room for those households in older homes. While housing assistance is still necessary for people with very low incomes and to promote integration, the scale of the nation’s affordable housing challenge would be much, much greater without filtering.

Which leads to the second lesson. By putting severe limits on new housing, the wealthy metropolitan areas of the East and West Coasts have embarked on a several-decades-long experiment in what happens when housing filters down much more slowly than normal. The result has been a disaster: highly inflated prices for older homes that have left so little room for people of low and modest incomes that they’ve changed national migration patterns. 

As a result, these regions have created a need for much broader and deeper housing subsidies than would be required if they had allowed for normal filtering. (Recall the link at the top of this post to a story about San Francisco giving significant housing assistance to people making over $100,000 a year.) In the short run, Rosenthal argues (and we agree) that his paper helps make the case for a dramatic expansion of housing assistance in these metropolitan areas.

But in the long run, he also shows that places like San Francisco and Boston must re-start the filtering process. Many of these regions, by refusing to make that room, have clearly already reached the point where no realistic amount of low-income subsidies will create a sufficient amount of affordability—and if legal restrictions on new construction continue to exacerbate their housing shortages, that gap will only widen further.

Many studies of gentrification (for example, the Federal Reserve Bank of Philadelphia study we wrote about last week) begin by dividing neighborhoods into one of two categories: gentrifiable and non-gentrifiable. Usually, to qualify as “gentrifiable,” a neighborhood must rank relatively low on the socioeconomic ladder: one standard used by at least a few different reports is having a median household income that’s below average compared to the metropolitan area as a whole.

In the common understanding of gentrification, this isn’t a terribly unreasonable line. But that frame can give us a very distorted vision of neighborhood change and issues related to the shifting geography of economic privilege.

On the one hand, it becomes easy to conflate “below average” with “poor.” Some of the studies using this standard for “gentrifiable” have reported extremely high rates of gentrification in major cities, which might be understood to mean that low-income neighborhoods are rapidly filling up with the relatively well-to-do. But of course a neighborhood at the 49th percentile of median income regionally—or, for that matter, the 40th or even 30th—is probably very, very different than one at the 10th percentile. Studies that focus on truly low-income neighborhoods, including our own “Lost in Place,” have shown that gentrification is generally rare in communities with very high concentrations of poverty. If we’re worried about the plight of especially low-income people and neighborhoods, this is an important nuance.

From the other end, by writing half of all neighborhoods out of the story from the very beginning, these studies may imply that economic change in relatively higher-income communities is either less prevalent, or less important. It’s not clear that either is true—and at the very least, this question deserves to be a part of the conversation.

 

Socioeconomic shifts in neighborhoods whose residents are disproportionately low-income or people of color are particularly notable, because they involve changing some of the most highly visible social boundaries in American life. But that doesn’t mean that other kinds of changes, like a predominantly white, middle-class neighborhood becoming a predominantly white, wealthy neighborhood, don’t also matter. For one, this kind of economic segregation can put housing even further out of reach for working class and low-income households, requiring deeper, less efficient subsidies, or increasing housing prices so much that vouchers won’t cover the cost of rent. Moreover, growing high-income segregation has grave implications for cities, and society, as a whole.

Previous research, in fact, has demonstrated that much of the increase in income segregation over the past few decades has been driven by the “secession of the rich”: the phenomenon of the very wealthy separating themselves from everyone else. Increasing segregation of high-income households can reduce the resources available to support common, community-wide services—a problem that’s particularly bad when these elite neighborhoods happen to be separated from others by municipal or other government bodies, which can collect super-sized tax revenues to provide extremely high-quality “public” services, but only to their rich constituents.

New Trier Township High School in Winnetka, Illinois.

And looking at income growth across the whole distribution of neighborhoods can help tell us about how income segregation is growing—or not. After all, for income segregation to be declining, low-income neighborhoods have to see faster income growth than more affluent ones. If the opposite is happening—or even if gains are equally distributed—then we’re not making progress on income segregation.

So what would a study of neighborhood income change find if it didn’t define some places as “ungentrifiable”? To get some idea, we looked at five metropolitan areas: Chicago, Detroit, Miami, Philadelphia, and Portland, OR. Using 2000 Census data, we divvied up Census tracts (areas roughly the size of a neighborhood) into buckets based on their median incomes in 2000—below $25,000, from $25,000 to $50,000, and so on in increments of $25,000. We then looked at how fast median income grew in each of those buckets between 2000 and 2010.

The results are too complex to be summarized in a phrase—but of the five cities, only Miami appears to show a clear pattern of lower-income neighborhoods seeing faster income growth than middle- or upper-income neighborhoods. In Chicago, very low income neighborhoods—those with median incomes of below $25,000 in 2000—grew very fast, but many of those tracts appear to be in communities where public housing projects were dismantled in the 2000s, removing large numbers of low-income people and, as a result, making the median income higher. Above $25,000, Chicago appears to follow a “rich-get-richer” pattern—at least up to a median income of $125,000.

 

Portland shows the fastest income growth at the extremes of wealthy and poor, though its fast-growing upper-income bucket ($75,000 to $100,000 median income) grew faster, at 26.6 percent, than its lower-income bucket (under $25,000 median income), at 23.8 percent. The middle-income buckets grew more slowly. Even so, Portland’s incomes are notable for being evenly distributed: unlike the other metros in our sample, none of Portland’s neighborhoods had a median income of more than $125,000.

Philadelphia and Detroit both show a fairly clear pattern of “rich-get-richer,” with Detroit’s being particularly stark: The median neighborhood with an income below $50,000 grew not at all or actually became poorer, while those with incomes above $100,000 grew most quickly. In Philadelphia, very poor neighborhoods (those with 2000 incomes under $25,000) grew slowly, at 12.4 percent, while other neighborhoods grew faster: neighborhoods with incomes between $75,000 and $100,000, for example, grew median incomes by 27.1 percent.

So what to take out of all of this? In part, it isn’t surprising: We know that income segregation is growing nationally, and as we said, for that to be true, wealthy neighborhoods have to be growing faster than lower-income neighborhoods on average. As a caveat, by averaging out rates of income growth across many neighborhoods, we’re missing huge amounts of variation. There are some higher-income neighborhoods that are becoming less affluent, and there are some low-income neighborhoods that have seen very rapid income growth.

But looking at income growth across all kinds of communities gives some much-needed context to the conversation about neighborhood change. It’s not that change in low-income neighborhoods is less important: indeed, we ought to be concerned about the welfare of people who are most vulnerable, and what happens in their neighborhoods. But social equity involves the distribution of resources across all neighborhoods, and so it matters if high- and moderate-income communities are becoming even more exclusive.

The numbers we’ve come up with here are far from a full picture, of course—more like a first attempt to explore the question. We’re looking forward to learning more in the future.

The House of Representatives has hit on a clever new strategy for funding the bankrupt Highway Trust Fund: raid the Federal Reserve. Their plan calls for transferring nearly $60 billion from the profits earned on the Federal Reserve’s operations—basically fees paid by member banks—to bail out the Highway Trust Fund.

For years, many macro economists have been urging the Federal Reserve to stimulate the economy by using its power to effectively print money in the form of a “helicopter drop”—simply crediting every American with a certain amount of extra dollars in their bank accounts. The idea has been suggested as a way to jump start consumer spending in a moribund or deflationary economy by economists of some stature, including Ben Bernanke and Milton Friedman. The idea was advanced as a way of accelerating the sluggish growth we’re currently experiencing in an article in Foreign Affairs. But while it might make theoretical sense to economist, it was simply politically impossible, because as The Economist intoned, the idea of a helicopter drop would be anathema to Republicans.

 

But when it comes to a helicopter drop for highways, there’s no such problem. Remarkably, the proposal to tap the Federal Reserve’s funds comes not from radical Keynesians, but from the Republicans in the very conservative House of Representatives. And apparently, the same people who preach personal responsibility in almost every other field of endeavor want to insulate automobile drivers from paying the costs of the roads they drive on. While they may espouse the virtues for the free market in almost everything else, this position makes them “asphalt socialists” when it comes to transportation.

The best estimates are that drivers now pay only a tiny fraction of the direct costs of building and operating roads, not to mention causing huge externalities in the form of crash-related injuries and deaths and pollution. As we’ve noted before, the heaviest road users are the ones who get the biggest subsidies: The Congressional Budget Office estimates that trucks already cost the public as much as $129 billion annually more than they pay in road user fees. And a report from TransitCenter and the Frontier Group recently detailed the $7.3 billion in parking tax subsidies drivers get every year as well.

(Even with these subsidies, however, increasing fuel efficiency and the decline in per capita driving have pushed down revenues for the Highway Trust Fund, and contributed to the current crisis.)

While this latest chapter of dysfunctional public finance and ideological hypocrisy is playing out at the federal level, it’s equally prevalent in the way states and localities treat driving, too. Local governments have parking requirements that drive up the cost and drive down the supply of housing to subsidize car ownership. In Seattle, parking requirements add something on the order of $250 a month to the price of a typical apartment.

The new transportation bill will favor cars in other ways, too. Local highway projects will get an 80 percent federal match, but transit projects will get only 50 percent. Meanwhile, important sources of funds for transit, pedestrian, and bicycle programs, including TIGER grants and the Transportation Alternatives Program, were cut or imperiled.

While advocates of the road system regularly cloak their arguments in the rhetoric of choice and the free market, our transportation system is actually characterized by heavy government intervention on behalf of private vehicles. Massive, taxpayer-supported subsidies effectively bribe people to drive, and insulate them from the financial consequences their choices impose on others.

Drivers want more roads—as long as they don’t actually have to pay for them. The fact that there’s no stomach for increasing the gas tax—even though gasoline prices have fallen by more than a dollar a gallon in the past year—shows that when put to the test of the marketplace, there’s actually little demand for more transportation.

The irony, of course, is that transportation is clearly one policy area where traditional free market principles would put a serious dent in the problems of traffic congestion, air pollution, and safety. If car users faced anything close to the actual costs of building and operating roads (and mitigating or preventing the injuries and pollution effects), we’d see much less driving, and much less demand for additional capacity.

This week, City Observatory’s founder Joe Cortright sat down with the Knight Foundation’s Carol Coletta for the Knight Cities podcast. Their conversation reflected on the work City Observatory has undertaken over the past year, and dug more deeply into some of the topics, like neighborhood change and inequality, that have been a focus of our recent work.

Listen in to find out more about these topics:

• How higher inequality at the neighborhood level actually is one key to more integrated metropolitan areas.
• Why public policy has ended up making the most desirable neighborhood types illegal, and what we can do about it.
• Which indicators city leaders ought to be paying attention to if they want their cities to succeed.

Plus, listen in to hear what’s next for City Observatory.

Check it out!

On Tuesday, voters in Seattle, San Francisco, Boulder, and elsewhere went to the polls to vote on referenda and other local elections with important consequences for urban planning and policy. Here’s an overview:

Seattle:

There are very good rundowns of the Seattle results from an urban policy perspective at Erica C. Barnett’s blog and The Urbanist blog. The highlights:

1. Voters approved a property tax levy worth $930 million over nine years to support investments in transportation. The campaign, called “Move Seattle,” proposed spending $385 million on road maintenance and street redesign to accommodate 50 miles of bike lanes and safer pedestrian environments, and $166 million on public transit improvements, such as upgrading several bus lines to “RapidRide” service.

2. Three of the most anti-housing growth candidates for the nine-seat City Council lost, two of them by over 50 points. Housing development has become a heated issue in Seattle, as Mayor Ed Murray has proposed some of the boldest housing affordability measures in the country, including significantly expanding the supply of housing and making some tentative reforms to the city’s single-family-only zoning districts. The results of this election suggest that a backlash to this growth agenda is weaker than some may have thought. Voters also re-elected socialist Kshama Sawant, who has advocated for tougher inclusionary zoning requirements, linkage fees on new development, a one-for-one replacement of any affordable housing and a multi-hundred million dollar bond measure to provide housing for the homeless.

San Francisco:

1. The “Mission moratorium,” a cause that has received national attention for the better part of a year, finally went to the city’s voters—and failed. The moratorium, which we’ve written about at City Observatory, would have put a temporary hold on all market-rate housing construction in San Francisco’s Mission neighborhood. While advocates said the measure would help stem the tide of gentrification and give stakeholders time to create a comprehensive affordability plan, others—including City Observatory and San Francisco’s own Office of Economic Analysis—argued it would only exacerbate the massive housing shortage behind the Bay Area’s affordability crisis. While the Mission itself approved the measure, only two other neighborhoods in the city gave it a majority.

2. Meanwhile, another referendum that would make a measurable and positive impact on affordable housing passed overwhelmingly. Proposition A, a $310 million bond issue to create or rehabilitate thousands of units of below-market-rate housing, garnered about 75 percent “yes” votes. (It needed two-thirds to pass.) While Proposition A is hardly enough to solve the Bay Area’s housing needs—especially given that much of that figure is made up of “preserving” units that already exist—it’s a small step in the right direction.

3. Proposition F, which would have imposed restrictions on AirBnB and other short-term rentals, failed. As catalogued by TechCrunch’s Kim-Mai Cutler, Proposition F created a bizarre hodgepodge of temporary allies—landlords and renters on one side, progressive firebrands and pro-business politicians on the other—debating whether AirBnB is an important source of income for struggling renters and homeowners, or an end-run around hotel taxes that pushes rents higher by taking one to two thousand units off the regular rental market. We’re sympathetic to Cutler’s position that both the current regulatory framework and Proposition F are deeply flawed, but that referenda (which can effectively only be amended by another popular vote) are a problematic way  to regulate a fast-changing and unpredictable policy issue.

 

Boulder, CO

1. Voters rejected a measure that would have given Boulder, already famously anti-housing, one of the most exclusionary development approval processes in the country. As Kriston Capps explained at CityLab, ballot issue #300 would have divided the city of 100,000 into sixty-six micro-jurisdictions, each of which would then have veto power over any development within its borders—leaving members of the broader community who are impacted by such decisions without any voice in the supposedly democratic process. As we’ve written before, such hyper-local decision-making is usually a recipe for exclusion and competition in which the most disadvantaged lose out.

2. Another anti-housing measure, ballot issue #301, was also defeated. It would have required that development “pay its own way” by making large contributions to support social services and infrastructure demand. The measure would have added massively to the cost of building new housing, making it significantly more difficult to build below-market-rate or moderate-income homes. As the definition of “fiscal zoning”—that is, using zoning regulations to keep out anyone (like the low-income) who need more social services than they can pay for—this was a measure predicated on exclusion.

 

Other elections

For more information on other ballot initiatives—including a terrible highway construction proposal in Texas (which passed) and a slew of road-and-transit funding levies in Utah (which passed in 10 of 17 counties, but not Salt Lake City), check out Angie Schmitt’s analysis at Streetsblog.

It’s a plausible and widely-believed hypothesis: Poor people in the United States suffer from measurably worse nutrition because they have such limited access to good food. Confronted with a high concentration of poor diet choices (like fast food, and processed food in convenience stores) and with few markets offering fresh fruit and vegetables, the poor end up eating a less healthy diet. In this view, bad diets are a problem of the urban environment—the lack of good food in poor neighborhoods.

But while there are certainly urban neighborhoods that lack good grocery options, is there any evidence that close physical access to food—as opposed to other factors like income or education—are big determinants of healthy eating? We’ve been skeptical of that view for some time.

 

A new study by researchers at the University of Pennsylvania, Princeton and the US Department of Agriculture summarized in the Chicago Policy Review concludes that after controlling for differences in educational attainment and income, variations in physical access to food explain less than ten percent of the variation in consumption of healthy foods. They also find that the opening of new, healthier supermarkets in neighborhoods has very little effect on food consumption patterns of local residents.

This new study confirms earlier research that questioned whether the physical proximity to healthier eating choices is the big driver of our hunger and nutrition problems.

Studies show that there is no apparent relationship between a store’s mix of products and its customer’s body/mass index (BMI) (Lear, Gasevic, and Schuurman, 2013). Limited experimental evidence suggest that improving the supply of fresh foods seems to have limited impacts on food consumption patterns. Preliminary results of a study of consumers in a Philadelphia neighborhood that got better supermarket access showed no improvement in fruit and vegetable consumption or body mass index even for those who patronized the new store.

In January, we observed that physical proximity alone is not likely to be a strong explanation of variations in diet. Judged by proximity to grocery stores nearly all of rural America is a food desert. Nathan Yau at FlowingData uses Google maps data to construct a compelling map of how far it is to the nearest grocery store across the entire nation. The bleakest food deserts are the actual deserts of the American West, in Nevada and Wyoming.

City dwellers, particularly those in the biggest, most dense cities tend to live closest to supermarkets and have the best food access. WalkScore used their data and modeling prowess to develop some clear, objective images of who does (and doesn’t) have a good grocery store nearby. They estimate that 72 percent of New York City residents live within a five-minute walk of a grocery store. At the other end of the spectrum, only about five percent of residents of Indianapolis and Oklahoma City are so close. If you want to walk to the store, this data shows the real food deserts are in the suburbs.

There are other ways of measuring food access and mapping food deserts. The U.S. Department of Agriculture and PolicyMap have both worked to generate their own maps of the nation’s food deserts. They use a combination of physical proximity (how far it is to the nearest grocery store) and measurements of neighborhood income levels.

While it’s clear that income plays a big role in food access, it’s far from clear how to combine income and proximity to define food deserts. The USDA uses an overlay which identifies low-income neighborhoods with limited food access. PolicyMap has a complicated multi-step process that compares how far low-income residents have to travel to stores compared to higher income residents living in similarly dense neighborhoods.

In practice, combining neighborhood income and physical proximity actually muddles the definition of food access. First, and most important, it acknowledges that income, not physical distance, is the big factor in nutrition. Both of these methods imply that having wealthy neighbors or living in the country-side means than physical access to food is not a barrier. Second, it is your household’s income, not your neighbor’s income, that determines whether you can buy food. Third, these methods implicitly treat low income families differently depending on where they live. For example, PolicyMap excludes middle income and higher income neighborhoods from its definition of “limited supermarket access” areas—and therefore doesn’t count lower income families living in these areas as having poor food access.

The fact that both of these systems use a different yardstick for measuring accessibility in rural areas suggests that proximity isn’t really the issue. Rural residents are considered by USDA to have adequate food access if they live within ten miles of a grocery story, whereas otherwise identical urban residents are considered to have adequate access only if they live within a mile or half-mile of a store.

If we’re concerned about food access, we probably ought to focus our attention on poverty and a lack of income, not grocery store location. The argument here parallels that of Nobel Prize-winning economist Amartya Sen, who pointed out that the cause of starvation and death in famines is seldom the physical lack of sufficient food, but is instead the collapse of the incomes of the poor. Sen’s conclusion was that governments should focus on raising incomes if they wanted to stave off hunger, rather than stockpiling or distributing foodstuffs

It’s tempting to blame poor nutrition and obesity on a lack of convenient access to healthier choices, but the problem is more difficult and complex than that. Poverty and poor education are strong correlates of poor nutrition and obesity.

Of course, we have good reasons to believe that the built environment does play an important role in obesity—but as the Surgeon General’s report implies that may have more to do with how easy it is to walk to all our daily destinations, and not just the distance to the fresh food aisle.

(Portions of this post appeared originally on City Observatory in a January commentary “Where are the food deserts.”)