As our name implies, we’re very focused on cities. We think cities are the key to solving many of the nation’s most challenging problems, from economic opportunity and social justice, to environmental sustainability. And we’re not alone: more and more, activists are looking to cities to take the lead on critical policy issues.

Cities should be fearless innovators. But at the same time, we have to recognize that there are some things that cities can’t do, there are some problems that transcend municipal boundaries in ways that defy effective or rational solution on a city-by-city basis. For some policy issues—including ones that play out in cities—there is simply no substitute for getting national policies right.

 

In a recent New York Times article, “Liberals turn to cities to Pass Laws and Spread Ideas,” Claire Cain Miller explained that progressives find a more receptive audience in the nation’s bluest political regions. It’s easier to try out controversial new policy ideas like paid parental leave in cities like San Francisco; and if a policy innovation can be shown to work at a smaller scale, it might lead to momentum to spread the policy nationally.

Viva la (Reagan) Revolution?

Progressives have increasingly turned to cities and states because of the seeming futility of engineering major changes in federal policy. If, prior to 1980, you had the expectation that the federal government was going to ride to the rescue in any major domestic policy arena, President Reagan sought to disabuse you of that notion. Three decades later, its apparent that many progressives have internalized this worldview.

With little hope or expectation that a federal government, hamstrung by chronic fiscal problems and paralyzed by deep partisan divisions would take any action, local activists have pushed cities and states governments to step forward to tackle problems, rather than waiting for a federal response that would never come. The shift to local, rather than national policy-making is, in effect, a concession to the Reaganite view of federalism.

With one notable exception—and we’ll return to this in a moment—federal domestic policy has consisted mostly of tokenism and misdirection. Token efforts that were too small to make any serious dent in a policy problem (like “Promise Zones”), or misdirection—the recently abandoned (or retooled if you like) “No Child Left Behind” act, that essentially imposed an overlay of federal regulation for states and local schools without providing new resources for K-12 education.

The single notable exception to the atrophy of national domestic policy is the Affordable Care Act, in which the federal government has re-written the rules for the health care sector, and put in place what seems to be (sorry skeptics) an irreversible move toward nearly universal health care coverage.

But with a nearly complete policy vacuum at the federal level in other policy areas, states and especially cities have upped their policy making game, on subjects as diverse as climate change, housing affordability, economic development and innovation.

 

Cities are clearly attractive arenas for policy innovation for a couple of reasons. Most importantly, there’s a political consensus. Most big cities are a deep, dark blue, so there’s little question of the political viability of some ideas—few push back in San Francisco or Boston if you fret about global warming or inequality.

To be sure, there are some issues of personal and individual rights and freedoms and local public health where cities are well-qualified and capable of implementing meaningful reforms, playing their fabled role as laboratories of democracy that test out solutions that can be emulated nationally. States and cities have taken important leadership roles in decriminalizing and legalizing marijuana, extending gay rights and marriage equality, limiting smoking in public places, and successful local policies pioneered in leading cities have lead to increasing policy adoption elsewhere.

Where better national policy is desperately needed

But even with best of intentions, there are some things that cities simply can’t do. Top of the list, the environment and the economy. Despite the noble efforts of cities and some states to push forward with greenhouse reduction goals and renewable portfolio standards, some form of carbon pricing (auctioning permits or taxing carbon) can only effectively be implemented at a federal level. Having Texas or Wyoming opt out of carbon limits would pretty much negate their impact, and puts a real brake on policies that meaningfully push costs on polluters. At some point, the learning and examples from local experimentation have to be rolled up to a national scale if we are to actually solve these problems.

Cities and states are increasingly concerned with promoting economic opportunity and raising wages. Many have devised useful programs to train workers, to provide better access to jobs for those cut off from them, and to legislate increases to minimum wages. But the success of all of these initiatives ultimately depends directly on the state of the national economy: the task of every city has been made harder by the stagnant economic growth which is a product of a contractionary federal fiscal policy, and which threatens to be pushed into recession at any time by a Federal Reserve Board that is still obsessed with fighting the imaginary inflation demons of the 1970s.

In many cases, changes to federal policy are essential simply to enable local experimentation. Some policies that seem to be amenable to local action have incentives that are so deeply embedded in federal law and regulation that it’s almost impossible to change. For example, the federal government dictates (and operates) the key features of the nation’s housing finance system from the term of mortgages and guarantees thereon, to a series of tax policies that prod families into homeownership. It also heavily subsidizes car and truck travel and highway expansion from general funds, and allocates money to local entities that are strongly oriented toward more road building.

 

Perhaps most fundamentally, local governments find it nearly impossible to directly tackle income inequality. Local governments that attempt income redistribution just impel the wealthy to secede to other jurisdictions; and our income inequality and segregation are actively worsened by exclusionary cities that use their police power to exclude the poor.

As well-intended and pragmatic as the shift to more favorable local venues seems, we think it is a mistake not to pursue strong national advocacy for specific federal policies that would help cities—even if there’s little chance of short-term adoption. What we need, in many cases is the policy framework that considers the root causes and scale of the problem, and which contributes to a dialog about what the nation as a whole needs to do—rather than relying solely on the courageous, but inherently limited efforts of individual cities. We’ve sketched out the case, for example, for shifting federal housing subsidies into vouchers or tax credits that would reach more of the nation’s rent burdened households. The ambivalence or latent hostility of existing federal policies is often a major headwind to local efforts to remedy these problems.

While it seems prudent in today’s political environment to “think globally and act locally,” we are quickly approaching the limits of what cities can do on their own to tackle big problems of inequality, housing affordability, environmental sustainability, and economic progress. Successful federalism hinges on a strong partnership, with a clear division of labor between the important roles to be played by both national and local governments. Increasingly, if cities are to continue to be crucibles of change, we’ll need new national policies that provide the frameworks, incentives and in some cases resources that are needed to realize the potential of solving major national problems by building more diverse, inclusive cities. As it turns out, 2016 is a presidential election year: Maybe now we should start having this conversation?

 

A breathless feature article at the New York Times describes how the design wizards at IDEO are helping stodgy old Ford Motor Company re-imagine how transportation might work in the future.

IDEO conceptualized the design task by sending groups of its employees to a restaurant a few miles away via different transportation modes, so they could assess the challenges each faces: the subway (too smelly), Divvy bikeshare (too dirty), and Uber (too expensive).

The hope is this exercise sheds light on how will enable IDEO to brainstorm clever new ways to get from point A to point B in the future. (We’re pretty sure the solution will involve apps.)

In our view, this is an epic fail for several reasons. First, it just gets certain things wrong. For example, according to the article, one of IDEO’s big complaints about the subway was the lack of cellphone reception—a problem the CTA had already announced it would be fixing when they took their ride in October, with full coverage in all subways rolled out in December.

But there’s a more fundamental problem: Is the optimal place for a quick work lunch four miles from IDEO’s office? If it is, isn’t the real problem here that a company has located its office in a place where its employees have to travel four miles just to get lunch and have a meeting? And isn’t the restaurant’s problem that it’s located in a place where its customers are four miles away?

 

And in fact, IDEO has already solved this particular design problem for itself. Fork and Tine, the restaurant they chose, might be four miles away, but there are dozens and dozens of restaurants within a quick walk of its downtown offices. City Observatory’s Chicago bureau chief, Daniel Hertz, spent an afternoon walking around IDEO’s West Loop neighborhood to find a bite to eat in the name of research. A five minute walk in one direction is Greektown, where you can get a quick gyro or souvlaki. A few minutes north of there is Randolph Street, one of the premier dining destinations in the city, with everything from high-concept burgers to Indian curries. Or, just about ten minutes straight north of IDEO’s offices is the French Market food court at a major commuter rail station, a hugely popular workday lunch spot. Not to mention that you pass at least a couple places to eat on every block on your way to any of these destinations.

It’s not a coincidence that there’s so much to do within a quick walk of IDEO’s offices—that’s almost certainly a major reason they chose to locate in the West Loop. Indeed, it’s a big reason that Chicago’s downtown has seen a steady stream of companies opening new or relocated offices there.

In other words, the issue here has at least as much—if not much more—to do with the design of cities than the relatively superficial features of different transport modes.

With rows of restaurants down the street from the IDEO offices, they don’t have to travel at all, save to walk a few hundred feet, saving them bundles of valuable time. So being in a dense urban location turns out to be the optimal design solution: relying as it does on the healthiest, least expensive, lowest carbon and most fully deployed transport technology in human history: walking. IDEO already knows this: that’s why they pay premium rents for their tidy, exposed-brick office space in the West Loop.

 

One of the subsidiary tasks IDEO assigned its testers was schlepping a couple of large shopping bags—to simulate, in some way how a busy person might have to mix some domestic errands with their business lunch. Fair enough. But if one lived in a mixed use neighborhood, where there was say a corner store or bodega down the block, one might easily handle all one’s shopping with more frequent but much more convenient walking trips to buy just a handful of necessities, rather than having perforce to carry a week’s worth of groceries because it was several miles to the big box store.

If we think about it correctly, dense, mixed use urban spaces are the ultimate design solution to our transportation problems. They provide low-cost, no-carbon, time-saving access to all manner of things that consumers want and need in their daily lives.

The real failure in design thinking here is IDEO viewing this task as primarily choosing between different transportation modes. Of course, they are free to frame this question however they—and their paying client—would like. But from a broader policy perspective—and from the perspective of citizens and consumers, we’d all be a lot better off if we’d make the design conversation about how we arrange our cities. And the design lens is often blinded by the look and feel of things, rather than comprehending basic, systemic issues: the quality of bus service, for example, has much more to do with schedule frequency, and running times, than the features of the transit system’s arrival time notification app: we think bus riders would be much more impressed with buses that arrived every ten minutes and made the trip faster thanks to dedicated lanes, than they would be by an app that told them the next bus was exactly 22 minutes from now.

Just focusing on transportation ignores and rules out the very substantial gains that could be made by better designing our cities for living. It’s hard to get the right answers under the best of circumstances. It’s just impossible to get the right answers if you ask the wrong questions.

By far the most common way to measure transit use is “commute mode share,” or the percentage of workers who use transit to get to their job. For the most part, this is a measure of convenience: it’s the most direct way the Census asks about transportation, which means it’s the easiest way to get consistent data from any city or metropolitan area in the country.

But it also has a lot of problems. For one, the vast majority of trips—about 84 percent—aren’t simple home-to-work commutes. And it’s not just that people who work also go to the grocery store, restaurants, or friends’ homes. Lots of people don’t work at all, and those people—largely students, the elderly, or people with disabilities – are disproportionately likely to use transit for all or almost all of their trips. Finally, plenty of people who do work might drive three or four days a week and take transit the other one or two. But since the Census only asks about what they do most of the time, they’ll show up as “drivers.” All of these things will tend to undercount a place’s reliance on public transit.

 

A handful of people have proposed their own measures to try to correct for some of these problems. One of the best came from Reuben Fischer-Baum at FiveThirtyEight, who ranked American cities based on annual transit trips per capita. That has the advantage of counting all trips, whether they’re work-related or not. It can’t, however, tell you much about the distribution of use across people: maybe a place scores highly because ten percent of people use transit a lot, or 40 percent of people use transit occasionally.

In the spirit of this work, City Observatory would like to offer our own measures of transit use, based on data from the Census’ American Housing Survey. (The 2013 AHS includes just 25 metropolitan areas, which is why many larger cities are left out of our list below.) And these measures suggest that, indeed, commuting mode share dramatically understates Americans’ reliance on transit.

The first, more restrictive measure is the percentage of households that report using transit to get to school or work “sometimes, most of the time, or always” (leaving out people who reported “once in a while” or “never”). The second, broader measure is the percentage of households that report using transit for any purpose.

These measures have two big advantages over commute share. First, like Nate Silver’s index, they include a broader sample of trip destinations than just work. Second—just as importantly—they recognize that transportation decisions are usually made at the household level, not individual. Consider a couple who both work outside the home. That is, if a man takes the bus to work, then his wife or husband also depends on that transit service, even if they usually drive. After all, if the bus stops running, they’re going to have to figure out a way to carpool, or even buy another car—a major logistical or financial burden for many families. The same is true for parents of children who take transit to school, or adult children who live with elderly parents who rely on transit to get to social services or other activities.

That means that these figures better demonstrate the number of people with a direct stake in transit service, whether or not they themselves ride it on a regular basis. (Of course, lots of people who “have a stake” in transit are still left out, including people who would like to use transit but can’t because the service isn’t good enough, or people who drive but benefit from reduced congestion because of transit, or employers whose employees wouldn’t be able to show up for work without transit.)

And that matters because the people who make decisions about transit investments—politicians—look at how many of their constituents benefit from a given service as a major component of whether they benefit politically from supporting it.

And if they’re just looking at commute share, they’re looking at too few people. Even transit-rich metropolitan Boston doesn’t look so great by that metric: only 12 percent of workers there usually take transit to their jobs. But 29 percent of households include someone who regularly takes transit to school or work, and fully 56 percent of households use transit for at least some of their trips. In sprawling Houston, just 2 percent of workers commute with transit – but more than twice that proportion of households use transit for work or school, and more than one in ten households use transit for some of their trips. That’s still not great, but it’s much more significant than the minuscule commute numbers. It also suggests that even in one of the most transit-hostile regions of the country, a remarkable number of people find public transit useful for certain trips, forming a toehold for better service to produce even more ridership.

 

Of course, critics of these measures will point out that using households rather than individuals will make the proportion of car use increase, too, since a large number of households use both transit and private automobiles. But that’s really the point: people’s transportation behavior is much more diverse and flexible than the simple commute numbers suggest, and we ought to be giving as many people as possible as many choices as possible so they can determine what makes the most sense for a given trip.

In the end, the fact that transit use is broader than we think is evidence of its usefulness, and evidence that where service is adequate, many people will recognize that usefulness. But the case for better transit service goes beyond that. It’s about connecting people with opportunities in an affordable, efficient way, whether that’s a job or a cultural event. It’s about giving people the freedom to access what their own city has to offer. Everyone ought to have that choice.

What City Observatory did this week

1. Another round on the Washington Post‘s housing roundtable. On Friday, we took part in a roundtable at the Washington Post‘s Wonkblog on what it would take to solve the housing affordability crises in places like San Francisco. On Monday, we followed up on some of the ideas of our fellow roundtablers, highlighting the surprising number of agreements before narrowing in on the biggest dispute: what is the role of market-rate housing construction, especially high-end construction? We argue that the role of housing filtering—of high-end construction taking pressure off of low-price housing—is a key and underappreciated part of the affordability picture.

2. Undercounting the transit constituency. The most common way we talk about how many people use public transit—or biking or walking—is “commute mode share,” or the percentage of commuters who take a particular form of transportation to work. But more than four out of five trips aren’t commutes—not just for workers who also have to pick up their kids from school and go grocery shopping, but for students, retirees, and other non-workers whose lives don’t include any commutes at all. Those are people who are disproportionately likely to use transit, and so commute mode share will tend to overstate a place’s car reliance. In the Philadelphia metro area, for example, only about 10 percent of people commute to work on transit—but 21 percent of households use it to get to school or work, and 42 percent of households use transit for some purpose.

3. What I learned playing SimCity. The education of a City Observatory writer included lots and lots of SimCity. But a return to city-building video games also revealed a whole host of built-in assumptions about how cities and urban planning work: from mandatory US-style zoning to the invisibility of parking and the total absence of neighborhoods and politics. It turns out there’s a lot you can learn about modern urban planning’s blind spots and biases from a game.

4. Designed to fail. A recent New York Times article covered the work of a design team hired by Ford to reimagine the future of urban transportation. But they missed an insight that, ironically, they had already acted on: although the designers tested Chicago’s transportation system by going to a restaurant four miles away, their downtown offices were located within a quick walk of dozens of restaurants. The design of neighborhoods matters just as much as the details of its public transit or a ride-hailing app when it comes to connecting people to the amenities and resources that they need.

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The week’s must reads

1. The National Committee on Uniform Traffic Control Devices has one of the most snooze-inducing names imaginable—but that doesn’t mean it’s not important, as it helps set guidelines for what streets look like from coast to coast. And asStreetsblog USA reports, NCUCTCD is responding to changes on the ground, like green paint for bike lanes and innovative, multimodal-friendly traffic signals, by adopting national standards that will help spread those progressive changes to other cities, and encourage local leaders to embrace consistency from place to place.

2. Marisa Novara at Chicago’s Metropolitan Planning Council writes about the challenges of housing policy in a city where some neighborhoods are heating up, but overall population isn’t increasing—a situation that many cities in the Midwest and Northeast find themselves in. She makes the important point that on-the-ground changes people see in their neighborhoods, like rising home prices, need to be thought of as the outcomes of many different interacting factors, including changing demand, transportation networks, and housing supply—rather than as acause by themselves. Novara also points out that while below-market subsidized housing is important, no realistic amount of funding will produce enough for that to be a solution on its own: market prices also need to be kept under control.

3. As the presidential primaries heat up, Gabrielle Gurley at The American Prospect takes a look at the infrastructure plans of the Democratic candidates, Hillary Clinton and Bernie Sanders. The topline numbers: Clinton proposes $275 billion over five years (compared to Obama’s $500 billion proposal in 2015), while Sanders goes for $1 trillion. But neither of those figures seems likely to get by Congress. Both candidates also includes a national infrastructure bank (which we’ve been skeptical of). Gurley ultimately concludes that there’s little to be excited about.

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New knowledge

1. How affordable is affordable housing? Affordability is a function not just of rents, but of the embedded costs of transportation attributable to a house’s location. As reported by the Dallas Morning News, a new study by Shima Hamidi of the University of Texas – Arlington and Reid Ewing of the University of Utah shows that by failing to take into account transportation costs, the total location costs of HUD-funded affordable housing are beyond what low-income households can afford. In particular, homes in sprawling areas are likely to require transportation spending that is more than 15 percent of total household income, the threshold above which transportation costs are considered “unaffordable.”

2. CityLab‘s Eric Jaffe has an excellent writeup of a paper looking at why, exactly, American cities have seen an influx of young, highly educated people since 2000. The study, by Victor Couture of UC – Berkeley and Jessie Handbury of the University of Pennsylvania, tests various hypotheses about the location-choice decisions of college graduates between 25 and 44. They find that a desire to be close to sought-after amenities, like restaurants, bars, gyms, and retail stores, provides the strongest explanation. Interestingly, proximity to jobs was a relatively minor factor, as people with jobs in the suburbs were not much less likely to choose a downtown home than those with center city jobs.

3. A new report from SSTI tracks venture capital funding by metropolitan area for 2015. The topline findings shouldn’t be surprising: the San Francisco area got the most funding, with $21 billion, or about $4,500 per person; the San Jose region was next, with $3,200 in VC funding per resident. Columbus, Ohio and Tampa, Florida posted the most rapid growth, with total VC funding increasing by over 80 percent.

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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.

Like most city lovers of a certain age, I spent many hours as a kid playing SimCity. For readers who are tragically uninitiated, SimCity is one of the iconic computer games of the 1990s, though new versions have been released as recently as 2013. Playing as mayor (or, really, dictator, but more on that later), you shepherded the growth of a city from its very first streets to towering skyscrapers—assuming you weren’t wiped out by tornados, fires, or aliens. By making thousands and thousands of people plan commercial, industrial, and residential districts for their virtual towns, the creators of SimCity have probably done more than anyone in the history of the world to introduce basic principles of zoning to the public.

 

Recently, I started playing a successor to SimCity, Cities: Skylines (or CS, as I’ll call it). CS is very much like SimCity, with some added details (at least compared to the last version I played) and much better graphics. But unlike when I was ten, I can also appreciate that CS, like SimCity, has a whole host of assumptions about how cities work, and how urban governance works, built into the gameplay—assumptions that are both frustrating as a player and fascinating as someone who spends a lot of time thinking about real urban planning and governance. While all games that simulate real life are of course drastically simplified, the way that they’re simplified often speaks to the actual worldview of the people who design and play them. With that in mind, here are some notes on what a video game can teach us about the biases and blind spots of real-life urban planning in the US:

• You must zone—and use single-use zoning. With the exception of some Sunbelt cities, nearly every urban core in America took shape in an era before zoning. As we’ve written, brownstone Brooklyn, Wicker Park in Chicago, Cooper-Young in Memphis, and any number of pre-WWII neighborhoods across the country—not to mention iconic cities in other parts of the world—could only have been built without modern American zoning, with its density limits, parking requirements, and separation of shops and homes. But in CS, no one can build anything on a plot of land until you’ve given it a zone: Residential, Commercial, Industrial, or Office, and specified high- or low-density. It’s striking that zoning is so baked into our assumptions about how urban development works that leaving something unzoned is just not possible—let alone creating mixed-use zoning, form-based zoning, or other kinds of development regulations like those used in Europe.

 

• You must give cars primacy on the street. One of the most important tools real-life planners have is designing public space, including streets. The tradeoff between pedestrian spaces, bike lanes, and lanes for motorized traffic—and within motorized traffic, between private vehicles and public transportation—has a profound effect on neighborhood character, development patterns, and how people choose to get around. But in CS, that decision has been made for you—and as with zoning, the assumption is that all streets will follow the mid-to-late-20th-century US norm, which is dedicating as much space as possible for the use of private vehicles. Pedestrian-only and pedestrian-dominated streets, transitways, or simple bus lanes are all impossible, even though, again, many real-life neighborhoods around the world would be very, very different without them.

• Parking doesn’t exist. This is an interesting one: whereas the last two issues bake in assumptions based on 20th century US practices, when it comes to one of the defining features of modern urban land use in America—parking—CS simply pretends it doesn’t exist. Why would it do that, when the game takes so much care to have a sophisticated transportation model, with individual workers who have to get to jobs, creating traffic jams, or using specific bus or train stops? Here’s one theory: no one actually wants a city full of parking lots and multi-story garages. Put simply, accommodating the actual demand for parking that your little citizens generate would be a bummer, because half of the buzzing streetscapes or idyllic suburbs you created would be erased for parking lots. This is, in fact, what we have done in real life, and it is a bummer. But CS might have forced players to look at parking as a part of the transportation system—and to recognize that the attractive, non-parking-lot-based neighborhoods in which many people wish to live their lives are incompatible with massive car use. Instead, it just pretends that all the costs associated with car storage don’t exist—a form of denial that is still strong more than ten years after the publication of The High Cost of Free Parking.

• It’s all about the built environment. CS presents cities as a kind of dynamic puzzle, a system with inputs and outputs that can be optimized towards whatever goal you might have for them. But in real life, cities are mostly about people, and the relationships between them. Interestingly, though in many ways the game locks in an incredibly specific time and place—America in the second half of the 20th century, more or less—many of the defining features of that era are entirely absent. There are no poor neighborhoods in CS; race doesn’t exist, so there are no segregated black or white or Asian or Latino neighborhoods, either. In fact, community does not exist in any form. Every person cares only about their individual inputs and outputs: finding a job, having a means of transportation to the job, and so on. But for many real people, community is what cities are all about. Moreover, a central tension in urban governance is reconciling the design of the built environment with the goals of the people and communities who live in it. It’s disappointing that at least one version of the planners’ fantasy resolves that tension by simply imagining people and community out of the equation.

• There are no politics. It would take a special kind of weirdo (like me) to play a game where you have to negotiate funding for major infrastructure projects with representatives from your state’s DOT, and get a community organization’s approval for every new apartment building. But those politics are, in fact, central to how cities get built today. In CS, you don’t really answer to anybody, which, obviously, is part of the fun—but it also represents a particular fantasy that has dogged urban planning since its beginning: namely, the myth of planning as engineering, a quasi-scientific exercise in tweaking traffic flows and directing people and jobs to the optimal locations to achieve a unified vision. In real life, every decision that gets made has a coalition of interested parties behind it. Understanding those interests, and the government institutions through which they’re channeled, is as important to understanding urban planning as a traffic model or supply and demand curve.

 

Even though it’s just a computer game, Cities: Skylines has a lot to teach us about the unstated premises of our urban planning conversations, and demonstrates how those premises profoundly shape what our cities can look like. When we assume the necessity of a given way of regulating cities, assume away the messiness of people and their relationships, assume away politics, and ignore major costs, we miss an awful lot of what urban planning debates should be.

Last Friday, we took part in a roundtable at the Washington Post’s Wonkblog on affordable housing. The conversation focused on a long-running debate about how best to address the affordability crisis in cities like San Francisco, and was sparked in particular by the new California Legislative Analyst’s Office report that found neighborhoods in the Bay Area with more market-rate housing construction were less likely to experience displacement of low-income residents.

Because there were several participants, space was limited. And although we’re generally familiar with the arguments, we didn’t get to see other contributors’ pieces before they were published. So we’d like to take the opportunity to respond to a few ideas here.

 

One big takeaway is that there’s much more overlap in the arguments than you might think. For example, Alex Karner of Georgia Tech’s planning school and Chris Benner of UC – Santa Cruz, who take a skeptical position with regards to the LAO study, agree that we need more housing supply: “The LAO report is correct that there is a housing shortage across California,” they say. And when they write:

We need innovative policies that move beyond the limited existing [affordable housing] programs. The most promising…would provide direct subsidies to create permanently affordable housing…. The question is whether we have the political will to overcome local opposition to new development and to change policies, like the mortgage interest tax deduction, that currently do more to subsidize middle- and high-income homeowners than struggling low-income renters.

…they sound very similar to what we’ve written at City Observatory, where we’ve criticized the limited scope of existing affordable housing programs, advocated for innovative new programs to give direct housing subsidies to the low-income, talked about the political difficulties of local development politics, and argued for cutting the wasteful and regressive mortgage interest tax deduction.

So where’s the rub? That comes with our differing views on whether new market-rate housing construction can help even if that housing is targeted at high-income households. For Karner and Benner—and Dan Immergluck, also of Georgia Tech’s planning school—the answer is no. “To be sure, more supply is needed,” Karner and Benner write, “but unless it is targeted to those who need it most, it will only help wealthier residents.” Moreover, they add, high-income housing is already well supplied.

Our view is that this makes a fundamental mistake by implying that some housing is inherently “high-end” and other housing is inherently “low-end.” In fact, nearly all “low-end” housing is just high-end housing that became cheaper as it aged—in wonk terms, it “filtered down.” In the same way, gentrifying neighborhoods don’t become expensive because all of their “low-end” buildings are torn down and replaced with new “high-end” buildings: in San Francisco, like Brooklyn, Chicago, and other US cities, the vast majority of people in gentrified neighborhoods live in homes that have been around for decades, a century, or more.

Rather, these older homes become expensive because wealthier people become willing to pay more for them. Sometimes, that’s because landlords do major renovations; but other times, it’s simply because the area has become more desirable as a result of job growth or just the growing demand for urban living, and those are the only places in the neighborhood to live. When a landlord finds that she has many people bidding for her apartments, she will tend to rent to whoever can pay the most—increasing the rent until lower-income people drop out of the running. Adding more housing to the neighborhood, even if it’s expensive, will divert some of those high-income people from bidding on older apartments—which means less competition between high- and low-income people for the same homes, and fewer old buildings that “filter up” to become more expensive.

 

Immergluck directly addresses this “filtering” problem. He admits that it is a major source of “naturally occurring” (or market rate) affordable housing, but goes on to say that the process simply doesn’t work in neighborhoods experiencing rapid gentrification, “because land values and rents rise as the neighborhoods become more desirable and developers bid up land values.”

Of course, we think it’s crucial make the why and how of rents being bid up: generally, it’s because the number of people wishing to live in a neighborhood grows faster than the number of places to live, and the latter is largely a result of legal restrictions on the kinds and number of homes that can be built.

Even so, there’s some agreement here, too. Some markets may be so far out of whack that it may be impossible to restore affordability—but they’re exceptional. It is certainly true that in the hottest urban neighborhoods, where the number of people who would like to move in is truly massive—think central San Francisco, or lower Manhattan—it would be very difficult to build enough market-rate housing to avoid so much competition for housing that low-end apartments “filter up” to become more expensive.

But for one, most cities and most neighborhoods are not like central San Francisco or lower Manhattan, and don’t have such overwhelming demand. And second, as Immergluck concedes, filtering can still work more broadly, “in the metropolitan context.” That’s crucial, as an increasing number of metropolitan areas don’t just have some unaffordable neighborhoods—the entire region is unaffordable, pushing lower-income people to other, lower-cost parts of the country. Arresting that trend, which has been called “the new exclusionary zoning,” is hugely important to creating equitable cities, and it can’t be done without building more housing. Thanks to filtering, that’s true even if, as will probably be the case, most of that new housing is built at the higher end of the market.

Next week, we’ll be releasing our latest City Report, which maps the location of consumer-facing businesses around the nation to provide a new, quantitative measure of a city’s street-level vitality—one facet of Jane Jacobs’ famed “sidewalk ballet.” Look for the full report, as well as detailed maps and breakdowns for each of the 51 largest US metropolitan areas, on our website.

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What City Observatory did this week

1. More driving means more dying. Traffic-related deaths increased more than 11 percent over the first nine months of 2015. The cause isn’t hard to detect: cheap gas prices and a recovering economy have more people driving, and just as traffic deaths fell when driving fell in the late 2000s, they’re rising as Americans drive more. While some organizations try to blame the increase on driver behavior—on cell phones, for example, which is hard to square with the declines in traffic deaths from 2006 to 2014—the reality is that our transportation system is designed in a way that nearly guarantees huge human costs.

2. With highways, be careful what you wish for. A new plan to widen I-55 in Chicago is based on a commonly-held idea: more highways means less traffic. But a Google-assisted trip to cities with double or even triple the highway capacity per capita of Chicago reveals that even places like Atlanta or Houston that have gone to extreme lengths to avoid traffic congestion, spending billions of dollars to push highways through neighborhoods, still have lots of traffic congestion. The problem is that cars take up a lot of space—too much space for them to always be an efficient way to get around big cities.

3. Urban myth busting: New rental housing and median-income households. It’s a common argument: new high-end housing is a cause of our housing crisis. But it doesn’t fit the evidence. In fact, new housing has historically been too expensive for low- or moderate-income households—just as new cars (average price today: $34,000) are. Most housing becomes affordable the same way that cars do: it ages, and the relatively affluent owners move on to newer, trendier offerings. But in places where there is little new housing but strong demand, that process has been interrupted, leading the affluent to hold onto their old housing, keeping its prices high.

4. Costly misses on convention centers. University of Texas – San Antonio professor Heywood Sanders writes a guest post on the problem of systemically over-optimistic projections about the utilization and positive economic benefits of new publicly funded convention centers. Focusing on a new proposal in Austin, Sanders shows that the new projection mimics one made two decades ago, even though the first fell woefully short of reality: while it projected nearly 100 trade shows a year, the center hosted just 40 in 2013.

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The week’s must reads

1. We often use economic arguments and studies to inveigh against the problems created by cities’ minimum parking requirements. But sometimes it’s best to just look at a single example on the ground. That’s what the blog Urban Cincy does, highlighting how the redevelopment of a historic building in that city’s Over the Rhine neighborhood is threatened by parking requirements that did not exist when it was built. While developers have found a 175-space lot a few blocks from the building, it’s not clear whether the city will give a variance to allow those spaces to be used for the building’s requirement. As you can see below in the image from Urban Cincy, the building and its streetscape would clearly be improved by a giant parking lot.

2. At CityLab, Amanda Kolson Hurley has written a three–part series on the amazing demographic changes in the Minneapolis-St. Paul suburbs—changes that reflect, and perhaps predict, broader shifts around the country. Hurley shows how once-90 percent white suburbs have significantly diversified, with immigrants from Asia, Africa, and Latin America, as well as people of color moving out from the central Twin Cities. But as they have diversified, they are also facing increasing problems of poverty and resegregation in the suburbs. Hurley dives deep into the debate over exactly how much establishing diverse, stable, opportunity-rich suburbs depends on battling racial segregation.

3. At Planetizen, Joshua Drucker raises concerns about economic impact statements in a piece that makes good joint reading with our own guest post about convention center projections. Drucker points out that economic impact statements often depend on the assumption that previous trends can continue indefinitely, ignoring issues like capacity constraints that may make that untrue. He argues that while economic impact studies are important, both practitioners and community members need to be educated about their shortcomings and take steps to minimize them, including ending false claims of precision, using multiple methods, and building different scenarios.

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New knowledge

1. At CityLab, Richard Florida covers a new study from Trulia on the continued rise of renting. The proportion of American households that rent their housing has continued to rise during the recovery from the recession, reaching 41.1 percent in 2014, compared to 36.1 percent in 2006. The rise has been especially pronounced among younger people, with 71.6 percent of 18-to-34-year-olds renting in 2014, up from 62.5 percent in 2006. While some of the increase may be due to economic issues, even high-income households are seeing a rapid increase in renting.

2. How many people actually use those huge parking lots in front of so many suburban—and many urban—retail stores? Jennifer Evans-Cowley of The Ohio State University led a team that used aerial imagery to measure parking use around the Columbus, Ohio metropolitan area. It probably won’t shock you to hear that Evans-Cowley’s team found massive underuse everywhere they looked: on average, parking lots were just 28 percent occupied (or nearly 300 percent oversupply), with the highest utilization rate being 69 percent (or about 45 percent oversupply). Meanwhile, the massive, largely empty parking lots—which may be required by local zoning codes—force buildings to be more spread out, making it more difficult for people to walk or use transit to run errands.

3. CityLab covers a new study from Elliot Anenberg of the Federal Reserve and Edward Kung of UCLA on how food trucks decide where to set up shop. The researchers underline the importance of mobile technology in connecting consumers with food trucks, and the ways that these mobile shops can benefit from consumers’ preference for variety in their food. Interestingly, New York City is a major outlier in having relatively few online searches for food truck locations—perhaps, as CityLab‘s Richard Florida speculates, because the city’s dense land use patterns mean there are so many options within a short walking distance that searching is unnecessary. (Surprisingly, Portland Oregon—which has one of the nation’s largest concentrations of free-standing food vendors—ranks very low on the “food trucks” Google Search list, possibly because in Portland they are called “food carts.”)

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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.

After fourteen seasons, Discovery Channel’s always entertaining “Mythbusters” series is coming to an end later this year. If you haven’t seen the show, co-hosts Adam Savage and Jamie Hyneman construct elaborate (often explosive) experiments to test whether something you see on television or in the movies could actually happen in real life. (Sadly, you can’t make a bullet curve no matter how fast you flick your arm.)  

At City Observatory, we feel compelled to enter into this void, and we’ll start by doing our own urban myth-busting. First up: Does building new high-priced apartments, affordable only by middle- and upper-income families, make housing less affordable for lower income households?

We’ve heard this claim time and again in public hearings: new rental housing charges higher rents than existing apartments, and must therefore be making affordability problems worse.

Even Harvard University’s Joint Center on Housing Studies reprised this line in their recent report: “50 percent of rental households make less than $34,000 per year, but only 10 percent of new multi-family units are affordable at this income.”

From this statistical observation, it’s a short leap to the conclusion that building new housing is part of the affordability problem. The Wall Street Journal reported that “much of the new supply is aimed at higher-income renters.” In May, the Journal ran a story claiming: “A focus by builders on high-end apartments helps explain why rents are soaring across the country.”

 

On its surface, this sounds terrible. But the key context missing here is that in the United States, we have almost never built new market-rate housing for low-income households. New housing—rental and owner-occupied—overwhelmingly tends to get built for middle- and upper-income households. So how do affordable market-rate housing units get created? As new housing ages, it depreciates, and prices and rents decline, relative to newer houses. (At some point, usually after half a century or more, the process reverses, as surviving houses—which are often those of the highest quality—become increasingly historic, and then appreciate.)

What really matters is not whether new housing is created at a price point that low- and moderate-income households can afford, but rather, whether the overall housing supply increases enough that the existing housing stock can “filter down” to low and moderate income households. As we’ve written, that process depends on wealthier people moving into newer, more desirable homes. Where the construction of those homes is highly constrained, those wealthier households end up bidding up the price of older housing—preventing it from filtering down to lower income households and providing for more affordability.

This isn’t theoretical: As we’ve discussed before at City Observatory, the vast majority of today’s actually existing affordable housing is not subsidized below-market housing, but market-rate housing that has depreciated, or “filtered.” Syracuse economist Stuart Rosenthal estimates that the median value of rental housing declines by about 2.2% per year. As its price falls, lower-income people move in. Rosenthal estimates that rental housing that is 20 years old is occupied, on average, by households with incomes about half the level of incomes of those who occupy new rental housing.

 

In its recent report, the California Legislative Analyst’s Office noted that as housing ages, it becomes more affordable. Housing that likely was considered “luxury” when first built declined to the middle of the housing market within 25 years. Take the 1960s-era apartments built in Marietta, a suburb of Atlanta: When they were new, they were middle to upper income housing, occupied by single professionals, gradually, as they aged, they slid down-market, to the point where the city passed an $85 million bond issue to acquire and demolish them as a way of reducing a concentration of low income households in the Franklin Road neighborhood.

New Cars are Unaffordable to Low Income Households, too

Here’s another way to look at the connection between affordability and the price of new things: cars. (After houses, cars are frequently the most expensive consumer durable that most American’s purchase.)

Exactly the same thing could be said of new car purchases: Most new cars aren’t affordable to the typical household either—the average sale price of a new car is nearly $34,000.

 

In fact, using the same kind of approach that Harvard’s Joint Center for Housing Studies used to assess rental affordability, Interest.com reports that the median family can afford to buy the typical new car in only one large metropolitan area. Similar to the “30 percent of income” rule widely—and in our view inappropriately—used to gauge housing affordability, they assume that the typical household makes an 20 percent down payment, finances its purchase over four years and pays no more than 10 percent of its income for a car payment. They report in most metros that the typical family falls 30 to 40 percent short of being able to afford a new car. So most households deal with car affordability pretty much like they deal with housing affordability: by buying used.

When it comes to anything new and long-lived, higher-income households buy most of the output. According to Bureau of Labor Statistics data, households in the two highest income quintiles accounted for about 67 percent of the purchase of new cars in the US in 2001. New car buyers are getting progressively older, and are more likely to be high income. According to the National Automobile Dealers Association, the median new car buyer is 52 years old and has an income of about $80,000, compared to an average age of 37 and an income of $50,000 for the overall population.

But there’s no outcry about America’s “affordable car crisis.” The reason: high-income households buy newer cars; most of the rest of us buy used cars—which are more affordable after they’ve depreciated for a while.That’s even more true of housing, which is much longer lived. Nationally, 68 percent of the nation’s rental housing is more than 30 years old—so only about 10 percent of the nation’s renters live in apartments built in the last decade.

New houses, like new cars, are sold primarily to higher income households—and affordability comes from getting a bargain when the car (or house or apartment) has depreciated. Building more high priced new apartments, in fact, is critical to generate the filtering down of older housing that constitutes the affordable housing supply.

This myth is busted: building more high end housing doesn’t make housing less affordable.

Today’s guest post comes from our colleague Heywood Sanders, Professor at the University of Texas San Antonio, and author of Convention Center Follies.

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Lots of people make guesses about the future. So do cities. And cities often employ “expert” consultants, who presumably have a wealth of knowledge and expertise to inform their guesses, and provide more accurate and precise forecasts of the future.

But those forecasts don’t always prove accurate and effective. And consultants may be prone to telling city leaders what they’d prefer to hear, sometimes leading to dire consequences for the cities and their residents.

One cautionary tale took place in Austin, Texas. In the mid-1990s, Austin was considering expanding its convention center, so it hired a consultant, Charles H. Johnson, to make two separate reports forecasting the effects of such a project. Both studies depicted a glowing future if the convention center expansion was built: double the convention events, double the attendance, double the hotel room nights. The city, presumably at least partly thanks to these figures, went ahead with it.

 

Almost two decades later, the city wants to do it again—but their own analysis shows that Austin has yet to see all the predicted benefits from the first round of expansions.

This year, Austin has once again contracted with Johnson to make a recommendation about building an even bigger convention center. Not surprisingly, the 2015 report is rosy about the expansion. But it also provides actual attendance figures for the first round of expansions, allowing us to compare Johnson’s projections from the 1990s with what has actually happened.

The comparison is not flattering. Where the 1990s reports forecast 98 annual conventions and trade shows, the center just managed to land 40 in 2013. Johnson had also forecast that expansion would more than double attendance figures, from 150,000 to 329,00. But the expanded Austin center housed 186,675 convention and trade show attendees in 2013, the most recent year in the new report. Hotel room nights likewise fell far short of projections.

On top of that, it turns out that not only does history repeat, but so do dubious projections of the future. The 2015 report suggests that in “Year 8” of the newly proposed convention center expansion, there will be 311,000 hotel room nights—roughly what the 1990s analysis projected for the first round of expansion.

Nor is Austin the only city to find itself in this position. Johnson himself also worked on a report for a proposed Boston convention center, suggesting that it would produce 794,000 hotel room nights by 2012. While the center that eventually was built was somewhat smaller than the one Johnson analyzed (at 516,000 rather than 600,000 square feet), it generated only a fraction of the business: just under 265,000 hotel room nights in 2014. And Dallas Magazine detailed some of the projections and accounting shenanigans surrounding that city’s convention expansions earlier this year.

You might think that someone in Austin—perhaps the Austin Convention Center director, the city manager and staff, or the city’s mayor and council—would bother to check on the track record of convention center projections, and those of Johnson in particular, before commissioning a study. You might ask how Johnson came up with his projection for the currently proposed expansion. And you might wonder how an “expert” consultant gets to be considered “expert.”

There is clearly a danger of “selection bias” going on here.  The municipalities that commission economic impact studies and forecasts are looking for a justification to build these facilities. Typically they are sponsored by convention and visitor bureaus, or other special purpose entities with a strong vested interest. They choose the consultants to conduct the studies. Confronted with a choice of consultants who invariably produce high numbers and go forward recommendations and other consultants who are more pessimistic and cautious, it’s likely that those commissioning the studies will choose the more optimistic firms. Over time, this will weed out the pessimists, and only optimists will be left. This theory has some support in academic research.

When cities commission feasibility studies, and especially when the results of those studies will guide the use of millions of dollars of public money, there ought to be some reason to believe that those reports will be accurate. Part of that is looking at the track record of similar studies by the same authors and using the same methodology. Cities and voters should be able to evaluate the people being hired both for their reliability—how close their projections are to observed outcomes—and their bias, or whether their projections consistently over- or under-shoot actual results.

Without some assurance of reasonable accuracy on these fronts, it’s hard to know why cities should continue to base major economic development investment decisions on these often faulty studies.

What City Observatory did this week

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

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

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

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

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The week’s must reads

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

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

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

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New knowledge

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

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

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

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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.

I live in Chicago. In Chicago, like pretty much everywhere, people complain about traffic. Almost every day, our roads and highways get congested at rush hour, leaving people crawling along supposedly high-speed corridors, wasting time, money, and gas. This is what it looks like on a typical Monday at 5:35 pm:

 

Obviously, no one is happy about this. So some people argue that we ought to build more highways. If the problem is that there are too many cars for the number of highway lanes, then surely building more highway lanes will improve the situation! In fact, just recently our governor announced that he was planning on adding at least one lane in each direction on I-55, which runs southwest out of the Loop.

It turns out that it’s true that Chicago has relatively few highways: by one measure, fewer than any other major metropolitan area, with just 0.33 highway lane-miles per 1,000 people. So let’s go on a Google-assisted fact-finding mission to some other cities with more highways to see if they’ve solved their traffic problems. Here’s Boston, which, at 0.62 highway lane-miles per 1,000 people, has almost double the highway capacity of Chicago:

 

Hm. That still looks pretty bad. Maybe the issue, though, is Boston’s famously narrow streets in its dense central city. (After all, people also blame Chicago’s congestion on too many people packed into too little space.) So here’s Atlanta, which has a similar number of highway lane-miles per 1,000 people (0.56), but is way less dense and has way bigger surface streets:

 

No dice. Okay, let’s go for even more highways. Remember, at this point we’ve nearly doubled Chicago’s highway capacity, spending many tens of billions of dollars, declaring eminent domain on hundreds of thousands of homes and businesses, and tearing apart dozens of neighborhoods. But what if we nearly tripled Chicago’s highway capacity? Houston has 0.82 highway miles per 1,000 residents, massive surface streets, and very few high-density areas like Boston or Chicago. Here’s what their rush hour looks like:

 

Obviously, this is not exactly a scientific study. Fortunately, however, other people have done those, and they find something similar: more road capacity does not necessarily mean less congestion. If a wider highway makes traffic flow faster, then some number of people who had been using other methods of transportation, or just making fewer trips, will start driving on the highway—adding more cars until traffic gets so bad that they stop. Over the longer term, additional highway capacity encourages developers to build ever farther into the suburban periphery, advertising the transportation benefits of being right next to a big highway that can bring you into the metropolitan area. The people who buy homes out there are then locked into driving longer and longer distances to get to work, go shopping, and meet people, each of which ends up increasing traffic congestion. That’s a big reason why people in Houston drive, on average, 12.2 miles to work, as compared to 10 in Chicago—even though Houston’s metropolitan area has almost a third fewer people than Chicago’s.

The problem, fundamentally, is one of space: cars take up a huge amount of physical space per person, compared with other kinds of transportation. In smaller cities, you might be able to accommodate them without total gridlock, at the cost of downtowns that are mostly parking lots, and streets that are unsafe for children or the elderly to cross. But as metropolitan areas grow, it simply becomes impossible to create enough space for cars. Even cities that have grown up almost entirely in the automobile era, and have catered to it in about as extreme a way as you can imagine, suffer from daily traffic jams.

 

When you’re sitting in traffic congestion, it’s natural to wish it away, and to imagine that with just a little more space, you could whisk yourself along at higher speeds. But if that’s the vision, it’s worth checking on other cities that have done just that. And it turns out that almost all of them, even ones that have double or nearly triple the highway capacity of a place like Chicago, still have the same problems. Maybe it’s time to look for different solutions.

New data from the national traffic safety administration shows an ominous trend: traffic related deaths are up 11.3 percent for the first nine months of 2015, as compared to the same period a year earlier.

Although the NHTSA warns that the data are subject to revision, and cautions that it’s too early to discern the causes of this change, those who have been paying attention to the longer trend know that there’s every reason to believe we already have a suspect.

As we’ve noted before at City Observatory, the decline in gas prices that started in mid-2014 has led to an increase in driving, reversing a nearly decade-long trend of Americans driving fewer miles per person per day.

What’s striking about the new NHTSA numbers is that road crash deaths are increasing much faster than total miles driven. As a result, the number of deaths per mile driven—which has been declining for decades—jumped up in the first three quarters of 2015, from 1.05 deaths per 100 million miles to 1.10 deaths per 100 million miles.

But this isn’t a new relationship: the same kind of disproportionate change occurred when gas prices increased in 2007-08. At that time, miles driven fell sharply—and traffic deaths fell even faster. In 2008, total vehicle miles traveled declined by 0.7% and in 2009, they declined a further 1.5 percent.

 

This suggests that the relationship between driving and deaths is non-linear: a one percent increase in driving produces a much larger than one percent increase in deaths—actually, something like a three percent increase in deaths, based on these very partial data.

Why might deaths increase faster than miles driven? There are several reasons. First, we know that some traffic phenomena, like traffic congestion, are very non-linear: the roughly 3 percent decline in traffic in 2008 produced a 30 percent reduction in traffic congestion. Second, it may well be that the additional (or, in economist-speak, “marginal”) miles driven, and marginal drivers driving them, are for some reason less safe than the typical mile driven. If we take longer trips, we may drive on more dangerous roads, or at more dangerous times. Third, it may be that people are driving faster—some research showed that high fuel prices induced motorists to slow down—and speed is strongly correlated with road safety. Over at Streetsblog, Angie Schmitt reports on David Levinson’s theory that price sensitive teen drivers may drive more when gasoline is cheap, and that may account for some of the hypersensitivity of crash rates to apparently small changes in the total amount of driving.

We know that for many reasons, there are structural connections between cheaper gas, more miles driven, and more traffic fatalities. But some analysts want to downplay those structural issues and place the blame on driver behavior. One of the most widely offered explanations for the increase in crashes and fatalities is “distracted driving,” and especially the rise of text messaging. While there’s little question that texting and driving is dangerous, and contributes to many crashes, the numbers simply don’t support this theory.

Available data suggests that text messaging grew much more rapidly between 2008 and 2013—when traffic deaths were declining—than in recent years. One source, citing data collected by Nielsen, reports that text messaging increased by a factor of four between 2007 and 2009, but has grown only about 12-15 percent per year since 2011. Forrester reports messaging increased about 14 percent between 2010 and 2011. While one could wish for much better data about the volume of text messaging, the growth of text messaging seems to coincide with a period of safer driving.

What’s clear though is that the minor changes in the amount of driving that we do seem to have disproportionately large effects on traffic fatalities. Lower gas prices that encourage more driving produce proportionately larger increases in fatalities. And higher gas prices that reduced driving in 2007 and 2008, produced disproportionately large reductions in fatalities.

We’ve known for a long time that housing shortages are a major driver of high housing prices—and that, as a result, places that prevent new construction also tend to have big affordability problems.

But now, for the first time that we’re aware of, researchers have taken the next step to showing directly that places like that prevent new construction end up inducing more displacement of their low-income residents.

That finding comes from California’s Legislative Analyst’s Office, which just released a new report on the state’s ever-growing affordability crisis. Using a broad definition of displacement—any decline of a neighborhood’s low-income population relative to its total population—the LAO shows that, even controlling for other demographic factors, Bay Area communities with the greatest expansion of market-rate housing also see the least low-income displacement.

The effect is strong: changing from a low-construction neighborhood to a high-construction neighborhood was associated with a decline in the probability of displacement from 46 percent to 26 percent.

And crucially, the LAO researchers found that this effect was independent of inclusionary housing programs. That is, new construction reduced displacement not because it included low-income set-aside units, but because it helped keep market prices lower. In fact, the presence or lack of an inclusionary housing policy had a much, much smaller effect on displacement than the amount of market-rate housing construction.

That’s the headline, but there’s much more to see in the report. It covers the challenges to expanding many of the state’s low-income housing assistance, and demonstrates the importance of filtering to creating “naturally occurring” affordable housing—and how zoning restrictions hamper that process. It bears close reading for anyone invested in creating affordable communities.

Over the last few months, we’ve outlined a number of policy ideas that address the problem of housing affordability by dramatically expanding the number of people receiving some sort of housing assistance. (Low-income people, that is. We think the number of affluent people receiving housing assistance is already pretty high.)

• We suggested taxing the growth in residential property values. Not only might that provide a disincentive to speculation that drives up market prices, but just a one percent tax would have raised $1.6 billion in the Bay Area in 2013 alone—more than five times San Francisco’s historic, but one-time, bond issue for affordable housing under Proposition A.
• We argued for making Housing Choice Vouchers an entitlement. At the moment, less than a quarter of households that qualify for low-income housing assistance actually receive any, because Congress simply doesn’t appropriate enough money. But we could pay for housing vouchers for every single qualifying person just by dropping one kind of housing subsidy—the mortgage interest tax deduction—for people making over $100,000 a year. Actually, that’s not quite true: we’d still have more than $10 billion left over to increase the value of the deduction for the middle class.
• We suggested that, perhaps even better than expanding Housing Choice Vouchers, we could make low-income housing assistance just as easy and automatic as we make upper-income housing assistance. We could put it in the tax code, by creating a refundable housing voucher tax credit.

None of these policies is on the brink of passing in Congress, or any state capitol or city hall. But they’re worth talking about both as a vision for what an equitable housing policy of the future might look like—and also as a contrast to the failure of scale of today’s marquee housing policies.

Local housing subsidies are woefully out of scale with the problem of affordability

As we noted above, less than a quarter of those who qualify for direct federal low-income housing subsidies get them. But when it comes to housing assistance, that’s the good news. Local housing policies—which, for obvious reasons of political scale, are often the focus of neighborhood activists, researchers, and planners—are in even worse shape.

Take inclusionary zoning, or IZ. Details vary from place to place, but typically, IZ requires housing developers to sell or rent some proportion of their units below market rate. In exchange, the city often allows the developer to build more densely than otherwise allowed, as a way of defraying some of the cost of the below-market units. And sometimes the developers have the option of paying a fee into an affordable housing fund, rather than building the units themselves.

Politically, the appeal of IZ is clear. First and foremost, it’s a way of financing housing that doesn’t require raising property or sales taxes. Second, it creates another hurdle for development, which is almost always a popular move in homevoter regimes. And it has great symbolic value: because of the high cost of construction, new buildings are often the most expensive housing in a neighborhood. Including below-market units in new luxury buildings can be a statement about the value of economic integration.

Unfortunately, IZ is more powerful as a symbol than as a way of helping people. A chart published in a New York City Planning Department report last fall makes this point rather eloquently on its own.

There’s a lot going on here, but the most important lines are “Total Unit Production” and “Total In-Lieu Fees Collected.” Washington, DC, for example, created 80 units of affordable housing and collected no money in fees between 2006 and mid-2014. In the DC metropolitan area, 46 percent of renters are burdened by their housing costs. Even allowing for some differences in the District itself (and our quibbles with the 30 percent ratio used to get that number), it’s clear that it would be generous to refer to 80 units of affordable housing—roughly 10 per year—as “token.”

And while DC is a particularly egregious example, the other cities are hardly exemplars themselves. San Francisco looks relatively impressive at 1,560 units—until you realize that’s under 140 units per year in a city of over 800,000 people where median home prices are well above what even upper-middle-class, let alone low-income, households can afford. (Indeed, San Francisco’s “affordable” units go to families of four making as much as $91,700.) Nor do the city’s in-lieu fees make up much of a difference: about $5 million a year, which, according to numbers from Kim-Mai Cutler, might buy about 20 units.

The most successful inclusionary zoning program relied on extremely rapid population growth

Arguably the most successful inclusionary zoning program is in Montgomery County, Maryland, outside DC. Montgomery County’s IZ program, the first in the country, has created over 14,000 affordable units since 1974, or more than 350 a year. But while that’s relatively impressive, it’s hardly met the need: according to the County itself, there are at least 78,000 households that are still cost-burdened. Moreover, Montgomery County’s relative success has been predicated on truly massive population growth, nearly doubling from 564,000 to over a million people from 1974 to 2013. Without that kind of growth, the County would be unable to produce as many IZ units—and, indeed, as population growth has slowed, so has the number of new units. While Montgomery County produced an average of 441 units per year from 1976 to 1999, from 2000 to 2013, it has averaged just 245. Cities that are unable or unwilling to accommodate very rapid market-rate housing construction won’t be able to replicate these results—which still haven’t come close to solving the problem.

 

 

None of this is necessarily an argument against inclusionary zoning on its own: local activists may reasonably conclude that this is the best that can be done at the moment. They may similarly decide that the tradeoff of slightly higher market prices is worth creating units at prices below what could otherwise be reached. (Though advocates frequently bristle at the suggestion that inclusionary zoning drives up the price of non-subsidized housing, evidence seems to suggest that it does, at least in markets with high demand and relatively restricted supply—that is, the sorts of markets where IZ is likely to be implemented. And, in fact, when IZ policies are being promoted to local homeowners, advocates sometimes pivot to arguing that affordable housing will be good for property values—in other words, it will make housing more expensive.)

We need to think bigger than inclusionary zoning

But there is no way to argue that inclusionary zoning is coming close to meeting the demand for below-market housing—or, importantly, that it will ever be able to do so. A hundred and forty units per year in San Francisco is not off by ten percent, or fifty percent, or even just one order of magnitude. Moreover, any dramatic expansion of IZ would also involve increasing the amount of private housing development by a similar amount, since IZ depends on piggybacking off of market-rate development—something that would be politically unthinkable in almost any jurisdiction.

In short, IZ needs to be reframed as not a centerpiece, but a minor part of an affordable housing agenda that actually serves everyone who needs help. Advocates need to push government to act on the scale of the problem, and one of the first steps is acknowledging out loud how far we have to go. At a local level, perhaps that can be done with a housing capital gains tax dedicated to funding affordable housing. At a federal level—and it seems more than likely that only the federal government has access to the resources to fully close the gap between the low-income housing assistance we need and what we currently have—expanding Housing Choice Vouchers, LIHTC, or creating something like the housing voucher tax credit could make a big difference. And, of course, broadly affordable housing requires reasonable market prices, too—which requires easing some of the regulations that prevent new housing for new residents and artificially inflate housing costs. Note the findings released just yesterday by the California Legislative Analyst’s Office, which found a much stronger connection between market-rate construction and reduced displacement than inclusionary housing policies.

Again, the point is not that inclusionary zoning is the enemy of affordable housing. It’s that it’s not that great a friend. The fact that IZ may be on the edge of what is politically possible today should not blind us to the fact that the cities and neighborhoods we envision require vastly more ambition.

First-time home buyers play a critical role in the housing market. The influx of new households into the owner-occupied market is a key source of sales, and provides impetus for existing homeowners to move, liquidate their investment, or trade up to a bigger or better house. They’re the bottom of the home-buying pyramid.

The number of first-time homebuyers has been low since the Great Recession, in spite of recent improvements in housing affordability nationally (at least according to standard metrics like low interest rates and lower housing prices). Total sales of new and existing homes are still well below levels of a decade ago (from more than 8.5 million to 5.3 million), and the National Association of Realtors reports a historic low in the fraction of buyers that are first-timers (30 percent).

These should be good times: the Millennials now just reaching prime homebuying age are the nation’s largest ever generation. But a recent presentation by Zillow’s Stan Humphries laid out a startling picture of how much tougher young adults find it today to transition from renting to buying their first home.

 

Compared with the 1970s, today’s first-time homebuyers are older, have rented longer, have smaller households, and—strikingly—have less income than did their predecessors.. And critically, the housing they’re looking to buy is much more expensive. While average incomes are down slightly, home prices (in inflation-adjusted terms) have increased 60 percent since the 1970s, (from $87,000 to $140,000).

We know these key metrics (lower incomes, longer rental tenure) reflect the economic headwinds that have plagued the Millennial generation, including higher college costs, more student debt, and a weak job market. On top of that, a much larger fraction of young adults today come from demographic groups (including Latinos and African Americans) whose families generally have less wealth—meaning less familial help to marshall a down payment.

All of these factors lend credence to projections by the Urban Institute and others that housing markets are facing a long period of gerontification. They predict that between now and 2030, all of the net increase in homeownership will be in households aged 65 and older, as Baby Boomers age.

Facing home higher prices, with less income, less accumulated wealth and greater debt—not to mention tougher credit availability—today’s young adults have unsurprisingly not been able to reverse the recent decline in homeownership rates. While the first-time homebuyer is hardly headed for extinction, all these trends taken together suggest that they’ll be a far less numerous and consequential force in housing markets than in years past.

A few months ago, we offered a proposal to dramatically increase funding for affordable housing and put a damper on real estate speculation: tax housing capital gains. While San Francisco’s voter-approved Proposition A will produce a one-time infusion of $310 million for below-market housing, and that city’s inclusionary zoning ordinance has produced just about $30 million per year in in-lieu fees, a barely-there one percent tax on the total increase in value of residential property in the Bay Area would have given local governments $1.6 billion in 2013. (Update: We should clarify that there is already a federal residential capital gains tax, but its revenues aren’t targeted at affordable housing, and it exempts the first $250,000 of gains entirely. As we suggested in the first piece we wrote about this, we have in mind something more locally administered and directly targeted at affordability. We’re also fine with exempting some “normal” amount of returns, but a quarter million dollar profit goes beyond “normal” appreciation.)

Now, that idea has received some backup from across the Atlantic. As reported in The Guardian, Britain’s National Institute of Economic and Social Research, or NIESR, released a paper arguing that a capital gains tax on housing would be one of the best tools to tamp down on an overheated real estate market.

 

NIESR focuses less on the potential for such a tax to generate funds to subsidize affordable housing than on its potential to even the playing field between housing and other kinds of investments, since the UK, like the US, gives strong tax preferences to residential property owners. That, in turn, would make residential real estate speculation less attractive, slowing rapid increases in property values and, hopefully, making housing market crashes less disruptive as well. In the American context, reducing tax incentives to buy housing might also balance the scales a bit more between renters and homevoters, easing the political imperative for local governments to pursue development policies that maximize homeowners’ investment returns.

The NIESR paper also makes a strong case that a real estate capital gains tax would be a boon for intergenerational equity. Rising real home prices are pretty much a straightforward transfer of wealth to older generations (who own homes) from the younger generations (who must pay, either through mortgages or rent) to purchase them. As in the United States, homeownership in the UK has not only been declining markedly, it has been experiencing “gerontrification”: as older people hold onto homes whose value has increased dramatically, homeownership among young people has crashed, as the combination of higher home prices and a weak economy mean that fewer and fewer of them have the means to purchase real estate.

Moreover, also like in the US, housing is an ever-larger proportion of overall wealth in the UK, and therefore a major driver of wealth inequality. Residential and nonprofit real estate now represents nearly 60 percent of all wealth in Great Britain. And as MIT graduate student Matthew Rognlie has shown, virtually all of the increase in the ratio of capital gains to wage income over the last several decades—the prime macroeconomic driver of wealth inequality—has come from housing.

The point of all this, as ever, is not that homeownership is bad, or that homeowners should be punished. The NIESR paper echoed us in advocating that a real estate capital gains tax be charged only when a home is sold, so that people on low or fixed incomes whose homes appreciate in value rapidly aren’t caught without enough cash to pay. They also agreed that homeowners could have some amount of price appreciation exempted from the tax as a “normal” return. But when demand for housing in a particular neighborhood or city skyrockets, there’s no reason that current homeowners should reap all of the benefit at the expense of people who would like to buy but can’t because prices are too high. A real estate capital gains tax would not only dampen market price increases, but would represent a sea change in the amount of money available for below-market housing in high-demand areas. It should be on the agenda for anyone who’s worried about inequality and affordable housing.

What City Observatory did this week

1. Don’t demonize driving—just stop subsidizing it. City Observatory likes to make data-driven arguments—but the rhetorical frameworks we use to explain the data matter, too. Here, we take a minute to try to reframe the urbanist argument about the role of cars in a “good” city. While advocates’ rhetoric sometimes makes it sound like cars are inherently bad, we think the issue is really that an over-reliance on cars is bad. Refocusing the problem in that way doesn’t just make for a much more politically palatable argument, given that most people will be keeping at least one car for the foreseeable future—it also makes the policy issue clearer, by focusing on how we subsidize car ownership in ways that encourage overuse and dangerous use.

2. Who’s afraid of affordable housing? The acrimonious debate over housing policy in San Francisco breaks down into two main groups: one that wants to ease regulations on new housing construction, and another that wants to encourage only below-market housing construction. So it’s odd that a proposed ordinance to ease regulations on 100 percent below-market housing ran into major opposition. But that opposition highlights, yet again, the ways that giving a development veto to local groups can serve to make housing less affordable—even when those same local groups are publicly committed to improving affordability.

3. Bursting Portland’s urban growth boundary won’t make housing more affordable. The Oregon Legislature is considering a package of bills that would trade a repeal of the state’s ban on inclusionary zoning for opening up the city’s urban growth boundary to new suburban development. But that’s a deal that affordable housing advocates should turn down: based on the experiences of other American cities, inclusionary zoning is likely to produce only token numbers of affordable units, compared to tax-backed programs Portland already runs—or other measures it could take (see the post below). Meanwhile, opening up the urban growth boundary would be unlikely to relieve much pressure on the market of housing in the central city, where the major affordability issues exist.

4. More support for a real estate capital gains tax. A British think tank makes the case for taxing windfall gains to residential property values—one that dovetails very nicely with the argument we made previously that Bay Area governments, and other local governments seeing rapid housing price growth, ought to tax the growth in residential property values and use the money for affordable housing. Just a one percent tax could have raised $1.6 billion in the Bay Area in 2013, orders of magnitude above the value captured by San Francisco’s inclusionary zoning ordinance.

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The week’s must reads

1. In recent years, policy gridlock at the federal level has led to talk of new leadership from mayors and other local urban leaders. But in City Limits, Judi Kende of Enterprise Community Partners makes the case that cities simply can’t solve the challenges they face without federal help. Many of her points echo arguments we’ve made as well—including that a lack of funding means only 23 percent of low-income households eligible for housing subsidies actually receive help—though while we’ve focused on demand-side solutions like vouchers, Kende suggests expanding affordable housing supply through programs like the Low Income Housing Tax Credit. Either would involve massively more resources than are currently marshalled by marquee local initiatives like inclusionary zoning—resources that only the federal government has access to.

2. Last week, we linked to an LA Times article about that city’s struggles with public transit ridership. This week, a number of writers pushed back on the idea that LA transit is seeing any such sustained decline. Transit consultant Jarrett Walker points out that while ridership is down since 2006, it’s up since 2005—and way up since 2004. In other words, ridership data is noisy, and the overall trendline is unclear. Transit Center says that if there is a post-Recession ridership drop, declining bus service—not a lack of demand—is to blame.

3. Though we often talk about the consequences of transit infrastructure on urban equity and quality of life, the ongoing lead poisoning crisis in Flint, Michigan, is a reminder that other parts of the built environment are just as crucial. And in case you thought this story doesn’t affect people who live outside Michigan, Vox dug through numbers from Pennsylvania and found that 18 of 20 cities in that state have lead exposure rates greater than Flint’s. While Flint’s issues are about lead water pipes, Pennsylvania’s are largely about lead-based paint in older buildings. But in both cases, these are stories about significant health effects of the urban built environment—something that ought to concern urbanists.

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New knowledge

1. It’s another story for the “Dow of cities” file: Consumer Affairs reports on a new Zillow study showing that the value of urban housing continues to grow faster than that of suburban housing. (They also cite some of our work as background.) In fact, in some metropolitan areas—including Boston, Washington, DC, and San Francisco—the average urban home is now worth more than the average suburban home, reversing a decades-long pattern. The change is even more dramatic when adjusted for home size. That’s just another piece of evidence of the long-term shift of demand towards urban centers.

2. We talk about income inequality and wealth inequality, but what about housing price inequality? A new paper from David Albouy of the University of Illinois and Mike Zabek of the University of Michigan tracks this kind of inequality from 1930 to 2010. They find that home price inequality declined through the middle of the 20th century, before beginning to climb again in the 1970s and 80s, reaching roughly 1930s levels by 2010. The changes are explained not by the quality of housing itself, but by the value of land—that is, the value of the location of housing. They write that their findings suggest that “regulatory and geographic constraints on housing supply,” like zoning, “may play a role” in housing inequality within cities.

3. A new report from New York’s Regional Plan Association takes aim at “the unintended consequences of housing finance.” The RPA argues that federal loan programs make financing mixed-use, multi-family urban infill projects more difficult than suburban-type single-use single-family homes, exacerbating the shortage of housing in the sorts of walkable urban neighborhoods that are increasingly in demand. They suggest easing regulations on, for example, the proportion of buildings’ square footage that is allowed to be used for commercial or other non-residential purposes, as the current cap rules out most multifamily buildings with ground floor retail under five stories.

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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.

Like many cities in the US, Portland has been experiencing an affordable housing crisis as rents have risen substantially over the last several years. One proposed solution to this problem is inclusionary zoning—requiring people who build new apartments to hold some units’ rent at below-market rates.

In the coming month or so, the Oregon Legislature will consider a package of bills to address this problem. Unlike most states, Oregon law prohibits local governments from enacting inclusionary zoning laws. As a quid pro quo for agreeing to drop the ban—at least for rental housing—the development industry is suggesting it would like to see the state’s land use laws, including its signature urban growth boundary, weakened.

 

But this is a losing proposition on both ends. Busting the urban growth boundary will do nothing to address housing affordability, and inclusionary zoning would likely make the city’s affordability problems worse, not better. Here’s why:

1. Affordability is about growing up, not out. The economic literature is very clear that the problem is primarily constraints on achieving higher levels of density within existing urban areas: i.e. building more multi-family housing. Rents are rising in Portland (and Seattle and San Francisco) because of the difficulty/constraint on building more density in the center, not expanding the periphery. More housing in the center makes better use of our existing, expensive infrastructure, and lowers transportation costs and pollution. Adding land at the urban edge does little to expand either the supply of housing or, more importantly, the supply of affordable housing. In the last 15 years, the Metro urban growth boundary (or UGB) has been expanded to add more than 32,000 acres of land. Since 2000, those UGB expansion areas have added only 8,500 new housing units, about 7% of new dwellings built since 2000.

2. The market demand/affordability problem is in the urban core. That message is abundantly clear in the shift in home prices in Portland. All of the price appreciation in the Portland area is focused on the urban core. In 2005 that homes in Portland sold for a $20,000 discount to homes in the suburban counties. Now Portland homes sell for a $27,000 premium to homes in the suburbs. Adding more land on the periphery does very little to influence supply in the center, where the demand is.

3. Adding more supply in the core is the key to addressing affordability. The solution to rising rents is to continue to aggressively expand the supply of housing, especially in the core in Portland. Build more apartments. Demand has shifted much more quickly than supply, and the development pipeline is long and slow, but as new units come on line, they help absorb the demand that is pushing up prices. In recent weeks, Seattle rents have begun to soften. Seattle is roughly a year or so ahead of us in the up-cycle in housing construction.

4. Inclusionary zoning increases market prices. Inclusionary zoning tends to drive up the cost of market-rate units, especially in tight housing markets like Portland’s, since developers recoup the cost of subsidized units by raising prices elsewhere. On top of that, the inherently negotiated nature of inclusionary zoning approvals adds uncertainty and delay to the development approval process—which also drives up costs. There’s only limited experience with inclusionary zoning, but evidence from Boston, where it’s been in place for some time, suggests that inclusionary zoning will cause fewer total new units to get built, and that constriction in supply will tend to drive up prices in the entire market.

5. Inclusionary zoning creates only token numbers of affordable units. In the five boroughs of New York, in one of the hottest real estate markets in the world, that city’s inclusionary zoning program produced fewer than 3,000 units in a decade. Portland subsidized nearly that many (about 2,300) affordable units in the Pearl District with Tax Increment Financing. So inclusionary zoning creates so few units that it ends up like a lottery: if you’re lucky enough to get a subsidized unit, bully for you. But everyone else probably ends up paying more for housing as a result.

6. Inclusionary zoning requirements would encourage further sprawl. Because inclusionary zoning is likely to apply only to housing built in Portland, but not in suburban jurisditions, it will effectively be a way of penalizing and disincentivizing dense development in the city relative to housing on the periphery. It would effectively be a tax on urban development, but not suburban development—unless the inclusionary zoning requirement applies regionally and a exacts a payment-in-lieu from all new housing construction.

7. If we want to make housing more affordable, let’s get rid of parking requirements. Oregon actually does allow inclusionary zoning—for cars, in the form of parking requirements. Requiring parking reduces the amount of land that can be used to house people, and directly drives up the price of new homes and apartments. These costs get passed on to homebuyers and renters. Studies show that in urban centers, parking requirements drive up rents by something on the order of about $200 a month. If we want to increase affordability we ought to be getting rid of this kind of hidden housing tax.

Housing affordability is a real problem, and it demands solutions that address the reality of today’s housing market. Sacrificing the state’s prudent system of planning for urban growth won’t remedy housing affordability.

Last year, we described the widening gap between typical housing values in cities and suburbs as the “Dow of cities”: Just as differences in stock prices signal the performance of companies, variations in average home prices are a market signal of the performance of cities. High and rising prices, relative to the overall market, are an indicator that people value what a city offers.

The original data for this analysis came from a report prepared by investment advisory firm Fitch, which combed through 25 years of its Case-Shiller housing price indices to compare changes in home values of homes in four concentric circles in each of the nation’s largest metropolitan areas. That analysis showed that homes in the most central neighborhoods appreciated 50 percent more after 2000 than their peers in each of the more peripheral neighborhoods.

 

Last week, the real estate analytics firm Zillow released its analysis of zip code-level data that tackles the same broad question. Zillow assigned each zip code in the nation’s largest metropolitan areas to one of three categories—urban, suburban, or rural—based on its analysis of survey data about consumer perceptions and their correlation to some of the key characteristics of zip codes, like population density. They they used this classification to track the change in home values for urban, suburban, and rural areas in each of the nation’s largest metropolitan areas from 1997 through 2015.

Overall, they find that urban home values now surpass suburban home values on average. The crossover, according to Zillow’s numbers occurred in November 2014. Today, the average urban home is worth about $269,000, compared to $264,000 for the average suburban home. On a per square foot basis, the somewhat smaller urban homes have been worth more than their suburban counterparts since the late 1990s. Zillow reports that gap has widened, and now the typical consumer pays about 25 percent more per square foot for an urban home ($198) than for a suburban one ($156).

Of course, values vary by market. Thoughtfully Zillow has included metropolitan level data for the nation’s largest metropolitan areas. You can drill down to individual metros and see how the pattern of price changes varies by neighborhood type over the past two decades.

The growing premium that households pay for urban locations compared to suburban ones is an indication of the growing value of cities, and also an indication that we’re facing a shortage of cities.

At City Observatory, we try to stick to a wonky, data-driven approach to all things urban. But numbers don’t mean much without a framework to explain them, and so today we want to quickly talk about one of those rhetorical frameworks: specifically, how we talk about driving.

Our wonky perspective tells us that there are lots of problems that stem from the way we use cars: We price roads wrong, so people over use them. Cars are a major source of air pollution, including the carbon emissions that are causing climate change. Car crashes kill tens of thousands of Americans every year, injure many more, and cost us billions in medical costs and property damage. And building our cities to accommodate cars leads to sprawl that pushes us further apart from one another.

But the problem is not that cars (or the people who drive them) are evil, but that we use them too much, and in dangerous ways. And that’s because we’ve put in place incentives and infrastructure that encourage, or even require, us to do so. When we subsidize roads, socialize the costs of pollution, crashes and parking, and even legally require that our communities be built in ways that make it impossible to live without a car, we send people strong signals to buy and own cars and to drive—a lot. As a result, we drive too much, and frequently at unsafe speeds given the urban environment.

 

Many people—transit boosters, cyclists, planners, environmentalists, safety advocates—look at the end result of all this, and understandably reach the conclusion that cars are the enemy. The overriding policy question, then, becomes: “How do we get people out of their cars?”

In this December story in The New Republic, for example, Emily Badger quotes Daniel Piatowski, a planning PhD presenting a paper on “carrots and sticks” at the Transportation Research Board conference, saying: “The crucial component that’s missing is that we’re not implementing any policies that disincentivize driving.”

“Getting people out of their cars” is a rallying cry and a mission statement that’s guaranteed to provoke a formidable opposition. That’s because most people, correctly, can’t imagine any time soon when they won’t need to use a car for most—even all—of their daily trips. As a practical matter, the fact that for seven or eight decades the entire built environment and most transportation investments have been predicated on car travel means that we can’t quickly move away from auto dependence. For most Americans, driving isn’t attributable to an irrational fondness for cars. In many places, it’s simply impossible to live and work without one.

But there’s good news. The first is that incentives matter. We learned that higher gas prices, for example, had a large and sustained impact on driving behavior. After growing steadily for decades, vehicle miles traveled per person peaked and declined after 2005 (as gas prices shot up). This produced knock-on changes in housing markets, and helped accelerate the move back to cities. And the recent decline in gas prices triggered more driving. “This shows that more intentional kinds of pricing schemes, like congestion pricing or parking pricing, could have similar effects.”

The second point is that small changes matter. Even slight reductions in car use and car ownership will pay big dividends. Traffic congestion is subject to non-linear effects: small reductions in traffic volumes produce big reductions in traffic congestion. Travel monitoring firm Inrix reported that in 2008, the 3 percent decline in vehicle miles traveled led to a 30 percent decline in traffic congestion. . As driving declined, carbon emissions declined and so too, did crashes and traffic deaths.

Moralizing about mode choice is a recipe for policy gridlock

Bitter and acrimonious flamewars between people who are convinced that one side or the other is trying to run us off the road will surely be unproductive. We agree with most of the policies advocates like Piatowski want, including the “sticks” like parking and congestion fees—but not the way they’re being described.

 

Rather than being framed as a punishment, it should be more about responsibility. Drivers should pay for the roads that they drive on. They should be regulated in a way that protects the safety of other users of the right of way. Trucks ought to pay for the damage they do to roads. Every car driver ought to pay for their parking space they use—whether it’s in the public or the private realm. All cars and trucks should be responsible for the carbon pollution they emit. We shouldn’t require third parties such as homebuilders or renters or local businesses to subsidize car travel and parking. This isn’t about creating a “disincentive for car use,” but, as a matter of fairness and practicality, dropping what have essentially been subsidies for financially and socially expensive and dangerous behavior.

Driving is a choice, and provided that drivers pay all the costs associated with making that choice, there’s little reason to object to that. After all, very few people think that a zero car world is one that makes a lot of sense. Low-car makes much more sense that non-car as a policy talking point. How do we get people to make these choices. There’s an analogy here to alcohol. We tried prohibition in the twenties. It was moral absolutism, zero tolerance. Alcohol in any amount was evil. That didn’t work.

When we experienced the epidemic of drunk driving, we didn’t go back to prohibition. Instead, we raised penalties to make drivers more responsible, set tougher limits on blood alcohol content, and put more money into enforcement. People still drink—but there’s a different level of understanding of responsibility and consequences, and fewer people drive drunk.

Update: As reported by the San Francisco Chronicle, the SF Board of Supervisors has passed the ordinance in question.

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As bitter as the housing debate in the San Francisco Bay Area gets sometimes, no one disagrees that the region is facing a crisis of high costs. It’s just that some people believe the crisis can’t be resolved without easing some of the zoning regulations that make it more difficult to build new housing, exacerbating a severe shortage; and others believe that market-priced units will never help, placing all their hopes on building more below-market housing.

So surely a proposal to ease regulations on 100 percent below-market housing developments would sail through to victory, right?

Except it isn’t. As the Chronicle reported, the Planning Commission deadlocked on a proposed ordinance that would remove a lengthy regulatory hurdle, the “conditional use permit,” that’s required even for developments that meet existing zoning and face no community opposition. It can add months, or even a year, to all-below-market projects, slowing down production and adding significant costs to the developers. And all a “conditional use permit” requires is showing that the project is “necessary and desirable,” which one would think would apply to basically any below-market development in San Francisco.

 

So what’s the issue? Some of it appears to be local political grudges. But the proposal is also laying bare some of the inherent political tensions of local governance—even among self-described progressives. In short, neighbors are simply unwilling to give up any power to control what happens in their neighborhoods, even if it means fast-tracking 100 percent below-market housing that they admit their communities desperately need. The Chronicle quotes one Commissioner saying that the proposal was trying to “take away the public’s right to comment”—even though neighbors could call for a discretionary review if they happened to object to a project. But it seems that any reduction in the leverage Commissioners and neighbors hold over developers—even developers of all-below-market housing—is perceived as a threat. They’re not going to say no to the construction of more affordable housing, the argument apparently goes, but they’d like to maintain every possible option to do so if they change their minds.

And perhaps part of it is that some San Franciscans who have been opposing development on affordability grounds, when faced with the prospect of affordable development, have realized that they’re just against any development at all.

For those of us who don’t live in San Francisco, this anecdote serves mainly as another example of the problem of placing overwhelming power over urban policy, including development policy, at a very local level. Even where the need for below-market housing is overwhelming—and where residents self-identify as very progressive and pro-affordability—the immediate neighbors of development of almost any type tend to oppose it. And at the very least, they’re unwilling to give up their veto, even if that ultimately means that less affordable housing will be built. It’s not a coincidence that a study out of UCLA, released just over a month ago, found that municipalities with more onerous building permit processes—like, say, the conditional use permit—were associated with more segregation of the low-income.

The Commissioner who introduced the ordinance is now placing it on the ballot for a referendum. Hopefully, asking voters citywide to weigh in will allow them to place their values—and the region’s clear need for more housing, especially below-market—above maintaining maximum hyper-local power. We’ll see.