You might not think it, but New York City has a below-market affordable housing infrastructure that most other cities can only dream of. As one of the only major American cities not to tear down large amounts of its legacy public housing, it has nearly 180,000 units. Many more are in other below-market housing programs. And then, of course, there’s the city’s rent control and rent stabilization policies. In all, just 38.9 percent of New York City’s rental housing is entirely priced by the market.

But overwhelming demand—and the relatively slow pace of market-rate construction, at least up until recently—means that there’s still a massive housing shortage at almost every price range. The bidding war over scarce homes has led to situations like that of Chelsea, in Manhattan, where 29 percent of homes are in public housing or another income-restricted program, creating some space for low-income households—but market-rate units are so expensive that they price out all but the wealthy. And when below-market units do open up, the crush of applications makes affordable housing seem more like a lottery prize than a social safety net.

 

Under former mayor Michael Bloomberg, the city attempted to address the crisis in a number of ways. A series of rezonings created corridors in which developers could add more housing to address the shortage. But studies have shown that overall, downzones (reducing allowed density) actually outnumbered upzones (increasing allowed density) under the Bloomberg Administration. In those years, the city also created a “voluntary inclusionary housing” law, giving developers density bonuses in exchange for below-market units. But that program produced a relative handful of actual housing—just a few thousand units through the end of last year in a city of eight and a half million.

Current mayor Bill de Blasio was elected in 2013 on a platform of reducing the gap between New York’s rich and poor, including addressing spiraling housing costs. Soon after, his administration released an ambitious ten-year housing plan, which laid out a sprawling agenda to reform everything from zoning to finance to preservation, leading to the preservation of 120,000 below market rate units, the construction of 80,000 more, as well as the construction of thousands more market rate homes. Many of the plan’s key points were combined into two pieces of legislation: Mandatory Inclusionary Housing (MIH) and Zoning for Quality and Affordability (ZQA).

MIH aimed to remedy what many saw as a fatal flaw of Bloomberg’s voluntary inclusionary zoning scheme: namely, the voluntary part. It proposed that in all newly upzoned districts, developers would be required to set aside a certain proportion of their units at below-market rates. Exactly how many, and at what prices, would be determined by the City Council. MIH proposed a menu of three choices, ranging from 25-30 percent of units and 60-120 percent of area median income; the idea was that the Council would pick the level most appropriate for the neighborhood being upzoned.

ZQA included a raft of tweaks to the zoning code: harder to explain that MIH, but probably more consequential. Among the changes:

• Parking requirements near the subway would be dramatically reduced, allowing more buildable area to be used as housing for people, rather than being required to be set aside for storage of cars, and reducing the cost of development—a big deal particularly for affordable developers
• Increases of one to three stories in maximum building height for certain senior and low-income housing developments
• Adjustments to “contextual” zoning requirements and other regulations aimed at improving the built environment

When MIH and ZQA were released in early 2015, some applauded, but many came out in opposition. Preservationists opposed ZQA’s lifting of height limits by up to 15 feet in “contextual districts”; some affordability advocates argued that MIH’s affordability wasn’t deep enough, and, in some cases, that allowing more market-rate construction, even if tied to subsidized units, would necessarily further gentrification; and in other cases, objections included the time-honored fear of increased competition for “free” on-street parking as a result of ZQA’s parking requirement reductions.

These concerns and others led the vast majority of Community Boards—local advisory bodies to City Council members—to reject the proposals last fall. The votes were widely reported as a major setback for the mayor, though de Blasio remained defiant.

In fact, just a few months later, the City Council overwhelming approved both measures largely intact. Partly, this may reflect that political actors expected the Community Boards, whose local constituencies tend to reflect the same skepticism of development and change as other local bodies around the country, to be critical of any plans like MIH and ZQA. Also important is that de Blasio, whose approval rating climbed above 50 percent early this year, has a working majority aligned with him in the Council that may have been unwilling to torpedo one of his signature policy initiatives.

 

But his office also brought a strong array of interests to organize and testify in favor of the reforms in front of the City Council in February, even as other advocates argued that the plan didn’t go far enough. Groups urging passage included architects, business groups, the senior organization AARP, affordable housing developers, and several large labor unions, among others.

The Council did make a few tweaks to the initial proposals before passing them. Most notably, in response to concerns about the depth of affordability in MIH, it added a fourth menu option, with 20 percent of units at 40 percent of Area Median Income, and tweaked the third to drop average AMI to 115 percent, with portions required to be at 70 percent and 90 percent. Some of ZQA’s height bonuses were scaled back, and the “transit zones” of the city in which parking reductions would apply were also shrunk somewhat.

How much of an impact will these reforms have? It’s unclear. MIH, in particular, applies only to parcels that the City Council votes to upzone in the future. Several neighborhood rezonings are on the docket, but each presents a politically fraught vote that can be contested, although advocates hope that the menu of affordability options created by MIH will smooth the negotiations process.  One of the first such up-zoning cases–a proposal to add 175 affordable housing units to a proposed apartment building in Manhattan’s Inwood neighborhood was shot down when a local City Councilor–who had voted for Di Blasio’s MIH plan–came out in opposition to the project.

Even if all of the upzones pass, however, most of the city will remain outside the requirements of MIH. Moreover, in some of these neighborhoods, such the low-income Brooklyn community of East New York, it’s not clear that large-scale market-rate construction projects that would trigger MIH requirements are yet financially viable. In addition, the expiration of a state program known as 421a (which provides a property tax exemption for affordable units) may threaten the effectiveness of MIH.

For these and other reasons—including issues that apply to inclusionary zoning strategies generally—MIH is not likely to create a large proportion of the affordable units in the de Blasio administration’s housing plan. In fact, last year, the city’s Association for Neighborhood and Housing Development, which supported the plan, estimated that the original version of the plan might produce 13,800 affordable units, out of the 80,000 new units, and 200,000 new and preserved, envisioned by the Housing New York plan over the next ten years.

ZQA, in contrast, does not require any future action by the Council. It may lead to thousands of new affordable units in several ways, including allowing affordable developers to build more units on parking lots that are no longer required; allowing affordable developers to build more densely; and making affordability incentives for market-rate developers more attractive by better aligning allowed building envelopes with floor area bonuses. Unlike MIH, however, there is no guarantee that the affordable units produced by ZQA will be part of mixed-income projects, or mixed-income neighborhoods, that encourage economic integration.

For observers outside New York, there are several lessons in all of this. Perhaps a major one is that there may be low-hanging fruit in zoning reforms, such as those passed in ZQA, that don’t get immediate recognition as affordability policies like inclusionary zoning does.

Another is that perhaps because of this difference in perception, ZQA-type zoning reforms may be easier to pass in a package with more traditional affordability policies like IZ. The decision to propose and vote on ZQA and MIH together, even though they were separate bills, appears to have been driven by exactly this political calculation.

For larger cities with neighborhoods in many different economic conditions, it will also be interesting to see whether New York’s approach—essentially passing an enabling law that creates a menu of inclusionary zoning requirements for future application—does indeed reduce bargaining costs for future upzonings.

But it’s also important to keep in mind that these represent just part of de Blasio’s larger housing plan. Getting to the headline numbers of 200,000 affordable units created or preserved will depend heavily on other parts of the plan—perhaps most notably a commitment to doubling capital funds for affordable housing, at over $8 billion over ten years. How many other cities have the political appetite, or financial ability, to create that level of funding, even adjusted for New York’s size?

Moreover, though de Blasio’s plan is among the most ambitious in the country, 80,000 new affordable homes, and 120,000 preserved, won’t solve New York’s housing crisis. Even the nation’s largest city is heavily dependent on policies outside of its direct control, from federal subsidies for programs like Housing Choice Vouchers and LIHTC, to state programs like 421a, to the zoning decisions of suburban municipalities who play a major role in the housing shortage that has pushed up market prices across the metropolitan area.

In some ways, New York City has set an example for other American cities by bringing together a coalition of affordability advocates, developers, and labor interests to support zoning changes to increase the supply of low-income and market-rate housing, as well as double the spending devoted to low-income housing. But it also demonstrates the limits of municipalities’ power to address housing issues. For reasons of both resources and coordination, the battle for fair, plentiful, and affordable housing has to be taken far beyond City Hall.

What City Observatory did this week

1. How economically integrated is your city? It keeps getting clearer: Mixed-income neighborhoods are an important force in helping more kids escape poverty. So has economic integration been getting worse or better? A study this year by Kendra Bischoff and Sean Reardon found that income integration has declined in virtually every metro area over the last 40 years, with Milwaukee, Philadelphia and New Haven seeing the biggest shifts to income segregation. As of 2012, the most income-segregated metros are Dallas, Philadelphia and New York; the most integrated are Portland, Orlando and Minneapolis.

2. Why talent matters to cities. The single best predictor of a metro area’s prosperity isn’t the tax rate, the average speed of a cargo truck, or the acreage of parkland — it’s the percentage of the population with a college degree. Even workers without college degrees tend to have higher wages and lower unemployment when more of their neighbors have college degrees. In a two-year update of our data on this Talent Dividend, we find that the association between college attainment and per-capita income has gotten even stronger since the recession, increasing the rewards for cities that attract and retain skilled workers.

3. The link between parking and housing. Every parking space that sits empty has added thousands of dollars, sometimes tens of thousands, to the cost of the building. That’s enough to stop many potential projects from being built. Yet even cities suffering severe shortages of housing for people continue to mandate housing for cars — more of it than people are actually using. A more effective answer to scarce street parking: parking-permit districts that force developers to include as much parking as their tenants will actually need, but no more.

4. More driving, more dying: summer 2016 update.After many years of rising road safety, the traffic safety news keeps getting worse. National Safety Council statistics for the first half of 2016 put the United States on track for more than 38,000 road deaths, up from 33,000 in 2014. Though the NSC is eager to blame increased driving on the stronger economy, gas prices seem to be the clearer culprit, especially given research showing that the trips deterred by pricier gas seem to be disproportionately likely to be deadly.

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The week’s must reads

1. How bail traps people in poverty. Last week, the U.S. Department of Justice argued for the first time that it should be unconstitutional to jail people for not posting bail. In Vox, a public defender from Oakland uses two stories to show how bail requirements lead to disproportionate plea bargains and felony charges on poorer people. She suggests broader use of ankle monitors, or bail set at a percentage of a person’s assets. (Also see this related finding that bail seems to increase recidivism and false conviction.)

2. Japanese zoning 101. TgrPeople intrigued by recent coverage of Tokyo’s success at keeping housing prices low amid growth may be interested in this short guide to Japanese zoning, written in 2014. “Japan’s zoning laws are more rational, more efficient and just plain better,” writes the author of Urban Kchose after exploring the country’s top-down approach to regulating land use, building size and building height.

3. Wider roads vs. affordable housing. Cities that require road widening as a condition of new development should check their math: more than half the time between 2002 and 2012, roads expanded by developers wound up with more capacity than they needed. Not only do overlarge roads encourage speeding — they also added as much as $50,000 to construction costs per new home, stifling development.

4. Opposition kills California housing reform. The “boldest California housing policy proposal in years” is dead for now, reported the San Francisco Business Times. Gov. Jerry Brown has been pushing for any housing projects with at least 5 percent below-market-rate units to be approved without local review as long as they followed local zoning. But numerous players opposed the change. The SFBT says the final blow came from the state’s building trades union, which came out against it after Brown rejected their call for all such projects to be built by higher-wage laborers.

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New knowledge

1. About one in 10 Airbnb units in big cities displaces long-term housing. Using fresh data from consulting firm Airdna, FiveThirtyEight offered the closest look yet at the effects of short-term rentals on urban housing supply. In Los Angeles, almost half of Airbnb revenue comes from the 16 percent of local local listings (about 1,300 units) percent that are rented out close to full time, essentially displacing a possible long-term unit. In Airbnb’s top 50 markets, such units account for 9.7 percent of listings, with plenty of variation by city.

2. Berkeley’s local soda tax worked. Last year the California city became the nation’s first to put an excise tax on sugar-sweetened drinks. Jennifer Falbe and colleagues at the University of California found that sales of those beverages plummeted 21 percent after the city imposed a tax of one cent per ounce (12 cents on a can of Pepsi), and water consumption rose 63 percent, compared to 19 percent in comparison cities.

3. Are entrepreneurship and innovation created by cities and regions, not founders and firms? “Place has replaced the industrial corporation as the key economic and social organizing unit of our time,” argue Richard Florida, Patrick Adler and Charlotta Mellander in a sweepingly theoretical working paper for the Martin Prosperity Institute. Drawing on sources from Marx to Jacobs to Glaeser, they propose that contrary to common thought, “innovation and entrepreneurship are an urban or regional process.”

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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 or on Twitter at @cityobs.

Generally, parking is thought of as a transportation and urban design issue, involving tradeoffs between easing access to a place by car while potentially imposing greater social costs by discouraging other modes and, sometimes, degrading the pedestrian environment and spreading out neighborhoods and entire cities. There’s no shortage of parking craters nominated to compete in Streetsblog’s annual “Parking Madness” competition.

But increasingly, parking is also understood as a housing issue—in particular, because of the near-ubiquitous laws that require new housing developments to include off-street parking. Particularly in denser projects where that parking will be in a garage rather than a surface lot, those spaces can be quite costly. A report from the Chicago-based Center for Neighborhood Technology found that per-stall estimates run up to the tens of thousands of dollars—and given that many municipalities require one parking space per unit, or even one per bedroom, that means that a significant portion of the cost of new housing is often not about space for people, but for cars.

 

For obvious reasons, critics have linked that fact with rising home prices in many of the country’s most sought-after urban cores in making the case that parking minimums are an enemy of housing affordability. Seattle’s Sightline Institute estimates that parking requirements add about $200 a month to the cost of rental apartments–whether or not their tenants have cars.

It’s important to note that in many of these overheated markets, reducing the costs of parking in new buildings is unlikely to translate into a one-to-one reduction in the price of new housing. After all, the essence of the affordability crisis is that a shortage of supply has allowed prices to be bid up and disconnected from the cost of providing housing.

But parking costs help constrict supply and have important effects in other ways. For one thing, most Americans don’t live in one of the major American cities with severe housing shortages, and in those places parking requirements directly drive up housing prices. But even in a place like Los Angeles or Washington, DC, parking requirements can be a serious problem, taking up space that might otherwise go to more housing to ease the supply crunch. And parking minimums are especially pernicious for affordable housing developers. They reduce the number of below-market homes that can be built by increasing per-unit costs for nonprofit builders already scrambling to put together financing for their projects—ironically, for tenants who are even less likely to actually own cars.

Fortunately, awareness of the high cost of “free” parking, in the form of requirements is beginning to percolate into policy. In Portland, these sorts of issues are coming up at public meetings where local officials are considering changes to the city’s parking rules. As reported by BikePortland, affordability advocates convinced the City Council to pull a proposed ordinance that would have required parking garages in some large transit-oriented housing projects. Significantly, the higher parking requirements were opposed by local tenants advocacy groups, who made the connection to housing affordability.  In Chicago, testimony from CNT and others about the high cost of parking requirements helped convince aldermen earlier this year to expand that city’s transit-oriented development zone—within which parking minimums fall by half or more—from a quarter mile to a half mile around rail stations.

Of course, municipal leaders will still feel the need to respond to constituent complaints that street parking is too scarce. But there are many more options than simply building more parking garages. After all, as Mike Andersen of BikePortland has pointed out, without a reason to prefer parking in garages, most people will continue to look for street parking as a first option—meaning that more garages are unlikely to solve the street parking issue.

What else might work? One possibility: tradeable, priced permits. Portland, in fact, is considering just such a plan, which would allow residential communities to create parking permits and sell them, calibrating the number and price to avoid competition and overuse of the available space. Perhaps even better—again, echoing Andersen—would be to make the permits tradeable, so that their prices could fluctuate based on changing demand. Essentially, this would be recreating the price-variable parking meter model we’ve written about earlier, in which prices change dynamically to ensure about 85% occupancy—enough that lots of people are actually using the space, but with enough vacancy to ensure that it’s not too hard to find a spot. And as Donald Shoup has recommended, providing discounted purchase prices for neighborhood residents can help address equity concerns.

The CNT report also mentions a number of other possibilities, including parking districts that treat spaces as a community resource, allowing, say, off-street parking behind a movie theater to be used as residential parking during off-peak hours, rather than insisting that every individual use have enough dedicated parking for its own peak period. Municipalities can also give credits for developers that encourage other modes of transportation, for example reducing parking minimums if developers provide tenants with transit passes, bike parking, or carsharing spaces.

It’s clear, though, that current parking requirements are causing more problems than they’re solving. Introducing better pricing, more flexible use, and encouraging other modes are likely to create benefits to both transportation and housing issues.

Its a truism that the zip code that you are born in (or grow up in) has a lot to do with your life chances. If you’re born to a poor household, a neighborhood with safe streets, good schools, adequate parks and public services, and especially some healthy and successful peers and neighbors has a material impact on whether you rise out of poverty or are trapped in it.  While this message often gets presented in fatalistic tones, there’s a growing body evidence that suggests how we build our cities, and specifically, how good a job we do of building mixed income neighborhoods that are open to everyone can play a key role in reducing poverty and promoting equity.

The big problem the US confronts is that poverty has grown increasingly concentrated over the past four decades. Our Lost in Place report showed the number of poor people living in urban census tracts with a poverty rate of 30 percent or higher has doubled since 1970; and today more of the urban poor live in neighborhoods where a high fraction of their neighbors are also poor. As difficult as it is to be poor, its harder growing up in a place where many or most of your neighbors also face these challenges.

New research shows that neighborhood effects—the impact of peers, the local environment, neighbors—contribute significantly to success later in life. Poor kids who grow up in more mixed income neighborhoods have better lifetime economic results. This signals that an important strategy for addressing poverty is building cities where mixed income neighborhoods are the norm, rather than the exception. And this strategy can be implemented in a number of ways—not just by relocating the poor to better neighborhoods, but by actively promoting greater income integration in the neighborhoods, mostly in cities, that have higher than average poverty rates.

In the New York Times, economist Justin Wolfers reported on groundbreaking work by Eric Chyn of the University of Michigan that found previous research may have understated the effect of neighborhoods on lifetime earnings and employment. The paper shows that moving low-income children in very poor neighborhoods to less poor neighborhoods can have a major positive effect on their life chances.

Most media outlets have covered this story as reinforcing the importance of “mobility programs”: that is, policies that encourage residents of very low-income neighborhoods to move to more economically integrated areas, usually with some form of direct housing assistance like vouchers. And the ability to move to neighborhoods with good amenities and access to jobs, without having to pay unsustainable amounts for housing or transportation, is a crucial part of creating more equitable, opportunity-rich cities.

But the coverage may be missing the other half of the policy equation: Chyn’s paper adds to the evidence about the value of mixed-income neighborhoods in general, not just mobility. That means it’s just as important that cities find a way to invest in low-income neighborhoods to bring opportunity to them, rather than simply trying to move everyone out.

Why this research is so important

The results of the voucher demonstration illustrate that there can be large benefits from even modest changes in economic integration. The average household moved about 2 miles from their previous public housing location, and still lived in a neighborhood that had a higher than average poverty rate. Chyn’s results show the effects of moving from neighborhoods dominated by public housing (where the poverty rate was 78% on average), to neighborhoods that had poverty rates initially 25 percentage points lower, on average. Most participants still lived in neighborhoods with far higher levels of poverty than the typical American neighborhood. But compared to their peers who remained in high poverty neighborhoods, they enjoyed better economic results later in life.

In this chart, you can see the growing earnings benefit to children who left very low-income neighborhoods in their adult years.

This study—on the heels of a widely-cited study led by Harvard economist Raj Chetty released last year—adds even more heft to the growing body of evidence that helping people with lower incomes move to mixed-income neighborhoods can play a huge role in spreading economic opportunity.

The new research improves on older studies by getting rid of an important confounding factor that affected some earlier research by more closely replicating a true “natural experiment.”

The experiment was made possible by the decision to demolish large scale public housing in Chicago in the early 1990s. The families dislocated from the old style public housing—which were in neighborhoods of extremely concentrated poverty—had to find new housing. The Chicago Housing Authority (CHA) provided the families with vouchers to move to privately operated rental housing, typically in neighborhoods with far lower levels of poverty. The kids who moved to new lower-poverty neighborhoods saw a significant increase in their lifetime earnings compared to otherwise similar kids who remained in the public housing that wasn’t torn down.

This natural experiment has an important advantage over the “Moving to Opportunity” (MTO) housing experiment conducted by the federal government in the 1990s. In MTO, public housing households had to apply for a voucher lottery. This created the possibility that the people who had applied were particularly motivated and able to make the transition to a new neighborhood. That would mean that even those households that lost the lottery might have better-than-average outcomes, reducing the gap between those who moved and those who didn’t, and making the effect of moving appear smaller than it really was.

But unlike MTO, the participants in the CHA relocation program were not self-selected. They represented a more or less random cross-section of public housing residents, and so the differences between the outcomes of treatment groups (those who got vouchers) and those who didn’t (control groups) could be treated as purely the result of the voucher program.

The policy implication: Mixed-income neighborhoods promote opportunity

But it’s important to put this finding in a broader context. Evidence about mobility programs, in turn, are part of a larger body of research that neighborhoods matter for economic opportunity. While the focus has been helping people leave neighborhoods with high concentrations of poverty, it’s also possible to bring investments and resources to these communities.

Of course, when that happens, it often happens in conjunction with—or even because of—a return of middle- and upper-income people to the neighborhood. In other words, gentrification.

For some, that’s enough to reject that policy avenue. But some research suggests we ought to give it another look. While news from neighborhoods in San Francisco and Brooklyn, where incredibly high levels of demand and tight supply have led to spiraling housing costs, makes it sound like gentrification inevitably and utterly displaces all a neighborhood’s residents, other research suggests that displacement is far less widespread than commonly thought. While housing costs can be an issue, a recent study from the Philadelphia Federal Reserve suggests that displacement is much less common than we might expect—and another study of New York public housing residents in gentrifying areas showed an increase in earnings and school test scores.

This research also occurs against a backdrop of widening inequality and economic segregation. And inequality has an important spatial dimension: low-income and high-income households are increasingly segregated from one another in separate neighborhoods.

While the spatial response, as we’ve said, has focused on mobility, enabling the poor to move to higher income neighborhoods is challenging for a number of reasons. The raison d’etre of many suburbs is exclusion—using zoning requirements to make it essentially impossible for low income households to afford housing—and efforts by outside organizations or governments to reduce these barriers have been difficult. If we want to make the biggest difference in economic integration, we need to try to integrate low-income neighborhoods as well as high-income neighborhoods.

Neighborhoods for everyone

Taken together, the new Chyn results add to the growing body of literature on neighborhood effects and strongly suggest that we ought to be looking for all kinds of opportunities, large and small, to promote more mixed-income neighborhoods. Even the small steps—like lowering the poverty rate in a kid’s neighborhood from 75 percent to less than half—pays clear economic dividends.

But we also need to remember that integration isn’t just about moving around people with low incomes. We can reinvest in neighborhoods of concentrated poverty in ways that improve quality of life and enhance opportunity in place.

What City Observatory did this week

1. The high price of cheap gas. We’ve hit the peak of summer driving season, and also the 103rd consecutive week of falling year-on-year gas prices. Though the 39 percent drop in gas prices over the last two years has led to only 4 percent more driving per person (so far), it also seems to be driving up traffic fatalities (up 8 percent), reducing fuel economy and accelerating damage to the climate. All of these things are bad for the economy in the long run. Cheap gas isn’t worth celebrating.

Vacation Traffic (Flickr: Lunavorax)

2. Data-driven planning has serious shortcomings. There’s a subtle but profound bias to our current transportation data: it’s all about vehicle travel, and not at all about walking, biking and how we might have fewer and shorter trips. Traffic engineers can immediately tell us when a road’s pavement has deteriorated, or its level of service has become (or might someday become) degraded. But if you don’t count it, it doesn’t count – and many things that matter to cities are hard to count or uncountable. As Google’s city planning arm, Sidewalk Labs, tries to apply “big data” to urban problems, we must remember that better technology can’t solve bad priorities.

3. How do we know zoning constrains urban development? Some people look at expensive central cities and argue that with no zoning, we’d have more density. Others look at growing suburbs and argue that with no zoning, we’d have less density. Who’s right? An important 2005 study used data from Boston and Atlanta to test this. It found that Atlantans who said they preferred dense areas were much less likely than Bostonians to succeed in living in one – implying a “shortage of cities” in greater Atlanta.

4. More evidence that mixed-income communities connect poor families with opportunity. Chicago children who moved out of very low income neighborhoods were 5-10 percentage points more likely to be employed as adults, according to the long-term outcomes of a randomized voucher program in the early 1990s. Because previous research didn’t draw on a randomized test, it may have understated this effect. The lesson: cities are well-served when neighborhoods have a mix of people from different income groups, rather than being segregated by income.

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The week’s must reads

1. Is violent urban crime rising or falling? The question is a football in the presidential race, and the truth is that crime rates fluctuate by year and vary by city. Yes, Baltimore did see a big spike in 2015; yes, the national trend is a huge drop since 1990. The Marshall Project transcribed 40 years of FBI crime data by city to show how much the great crime decline varies from place to place. At the national level, the answer is clear: violent crime is down 50 percent since 1992, and lower now than any time since 1976.

2. Should cities replace population forecasts with vacancy targets? Traffic forecasts have proved horrifically inaccurate in the last 15 years. Why do cities assume they can predict population changes? Shane Phillips argues that (much like cities should set a target curb vacancy rate rather than trying to guess the perfect parking price) cities would be better off setting a target housing vacancy rate and then using tools like zoning and public financing to move it up or down.

3. The bleak future of suburban poverty. More people in poverty now live in suburban areas than in urban ones. In some ways, that’s a reversion to the mean – rich people in the core, poor people further out. But it’s also “hard to imagine a more despotic environment to be poor in than America’s suburbs,” built around the car and around infrastructure that’s hugely expensive to maintain. Strong Towns spent the week examining modern suburban poverty from different angles.

4. One last push for smarter traffic modeling. Ahead of an Aug. 20 deadline for public comments on the U.S. Department of Transportation’s proposed congestion measure, Smart Growth America’s Alex Dodds has an op-ed in The Hill, arguing that federal rules should recognize that a “10-minute commute at 10 miles per hour is better than a 50-minute commute at 50 miles per hour.”

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New knowledge

1. Who’s living in crowded bedrooms? Eight percent of homeowner households and 26 percent of renting households have nonmarried household members sharing a bedroom. To make the estimate, Trulia’s Mark Uh used American Community Survey data and started from the assumption that each married couple shares a bedroom and others get their own bedrooms unless they can’t. The ratio varies considerably across metro areas: in higher-priced ones, room-sharing is much more common, with Los Angeles leading the pack among both renters and homeowners.

2. “Economic distress” doesn’t really capture the Trump coalition. Gallup economist Jonathan Rothwell mines a wealth of demographic and polling data to conclude that support for Trump is not strongly correlated with economic distress, as many pundits have suggested. Though Trump supporters are more likely to be blue collar, they tend to have higher than average incomes. And they’re more likely to live in neighborhoods that are less racially and ethnically integrated. It’s the latest sign that residential segregation is closely related to polarized national politics.

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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 or on Twitter at @cityobs.

One of the chief arguments in favor of the suburbs is simply that that is where millions and millions of people actually live. If so many Americans live in suburbs, this must be proof that they actually prefer suburban locations to urban ones. The counterargument, of course, is that people can only choose from among the options presented to them. And the options for most people are not evenly split between cities and suburbs, for a variety of reasons, including the subsidization of highways and parking, school policies, and the continuing legacies of racism, redlining, and segregation. One of the biggest reasons, of course, is restrictive zoning, which prohibits the construction of new urban neighborhoods all over the country.

But does zoning really act as a constraint on more compact, urban housing? Sure, some skeptics might say, it appears that local zoning laws prohibit denser housing and walkable retail districts. But in fact, city governments pass such strict laws because that’s what their constituents want. Especially within a metropolitan region with many different suburban municipalities, these governments are essentially competing for residents and businesses. If there were real demand for denser, walkable neighborhoods, wouldn’t some municipalities figure out that they could attract those people by allowing that type of development?

A 2005 study by Jonathan Levine—and explored further in Levine’s 2006 book, Zoned Out—seeks to answer this question. Are local governments just responding to “market” demand in ensuring that new development is low-density and auto-oriented? Or is there really pent-up demand for more urban neighborhoods that can’t be satisfied because of zoning?

 

Levine looks for the answer in two contrasting metropolitan areas: Boston and Atlanta. Boston, as a much older region, has a relatively higher number of dense, walkable neighborhoods, while in Atlanta, which mostly boomed after World War Two, urban neighborhoods are much more scarce. Levine hypothesizes that if dense housing is adequately supplied to match people’s preferences, you should find a pretty good match between the kinds of places people say they’d like to live, and the kinds of places they actually do live. But if zoning really creates a “shortage of cities,” then the greater the shortfall of urban neighborhoods, the worse the matchup between stated preferences and actual living arrangements.

This is an important wrinkle to the “revealed preference” arguments of many defenders of the suburban status quo. Recent Census population figures sparked what were only the latest of a long line of scuffles over whether, or to what extent, the “back to the city” movement is real. But if Levine’s argument is correct, measuring demand for urban areas simply by how many people end up living there is flawed, because some people who would like to live in more compact neighborhoods can’t do so because there aren’t enough to go around.

To begin his analysis, Levine classified neighborhoods in both the Boston and Atlanta metro areas according to their level of “urban-ness” on a five-point scale, with “A” neighborhoods being the densest and most urban, and “E” being the most sprawling and exurban. Levine and his researchers then conducted a survey of residents in each of the zones, asking about their housing preferences and satisfaction with their current housing situation.

In Boston, about 40 percent of respondents said they preferred denser, more pedestrian-friendly neighborhoods, while in Atlanta, just under 30 percent of respondents did so. (Auto-oriented neighborhoods were preferred by 29 percent of people in Boston and 41 percent of people in Atlanta, with remaining respondents neutral.)

And how well did these preferences match actual behavior? Well, in Boston—where neighborhoods in the three most urban categories made up over half of all housing—83 percent of people with strong preferences for urban neighborhoods lived in one of these three urban zones. In Atlanta—where the same top three urban categories make up barely over 10 percent of all housing—just 48 percent of people with strong preferences for urban neighborhoods lived in an urban zone.

In fact, all down the line, people whose stated preferences were more urban were much more likely to actually live in an urban neighborhood in the Boston area than in the Atlanta area—suggesting that in Atlanta something might be preventing them from satisfying their preferences. At the same time, people who expressed preferences for the most auto-oriented neighborhoods were able to satisfy that demand the vast majority of the time in both regions—about 95 percent of those in Atlanta, and 80-90 percent of those in Boston. More rigorous tests prove that this difference is statistically significant.

This seems like strong evidence that there is a “shortage of cities” in Atlanta. Why, otherwise, would there be such a gap between the number of people who satisfy their preferences for urban neighborhoods in the Boston and Atlanta metro areas—and much smaller gaps between people who can satisfy their preferences for more car-oriented areas?

If this is correct, it helps explain a other issues we see. If urban neighborhoods are undersupplied compared to demand for them, we would expect to see urban housing go to the people willing to outbid other households, increasing prices relative to auto-oriented neighborhoods, which are more plentiful. In a place like Atlanta, lots of urban housing would have to be built before this bidding war could be ended, returning prices to a “normal” market level.

It’s also notable that this kind of “shortage of cities” can occur even where there is no overall housing shortage. Atlanta, for example, is not a particularly high-cost region, but it has mostly added new housing on the suburban periphery. So while there’s no bidding war for housing in the metropolitan area as a whole, there is a bidding war for more urban housing, making walkable neighborhoods more expensive than they would have to be. Boston is almost the opposite: walkable neighborhoods appear to be less undersupplied relative to auto-oriented neighborhoods, but the region as a whole has very expensive housing, suggesting that the total supply of housing is too low. Boston could help bring down housing prices by building any housing at all—auto-oriented or more walkable. (Though walkable housing would have lower total location costs.)

Levine’s study ought to be known by anyone who works in urban planning or housing. It’s one of the strongest pieces of evidence that “revealed preferences”—the choices that people actually make about where to live—actually reveal the limited choices that people are given as a result of restrictive land use laws.

City Observatory believes in using data to understand problems and fashion solutions. But sometimes the quantitative data that’s available is too limited to enable us to see what’s really going on. And incomplete data can lead us to the wrong conclusions.

Our use of data is subject to what we call the “drunk under the streetlamp” problem: An obviously intoxicated man is on his hands and knees on the sidewalk, under a streetlamp. A passing cop asks him what he’s doing. “Looking for my keys,” the man replies. “Well, where did you drop them?” the cop inquires. “About a block away, but the light’s better here.”

When it comes to transportation, we have copious data about some things, and almost nothing about others. Plus, there’s an evident systematic bias in favor of current modes of transportation and travel patterns. The car-centric data we have about transportation fundamentally warps the field’s decision-making. Unless we’re careful, big data will only perpetuate that problem—if not make it worse.

Sometimes Qualitative Data is More Informative

To understand why qualitative data can sometimes tell us more, let’s look at some documentation about the way one American transportation system performs.

Three recent essays from people walking in Houston make it clear that, there, the infrastructure and land use patterns that facilitate safe walking simply don’t exist. The following excerpts are snapshots from a large body of qualitative evidence showing that, in many U.S. cities, walking is a hellish experience.

Writing in Texas Monthly, in an essay entitled “Where the Sidewalks End,” Sukhada Tektel describes her experiences adapting to Houston after living in Mumbai and Toulouse:

Nothing could have prepared me for the disconnectedness of this oil-and-gas mecca: no clear city center, pitiable public transportation, and, most strikingly, no place to walk…For as far as the eyes can see, there are only cars and not a single person on foot.

David Yearsely wrote a different essay, albeit with a similar title (“Where the Sidewalk Ends”), describing wandering about Houston’s downtown and Third Ward while visiting for an organ music gathering. Even traversing the city’s upscale River Oaks district, he describes long, sidewalk-less stretches outside the walled enclaves of the busy four-lane San Felipe Avenue. In ten miles of walking, he encountered only two other pedestrians, both walking their dogs.

At the Houston Chronicle, David Dorantes wrote, “I want to walk, but Houston won’t let me.” Like many migrants to the Bayou City, he has lived in other places where walking is a normal part of everyday life. But not in Houston:

Nowhere else have I ever experienced such fear when walking in the street. I don’t mean that I’m afraid of the people who I meet on the sidewalk. I mean that walking in Houston is a horrific adventure, a pleasure endangered.

It’s unfair to pick on Houston. Large parts of most American cities, and especially their suburbs, constitute vast swaths of hostile territory to people traveling on foot. Either destinations are too spread out, or there just aren’t sidewalks or crosswalks to support safely walking from point to point. Moreover, walking is so uncommon that drivers have become conditioned to behave as if pedestrians don’t exist, making streets even more foreboding.

From the standpoint of the data-reliant transportation engineer, the problems encountered by Dorantes, Yearsley, and Tektel are invisible—and therefore “nonexistent.” Because we lack the conventional metrics to define and measure, for example, the hardships of walking, we don’t design and enforce solutions or adopt targeted public policies.

But when it comes to car traffic, we have parking standards, traffic counts, speed studies, and “level of service standards.” There is simply no comparable vocabulary or statistics for walking or cycling. Traffic engineers will immediately tell us when a road is substandard, or its pavement has deteriorated, or its level of service has become (or might someday become) degraded. We have not collected a parallel array of metrics to tell us that it isn’t similarly as safe, convenient, or desirable to walk or bicycle to common destinations. The American Society of Civil Engineers’ Infrastructure Report Card grades roads chiefly on vehicle congestion and delay (using dubious data, in our estimation). And, as we’ve pointed out, the U.S. DOT’s proposed performance measures for urban transportation further codify this bias by making vehicle delay the chief indicator of how well roads work. The logical result, as Smart Growth America has argued, is that we will end up with a system that optimizes every street for fast-moving cars, with—predictably—negative effects on walking.

The personal stories of pedestrians in Houston are rich and compelling in their detail, but lack the technocratic throw-weight of quantifiable statistics or industry standards to drive different policies and investments in our current planning system.

Will the move to “smart” cities make this worse?

Last month, the U.S. Department of Transportation announced that Columbus, OH, was the winner of its Smart Cities Challenge, beating out six other cities around the country. Google’s city planning subsidiary, Sidewalk Labs, promised to work with the winning city to deploy a wide array of big data and communication tools in order to better plan and operate transit systems. While the Guardian speculated that Google is securing a central position for its technologies in urban transportation markets, we have a different concern.

Sidewalk Labs has sketched out Flow, a flashy new data system for transportation. According to its own descriptions and press reports, it will help cities optimize traffic and parking. Clearly, Flow is primarily concerned with vehicles (cars and transit vehicles alike). But there’s no indication how it will address the movement of people on foot and on bicycles. It’s ironic that an entity called Sidewalk Labs appears more concerned with cars than with pedestrians.

As the old adage goes: If you don’t count it, it doesn’t count. That premise becomes vastly more important the more we define problems in big-data terms. New technology promises to provide a firehose of data about cars, car travel, car delay, and roadways—but not nearly as much about people. This is a serious omission, and should give us pause about the application of “smart” principles to cities and transportation planning.

It will likely amplify the bias that already favors counting cars, but not people. Consider New York City, perhaps the most pedestrian-oriented place in the nation. New York gathers data on pedestrian activity in a twice-annual survey (which counts pedestrian traffic on two different days in May and September at 100 locations). Contrast that with its system that reports vehicle traffic speeds in real time at more than 300 locations.

This isn’t simply a matter of somehow instrumenting bike riders and pedestrians with GPS and communication devices so they are as tech-enabled as vehicles. An exacting count of existing patterns of activity will only further enshrine a status quo where cars are dominant. For example, perfectly instrumented count of pedestrians, bicycles, cars in Houston would show—correctly—little to no bike or pedestrian activity. And no amount of calculation of vehicle flows will reveal whether a city is providing a high quality of life for its residents, much less meeting their desires for the kinds of places they really want to live in.

The fundamental problem is that we’ve designed our cities for the people moving through them, rather than for the people living, working, and being in them. We’re obsessed with getting there rather than being there.

If we want cities that are truly walkable and bikeable–that can become great places to be rather than easy corridors to travel through–we have to listen to more than big data. We need a framework that considers a wide array of evidence of what we’ve done and what we’ve left undone; of what we are, and what we aspire to be. Simply grafting more technology on to today’s imbalanced system will not accomplish this.

Last week, the Washington Post reported that the U.S. District Court in Washington, D.C., has ordered new ridership projections for the proposed Purple Line light rail line, which will connect a series of Maryland suburbs. Like any multi-billion dollar project that serves a densely settled metropolitan area—and this one connects some of its wealthiest suburbs—there’s bound to be controversy. But today, we’ll ignore the substantive debate over the merits of the proposed alternative and focus instead on the technical issue of projecting future ridership on which this case turned.

The court’s decision was based on the fact that the state, and the FTA, have failed to update ridership projections since 2009. The plaintiffs argued that rail ridership on the Washington Metropolitan Area Transit Authority’s Metro system has declined every year since then, and that the system’s recent safety, budget, and operational woes are threatening to push ridership even lower.

The state of Maryland and the Federal Transit Administration, the Purple Line’s project sponsors, argued in response to the plaintiffs that because WMATA is a separate transit system, its ridership is not germane to assessing the environmental impacts of the Purple Line, which will be operated by the Maryland Transit Administration. The court rejected these claims, noting that more than a quarter of the expected riders of the Purple Line are also expected to use the WMATA Metro system.

U.S. District Court Judge Richard J. Leon determined that the failure to update the ridership forecasts in light of WMATA’s troubles was “arbitrary and capricious.” In his opinion, the two agencies were “cavalier” and failed to update ridership forecasts in the face of changed circumstances, which “raises serious concerns about their competence as stewards of nearly a billion dollars of federal taxpayer’s funds.”

The case is Friends of the Capital Crescent Trail v. FTA, Civil Case #14-01471. The decision was handed down on August 3. A copy of Judge Leon’s memorandum of opinion from August 3 is available here.

Maryland officials have said they’ll appeal the District Court’s ruling, so it’s not yet certain that this case will be the law of the land. But in our view, if this ruling stands, it has an important implication for transportation planning—especially the construction of highway expansion projects. The underlying principle here is that big investments ought to be based on forecasts—whether of future traffic or ridership—that fully reflect all the information we have at hand on how travel patterns are changing, and are likely to change in the future. The track record for highway traffic forecasts has, if anything, been far worse than the problems flagged for WMATA’s Metro.

Around the nation, state departments of transportation have routinely overestimated the growth of automobile traffic and used these exaggerated projections to justify billions of dollars of new roads. The State Smart Transportation Institute analyzed an aggregation of state traffic forecasts prepared annually by the USDOT. SSTI’s analysis showed that 20-year projections overestimated future traffic volumes in every single year states’ reports could be compared against data on actual miles driven by Americans.

As we and others have noted, there’s been a sea-change in American travel habits, influenced by changing gasoline prices and a generational change it attitudes toward travel and urban living. Yet many state forecasting models are still grounded in unexamined extrapolations of trends dating back to the 1990s. In Friends of the Capital Crescent Trail v. FTA, Judge Leon cited press reports on the impact of Metro safety problems on ridership. If courts take judicial notice of the contemporaneous developments that are materially changing travel patterns, we hope that they will cast a similar light on the abundant evidence about changing travel behavior —and insist that highway projects also fully consider these changing circumstances. There’s a precedent: As we reported last year, a federal court in Wisconsin struck down the approval of a highway project there based on flawed and outdated traffic projections.

A overwhelming amount of assumptions, inertia, and potential bias are buried in traffic projections. At a time of rapid shifts in travel behavior, markets, and technology, and especially in response to climate change, we should be especially wary of projects based on models that are opaque extrapolations of outdated trends. It’s a good thing that the National Environmental Policy Act requires project sponsors to take note of changing circumstances. Hopefully, as Judge Leon observed in his opinion, this ought to be simply a matter of common sense.

The biggest single factor determining the success of a city’s economy is how well-educated is its population. As the global economy has shifted to knowledge-based industries, the jobs with the best pay have increasingly gone to those with the highest levels of education and skill.

For a long time, we’ve been talking about the talent dividend–how much an area’s college attainment rate is correlated with its per capita income. Since its such an important touchstone for policy, we think its worth taking a close look at what the data say about the strength and importance of this relationship.

Today, we’ve pulled together the latest metro area data–for 2014–from the Census Bureau (on educational attainment) and from the Bureau of Economic Analysis (on per capita income).  The following chart plots the relationship between per capita personal income (on the vertical axis) and the fraction of the adult population who have completed at least a four-year college degree (on the horizontal axis).  Each dot on the chart represents one of the nation’s metropolitan areas with at least 1 million population (53 of them, according to the 2014 Census tabulations).  You can mouse-over a dot to see the corresponding metropolitan area and its educational attainment rate and per capita income.

As you’ll immediately notice, there’s a strong, positive correlation between educational attainment and per capita income.  The metro areas with the highest levels of education have the highest levels of per capita personal income.  Cities like San Francisco, Boston and Washington have the highest levels of per capita income and the best-educated populations. Cities like Riverside and Las Vegas have low levels of educational attainment and correspondingly lower levels of per capita income. The coefficient of deterimination of the two variables–a statistical measure of the strength of the relationship–is .67, which suggests we can explain two-thirds of the variation in per capita personal income among metropolitan areas, simply by knowing what fraction of their adult population has a four-year degree.

This chart tells you the most important thing you need to know about urban economic development in the 21st century: if you want a successful economy, you have to have a talented population. Cities with low levels of educational attainment will find it difficult to enjoy higher incomes; cities with higher levels of educational attainment can expect greater prosperity. As Ed Glaeser succinctly puts it: “At the local level fundamentally the most important economic development strategy is to attract and train smart people.” And critically, because smart people are the most mobile, building the kind of city that people want to live in is a key for anchoring talent in place. And, importantly, the economic research shows that the benefits of higher educational attainment don’t just accrue to those with a better education: people with modest education levels have higher incomes and lower unemployment rates if they live in metro areas with higher average levels of education.

The data presented here imply that a 1 percentage point increase in the four-year college attainment rate is associated with about a $1,100 per year increase in average incomes in a metropolitan area.  This is what we call the Talent Dividend.  This cross-sectional relationship suggests that if a metropolitan area were to improve its educational attainment by one percentage point on a sustained basis, that it would see a significant increase in its income.

Over time, the strength of this relationship, and the size of the talent dividend effect has been increasing.  When we computed the relationship using 2010 data, the correlation coefficient was .60 and the size of the talent dividend was $860 (in current dollars).  These data suggest that educational attainment has become even more important in determining economic success than just a few years ago.

We’ve also mapped the metro level data on the talent dividend relationship.  On this map, the color of each circle corresponds to a metropolitan area’s level of educational attainment (red circles have lower than average educational attainment among these metros, blue circles higher educational attainment).  The size of circles is proportional to an area’s per capita income; larger circles indicate higher per capita income.  (You can mouse over any metro area to see the educational attainment and per capita income figures for that metro area).

Education is a stronger predictor of economic success today than ever before. That’s true for individuals, for private businesses, for communities, and for metropolitan economies.  The better educated you are, the more likely you are to be prosperous in a knowledge-based economy. Not only do well-paid and fast growing technology jobs go disproportionately to the better educated, but better educated workers tend to be more adaptable and more innovative, which better prepares them to cope with a changing economy.  The policy lessons for city leaders are clear: a successful economy depends on doing a great job of educating your population, starting with your children, and also building a community that smart people will choose to live in.

Readers of the Aug. 19 Week Observed: here’s the piece you’re looking for.

Here’s a puzzle: If 89 percent of Apple’s ideas are invented in the U.S., why is 92 percent of its profit overseas?

The link between local economies and tax bases has long been obvious and physical. Companies paid property taxes on their buildings and equipment, people and businesses paid sales taxes on their purchases, and employers and employees paid taxes on their income. But the economy is changing, and the link between economic activity and taxes has changed.

Perhaps no products are a better examples of this trend than Apple’s iPhone and MacBookAir laptop computer. If you look at the polished aluminum backside of any Air, you’ll find an emblazoned slogan: “Designed by Apple in California.” That imprint has a strong basis in fact.

Between 2011 and 2015, Apple got 7,527 patents worldwide, according to the U.S. Patent and Trademark Office. Of these, 6,716 were in the United States, and 6,143 were in California.

The next line on the back of the MacBookAir is “Assembled in China.” Stories of the globalization of production of high-tech devices abound. Many reports have chronicled the conditions of the tens of thousands of workers employed by contractors like China’s FoxConn, which produce all manner of technological devices. But the labor and even the components in most tech devices reflect only a small portion of their value. The cost and profitability of devices stems not from their physical elements or the labor used to assemble them, but from the superior software and design features—or, the intellectual property generated by Apple.

As The Economist explains, “Apple, it’s worth pointing out, continues to capture most of the value added in its products. The most valuable aspects of an iPhone, for instance, are its initial design and engineering, which are done in America.” InformationWeek estimates, “The cost of parts and labor to assemble an iPhone 6S, for example, cost an estimated $160, compared to a selling price of $399.”

However, even though Apple does 90 percent of its creative work in the United States, it pays very little in U.S. taxes. Instead, Apple attributes a disproportionate share of its earnings to the Republic of Ireland. Nobel laureate and former World Bank economist Joseph Stiglitz has called Apple’s accounting “fraudulent,” telling Bloomberg:

“Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland—that’s a fraud.”

How does Apple do it? The exact mechanics are hidden in the company’s tax filings in the U.S. and Ireland, but the basic mechanism at work here is transfer pricing. Apple has transferred ownership of its intellectual property (its patents and software designs, and perhaps even its brand and logo) to its overseas subsidiaries. Obviously, Ireland is not a major center for Apple’s technology development. According to USPTO, between 2011 and 2015, Apple received exactly zero patents for work performed in Ireland. By contrast, at least some other U.S. technology companies, including IBM, Intel, Microsoft, and Google, all reported Irish patents.

Nonetheless, Apple’s operations in the U.S., and throughout the rest of the world, make payments (including royalties and purchases) to foreign affiliates in, say, Dublin, in to make use of the intellectual property. The foreign affiliate records its income and pays any applicable taxes in its low-tax or no-tax jurisdictions.

This strategy shifts profits from the United States, where they might be taxed at the high statutory 35 percent corporate tax rate, to places like Ireland, where taxes are much lower and can be deferred. As a result, Apple’s profits have piled up overseas. Today, $215 billion of Apple’s $232 billion cash hoard is located outside the United States.

Apple is hardly alone in pursuing such strategies to avoid U.S. taxes. Facebook is facing an IRS claim for billions in back taxes for a single year, based on its strategy of shifting its intellectual property to the Cayman Islands.

Because so many companies are doing this, the cumulative reduction in American taxes paid by American corporations is significantly reducing federal revenue. The most comprehensive analysis of tax avoidance is by University of California’s Gabriel Zucman, author of The Hidden Wealth of Nations. Zucman estimates that these tax avoidance tactics cost the U.S. Treasury $130 billion annually in lost revenue.

A bizarre side effect of these tax-avoiding machinations showed up last month in the form of a breathtaking report that in 2015, the Gross Domestic Product of Ireland had increased an astonishing 26.3 percent over the prior year. This Irish miracle, as it turns out, has almost nothing to do with local economic activity and everything to do with the nation’s tax haven status, which artificially inflates the size of Ireland’s measured GDP.

The economy is increasingly dominated by global, knowledge-based companies whose profits are largely attributable to their intellectual property. The current system of taxation rewards Apple, Google, Facebook, and others for offshoring their patents, brands, or proprietary designs.

While the primary implications are for the U.S. Treasury, it’s also likely that shifting taxable income outside of the United States shortchanges states and cities as well. Most state tax systems piggyback on important aspects of the federal system, and state revenue departments are even more hamstrung in dealing with the high-powered lawyers and accountants of global firms than is the IRS.

As more sectors of the economy are disrupted by big firms using brands and patents, it may be harder for states and cities to collect taxes. This could also put smaller local firms at a competitive disadvantage. A city or state may have the legal ability to collect taxes from a local coffee shop, a bookstore, or a taxi company, but if a Starbucks, an Amazon, or an Uber attributes its profits to foreign domiciled intellectual property, that’s likely to be beyond the understanding, much less the reach, of local tax collectors.

This is a global problems that affects local economies and local governments, but it’s almost entirely beyond their ability to influence. At some point national governments—and international cooperation—will be required to establish clear ground rules and a level playing field in a world increasingly characterized by global, knowledge-based competition.

Last summer, we told here the story of Marietta, Georgia, where local officials used $65 million in taxpayer funds to buy up and begin demolishing some 1,300 apartments along Franklin Road. This is a striking case where the displacement of low income families was an explicit objective of public policy, rather than the side-effect of a changing real estate market. The tale raising some interesting questions about how we talk about neighborhood change, and whether we’re really open to economic integration in all places–city and suburb.

The Marietta apartment complexes had been built in the 1960s, and, when new, were a preferred upscale location for single professionals and young married couples. Over the decades, the apartments aged and the mix of occupants changed. Franklin Road shifted to families with increasingly modest incomes—a process housing economists call filtering, which is the primary source of affordable housing throughout the nation. Along the way, the economic and and racial makeup of the apartments transformed from nearly 90 percent white in 1980, with a poverty rate around five percent, to 20 percent white in 2010, with a poverty rate of nearly 25 percent.

Despite the usefulness of filtering, which increased the diversity of suburban Marietta, the city perceived these units as growing concentrations of poverty and, thus, a problem. So it used the proceeds of a voter-approved bond measure to purchase and begin demolishing the housing complexes. It’s worth noting that no one ever claimed that the buildings themselves were a problem, despite their age. Rather, it had everything to do with the demographics of their occupants. In all, the city’s plan calls for acquiring and demolishing almost 10 percent of the city’s multi-family housing stock.

Caution:  This post contains graphic images of housing displacement. Viewer discretion is advised.

Marietta’s plan is proceeding apace. The city re-christened Franklin Road as “Franklin Gateway” to signal change. It began demolishing the apartments last year. Here, we’ve used imagery from Google Maps show what’s happened where one of these complexes—the Woodland Park Apartments—once stood.  This is what they looked like in 2011.

Early this year, the demolition was nearly complete. All that remains of  the old apartment complex is its driveway, a partial brick wall and metal gate, and two patches of evergreen shrubbery, flanked by a stand of pine trees.

The latest Google imagery shows the city’s unfolding plan for development. The site will become the training facility for Atlanta United, the area’s new major league soccer team. For use of the 32 acres formerly covered by apartments, the team will pay the city $1 per year for the first ten years of a thirty-year lease.

The demolition of the apartments on Franklin Road represents a kind of national blind spot when it comes to talking about neighborhood change. In any large city—say New York, Los Angeles or Washington—the wholesale demolition of affordable housing to provide discounted land for new businesses would undoubtedly be treated as the most pernicious form of gentrification. But because it happens in a suburb, somehow it doesn’t count, or at least isn’t objectionable.

Perhaps this reflects a deeply ingrained but seldom-voiced bias in our views about place: Suburbs are for rich, mostly white people. Cities are for poorer people and people of color. Anything change that runs counter to this worldview (like gentrification of a Brooklyn neighborhood, or efforts to build affordable apartments in suburbs like Marin County) is an affront to the order of things. The apparent prevalence of this outlook shows just how hard it will be to make progress on economic integration.

Back in 2009, in the darkest days of the Great Recession, Federal Reserve Chair Ben Bernanke attempted to reverse the economic pessimism that gripped the nation. He pointed to what he called “green shoots,” small bits of good news around the country. To him, the green shoots showed that the economy was turning around, the economic winter was ending, and spring was around the corner. Bernanke was right. That year, job losses slowed, then stopped, and the economy began growing again.

 

Today, we turn our attention to Detroit to look for evidence of green shoots in its economy. Detroit and its long period of wrenching industrial change and urban decline has long been the locus of conversation. More recently, the media has emphasized efforts to revive Detroit. The city has embarked on the construction of a downtown light rail line. Quicken Loans conspicuously moved its headquarters downtown in 2010 and has steadily expanded its footprint. In the past few months, a Niketown has opened and a Shake Shack has been announced. These are visible signifiers of progress and renewal.

At City Observatory, we judge the success of revitalization efforts based on whether they move the needle of key economic statistics. And there’s growing evidence based on our analysis of employment statistics for Wayne County (which encompasses the city) that things are changing in a positive direction in Detroit, confirming the anecdotal signs on its streets.

A core measure of economic growth is the number of jobs in the local economy. By that standard, the late 1990s and the early 2000s were an unrelenting tide of bad news for Detroit. Between 2001 and 2010, Detroit lost more than 200,000 jobs. Total payroll employment declined by 24 percent. Even though the national economy and employment expanded for most of the decade, employment in Detroit declined every year between 2001 and 2010. The Great Recession simply amplified these job losses.

During this time, the city was in dire straights, both politically and financially: Its Mayor Kwame Kilpatrick had been removed from office in a scandal, the city’s financial administration had been turned over to a state-appointed administrator, and in 2013, the city entered the nation’s largest municipal bankruptcy.

But since 2010, Detroit’s economy has turned around. Employment totals for Wayne County bottomed out at about 690,000 jobs, then started growing again. Detroit has recorded year-on-year increases in employment every year since then, and is continuing to do so in 2016. Today the city has 50,000 more jobs than it did in the depths of the recession.

 

There’s encouraging news, too, in the kind of growth that’s occurring. The details of Detroit employment growth point to a small rebound in the traditional manufacturing sector, as well as some much-welcomed growth in other knowledge-based sectors of the economy.

The industry detail shows that some sectors of the Detroit economy (Wayne County in particular) are now performing better than their counterpart industries nationally over the past year, March 2015-2016. For example, while manufacturing employment has slipped nationally, it’s up nearly 1 percent in Detroit over the same time period—positive news after so many years of decline. Information industries and professional and business services, two stalwarts of the knowledge economy, have both recorded faster job growth in Detroit than the country overall in the past year. And financial services employment has grown at a 7.7 percent clip, four times faster than in the nation as a whole.

Still, not everything’s rosy: Wayne County is growing more slowly (+1.4 percent) than the surrounding suburban counties (+2.7 percent) and the nation as a whole (+2.0 percent). Some of this reflects continuing, difficult adjustments. For example, government employment is down 1.0 percent in Detroit, and up about 0.5 percent nationally.

Altogether, the employment data provides hopeful signs that the Detroit economy has put its worst economic days in the rearview mirror, and is starting to build a stronger economic future. Some of this undoubtedly has to do with the national economic recovery. However, it’s important to remember that during the last national economic growth cycle (2001 to 2008), Detroit was actually losing jobs when the nation was gaining them—evidence of the region’s structural economic problems. Even though the city and region have a long way to go, they are now headed in the right direction.

About the data

Please note that for this analysis, we use federal data for Wayne County, Michigan, which is centered on Detroit and includes the adjacent cities of Dearborn and Livonia, but does not include the surrounding suburban counties that make up the balance of the Detroit metropolitan area. The Bureau of Labor Statistics, which compiles these data, doesn’t compile monthly or annual city level statistics that would let us track these changes. These data are BLS Series ID SMS26198040000000001, and are available at from the BLS website.

In the first installment of this two-part series, we investigated what each of the major party platforms had to say about a crucial urban policy issue: housing. This time, we’re taking a look at another major concern for American cities: transportation. (It’s also definitely worthwhile to read what other people have written on the subject, including at The Transport Politic, Streetsblog, and the Washington Post.)

It is easy to sum up the space transportation takes up in the Democratic platform: not much. In fact, while housing only gets four paragraphs under its own heading in the 39-page document, “transportation” doesn’t have its own section at all. Rather, the handful of mentions mostly appear under “Infrastructure,” and include promises to:

…make the most ambitious investment in American infrastructure since President Eisenhower created the interstate highway system…put[ting] Americans to work updating and expanding our roads, bridges, public transit, airports, and passenger and freight rail lines.

And that’s about it.

 

Certainly American public transit could use more and better infrastructure in many places—but the failure to mention improving service funding at all shows a classic misunderstanding, or simple lack of care to understand, of what actually makes for valuable, and useful, public transportation. Moreover, without significant changes to, say, how we judge road performance, or orienting transportation dollars to improve accessibility rather than simply mobility, a massive new infrastructure public works program might make for a good jobs program, but  expensive highway widening projects come at the cost of greater sprawl, decreased long-term accessibility, especially for the low-income, locking in more greenhouse gas emissions, and worsening the public health crisis of vehicle crashes.

The only other detail in the Democratic platform is an infrastructure bank, which we’ve written about before.

But if the Democratic platform skimps on substance, the substance of the Republican platform is more or less openly hostile to urban transportation. After praising a government program that changed the shape of Americans’ lives more than almost any other in the twentieth century—Eisenhower’s highway system—the platform goes on to condemn the “social engineering” of “an exclusively urban vision of dense housing and government transit.” (About 80 percent of the spending in the transportation bill President Obama signed last December goes to roads.) The platform condemns the use of Highway Trust Fund money for “bike-share programs, sidewalks, recreational trails, landscaping, and historical renovations,” and proposes phasing out entirely federal support for public transit.

Both of these platforms are deeply disappointing on urban transit. If it’s perhaps unsurprising that the Republican Party—which has been all but moribund in the vast majority of America’s urban neighborhoods, particularly in large cities, for decades—would be hostile to urban transportation, it’s more surprising that the Democrats—a large amount of whose base resides in cities like New York, Chicago, Los Angeles, and so on—would phone it in on this issue.

Platforms, of course, are not themselves legislation. But as we mentioned in writing about housing policy, evidence does suggest that policies that make it into official platforms have a better shot of making it into legislated policy in the future. Making real urban transportation reforms an acknowledged, specific part of a major party’s platform (at this juncture, almost certainly the Democrats’) isn’t a meaningless exercise. Nor is it something that ought only to appeal to people who read Planetizen, the Overhead Wire, CityLab (or City Observatory): improving car-free access to jobs, schools, and stores within urban areas is an essential part of a more just, environmentally sustainable, and prosperous America. It’s a shame for that conversation not to be happening at the most high-profile political conventions.

Making a market for shared mobility services

Yesterday, we urged cities to think hard about how they can craft the rules for the transportation network companies that offer “ride sharing” systems to maximize competition, and encourage innovation and low prices.  “Let a thousand Ubers bloom,” we said.

 

The rules and regulations that cities set for ride sharing — everything from taxes, to accessibility requirements, to safety measures (like fingerprinting drivers) — can have an impact on whether ride sharing ultimately becomes an effective monopoly or cozy duopoly that is profitable for firms but offers limited choices for riders, or whether there’s an open system where new entrants can continually be as disruptive to incumbents as Uber and Lyft currently are to inefficient taxi systems.

Here’s our initial list of things cities should be considering to encourage a competitive, dynamic marketplace for ride sharing services.

1. Assure ride sharing information is open and accessible. Ride share operators make their money using a scarce and expensive public asset: streets. They should be required to provide information about the trips they take, the areas they serve, and the fares they charge so that the public can understand how ridesharing affects the community—for good and for ill. Disclosing information on fares and service can also encourage competition, enabling comparisons between cities to see if consumers are getting a good deal. It can also provide a basis for deterring anti-competitive practices, like price discrimination. Boston and San Francisco have negotiated agreements with Uber to provide data on trip origins and destinations.
2. Set some basic ground rules, including certification for drivers. If there are some minimal standards that assure rider safety and transparent information and pricing, consumers may be more willing to try smaller and newer firms. One possible reason that Uber and Lyft opposed fingerprinting drivers was that it diluted the value of their brand reputation by leveling the playing field, assuring that all persons using a ride sharing service were driven by similarly vetted drivers.
3. Encourage bidding for travel. We’re all used to using services like Kayak to shop for the best airfares or bidding on eBay in real time auctions. Uber and Lyft act as price-setters, dictating a single price for trips, regardless of who’s traveling or who’s providing the ride. They then allocate drivers to riders and riders to drivers. It’s possible to imagine a more free-wheeling auction system, where riders could bid for trips, and drivers could compete to provide service. Such services might help make it easier for smaller rivals to break into the market, and would give customers more leverage.
4. Don’t inadvertently privilege large size with regulatory set ups. Virtually any regulatory requirement will impose a higher burden on small firms and startups than on larger, established businesses.  For example, requirements that all ride share operators offer a certain number or proportion of wheelchair-accessible vehicles. A provision that assesses a fee to cover the cost of these services—or gives operators the option of paying a fee in lieu of equipping vehicles, would lower the barriers to entry.
5. Insist on multiple options when integrating ride sharing with public transit. It’s increasingly apparent that ride sharing services could be a logical complement to fixed route transit in lower density locations and during off peak hours.  Transit operators should resist the temptation to enter into exclusive deals with a single ride share provider. Public transit is, in most places, a monopoly—but it’s under public control, and subject to a fair degree of scrutiny.
6. Restrict or prohibit fare and driver compensation schemes that lock users into a single service. In Boston, Uber is offering 1 cent rides on UberPool—provided you buy a $40 monthly pass. While undoubtedly a money loser, this UberPool pricing model effectively discourages those who sign up from using alternative providers. Similarly, Uber and Lyft frequently offer much more favorable compensation to drivers who drive full time for only one service or the other: again, the idea being to lock drivers into one service, and reduce their competitors’ market share. If drivers truly operate as “independent contractors,” they should be free to secure business through any network, and to set their own prices.

Recently, we profiled Paul Romer, who has just been appointed as the Chief Economist for the World Bank.  One of the key insights of his New Growth Theory is that we ought to be open to a range of different institutional set-ups in order to encourage experimentation and promote economic growth.  That’s exactly the attitude we ought to bring to ride sharing.  Having different cities around the country develop various ways of regulating this industry is likely to prompt a range of different business models and a faster pace of innovation.

While hardly an exhaustive list, these six ideas illustrate the important ways that setting the rules of the game for the ride sharing industry are likely to influence competition, innovation and customer choice.  Ride sharing and urban transportation are evolving quickly; we should aim to build on this momentum.