Hagiometry: Fawning flatterers with an economic model

It’s no longer fashionable to get an unrealistically flattering portrait painted, but you can get an economist to do it with numbers.

You’ve no doubt heard the term “hagiography” an unduly flattering biography or other written treatment designed to burnish the public image of some person. The term is derived from the Greek words for “holy” and “writing”, in this combination meaning essentially, “writing that makes something seem holy.” The dictionary definition is:

A very admiring book about someone or a description of someone that represents the person as perfect or much better than they really are, or the activity of writing about someone in this way.”

 In short, it’s an academic’s $20 word for what working journalists would call a puff piece.

Well, today, at City Observatory, we’re adding our own coinage to this realm: hagiometry.  So if hagiography is writing that flatters the ego; hagiometry is flattery with numbers. And its the stock in trade of a coterie of consultants who will, for a fee, tell you that your convention center, sport stadium, industry, tourist attraction or highway overpass is quantitatively all kinds of good for the local economy. While there’s little market for long form fawning biographies (you can write your own autobiography and take care of that) and large format portraiture has gone out of style, we’re increasingly a data-driven society, so its little surprise that the largest and most lucrative field for highly compensated ego polishing involves the manipulation of statistics.

So what does hagiometry look like?  Well, for starters, if you’ve ever read an economic impact study, then chances are you’ve put your hands on real life hagiometry. We were reminded of just how obvious this is when we read about a recent report designed to show the economic impact of a spring training ballpark in Dunedin, Florida. Let’s turn the microphone over to Deadspin’s Kevin Draper, who wrote a story last week “Florida’s Go-To Stadium Economist is a Hack, A Shill, and also not an Economist.” Draper tells the story of Mark Bonn, a Florida State University professor of recreation who has a small cottage industry of writing economic impact statements for ballparks. He produced a report for the Toronto Blue Jays showing that their spring training site produced $70 million in annual economic impacts, as part of the team’s effort to convince state and local taxpayers to shell out $65 million in subsidies for the stadium. Bonn’s work was so egregiously overstated that even his client couldn’t countenance the exaggerations. The consultant fought to keep the inflated numbers and suggested his client suppress the methodology to avoid any embarrassing questions. (Bonn also produced a report for the New York Yankees showing that their spring training games generated nearly $10 million per game in economic impacts). Even more damning: the whole train of inflated numbers, questionable assumptions and bad math was unearthed by reporters from the local television station WTSP. (Not a medium noted for its interest in or ability to critique any data driven story).

While stadiums are obvious examples of this oeuvre, these charlatans ply their trade in all manner of fields:  port impact studies, university impact studies, tourism impact studies, toll revenue forecasts.  The concept of an economic multiplier is a Godsend to this group; coupled with generous assumptions and a penchant for double- and triple-counting things, and they can make anything appear of out-sized importance.  Archimedes famously said:   give me a long enough lever and I can move the earth,   To the economic impact study, if you give me a strong enough assumption, I can produce any benefit cost ratio you like.

Hagiography is a time honored practice, and has, even produced great art.  Take for example the 21 panel life of Marie de Medici by Peter Paul Rubens than hangs (appropriately in Medici Gallery, at the Louvre).  It depicting major events in her life, all larger than life and with the hand of God clearly shown at every step.  The series begins with God smiling approvingly at her birth and ends with Marie ascending to His side in heaven:
Old School Hagiography: The Life of Marie de Medici

A field guide to hagiometry

Hagiometry has a number of obvious hallmarks. Most importantly, hagiometry is all about selling:  one should either generously subsidize some activity or forbear from unduly burdening it with taxes and/or regulations.  It is also almost always the case that public entities with cash to spend (or who might levy taxes or rules) who are the intended audience for these glowing statistical portraits. More specifically, you know its hagiometry if you see these things:
  1. Its used to sell, not to choose among alternatives or decide “how much” is the right amount to spend on a particular project.
  2. They never talk about opportunity costs or the negative multiplier associated with moving money from other activities.
  3. All activity is assumed to be additive, with no displacement.  Sporting events like the Super Bowl have been shown to “crowd out” other economic activity, so the net effect is smaller than the activity generated by the event itself.
  4. Added costs get counted as benefits:  if people drive more, they spend more on gasoline, and cars, and even though their total cost of living has risen, it all gets counted as a net gain.
  5. There’s little or no mention of who loses.  Economic impact studies focus exclusively on benefits, and almost never on costs. If these businesses get more money, then won’t consumers spend less at other businesses? That Cabelas might chalk up millions in sales, but it may suck the life out of other local retailers, a negative that’s almost never reflected in impact studies.

 Gresham’s Law & the market for economic impact studies

 Just like fawning biographies and larger than life portraits, economic impact studies are invariably commissioned, not by someone with a detached interest in the pursuit of truth (or beauty) but someone with a pretty clear axe to grind. That creates a selection environment which is virtually guaranteed to produce exaggerated results. Artists who produce ugly, if truthful, portraits don’t get many commissions.  The same principle applies to hagiometry: consultants who produce conservative estimates are much less likely to find favor than those who produce generous ones.  The result is that there is a kind of Gresham’s law at work in the industry:  firms that produce generous estimates are in high demand and can earn high fees; those who are less glowing, find they have less work, and either change their methods, or find other lines of business to pursue. This produces an unsurprising race to the bottom that produces the kind of work Mark Bonn did for the BlueJays.

Several years ago, I was part of group opposing something called the “Columbia River Crossing” a multi-billion dollar freeway widening project in Portland.    The State DOT hired a company with a track record of repeatedly over-estimating traffic and toll revenue (they were in part responsible for the SH 135 toll road estimates in Austin, which subsequently went into default).  For a moment, I was puzzled as to why our DOT would choose someone who routinely over-estimates revenue; but then it occurred to me that for the highway advocates excessive optimism was not a bug, but an essential feature.  They didn’t want someone to tell them it would be impractical or risky to build their project.
 The best advice we can offer the public and policy makers in countering hagiometry is simply to be very skeptical of all such economic impact studies. Ordinarily, we might invoke the Latin admonition “Caveat Emptor” or “let the buyer beware,” but in this case, the economic impact study is invariably bought and paid for by its flattered client. When presented with an economic impact study that expensively describes some organization or project’s accomplishments and importance, one might consider another Latin expression: “Timeo danaos et dona ferentes” which is generally translated to mean, “Beware of Greeks bearing gifts.”

The 0.1 percent solution: Inclusionary zoning’s fatal scale problem

Inclusionary zoning programs are too small to make a dent in housing affordability

Two of the most respected names in housing research are Lance Freeman and Jenny Schuetz.  Freeman is professor urban planning at Columbia University and author of a series of papers examining neighborhood change, and considering whether and when gentrification leads to the displacement of neighborhood residents (it’s rare). Schuetz is an urban economist, now working for the Federal Reserve, who’s written an impressive series of papers addressing everything from mortgage foreclosures, to neighborhood retail, to the effects of land use regulation on housing prices. Earlier this month, Freeman and Schuetz co-authored a new paper on housing affordability policies for the Department of Housing and Urban Development’s quarterly Cityscape journal.

Colorful, but just a drop in the bucket (Flickr: Bill Young)

Their article poses the question “Producing Affordable Housing in Rising Markets, What Works?”   The paper looks a range of state and local policies to subsidize or facilitate the construction of more affordable housing, including statewide housing fair share laws, direct subsidies, support from tax increment financing and inclusionary zoning (IZ).

At City Observatory, we’ve been highly skeptical of the effectiveness of inclusionary zoning. While inclusionary zoning gets top mention as a preferred policy by many affordable housing advocates, there’s precious little evidence that its ever had more than a token effect on the size of the housing affordability problem in any city. In addition, because inclusionary zoning requirements essentially shift the cost of housing subsidies onto new development, they raise its cost, and likely reduce the number of units that get built–which tends to aggravate housing shortages and further accelerate prices. We’ve written that inclusionary zoning has a scale problem, and its a question that this paper investigates directly.

Here’s the quantitative evidence to that point: Freeman and Shuetz compiled data on 150 different inclusionary zoning programs in five different regions of the country.  To illustrate the scale of these inclusionary zoning programs relative to the market, they show the total number of existing housing units in 2000 in the jurisdictions with inclusionary zoning, and for reference show the number of units financed through the federal Low Income Housing Tax Credit (LIHTC)

They conclude:

Average annual production under local IZ programs varies systematically across regions, but in all areas has contributed only a modest amount of affordable housing.  * * * Expressed as a share of the existing housing stock, affordable housing produced under IZ is less than 0.1 percent of existing housing in all regions.

One of the big questions about inclusionary zoning is whether the added costs imposed on developers increase the price and depress the supply of market provided housing, thereby offsetting the (small) gains from affordable units. In Seattle, Sightline’s Dan Bertolet has calculated that if the added cost of IZ requirements reduces construction by just two apartment projects, it will more that offset the positive supply effect from the inclusionary affordable housing construction. Freeman and Schuetz only briefly touch on the questions how the cost of inclusionary zoning’s requirements are likely to affect housing supply and prices.  They observe:

Existing research has found mixed results of local IZ programs, with some evidence that IZ contributes to higher housing prices, reduced construction, and a shift toward smaller housing units, but these effects vary across regions and time periods.

In their policy recommendations however, they are quite clear: local governments should reduce cost-increasing zoning and building requirements, and up-zone residential areas, allowing for more apartments and accessory dwelling units. If you take that advice at all seriously, you should think twice before imposing an IZ mandate on new development.

We understand the political attractiveness of inclusionary zoning programs, they don’t seem to cost any money:  You require developers to build 1 or 2 affordable housing units for every ten new apartments that they build.  Maybe your city offers up a density bonus, or expedites permit handling, but unlike conventional public housing, the city doesn’t have to lay out any of its cash to get more new affordable housing. That’s why Evan Roberts of StreetsMN described it as politically understandable, though terrible policy. Its the kind of solution that is congruent with a kind of morality-tale explanation of housing unaffordability: it’s the fault of greedy developers and heartless landlords, so its only fair to somehow dragoon them into paying for the solution.While showy and contentious, however, the real world results of inclusionary zoning have been at best paltry, and the risks that inclusionary requirements will depress housing supply–and thereby drive up rents, ought to persuade policy makers to look more broadly if they are to find practical solutions to this problem.




Happy Earth Day, Oregon! Let’s Widen Some Freeways!

Four decades after the city earned national recognition for tearing out a downtown freeway, it gets ready to build more

April 22 is Earth Day, and to celebrate, Oregon’s Legislature is on the verge of considering a transportation package that would drop more than a billion dollars into three Portland area freeway widening projects.

Back in the day, Portland built its environmental cred by tearing out one downtown freeway, and cancelling another–and then taking the money it saved to build the first leg of its light rail system. In place of pavement and pollution, it put up parks. Downtown Portland’s Willamette riverfront used to look like this:

Now the riverfront looks like this:


But as part of a transportation package being developed by the Oregon Legislature, the plan is to raise gas taxes and other fees partly to shore up the state’s multi-billion dollar maintenance backlog, but prominently to build three big freeway widening projects in the Portland metropolitan area. One project would spend $400 million to add lanes to Interstate 5 near downtown Portland, two others would widen freeways in the area’s principal suburbs. The estimated cost of the projects would be around a billion dollars, but when it comes to large projects, the Oregon Department of Transportation is notorious for grossly underestimating costs. Its largest recent project, widening US Highway 20 between Corvallis and Newport was supposed to cost a little over $100 million but has ended up costing almost $400 million.

The proposal is advancing at a doubly ironic time: Just two months ago, the state’s Greenhouse Gas Commission (of course, Oregon has one) reported that the state is way off track in achieving its statutorily mandated goal of reducing greenhouse gases by 10 percent from their 1990 levels by 2020.  The commission’s finding:

Key Takeaway: Rising transportation emissions are driving increases in statewide emissions.

As the updated greenhouse gas inventory data clearly indicate, Oregon’s emissions had been declining or holding relatively steady through 2014 but recorded a non-trivial increase between 2014 and 2015. The majority of this increase (60%) was due to increased emissions from the transportation sector, specifically the use of gasoline and diesel. The reversal of the recent trend in emissions declines, both in the transportation sector and statewide, likely means that Oregon will not meet its 2020 emission reduction goal. More action is needed, particularly in the transportation sector, if the state is to meet our longer-term GHG reduction goals.

Transportation is now the largest source of greenhouse gas emissions, and cheaper gas is now prompting more travel. The decline in gasoline prices in mid-2014 prompted an increasing in driving and with it, an increase in crashes and carbon pollution.  Oregon’s vehicle miles traveled, which had been declining steadily, ticked up in 2015, as did its fatality rate. Building more freeway capacity–which will trigger more traffic–flies in the face of the state’s stated and legislated commitment to reducing greenhouse gases.

The second irony is that the state is proposing a gas tax increase that would go to new road capacity at exactly the same time it doesn’t have enough money to pay for other public services.  Despite a robust economy, the state faces a serious revenue shortfall.  General fund revenues for the coming 2017-19 biennium are an estimated $1.6 billion short of the amount needed to fund the current level of public services. So unless new tax revenues are found, the state will likely have to cut back on schools and medical care for the poor (the two biggest categories of public expenditure). Oregon is likely to celebrate the end of the current legislative session by raising taxes to spend more money subsidizing driving at the same time it is cutting back on education (which is the one thing that’s been reliably shown to improve a state’s economy).

Building more capacity doesn’t solve congestion, it just increases traffic (and emissions)

The new word of the day is bottleneck: Supposedly, adding a lane or two in a few key locations will magically remedy traffic congestion. But the evidence is always that when you “fix” one bottleneck, the road simply gets jammed up at the next one. As the Frontier Group has chronicled, the nation is replete with examples of billion dollar boondoggle highways that have been sold on overstated traffic projections, and which have done little or nothing to reduce congestion.

As we all know, widening freeways to reduce traffic congestion has been a spectacular failure everywhere its been tried. From the epic 23-lanes of the Katy Freeway, to the billion dollar Sepulveda Pass in Los Angeles, adding more capacity simply generates more traffic, which quickly produces the same or even longer of delays. The case for what is called induced demand is now so well established that its now referred to as “The Fundamental Law of Road Congestion.” Each incremental expansion of freeway capacity produces a proportionate increase in traffic. And not only does more capacity induce more demand, it leads to more vehicle emissions–which is why claims that reducing vehicle idling in congestion will somehow lower carbon emissions is a delusional rationalization.

If you’re a highway engineer or a construction company, induced demand is the gift that keeps on giving: No matter how much we spend adding capacity to “reduce congestion,” we’ll always need to spend even more to cope with the added traffic that our last congestion-fighting project triggered. While that keeps engineers and highway builders happy, motorists and taxpayers should start getting wise to this scam.

A Faustian bargain for transit and active transportation

Portland’s  freeway widening proposal is part of a convoluted political bargain to justify spending for a proposed light rail line. Supposedly, voters won’t approve funding for new transit expansion in Portland unless its somehow “bundled” with funding for freeway expansion projects. That flies in the face of experience of other progressive metropolitan areas, including Denver, Los Angeles and San Francisco.  Urban transit finance measures have a remarkable 71 percent record of ballot box success. Just last November, voters in Seattle approved a $54 billion (that’s with a “B”) Sound Transit3 tax measure to fund a massive, region-wide expansion of bus and rail transit. To argue that you can’t get public support to fund transit with out also subsidizing freeways is an argument that’s at least 50 years out of date.

The good news is that there’s some pushback from folks who think more freeways isn’t a solution to anything. But a lot of the energy seems to be directed to a “me too” package of investments in token improvements to biking and walking infrastructure. As Strong Town’s Chuck Marohn warns, that’s a dead end for communities, the environment and a sensible transportation system; while he’s writing about Minnesota, the same case applies in Oregon:

Oh, they’ll pander to you. They’ll promise you all kinds of things….fancy new trains (to park and rides), bike trails (in the ditch, but not safe streets)….but this system isn’t representing you at all. It’s on autopilot. It’s got a long line of Rice interchanges and St. Croix bridge projects just ready to go when you give them the money. Don’t do it.

And as a final word, for those of you hoping to fund transit, pedestrian and cycling improvements out of increased state and federal dollars, I offer two observations. First, you are advocating for high-return investments in a financing system that does not currently value return-on-investment. You are going to finish way behind on every race, at least until we no longer have the funds to even run a race. Stop selling out for a drop in the bucket and start demanding high ROI spending.

Second, the cost of getting anything you want is going to be expansive funding to prop up the systems that hurt the viability of transit, biking and walking improvements. Every dollar you get is going to be bought with dozens of dollars for suburban commuters, their parking lots and drive throughs and their mindset continuing to oppose your efforts at every turn. You win more by defunding them than by eating their table scraps.

So when it comes to 21st Century transportation and Earth Day, maybe we should start with an environmental variation on the Hippocratic Oath:  “First, do no harm.” We were smart enough to stop building freeways when environmentalism was in its infancy, and the prospects of climate change were not nearly so evident. Why aren’t we smart enough to do the same today?

This post was revised to correctly reflect the date of Earth Day 2017.


The New Urban Crisis: Cliff Notes version

Your 1,200 word bluffer’s guide to Richard Florida’s new book

Richard Florida’s new book “The New Urban Crisis: How our cities are increasing inequality, deepening segregation, and failing the middle class–and what we can do about it,” came out last week.

The book touches on many of the issues that are near and dear to us at City Observatory, and in the coming weeks, we’ll have much to say about the arguments, evidence and recommendations advanced in the book.

But today, we’ll start off with just a simple synopsis of what the book says.

If Florida’s 2002 “Rise of the Creative Class” was a manifesto, The New Urban Crisis is a lamentation and encyclopedia. The lamentation is that the continued and growing success of the creative class is widening the divisions in our country and within our communities. The encyclopedia is some 37 pages of references to much of what has been written about cities, poverty, inequality, segregation, and urban economic growth in the past decade.

The book is divided into ten chapters, each built around a single theme.

Chapter 1 describes an “urban contradiction”: Economic success is now driven by urban, knowledge-based economies, but as it is, success is becoming more concentrated in cities, and specifically in some cities rather than others, and within cities in particular neighborhoods. Cities are indispensable to having an innovative and globally competitive economy, but by their nature, they create divisions and inequality.

Chapter 2 argues that we live in a world of winner-take-all urbanism, that the economic advantages of being in a big city trump and undermine the competitive position of smaller cities. The kinds of industries that are now driving the economy flourish in just a few urban locations, where firms and workers cluster. Big, successful cities are taking an increasing share of the economic pie, and undercutting the economic position of everyone else.

Chapter 3 says cities are increasingly occupied by the elites, those with the highest levels of education, who are disproportionately members of Florida’s creative class. The super wealthy are concentrating in a few leading centers, as is much venture capital investment. But the concentration of wealth and talent doesn’t seem to be having a stultifying effect on creativity in these places.

Chapter 4 discusses gentrification. It relates the widespread media coverage of gentrification, including Spike Lee’s famous rant, and says that the pain the gentrification causes is real and should be taken seriously. It also cites literature pointing out that gentrification and displacement are extremely rare and restricted mostly to superstar cities. The growth of concentrated poverty is a bigger problem than gentrification.

Chapter 5 discusses income inequality in cities and presents measures of the degree of wage and income inequality. Like the nation as a whole, the distribution of income in cities is becoming more unequal. Florida argues that few cities are able to combine income growth with reductions in inequality.

Chapter 6, entitled “The Bigger Sort” looks at the spatial dimension of income inequality: economic segregation. Florida reports on the literature showing that within cities, rich and poor now live further apart than ever before. A similar widening divide separates American’s when they are divided into Florida’s creative class, the service class and the working class.

The Patchwork Metropolis, described in Chapter 7 is Florida’s classification of metropolitan spatial form into four different categories: based on the relative concentration of the “creative class” relative to others. The four categories are:

  1. Creatives “re-colonize” city centers,
  2. Creative live in the suburbs,
  3. Bifurcated metros, where creative are found disproportionately on one side of a metro area, and
  4. The scattered archipelagos of creatives.

Florida says the pattern in each metro is shaped by a combination of the strength of the urban core, the nature of the transit system, the location of universities and the presence of natural amenities.

Chapter 8 shifts our attention to the suburbs, and reviews evidence on the growing levels of poverty in the suburbs (as an aggregate). Once the bastions of the American middle class, now more poor Americans live in suburbs than anywhere else. Florida notes the environmental and social costs of sprawl and the political cleavages and emerging voting patterns.

Chapter 9 broadens the book’s perspective from its domestic focus to global cities. Florida presents the well-known statistics about the growing number of people living in cities globally, and focuses on the economic progress of those living in urban slums.

Chapter 10 is Florida’s policy recommendations, grouped under the slogan “Urbanism for all.” The chapter begins with a quantitative synopsis of the books findings called the “New Urban Crisis Index” which ranks US metro areas top to bottom; high scoring cities are where “the crisis is most acute.”

Here are the main recommendations:

  • Make clustering work for us. Florida argues the New Urban Crisis is due in part to laws that restrict the use of land where it is most valuable and in highest demand. He rejects both lasseiz-faire market urbanism (abolishing all land use controls) and hyper-density (urban economies are powered not by high-rise, but mid rise development, that reinforces a pedestrian scale.
  • Invest in infrastructure to support density. We should build more high speed rail to connect cities, and invest in more transit within cities to connect the poor to opportunities.
  • Build more affordable rental housing. Current housing policies are too tilted toward homeownership; more people, especially young one’s are renters, and an increasing number of renters are cost-burdened, especially in “superstar” cities. Rent control and inclusionary zoning have limited appeal and applicability, so government will have to pay for the new housing.
  • Turn low-wage service jobs into middle class work, by raising the minimum wage, and indexing it to local living costs. We’ll also need to re-engineer service jobs to make them more productive.
  • Florida straddles the “people v. place” controversy by arguing we should invest in both to reduce poverty. We need to spend more on places, especially schools in disadvantaged neighborhoods and in people through provide expanded early childhood education and implement a negative income tax.
  • Donald Trump’s victory caused Florida to re-write his final recommendation. There’s no hope of federal action to implement any of these recommendations, so Florida calls for “empowering cities and communities.” With America deeply split between red and blue, there’s no way to achieve a national consensus, so we should just revert to local solutions. It’s unclear what form this empowerment might take; one example: Florida suggests that groups of cities and suburbs would oversee transit and transportation. The burden of solving the New Urban Crisis falls upon mayors and other urban leaders.

The New Urban Crisis Index

An Appendix includes the methodological details and ranking of each of the nation’s 359 metropolitan areas according to Florida’s New Urban Crisis Index. The Index itself is a composite of four equally weighted sub-indices: 1. Income inequality, 2. Wage Inequality, 3. Income Segregation and 4. Housing affordability. According to this index, Bridgeport, CT, Los Angeles, New York and Gainesville have the most acute “urban crises” while Jefferson City, MO, Fond du Lac, WI and Wassau WI have the least.


Too soon to write off city revival

County data can’t tell us much about thriving urban neighborhoods

New county-level census population estimates became available last week, and Jed Kolko produced an interesting analysis published by FiveThirtyEight concluding that “America’s Shift to the Suburbs Sped Up last year.”  While there’s nothing wrong with Kolko’s math, we think there are several reasons to believe that this data shouldn’t be taken as some have suggested, as evidence that the demand for cities is decreasing.

While some critics want to portray this as evidence that urban revival is inflated, Kolko concedes that the move back to city centers is real:

That revival is real, but it has mostly been for rich, educated people in particular hyperurban neighborhoods rather than a broad-based return to city living. To be sure, college-educated millennials — at least those without school-age kids — took to the city, and better-paying jobs have shifted there, too. But other groups — older adults, families with kids in school, and people of all ages with lower incomes — either can’t afford or don’t want an urban address.

More broadly, we think there are several key reasons why this county level data shouldn’t make anyone glum about the continuing prospects for urban growth and revitalization.

First, County level data don’t really tell us much about urban growth.  We’ve made this point before with Kolko’s analysis of job growth.  County boundaries correspond poorly, if at all, with cities or urban density.

Consider Chicago, which gets tarred with the “Biggest Loser” title in Kolko’s tabulations.  While Cook County saw an overall decline in population, the most urban parts of the city, including its Downtown Loop and Northside neighborhoods, continued to rack up big gains.


A more finely grained geographic analysis shows that the closer you get to the city center in most metros, the stronger has been the performance. While its true that the more outlying parts of some cities are losing population, their cores are becoming increasingly vibrant. As we’ve noted, that notion of critical mass at the neighborhood level is one of the defining characteristics of urban growth.

Second, national aggregations conceal local patterns. To be sure, these data show a renewed growth in the sunbelt. And in the biggest sunbelt metros, a big chunk of the growth is in their sprawling suburbs (Houston, Dallas). But the growth in these metros is not representative of what’s happening in many other places.

Third, there’s a baseline issue here.  City growth has decelerated from the past year or two.  But city growth this decade looks far different than it did a decade ago.  While Kolko’s FiveThirtyEight.com post just shows the change in city and suburb growth rates over the past few years (and emphasizes the one-year change between 2015 and 2016), his longer blog post on his own website shows the change in population by type of county since 2001. Taking this longer view, its apparent that growth rates in suburbs have declined sharply since the last decade, while growth rates in urban counties were up.

Between 2001 and 2005, low density suburban counties (gray line) were growing more than 2 percent per year–their growth rates since 2011 are about half that. During that same time, the most urban counties (blue line) were growing sluggishly or losing population–and they’re now growing. While urban counties dramatically underperformed suburban ones last decade, the growth patterns have converged dramatically since then. As a result, when judged against the baseline of the previous decade, more urban counties have accelerated, while more suburban ones have faded.

Fourth, in many places we’re bumping up against the (policy-induced) limits to meeting the market demand for urban living. In the early stages of growth, cities can add population by filling vacant housing. But as vacancy rates fall, the only way to accommodate more people is to add more housing, which is a process that (a) takes time, and (b) is too often unfortunately encumbered by NIMBY building restrictions. That suburbs might grow faster than cities for a time is not necessarily evidence of a declining demand for city living, so much as it is evidence that we haven’t expanded the supply of urban living opportunities to meet that demand.


Has Portland’s rent fever broken?

More evidence that supply and demand are at work in housing markets

In early 2016, Portland experienced some of the highest levels of rent inflation of any market in the US.  According to Zillow’s rental price estimates, rents were rising between 15 and 20 percent year over year in late 2015 and early 2016. Portland was attracting lots of new residents, and its housing supply was still in the process of rebounding from the effects of the Great Recession. In response to the big uptick in rents, the city enacted one of the nation’s most stringent inclusionary zoning requirements, which will force developers of new apartment buildings permitted after February 2017 to set aside as much as 20 percent of new units for low and moderate income households.

But in the past year, there are growing signs that the surge in rental inflation has peaked.  According to Zillow’s estimates, the average price of a two-bedroom apartment in the Portland area $1495 is almost exactly the same as it was a year ago.  Rental price inflation has dropped from nearly 20 percent a year ago to effectively zero in the first few months of 2017.


It’s not easy to accurately estimate the current level of apartment rents. Different sources have their own strengths and limitations, and some services, which just rely on skimming the current crop of apartment listings, with little adjustment for quality or time on market, produce erratic and unreliable results, as we’ve explained. So to try and triangulate our view of the Portland market, we turn to a couple of other sources of information.

Zillow’s estimates of current rent price inflation are largely confirmed by independent figures from ApartmentList.com.  ApartmentList.com uses a variant of the “repeat sales” technique employed by the CaseShiller home price index. By comparing the rental price for the same apartment at different periods of time, one can generate estimates of price inflation that are unaffected by shifts in the composition of apartments available for rent at different times (a problem that plagues more simple-minded indices).  ApartmentList.com’s estimates suggest that Portland’s rents have fallen to 0.9 percent in the past twelve months.

In its national rankings, ApartmentList.com now ranks Portland one of seven markets with declining rents over the past year, a group that includes Houston, San Francisco, and Miami. The following chart shows 12 month rent inflation estimates for each of the nation’s 52 largest metropolitan areas.


Another bellwether of the multi-family marketplace, asking prices for apartments seems to have peaked and declined slightly in the past few months.  LoopNet, which tracks real estate transactions, reports that the asking price for apartments for sale has declined about 4 percent in the past few months. These data suggest that investors, who bid up the typical price of an apartment to almost $170,000 in 2016, have backed off a bit from that level. (The amount that investors are willing to pay for apartments tracks closely with expectations about future rent levels).

The outlook:  Higher incomes, more housing supply

Going forward, there are a couple of reasons to expect that Portland’s housing affordability problems will moderate. First, the improving regional economy is starting to drive up incomes. State economist Josh Lehner has an analysis showing that renter incomes are rising, and predicts that rental affordability (as measured by the share of income that people spend on rent) will stop getting worse.

More importantly, there’s a big surge in apartment supply in Portland. One private firm that tracks the construction industry locally–the Barry Apartment Report–estimates that there are roughly 25,000 apartments in the construction pipeline in Portland.

More of this will drive down rents

The big uncertainty in the years ahead will be whether the policies the city has enacted (inclusionary zoning) and others that it is considering (rent control) will choke off future investment in local housing supply.  Once the current inventory of permitted housing is built (and much of it was permitted just prior to the new inclusionary requirements taking effect), its far from clear that developers will find Portland as attractive a marketplace for new apartments as it has been in the past few years.

Why might Uber & Lyft support road-pricing?

The real disruptive technology for transportation is road-pricing.

There’s been a surge of interest in road pricing in the past few weeks. In a new study of growing traffic congestion in New York City, Bruce Schaller attributed traffic delays to the expanding number of Uber and Lyft vehicles on city streets. Given the economics of the business, and the concentration of fare-paying passengers in dense urban neighborhoods (plus the added inducement of earning surge fares), ride-share drivers have strong incentives to drive at peak hours in city centers.  The only feasible solution for this, according to Schaller, is to implement some form of road-pricing, as he says:

If TNC growth continues at the current pace (and there is no sign of it leveling off), the necessity of some type of road pricing will become more and more evident. Technological innovations have created new options for design and implementation of a road pricing system that targets the most inefficient use of scarce road space during the times and on the streets where additional vehicles contribute the most to traffic delays. There are thus practical opportunities for officials to design, test and gain public acceptance of a road pricing scheme carefully targeted to reducing unnecessary traffic congestion.

At City Observatory, we’ve long diagnosed traffic congestion as the failure to confront users, particularly peak hour single occupancy car drivers, with anything approaching the full cost of road use. Prices are too low, and demand overwhelms limited capacity (just as Ben and Jerry’s are overwhelmed when they give ice cream away free once a year). When we price road capacity–as Louisville recently demonstrated by pricing its I-65 bridges–we suddenly find that peak hour traffic congestion disappears, and that our infrastructure is more the sufficient to accommodate the demand from travelers who actually are willing to attach even a modest financial value to road use.  Our speculation is that in the absence of road pricing, both fleets of “transportation network company” (TNC) ride-sharing vehicles will aggravate this problem. And its likely to reach crisis proportions when self-driving vehicles lower costs still further. We think we’re rapidly approaching an inflection point that will require a sharp change in the way we pay for roads.

We were somewhat surprised, to read two weeks ago, that Uber has issued a corporate statement of support for road pricing.  The company’s director of transportation policy Andrew Salzburg wrote a short direct  column in Medium–titled “Road Pricing the Solution to Gridlock“–and going so far as to quote the Duranton & Turner paper “The fundamental law of road congestion.”

To tackle this issue at its core, the cost of driving ultimately needs to reflect its cost to our cities. It’s becoming increasingly clear that the most effective way to manage vehicles on the road is through pricing. By charging a fee for all vehicles (private motorists, delivery vehicles, taxis, and services like Uber), road pricing creates an incentive for everyone to share space more efficiently.

Salzburg’s’s endorsement comes not long after two of Lyft’s founders–John Zimmer and Logan Green–published their own Medium essay on “The End of Traffic” which also endorsed road pricing, under the gentler rubric of “smart lanes”:

Smart lanes will supercharge everyone’s commute by being active during peak hours and returning to regular (or “dumb”) lanes in off-peak hours. The smart lanes will be 100% free for any vehicle with three or more people and have a market-based price for vehicles with fewer than three people.

It might not be immediately obvious why these two companies would support road pricing. Right off the bat, they’d be two of the biggest payers of road fees, especially if fees varied by time of day or by location (as they should). These firms disproportionately serve the most congested locations at the most congested times, and so would end up paying a lot. But Uber and Lyft recognize that un-priced roads aren’t really free, and that rationing road capacity by queueing rather than price will cost them (and everyone else) a lot of money.

I suspect their are at least three reasons why the TNC’s might be pushing ahead here:

First, they may be genuinely altruistic. They recognize that road-pricing will stem congestion, and provide better travel times for everyone. If urban transport markets get saturated and car travel becomes slower, the growth of demand and the profitability of the TNC industry could be sapped. Less congestion would be better for business.

Second, they may be trying to get ahead of the game and avoid a system where TNCs get burdened with fees, and other road users do not. As the Schaller report makes clear, its tempting to blame TNCs as being the sole or major cause of growing congestion. Even though that isn’t entirely fair–every vehicle on the road at rush hour contributes to congestion, not just the last one–the TNCs could easily get painted as the villains, and then get socked with the bill. The fact that their vehicles are already fully instrumented, and in many cases required to share data with municipalities, makes them an easy target for fees and taxes (already many municipalities piggyback many fees on TNC operators, as they do taxi operators). In a world where TNCs pay road use fees, and private car owners do not, TNC’s would be at a significant competitive disadvantage.

Third, the more we move to marginal, per-trip pricing for all car travel, the stronger the case for people to not own cars, and instead to rely on a diverse array of modal options optimized for each trip: routine commutes, mostly by transit or bike, urgent ones by TNC.  Already, we’ve shown that the uptake of TNC’s like Uber is highest in those cities with the highest parking costs. High parking costs make owning and using a private car of one’s own relatively less attractive that using and Uber or Lyft vehicle when you need one. Road pricing would reinforce that calculus, and ultimately expand the market for the TNCs.

As Congressman Earl Blumenauer explained last week, the end of the gas tax as a viable means of road finance is now clearly in sight. Self-driving cars and electrification are looming ever larger.

With more fuel-efficient and zero emission vehicles, the bottom will fall out of the transportation funding model. All autonomous vehicles entering service will be electric. This will hasten the death spiral of how we fund transportation.

The result is the we face a once in a century inflection point for re-thinking our road finance system. If we do it in a way that comes closer to getting the prices right–and that specifically includes peak hour road pricing–we could potentially make major improvements to urban transportation.

Perhaps these two companies that have so disrupted urban transportation have put their finger on the next big disruption. Uber and Lyft are on board for road pricing. Do I hear an “Amen!,” Waymo?



New York City isn’t hollowing out; It’s growing

You can’t leave out births and deaths when you examine population trends

The release of the latest census population estimates has produced a number of quick takes that say that cities are declining. The latest is Derek Thompson, writing at The Atlantic and bemoaning the net domestic migration out of the New York metro area, and taking that as a sure sign that the city is hollowing out.

And there’s a factoid that’s true here:  More people who were living in New York City in 2010 are living elsewhere in the US in 2016 than people who were living in the US outside of New York City who live there today.

But “net domestic migration” is only one part of the population change puzzle.

New York: Welcoming immigrants and witnessing births.

A second, that Thompson acknowledges, is international immigration.  New York still is the first port of entry for more people moving to the United States than any other city. (My grandmother immigrated there a century ago; there’s a good chance several of your relatives did, too). New York’s population growth has always been fueled by foreign immigrants.  And foreign immigration has almost perfectly offset domestic out-migration from the city.  Since 2010, net domestic out-migration was -425,000; and foreign immigration was +400,000, so the net loss due to both forms of migration (foreign and domestic combined) was -25,000 (or about 0.3 percent of New York City’s population over a six-year period.

If that were all to the story, then Thompson might have a point (although a very small one).  But there’s a third piece of the population puzzle that he’s omitted altogether: natural increase, or the difference between births and deaths. Though you might not think so given all the “family hostile” rhetoric in Thompson’s article–”Maybe families want to live in denser areas but are being priced out, moving to the suburbs, and buying larger vehicles rather than a small car that can be parallel-parked on a crowded city block”–New York City’s population skews a lot younger than the US.  The result: it produced a lot more babies than funerals.  In fact, the five boroughs are positively fecund by comparison to the rest of New York State.  Over the past six years, the natural increase in the population in New York (i.e. births minus deaths) was plus 400,000–that’s more than 16 times larger than the difference between net domestic outmigration and foreign in-migration.

Leaving out natural increase really mis-states the effect of net-domestic migration.  Some of the people who migrate out of the city in any year are children under the age of six, i.e. people who weren’t here in 2010.  So Thompson’s math excludes these new born kids from his base year calculation, but then counts them when the leave the city. The key point here is that you can’t make sense of the aggregate impact of migration without also looking at natural increase.

And this dynamic is different for different cities:  In Pittsburgh, the reverse is true.  That city’s population skews much older than the US average, and experiences more deaths than births, with the result that its natural increase is negative. To be sure, some people are moving out of New York, but its not demonstrably because they dislike the place, but because the city is becoming increasingly crowded.

Bottom line:  New York City is growing.  When you account for all of the different components of population change–births, deaths, people moving in and people moving out–the city’s population is up in total by almost 400,000 since 2010, an increase of 4.6 percent.  Here’s a synopsis of county/borough level population data for New York City, compiled from Census estimates by the Empire Center.

Not only that, every borough in New York City is growing. Even the Bronx is growing.

As with so many stories that rely on fragments of migration or population data, the narrative that some people are moving out of cities implicitly assumes that they are choosing to leave because they don’t want to live in cities. In fact, the growth of city population, and the rising price of homes in cities is a sign that more people want to live in cities than we can currently accommodate. Our failure to increase the supply of housing in cities is increasingly becoming the constraint on urban economic growth. You’ll know cities are failing when you see house prices and land values dropping.  That will be a sign that consumers have rejected urban living. But that’s not what’s happening in New York City today.

Migration is making counties more diverse

Migration, especially by young adults, is increasing racial and ethnic diversity in US counties

As we related last week, a new report from the Urban Institute quantifies the stark economic costs of racial and income segregation in the United States. Places with higher levels of segregation have lower incomes for African-Americans, lower rates of educational attainment, and higher rates of serious crimes. Reducing segregation by race and class is an important and unfinished agenda for achieving greater social justice, and improving our economy.

But how can we reduce segregation? As we all know, its difficult and expensive to build new housing in established neighborhoods. There’s often opposition to new development, whether its infill housing in cities, or affordable housing in suburbs. But while the housing stock can change only slowly, the occupants of housing units are changing all the time–the average renter has lived in her apartment less than two years, for example. The critical question is whether the regular and on-going movement of people in and out of different housing and different neighborhoods is reinforcing existing patterns of segregation, or whether its creating greater diversity.

A new report–Moving to Diversity–from the Richelle Winkler a sociologist at Michigan Technological University, and Kenneth Johnson, a demographer at University of New Hampshire, looks at the way in which population movements are changing the face of America’s counties.  Counties turn out to be a convenient unit for analysis, because its possible to accurately separate out the effects of births, deaths and net migration by race and ethnicity. The report looks at population change between 1990 and 2010, and focus on four broad racial-ethnic categories: non-hispanic whites, non-hispanic blacks, hispanic persons, and all other racial-ethnic combinations. To compute the effects of migration, the authors calculate what each county’s demographics would look like based on its racial and ethnic composition in the base year (for example 1990) forecast forward simply to reflect the effects of births and deaths of the base year population. The difference between that estimate and the actual observed value in the end year (for example 2000), is the net effect of migration on county demographics.

The report offers several key insights into the ways in which migration is influencing the racial and ethnic composition of different counties. First, its the movement of younger people, especially young adults which is contributing to the big increases in county-level diversity.  The movement of those 20-39 accounted for the biggest changes in both black-white and hispanic white diversity. Moves by older adults actually tended to decrease racial and ethnic diversity (think white people moving to even “whiter” counties, and so on).  But overall, the trend toward greater diversity is driven by the young, who are both more likely to move, and when they move, tend to move to more diverse locations.


There are important city-to-suburb and suburb-to-city components to migration. Young white people contribute to greater diversity by moving from whiter counties (disproportionately in suburbs) to urban counties that tend to have more persons of color. Conversely, Black and Hispanic migrants exhibit net migration in the other direction, from less white urban counties to whiter suburban ones. The effect of both kinds of migration is to increase diversity in both counties.  As Winkler and Johnson explain:

Blacks and Hispanics of all ages migrated to areas that were “whiter,” thereby increasing diversity. The movements of the white population have been more complex, however, with impacts that vary considerably by age. White young adults (age 20–39) moved from predominantly white counties to counties with larger black and Hispanic population shares, often in large urban centers. The net flow of white young adults into central-city counties increased the white young adult population there by approximately 20 percent in the 1990s and again in the 2000s. The outflow of these same young white adults from suburban and rural counties to big urban cores also contributed to more diversity in these origin areas by diminishing the number of whites there.

While the overall effect of migration was to increase integration by race and ethnicity, this didn’t occur everywhere. Winkler and Johnson estimate that migration significantly increased diversity in  about 10 percent of counties, a modestly increased diversity in about 56 percent of counties, had little effect one way or another in about 32 percent of counties, and resulted in noticeably less diversity in only about 2 percent of counties.

The distinct age structure of these migration trends suggests that future migration will also tend to increase diversity. Young people are much more likely to migrate than older ones. The persistence of the migration of white young adults to cities, coupled with the migration of persons of color to suburbs makes both areas more diverse than they would otherwise have been.

In the face of a growing body of evidence on the negative effects of segregation, its good to know that the individual migration decisions of people in the up and coming generations are contributing to growing diversity at the county level in the US.

The Ben & Jerry’s crash course in transportation economics

What one day of free ice cream teaches us about traffic congestion

Today’s that day, folks. Ben and Jerry are giving away free ice cream to everyone who comes by their stores. Whether you’re hankering for Cherry Garcia or Chunky monkey, you can now get it for absolutely zero price.

Well, there is that one thing:  You’re going to have to wait in line, and probably for a long time. As you’re standing there, it would be a good time for you to ponder the valuable lesson that Ben and Jerry are providing in the fundamentals of transportation economics.


You’ll note that unlike the average day at a Ben and Jerry’s, when you might have to wait in line a for a minute or two to get your favorite flavor, now you’re going to end up waiting twenty minutes, or a half hour, or possibly longer.  In terms of customers served and gallons scooped, this is going to be their biggest day of the year–last time they gave out a million scoops of ice cream worldwide.

You’ll probably also notice that most of the people standing in line are people who aren’t working nine-to-five.  Not many investment bankers or plumbers, but lots of students, moms with small kids, and people who have at least part of the day off from work.

Make no mistake, although you’re not laying out any cash for your ice cream, you are paying for it: with your time. Let’s say that you’d pay $2.50 for that scoop of Phish Food (they’re a bit smaller than regulation on free cone day).  If you have to wait half an hour, and you value your time at say, $15.00 per hour, that $2.50 scoop really cost you something like $7.50.  It’s a safe bet that most of the people waiting in line value their time at something less than $5.00 an hour if they’re willing to wait that long for a “free” cone. Also, if you really want ice cream, and are pressed for time, there’s no way that you’re going to jump to the head of the line no matter how much you’d be willing to pay.

Free. It only works because its one day a year.

Substitute “freeway” for “free cone” and you’ve got a pretty good description of how transportation economics works. When it comes to our road system, every rush hour is like free cone day at Ben and Jerry’s.  The customers (drivers) are paying zero for their use of the limited capacity of the road system, and we’re rationing this valuable product based on people’s willingness to tolerate delays (with the result that lot’s of people who don’t attach a particularly high value to their time are slowing down things for everyone).

If Ben and Jerry’s were run by traffic engineers, instead of smart business people (albeit smart business people with a strong social minded streak), they’d look at these long lines and tell Ben & Jerry that they really need to expand their stores.  After all, the long lines of people waiting to get ice cream represent “congestion” and “delay,” that can only be solved by building more and bigger ice cream stores. And thanks to what you might call the “fundamental law of ice cream congestion” building more stores might shorten lines a little, but then it would likely prompt other people to stand in line to get free ice cream, or to go through the line twice. But, of course, with zero revenue Ben & Jerry would find it hard to build more stores.

No doubt Ben and Jerry generate enough good will, and probably attract a few new customers with their willingness to give up one day of revenue per year. And they’ll make more than enough money on the other 364 days of the year to cover their losses. But what works for ice cream one day a year is an epic failure when it comes to roads. As long as the price is zero, there will be more demand than you can handle, and you’ll be struggling to pay for the capacity that (you think) is needed.


Carmaggedon stalks Atlanta

Why predicted gridlock almost never happens and what this teaches us about travel demand

It had all the trappings of a great disaster film:  A spectacular blaze last week destroyed a  several hundred foot-long section of Interstate 85 in Atlanta. In a city that consistently has some of the worst traffic congestion in the country, losing a key link its freeway system could only mean one thing: Carmageddon.  Governor Nathan Deal has declared a state of emergency. The bridge collapse effectively “puts a cork in the bottle,” said Georgia State Patrol Commissioner Mark McDonough. This particular segment of freeway carries nearly a quarter million cars per day. So as the Daily Mail shouted, chaos is coming:


The prospect of gridlock makes for great headlines and local TV news stories, but as it turns out, predictions of terrible traffic in the wake of even major disruptions to the road system are almost never realized.

One of the most famous instances of this phenomena was in Los Angeles.  In 2011 and 2012, the state highway department closed a 10 mile stretch of Interstate 405 on several weekends to rebuild overpasses. The media was awash in predictions of Carmaggedon. But surprisingly, nothing of the kind happened.  As Brian Taylor and Martin Wachs explain in an article in Access, people mostly avoided taking trips in the area, or chose alternate routes, with the effect that traffic was actually much lighter than normal. They report that “Rather than creating chaos, the first closure greatly reduced traffic congestion.” Taylor and Wachs explain that “crying wolf” about likely gridlock depressed trip-taking in the affected area, but that effect faded as travelers realized things were nowhere as bad as predicted.

You might think that the kind of behavioral effects that keep Carmaggedon at bay only work when its a short closure of a few hours. But even the year-long closure of I-35W in Minneapolis, following the collapse of a highway bridge over the Mississippi in 2007 produced similar results. Travelers quickly changed their routes and travel times, and many people simply stopped taking trips that crossed the river. David Levinson reports that there were about 46,000 fewer trips per day across the river after the bridge collapsed.

You’ll forgive our excessively clinical attitude about this damage–and its going to cost tens of millions to fix–but what we have here is a classic “natural experiment” of the kind economists and students of public policy relish. So what happens when we take a major urban freeway out of service for a couple of months?  Are Atlanta commuters in for hours of gridlock every day and grisly commutes? Will the region’s economy grind to a halt as a result? We’ll be watching over the next several months to see.

So far, the results are consistent with what we’ve seen in Los Angeles and Minneapolis.  Monday morning came, and something funny happened: traffic wasn’t so bad.  The Atlanta Journal Constitution reports

And Google Maps showed that late in the morning, traffic looked pretty normal:

So what’s going on here? Arguably, our mental model of traffic is just wrong. We tend to think of traffic volumes, and trip-making generally as inexorable forces of nature.  The diurnal flow of 250,000 vehicles a day on an urban freeway like I-85 is just as regular and predictable as the tides.What this misses is that there’s a deep behavioral basis to travel. Human beings will shift their behavior in response to changing circumstances. If road capacity is impaired, many people can decide not to travel, change when they travel, change where they travel, or even change their mode of travel. The fact that Carmageddon almost never comes is powerful evidence of induced demand: people travel on roadways because the capacity is available for their trips, when when the capacity goes away, so does much of the trip making.

If Atlanta can survive for a month or two without a major chunk of its freeway, that’s a powerful indication that more modest steps to alter road capacity don’t really mean the end of the world. If we recognize that traffic will tend to adjust to available capacity, we then end up taking a different view of how to balance transportation against other objectives. For example, this ought to be a signal that road diets, which have been shown to greatly improve safety and encourage walking and cycling, don’t have anything approaching the kinds of adverse effects on travel that highway engineers usually predict. So in the next few weeks, keep an eye on Atlanta: If the one of the nation’s most sprawling and traffic ridden cities can survive the loss of a freeway segment that carries a quarter million vehicles a day, its a strong sign that more modest changes to road systems really don’t have much impact on metropolitan prosperity.


The Week Observed, April 7, 2017

What City Observatory did this week

1. Carmaggedon stalks Atlanta. Following an arson-caused blaze, a key section on Interstate 85 in Atlanta collapsed, and is likely to be out of service for at least a couple of months. Since the roadway carried about a quarter million cars every day, the media were quick to predict that Atlanta was in for a hellish dose of carmaggedon. But the lesson from other freeway closures in Los Angeles and Minneapolis is that travel demand actually adjusts pretty quickly to the reduced capacity. The regularity with which this occurs is a reminder that car travel is not an ineluctable force of nature, but a product of the incentives and investments that we make, and that we can change it without the world coming to an end.

2. Ben & Jerry’s crash course in transportation economics. April 4 was the annual “free cone day” at Ben & Jerry’s ice cream parlors across the country. The company dished up more than a million free scoops of ice cream. But the low price had a downside: long lines of people waiting to get Chunky Monkey and Cherry Garcia. Whats going on here is the perfect metaphor for how our road system operates every day. The price is set to zero, so demand overwhelms supply and we have long lines at rush hour. The lesson: if we priced the road system–like Ben & Jerry’s price ice cream 364 other days a year–we could eliminate the lines and be sure our transportation finance system was solvent.

3. Migration is making counties more diverse. A new study of county level migration trends since 1990 shows that the net effect of migration, especially by white young adults has been to make American counties more racially and ethnically diverse. Young whites are disproportionately moving from whiter suburban counties to less white urban ones, and the net effect of their migration is to increase diversity in both places. In contrast, the numerically much smaller migration of older Americans tends to reinforce existing racial and ethnic patterns. But on balance, the much larger migration of young adults is increasing racial and ethnic diversity at the county level.

4. New York City isn’t shrinking, it’s growing. Some commentators, focusing on data showing net domestic out-migration from some cities, like New York, are calling the end of the back to the city movement. But especially in the case of New York, this view ignores the critical roles of foreign immigration and natural population increase. Not only is New York still an immigrant gateway to America, its population structure is now younger than the rest of the US, and as a result, the city has many more births than deaths. Every borough of New York has recorded a population increase since 2010. As a result of the demand for urban living, New York, like many cities, is bumping up against the limits of its housing supply. Out-migration says more about our failure to increase that supply than it does about any growing disenchantment with cities.

Must read

1. No more roads. With a Republican health care plan in limbo, it looks like the next major legislative priority of the Trump Administration may be infrastructure.  Writing at Slate Henry Grabar says the last thing that America needs is more roads and bridges. Looking back over the past couple of decades, Grabar reports that in urban areas, we’ve been building roads faster than we’ve been growing population, with the net effect that the maintenance burden is increasing. Urban road mileage has grown at exactly twice the rate of population. Today, there’s a mile of urban road for every 215 residents, in 1980, it was one mile per 273 residents. Highway advocates routinely play bait-and-switch with the maintenance backlog–decrying the cost of growing decay, but then using added funds to further expand the road network.

2. Why car insurance costs more in minority neighborhoods. In an in-depth piece of statistical investigative journalism, Pro Publica drills into the differences in auto insurance rates in different neighborhoods in California, Texas, Missouri and Illinois. It finds that otherwise identical drivers in predominantly minority neighborhoods pay higher auto liability insurance rates than those in white neighborhoods. The difference in rates isn’t explained by differences in losses: even controlling for claims expense, insurance rates are higher in minority neighborhoods. While Pro Publica highlights the racial dimension of this disparity, there’s a distinct city/suburb split here, as their map of metro Chicago makes clear. Premiums charged relative to claims paid are much higher in the city than in the suburbs (darker colors on this map). This seems to indicate that insurers charge city residents more for car insurance than is warranted by the losses in cities.

New ideas

1. New York Walk up report. Smart Growth America and George Washington University have collaborated on a new report that classifies New York area neighborhoods based on their index of walkability. The report uses four broad categories, from most walkable (Walkable Urban Places, or WalkUps), to car dependent ones. Like earlier reports, this one points out the big value differences between the most walkable neighborhoods and suburban, car dependent ones. “The average square foot of walkable urban real estate is valued at $541, a 150 percent premium, or two and a half times more than region’s drivable suburban real estate.” While its fair to say that some of this is related strictly to “walkability” there are also big differences in transit access, and most importantly centrality, between these property types–the most walkable areas are chiefly in Manhattan, while driveable suburban areas are mostly outside the five boroughs of New York City. Much of what’s being measured here isn’t just walkability, but rather a classic urban rent gradient; people are willing to pay much higher rents to live close to the center than on the periphery.

2. Market-timing & credit availability make housing a bad investment for low income households. As we’ve noted at City Observatory, low and moderate income households tend to suffer from a “buy high/sell low” tendency in the housing market. A new study of credit availability and the timing of home purchases adds some additional evidence to this theory. In a study entitled, “Housing Wealth Reallocation Between Subprime and Prime Borrowers During Recessions,” Ayse Sapci and Nam Vu find that higher income households tend to purchase homes disproportionately in recessions (when prices are lower and credit is less available) and sub-prime borrowers tend to do the reverse (buying housing when prices are high and credit standards have been relaxed. Their key conclusion:

Even after controlling for demographic and financial differences across groups, we find that prime borrowers are more likely to buy investment homes during recessions compared to recoveries, whereas subprimers are more likely to lose their primary homes. These results point to a dramatic difference between subprimers and primers: while subprimers are most harmed by the collapse of the housing market, primers can take advantage of lower house prices.

Given these dynamics, its really hard for owning a home to be a ticket to wealth creation for those of modest means–and in fact, as the collapse of the housing bubble shows, it can be a powerful wealth-destroying strategy.

City Observatory in the news

If Atlanta can weather the loss of a freeway segment that carries a quarter of a million cars a day, maybe that’s a signal that Syracuse could live without an obsolete stretch of Interstate freeway that slices through the center of town, writes Charley Hannegan, a columnist for Syracuse.com.


The Week Observed, April 14, 2017

What City Observatory did this week

1. Too soon to write off city revival? The release of the Census county-level population estimates two weeks ago led to a series of quick-reaction analyses of what the data portend for the “back-to-the-city” movement that’s been seen in the past several years. Unfortunately, county level data is a poor guide to understanding city population trends. And while it appears that city growth has moderated compared to the past year or two, cities are growing more rapidly than a decade ago, while suburbs are growing more slowly. In addition, we are likely reaching a point where city growth is constrained not by a diminished preference for urban living, but by the failure of supply to keep up with the growing demand for cities.

2. Has Portland’s rent fever broken? In early 2016, rents in Portland were growing at double-digit levels, prompting its City Council to enact one of the nation’s most demanding inclusionary zoning requirements. But over the past twelve months, new apartment supply has apparently been catching up with demand. According to data tabulated by ApartmentList.com and Zillow, rents in Portland have been flat over the past year, and the city has recorded some of the lowest levels of rental inflation of any large metro area in the US. Plus, there are thousands of  more units in the construction pipeline, many of them motivated to get building permits before the new inclusionary zoning requirements kick in. More supply is likely to further moderate rents in Portland in the year ahead.

3. Why might Uber and Lyft support road pricing? In the past few months, key executives at the nations’ two largest transportation network companies have editorialized in favor of road pricing. At first glance, this seems odd, inasmuch as both firms would be among the biggest payers of such fees. But looking forward, there are good reasons to think that road pricing would spur further growth of their business models–as well as potentially improving the flow of traffic in cities.


Must read

1. Henry Grabar’s review of The New Urban Crisis. Richard Florida’s latest opus has hit the shelves, and while we’re still reading our copy at City Observatory, Slate’s Henry Grabar offers up his views. If you don’t have the book, there’s an excerpt at CityLab. Grabar’s key point: while Florida presents a good synthesis of the literature and data on growing income inequality and economic segregation within metro areas, his composite “urban crisis index” creates a mish-mash of cities with very different problems and characteristics. That, and November’s Trump victory seem to have quashed Florida’s (and everyone else’s) hope that national policies will take on a seriously city-centered approach to any of the nation’s most pressing problems. There’ll be more to discuss in the weeks ahead, but Grabar offers some useful questions to start the debate.

2. The Economist on Parkaggedon. The venerable London-based global newsmagazine the Economist channels its inner Donald Shoup in a long article and editorial making the case for better pricing parking. While there’s little new here for those who following parking closely, its a prominent and extremely well-argued case for reforming the way we think about parking.  Bottom line: Don’t let people park for free.

3. Alon Levy debunks the vacuum tube. The hyperloop is generating a new round of hype in transportation circles. At Pedestrian Observations, Alon Levy does some basic fact checking on the cost assumptions and physics of building a system of pneumatic tubes to shoot people from city to city. He concludes that hyperloop advocates make some heroic (and unsubstantiated) assumptions about cost, and that a fawning and deferential press gives Elon Musk a pass on outrageous claims because he’s a wealthy techno-celebrity. Levy also points out that the lateral acceleration and g-forces that a hyperloop would create would make a roller-coaster ride tame by comparison.

New ideas

We’re spending less time traveling. While headline grabbing “cost of congestion” reports seem to paint a picture of ever increasing traffic and lengthening commutes, there’s another source of data about our travel habits that show a very different trend. A new paper from George Washington University’s Chao Wei and Chen Song compiles decades of time use data to examine travel behavior relative to other uses of time. The federal government has long surveyed American’s on their use of time, asking respondents to fill out time diaries that record all of their activities on given days. This source of data shows that actually, the amount of time that working Americans spend traveling to and from their jobs has actually decreased over the past couple of decades.  The following chart shows the change in time spend working (the blue line) and the time spent traveling to and from work (the red dotted line) since 1975. While commuting time increased in the 1980s and 1990s, the time diary data suggest that commute times have declined since then, and are now 10 to 20 percent less than they were in 1975.

City Observatory in the news

More than just call centers. The Portland Business Journal looks at the way that software companies increasingly rely on ongoing relationships with their user base to continually refine and improve their products. As Joe Cortright explains, far from simply offering highly scripted hand-holding, the customer support function in many firms is a critical part of the product development and improvement process.


The Week Observed, April 21, 2017

What City Observatory did this week

1. How we measure segregation depends on why we care. Daniel Hertz explores the various ways we measure the geographic separation of different racial and ethnic groups. There’s a widely used dissimilarity index, that looks at differences between two groups, like blacks and whites. There are broader measures that look at population diversity. The different measures tell us about different aspects of segregation, and remind us that segregation is not a simple, one-dimensional problem.

2. The cliff notes version of The New Urban Crisis. Urbanists everywhere are reading and talking about Richard Florida’s latest opus exploring what he calls “The New Urban Crisis.” Has he re-canted the creative class message? What problems are inherent to 21st century urbanism, and which can be solved? And who can solve them? To get you started, we offer a short outline of the book. In the coming weeks, we’ll have more to say about what’s in the book. Be ready for the discussion.

3. Why is affordable housing so unaffordable? Cities and states are struggling to come up with more money to help build additional affordable housing, but they’re finding their money doesn’t go very far. Unit costs of constructing new apartments in San Francisco, for example, are in the $600,000 to $800,000 range, and even more modestly priced metropolitan areas like Portland and Minneapolis are not able to build many units because of high costs. Private builders have come forward in Portland with offers to build more spartan units for as little as $100,000 each, and there are proposals to adopt pre-fab, off-site construction techniques, but until something radical happens, the high cost of construction will be a big barrier to the public sector building enough units to make a serious dent in the housing affordability problem.

4. Happy Earth Day, Oregon! Let’s widen a freeway! Saturday April 22 is the 47th installment of Earth Day, and if the rate of climate change is any indication, not a sign that we’ve made much progress. Some places, like Oregon, have legislated bold goals to reduce greenhouse gas emissions . . . a few decades from now. In the mean time, the highway lobby has its own plans for celebration: a billion dollars worth of freeway-widening projects in the Portland area. Its doubly ironic that a city that made national headlines for tearing out a downtown freeway when environmentalism was new four decades ago, has somehow forgotten that building more freeways just generates more traffic and pollution.

Downtown Portland’s Now Extinct Harbor Drive Freeway ca. 1962 (Not shown: Parks, River, People).

Must read

1. Will Boomers age in place? Day-by-day, the baby boom generation is getting older. While housing market experts have long maintained that boomers will want to “age in place,” declining health, changing preferences and shifting real estate markets are all likely to impact those decisions. As has regularly been the case over the decades, the sheer numbers of boomers simultaneously lurching into and out of markets as changed whole industries. As boomers look to sell their mostly suburban, single family homes, there’s the danger there’ll be a huge glut on the market, just as demand by younger generations has shifted back towards cities. The result, the University of Utah’s Art Nelson suggests, is likely to be the case that many boomers will be “stuck in place” by the low value of their homes.

2. The high cost of negotiated community benefit agreements. Social justice advocates have increasingly turned to negotiating formal “community benefit agreements” (CBAs) to assure that when new developments go forward, that those impacted by growth are change are compensated. In Oakland, California, developers on one apartment complex signed aCBA worth nearly $800,000 on a 400 unit apartment project; another apartment agreed to a $1.8 million CBA. In both cases, the money went to a range of investments in the nearby community and contributions to local non-profits. And these amounts were on top of development impact fees that the City already imposed.  SPUR’s Robert Ogilivie looks at the downside of CBAs:  the delay and uncertainty associated with the negotiation of a community benefit agreement makes it hard for developers (and prospective tenants) to know in advance whether the decision to choose a particular location will be cost-effective, or even possible.

3. Tesla’s parking problem. How’s Elon Musk going to solve urban transportation problems, either with his sleek Tesla vehicles, his swoopy Hyper-Loop or magically inexpensive highway tunnels, if he can’t even figure out how to solve the parking problem at his own offices? That’s the question that’s posed by an article in the Wall Street Journal chronicling the crazy competition for parking spaces at Telsa HQ.  Streetsblog Angie Schmidt has the details, in a post entitled “Tesla’s Parking problem says a lot about Elon Musk’s particular brand of tech saviorism.”  Our advice: have Elon read Don Shoup’s High Cost of Free Parking. He might also pay attention to what his colleagues at Uber and Lyft are saying about the need for road pricing.

New ideas

Peak Voiture? Data from France shows that car travel in its largest metro areas actually peaked about 15 years ago, and has been declining everywhere since then. The following data show car trips as a percentage all trips in the country’s principal urban areas. (Ile de France is the Paris metropolitan area). A tip of the chapeau to Rue 89Lyon which presented these numbers in an excellent story relating how down-grading the autoroute through Lyon to a boulevard will actually facilitate travel and improve urban life.


City Observatory in the news

Joe Cortright is interviewed about Detroit’s rebound, and how to cope with concerns about gentrification in the Center for Michigan’s monthly magazine “Bridge“.

A New York Magazine “Science of Us” feature asks “Is everyone focusing too much on gentrification?” The story quotes City Observatory’s Joe Cortright and our study “Lost in Place” looking at the persistence and growth of high poverty neighborhoods in the nation’s largest metropolitan areas.


The latest from the Louisville traffic experiment

Even with the free alternative closed, traffic is very light on the new I-65 bridges

Time for one of our periodic check-ins on our real world transportation pricing experiment in Louisville, Kentucky.  As you recall, we’ve been watching Louisville closely, because just at the end of last year, the city started what amounts to a laboratory experiment in transportation behavior.  Kentucky and Indiana build a new bridge to double the capacity of the I-65 freeway as it crosses the Ohio River near downtown Louisville. At the same time, it put tolls on the I-65 crossing, but not on the nearby Second Street Bridge, an older, four-lane highway bridge that connects Louisville to the Indiana suburbs north of the River.

As we reported in February, the initial month’s worth of data on bridge traffic shows that adding tolls (which run from $1 to $4 for cars) have caused traffic levels to fall by almost half, from about 122,000 vehicles per day to about 66,000.  We showed photographs from area traffic-cams that show rush hour traffic on the tolled bridges almost empty, while traffic was fairly think on the free Second Street Bridge.

The latest phase of our experiment came this past  this weekend, courtesy of “Thunder Over Louisville” a kind of combined concert, airshow and fireworks display that is held annually. To handle the big crowds the come downtown, and afford great vantage points, the city closes the Second Street Bridge. It did so on Thursday.  So we looked to see how this affected traffic levels.  (The festival itself didn’t start until Friday night, so Thursday was still a reasonably typical business day).

As you can see traffic on the tolled I-65 bridges was still very light.  (This photo was taken about 5 minutes after 5pm on April 20 and comes from the local “TRIMARC” traffic monitoring website.).  The peak direction of traffic is moving away from the camera’s vantage point, on the right hand side of the photo, north-bound, from downtown Louisville.

As noted, the Second Street Bridge was closed, with barricades. This is the bridgehead in downtown Louisville.

What these images suggest is that, even with the nearby free alternative closed, there’s way, way more capacity on I-65 that there is peak hour demand for travel. You can compare these photos to ones we captured two months ago when the Second Street Bridge was open to traffic at rush hour. While ostensibly the crossing was widened from 6 lanes to 12 to eliminate congestion, the real congestion-fighting investment was the decision to ask users to pay just a portion of the cost of widening the road. With tolls in place, drivers have voted with their feet (or perhaps, wheels) that they didn’t really need additional capacity.

There’s another point as well. It isn’t just that traffic has shifted to the “free” alternative. Its that with tolling in place, apparently many other trips just simply evaporated. That tendency of traffic to disappear when there’s a toll is an indication that people have much more flexibility about when, where, and how much they travel than is usually contemplated in policy discussions or travel demand models. The mental model that says traffic levels are some inexorable natural force like the tides, which must be accommodated or else, is just wrong.

Of course, photos of one moment in time (even at the height of what should be rush hour) are hardly the best evidence of how well a bridge is being used.  For that, we need actual traffic counts–the kind of data that would be generated, for example, if you had cameras, and license plate readers and transponder readers on a bridge, which is exactly what we have on I-65. But while Riverlink, the toll-bridge operator quickly posted January’s weekly traffic counts on February 1, its website has no new traffic data for the intervening two-and-a-half months. In fact, the Riverlink website which featured more or less weekly press releases since November, contains no new press releases since that February 1, traffic data.

There are many reasons why they might not yet have pulled together the data, and we’ll be watching eagerly to see when it becomes available.  But we couldn’t help but notice a story that appeared in local press just last week. It turns out that the Kentucky Transportation Cabinet has just signed a $300,000 contract with a Florida consulting firm to help it “determine whether the toll revenue generated by the RiverLink bridges is enough to make debt payments on the project’s bonds.” The financing of the widened I-65 crossing (and another beltway freeway crossing several miles to the East) hinges on tolls generating enough revenue to repay the bonds that Kentucky issued to pay for the project. If toll revenues don’t grow fast enough in the years ahead, the state will have to find some other source of funds to make these payments, which could make this particular experiment in transportation behavior a particularly expensive one. Stay tuned!





The Week Observed, April 28, 2017

What City Observatory did this week

1. The latest from the Louisville travel behavior experiment. Just before the New Year, Louisville started charging tolls to cross its newly-widened I-65 bridge. When it did, traffic across the bridge fell by almost half. Part of the reason was that motorists could take a very short detour and cross the Ohio River on an un-tolled Second Street Bridge. But that bridge was recently closed temporarily as part of the city’s annual Thunder over Louisville celebration. So, did the absence of a free crossing boost traffic on the tolled bridge? Traffic cam photos suggest that the toll bridge is still lightly used at peak hours. But photos are far from the best evidence, which would be actual traffic data. Unfortunately, Riverlink, the I-65 toll collectors, haven’t released any traffic data since the first month of tolling, so we don’t know how things are going. In related news, however, Kentucky did announce that it had signed a $300,000 contract for a consultant to determine whether toll revenues would be sufficient to repay the bonds issued to finance bridge construction, which may be a sign that that there’s some trouble in this river city.

Rush hour on Louisville’s I-65 bridges (April 20, 2017)

2. The 0.1 Percent Solution: Inclusionary Zoning’s fatal scale problem. A new study from noted urban scholars Lance Freeman and Jenny Shuetz looks at the effectiveness of local policies to promote housing affordability. They take a close look at more than 50 inclusionary zoning programs in five different states and conclude that they’ve had an miniscule effect on housing supply, contributing less than 0.1 percent to the building stock, with an average of fewer than ten affordable units per year. Freeman and Schuetz argue that to address affordability local governments need to upzone widely to allow greater density and cut-back on regulations to lower development costs and encourage more supply.

3. Word of the day: Hagiometry. You know doubt already know about “hagiography”–works of art or literature that glorify a particular person (usually the person who commissioned the work). While old-school hagiography may no longer be in fashion, in our data-driven world, a new form of fawning portraiture has emerged, with all the flourishes and exaggerations that have been traditional in the genre. The key difference is that its flattery with numbers, rather than paint or words. We take a close look at some of the common flaws that underlie the economic impact studies that gin up impressive sounding numbers to help sell everything from ballparks to big box retail stores.

4. What does it mean to be a Smart City? The term “smart city” is all the rage, and in generally focuses heavily on technology, and how we might better exert control over systems from streetlights to water systems to traffic by instrumenting everything in sight. But in our view this highly centralized, engineering view of cities smacks of the kind of heavy-handed approach to cities exemplified by the master builder Robert Moses. In contrast, the real smarts, or intelligence of cities stems from their ability to bring people together, in a fashion better described by the work of Jane Jacobs. We shouldn’t be so enamored of technology that we forget that cities succeed because largely because they enable their residents to easily connect to one another in the urban environment.

Must read

1. How affordable housing lotteries work in practice. Inclusionary zoning programs require developers of new apartment buildings to rent out a portion of their units at below market rates. To qualify households have to have income that is in some target range (generally less than 80 percent or less than 60 percent of area median income) with rents pegged to their income level. Because rents are much cheaper than market, there are many more applicants for such housing than available units, so city’s conduct lotteries to allocate the units. City Living, describes how the process works in practice. They emphasize that there’s much more demand among the lowest income groups than moderate income groups (there are more than 1,000 applicants for each unit in two of the three lowest income categories, and as few as 15 applicants for each unit in the “highest” but still moderate income category. That’s hardly surprising: the higher your income the relatively less attractive the affordable unit is compared to market prices.

2. The high cost of starchitecture-London’s Garden Bridge edition.  For the past several years, a new signature bridge has been in the offing for central London. Called the Garden Bridge, this pedestrian only structure would provide a landscaped path over the Thames. The design looks a bit like a freeway overpass with an overgrown hedge. The Happy Pontist, a bridge aficionado and critic writing in the UK chronicles the megaproject bloat that has engulfed the project. Originally proposed at a cost of about 60 million pounds in 2013, the project’s pricetag is now likely to exceed 2o0 million pounds–if the project goes forward. One of its leading proponents, former London Mayor Boris Johnson is out of office, and his successor is likely to be willing to write off sunk costs of 46 million pounds. And as the Happy Pontist notes, the problem is that the so-called “professionals” in architecture, transport and engineering who might have warned about the likely results of this folly did almost nothing to warn their clients or the public of the risks involved.

3. Why its important to tell the truth about economic change. Writing at Vox, Matt Yglesias challenges the notion that public discussions ought not to challenge the economic worldview of Trump voters. Denying the reality of fundamental economic change and offering up nostalgia as an economic strategy isn’t going to help us move forward. Neither the Appalachian coal industry, nor shuttered manufacturing plants like Lewiston Maine’s paper mill, will be revived. Economies don’t stand still, and they don’t go backwards. Ironically, the historical process of economic development in the US has always been about our willingness to embrace and thrive on change, building new industries, making large scale investments, migrating to opportunity, creating new homes and communities. Nostalgia isn’t an economic strategy, and indulging it is an obstacle to actually solving our economic problems.

New ideas

The economic disadvantages of being a suburban state. A new study published by the Philadelphia branch of the Federal Reserve Bank offers up an in-depth analysis of employment change in New Jersey over the past decade. By many traditional measures, including its high level of educational attainment, the Garden State should be well-positioned to compete in a knowledge-driven economy. But for the past 15 years, its economic performance has trailed that of the nation. The Fed study “Is Urban Cool Cooling New Jersey’s economy,” notes that New Jersey’s economy (which still has employment 2.2 percent below its pre-recession peak) has dramatically underperformed the urban centers of Philadelphia and New York. Essentially all of New Jersey is a suburb of one or the other of these two metropolitan areas, so the culprit seems to be the relative decline in the attractiveness of suburban locations. The Fed study includes a detailed shift share analysis which shows that New Jersey recorded much less job growth in urban-centered industries like finance and professional services, that drove national growth in the latest recovery.  This is more evidence that national job growth is shifting away from suburbs and toward cities.



The high, high price of affordable housing

Why is affordable housing so expensive?

In many cities, affordable housing has a problem:  it’s not affordable. California Governor Jerry Brown made that point again, emphatically, with his new state budget. He’s said that he’s not putting any new state resources into subsidizing affordable housing until state and local governments figure out ways to bring the costs down. Last year, opposition from labor and environmental groups blocked the governors proposal to exempt affordable housing from some key regulatory requirements.  Brown had offered $400 million in additional state funds for affordable housing if that proposal was adopted. Now that money is off the table.

“We’ve got to bring down the cost structure of housing and not just find ways to subsidize it,” Brown said in is budget speech.

And the costs are substantial. In San Francisco, one of the largest all-affordable housing projects, 1950 Mission Street, clocks in at more than $600,000 per unit.  That number isn’t getting any lower: new units in that city’s Candlestick Point development will cost nearly $825,000 each, according to recent press reports. Brown’s point is that at that cost per unit, its simply beyond the fiscal reach of California or any state to be able to afford to build housing for all of the rent-burdened households.

San Francisco’s 1950 Mission Affordable Housing (Bridge Housing)

And while the problem is extreme in San Francisco, it crops up elsewhere.  In St. Paul, affordable housing–mostly one bedroom units– in a renovated downtown building cost $665,000 per unit.

In Portland, newly elected Mayor Ted Wheeler has temporarily embargoed any further spending of the city’s recently improved $258 million affordable housing bond issue. Shortly before he took office, the Portland Housing Bureau committed to spending nearly 15 percent of the levy’s proceeds to acquire an existing 263 unit housing complex. The city will pay $51 million in total, about $193,000 per unit for the building. The cost of new construction tends to be even higher. Public projects often involve more elaborate design, LEED certification, additional public spaces and higher overhead costs.

More broadly, the case has been made that much publicly subsidized  affordable housing costs much more to build that market rate housing.  Private developers are able to build new multi-family housing at far lower cost. One local builder has constructed new one-bedroom apartments in Portland at cost of less than $100,000 a unit, albeit with fewer amenities and in less central locations that most publicly supported projects. In Portland, local private developer Rob Justus has proposed to build 300 apartments and sell them to the city for $100,000 each on a turn-key basis to be operated as affordable housing. Another possible cost savings measure: off-site construction. The University of California, Berkeley’s Terner Center has a new report that explores the possibility for pre-fabricated, off-site construction to reduce construction costs.

Portland Mayor Wheeler voices the same concerns as California Governor Brown:

“We’ve added a lot of programs to affordable housing that may be socially desirable. But when the goal is to create the maximum number of new doors, we have to reduce costs and get more supply on the market as quickly as possible.”

In the Twin Cities, Myron Orfield has pointed out that the allocation of tax credits and the concentration of community development corporations in urban neighborhoods has tended to produce more housing in costly urban locations. Orfield also blames the high overhead costs of CDCs.

. . . central city development programs are inefficient, spending much more per unit of new affordable housing in the central cities than comparable housing costs in more affluent, opportunity-rich suburbs. Many of the leading developers working in the poorest parts of the region also pay their managers very high salaries. As a result, the funding system incentivizes higher cost projects in segregated neighborhoods over lower cost projects in integrated neighborhoods.

Perhaps the central problem of housing affordability is one of scale: the number of units that we’re able to provide is too small.  That’s true whether we’re talking about through Section 8 vouchers (that go to only about 1 in 5 eligible households), or through inclusionary zoning requirements (which provide only handfuls of units in most cities). The very high per unit construction costs of affordable housing only make the problem more vexing: the pressure to make any project that gets constructed as distinctive, amenity-rich and environmentally friendly as possible, means that the limited number of public dollars end up building fewer units. And too few units–scale–is the real problem here.

The combination of very limited public funds for affordable housing, even in the most prosperous and liberal cities, and the tendency for publicly subsidized housing to be nearly as costly as new, market rate housing, is a recipe for failure.





How we measure segregation depends on why we care

Segregation is complicated and multi-dimensional, and measuring it isn’t easy

In 2014, NYU’s Furman Center hosted a roundtable of essays on “The Problem of Integration.” Northwestern sociologist Mary Pattillo kicked it off:

I must begin by stating that I am by no means against integration…. My comments are not to promote racial separatism, nor to argue that people of the same “race”–-and we must always signal just how time- and place-specific “race” is–“naturally” want to be around each other….

Instead, my point is simply to identify the following conundrum of integration politics: Promoting integration as the means to improve the lives of Blacks stigmatizes Black people and Black spaces and valorizes Whiteness as both the symbol of opportunity and the measuring stick for equality.  In turn, such stigmatization of Blacks and Black spaces is precisely what foils efforts toward integration. After all, why would anyone else want to live around or interact with a group that is discouraged from being around itself?

I thought of this problem, and this roundtable, while reading about FiveThirtyEight’s fascinating metric for residential racial segregation in American cities. By creating “diversity indices” at both the metro area level and neighborhood level, Nate Silver was able to distinguish between two relevant kinds of racial makeup, and – by subtracting one from the other – create a segregation statistic that takes into account the fact that Salt Lake City’s overall population does not look like Atlanta’s. In doing so, Silver came to the (perhaps not so surprising) conclusion that more diverse cities also tend to be more segregated.

Screen Shot 2015-05-04 at 10.38.35 AM

But another number jumped out at me from this analysis. Or rather, the lack of one: New York City did not appear on the “most segregated” list. Why was this? After all, on what is probably the most-cited measure of segregation, the dissimilarity index, metropolitan New York City ranks as the third-worst city in the country for black-white segregation (behind only Detroit and Milwaukee), and second-worst for Hispanic-white segregation (behind only Los Angeles).

(New Yorkers, of course, are frequently surprised to hear that their city is so divided. Then again, they only recently discovered that Los Angeles has art galleries, so.)

The answer, of course, has to do with the difference between Nate Silver’s segregation index and the dissimilarity index. Silver’s measure looks at whether people of any racial or ethnic group live in neighborhoods where they’re as likely to run into people of other groups as they would be in their metropolitan area as a whole. That is, you get a really bad score for having neighborhoods that are made up overwhelmingly of a single racial group.

On that measure, New York is clearly less segregated than, say, Chicago, to take the worst city by Silver’s count. Here, for example, are the areas in New York where 90% or more of the residents are black:

And here it is in Chicago:

In New York, this kind of single-race neighborhood is relatively rare, while in Chicago it’s almost the norm on the South and West Sides. Why, then, does the dissimilarity index suggest that New York is so segregated?

It’s because the dissimilarity index asks not just about any racial mixing – it usually asks specifically about whether blacks and whites, or Hispanics and whites, live in the same neighborhoods. And if that’s the question, then New York looks much, much worse. In fact, if you look for places where both blacks and whites make up at least 10% of the population, it turns out only a small minority of New York neighborhoods meet that criteria. (New York City overall is about 35% non-Hispanic white and 25% black.*)


So which measure is “right”? Both of them, of course – they just answer different questions.

But to bring us back to the Furman Center’s roundtable, I think at this point it’s useful to ask why we think segregation matters. If the answer is that we think that our lives are enriched by being in proximity to – and, hopefully, forming meaningful friendships with – people of other backgrounds, then Silver’s index makes sense.

But one of Furman’s respondents, the sociologist Patrick Sharkey, suggested another, perhaps weightier reason. Segregation is important not just because it troubles our dreams of a country where people of different backgrounds can all get along, Sharkey wrote; it matters because segregation is how deep racial inequalities get reproduced from generation to generation:

Living in predominantly black neighborhoods affects the life chances of black Americans…because black neighborhoods have been the object of sustained disinvestment and punitive social policy since the emergence of racially segregated urban communities in the early part of the 20th Century. Residential segregation has been used consistently over time as a means of distributing and hoarding resources and opportunities among white Americans and restricting resources and opportunities from black Americans. Racially segregated communities provide one of several mechanisms through which racial inequality is made durable.

That is, it’s easier to send black children to inferior schools if their schools are all on one side of town, and white schools are on the other. It’s easier to target housing and mortgage discrimination against blacks – one of the most important causes of the wealth gap – if all the black-owned houses are in one area. It’s easier to unleash abusive policing and incarceration practices on black communities without disturbing – or even attracting the attention – of whites for decades if whites and blacks don’t live in the same neighborhoods.

The New York Times‘ visualization on how the neighborhood a child grows up in affects their future earnings reinforces this idea. As Yonah Freemark pointed out, a map of counties where social mobility is worst looks pretty similar to a map of counties with large black – or Native American – populations.

And that includes the large black populations in the New York metro area.

If this is why we care about segregation, then Silver’s measure – which doesn’t care which racial groups are mixing, as long as there is some mixing going on – is less useful. What matters then isn’t just integration: what matters is that privileged groups live in the same places as traditionally oppressed groups, so that place-based discrimination is made more difficult. In the United States, that means whites and people of color living in the same neighborhoods. Where that doesn’t happen – even if an area is integrated with, say, blacks and Latinos – then place-based discrimination is still viable, and it will be much easier to reproduce racial inequality.

This is also at least a partial resolution to Mary Pattillo’s concern that wringing our hands about the problem of segregation could, effectively, be implying that black people and their neighborhoods are inferior. Instead, focusing on place-based discrimination underlines that segregated neighborhoods aren’t inferior – they’re just more vulnerable to discrimination from more powerful groups whose members don’t live there. That, of course, is not the end of the story, and there are other tradeoffs involved in integration. But focusing on this rationale provides some clarity both to conversations about, and measures of, what continues to be one of the defining traits of the American city.

* Here, for the sake of convenience, I’ve switched to city, rather than metro-area, numbers, but I promise it looks pretty much the same at the larger scale, too.

What does it mean to be a “Smart City?”

Cities are organisms, not machines; So a smart city has to learn and not be engineered

The growing appreciation of the importance of cities, especially by leaders in business and science, is much appreciated and long overdue.  Many have embraced the Smart City banner.  But it seems each observer defines “city” in the image of their own profession.  CEOs of IT firms say that cities are “a system of systems” and visualize the city as an increasing and dense flow of information to be optimized.  Physicists have modeled cities and observed relationships between city scale and activity, treating city residents as atoms and describing cities as conforming to “laws.”

In part, these metaphors reflect reality.  In their function, cities have information flows and physical systems.  However, it is something more than its information flows and physical systems, and its citizens need to be viewed as something other than mindless atoms.

The prescriptions that flow from partial and incomplete metaphors for understanding cities can lead us in the wrong direction if we are not careful.  The painful lessons of seven decades of highway building in U.S. cities is a case in point.  Epitomized by the master builder, Robert Moses, we took an engineering view of cities, one in which we needed to optimize our cities to facilitate the flow of automobiles.  The massive investments in freeways (and the re-writing of laws and culture on the use of the right of way) in a narrow way made cities safe for much greater and faster travel–but at the same time they produced massive sprawl, decentralization and longer journeys, and eviscerated many previously robust city neighborhoods.

If we’re really to understand and appreciate cities, especially smart cities, our focus has to be elsewhere:  it has to be on people. We take the Jane Jacobs view: Cities are about people, and particularly about the way they bring people together.  We are a social species, and cities serve to create the physical venues for interaction that generate innovation, art, culture, and economic activity.

What does it mean for a city to be smart?

The most fundamental way a city can be smart is to have highly skilled, well-educated residents.  We know that this matters decisively for city success.  We can explain fully 60% of the variation of economic performance across large U.S. metropolitan areas by knowing what fraction of the adult population has attained a four-year college degree.  There’s strong evidence that the positive effects of greater education are  social–it spills over to all residents, regardless of their individual education.

Educational attainment is a powerful proxy measure of city economic success because having a smart population and workforce is essential to generating the new ideas that cause people and businesses to prosper.

So building a smart city isn’t really about using technology to optimize the efficiency of the city’s physical sub-systems.  There’s no evidence that the relative efficiency of water delivery, power supply, or transportation across cities has anywhere near as strong an effect on their success over time as does education.

It is in this process of creating new ideas that cities excel.  They are R&D facilities and incubators, and not just of new businesses, but of art, music, culture, fashion trends, and all manner of social activity.  In the process Jane Jacobs so compelling described, by juxtaposing diverse people in close proximity, cities produce the serendipitous interactions that generate what she called new work.

We don’t have an exacting recipe for how this happens.  But we do know some of the elements that are essential.  They include density, diversity, design, discovery and democracy.

Density. The concentration of people in a particular place.  Cities, as Ed Glaeser puts it, are the absence of space between people.  The less space, the more people, and the greater the opportunities for interaction.  Cities are not formless blobs; what happens in the center–the nucleus–matters, because it is the place that provides key elements of identity and structure and connection for the remainder of the metropolitan area it anchors.

Diversity. The range of different types of people in a place.  We have abundant evidence that the diversity of the population– by age, race, national origin, political outlook,and other qualities– helps provide a fertile ground for combining and recombining ideas in novel ways.

Design.  We are becoming increasingly aware that how we populate and arrange the physical character of cities matters greatly.  The arrangement and aesthetic of buildings, public spaces, streetscapes and neighborhoods matters profoundly for whether people embrace cities or abandon them.  We have a growing appreciation for urban spaces that provide interesting variety and are oriented to walking and “hanging out.”

Discovery.  Cities are not machines; citizens are not atoms.  The city is an evolving organism, that is at once host to, and is constantly being reinvented by, its citizen inhabitants.  A part of the attraction of cities is their ability to inspire, incubate, and adapt to change.  Cities that work well stimulate the creativity of their inhabitants, and also present them all with new opportunities to learn, discover, and improve.

Democracy.  The “mayor as CEO” is a tantalizing analogy for both mayors and CEOs; CEOs are used to wielding unitary, executive authority over their organizations; many mayors wish they could do the same.  But cities are ultimately very decentralized, small “d” democratic entities.  Decision-making is highly devolved, and the opportunities for top-down implementation are typically limited.  Citizens have voice (through voting) and the opportunity to “exit” by moving, appropriately limiting unilateral edicts.  Cities also give rise to new ideas, and when they work well, city political systems are permeable to the changing needs and values of their citizens– this is when many important changes bubble up.

All of these attributes of cities are susceptible, at least in part to analysis or description using the constructs of “information flows” or “systems of systems.”  They may be augmented and improved by better or more widespread information technology. But it would be a mistake to assume that any of them are capable of being fully captured in these terms, no matter how tempting or familiar the analogy.

Ultimately, when we talk about smart cities, we should keep firmly in mind that they are fundamentally about people; they are about smart people, and creating the opportunity for people to interact.  If we continuously validate our plans against this key observation, we can do much to make cities smarter, and help them address important national and global challenges.