The “commonly accepted” 30 percent standard for judging housing affordability leaves out transportation and location

At City Observatory, we’ve long been dissatisfied with commonly used measures of describing housing affordability. There are lots of reasons to believe that a single, fixed percentage of income standard does a poor job of reflecting whether housing is priced appropriately, and whether households are being asked to spend too much. We’ve explored some of these issues before, but today we want to focus on one key issue–the tradeoff between cheap rents and costly transportation.

In virtually every major urban real estate market, a major determinant of rent and housing prices is accessibility.  If you live in a dense, walkable urban neighborhood, you might manage to live quite comfortably not owning a car, or having just one car for a two-worker family.  If you live on the exurban edge, in a low density subdivision, you might need to own multiple cars just to manage the daily chores of school, shopping and play, as well as commuting to work. It turns out that the value of accessibility gets priced in to the walkable, well-located housing; and conversely, rental and for sale housing that’s located at a distance from everything is priced at a discount to the market.

What this means as a practical matter that you can’t judge whether an individual household’s living situation is affordable just by looking at whether they spend less than 30 percent of their income directly on housing. Consider this example: two otherwise identical households.  One lives in a suburb, owns two cars, and drives most places. They spend 30 percent of their income on housing and 20 percent of their income on transportation.  The second household lives in a city and owns one car.  Their house is more expensive than the suburban one, so they spend 40 percent of their income on housing, and just 10 percent on transportation. Is it really accurate to describe the second (city) household as any more “cost-burdened” than its suburban peer?

This is the essential insight behind the Center for Neighborhood Technology’s “H+T” Housing and Transportation Index, which quantifies the approximate costs associated with housing and transportation in different neighborhoods. They’ve used census data on income and housing costs, and estimates of commuting patterns, transit available and car ownership to estimate what fraction of a household’s income gets spent on housing and transportation in different locations. They show that some neighborhoods with high housing costs are actually more affordable than lower rent areas, once you add in the savings in transportation costs.

This year’s report The State of the Nation’s Housing from the Joint Center on Housing Studies at Harvard shines a slightly different light on this question, by revealing differences in spending patterns among households. This report examines data from the Bureau of Labor Statistics Consumer Expenditure Survey, which is constructed from spending diaries completed by a random sample of American households. We’ve taken their analysis from Table W-6, and reformatted it slightly, computing the share of total spending on housing and transportation for each income group.  We’ve also truncated the table to exclude a detailed breakout of other types of spending (food, apparel, etc).

The Consumer Expenditure Survey divides households into four quartiles according to household spending.  The lowest quartile spends the least (about $1,370 per month); the highest quartile spends about $9,300.  Within each quartile, the report divides households into three groups based on how much they spend on housing. Less than 30 percent is the group that is considered not-cost burdened by housing, 30 to 50 percent is cost-burdened by housing, and households spending more than 50 percent are severely cost burdened, according to this rubric.

What’s interesting to note here, is how, within each quartile, households that spend less on housing end up spending a great deal larger share of their income on transportation.  Conversely, households that spend a larger fraction of their income on housing spend, on average much less on transportation. For example, households in the second quartile who spend less than 30 percent of their income on housing spend 12.6 percent of their income on transportation. That falls to less than 10 percent for those who are somewhat cost burdened, and less than 5 percent for those who are severely cost burdened. This pattern across income groups is consistent with the idea of a tradeoff between cheaper rents and higher transportation costs.

Its especially instructive to look at households in the highest spending quartile.  These are the 25 percent or so of most affluent households (as judged by their spending patterns), with monthly spending of about $9,300.  Households that spend less than 30 percent of their income on housing in this group spend $2,300 per month on transportation. Meanwhile, their peers with higher housing costs spend dramatically less on transportation ($400 to $600 per month).

To be sure, there are important limitations to the Consumer Expenditure Survey data presented here. They aren’t adjusted for household size (small households tend to spend a larger fraction of their income on rent than larger ones), nor do they adjust for age, or exclude households who have paid of their mortgages (which also tends to dramatically affect reported household spending patterns). Nonetheless, the consumer spending data confirm that there’s a connection between lower rents and higher transportation costs.

The practical implication is that we shouldn’t be talking about housing affordability in isolation. We should really be talking about “affordable living” rather than “affordable housing.” If your rent is low, but you have to spend a disproportionately large share of your income on transportation, then your living situation isn’t affordable.

Over the past year, rent inflation has declined in 48 of the top 50 markets

For the past several years, rising rents have been at the center of the nation’s housing affordability debate. A combination of former homeowners dispossessed by the collapse of the housing bubble, weak incomes and job prospects for younger workers and a growing demand for urban living have increased the demand for rental housing in the face of a relatively slowly changing supply of apartments and rental houses. Particularly in hot coastal markets, like San Francisco, Seattle, New York and Washington, rents have been rising much faster than inflation.

Spiking rents have produced a predictable demand for policy solutions, ranging from inclusionary housing mandates to rent control. Economists–ourselves included–have long counseled that the most important ingredient to achieving a reduction in rental inflation was an increase in housing supply. A critical challenge is the temporal mismatch between supply and demand. The demand for housing can change relatively rapidly, with changes in employment, migration and tastes. Building new housing takes time: prospective developers have to recognize a need, arrange financing, secure planning permission, and then actually construct new units. Its common for demand to outstrip supply in the short term.

Not surprisingly, those confronted with the burden of paying ever higher rents have little comforted by economists lecturing them about the long run benefits of increased supply. And some have even counseled economists to keep their mouth’s shut and not talk about housing markets in terms of supply and demand. At City Observatory, we’ve been looking for teachable moments to make the case for basic economic principles. In the past few months, we’ve pointed out some examples of markets where rental rates have been moderating. But its worth taking a look across the nation to judge the trends.

Today there’s growing evidence that in rental markets across the nation that supply is catching up with demand, and that rent hikes are moderating everywhere. Rents are actually falling in some cities.  The latest data from Zillow tracks changes an multifamily rents on a monthly basis for the nation’s metropolitan areas. We look at the 12 month change in prices between April 2016 and April 2017 (the last twelve-0month period for which data are available) and compare it to the change in rents in the preceding 12 months (April 2015 to April 2016).  In the following chart, blue dots indicate the rate of rental inflation in the past 12 months (April 2016- April 2017), and red dots indicate the rental inflation in the preceding 12 months (April 2015-April 2016).  Metro areas are ranked in order of their rate of rental inflation in the earlier time period.

First, the most striking finding:  Rental inflation was lower in the past 12 months in 48 of the 50 largest metro markets.  Only in Hartford and Cincinnati did rents increase more in the past 12 months than in the period between April 2015 and April 2016.  The deceleration was particularly sharp in most of the markets with the highest rates of rental inflation in 2015.  San Francisco’s rent inflation dropped from 12 percent to -0.7 percent.  Portland’s dropped from 11 percent to 0.5 percent.

Second, in 20 of the top 50 markets, rents actually declined in the past 12 months. Year-over-year, rents dropped in San Francisco, New York, Austin and Miami. There’s a certain asymmetry to reporting on rent data:  Rent increases merit headlines; rent decreases generally don’t.

Third, looking forward, its possible, if not actually likely that rental inflation could soften further. Even more housing units are coming on line in the next year or two.

The combination of more supply and continuing (if slow) improvements in income are likely to lessen the nation’s housing affordability problems. Already, according to the Joint Center for Housing Studies, the share of rental households who were cost-burdened (i.e. spent more than 30 percent of their income on housing) declined from 49 percent in 2014 to 48 percent in 2015.

We’ll keep following the data on rental price trends in the months ahead. The good news for the moment is that the economist’s prediction appears to be right:  As more supply comes on the market, we should expect rental inflation to subside. Stay tuned.

 

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This post has been revised to correct an earlier mistaken reference to the colors of the dots identifying the two time periods. Thanks to our sharp-eyed readers for pointing out the error.

 

 

 

Since 2000, the number of people living in extremely poor neighborhoods has doubled; neighborhoods of concentrated poverty are still disproportionately in the densest urban places.

Last week, the Joint Center on Housing Studies released its annual “State of the Nation’s Housing” report. While most of the report focuses on new housing construction, and the slow and uneven rebound in home prices in the wake of the collapse of the housing bubble, there’s some alarming data on the growth of concentrated poverty.

Being poor is hardship in itself. But growing up in a neighborhood where a large fraction of your peers are also poor has been shown to have devastating consequences for the lifetime prospects of children living in these neighborhoods. Growing up in concentrated poverty increases your exposure to and risk of becoming involved in crime, worsens your health, lowers your chances of marriage, and reduces your employment prospects and lifetime earnings.

As we’ve emphasized in our report Lost in Place, despite all of the attention that’s given to gentrification, the big story in urban neighborhood change is the steady, and much larger growth of neighborhoods of concentrated poverty. Our work looked at a 40 year period from 1970 to 2010, and noted that nearly all of the neighborhoods that were poor in 1970 were still poor four decades later.

The new JCHS study examines the change in concentrated poverty from 2000 through 2015. Nationally, the poverty rate increased significantly over this time period, a product of sluggish economic growth in most of the first decade of the millennium, growing income inequality and the devastating effects of the Great Recession. So it’s little surprise that the overall number of people in poverty–from 34 million in 2000 to 48 million in 2015–and the number of extremely poor neighborhoods increased over that time period.

The JCHS data show that concentrated poverty increased even faster.  The number of poor people living in neighborhoods of concentrated poverty in metropolitan areas more than doubled between 2000 and 2015, from 2.7 million to more than 5.4 million JCHS uses a 40 percent threshold as their definition of extreme poverty (at least 40 percent of the households living in a census tract have incomes lower than the federal poverty line.  The number of neighborhoods with poverty rates in excess of 40 percent in metro areas also nearly doubled, from about 1,800 to more than 3,500.

Concentrated poverty is disproportionately found in dense city neighobrhoods

The JCHS study provides a useful geographic disaggregation of the location of high poverty neighborhoods.  For each US metropolitan area, they divide the census tracts that compose that metro area into three groups, based on density, and then tabulate the poverty rate for each of these three groups.

The data are shown here.  (We’ve excluded the data for non-metropolitan areas, and presented our own calculations, based on the JCHS data, to show the share of the number of poor persons living in each of the three density categories).

Almost three-fifths of all of the persons living in neighborhoods of concentrated poverty live in the densest one-third of all of the nation’s metropolitan census tracts.  Although the share of the poor living in these dense areas has declined slightly (from about two-thirds to about three-fifths), the densest neighborhoods are still about twice as likely as medium density neighborhoods to have concentrated poverty; and are about five times as likely to have concentrated poverty as the least dense urban neighborhoods.

Its still very much the case that poverty rates are much higher closer to city centers than at the urban periphery. Luke Juday’s summary of the data for the 50 largest US metro areas makes it clear how strong this pattern is, and how little it has changed over the past 25 years. The poverty rate within 5 miles of the center of large metro areas (which are almost always the densest neighborhoods) are more than double, on average, the poverty rates 15 or more miles away from the center. (The orange line is poverty rate in 1990, the purple and blue lines show 2012 and 2015 respectively).

While it is true that poverty is growing faster in suburbs (in the aggregate) than in cities, it is still the case that poverty rates are much higher, and the incidence of concentrated poverty is much more common in cities than in suburbs. In addition, aggregated data about suburban poverty masks the fact that suburban poverty is itself concentrated in older, inner ring suburbs, and not distributed evenly in all suburbs. As we’ve pointed out before, there’s precious little evidence for claims of a Paris-style inversion where the rich live disproportionately in cities while the poor live in suburbs.

The fallacy of composition leads people to get the connection between density and affordability backwards

Our good friend at Strong Towns, Chuck Marohn is utterly right about a great many things. But he’s committed a classic Kotkinesque blunder when it comes to evaluating the connection between density and home prices. His theory is that higher density makes housing more expensive. But he has it exactly backwards: Limiting the number of homes and apartments that can be built in places where there is high demand will inevitably drive up housing costs and make affordability problems worse.

I’m not sure that I agree with you a hundred percent on your policework there, Lou

He observes that in Portland and Austin (as in other cities) land which is zoned for apartments commands much higher prices than land zoned for single family housing.  So much so, that it’s just not economically possible to build less dense structures on land that is zoned for more intense housing.

Its undeniably true that a 10,000 square foot lot on which you can build 100 apartments will command a higher price than that same 10,000 square foot lot on which you can build only a single home. And downzoning that lot from allowing 100 apartments to allowing one house will lower the price of that lot.  But it won’t lower the price of land generally, nor will it lower the price of housing. This is the classic fallacy of composition: what’s true for any one individual lot is not true for an entire marketplace.

At a larger scale the effect is reversed. The practical effect of down zoning would be to further drive up the price of the remaining land which upon which apartments could be built. The price of land is a product of the supply of sites on which apartments can legally be built and the demand for living in a neighborhood and metropolitan area. Down-zoning a particular site reduces the supply, but doesn’t diminish the demand, with the result that buyers bid up the prices of the remaining parcels. That, then gets reflected in the price of housing.  Vicki Been demolished the New York City version of this argument:

If the supply of housing is not increased, to accomodate growth, rents will go up. There are no other plausible outcomes . . . Unless we build new housing, people who can afford higher rents will outbid poorer current residents for existing housing.”

Let’s take Chuck’s argument to its logical conclusion:  If you prohibit development altogether on a piece of property, you can drive its market price almost to zero. But then you also don’t get any housing built on that property, and the demand for housing that could otherwise be filled by that site is displaced to all other properties, driving up the overall level of prices. Alternatively, consider Noah Smith’s thought experiment:  If we believe lots of high priced housing is the problem, what would be the effect of demolishing a lot of high priced homes? As Smith points out, the occupants of those homes would bid up the price of the remaining housing stock.

For powerful evidence of how allowing more density actually facilitates lower housing prices, you need look no further than this Strong Town Post from last fall: “The $50,000 San Francisco Home.”  As the article points out in copious detail, its possible to produce small but affordable housing on land of any given price, provided you are allowed to build densely enough.

Downzoning, in essence, is a requirement that any person who wants to build a home has to buy a fixed amount of land to go with that home.  A 5,000 acre minimum lot size says, you can build as many houses as you like, but you must buy 5,000 square feet of land to go along with each home. Anybody who can’t buy that much is automatically priced out of the neighborhood.

And from the standpoint of public finance–where Strong Towns has a sensible perspective–downzoning is a fiscal disaster.  Cities incur substantial expenses to build roads, transit systems and parks to enable development in a neighborhood. Downzoning automatically increases the per capita costs of all of those investments, because each road, park and bus line can serve fewer people. It also pushes additional development to the urban fringe, where some municipality must build entirely new infrastructure at high cost, and where not incidentally individual households will have to drive more, creating more pollution and congestion plus incurring more transportation costs. Ultimately, downzoning is a recipe for more sprawl: if you can’t build as many apartments, you’ve got to build more single family homes, and you’ll end up consuming a lot more land in the process.

If we are concerned that the price of land for apartments is too high, it actually means that we want to increase the number of places where you can build apartments, by upzoning.  The reason people pay high prices for land zoned for multi-family development is because most land is restricted to only single family homes.

The the level and increase in rents in Portland is alarming, especially if you’ve arrived from Brainerd. Some of what’s going on in Portland–and other cities–is what economists call the “temporal imbalance” between supply and demand: demand changes rapidly, but supply takes longer to respond. Thankfully, there’s growing evidence that rent increases are subsiding as new supply comes on line. But the high prices for land in cities–and particularly in desirable urban neighborhoods is a sign that we’re not building enough housing units in those places. And far from making housing cheaper, downzoning land in cities like Portland and Austin will make the housing affordability problem far worse.

 

Portland and other cities are considering future policies for a world of autonomous vehicles:  We have some advice:  Use this opportunity to dynamically price roads.

Like many cities, Portland is considering what policies it should adopt to accomodate autonomous vehicles. Mayor Ted Wheeler has expressed his support for opening the city to self-driving cars and the city is holding hearings on what those policies should entail.  Here’s what City Observatory’s Joe Cortright had to say in his testimony. We think these same issues are likely to apply in other cities as well.

As the city considers a policy for the likely advent of autonomous vehicles, I strongly urge you to use this as an opportunity to fundamentally re-think our policy for pricing and paying for city streets and roadways.

Just as Oregon had to innovate radically when the automobile came on the scene a century ago, we will have to innovate again. It’s important to remember that prior to the automobile, roads were not financed by a tax on the hay consumed by horses, and wagons and buggies and their operators did not have to be licensed. We took the dramatic step of taxing fuel and licensing vehicles and drivers as a means to pay for the much expanded, and more expensive roadway system, and to assure that vehicle owners and operators were accountable for their use of the system.

The same principle applies today. With modern electronics, and especially with autonomous vehicles, position and speed is monitored with great precision. There is no reason why they should not pay for exactly the amount of roadway that they use. And we know that the cost of the city’s roadway varies substantially across space and over time. Use of road capacity in less dense neighborhoods at off-peak hours imposes nominal costs on the city’s road budget. In contrast, peak hour use of city streets and arterials, particularly in and near the city center, imposes huge costs on the city and its residents. Those who use the system at peak hours in congested locations should pay the costs associated with creating, maintaining, and where necessary expanding that infrastructure.

Ride-hailing companies like Lyft and Uber are already applying this principal through surge pricing. This enables them to capture the value (what economists call “economic rents”) associated with the highly valuable roadway capacity they are using. The city should insist that a portion of these rents be shared with the city to cover the costs of the scarce and expensive infrastructure they are using. Representatives of both Uber and Lyft have already expressed support for real-time, dynamic road pricing. The same principle should be applied to fleets of autonomous vehicles, and eventually to all road users.

There is a high likelihood that fleets of autonomous vehicles could dramatically exacerbate urban traffic congestion, especially if roads are not priced appropriately. Studies of ride-hailing services in both New York and San Francisco have shown that these services disproportionately concentrate their vehicles in dense urban settings. Ride-hailed vehicles now account for 25 percent of traffic in downtown San Francisco. The growth of ride-hailed vehicles in New York has caused greater congestion and slower travel speeds. Autonomous vehicles, which would have lower operating costs would be likely to flood high demand locations, and could easily worsen city traffic congestion.

I strongly urge you to make real-time dynamic road-pricing a core component of the city’s strategy for dealing with autonomous vehicles.

This technological transition represents a roughly once-in-a century opportunity to fundamentally change the way we pay for and price roads. Just as we innovated our road finance system to accommodate the automobile 100 years ago, we should innovate our road finance system to incorporate this new technology today.

Is historic preservation just thinly veiled NIMBYism?

There’s a growing recognition that local land use controls that preclude increased density in cities are helping contribute to the shortage of affordable housing. President Obama’s Council of Economic Advisers lent considerable credence to that view, and the YIMBY movement is growing. Unsophisticated and bald-faced efforts to block development are now much more likely to be called out for what they are.

But, increasingly, especially in some of the nation’s wealthiest neighborhoods, historic preservation is being wielded as a tool of NIMBYism.

The nation’s historic preservation movement, which grew out of a well-founded impulse to avoid losing the nation’s architectural patrimony (symbolized notably by the demolition of New York’s Pennsylvania Staton) has grown considerably in the past half century. But there are those who have questioned the wisdom of these building restrictions.

While some, like Alex Tabarrok would do away with historic preservation restrictions altogether–if people want to preserve a historic building, then they ought to buy it–most people recognize the desirability of some form of property restrictions. Even Ed Glaeser, a strong critic of preservation laws writes: “It is wise and good to protect the most cherished parts of a city’s architectural history.”

So when it comes to preservation, the question is not “whether,” but “how much?” Which structures are truly of historic interest and which aren’t? Once a structure is built it automatically becomes a candidate for “historic” designation as it ages. In New York City, landmark preservation laws that were designed to protect the most significant architecture, have increasingly been extended to cover a significant share of the market. By constricting supply in some neighborhoods, it tends to drive up prices, and make the city less affordable.

Almost by definition, the most historic structures tend to be located in the centers of cities, where land is most valuable, and where it makes the most sense to add more density. In contrast, suburban greenfield development is never fettered by the need to protect historic structures. (And neighboring cattle or trees are unlikely to make the case that housing subdivisions are “out of character” with the pre-existing rural landscape.)

In Los Angeles, residents of one high rise building have invoked historic preservation (blocking their view of a clock on an older building) as an argument against allowing the construction of a another high rise building nearby. As Urbanize LA wrote: “How do you fight the project next door while avoiding the dreaded NIMBY label? Just call it Historic Preservation.”

While protecting a few buildings is unlikely to have much effect on a region’s housing supply, the expansion of historic preservation to a wide range of older structures (almost regardless of historic merit), and more recently the application of the historic designation to entire neighborhoods, has significantly raised the stakes.

There’s little question that the addition of historic review is likely to have a major impact on development prospects. Portland’s Irvington neighborhood was designated as part of the National Register of Historic Places in 2010. As a result, redevelopment is subject to stringent review. Very little new housing is being built in this neighborhood, despite the very strong housing demand. Just outside the historic district’s boundaries, a new apartment building has been constructed on the site of a 1920s era gas station. The project was subject to heated protests from neighbors (including those just across the street inside the Irvington historic neighborhood). But because the site was zoned for apartments and was outside the historic district, the development plan wasn’t subject to discretionary approval. Had it been inside the district, the situation would have been very different. Today, there are 68 new apartments where previously there was a decades-vacant gas station.

2015: Derelict gas station	2017: 68 new apartments

Another of Portland’s tonier neighborhoods–Eastmoreland–is in the process of seeking a federal historic neighborhood designation. Doing so will enable it to impose rigid controls over demolitions, remodeling and will dramatically limit additional density and re-deveolpment.  A similar measure is being considered in another pricey Portland neighborhood (Laurelhurst). As we’ve pointed out before, there’s a kind of prisoner’s dilemma that confronts local neighborhoods:  if other neighborhoods in the city are designated as “historic” and yours isn’t, then you’re more likely to bear the brunt of development pressures. What makes sense from the standpoint of an individual neighborhood quickly leads to a situation that’s bad for a city.

The Oregon Legislature is currently considering HB 2007–supported by House Speaker Tina Kotek–which aims to expedite development review processes, especially for affordable housing projects, and also begins to rein in the widespread designation of historic areas. Portland for Everyone’s Michael Andersen describes how the legislation would work. Currently, under Oregon law, the state piggybacks on the federal National Register of Historic Places. A neighborhood can qualify for federal designation with no local government approval, with the result that all demolitions and many other land use actions become subject to a discretionary approval process.  Andersen explains:

The perverse result: Under current law, national historic districts can be initiated by landowners and approved without anyone formally considering the negative consequences. Democratically elected officials have no power to intervene.  Once that historic district is in place, any building that has been marked as “contributing” (a standard that describes most houses in any national historic district) can never be redeveloped without a direct vote of the city council.

Here’s the key thing about historic preservation: It almost invariably adds a layer of discretionary approvals on land use actions. The need to get added permits gives NIMBY opponents a powerful tool to prevent additional development. As UCLA researchers Paavo Monkkonen and Michael Lens have shown, the more local land use processes allow for discretionary review, the higher the level of economic segregation in a community.

Historic preservation is an important objective, but the more we preserve some places, the more pressure to develop others. Unless the scale of historic preservation is restricted to those buildings and areas that are of true significance, the result is likely to be an even more constrained supply of housing, which is likely to worsen affordability problems.

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June 13: This post revised to acknowledge Representative Tina Kotek’s role in supporting HB 2007.

When you build a city that enables people to drive less, they spend less on cars and gas and have more to spend on other things.

Here is my 2007 report, published by CEOs for Cities, which describes Portland’s Green Dividend–the additional income that Portland area residents have to spend because they drive fewer miles than the typical American urban dweller. A decade ago, we estimated that Portlander’s saved a collective $1.1 billion thanks to the fact that they drove about 20 percent less than the average American.

In the wake of Pres. Trump’s withdrawal from the Paris climate accords, many mayors and governors have stepped up their rhetoric on climate change. Will their actions match their words?

On June 1, President Trump announced that he would withdraw the United States from the international climate accords agreed to in Paris in 2015. The move produced denunciations and opposition from around the world. As a symbol of protest, Paris Mayor Anne Hidalgo had the city’s iconic Hotel de Ville illuminated in a stark, green light. Mexico City and Montreal bathed their civic monuments in green as well. Mayors around the US did the same. New York Governor Andrew Cuomo–with no apparent sense of irony–had the Pulaski highway bridge greenlighted as well.

In Oregon, one of the nation’s greenest states, the reaction to the Paris withdrawal was swift and predictable. Oregon’s Governor, Kate Brown tweeted:

Similarly, Portland’s Mayor, Ted Wheeler, tweeted:

Its comforting to many environmentalists to hear that progressive cities and some states will still adhere to the spirit of the Paris accords. But it’s one thing to strike a bold rhetorical position, it’s still another to back it up with policy decisions and spending priorities.

To their credit, Oregon and Portland have both adopted their own greenhouse gas reduction goals. Oregon’s goal (enacted by the Legislature a decade ago) is to reduce the state’s carbon pollution by 10 percent from 1990 levels by 2020, and by 75 percent by 2050.  The City of Portland’s stated climate goal is to reduce 40 percent by 2030.

But goal setting (and tweeting) are easy and policy and implementation are hard. And in Oregon’s case, where the rubber hits the road* is how the state spends its limited resources.  Just the day before Trump announced the pull out from the Paris Climate Accords, the Oregon Legislature released the first public version of legislation spelling out the terms of a new transportation funding package. Key among its provisions: pledging upwards of a billion dollars for three freeway widening projects in the Portland metropolitan area.  The bill would also impose additional registration fees on electric and other clean vehicles, as well as a sales tax on bicycles.

The proposal to spend more on road widening comes just after the Legislature has received a report from its official global warming commission (yes, Oregon has one), examining the state’s progress to meeting its legally adopted greenhouse gas reduction goal. And the news was not good: after several years of progress, Oregon’s greenhouse gas emissions surged upward in 2014, primarily due to an increase in driving associated with the fall in gasoline prices. There’s now virtually no way the state will meet its adopted 2020 goal.

One of the most consistent findings in transportation research is the principal of induced demand: providing more roadway capacity in congested urban locations induces more trip-making and more driving, which automatically means more carbon pollution. The phenomenon is now so well documented that its called “The Fundamental Law of Congestion.” If we really care about climate change, the last thing we should be doing is building new or wider roads.

Ultimately, its going to take more than green lighting and glowing rhetoric to tackle the climate problem. Local and state leaders who profess a continuing commitment to the Paris accords have to match their lofty words with their everyday actions. Building more road capacity makes greenhouse gas emissions rise. Mayors and governors who want to show their commitment to the Paris agreement can start simply by applying a green version of the Hippocratic oath: First do no harm. Not wasting scarce public funds on roadway expansion is a far more powerful symbol of your city’s commitment to protect the environment than a green lantern.

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* – Sorry.

 

 

New data shows the diffusion of ride-sharing among US metro areas: Parking prices matter.

We know from casual observation and the occasional leaded corporate document that ridesharing (which is more accurately but clumsily labeled ‘transportation network companies’) is growing rapidly. Although Uber and Lyft are pretty stingy with their data, our friends at the Brookings Institution, Ian Hathaway and Mark Muro, have come up with a clever, indirect way to measure the growth of ridesharing across US metro areas.  Because driver’s are, at least on paper, independent businesses, the transportation network companies are required to provide them with 1099 forms listing their income, and in turn, each driver is required to report this income on her or his personal income tax returns. The Census Bureau taps an anonymized version of this tax data to compute the number of self-employed persons reporting business income, as part of their “non-employer” data series.  Hathaway and Muro have gathered this data by metro area, focusing in on persons who reported income from being transportation service providers. The net result is a useful index of the scale and growth of the ridesharing industry.

Last week, they released their analysis based on the latest (tax year 2015) data. The key finding is that rideshare related non-employment grew dramatically over the previous year.  More than 500,0000 people reported income as transportation service providers, up by 63 percent from 2014.  The Brookings report shows in detail the acceleration of growth by metro area.

At City Observatory, we’ve been keenly interested in which cities ridesharing is most prevalent, and understanding what characteristics of these cities seem to drive the industry’s growth. We’ve used the Brookings data to compute the relative scale of ridesharing in each metro area by dividing the number of ridesharing non-employers in a metro area by the region’s population. The following chart shows the number of rideshare non-employers per 100,000 population.

Ridesharing is most advanced in the nation’s largest, densest and most tech-oriented cities. San Francisco, New York, and Washington top the list with more than 500 rideshare non-employers per 100,000 population.  The median large metro area on our list has about 140 ride-share non-employers. Ridesharing is much less common in the smallest of these metro areas:  Birmingham, Rochester and Memphis.

The relative attractiveness of ridesharing hinges on the cost and convenience of alternatives, most notably private car ownership. Uber and Lyft and their competitors provide on-demand service that frees customers from the need to travel to and from where their car is parked, and to have to pay for parking. In places where parking is abundant and free (or at least, un-priced) to car travelers, Uber and Lyft are relatively less attractive alternatives. To these this relationship, we’ve again combined data on the variation in parking prices among US cities (which we calculated by looking up the cost of monthly parking at off-street private lots near each large city’s City Hall), and the Brookings data on the penetration of ride sharing.  The data show that the penetration of ride sharing services tends to be higher in cities with more expensive parking.

These data show a similar pattern to the analysis we undertook with 2014 data. The explanatory power of parking price variations declined somewhat (the coefficient of determination was .68 for the 2014 data and .51 for the 2015 data), which suggests that other factors played a larger roll in 2015. This is consistent with a “technology diffusion” model of ridesharing growth: the industry starts and grows disproportionately faster in the cities with the most favorable market conditions (i.e. high parking prices), but then gradually diffuses to other markets where market conditions are less favorable.

The one glaring limitation of the non-employer data is that they come with a significant time lag. We’re only now just learning about the growth of the industry in 2015, and it will be May or June of 2018 before we see then 2016 Census non-employer numbers. It’s also the case that these data are capturing growth in a period of time in which Uber, in particular, has been heavily subsidizing fares. Whether its business model and its growth trajectory are sustainable, is still open to question.

The key takeaway here is that pricing matters. Places that price private automobile operation (even just indirectly through parking charges) prompt travelers to adopt alternative means of transportation. As we and others have noted, the fact that ridesharing services don’t have to pay for access to the street network in peak hours (even though they charge peak prices at these times), leads to more vehicular congestion. As ridesharing grows, and with the advent of autonomous vehicles seeming ever more likely, re-thinking the way we price access to roads will be central to sustainable transportation in cities.

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Thanks to Ian Hathaway and Mark Muro for sharing the data used in their analysis.

What City Observatory did this week

1. How green was my city? The Trump administration’s announcement that it would pull the US out of the Paris Climate Accords was greeted with dismay by many environmentalists, but governors and mayors around the nation stepped up to say they’d continue to fight climate change. Climate hawks are no doubt buoyed by the support, but state and local governments need to back up the rhetoric with strong action. Chief among these: foreswearing more spending on expanding road capacity. Its impossible to reconcile a commitment to reducing greenhouse gases with measures that essentially subsidize more driving.

2. Portland’s green dividend. We reprise our 2007 report looking at the economic benefits that a local economy reaps when it is built in a way that its residents don’t have to drive as much or as far.  Portland residents drive about 20 percent fewer miles than the average urban resident, saving them more than $1 billion a year in out of pocket costs for cars and gasoline. That money then gets spent in the local economy.

3. More evidence on the growth of ride-hailing services. The Brookings Institution has worked out a clever way to estimate the size and growth rate of the ride-hailing businesses using tax filings by the independent driver/owners who contract with Uber, Lyft and others.  Their analysis shows the industry grew by almost xx percent in 2015 over the previous year, and involved more than 500,000 contractors nationally. We map out the relative size of the ride-hailing business in each of the nation’s large metro areas, and show how its strongly correlated to local parking prices. Ride hailing is the biggest where parking is most expensive, more evidence that how we price transportation affects how it works.

Must read

1. Roots of segregation run deep. In his new book, The Color of Law Richard Rothstein takes a retrospective look at the causes of persistent racial segregation in the US. He points out that federal policies dating from the 1930s and 1940s contained explicit racial provisions–for example, banning the sale of homes or the provision of mortgages to blacks in white neighborhoods. Those provisions, coupled with other policies became entrenched, and had profound long-term effects in limiting the opportunity of Black Americans to invest in housing in the neighborhoods that enjoyed the greatest appreciation. The segregation we see today is in many respects a measure of how deep and enduring the effects of those policies have been.

2. There’s something wrong with Connecticut.  For decades, it seems, suburban Connecticut has been the destination of choice for big name companies looking to move out of New York City to a leafy, and low tax campus environment. But the growing movement of companies back to city centers is having a dramatic impact on places like Connecticut. Hartford based insurance giant Aetna has just announced it will follow in the footsteps of GE and move its headquarters out of the state, chiefly to get better access to talented workers. Slate’s Henry Grabar notes that while the state continues to have lower business taxes than its competitors, it isn’t competitive in offering a sense of place: “The deeper, more daunting question is what besides a tax break will make Connecticut a place people want to live and work. The state still hasn’t found the answer.”

3. Parking requirements penalize the poor. Its commonplace for local zoning codes to require that developers build new, off-street parking in order to receive planning permission for new homes or apartments. Parking can easily add $20,000 or more to the cost of a new apartment, and that price ultimately is passed on to renters whether or not they actually own cars. A new study from UCLA estimates that low income households that don’t own cars pay $440 million annually in higher rents to cover the costs of parking spaces that they don’t use.

4. The theory and practice of re-thinking parking. CNU’s Public Square has an interview which combines the research insights of parking guru Don Shoup with the practical experience of planning consultant Jeffrey Tumlin of Nelson/Nygaard. They describe, in simple terms, why cities have a strong interest in reducing parking requirements and pricing street parking correctly, and outline the steps cities can take to turn parking from a problem into an opportunity to revitalize urban spaces. Separating land uses, limiting density and requiring the provision of free parking has predictably generated an auto-dependent urban form. Fixing parking is a critical step in un-doing that pattern.

New ideas

Concentrated poverty and neighborhood change in the Netherlands. Like the US, cities in the Netherlands have been demolishing some large scale low income housing complexes and working to rebuilding these neighborhoods are more mixed income places. A new study from the Delft University looks at the effects of this effort. The redevelopment process has resulted in higher incomes in redeveloped neighborhoods, and hasn’t produced a re-concentration of poverty elsewhere.  As the authors explain: “large-scale demolition does not seem to lead to new concentrations of low income households in other deprived neighborhoods  As such, large-scale demolition seems to be effective in breaking up concentrations of poverty by creating a larger geographical spread of low-income households.”

 

 

What City Observatory did this week

1. Downzoning won’t make housing cheaper. Chuck Marohn of StrongTowns notes that land that’s zoned for apartments generally commands higher prices than nearby land zoned for single family homes. Couldn’t we lower the cost of housing, he asks, by downzoning that multi-family land? The short answer is no: Low density zoning is essentially a requirement that every household by at least a minimum amount of land regardless of how much they want or can afford. Plus: reducing the amount of land available for apartments drives up the price of the remaining multi-family zoned land–which further increases the rents for apartments. If you want to make housing more affordable, you need to upzone, not downzone.

2. Concentrated poverty is still growing. Growing up poor is a burden, but growing up in a neighborhood where your neighbors are also poor amplifies all of the negative effects of poverty. The State of the Nation’s Housing Report, released last week, shows that concentrated poverty is growing. The report focuses on neighborhoods with poverty rates in excess of 40 percent, extreme poverty. The number of such neighborhoods as doubled and the number of poor people living in such neighborhoods has increased from 2.7 million in 2000 to 5.4 million today. And while suburban poverty has increased, its still the case that 60 percent of the extreme poverty neighborhoods are located in the densest third of all urban neighborhoods.

3. Rent inflation is abating. For most of the past five years, rents have been increasing around the country. In the face of calls for rent control and mandatory inclusionary housing requirements, economists have counseled patience, arguing that eventually, the growth in housing supply would catch up with growing demand, and slow the pace of rent increases. That finally seems to have happened. In the past year, the rate of rental price inflation fell in 48 of the nation’s 50 largest housing markets; rents actually declined in 20 markets, including hotspots such as San Francisco and New York. Further increases in supply in the coming year could ease the nation’s apartment affordability problems further.

4. You can’t judge housing affordability without considering transportation costs. The most common way of computing housing affordability is simply to ask whether a household’s rent or mortgage payments exceed 30 percent of its income. There are many problems with this simplistic test, and one of them is that low rent housing in inaccessible locations may impose much more in additional transportation costs than it saves in rent. If a household needs an extra car to drive for all of its daily needs, it can end up spending a lot more than if it pays a higher fraction of its income to rent in a better location. Data from the newly released State of the Nation’s Housing report confirms that households that spend a larger fraction of their income on housing end up spending considerably less on transportation–confirming this tradeoff between housing costs and transportation savings. Rather than look at housing in isolation, we should talk about affordable living, including transportation costs.

Must read

1. Grabar on city leadership and climate change.  Slate’s Henry Grabar has been knocking it out of the park lately.  His latest missive challenges the widely held belief that mayors and cities can step up and take the mantle of leadership now that the Trump Administration has pulled the US out of the Paris Climate Accord. “Lefty Cities Say They Want to Fight Climate Change but Won’t Take the Most Obvious Step to Do It.” It’s one thing to scold national leaders and make bold pronouncements, but cities that don’t allow new housing and higher density in the face of strong demand, and which waffle on making cars pay their own way, aren’t really serious about climate change. Grabar points to strident Berkeley city leaders, who condemn Trump, but have blocked new housing in their city, forcing demand elsewhere, and producing longer commutes and more pollution.

2. Berkeley Housing Op-Ed. And speaking of Berkeley, City Councilor Lori Droste has reached out to some of California’s resident experts on housing policy and co-authored an Op-Ed calling for the city to allow more market rate housing, and to carefully assess whether proposed inclusionary housing requirements and higher “linkage fees”–surcharges on new construction to fund affordable housing programs–will discourage additional housing in the city. The Op-ed argues that “Downzoning would be a disastrous step backwards for Berkeley, and will undoubtedly worsen affordability and lead to even more displacement and exclusion.” It also points out that the city’s linkage fees would be the highest in the Bay Area, and could be so high that  “we will drive new housing to other cities and will not likely see any affordable housing–or any housing–in Berkeley for a long time.” Droste is joined in the letter by UCLA’s Michael Lens and Paavo Monkkonen, who specifically argue that downzoning will lead to higher housing costs and more displacement from Berkeley. Also signing the letter is UC Berkeley’ planning professor Karen Chapple and Terner Housing Center Director Carol Galante. Berkeley is fortunate to have so many heavyweights weighing in on their deliberations–but what they have to say applies with equal force to many other cities.

3. Kids in cities:  Lessons from Vancouver.  Brent Toderian discusses the kinds of planning and investments that can make cities more welcoming to families with children. Three keys: encouraging the construction of family-sized units, providing for day-care and schools in denser areas, and designing the public realm so that it works for children as well as adults.

 New ideas

1. Philadelphia’s Middle Neighborhoods. The Reinvestment Fund’s Emily Dowdall has a new report digging into the health and prospects of Philadelphia’s “Middle Neighborhoods.” Middle neighborhoods are identified by average neighborhood income, and have incomes that are between 80 percent and 120 percent of the regional median. The report further classifies these middle neighborhoods by their racial and ethnic composition, and tracks changes in population, income levels and home values in each segment. A plurality of these middle neighborhoods are classified as “mixed race and ethnicity,” meaning no single ethnic group dominates. These mixed middle neighborhoods have added population in the past 15 years; growing about four times faster than all other middle neighborhoods (9 percent vs 2 percent since 2000). While poor and upscale neighborhoods often get most of the policy attention, these middle neighborhoods are often the most racially/ethnically diverse neighborhoods in a city. In Philadelphia middle neighborhoods  home to a majority of the city’s foreign born residents, a key demographic group behind citywide population growth.

2. Tech Cities. Real estate brokers Cushman-Wakefield have a new report out ranking the nation’s metro areas according to their tech prowess.  No surprises here:  Silicon Valley and San Francisco come out top of the list. These rankings are based on an analysis of education levels, venture capital funding, the concentration of jobs in electronics, software and other technology related firms, and measures of entrepreneurship. The underlying data is probably of greater use than the rankings here. But beware, at least one table contains some inaccurate information. On page 17, of their report, metro Denver’s educational attainment rate is ranked number one, based on a reported 55 percent of adults having completed at least a four-year college degree.  But actually, according to Census data (American Community Survey, 2015 One-Year Estimates, Table S-1501), the metro area’s four year college attainment rate is actually 41.8 percent–still high, but not number one.

 

What City Observatory did this week

1. Urban Myth Busting: Idling in traffic and carbon pollution. There’s a frequently repeated, just-so story about carbon emissions: if we didn’t spend so much time stuck in stop-and-go traffic and idling, we’d emit less pollution. Highway advocates seize on this idea as an excuse to build more capacity: if we had enough lanes that nobody ever needed to slow down, there’d be less pollution. The problem is adding more capacity, particularly in urban environments simply stimulates induced demand, and generates more driving–and more pollution. A recent study from Portland State University debunks this idle rumor once and for all.

2. Parking prices and ride-hailing use. Ride-hailing companies like Lyft and Uber have been notoriously reluctant to share data on the origins and destinations of their trips. But the San Francisco County Transportation Authority figured out a clever work-around, tapping into the company’s public-facing Application Programming Interfaces (APIs) to track trips. This novel data shows the high concentration of ride-hailing in the city’s urban core–where these trips account for more than a fifth of all traffic at peak hours. We combine this data with information on parking rates to show that patronage of ride-hailing services is highest in areas where parking is most expensive. Its powerful evidence that the way we price parking (and don’t price roads) has profound effects on how people choose to travel. As we’ve suggested before, the advent of ride-hailing (and ultimately, autonomous vehicles) will require that we change the way we price the road system.

3. Pity the poor super commuter. According to some reports, the number of “super commuters”–those traveling more than 90 minutes to work each day is on the rise. In reality, about 2 percent of all US car commuters travel that long daily, a number that’s barely budged in the past decade. Transit riders are about five times as likely as car commuters to endure these long commutes. And arguably many of those who choose long commutes do so to get better access to lower cost housing or amenities, earning a kind of sweat equity by commuting.

Must read

1. California’s failed housing law. For five decades, California law has, at least in theory, required cities to plan for sufficient housing to meet local demand. The state and regional planning agencies estimate population growth and the demand for housing, and set numerical housing goals for each city. The law calls for cities to zone enough land for various types of housing, but in practice, they can easily ignore, or evade the requirements, as the Los Angeles Times explains. Some places zone little or no land for housing, or designate prohibitively expensive or unbuildable areas to receive housing, or rely on discretionary approval processes to block proposed development. Monitoring of compliance is weak–some communities don’t report how many housing units they’ve permitted–and penalties are essentially non-existent. Critics call the existing requirements a waste of time; the State Legislature is considering bills that would add some real teeth.

2. YIMBYs v. Socialists. Another trenchant essay from Slate’s Henry Grabar looks at how the left thinks about housing. As usual, the conflicts are most evident and strident in San Francisco, home of the Bay Area Renter’s Federation (which aggressively advocates for more housing development almost everywhere), and is also home to a growth chapter of the Democratic Socialist of America (who view developers as exploitative bourgeoisie). Both sides agree that the housing market is broken, but are at odds on the practical steps needed to fix things. The irony is that progressive communities like Cambridge, Boulder, Berkeley are the kinds of places that are in high demand, and where development constraints are pushing up the price of housing. We’re looking to see the dialectic at work here; perhaps a new synthesis will emerge on how to tackle our shortage of cities.

3. Parking Placards, Politics and Patronage. Nowhere in North America is parking more valuable than in New York City, and one of the most coveted privileges available is a parking placard that not only allows its bearer to park free at metered spaces, but which effectively enables parking in places that would otherwise be illegal (like in cross walks, next to fire hydrants or in no parking zones). Parking placards are handed out by the Mayor’s Office, as well as other state and local governments. Politico explores who gets placards, from whom, and why.

4. Aetna moves its headquarters to New York City. After more than a century and a half of being headquartered in Hartford, Connecticut, insurance company Aetna is moving its headquarters to Manhattan.  The company cited the city’s knowledge economy hub status and access to its deep talent pool as motivation for the move. The company will also get an estimated $30 million in tax breaks. About 250 jobs will move to New York; an estimated 6,000 employees will remain in Hartford.

New ideas

Global Parking Price Comparison. Parkopedia, a web-based directory to parking facilities around the world has developed a list of the most expensive places to park in the world. They’ve compiled data on hourly, daily and monthly parking rates in major cities, and adjusted them for differences in purchasing power parities. London and Sydney are neck and neck at about $57.00 per day for parking (purchasing power parity adjusted). New York ($42), Chicago ($33) and San Francisco ($29) are the priciest US cities for daily parking.

What City Observatory did this week

1. Cities and the returns to education. We know that the nation’s best educated people are increasingly concentrated in urban areas. Data compiled by the US Department of Agriculture’s Economic Research Service shows a big reason why: the more education you have the bigger the urban wage premium. College-educated workers make more than those with just a high school education everywhere, but they make proportionately more in cities. Workers, especially well-educated ones, are more productive and better paid if they live in urban economies than rural ones.

2. Integration and the Kumbaya Gap. Even in neighborhoods that have experienced significant racial (and economic) integration in the past few years–like Washington DC’s U-Street–it’s still common to observe that people associate mostly with those with similar backgrounds and demographics. In his new book, Derek Hyra argues that this continuing micro-segregation of integrated neighborhoods means that integration is failing the poor and people of color. But is it? In our view, more integration is a necessary pre-condition for greater social interaction, but just as importantly, it breaks down the isolation and resource deprivation that often plagues poor neighborhoods. For example, we know that poor kids growing up in mixed income neighborhoods have better economic outcomes, than those who grow up in concentrated poverty.

3. Intermarriage and Segregation. Intermarriage–marriages composed of persons from different racial/ethnic groups–are on the increase in the US.  They’re up from about 3 percent of all marriages in the 1960s, to about 17 percent of all marriages today. We look at the variation in intermarriage rates across US metro areas, using data from a new analysis released by Pew. The data show that intermarriage is least common in the most segregated metro areas and most common in the least segregated areas. This is powerful evidence that integration tends to fuel more social interaction among people from different racial/ethnic groups.

4. Big data’s hidden bias. A Houston study of “near miss” traffic incidents reported by cyclists and pedestrians, got us thinking about the strengths and weaknesses of big data. The study aimed to improve our understanding of bike and pedestrian safety by looking beyond actual crash data to identify the location of near-misses. In theory, the bigger sample of instances could help identify danger areas. But as the study’s authors note, there’s an important problem: cyclists and pedestrians tend to avoid the most dangerous places, and as a result, the data may be self-censored to exclude from analysis the places that most need improvement. This is one example of a more general problem with gathering big data from existing travel patterns and behavior: it tends to impart a very strong status-quo (and therefore car-centric) bias, and systematically diverts us from asking aspirational questions about what kind of transportation system we’d actually like to have.

Must read

1. A housing market thought experiment. Bloomberg’s Noah Smith weighs in, once again, with more arguments for expanding the supply of housing–even high-end market rate housing–as a way to tackle the housing affordability problem in San Francisco (and a growing list of other cities). A standard NIMBY argument is that building high-end housing makes affordability problems worse (a claim that infuriates economists, but which resonates with many non-economists).  To dispel that view, Smith suggests this thought experiment: If you believe that more high priced housing causes affordability problems, then you ought to believe that demolishing high priced housing ought to make housing more affordable. Smith asks his readers to image what would happen in San Francisco if it suddenly demolished a bunch of luxury housing. The wealthy residents of these houses wouldn’t suddenly decamp from the Bay area; instead, they’d bid up the prices of the remaining housing, leading to even more displacement. Housing affordability is profoundly a matter of supply and demand.

2. Why we need market rate housing. Scott Weiner, the San Francisco Supervisor, now turned State Senator, has a long essay diagnosing the roots of that city’s housing affordability crisis, and outlining the policy steps the state needs to take to remedy the problem. Weiner argues: “Market-rate housing isn’t a bad word, and we won’t solve the housing crisis without it.” The public sector can’t build or subsidize enough affordable housing to meet the burgeoning need. Instead, the problem has to be solved by liberalizing zoning and eliminating the procedural roadblocks that stifle new housing production. He concludes: “Anyone who advocates that we ignore these process and zoning problems and instead focus our housing policy exclusively or dominantly on subsidized, income-based housing is advocating to perpetuate the housing crisis. ”

3. How NIMBYISM perpetuates segregation. Writing at Next City, Houston’s Chrishelle Palay describes how NIMBY arguments against new development are thinly veiled attempts to further enshrine segregation. She writes: “Sadly, NIMBY is the typical response to proposed affordable housing development in well-resourced communities. Neighborhoods that offer close proximity to high-performing schools, access to transit, employment centers and quality food choices typically lack affordable places to live — by design.” City government’s acquiesce to neighborhood opposition in these well-heeled communities–so little if any affordable housing gets built there. Meanwhile, similar proposals to build affordable housing in low income communities generates little political heat.  The result: public housing dollars, small though they are, help recapitulate and reinforce the economic segregation of metro areas.

New ideas

1. Do jobs follow people, or people follow jobs? Richard Florida has a nice write-up at CityLab on a new study of the relationships between migration and job growth drawing on data from three Nordic countries. The big takeaway: for highly skilled jobs and creative class workers, the relationship is that jobs follow people. For less skilled work, the tendency is the opposite: people tend to migrate to where jobs are more plentiful. As Florida notes, this dynamic tends to accentuate the bifurcation of economic activity between prosperous, high skilled and higher cost knowledge-based cities, and lower cost, but less productive areas.

2. Student loan debt and young adult homeownership. Silda Nikaj of Texas Christian University and Jonathan Miller of HUD have compiled some interesting data on homeownership and student debt. They find a statistical connnection between the level of student debt and the likelhihood of being a homeowner: each 10 percent increase in student debt is associated with a .07 percent decrease in the homeownership rate for young adults. Homeownership is most likely to be depressed among those who didn’t finish a program of study or who attended a less selective college or university.

 

 

What City Observatory did this week

1. Cultural appropriation: Theft or smorgasbord? A recent Internet furor erupted over a Portland burrito stand that copied its recipe from that of street vendors in Mexico. An essential feature of cities and economic development, as Jane Jacobs noted, is that they’re constantly remixing ideas. When is borrowing and adapting ideas from others acceptable, and even useful, and when is it theft? There’s some interesting discussion about this issue.

2. Is historic preservation just thinly veiled NIMBYism?  “Not in my backyard” or NIMBY has acquired a bad name, and its now mostly taboo to complain about the number, income levels, skin color or lifestyle of the prospective neighbors who might occupy new housing in one’s neighborhood. A more refined and politically correct way to object to density is to invoke historic preservation. This option is largely available to those with significant resources, particularly when it comes to designating entire neighborhoods for historic status.

3. Pricing roads for autonomous vehicles.  Portland and other cities are considering what kind of policy framework they ought to put in place for a world of autonomous vehicles. We have a suggestion: cities should use this major shift in technology to put in place real-time, dynamic road pricing that reflects back to road users–particularly those traveling at the peak hour–the costs of the infrastructure they use. In large part, firms like Lyft and Uber are already capturing this value through surge pricing, but what it really reflects is the huge public costs incurred to build, maintain, and expand road capacity to meet demand in the heart of our cities.

Must read

1. The Clear and Present Danger of Supply Skepticism. In a critical review of Tom Agnotti’s book “Zoned Out,” former New York City Housing Commission Vicki Been skewers the claim that down-zoning will somehow make urban housing more affordable. “If the supply of housing is not increased, to accomodate growth, rents will go up. There are no other plausible outcomes . . . Unless we build new housing, people who can afford higher rents will outbid poorer current residents for existing housing.”

2. Liquor licenses and livable neighborhoods. Sometimes there’s nothing that adds to the conviviality of an urban neighborhood more than the presence of of a corner bar or local tavern that provides a place for meeting and relaxation. Every state has its own laws for regulating and licensing liquor serving establishments, and many states greatly limit the number of licensed premises. In places like New Jersey, the limited number of licenses inflates their value and means that there are fewer places to have a round of drinks with friends. Steven Pedigo argues that liberalizing liquor control laws would help facilitate neighborhood revitalization.

3. Driving deeper into debt. American car buyers are increasingly being driven into debt by new car purchases. Last year, fully one-third of trade-in vehicles had more money owing on their original loans than the cars were worth; leading these buyers to roll an average of $5,000 in unpaid loan balances into their new car loan. The growing number of underwater car loans is propelled by rising prices of new cars (average sale: $35,000), a weak market for used cars, and the tendency of buyers to finance cars for much longer periods of time, meaning that less of their car payment goes to pay principal. A growing fraction of new car loans are financed for 84 months (7 years).

New ideas

San Francisco Ride-Hailing Study. The San Francisco County Transportation Authority has published a breakthrough study of Uber and Lyft activity. While these ride-hailing companies are notably reticent to share their data (in California, they’ve stonewalled city governments), SFCTA hired researchers from Cornell University to tap into the two company’s public-facing APIs (Application Programming Interface) to monitor the number and origins and destinations of hailed vehicles. We’ll have a lot more to say about this very innovative and public-minded use of big-data. But in the mean time, its worth having a look at this report, which provides very detailed information about the penetration of ride-hailing in different San Francisco neighborhoods.

 

Increasing road capacity to reduce greenhouse gas emissions will backfire

Time for another episode of City Observatory’s Urban Myth Busters, which itself is an homage to the long-running Discovery Channel series “Mythbusters” that featured co-hosts Adam Savage and Jamie Hyneman using something called “science” to test whether commonly believed tropes were really true. In each episode, they would construct elaborate (often explosive) experiments to test whether something you see on television or in the movies could actually happen in real life. (Sadly, you can’t make a bullet curve no matter how fast you flick your arm.)  

In our first installment, we took on the oft-repeated claim that somehow building more housing for middle and upper income people made housing less affordable for lower income households. (It doesn’t).

Today’s claim comes from the world of transportation. As we all know, transportation is now the single largest source of greenhouse gas emissions. Here, when confronted with the need to do something to address climate change, the highway lobby likes to point out that cars emit carbon, and when they’re idling or driving in stop and go traffic, they may emit  more carbon per mile than when they travel at a nice steady speed. And of course, they have a solution for that: spend more money expanding capacity so cars don’t have to slow down so much. That’ll be great for the environment, or so the argument goes.

This claim has been invoked by highway advocates everywhere. Most recently, its been raised by officials  speaking in favor of spending upwards of a billion dollars on three freeway widening projects in the Portland area.  Sate Senator Lee Beyer argued that truck idling due to congestion was contributing to global warming. Here’s what Beyer told Oregon Public Broadcasting’s Think Out Loud program on April 18, 2017:

To the extent that we have congestion, in Portland for example, or anywhere else, but there particularly, if you look at the amount of exhaust those trucks are spewing into the air during that 52 hours while they sit in traffic, that may have more of a negative impact on the environment and more carbon release than we would gain solely through the low carbon fuels piece as its currently structured.

His argument was echoed by City Commissioner Amanda Fritz:

It seems likely the emissions from vehicles crawling in this section are worse than those at normal speed.

So is there any truth to the idea that reducing traffic congestion will lower vehicle emissions?

In place of the now retired duo of Adam and Jamie, we’ll turn this question over to Alex and Miguel–Alex Bigazzi and Miguel Figliozzi, two transportation researchers at Portland State University. Their research shows that savings in emissions from idling can be more than offset by increased driving prompted by lower levels of congestion.  The underlying problem is our old friend, induced demand: when you reduce congestion, people drive more, and the “more driving” more than cancels out any savings from reduced idling. As they conclude:

Induced or suppressed travel demand . . . are critical considerations when assessing the emissions effects of capacity-based congestion mitigation strategies. Capacity expansions that reduce marginal emissions rates by increasing travel speeds are likely to increase total emissions in the long run through induced demand.

In a companion paper, they look at a variety of data, including variations among metropolitan areas, changes over time in congestion and emissions, and corridor level estimates of traffic and emissions. In each case, they find that carbon emissions are strongly correlated with the length of travel and weakly correlated (or uncorrelated) with levels of congestion.

Specifically, metropolitan areas with high levels of congestion do not have higher levels of CO2 emissions per capita than ones with low congestion. They conclude their is “no relation.” But vehicle miles traveled is a strong correlate. Here’s a chart showing daily peak period hours of vehicle travel per peak period travel (on the horizontal axis) and CO2 emissions per peak period traveler per day. More driving is correlated with more carbon emissions.

 

Similarly, metro areas that had an increase in congestion (as measured by the Texas Transportation Institute’s Travel Time Index), didn’t see proportionate increases in CO2 emissions.  The following panel shows how the change in emissions per traveler between 2000 and 2010 for an array of 101 metropolitan areas related to changes in congestion (left hand chart), changes in hours traveled per person (center chart) and vehicle miles traveled (right hand chart). There’s essentially no relation between increases in congestion and per traveler emissions; but more hours of travel and greater distances traveled translate very directly into more carbon emissions.

There’s also another kicker to the speed/emissions relationship that you’ll never hear highway advocates mention. While its true that cars emit more carbon per mile while idling and in stop and go traffic than they do when cruising at 30 to 45 miles per hour, traveling at higher speeds is actually less fuel efficient and produces more CO2 per mile driven. Hence one of the strategies that we ought to employ is imposing stricter speed limits (say 55 miles per hour). This also means that the more we build roads that let people drive at higher speeds (60 to 70 miles per hour) the more we’re increasing global warming.

This myth is busted: adding more capacity might reduce idling a bit, but it will actually induce more driving, which will lead to higher, not lower carbon emissions.

And, a technological post-script: Automakers are now increasingly equipping their vehicles with stop-start technology, which automatically turns the engine off when the car stops moving, and then re-starts the engine when the driver takes her foot of the brake. This virtually eliminates idling emissions, not just in traffic, but at red lights too. Some 15 million European cars already have stop-start, a majority of cars sold in North America are predicted to have in the next few years. In addition, electric vehicles don’t idle when they’re stopped. So in the long run, if we want to reduce emissions from idling, a technical fix is in the works–no need to widen roads to address this source of pollution.