Month: September 2017

Portland’s Inclusionary Zoning Law: Waiting for the other shoe to drop

Posted on by Joe Cortright

Developers stampeded to get grandfathered before new requirements took hold, will the pipeline run dry?

In December, Portland’s City Council adopted one of the nation’s most sweeping inclusionary zoning requirements.  Most new multifamily housing projects will have to set aside 20 percent of their units for families earning less than 80 percent of area median income (or alternatively 10 percent for families earning less than 60 percent). While the ordinance is intended to increase the supply of affordable housing, it creates a major burden on new developments, and may therefore actually reduce the housing supply. We and others will be watching closely to see what happens.

The measure took effect on February 1, 2017, giving developers a narrow window to file land use applications prior to the new rules taking effect. As of February 1, the city had an inventory of development approval requests for nearly 19,000 units of housing, about a 3-4 year supply given the rate at which new multi-family housing has been built in Portland in the past several years. Developers of these projects have until 2020–and if they nurse their projects through the permitting process, even longer–to move forward with their construction plans.

Last week, Portland’s Bureau of Planning and Sustainability released a short report describing some of the results of the first six months of experience under the new inclusionary zoning ordinance.Writing for Portland for Everyone, Michael Andersen has a very upbeat, glass-is-half full story stressing the 60 or so affordable units that might be attributable to the new ordinance (if they move through the permitting process and actually get the promised incentives). Last week, City Observatory attended a meeting of city staff and other interested parties that reviewed the report.  Here’s what we learned.

So far, between the glut of projects filed just before the new rules took effect, and the uncertainty and cost associated with the new requirements, new private apartment development proposals in Portland have all but disappeared. Since February 1, according to city officials, there have been no new private apartment projects of more than 20 units submitted for land use review. Five publicly sponsored projects are moving forward, and three projects permitted under the old rules have submitted new applications seeking the density bonuses and parking requirement waivers available under the new inclusionary ordinance.

Smaller units and the small building exemption

The new inclusionary zoning rules appear to be creating incentives for developers to “go small” either to avoid the inclusionary zoning requirements entirely or to minimize the cost of compliance. At the city-sponsored meeting to review the first six months of progress under the inclusionary zoning ordinance, several observers pointed out that the projects that seem to be going forward under the new law are coming from developers of “micro-apartments”:  very small studios. The city’s ordinance requires that “inclusionary” units be comparable in size and amenities to a building’s market rate units, so if a developer builds tiny market rate apartments, it faces comparably smaller costs of building its “affordable” ones. Meanwhile, it may be able to qualify for the full value of incentives (parking waivers, floor-area bonuses, and property tax exemptions).  City staff agreed that micro-apartments are more likely to be financially viable under the inclusionary zoning program than are larger apartments.

Some developments may avoid the new inclusionary requirements entirely: the city’s inclusionary zoning ordinance applies only to buildings with 20 or more units. City officials are looking to see whether there’s been an increase in applications for 15- to 19-unit buildings.  Data for the first six months of the inclusionary program (February 1 to August 1, 2017) show that 10 projects of 15- to 19- units were submitted.  In the previous 12 months, the city permitted 16 units in this size group. This fragmentary data suggests that on an annual basis, the number of such units permitted has increased 25 percent (from 16 units per 12 months to 20 units per 12 months).  Given the time lags in developing projects and seeking permission, however, its unlikely that the market has yet had time to react to the under 20 unit exemption. City staff will want to track this statistic closely in the months ahead.

For the immediate future, the city’s housing supply and rental affordability will benefit from the land rush triggered by the inclusionary housing requirements. It will take two to three years for developers to construct the 19,000 or so units that are now grandfathered under the old rules. As this inventory is gradually liquidated, however, the big question is whether developers will step forward and propose projects under the new requirements.

What to watch for

The key measure of program success will be whether new privately sponsored apartment projects move forward. If Portland doesn’t start seeing proposals for new 20+ unit developments soon, that’s a bad sign. It will mean that developers are being deterred by the cost and uncertainty associated with the inclusionary housing requirements.

A dearth of new apartment projects would be the clearest signal of trouble, but there are a couple of other measures to look at as well:  First, how does what happens in Portland compare to what happens in the rest of the region? Portland’s housing market is regional, and while city locations are in high demand, it’s possible that some development could shift to other locations. In effect, the region’s suburbs represent a kind of control group: none of them has a similar inclusionary housing requirement. If apartment construction proceeds apace or accelerates in nearby suburbs (some of which abut Portland), while stagnating in Portland, that would be a sign that the inclusionary zoning program is pushing development away.  It would be ironic if a program that labels itself “inclusionary” actually has the opposite effect by excluding housing and additional population from the city.

Another indicator of impact is what kind of units get built in Portland.  If the new development projects are disproportionately under the 20 unit threshold, or if new projects skew heavily toward micro-apartments, that would be an indication that the inclusionary zoning requirements are warping the housing market. Incentivizing developers to stay under 20 units may mean that some sites that could accomodate greater density are under-built, which essentially wastes public resources and promotes sprawl. Similarly, encouraging developers to build more micro-apartments may push down the price of studio apartments, but will do little to help the affordability of larger units which can accomodate families.

Finally, if it’s concerned about the impacts on housing supply, the city ought to be carefully monitoring changes in land prices. It’s often argued that inclusionary requirements won’t affect development because developers will simply bid less for land, effectively passing at least some of the cost of compliance on to landowners. If that theory is correct, we ought to observe a lessening in prices paid for land that could accomodate apartments in Portland.

In short, its too soon to tell what the effects of the inclusionary housing mandate will be. The negative effects of the ordinance will be concealed and delayed by the big backlog of housing permitted under the old rules. But when that inventory is gone, the real effects of the ordinance will be more apparent.

 

 

Transportation equity: Why peak period road pricing is fair

Posted on by Joe Cortright

Peak hour car commuters have incomes almost double those who travel by transit, bike and foot

The Oregon Legislature has directed the state’s department of transportation to come up with a value pricing system for interstate freeways in the Portland metropolitan area.  A key idea behind value pricing is that it would charge those who use freeways at congested peak hours a higher toll than at other times; tolls might even be zero in off-peak hours, giving travelers strong incentives to use the system when there was available capacity. One of the concerns that’s been raised about value pricing is that it will be an undue burden on the poor or low wage workers who might have little choice but to travel at the peak hour. Bike Portland‘s Jonathan Maus explains how this came up at a recent Portland City Council meeting, in testimony presented by the Oregon Department of Transportation’s public affairs staffer Shelli Romero:

Surprisingly, she [Romero] also attempted to impugn congestion pricing in general with a strange and unfounded jab. “Several people have brought up the issue of congestion pricing,” she said, “but there has been very little mention about how equity considerations, when you look at congestion pricing on this section of I-5, would be taken into consideration.” This is an odd statement from the staffer of an agency that has a mandate from the legislature to create and implement a congestion pricing program.

Of course, it’s always possible come up with an anecdote of a struggling minimum wage worker who drives an hour or more each way, always in peak hour traffic, and who would find tolls burdensome.  Although, strangely, this argument seldom seems to be made about those who pay bus fare that’s the same amount regardless of income.

Rather than rely on dueling anecdotes, we thought we’d take a look at the data.  How do the household incomes of those who drive to work compare to those who don’t? The American Community Survey gives us a window into the commuting patterns of the nation’s workers, and lets us look at variations in family income. We’ve used the indispensable IPUMS website to extract data on commuting choices and family income for the Portland metropolitan area.  The data are drawn from the five-year 2011-15 sample, and include all adults (persons aged 18 and older).

First, let’s compare the family incomes of those who travel to work by car with those who either aren’t in the labor force (non-workers). On average, adults who aren’t working (including not in the labor force, unemployed, retired and students), live in households with average incomes of just under $40,000 per year; those who commute to work by car have incomes about 75 percent higher ($73,600). Similarly, those who take transit (median household income of just under $45,000) and those who walk or bike to work (median incomes of just over $42,000) have much lower incomes than those who drive to work.  Overall, the median income of those who commute to work by car is more than 50 percent greater than those who aren’t workers or who travel by other modes.

Peak hour drivers have higher incomes

A second thing to keep in mind is that congestion pricing programs invariably charge higher fees to those who travel at peak travel times. But many workers, especially those with lower wages, don’t work a regular 9 to 5 schedule, and as a result, don’t travel during peak hours.

The American Community Survey provides a useful glimpse of these daily travel patterns. One of the questions it asks is what time workers usually depart on their journey to work.  (Unfortunately, the Census doesn’t ask what time workers usually leave work to travel home).  Nonetheless, ACS  gives us a good picture of which workers are traveling to work in the morning rush hour, so we use this data to divide workers into “peak” and “non-peak” travelers; treating those who routinely leave for work between 7:02 AM and 8:02 AM as “peak” travelers, and everyone else as “non-peak.”

For this analysis, we examine only those who commute to work by car — our objective here being to sort out the relative incomes of peak hour car commuters compared to those who drive to work at non-peak hours.

The following chart shows the results:

The median family income of those who drive at the peak hour (estimated from the morning peak) is nearly $83,000, about 20 percent higher than for those who drive to work at other hours.

These data suggest that peak hour road pricing predominantly affects those with the highest incomes. Those who don’t work, who travel to work by walking, cycling or transit, and those who commute to work in off-peak hours have incomes that are significantly lower than peak hour road users.

Its also important to note that accommodating peak hour drivers is the most expensive component of the transportation system:  One of the most unfair aspects of our current system of paying for roads is that it charges everyone the same amount, regardless of whether they use the road when its congested or whether they use it when few people are on the road.  A system that shifts more of the cost of the road system to peak hour users is fairer and more progressive than one that ignores mode and time of travel, as today’s road finance system largely does. Far from being inequitable, peak hour pricing asks those who place the greatest demand on the transportation system and have the highest ability to pay, to take financial responsibility.  That, more or less, is the definition of fairness.

Many thanks to the IPUMS team at the University of Minnesota:

Steven Ruggles, Katie Genadek, Ronald Goeken, Josiah Grover, and Matthew Sobek. Integrated Public Use Microdata Series: Version 6.0 [dataset]. Minneapolis: University of Minnesota, 2015. http://doi.org/10.18128/D010.V6.0.

Racial wealth disparities: How housing widens the gap

Posted on by Joe Cortright

The wealth of black families lags far behind whites, and housing markets play a key role

There’s a great article from The New York Times’ Emily Badger about a new study that shows just how much Americans (especially white Americans) underestimate the gap in the economic circumstances between black and white families. The study also makes the point that we tend to greatly overestimate the amount of progress that’s been made in closing that gap.

The Times’s story is based on research by Yale’s Michael Kraus, Julian Rucker and Jennifer Richeson, entitled “Americans misperceive racial economic equality.” Their paper that compares a series of surveys about perceptions of earnings, income and wealth gaps between blacks and whites with data gathered by the Census Bureau. The headline finding is that the average respondent thinks that black wealth is about 80 percent that of whites; whereas Census data suggest that black wealth is about 5 percent that of whites.

Let’s zero in for a moment on the question of the wealth disparity. While we have multiple measures of income, we have actually relatively few measures of the wealth of American households. One survey conducted by the Census Bureau (the Survey of Income and Program Participation, SIPP) asks questions about financial holdings and debts. The other survey is undertaken on a triennial basis by the Federal Reserve Board (the Survey of Consumer Finance, SCF). The SCF asks more detailed questions about investments, banking, credit, automobile and home ownership and related issues. There’s actually a terrific analysis by the Federal Reserve’s Jeffrey Thompson and Gustavo Suarez, entitled “Exploring the Racial Wealth Gap Using the Survey of Consumer Finances,”

We’ve plotted data from the Thompson & Suarez report  for the period 1989 through 2013 to chart the median net worth of black and non-Hispanic white households. The data are shown in 2013 dollars. The red line corresponds to the net worth of black households; the blue line non-Hispanic white households (values on the left axis) and the gray bars show median net worth of black households as a percentage of the median net worth of non-Hispanic white households (measured on the right axis).

A couple of observations: First: as of 2013, the net worth of the typical household hadn’t rebounded to pre-recession levels. This was true for white and black households alike. But the decline for black households was proportionately greater than for whites. The median net worth of black families fell 42 percent, from $19,200 in 2007 (on the eve of the Great Recession) to $11,100 in 2013.  The median net worth of white families decline as well, but by only 27 percent, from $183,500 in 2007 to $134,100 in 2013.

Second, as we look back at the longer historical record it was quite clear that during the 1990s in particular, black households were actually closing the wealth gap with their white counterparts.  In 1989, the typical black household had a net worth than was only 5.6 percent of the typical white household.  By 1998, black households net worth was 16.3 percent of that of whites. Black households treaded water during the early years of after 2000, and have clearly lost ground relative to whites in the wake of the Great Recession.  Today average black wealth stands at just 8.3 percent that of whites.  (This figure is slightly higher than the 5 percent reported in The New York Times story; excluding the value of owner-occupied homes, the SIPP reports that black wealth is about 5.3 percent that of white households in 2013.)

So what’s the explanation?

A lot of this has to do with housing markets, housing policy and the housing cycle. Households with good access to credit prior to the housing bubble were in the best position to profit from the run up in house prices (and note that white net worth outpaced black from 2001 onward). As we’ve explained at City Observatory, low income households generally, and households of color in particular tend to suffer from bad market timing: buying a home later in the housing cycle (when prices were higher) exposed them to more risk when housing markets collapsed. Moreover, housing is a larger fraction of the net worth of low income households and households of color, so when housing prices went down, they were harder hit that the typical white household (which had a much more diversified wealth portfolio).

There’s also an important spatial bias in black household homeownership. Black households tend to buy and own homes in neighborhoods with greater price volatility, especially on the downside. As Zillow demonstrated, the housing bust produced sharper and more sustained declines in home prices for households of color than for whites.

The takeaway–while it’s certainly true that white households have a huge (and widely under-estimated) edge in wealth, it’s not the case that we have not made progress. The decade of the 1990s stands out as a period in which the wealth of black households increased significantly relative to their white counterparts. What’s remarkable is that the housing bubble and the Great Recession essentially erased all of the relative gains in black household wealth from the 1990s. The lesson of the last twenty years seems to be that encouraging greater homeownership is not just ineffective in reducing the racial wealth gap, but is actually counterproductive.

And there’s a post-script here:  As startling as the wealth gap is between blacks and whites, its even sharper between owners and renters. According to the Census Bureau, the median net worth of a homeowner in the United States was $199,600.  The median net worth of renters is $2,200, barely one percent of that amount.  This disparity speaks strongly to the subsidies and tax preferences for housing as an investment. But it also shows that we have little if anything to offer in the way of a wealth-building strategy to the third to forty percent of the nation’s households who rent their homes. Given the financial perils of encouraging homeownership for those with modest incomes, we ought to be devoting more attention to mechanisms to help families build wealth without having to go long in the real estate market.

 

Cities lead national income growth, again

Posted on by Joe Cortright

Average household income in cities is increasing twice as fast as in their suburbs

Earlier this week, the Census Bureau released its latest estimates of national income based on the annual Current Population Survey. The data show some good news: a continued improvement in household incomes and a reduction in poverty. Median household income increased 3.2 percent to $59,039.  Significantly, poverty rates declined in 2016, by almost a full percentage point, from 13.5 percent to 12.7 percent.

But drilling down more deeply into these data shows that city economic growth, as measured by changes in average income has been especially strong. Median household income in “principal cities”–the most populous municipality in a metro area–were up 5.4 percent over a year earlier. Meanwhile, the increase in incomes in areas outside the principal city but still inside a metro area were up only about half as much: 2.1 percent. Although using municipal boundaries and principal cities to demarcate of “city” and “suburbs” is imperfect, these data suggest that income growth in cities is significantly outstripping that of suburbs.

This performance echoes a similar strong gain in city incomes that we reported on last year.  In 2015, city incomes out-paced suburban incomes according to Census Bureau tabulations 7.2 percent to 4.0 percent.

While the Census data show a clear pattern of city incomes outpacing suburban ones, they shed little light on the exact causes.  Is it the incomes of existing city residents that are increasing faster than the incomes of existing suburban residents, or is it the product of migration?  For example, if high income households are moving from suburbs to cities, and low income households are moving in the opposite direction, that would tend to accentuate city income growth and retard suburban income growth. The fraction of the population that moves in any one year is so small, however, that it’s unlikely to be the major cause here.

And for those who are worried about a so-called “Great Inversion”–the idea that cities are for now dominated by the rich and suburbs are populated largely by the poor–that’s clearly not the case.  Even after a couple of years of much faster income growth in cities, average household incomes in cities are still, in the aggregate, much lower than in the suburbs.  The median income of households in principal cities is $54,800, which is about 17 percent lower than the average of those living outside these principal cities in metropolitan areas ($66,300).  In 2016, cities closed the gap in incomes with suburbs by about 2.5 percentage points.  In addition, poverty rates in cities (15.9 percent) are still noticeably higher than in suburbs (10.0 percent).

This is yet more evidence of the growing strength of city economies. As we’ve pointed out at City Observatory, job growth in urban centers has been robust in this economic cycle, outpacing that of suburbs in many metro areas around the country. The demand for urban living is also fueling city income and economic growth.

Cash prizes for bad corporate citizenship, Amazon edition

Posted on by Joe Cortright

When we strongly incentivize anti-social behavior by big corporations, we get more of it

Everyone in the urban space is busy handicapping the Amazon horserace, to see which city will land Amazon’s HQ2, which promises to be the biggest economic development prize of the 21st century. Amazon’s RFP, issued last week, invites metro areas with a million or more population to submit their entries.

Which city will click with Amazon?

Prominent among them:  Show us your incentive packages:

Capital and Operating Costs – A stable and business-friendly environment and tax structure will be high-priority considerations for the Project. Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process.

Incentives – Identify incentive programs available for the Project at the state/province and local levels. Outline the type of incentive (i.e. land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers.

There’s actually very little to add to the speculation about which city has the inside edge. Plenty has been written that makes the most obvious points. Brookings’ Joseph Parilla narrows the list to 20 cities that have the size to accomodate the company. Richard Florida makes a strong case for the top half dozen. The New York Times Upshot has gone so far as to pick a winner (Denver); although their article is actually more helpful for thinking about the winnowing process than handicapping the eventual winner.

A common refrain is that this beauty contest is ultimately revealing as to 21st century corporate decision making factors. While there’s a lot of detail here, the factor that’s going to make the most difference is the availability of talent.  When you’re hiring upwards of 50,000 highly trained workers, as we’ve said before, the location decision is going to be made by the HR department. A city has to have a substantial base of talent–especially software engineers–and be a place that can easily attract and accomodate more.  Beyond these the availability of talent, it’s likely that analysts are reading too much into the criteria laid out in the RfP. The request for proposals was not drawn up to reveal Amazon’s decision criteria. It was drawn up to solicit the maximum number of credible incentive packages.

If you’ve been around the economic development fraternity for long, you’ll know that this is just the latest in a series of similar high profile corporate gambits to generate state and local subsidies. Back the the 1980s, states and cities were throwing themselves at GM’s newly minted Saturn division (remember them?), offering up subsidies for Microelectronics and ComputerTechnology Corporation (MCC) and submitting bids to be the home of the SuperConducting Super Collider. All three of these supposedly world-changing enterprises have since expired or been absorbed into other organizations.

Amazon–who after all, makes its business knowing the decision preferences of tens or hundreds of millions of customers–is hardly likely to rely on cities for the information to make its decision. In all likelihood, the company already has in mind a preferred site, or perhaps two.  The whole point of this exercise is to improve the company’s bargaining position for the location it wants.

Consider, for example, the recent case of General Electric’s relocation to Boston. The after the fact statements of the company’s CFO make it abundantly clear that GE was strongly attracted to Boston by the region’s urban amenities and the culture of innovation–attributes that could hardly be replicated at any price in most alternative locations.  Asked by the Wall Street Journal why GE chose an urban location (Boston’s Seaport District), CFO Jeffrey Bornstein emphasized these characteristics.

Yes. From the get-go we knew we wanted to be in a place that was vibrant and entrepreneurial, where you could walk out your door enriched by your environment and your ecosystem. I can walk out my door and visit four startups. In Fairfield, I couldn’t even walk out my door and get a sandwich.

We knew we wanted to be in a more urban environment where we could actually participate in the ecosystem and be smarter and more aware as a result.

Even though the chief financial officer acknowledges that talent and an entrepreneurial environment were critical, GE was handsomely rewarded with $145 million in incentives by going the Kabuki theatre route of pretending to be weighing lots of competing offers.  If anything, Amazon is more adept at this game than GE.  Greg LeRoy of Good Jobs First has pointed out that Amazon has managed to extract a quarter of a billion dollars incentives to support the construction of distribution centers around the country. The whole point of the HQ2 exercise is to up this game to a new and more lucrative set of subsidies.

As Richard Shearer of the Brookings Institution points out, the entire RFP exercise is a red herring:  At the end of the day, it’s likely to be reasons largely internal to Amazon’s business plans, corporate structure, and culture that dominate its location choice, not incentives. Amazon will face hard choices about which activities it hives off to headquarters two, and how to clearly demarcate and manage a company with two very large headquarters locations. It’s unlikely to risk the success of its enterprise on the difference between two sets of subsidies.

Corporations have choices. They could go about their business, and simply choose the best location, the one that makes the greatest business sense, and invest accordingly. Or they can as Amazon, GE, and dozens of others, go through the ritual of pretending to entertain a wide range of proposals, and use the leverage of competing bids to sweat the best possible deal out of their preferred location. The net result of our current approach is to provide giant cash rewards to those who engage in the most cynical behavior. As a result, while Amazon may turn out to be a winner, it may come at the cost of fiscally impoverishing the city that it chooses to locate in.  The other losers will be all the businesses against which Amazon competes, who are too small to have the leverage to insist on a comparable level of public subsidy for their similar operations.

 

Cognitive dissonance on the Potomac

Posted on by Joe Cortright

How can a city be named the first “LEED Platinum” city and be building freeways in its suburbs?

Submitted for your approval: Two recent news items from our nation’s capital.  In the first, Washington DC proudly announced that has been proclaimed the world’s first LEED Platinum city–based on the number of LEED-certified buildings it’s built in the past decade.  Here’s a story from Washington’s WAMU:

 

The second news item is about the region’s progress toward building a $2.3 billion, 22-mile long I-66 freeway widening project to fuel ever longer commutes from its most distant, and still sprawling suburbs.  To be fair, several of the lanes will be high occupancy toll lanes, and will price travel and encourage carpooling; but the net effect of the project is to greatly expand the capacity for car travel. Meanwhile, massive maintenance and repair problems plague the DC Metro subway system, and its financial health seems to be in even worse shape.

To us, this raises a big question:  How can you bee a LEED platinum city, if you are spending billions widening freeways, and your public transit system is in physical and financial disarray?

The LEED Platinum City status is handed out by the US Green Building Council, and while it’s a step forward from the structure-by-structure approach to sustainability, it’s looks a lot like a lifetime achievement award for getting (and ponying up for) LEED certification for new buildings.  And keep in mind, there are real questions as to whether LEED certified buildings are, on average, any more energy efficient than other new buildings. Washington DC has more than 120 LEED certified projects according to the Green Building Council but that’s still a tiny fraction of the entire building stock of of tens of thousands of commercial, office, industrial and residential properties in the city.  As related by WAMU, erecting lots of LEED certified buildings seems to be a key reason Washington earned platinum status:

On the green building front in particular, the District leads the way within the United States. The city has more LEED-certified projects per capita than any state. Many of those facilities are part of the D.C. public school system, including Brookland Middle School, which recently became the third D.C. Public School facility to receive a LEED Platinum certification.

Like many other US city leaders, DC Mayor Muriel Bowser makes a point of declaring the city’s commitment to following the Paris Climate Accords. But a rhetorical commitment to fighting climate disruption requires something more than slightly more efficient buildings.  In most cities, transportation is a principal source of greenhouse gas emissions.  No matter how many LEED buildings you build inside the beltway, if your regional transportation system is built on an ever-expanding freeways, it’s hard to see how you can think of your city as “sustainable.”

We seem to be stuck in this unfortunate world of cognitive dissonance, where mayors and architects proudly attach LEED plaques to relative handfuls of green buildings in one part of town, while at the same time, just down the road, massive amounts of public resources are subsidizing auto travel and sprawl.

As we suggested when it came to the solar powered 1,400 space parking garage put up by the National Renewable Energy Laboratory, and a Zero Net Energy Home with a sub-50 walk score, it takes a particular kind of tunnel vision to look only at the energy used by particular buildings, and to completely ignore the energy and pollution intrinsically associated with the urban (or suburban) landscape and transportation system of which they are a part: A kind of tunnel vision that puts you squarely in the twilight zone.

Oh, no! Is the urban revival really over?

Posted on by Joe Cortright

Reports of the demise of the city rebound have been greatly exaggerated

Richard Florida’s op-ed piece in The New York Times last week had an eye-catching headline:  “The Urban Revival is Over.” Here was the apostle of cities, apparently calling and end to the bull market for urban living.

First, let it be said that–as is so often the case–the headline bears only a passing resemblance to the arguments advanced in the article. Editors, not authors, write headlines, so the savvy reader should discount accordingly. In tweeting out the article, Florida synopsized his argument as “Our fragile urban revival” not “the “urban revival is over.”

Second, let us push back on some of the arguments advanced about cities. As we’ve noted time and again, looking to changes in municipal population totals is an unreliable guide to judging the growth or decline of of dense, urban neighborhoods. Many expansive municipalities (Chicago, Phoenix, Jacksonville) take in neighborhoods that would usually be thought of as suburban (i.e. tracts of lower density, single-family auto-oriented development). As is the case in places like Chicago, the densest, close-in urban neighborhoods continue to add population at fast clip, while older more distant neighborhoods continue to shed population.

It’s also worth noting that despite the slowdown in population growth in cities relative to their suburbs, that’s only in comparison to the recent very strong performance by cities. After decades of decline (in the 70s, 80s and 90s), cities are doing better in terms of both job and population growth (even if, in the aggregate, they’re not outpacing suburbs anymore). Consider this analysis of county-level data from Jed Kolko; the densest urban counties aren’t wildly out-performing less dense suburban ones as they did a few years ago; but they are growing consistently faster than they did in previous decades. Meanwhile, the least dense counties aren’t growing as fast at they did in the last boom. We think counties are far from the ideal geography to measure urbanism, but urban counties were losing population a decade ago; and though they’ve slowed, they’re still growing today.

The slowing of urban growth, moreover, doesn’t so much reflect any diminished demand for urban living–quite the opposite. We’re bumping up against the limits of the capacity of the existing urban housing stock to accomodate more residents. In the early days of the urban rebound, there was arguably a fair amount of slack in city housing markets. But the renewed and steady growth of cities has–as everyone has observed–led demand to outstrip supply, driving up rents and heightening concerns about affordability. At least some of what gets treated as the “revealed preference” for suburbs, is actually households that would gladly choose urban living–if it hadn’t gotten so pricey. This shows up in the steepening of the rent gradient: households are paying a higher premium to live closer to the urban center; a finding illustrated by Lena Edlund and her colleagues and Columbia:

So the problem isn’t so much that the era of the city has ended, but rather that we’ve hit the point at which future increases in city populations will depend on local governments accommodating the growing demand for urban living. Even in the best of circumstances, in accommodative jurisdictions like Seattle, this process takes time, and there’s invariably a lag between market demand, a rise in rents, the recognition of development opportunities, obtaining finance and needed permits and actually building new housing. There are signs that in some cities, supply is starting to catch up. But in other places where NIMBYism has a stronger hold, the land use planning process still constrains the growth of cities. This is true in some of the most desirable urban markets (New York, San Francisco).

At least one part of Florida’s argument for a bust in the market for city living strikes us as flat out wrong:  Crime. Florida notes that murder rates have ticked up in a handful of cities (Baltimore, St. Louis, Milwaukee).  But that’s scant evidence for a claim that crime is “foremost” among the factors stymying the urban revival. The long term trend in urban crime has been downward for more than two decades, with the result that crime in most large cities is now half what it was in the 1990s. And if the crime argument made any sense, it ought to be accompanied by falling demand for urban living and declining rents (something we observed in cities when crime was a growing problem in the 1950s and 1960s). The crime conjecture is simply at odds with the steady growth in urban home values and rents we see in cities around the country.

Rather that proclaiming the end of the urban revival, Florida’s evidence really makes the case for a renewed national commitment to building more great urban neighborhoods. Surely, as Florida suggests, the urban revival is fragile.  It depends heavily on overcoming many of the institutional and policy biases that work against the growth and development of great cities.

 

The Week Observed, September 22, 2017

Posted on by Joe Cortright

What City Observatory did this week

1. What price autonomous vehicles?  It’s easy to obsess about the cool technological details of autonomous vehicles: their sophisticated computers, LIDAR systems, and vehicle-to-vehicle communication. But for economists, the big variable determining their impact is likely to hinge on their price. There’s a wide range of speculation now about the prices that are likely to be charged for the per-trip use of autonomous vehicles operated as part of for-hire fleets. The cost might be as much as $1 per mile or as little as 15 cents.  Where it falls in this range will have a big impact on car ownership, transit operators, and cities.

2. How housing widens racial wealth disparities. As The New York Times reported last week, Americans greatly misperceive the black-white wealth gap; we think that black wealth is as much as 80 percent that of whites, but actually its more like 5 percent. We dig deep into the multi-decade trends in the black-white wealth gap; it turns out that we were closing that gap noticeably during the 1990s, but that it opened up again since 2000. A key factor explaining the deterioration in relative black wealth: the housing market. Households of color were less well-positioned to gain in the housing bubble, and were more vulnerable in its collapse, which produced a 42 percent decline in black median wealth. Promoting more widespread homeownership turns out to be a lousy way to try to reduce the racial wealth gap.

Must read

1. You can build your way to housing affordability. It’s a commonly repeated shibboleth: you can’t build enough housing to address affordability. But Sightline Institute’s Alan Durning argues that oft-repeated claim is flat-out wrong. Creating conditions where more supply can be built materially lowers housing costs. Durning marshals examples from around the US and around the world of cities that have liberalized restrictions, especially on building up, and shows that these places have measurably lower housing costs.

2. You’ll never be homeless in America, if you’re a car. A trenchant observation from Patrick Clark at Bloomberg Business Week; the number of three car garages built in the US exceeds the number of one-bedroom apartments. Moreover, at a rough average of 1,000 square feet, they’re comparable in size. It speaks volumes about American priorities that we have policies that subsidize larger homes (and their car storage facilities) in suburbs, while we have a decided shortage of affordable rental housing in the nation’s cities.

New Research

The high cost of parking subsidies. Streetsblog has an excellent summary of a new report from the Transit Center addressing the costs and consequences of parking subsidies. Through the tax code, the federal government offers generous subsidies to those who commute by single occupancy vehicle to city centers. Parking expenses up to $255 per month are excludable from taxable income, a benefit that costs the federal government more than $7 billion a year. The subsidies are most valuable for high income workers in places where parking is most expensive: usually in the central business district of large cities. The subsidies have the perverse effect of encouraging more people to drive, clogging roads, and undercutting the fiscal viability of public transit. Based on research by Virginia Tech’s Andrea Hamre, the report estimates that in large cities like New York, Philadelphia and Washington, that the parking subsidy reduces transit’s market share of commute trips by about a quarter.

In the News

Planetizen nominated City Observatory Director Joe Cortright as one of the 100 most influential urbanists. He’s in good company, with everyone from Jane Jacobs and Richard Florida to Carol Coletta and Ed Glaeser. We’re honored to have City Observatory mentioned in the same breath with these giants of the field.

The Portland Tribune looked at local trends in city and suburban growth, and quoted Joe Cortright’s observations that cities like Portland have grown mostly in the past few years by taking up the slack in local housing supply, and as a result are bumping up against supply constraints in seeing further population growth.

The Week Observed, September 29, 2017

Posted on by Joe Cortright

What City Observatory did this week

1.Interim report card on Portland’s Inclusionary Zoning Ordinance: An Incomplete. Portland’s inclusionary zoning requirements have been in effect for six months. While the ordinance prompted a land rush of development applications filed under the old rules, private sector apartment applications have almost completely evaporated since then. We take a close look at how the ordinance changes the incentives for development, and how it will likely lead to fewer and smaller apartments in Portland in the years ahead, and as a result end up compounding rather than reducing the city’s affordability problems.

2. Transportation Equity: Why peak hour pricing is fair and progressive. Portland’s planning to implement road pricing for its freeways, and some are raising concerns that tolling could be an undue burden on low income workers. We take a close look at Census data on the average incomes of workers both by transportation mode and by the time they travel. In metro Portland, car commuters have incomes that average about 70 percent higher than those who walk, bike or ride transit. In addition, peak hour drivers have median incomes over $80,000, more than 20 percent higher than those who drive to work during off-peak hours. This suggests that peak hour drivers–who are the most expensive travelers to serve–have higher incomes and greater ability to pay than the rest of the region’s residents.

Must read

1. International rent comparisons. Most of the rankings we see of variations in rental costs compare one US city against others. RentCafe has broadened its horizons to ask how much the equivalent of US$ 1,500 will buy you in the way of an apartment in large cities around the world. The most expensive markets are Manhattan, London and Zurich, where your $1,500 will get you barely 300 square feet (a tiny studio). But in other large cities, you get a lot more for your money: in Vienna, Frankfurt and Seoul, your $1,500 will get you more than 1,000 square feet.  Not only does this page summarize findings for 30 of the most “magnetic” cities in the world, RentCafe has thoughtfully linked to some local rental listings websites, like locservice.fr, rentswatch.com and propertyguru.com.sg, that let you drill down to neighborhood level data for each of these cities.

2. Is population growth a good metric of urban success? An essay at Governing questions whether population growth, by itself, is an indicator that a city is succeeding. It’s routine in the media to call some cities “winners” if they’re gaining population, and other’s “losers” if they’re not growing as fast, but research by Paul Gottlieb and others shows that wealth and economic success of cities isn’t necessarily correlated with population growth. Some fast growing places have fragile, un-sustainable economies; some slower growing places are building wealth and improving the quality of life of their residents. While chronic population loss is usually a measure of a failing city, the level of population growth may be only a weak, and partial correlate of successful places.

3. How rent control affects housing supply. Toronto has adopted rent control that limits annual rent increases for most apartments to 2.5 percent annually.  Previously, the rent control requirement had applied only to apartments built prior to 1991, with newer construction exempted from the law, in theory to incentivize additional supply. But as often happens with rent control, promises to exclude new construction from controls can be rescinded. Predictably, developers and apartment owners are seeking alternatives to avoid the law. According to the Globe and Mail, more than 1,000 planned rental units have been converted into for sale condominiums (which aren’t covered by rent control), and other developers are “reviewing” whether to go forward with planned projects.

4. “Snob zoning is racial housing segregation by another name.”  The title of Elizabeth Winkler’s column in the Washington Post’s Wonkblog pretty much says it all.  Municipal bans on small lot single family homes and on apartments are a thinly veiled means of excluding people of color from economic access to suburbs. “The laws do not specifically mention race, but because African-Americans and Latinos have on average far less wealth and income than white people, the laws do tend to drive people of color out and keep neighborhoods more uniformly white. ”

New Research

Food Deserts: Recasting poverty as a real estate problem. Laura Wolf-Powers has a critical essay questioning the rise of the “food desert” framing of poverty and hunger in cities. In her view, the food deserts concept leads to policy interventions that emphasize real estate over directly addressing the lack of income of the urban poor. It makes little sense, in her view, to subsidize grocery stores while we are cutting funding for programs like Supplemental Nutritional Assistance Program (SNAP). A focus on real estate distracts attention from policies to raise wages and incomes.

 

The Week Observed, September 15, 2017

Posted on by Joe Cortright

What City Observatory did this week

1. Cash prizes for bad corporate citizenship.  The urban world is all abuzz, handicapping the city vs. city vs. city race to land Amazon’s HQ2, a rich prize of investment and jobs.  Amazon’s request for proposals asks cities to sweeten their bids with an array of tax breaks and other subsidies. And while 50 (or more) cities are likely to respond, its almost certainly the case the Amazon already has just one or two candidate locations.  The high profile beauty contest is less about generating more information about possible locations, and more about giving the company the strongest possible leverage to extract concessions from its preferred location. Aside from the obvious importance of a city that has a strong talent base (and the quality of life to attract even more talented workers), the Amazon RfP tells us less about corporate location requirements than it does about corporate cynicism when it comes to public finance.

2.  Cities are leading in national income growth.  We got some good economic news this past week.  Annual tabulations of census data show that median household income is up and has fully recovered, in inflation-adjusted terms, from the effects of the Great Recession.  More good news:  Poverty rates have fallen by almost a full percentage point in the past year. And income growth has been fastest in the nation’s cities.  City incomes grew by 5.4 percent in 2016, more than double the rate of income growth in their surrounding suburbs.  This is more evidence that US economic growth is increasingly powered by what’s happening in the nation’s urban centers.

 

Must read

1.How local housing regulations hurt the national economy.  Writing in The New York Times, Chang-Tai Hsieh and Enrico Moretti summarize the results of their research on the connections between city size and economic productivity. Some cities are far more productive than others, and the limits on housing supply in those cities not only constrains their growth (not to mention driving up housing prices) but also lowers the overall productivity of the US economy and tends to decrease economic opportunity. They estimate the national economic cost of local housing regulations at about $1.4 trillion annually.

2. An instant experiment in pricing and road demand. Earlier this month, the new government of British Columbia abruptly ended tolls on its multi-billion dollar Port Mann and Golden Ears Bridges. In the space of a few days, traffic levels on the bridges jumped more than 20 percent. Although its a crazy policy change–and leaves a gaping hole in the budget for these projects, that will have to be subsidized by non-users–it shows just how dramatically and quickly traffic levels respond to changes in prices.

3. Portland community activists fight a freeway widening project. The Portland Mercury describes the unfolding battle over a plan to spend nearly half a billion dollars widening a mile long stretch of Interstate 5 through Portland.

 

The Week Observed, September 1, 2017

Posted on by Joe Cortright

What City Observatory did this week

1. Inequality in three charts. New data produced by Thomas Piketty and his colleagues provides a rich, high-definition look at the growth of income inequality in the US. But while the quality of our understanding of the inequality problem has improved, it’s apparent that the growth of inequality in the US has been obvious for more than a quarter century. It’s also interesting to compare inequality in the US to global trends. While the US income distribution is more unequal, global incomes have mostly tended toward greater equality, chiefly due to rapid economic growth in Asia. The worst income growth has been recorded by those in the bottom-half of the income distribution in richer, Western countries.

2. A peek at Uber’s ride-hailing data. Ride-hailing companies like Uber and Lyft have been notoriously reluctant to share the copious travel data generated by their activities. Uber has lifted the veil just a bit, and begun publishing travel time data through a new portal called “Movement.” Movement allows users to monitor variations in travel times between any two points in a metro area by time of day and over a period of several months or years. It can help answer questions about whether travel times on city streets are getting shorter or longer. There are some key limitations: data is richest in dense urban spaces (where Uber provides most of its rides) and so far only a handful of cities are available, including Boston and Washington. Still, its a great tool, and we hope Uber expands it to all the cities it serves, and continues to make comparable data available over time.

Must read

1. As Philadelphia’s center city population grows, demand for parking declines. Inga Saffron has a terrific article descrbing how garages and parking lots in Philadelphia’s center city are being converted to new housing. And remarkably, the demand for car storage in these increasingly populous urban neighobrhoods is going down. Population in the city center is up 16 percent since 2000, but the occupancy rate of city center garages, which peaked at about 78 percent in 2005, is down to about 74 percent. Saffron attributes the decline to the growing density of commercial activity in walkable neighborhoods and the advent of ride-hailing services; fewer than half of center city residents own cars. One problem remains: because the city underprices street parking — annual permits cost just $35 –the streets are full of parked cars.

2. Harvey and Houston’s non-zoning regime. It’s apparent that the damage wrought by Hurricane Harvey was amplified by Houston’s sprawling development, which covered over water absorbing land, and accelerated the rate of runoff from roofs, roadways and parking lots. As Daniel Hertz explains, while Houston doesn’t have zoning per se, other features of its system for regulating development encourage sprawling, low-density growth. The city prescribes and enforces minimum off-street parking requirements and mandates wide roadways, all of which increase impervious surfaces and runoff.

3. Climate change:  Fight or adapt. Writing at Pedestrian Observations, Alon Levy takes a critical view of strategies to promote adaptation in the face of climate disruption. Many rich, low lying-communities around the world have the resources to adapt to rising sea levels, more violent storms, and hotter weather. But while the rich can take refuge behind flood walls or air conditioning, the world’s poor don’t have those choices. At the same time dozens were dying due to Hurricane Harvey in Houston, 1,200 perished in floods associated with unseasonably strong monsoons in India and Bangladesh. In essence, adaptation is tantamount  Choosing adaptation over fighting climate change more aggressively is tantamount to climate apartheid, with safety for the rich, and vulnerability for the poor.

 

 

The Week Observed, September 8, 2017

Posted on by Joe Cortright

What City Observatory did this week

1. Is the urban revival over? A provocative (but highly misleading) headline in last week’s New York Times sits atop Richard Florida’s op-ed about the future of cities. Although Florida is really making the case that the urban revival is “fragile,” the headline says the revival is over. Actually, the evidence presented here doesn’t support that claim. Though growing somewhat slower than suburbs in the past two years, city growth has accelerated compared to the previous decade, while the suburban growth rate has slowed. More importantly, the continued growth in the demand for urban living shows up in the rising house price and rent premium Americans are paying to live in the densest, most urban locations. The biggest threat to the urban revival is our failure to build enough housing in the kinds of urban neighborhoods Americans most want to live in. Until we fix that problem, we’ll be bumping up against a shortage of cities.

2. Can you claim to be a LEED platinum city if your region is widening freeways? Washington DC just announced that it had been named the world’s first “LEED Platinum” city, based at least partly on the fact that the city has more LEED certified buildings per capita than just about anyone. But at the same time, the Washington area is just about to move forward with a $3 billion freeway widening project, that will likely further encourage car travel and sprawl. It’s another example of obsessing about the energy use of particular buildings (often just a few high profile ones at that), and ignoring how urban form and car-dependent transportation systems are the real threat to our climate.

Must read

1. The flaw with Net Zero. A growing number of innovative new green buildings, including (we think dubiously) some parking garages, make the claim that they are “net zero” consumers of energy. Lloyd Alter gives us some good reason to be skeptical of these Net Zero claims. The claim is usually based on the observation that the total value of energy that the building produces (say the output of solar collectors or wind turbines fastened to the building) is greater than the amount of energy consumed by the building itself. While that arithmetic may be accurate, it misses the fact that energy produced at one time (at noon in July) can’t be used at another time (say to heat and light the building in the dead of winter).

2. Is it legal to be a kid in the city? Adrian Cook lives in with his family in a condominium in Vancouver and writes the blog 5kids1condo.  He recently taught his four oldest kids (ages 7 to 11) how to ride the city’s great public transit system to get to school. As Lenore Skenazy relates in her blog Free Range Kids, Cook’s efforts to let his kids roam freely drew the ire of the Canadian version of child protective services, who investigated Cook, and ruled that it was against the law for children under ten to be unsupervised by an adult, inside or outside a home. When the state insists that any form of parenting other than helicopter parenting is illegal, it’s committing another crime: depriving children of their agency and their opportunity to develop a sense of independence and responsibility.

3.  Is Houston a model city?  Was it ever? Now writing for the New York Times, Emily Badger looks at the effect of Hurricane Harvey on Houston’s reputation for a certain kind of urbanism. Some, like Joel Kotkin and Wendell Cox remain steadfast that Houston’s sprawling development pattern is still the way to go.  But in the wake of Hurricane’s damage, amplified by a lasseiz faire attitude, particularly with regard to impermeable surfaces and stormwater runoff, its harder to justify Houston as a model. At a minimum the city’s development pattern no longer looks like such a bargain if one adds in the $180 billion cost of repairing the damage from just this storm.

4. Where Houston flooded. Trulia’s Ralph McLaughlin has assembled the data to show the Houston neighborhoods most affected by flooding from Harvey. It shows just how extensive the damage was in the region.

New Knowledge

Crime rates hover near a three-decade low in 2017. A new report from the Brennan Institute of Justice looks at crime statistics from early 2017 for 30 of the nation’s largest cities, and projects overall crime rates for the year.  They find that 2017 is on track to see about a 2.5 percent decline in crime from 2016, and that overall crime in 2017 is likely to turn out to be the second lowest rate recorded since 1990. They report that murder rates are down in many cities, including Detroit (-26 percent), Houston (-20 percent) and New York (-19 percent). The overall crime rate in the nation’s largest cities has fallen about 60 percent since 1990, from 10,000 crimes per 100,000 population, to fewer than 4,000.

What price for autonomous vehicles?

Posted on by Joe Cortright

It’s easy to focus on technology, but pricing will determine autonomous vehicles impact.

Everyone’s trying hard to imagine what a future full of autonomous cars might look like. Sure, there are big questions about whether a technology company or a conventional car company will succeed, whether the critical factor will be manufacturing prowess or software sophistication, and all manner of other technical details.

How much will it cost?
How much will it cost?

But for economists — and also for urbanists of all stripes — a very big question has to be:  How much will autonomous cars cost?  We’re going to tackle this important question in two parts.  Part one–today–assembles some of the estimates that have been made.  We’ll aim to ballpark the approximate cost per mile of autonomous vehicles.  In part two–tomorrow–we’ll consider what this range of estimates implies for the future of urban transportation, and for cities themselves, because transportation and urban form are so closely interrelated.

So here is a first preliminary list of some of the estimates of the cost per mile of operating autonomous vehicles.  We’ve reproduced data from a number of sources, including universities, manufacturers, and consulting firms. Its difficult to make direct comparisons between these estimates, because they not only employ different assumptions, but also forecast costs for different future years (with unstated assumptions about inflation). There’s some significant disagreement about the cost of operation of current vehicles, which range from 59 cents per mile to 84 cents per mile.  (For this commentary, we’ve assembled these estimates without undertaking our own analysis of their accuracy or reliability; we encourage interested readers to click through and read each of these studies and draw their own conclusions about their utility).

ford_av$1.00 per mile.
Ford (2016) thinks it can reduce the cost of highly automated vehicles to about $1.00 per mile, making them highly competitive with taxis which it estimates cost $6.00 per mile.
rmi_av_203551 cents per mile (2025), 33 cents per mile (2040)
Rocky Mountain Institute (2016) estimates that in 2018, autonomous vehicle costs will be roughly competitive with current vehicles (about 84 cents per mile), but will steadily decline, to 51 cents per mile by 2025 and 33 cents per mile by 2040.
morgan_stanley_share_owned50 cents per mile (2030).
Morgan Stanley (2016) estimates autonomous vehicles will cost about 50 cents per mile by 2030, compared to about 74 cents per mile for privately owned standard vehicles."
kpmg_201643 cents per mile.
KPMG (2016) estimates costs of 43 cents per mile total. It estimates current cars have variable costs of 21 cents per mile and fixed costs of 61 cents per mile for a total of 84 cents per mile. KPMG estimates new shared AVs would cost 17 cents per mile variable, and 26 cents per mile fixed (43 cents per mile total) with $25K car fully depreciated in 3 years being driven about 40K miles per year.
deloitte31 to 46 cents per mile.
Deloitte (2016) estimates costs of 46 cents to as little as 31 cents per mile for autonomous vehicles; the latter estimate corresponds to low speed purpose built pods.
barclays_201629 cents per mile (2040)
Barclay’s (2016) estimates the costs of autonomous vehicles at .29 per mile by 2040, compared to about 66 cents per mile for conventional, privately owned vehicles today.
earthinstitute_201315-41 cents per mile.
Columbia University Earth Institute (2013) estimates costs of autonomous vehicles would be about 41 cents per mile for full-sized vehicles and could be as little as 15 cents per mile for purpose-built low speed vehicles. This compares to costs of 59 to 75 cents per mile for conventional privately owned automobiles.

The estimates for future costs range from as much as a dollar per mile (Ford’s near term estimate of its cost of operation for what it refers to as “highly automated vehicles),” to an estimate of 15 cents per mile a decade or more from now for the operation of small purpose-built low-speed urban “pods”–like Google’s prototype autonomous vehicle.  Overall, the estimates imply that fleets of autonomous vehicles could be operated in US cities in the next decade or two for something between 30 and 50 cents per mile.

And, for a variety of reasons–which we’ll explore in more detail tomorrow–the deployment of autonomous vehicles is much more likely to occur in cities. The critical factor is that market demand will be strongest in cities. According to the Wall Street Journal, autonomous vehicles will initially  be restricted to low speeds, avoid bad weather and stay within carefully circumscribed territories (given the cost and complexity of constructing the detailed maps  autonomous vehicles to navigate streets), all factors that point to cities.

These estimates hinge on a number of important assumptions about operating costs. The highest estimates usually assume some form of automating something resembling existing vehicles; operating costs are assumed to be lower with electric propulsion and smaller vehicles. A key cost driver is vehicle utilization and lifetime; fleets of autonomous vehicles are assumed to be used much more intensively than today’s privately owned cars, with a big reduction in capital cost per mile traveled.

There are some other big assumptions about whole categories of costs, and the policy environment looking forward. Todd Litman raises the concern that autonomous vehicles will require relatively high expenditures for cleaning, maintenance and vandalism repair, as much as hundreds of dollars per week.  Its not clear that any of the estimates for the costs of operating electric vehicles include any kind of road user fee to replace gas tax revenues now paid by internal combustion powered vehicles.

Despite they uncertainties, the available estimates suggest that successful autonomous vehicles could be substantially cheaper than today’s cars. And if they’re available on-demand and a la carte–freeing users from the cost of ownership, parking, maintenance and insurance–this may engender large changes in consumer and travel behavior.