Affordable housing and sensible transportation were our most-read features

#7 – Urban myth busting: How building more high income housing helps affordability.  One of the predictable lamentations about the housing market is that developers are always building new structures for middle and upper income households, and nothing for the poor. That observation fuels an argument that more new high-end construction somehow makes all housing less affordable.. But building housing for higher income households increases the supply, and means that these households are less likely to compete with everyone else for other housing. This indirect effect is how high income housing actually helps affordability.

#6 – How luxury housing becomes affordable. Housing is a long-lived asset. Most new housing is built for the higher end of the market (see #7, above), but as it ages, it tends to become relatively less attractive. It’s hard to imagine, but many of the apartments built in the 1920s or 1960s were built for the relatively affluent. Today, these older buildings make up the core of every cities more affordable units. This process of depreciation and filtering turns once luxury housing into affordable units, but whether older units become more affordable depends significantly on whether we build enough new units (even for those with higher incomes) to allow this filtering process to proceed.

#5 – The end of the housing supply debate. Some affordable housing advocates are conceding–grudgingly–that increased housing supply will improve affordability and lessen displacement. A recent article in Shelterforce calls for an emphasis on “trickle up” housing–building more publicly subsidized affordable units at the low end of the market, because these units are twice as effective in reducing displacement as building new market-rate units. Given the great expense of new affordable units (up to $700,000 in the Bay Area, for example), we think that’s actually a strong argument for pushing more market rate housing.  The evidence suggests that two new high-priced market rate units have basically the same impact in reducing displacement as one additional “affordable” unit. Moreover, the policies that facilitate more market rate housing (more land zoned for apartments, lessened parking requirements, faster approval processes) would also lower the cost of building more affordable housing.

#4 – Signs of the times. A year ago, the only thing scarcer in deep blue Portland Oregon than “Trump for President” lawn signs were “For Rent” signs. What a difference a year makes: a quick survey of Portland neighborhoods shows “For Rent” signs popping up like mushrooms after the first fall rains the in Pacific Northwest. As supply catches up with demand, more apartments (especially older ones) are becoming vacant. It’s the first signal that more supply is going to ease the city’s affordability problems. Rents–which were rising at double digit rates in 2016–are actually down slightly over the past twelve months.

#3 – Carmageddon strikes Atlanta.  A fire that led to the collapse of a section of I-85 in Atlanta produced the predictable claims of carmaggedon. It seems obvious that eliminating a stretch of freeway (in car-dependent Atlanta, of all places) that carried more than 250,000 cars per day would wreak havoc on the region’s transportation system. Some news outlooks predicted months of travel chaos. But travel patterns quickly adapted to the changed roadway system–just days after the collapse (and with the roadway still out of commission) traffic in most of the Atlanta region was back to normal (still not great, but normal for Atlanta). It’s a reminder that traffic isn’t an inexorable tide, but the result of the malleable decisions of humans, who as it turns out are pretty good at adapting to change.

#2 – Going faster doesn’t make you happier. The implication of most of the metrics that guide highway planning is that faster is better. But are cities with faster moving traffic better for their residents? We use data from the National Household Travel Survey that compare the relative speeds of travel in different cities and survey data on satisfaction with the local transportation system to explore this question. What we find is that there’s essentially no correlation between travel speeds and citizen satisfaction with the local transportation system. If anything, the relationship is negative: places with faster travel speeds have lower satisfaction. In contrast, we find that longer commute distances have a strong negative correlation with satisfaction. It’s not how fast you drive, its how far you have to travel.

#1 – Don’t demonize driving, just stop subsidizing it. There’s a fair case to be made that cars and driving cause lots of problems, in economic terms, they have significant negative externalities (crashes, congestion, pollution, sprawl, etc.) That doesn’t lead us to want to declare a war on cars. Cars have many important advantages (speed, comfort, privacy, convenience). What we ought to insist upon, however, is that cars and their drivers pay the full costs for the systems they use and the damage they do. If we didn’t subsidize cars and driving so heavily, the negative effects would be far smaller, and we’d all be better off.

The so-called “peak millennial” conjecture.  Is it right? What does it mean? Should I care?

Time has published an article, based largely on the research of UCLA demographer Dowell Myers, proclaiming that US cities are hitting “peak millennial.” We’ve been critical of the peak millennial claims in the past. The gist of Myers argument is that we’ve seen the high water mark for the effect of millennials on urban growth, and that like previous generations, they’re going to decamp to the suburbs, and this whole “back to the city” movement will be over.

The key factoids in the Time article are the observations that the number of millennials in three cities–Boston, Chicago and Los Angeles–have declined between 2015 and 2016 according to the latest American Community Survey tabulations.

Time’s headline shouts the claim that the young are leaving cities

These Cities Have Already Reached ‘Peak Millennial’ as Young People Begin to Leave

We’re told that:

Millennials flocked to U.S. cities over the past decade, but in some places, the migration appears to be reversing . . . Myers says it’s only a matter of time before millennials head to the suburbs for more space.

What this seems to suggest is that young people have somehow become disenchanted with cities.

As we’ve pointed out, there’s a problem with equating “millennials” and “young people.”  In the past decade or so, all of the 20-somethings in the United States were millennials, and most of the millennials were 20-somethings, so it wasn’t far off the mark to use to two terms interchangeably.  But, inexorably, time and the aging process are moving millennials out of the “young people” category. And that’s really what these numbers show:  the oldest millennials (per Myers definition) are now 36; in 2007 the oldest were just 27.  There’s never been any question that there is a life-cycle effect: 36 year olds tend to be much more likely than 27 year olds to live in suburbs rather than cities.

Shifting definitions:  What’s a millennial? Who’s young?

The Time Magazine article quotes data gathered by Myers using  a definition of millennial as those born between 1980 and 1996, a definition he attributes to Gallup. But that’s a different definition than Myers used in the paper he published last year on peak millennials, where he said millennials were those born over a full two-decade period.

“A practical definition of birth years between 1980 and 1999 is adopted here . . .”

It’s probably inconsequential to the analysis, but is an indicator of how arbitrary the generational label “millennial” is that even a single author uses different dates to define the beginning and end of the generation in successive analyses.

In our view, looking at a single generation (or birth cohort) however defined at different points in time inherently confuses life cycle changes with generational shifts.  Our preferred  approach is to look at people in a specific age group, recognizing that successive birth cohorts are aging in and aging out of particular age groups all the time.  This approach tells us whether young adults today are behaving differently than young adults of earlier generations.  Comparing a single birth cohort’s location at two different years is really just recapitulating what we already know about life cycle tendencies rather than telling us anything about generational shifts.

To avoid muddling the picture with life-cycle effects, it makes more sense to look at the detailed data on US population by age group, and how the number of persons in each age group will change over time. The Census Bureau predicts these numbers based on birth and death rates and estimates of net international migration. abstracting from the relatively minor effects of international migration and mortality on this age group, all of the people who are and will be young adults are here (in the US) and we can be quite confident of how many there will be in each age group in the years ahead.  Focusing on prime age young adults — those 25 to 34 years old (a definition we’ve used consistently in our research for the past decade or more), we can expect a continued increase in their numbers well in to the next decade. These estimates show the number of 25 to 34 year olds plateauing, but not declining in the mid-2020s.

Picked Cherries?  Millennials are still increasing in many cities.

The Time article makes much of the fact that there are slightly fewer millennials in 2016 in Boston, Chicago and Los Angeles than there were in 2015. But that’s a small sample.  Is it typical?  Myers notes that over the past year, Boston recorded a slight decline in its millennial population (after a solid decade of increases). There’s a pretty obvious reason why this would be the case: Boston’s demographic profile is significantly skewed by college students.  It’s no surprise that Boston had more “millennials” when they were in the 18 to 34 age range in 2014, than they do in 2016 when they are in the 20-36 age range:  when you excluded 18 and 19 year olds from your sample in a city with a high fraction of college students, you’re going to get a lower total..

We selected three other cities (San Francisco, Seattle and Portland) to see if the same trends held for these places, which have been leading attractors of millennials.  We didn’t have immediate access to the IPUMS version of the ACS data for 2016, so instead we obtained data for 20 to 36 year olds from the Census Bureau’s American Fact Finder application from the same survey. Census tabulates data by five year age group; so we interpolated values for 35 and 36 year olds.  This analysis shows that the millennial population (defined as those born between 1980 and 1996) was still increasing in those three cities, after a decade in which the count of persons in this demographic had doubled in those same cities:

What’s the policy implication?

The subtext of the “millennials moving out” finding is that somehow the urban revival is drawing to a close. Those millennials, once enamored of cities, will wise up, and like previous generations move to the suburbs, ending the urban revival. But as we’ve pointed out, at every age, people in this generation are more likely to live in cities than were people earlier generations. For example, in 1980, 25 to 34 year olds were about 10 percent more likely that all adults to live in close-in urban neighborhoods; in 2010 they were about 50 percent more likely. Our finding has been confirmed by a number of academic studies (Diamond, Edlund, Sviatchi & Machado, Couture and Handbury).

In addition, if anything, the movement of now somewhat older young adults out of cities is indicative of our shortage of cities, and our failure to keep up with the high demand for urban living. Housing production is constrained in markets like Los Angeles and Boston, and the great demand of young adults to live in these cities is driving up rents. The slight decline in the count of aging millennials in some cities is less an indicator of generational disenchantment with urban living, than it is an indicator of the failure of our policies to build more housing in the kinds of neighborhoods Americans increasingly value. The number of 25 to 34 year olds in the US will continue to increase through the middle of the next decade and remain stable thereafter. Will we build the housing to accomodate them?

Churn means that lots of businesses, even large ones, aren’t around forever

Many of our discussions of the economy are based on simple, and often largely static mental models of the economy. In a good year, a local economy might add 2 or 3 percent to its job total, and the total number of businesses might change by even a smaller amount. But those aggregate numbers conceal a huge and continuous amount of change, both as workers move from business to business, and as businesses themselves wax and wane.

Economist Joseph Schumpeter famously coined the term “creative destruction” to describe the process by which economic improvement is the combined result of the continual formation of new firms and the death of older ones. That process is not generally revealed by our conventional economic statistics.

Any time an individual business fails, it seems like a harbinger of economic decline. Journalists are particularly prone to inflate the demise of a particular enterprise into a signal of widespread dislocation. Last week, The New Yorker wrote of “The inflated promise of the food hall,” noting that several gourmet food firms who had succeeded in one venue, found boutique food halls in other locations too costly or unprofitable.

Of more than a dozen current and former tenants I’ve spoken to, however, many have discovered that food halls are not the artisanal promised lands they seem to be.

No doubt a dozen interviews is a lot of ground for a journalist, but it may not be indicative of an entire industry. The restaurant business is a famously trendy and volatile sector of the economy, with new establishments opening and older ones closely on a weekly basis. The overall trend in this industry for the past decade has been one of steady growth, but that’s something that one can confirm only by looking at the data, and by consciously looking past the demise of many once fashionable establishments. We’ve added 50,000 restaurants nationally in the past five years, according to the Bureau of Labor Statistics:

A recent reminder of how volatile the economy actually is, and how much churn there is at the level of even fairly large establishments comes from a paper that uses data from the Equal Employment Opportunity Commission (EEOC) to examine patterns of racial segregation in the workplace. (The paper–”Population processes and establishment-level racial employment segregation” is worth a read in its own right, but for today we’ll focus on one sidelight raised in this report.  There’s a statutory requirement that business establishments with 50 or more employees provide an annual report to the EEOC on the race and ethnicity of their employees, so that the Commission can gauge compliance with fair employment laws. The EEOC data provide a useful longitudinal database of “large” establishments in the US. (In the vernacular of employment statistics an “establishment” is a single physical location of a particular business, like a particular store or factory; each McDonalds or Starbucks location would, for example, be a separate establishment).

You might think that these larger businesses are more likely to survive, year-to-year than all businesses, particularly smaller ones. In general large businesses are less likely to fail in any particular year. But what these data highlight is that the exit of large establishments from the EEOC rolls is surprisingly common. (What this means is that these business locations have gone from above the reporting threshold to below the threshold; some may have failed or closed, but most have probably down-sized.)

In most years, 20,000 to 30,000 establishments are aded to the EEOC rolls, with more added in times of robust economic growth (2000), than at other times. But there’s also a fairly rapid and consistent decay in these numbers in the following years.  On average, half or more of the establishments added to the EEOC reporting rolls in one year no longer appear five years later.  For example, in 1980, more than 25,000 new establishments were aded; by 1985, fewer than 10,000 of these were still reporting to EEOC.  There’s further attrition as time passes. The are clear cyclical effects (1985 is down from 1980; 2005 is down from 2000, following recessions), but the same decay pattern holds for each successive wave of business establishments that achieves the level of employment that requires reporting.

These data are a reminder that individual business establishments–even ones with more than 50 employees–often have a relatively short life-span. We shouldn’t be surprised when we see business establishments, even relatively large ones, down-size or go out of business completely. It’s strong evidence for the continuing importance of the kind of churn and creative destruction that Schumpeter said underlies economic dynamics.

What City Observatory did this week

1. Is inequality over? There was some good news from the labor market this month. According to an analysis by Jed Kolko, low wage workers saw their earnings increase slightly faster than all other workers over the past year. That’s a welcome change from the trend of growing wage inequality.  It’s not, as some commentators argue, the end of the inequality issue. The growing wage divide in the US is the product of decades long decline for lower wage workers, and won’t be erased by a single year’s improvement (which has come only after eight years of steady economic growth). We show how large the gap has become, and note that the growing skittishness of the Federal Reserve about tight labor markets, coupled with the huge increase in inequality built into the Republican tax plan will likely cause inequality to get worse in the years ahead.

2. The Great Freeway coverup. Covering or capping a freeway sounds like a great way to minimize its impact and create new urban space. But in Portland, freeway covers (really, slightly wider overpasses) are being used as cynical PR to help sell a widened freeway. Just as Robert Moses used deceptive graphics to help minimize the negative impacts of his massive projects, highway officials are creating the false impression that covers will create viable public spaces. Instead, what’s proposed are small and badly fragmented plots of land, bounded by busy arterials and overwhelmed by the noise and pollution from the freeway.

3. The Talent Dividend, Updated. For years, we’ve been advocates of the talent dividend: the idea that city economic success stems from better educating local residents. It’s long been the case that the educational attainment of the population has been the single most important determinant of metropolitan income. We update that statistical analysis with the latest data from the newly released 2016 American Community Survey.  Each 1 percentage point increase in the four-year college attainment rate of a metropolitan area is associated with a $1,250 increased in metro area per capita income. There’s no more important or effective means of improving a city’s economy than bolstering the educational level of its population.

Must read

1. Is the nuclear family the cause of our problems? Software engineer turned full-time mom Nicole Sallak Anderson relates her terror at discovering the utter daytime aloneness of life in the typical American suburb in a Medium essay entitled: Pretty Birds in Pretty Cages: Could the Nuclear Family Be the Reason We’re All Miserable? Walking around her subdivision, she encounters no other humans, and can even scream at top of her lungs without drawing attention. Everyone’s commuted to work, gone to school or shopping, or is ensconced in their separate large-lot homes. Her key point is that we’ve turned child-raising from a collective community or multi-generational family endeavor to a kind of maternal sole-proprietorship. She puts the blame on the nuclear family, but we can’t help noticing that its the economically segregated, single-use, single-family subdivision that’s really closely correlated with most of her complaints. If there were different sizes, types and prices of housing in the neighborhood, more density, stores, cafes and shops to walk to, and a more age- and income-diverse population living nearby, her experience would be different.

2. How Elon Musk really feels about transit. What with his electric cars, hyperloop dreams, and now claims of advanced tunneling technology, Elon Musk is the darling of the techno-fanboy community. In an interview in Wired, he tells us how he feels about mass transit. If you’re looking for a careful, comprehensive theoretical critique of the current modes of travel, you will likely be disappointed. Mass transit, Musk says, “sucks.” “It’s a pain in the ass,” he continued. “That’s why everyone doesn’t like it. And there’s like a bunch of random strangers, one of who might be a serial killer, OK, great. And so that’s why people like individualized transport, that goes where you want, when you want.” For a company that can’t even figure out how to store the relative handful of cars driven by its own employees, its difficult to imagine how they’ll solve urban transportation problems at scale for anyone other than the very wealthy:

3. The artisanal landlord. You may think we are recommending this article just for its clever title, which all though it would be enough, is not the reason. Besides wordsmithing, what you’ll find here is a thoughtful and engaging analysis of the contribution of small scale landlords to the rental housing supply in Vancouver, British Columbia. Nathan Lauster, who teaches sociology and researches housing at the University of British Columbia, notes that while Vancouver has much less purpose-built rental housing than Seattle, it has nearly the same fraction of renters. The reason: much of Vancouver’s multi-family housing gets built as condominiums, and is privately/individually owned, but then is rented out. Lauster estimates that a third of condos are rented out, and that Vancouver’s rental housing stock is also increased by “secondary suites”–i.e. basement apartments, subdivided single-family homes, and granny flats (in Canadian: “laneway cottages”). As much as half of Vancouver’s rental housing is owned and managed by these very small scale artisanal landlords. We frequently talk about “missing middle” housing like duplexes and smaller apartments buildings; historically, these have been the kinds of properties owned by small-scale, mom and pop landlords. Whether this kind of rental housing gets built, and continues to be offered for rent, probably depends on how conducive the legal and regulatory environment is to the amateur, artisanal landlords.

New knowledge

Craiglist and the US housing market.  Geoff Boeing of the University of California, Berkeley has assembled data from Craigslist to measure rental housing markets across the US. Craigslist has become the de facto listing service for rental housing. Boeing and his colleagues have scraped rental listings data from their website to develop price indices for major US markets.  Their work is summarized in this heatmap showing relative rent levels:

This creative use of big data offers some real advantages over other sources of information. It picks up many smaller scale “mom and pop” rentals that are unlikely to be captured by commercial real estate databases that include only larger and professionally managed properties. In addition, Craigslist data can be measured in real time, potentially providing a much more timely indicator of rental trends. Those advantages aside, there’s still one issue with any market listing: some units may be rented without ever being listed on Craigslist (especially if there rents are low), and there’s an embedded survivorship bias to rental listings: underpriced units get snapped up quickly, while overpriced ones linger on the database, with the result that an estimate of rent levels computed from any snapshot of listings is likely to skew somewhat higher than prices actually paid. Still, that’s a minor quibble, and the Boeing data are a great addition to our understanding of local rental markets, and a model of how to harness Internet based data to generate a new perspective.

In the news

In their piece the “Best, Worst, Most of 2017” Transit Center named our piece “Pollyanna’s Ride-Sharing Breakthrough” as having the best lede and title of the year.

The Salt Lake Tribune cites some of the key findings from our Young and Restless report in an article on efforts to attract and retain talented young workers in Salt Lake City.

What City Observatory did this week

1. Should cities be worried about “Peak Millennial?”  Time magazine highlighted data from three cities where the count of millennials has declined in the past year, according to the American Community Survey. To some, it seems to be a harbinger that the young are growing disenchanted with city living. We challenge that interpretation. The focus on millennials (those born from 1980 to 1996, at least in this tabulation) misses the point that the number of young adults in the US (ages 25-34 will increase through the middle of the next decade and remain stable thereafter. The focus on millennials confuses lifecycle effects with true generational change. Our work and other studies confirm that young adults, especially those with college degrees, are much more likely that previous generations to choose city living.

2. Diverging diamond blues. Portland’s proposed half-billion dollar freeway widening project is pitched as a way of improving the pedestrian experience in the city’s Rose Quarter area. But one of the central design elements of the re-worked street system is a miniature “diverging diamond” interchange, which flip-flops the direction of traffic on a two way street (so cars are traveling on the left rather than the right side of the road). The purpose of the diverging diamond is to give cars a faster, straighter route to leaving the freeway. The combined result of these changes is the opposite of traffic calming: street crossings are made wider, with faster turn movements, plus pedestrians will be put in an environment where cars are coming from the opposite direction they expect. It’s hardly a recipe for pedestrian comfort or safety.

3. How the “G-word” is poisoning discussions of how to improve our cities. We offer a guest post from Akron planner Jason Segedy examining the way the term gentrification is invoked in the context of rustbelt cities. Especially in these struggling cities, he argues, “gentrification critics are holding cities to an unreasonable standard, and placing them in an impossible situation. If much of the city remains poor and run-down, this is proof that the city does not care, and is not trying hard enough. If, on the other hand, parts of the city begin to attract new residents and investment, this is proof that the city does not care, and is not trying hard enough.  Heads I win. Tails you lose.” It’s time to figure out a way to talk about change that doesn’t make the perfect the enemy of the good, or at least the somewhat better.

Must read

1. The B-School case against Uber. Uber and its chief rival Lyft continue to grow, with more rides, riders, drivers and total sales.  But the latest financial reports from Uber show that its still losing money, more than 1.5 billion in the latest quarter. Writing in Forbes, Len Sherman makes the case that there are irremediable flaws in the ride-hailing business model: it’s not becoming more productive as is grows, and its improvements in margin are coming primarily from squeezing driver compensation. The hoped for first mover advantages and network effects that the company and its investors were counting on to produce long-term monopoly-like profits, don’t appear to be materializing. At best, its locked in a fiercely competitive duopoly with Lyft that ensures profit-sapping competition for drivers on the one hand, and customers on the other. Uber can sustain continuing losses as long as its store of investor capital holds out, but as that dwindles, the future of this firm, and the future of the ride-hailing industry are unclear.

2. Five immutable laws of affordable housing. As we near the end of the year many of our colleagues are reflecting on the best work they published in 2017. Inexplicably, we missed this gem published at Strong Towns. Milwaukee’s Spencer Gardner describes what can fairly be regarded as the five immutable laws of affordable housing.  We’ve reprinted them here in brief, but read the entire article to get a solid explanation. You’ll also find some useful thoughts on what it will take to make housing more affordable.

3. Demolitions aren’t shrinking the supply of affordable housing. One of the most frequently repeated arguments by opponents of new housing is that demolitions somehow reduce the supply of affordable housing and in their place build unaffordable units. A new study from Eve Bachrach, Paavo Monkkonen, and Michael Lens of the UCLA Luskin School tests that theory by looking at a random sample of developments in Los Angeles over the past three years. They find that, contrary to popular belief, post-demolition, these sites had both more total housing units and more affordable housing. Most of the demolitions are of single family homes, which are replaced with multi-family units, augmenting the housing supply.  They conclude that demolitions are so small in scale as not to be having a significant negative effect on the supply of so-called “naturally occurring affordable housing.”

New knowledge

When did your city reach its peak ranking compared to other US cities?.  Peak Charleston came in 1790, peak Buffalo was 1850, peak Minneapolis was 1890, peak Cleveland was 1920. Using historical census data and contemporary and consistent metropolitan area definitions, blogger peakbagger has shown how different cities have moved in and out, and up and down on the list of the nation’s 20 largest metropolitan areas over the past 220 years.  You see clearly the westward shift in population and the waxing and waning of industries and technologies.  Many cities that were historically important (Providence, Salem, Richmond and Albany) haven’t cracked the top 20 since the Civil War.  The sunbelt cities-Dallas, Houston, Atlanta, Phoenix– only show up starting in the 1940s and later. In addition to a spaghetti chart showing the shifting ranks, you’ll also find decade by decade rankings and population estimates for the top 20 US metro areas.

In the news

Dan Horrigan, Mayor of Akron, cited our essay “Cursing the Candle” in his Beacon-Journal Op-Ed on his vision for the city’s future growth and revival.

The Salt Lake Tribune cites some of the key findings from our Young and Restless report in an article on efforts to attract and retain talented young workers in Salt Lake City.

What City Observatory did this week

1. The death of Flint Street. In Portland, a $450 million dollar freeway widening project is being sold as a way to “re-connect” a community that was divided by freeway construction half a century ago. But there’s a problem with that claim. Part of the project is eliminating one key local street that’s been there since the area was platted in the 1800s, and which today serves as a heavily used segment of the city’s bike network. When asked last week as to why N. Flint Street was being amputated as part of the freeway widening project–the biggest transportation investment contemplated in Portland’s city center–the city’s transportation director simply didn’t know what the rationale was.

2. Constant change: Turnover in business establishments. It’s natural to think of businesses, particularly larger ones, as long-lived. But as economist Joseph Schumpeter famously observed decades ago, the process of economic growth is one of creative destruction. A recent study sheds some light on the frequency of turnover among largish business establishments. In the US, places that employ 50 or more employees are required to report annually on the racial, gender and ethnic composition of their workforces, and the movement of establishments in and out of that 50 employee threshold is an indicator of how much churn there is in the economy. Over most of the past three decades, about half of the new business establishments that filed in one year were no longer on the register 5 years later–a strong indication of the volatility of the business world.

Must read

1. Public schools shouldn’t undermine walkability.  Streetsblog writes another chapter in the long running story of how school siting and development decisions conflict with smart urbanism. Angie Schmidt describes how Decatur, Georgia is building a new elementary school in the as part of to redevelop an underutilized warehousing area as a more vibrant neighborhood (a good thing).  Unfortunately,the plan devotes devote most of the site to parking space for buses and the staff’s cars (not so good).  The result:  they’re tying up a big chunk of valuable land just a five minute walk from the city’s new Avondale MARTA rail station. The site actually devotes more land to parking that similar schools in more suburban locations.

2. High Streets for All.  It’s a decidedly English term, high street, but it captures the notion of a pedestrian scaled main street with shops, restaurants and public spaces that are at the heart of urban living. A new report from the London School of Economics catalogs the ways that a vibrant, thriving high street creates the kind of environment that promotes the well-being, social interaction, and economic opportunities of city residents.  While the focus is on London neighborhoods–most of which you’ve not heard of–the principles and insights have equal force on both sides of the Atlantic.

3. Declining population in some of Seattle’s most desirable neighborhoods. We’ve all heard stories of how Seattle is in the midst of its biggest population boom since the Gold Rush years (they’re true), but ironically, population is stagnant or actually declining in many of the city’s most desirable neighborhoods. Sightline Institute’s Dan Bertolet marshalls the data. The combination of strict single family zoning in most of the city’s privately owned land, coupled with declining household sizes, especially in higher income neighborhoods, means that actually fewer people live in places like Denny-Blaine, Madrona, and Leschi. Because these neighborhoods hold fewer people, those who might like to live their have to reside further away, adding to sprawl, reducing walkability, and cutting people off from opportunity. The solution? Look for ways to add “gentle density” like accessory dwelling units throughout single family areas, and find at more places that can be upzoned for multi-family dwellings.

New knowledge

A new measure of school performance. One of the most robust correlations in public life is the link between local incomes and kids test scores. Kids who live in wealthier cities or neighborhoods generally have higher test scores than those who live in lower income areas. But a new study, tapping data from the standardized tests used to implement the No Child Left Behind law, sheds new light on how effective schools are in boosting the measured achievement of their students over time. It turns out that many schools in poor neighborhoods actually do a better job than their richer counterparts in lifting student achievement over time. The study was done by Sean Reardon and his colleagues at Stanford, and draws on another trove of big data: this time 11 million test score results from 11,000 school districts around the nation.  The New York Times has a powerful interactive graphic illustrating the study’s findings for the nation’s school districts. For example, Chicago Public Schools (which are poorer on average than those nationally), start out with third graders lagging about a year-and-a-half behind the typical third grader nationally. But by the time they reach 8th grade, these Chicago students have closed about two-thirds of the gap with the national average, and are only about six months behind.

What that means is that their schools have essentially accelerated their learning, compared to the average amount of progress made in schools nationally. Nationally, many relatively poor school districts rank considerably higher in raising student achievement over time than do relatively rich school districts. (Hat tip to the estimable Emily Badger and her colleagues at NYT Upshot).

In the news

Inga Saffron, the architecture critic for the Philadelphia Inquirer cited our commentary “Inclusionary zoning has a scale problem,” in her column discussing Philadelphia’s proposed inclusionary housing requirements.

The Portland Mercury quotes the testimony of City Observatory Director Joe Cortright in an article about Portland’s plans to move forward with congestion pricing.

What City Observatory did this week

1. Uber and Lyft: A dynamic duo(poly)? The continued growth of the ride-hailing industry has been something we’ve followed closely. New data show that in most major markets across the country, Lyft has been gaining market share at the expense of industry leader Uber. This rivalrous duopoly has important benefits for consumers, even if it falls short of a highly contested market with many competitors.

2. Where should affordable housing be built?  Is it better to build affordable housing in low income neighborhoods, or higher income neighborhoods? Our colleague Daniel Hertz explores the conflicting arguments here. To be sure, there is some evidence of externalities associated with building low income housing in higher income neighborhoods, but the data show these effects are small and geographically limited. Building more affordable housing in low income neighobrhoods often perpetuates the concentration of poverty, which has been shown to have detrimental long-term effects on economic mobility.

3. Remember: There’s no such thing as a “Free” way. There’s growing interest around the nation, in New York, Chicago, Los Angeles and Portland, to name a few, to implement road pricing. While paying a price to use the road seems like an added burden, it isn’t, because despite their name, freeways aren’t free.  Un-priced roads in urban environments trigger excessive demand, and as a result we end up rationing road space according to desperation and traveler tolerance for delay. Pricing can encourage some travelers with flexibility to travel at other times, choose different modes or routes, or travel to other destinations, reducing traffic flows enough to provide all travelers with better service. Congestion pricing can be a win-win that makes the road system perform better for users, and save billions by avoiding the need to construct additional capacity.

Must read

1. How segregation leads to racist voting by whites.  Writing at Vox, Ryan Enos explores how neighborhood and community level racial and ethnic change can trigger racist voting patterns by whites. Using both observational data and experiments, he shows that the expansion of groups of “others” is associated with more in-group attitudes and actions. Integration appears to be a key antidote to this phenomenon: when racial and ethnic groups are more interspersed at the neighborhood level, the suspicions and animosities abate, and with them voting patterns are less polarized.

2. More hidden bias against pedestrians and in favor of cars. Our must reads are invariably articles on the web, but this week, our must read is a tweet from Don Kostelec. He flags a major inconsistency between the way the National Highway Traffic Safety Administration reports the role of alcohol in deaths of pedestrians and motorists. Its data show the number of drivers killed with a blood alcohol level of 0.08%, but reports as pedestrians killed with blood alcohol levels of just 0.01%. As he points out, that’s the level you’d have after a couple of tablespoons of cough syrup. The effect is to greatly magnify the “drinking while walking” scourge as a contributor to traffic deaths. As Don tweets: “Great bias here by @NHTSAgov & reason to be skeptical when you see reports blaming pedestrians with alcohol in their bloodstream. They use 0.01 BAC (a dose of cough syrup) for pedestrians vs. 0.08 BAC (a few beers) for drivers.”

3. Stockholm’s lesson on congestion pricing: seeing is believing. There’s natural reluctance to want to pay for something that you think is free, and so little wonder that there’s resistance to implementing urban congestion pricing. But in practice, once the congestion pricing system is up and running, and people see that pricing means shorter, surer travel times and less congestion, they recognize they’re getting value for money. Transit Center hosted Stockholm Transportation Director Jonas Eliasson who explained the evolution of public perception about pricing from its rocky start in 2006, to its widespread acceptance today.  Now, some 70 percent of the city’s population support the system.  The message to US cities: Just do it!

New knowledge

The Urban Institute has a wide ranging report with recommendations for restoring the economic fortunes of the rust belt. Entitled “Building Ladders of Opportunity for Young People in the Great Lakes States,” the report assembles research on public finance, demographics, education, criminal justice and economic development to identify steps that will improve the well being of residents of this region. The breadth of the report makes it clear this will be no easy task. Its critical that the public sector do a better job with education beginning with more early childhood education and buttressed with neo-natal visitations, child health insurance and paid family leave. Making these new investments will be challenging, in large part due to the costs associated with an aging population, including increasing demands for health care and unfunded pension costs.

In the news

Writing in the Washington Examiner,  “In defense of gentrification” Michael Barone cites our work looking at the patterns of income distribution within different cities.

The National Real Estate Investor named our piece on the high cost of affordable housing one of its ten must read articles last week.

Educational attainment explains two-thirds of the variation in economic success among metropolitan areas.

Each additional percentage point increase in the four-year college attainment rate increases metro per capita income by $1,250

For a long time, we’ve been exponents of what we call “The Talent Dividend,” the idea that raising a metro area’s educational attainment is the key to raising productivity, living standards and incomes. Our core metric for assessing the importance of a well-educated population is to look at the relationship between per capita incomes and the four-year college attainment rate.

We’ve been tracking these data, and today we’re updating them to reflect the latest information from the Census Bureau’s just-released 2016 American Community Survey.  We’ve paired this information with the Bureau of Economic Analysis’ estimates of per capita income in each metropolitan area for 2016. The following chart plots the relationship between per capita personal income (on the vertical axis) and the fraction of the adult population who have completed at least a four-year college degree (on the horizontal axis).  Each dot on the chart represents one of the nation’s metropolitan areas with at least 1 million population (53 of them, according to the 2015 Census tabulations).  You can mouse-over a dot to see the corresponding metropolitan area and its educational attainment rate and per capita income.

As you’ll immediately notice, there’s a strong, positive correlation between educational attainment and per capita income.  The metro areas with the highest levels of education have the highest levels of per capita personal income.  Cities like San Francisco, Boston and Washington have the highest levels of per capita income and the best-educated populations. Cities like Riverside and Las Vegas have low levels of educational attainment and correspondingly lower levels of per capita income. The coefficient of deterimination of the two variables–a statistical measure of the strength of the relationship–is .67, which suggests we can explain two-thirds of the variation in per capita personal income among metropolitan areas, simply by knowing what fraction of their adult population has a four-year degree. Most cities lie close the to regression line; a few outliers have plausible explanations for their over or under performance. San Francisco and San Jose lie far above the regression line, and are super-charged (and expensive) high performers.  Raleigh and Austin have incomes lower than their educational attainment would predict, but also have populations that skew very young, and therefore have lower incomes.

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

The data presented here imply that a 1 percentage point increase in the four-year college attainment rate is associated with about a $1,250 per year increase in average incomes in a metropolitan area, an increment we refer to as the Talent Dividend.  This cross-sectional relationship suggests that if a metropolitan area were to improve its educational attainment by one percentage point on a sustained basis, that it would see a significant increase in its income.

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

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