A careful study of evictions in San Francisco says “No.”

There’s a widespread belief among some neighborhood activists that building new housing triggers displacement. We-and most economists are highly skeptical of that argument at the metropolitan level, but its at least theoretically possible that there could be some neighborhood effects, for example, that building a nice new building triggers a change in the perception of a neighborhood and makes the existing housing nearby more attractive and more valuable. (There’s the further un-stated assumption that this spillover effect more than offsets the downward pressure on prices from additional supply.)

If there was any place where one would expect to find this localized displacement it would be in the San Francisco. The city is famous for its extraordinarily expensive housing and the great difficulty with which new housing is approved. There are also many neighborhoods on the cusp of gentrification.

A recent study from the University of California’s Kate Pennington takes a close look at data on eviction notices in San Francisco to see whether new development leads to an increase in displacement nearby. Her overall finding is that new construction has no discernable statistical effect on the rate of evictions. Describing her findings on the effects of new market rate housing on nearby eviction rates, Pennington reports:

Each of these point estimates is a precisely estimated zero, no larger than 0.05 percentage points and always statistically indistinguishable from zero. This means that the monthly probability of an eviction notice being issued does not change due to the completion of new housing nearby

Pennington’s study is remarkably detailed and meticulous.  She gathers project-by-project and block-by-block data on new construction and inventories all of the eviction notices issued in San Francisco over the course of a decade.  She looks at eviction rates before, during and after construction of new housing, and disaggregates her analysis separately for market rate and affordable housing. She event separately analyzes more than 1,000 different housing projects to see if particular ones were associated with upticks in eviction activity.

Not surprisingly, the study has generated considerable controversy. Some anti-gentrification activists dispute the studies findings, claiming that the data is incomplete, and runs counter to their experiences.  Mission Local (a blog for the city’s Mission neighborhood) worries that:

. . . Pennington’s report could serve as a cudgel for the city’s YIMBY (Yes In My Back Yard) faction, which fervently advocates for a glut of new construction at all levels of affordability.

A key issue is whether legal eviction notices are a good proxy for displacement activity. Not all displacement is associated with eviction; some tenants are pressured or harassed by their landlords. But as Pennington argues, there’s little reason to believe that landlords prefer or are more likely to use these tactics rather than legal eviction procedures when new development occurs nearby.

If you were going to find a localized displacement effect as a result of new construction changing the character of a neighborhood and generating an upgrading spillover in adjacent properties, you would most likely find it in a city like San Francisco, where prices are high, supply is tightly constrained, and new development is occurring in dense urban neighborhoods. The fact that there’s almost no discernable impact of new construction on the rate of evictions is a strong signal that we ought to be focused much more on the price-ameliorating benefits of additional supply, and worrying a lot less about whether new construction causes displacement, even locally.

Kate Pennington, “The Impact of Housing Production on Legal Eviction in San Francisco,”  June 8, 2018

Part 4. Are racially and economically homogeneous cities and suburbs in a segregated metro “inclusive?”

Looking only at disparities within cities misses the often far larger disparities across cities within in single metropolitan area.

(Editor’s note: This is the fourth in a five-part series examining a recent Urban Institute report measuring and ranking city-level inclusiveness. Please read part 1 for an introduction to the report, and an overview of the issues it raises.)

The Urban Institute’s “Measuring Inclusion” report looks at both racial inclusion and economic inclusion, and ranks US cities based on a series of factors. As we’ve suggested, cities are far from ideal units for measuring inclusion; city boundaries are varied, and in many cases were constructed to divide metropolitan areas by race; often times city policies produce exclusionary results.

In the Urban Institute report, racial inclusion is defined as a composite of a segregation index (confined to looking at segregation within city limits), and the disparity between people of color and whites in homeownership, educational attainment and poverty.  These measures ignore the level of indicators (whether education is high or low) and only look at differences between groups. So if whites and people of color have have similarly low levels of say educational attainment, a community is regarded as more inclusive.

Let’s just zero in on the Detroit metropolitan area. Keep in mind:  Metro Detroit is by one common measure–the black/white segregation index–the most segregated large metro areas in the US. Here’s the 2010 ranking of US metro areas from Brown University’s US 2010 project:

According to the Urban Institute analysis, the City of Detroit is a paragon of racial inclusion (ranking 11th of 274 cities), and so too, are its suburban cities of Dearborn (49th) and Sterling Heights (43rd).  Detroit is 90.9 percent persons of color, and Dearborn is 12.4 percent persons of color (271st) and Sterling Heights 17.3 percent persons of color (264th). To look at these cities in isolation is to pretend that they are different worlds, not connected to one another in any meaningful way. But anyone with a casual familiarity with the politics of local government and racial history in the US will know that is parsing willfully blinds us to the underlying problem.

The broader region–Detroit and all its surrounding suburbs–is profoundly segregated, moreso than every other major metropolitan area in the US. You cannot find any central city with a share of persons of color differs more from that of its suburbs than Detroit. But to read the UI report, one would believe that both the City of Detroit, and its surrounding suburban cities are exemplars of racial inclusion among American cities, all ranking in the top 20 percent of American cities in racial inclusion.

What’s driving the high racial inclusion ranking for Detroit and many of its suburbs is the fact that there are very small racial gaps in poverty rates, educational attainment and homeownership. The City of Detroit ranks in the lowest 10 percent of US cities for the poverty gap, education gap, and homeownership gap. But this is only because the city’s population, regardless of race, is so poor, and because so many people with choices, regardless of race, have moved away, leaving a poor, but equal population. Detroit is inclusive in its immiseration.

Nor is this peculiar to Detroit: other industrial cities experiencing population losses, such as Gary, Indiana, and Camden New Jersey also score highly on Urban Institute’s measure of racial inclusion–16th and 13th respectively, again out of 274.

The disparity between metropolitan and principal city scores for segregation extends to economic segregation as well. Again, let’s focus on Detroit.  The City of Detroit, according to the Urban Institute report has the lowest level of income segregation of any of the principal cities in the 50 largest US metro areas. But the Detroit metropolitan area is one of the five most economically segregated large metropolitan areas, according to the data compiled by Reardon and Bischoff.
The city of Detroit scores well on economic segregation because it is uniformly poor. The Detroit metro area scores poorly on economic segregation because the region’s poverty is concentrated in the principal city, and its higher income households are concentrated in suburbs. Looking just at segregation within city limits conceals the region’s high level of economic segregation.

Overall, there’s actually very little correlation between principal city economic segregation and metropolitan economic segregation. As a result, city level data don’t serve as a proxy or parallel for regional economic polarization. Looking just at city level segregation data misses big variations in regional income segregation. The following chart shows principal city economic segregation from the Urban Institute report on the vertical axis and metropolitan economic segregation on the horizontal axis.  Larger values on both axes correspond to higher levels of economic segregation.

In our view the high racial and economic inclusion rankings that the Urban Institute report assigns to Detroit (and similar cities) are a clear sign that its methodology is not well-aligned with our understanding of what really constitutes inclusivity. Looking only within individual city boundaries, and ignoring the larger metropolitan context, especially the patterns of segregation among cities within a metropolitan area, produces a highly distorted view of which places are inclusive and which aren’t.

Part 3.  Do annexations and mergers constitute economic growth?

Not adjusting city job growth estimates for changes in city boundaries produces misleading estimates, especially when used for comparing and ranking cities.

(Editor’s note: This is part 3 of a part of a five-part series examining a recent Urban Institute report measuring and ranking city-level inclusiveness. Please read part 1 for an introduction to the report, and an overview of the issues it raises. In part 2, we argued that city boundaries are a poor basis for comparing different regions, and that city limits seldom capture the imprint of exclusion.  Today, we point out that changes to city boundaries over time make them a poor basis for gauging economic success, one pillar of the Urban Institute report.)

The Urban Institute’s recent report, Measuring Inclusion, focuses heavily on the relationship between economic growth and inclusiveness. Does economic growth promote inclusion? Is inclusiveness helpful for stimulating growth? These are clearly interesting and important questions.

Setting aside for a moment whether city boundaries correspond to functional economies (they mostly don’t), a critical question is whether data reported for cities is comparable over time. The problem is that city boundaries often change from year to year. Some cities, especially suburban ones, grow through the steady addition of land via annexation. More rarely, but more sizably, some cities merge with their surrounding counties to form a new, and much larger jurisdiction. And importantly for time-series analysis, there are wide variations among cities in the contribution of mergers and annexations to growth: Many cities are land-locked (surrounded by other jurisdictions), or are in state’s where annexation is difficult and rare; while other cities–edge suburbs, are continually in the process of growing via annexation.

Calculating employment growth rates without making allowance for the effects of boundary changes makes raw city growth data a very poor basis for comparing the economic health of cities over time. But, unfortunately, that’s exactly what the Urban Institute report does. Measuring Inclusion highlights four cities for case studies, based in part on their strong economic growth, measured using city boundaries.  But three of these four case study cities–Louisville, Columbus, Ohio, and Midland, Texas, have all expanded significantly via annexation in the years covered by this study. As a result, we believe that it’s problematic to draw any lessons from these cities about the connections, or lack thereof, between economic success and inclusion, which is at the heart of the Urban Institute report.

Louisville was a job growth laggard, not a world-beater (once you correct for the merger)

To get a sense of how this can affect the results, take a close look at the City of Louisville, which merged with surrounding Jefferson County in 2003.  The UI report indicates that employment in the City of Louisville chalked up an extraordinary 150 percent job growth between 2000 and 2013.  As Urban Institute reports, this was the fastest increase in employment in any city in the US, which resulted in Louisville having the fourth highest ranking on economic performance of any of the 274 cities UI examined.

But this growth was driven entirely by the merger. Comparing employment totals for the old city limits in 2000 with the expanded county-wide totals in 2013 recasts the merger into economic growth. It’s actually quite easy to correct for this by comparing growth rates for a standard geography–Jefferson County–in both 2000 and 2013. Below, we show the wage and salary employment totals reported by the Bureau of Economic Analysis for Jefferson County from 2000 to 2013. Rather than increasing by 151 percent, employment in the county actually decreased by 2.1% (falling by about 10,000, from 470,000 jobs in 2000 to 460,000 jobs in 2013).  Once we correct for this boundary change, Louisville’s supposed employment growth goes from 1st fastest to 241st (out of 274).

 

This also has a material effect on the city’s overall economic prosperity ranking. Rather than a positive z-score of 5.467, employment growth was -2.1 percent which translates into a is was  z-score of -.788, which in turn lowers the city’s composite economic health score. The Urban Institute report ranks Louisville fourth overall based on a combined z-score for job growth, unemployment rate, vacancy rates and median family income.  If we adjust just the job growth number to accurately reflect the decline in employment in Jefferson County, this lowers the overall economic health score from +1.29 to -.273; this lowers the Louisville economic health ranking from 4th highest to sub-par 185th (out of 274 cities studied).  This is important because the study classifies Louisville as having experienced a recovery between 2000 and 2013 (it actually declined), and then makes the city one of four success stories selected for further analysis in the report.

Annexations helped drive job growth in other case study cities

While Louisville’s city-county merger is the most dramatic example of how boundary changes can distort the meaningfulness and utility of raw employment growth rates, its clear that this affects a number of other cities as well. Two of the four other cities selected as examples of successful economic growth (Midland Texas and Columbus Ohio), have both had growth fueled by annexation. Midland, Texas has regularly annexed growing areas adjacent to its city boundaries.  The city’s annexation map shows a patchwork of annexations.

Columbus, Ohio, is another city that has expanded substantially by annexations. Since 2000, the city has added more than 8,500 acres through 400 annexations, expanding the total size of the city by about 6 percent. It’s much more difficult to tease out the contribution of annexations to job growth, but importantly, because some cities are annexing aggressively, while others aren’t, un-adjusted job data provide a poor basis for making cross-sectional comparisons.

In sum, municipal boundaries are a poor choice for assessing economic performance, both because cities are incommensurable units, and, as this brief examination shows, annexations and mergers can easily distort growth statistics. As a result, the economic performance statistics reported in the Urban Institute report Measuring Inclusion, don’t provide a reliable or accurate indication of which cities are economically successful, and consequently don’t provide any reasonable basis for drawing conclusions about the connections between racial or economic inclusivity and economic performance.

Part 2. Are city boundaries the right way to measure inclusion?

Municipal boundaries produce a myopic and distorted view of inclusion; the boundaries themselves were often drawn to create exclusion

(Editor’s note: This is the second in a five-part series examining a recent Urban Institute report that attempts to measure and rank the inclusiveness of U.S. cities. Be sure to read Part I, here, for a description of that report, and an overview of the issues it raises).

The Urban Institute report “Measuring Inclusion” uses data for the nation’s cities, i.e. following municipal boundaries to define and measure economic and racial inclusion and economic performance. In our view this is a critical, and problematic choice, especially if we want to compare and rank different cities on these measures, which is the central premise of the Urban Institute report. For very good reason, the standard for most scholarship looking at issues of segregation, for example, is to look an entire metropolitan areas, because they are defined in a relatively consistent fashion.

Cities are incommensurable units, especially when it comes to describing their inclusiveness and economic performance. Some cities are the core of an urban area, while others are largely or entirely suburban. So for example, Atlanta and Austin are both cities, but so, too are Overland Park, Kansas, Scottsdale, Arizona, and Bellevue, Washington (all much wealthier and whiter suburban cities than the central cities in their metro areas). Some cities are isolated and rural while others are a small part of a much larger metropolitan area. Older central cities tend to be landlocked on all sides by surrounding suburbs.

A big part of the problem is that city boundaries are just the wrong units for assessing whether a region is achieving inclusive outcomes. We know that many cities–especially suburban ones–were formed and had their boundaries drawn specifically to achieve exclusionary ends. They include some people and exclude others. Looking only within city boundaries to assess inclusion means that you are effectively blinded to the way these boundaries themselves are a cause or contributor to racial and economic exclusion.

While much of the race and class gerrymandering of municipal boundaries is a settled historic fact, it remains a current topic. For example, consider the drama currently being played out in suburban Atlanta, where the wealthy neighborhood of Eagle’s Landing is looking to hive off into a separate city from Stockbridge, of which it is currently a part. Incomes in Eagle’s Landing average $126,000, almost double the rest of the current city of Stockbridge.

The Urban Institute’s measures look only at the racial and economic composition of a city, and not at all at the larger metro area in which it may be situated. Segregation indexes are constructed so that they aren’t influenced by the variations in the racial ethnic composition of different jurisdictions.

Metro areas, particularly when confined to specific size ranges, make better (though not perfect) units for comparison.  Their boundaries are set using a common rubric (tied to the commuting patterns of workers and the size of the labor market), and so they encompass entire functional regional economic units, rather than varied fragments of a regional economy.

A key part of the trouble with cities is that people are sorted among cities within a metropolitan area, not randomly, but by a combination of economic and political factors and personal choices. If rich people opt out of distressed central city neighborhoods, and only poor people remain, the measured inclusion of the central city increases, according to the Urban Institute methodology because the remaining residents are statistically more equal.

The bottom line is that using city boundaries as a lens for measuring inclusion will almost certainly produce a distorted picture. The pattern of city boundaries is an intrinsic aspect of the way exclusion is achieved and maintained in the US, and it is the sorting of people of different races, ethnicities and incomes into a region’s different cities that is a principal manifestation of exclusion and segregation. Municipal measures blind us to these fundamental facts.

Inclusiveness is a worthy policy goal, but in practice turns out to be devilishly hard to measure. A recent report from the Urban Institute shows some of the pitfalls: looking just within city boundaries ignores metropolitan context and gives a distorted picture of which places are inclusive.

(Editor’s note:  Over the next several days, City Observatory will be taking an in-depth look at a recent report from the Urban Institute that attempts to measure and rank the inclusiveness of US cities. “Inclusion” has become one of the most popular buzzwords in the urban realm right now. While it seems like the term is simple, and agreement over its merit–the idea of reducing unwarranted inter-group disparities–the practical business of defining and measuring it is not at all simple.)

Achieving a more inclusive nation,  more inclusive metropolitan areas, more inclusive cities, and more inclusive neighborhoods is a critical national priority.  Fifty years after the Fair Housing Act, America remains deeply divided by race, and there’s strong evidence that we’ve become more segregated by income. As we’ve stressed at City Observatory, concentrated poverty makes all of the pathologies of poverty worse. But this is not a simple problem, and is difficult and potentially misleading to characterize with seemingly obvious statistics relating inter-group disparities within cities. We think a recent Urban Institute report, Measuring Inclusion in America’s Cities, while well-intentioned, falls prey to some of the complexities of describing the nature of segregation and separation.

We want to stress that we have enormous respect for the researchers at the Urban Institute: over the years we’ve learned tremendously from their work. We and everyone who cares about cities has a huge debt for their scholarship and advocacy. They’ve provided powerful evidence of the huge economic and human toll continuing racial and economic disparities in their report “The Cost of Segregation.” Our own report on concentrated poverty Lost in Place, draws liberally from the canonical work by the Urban Institute. The critique presented here is meant to advance our shared understanding of how we can build more inclusive cities. We conferred with the authors of the report earlier this year and shared these concerns with them. The analysis presented here remains solely the responsibility of City Observatory.

Our analysis is divided into five parts. First, we address some of the broad conceptual issues in defining inclusiveness, and explore why disparities and inequality, particularly when measured for small geographies defy easy interpretation. Part one is presented in this commentary; future commentaries will address the other four issues. Second, we take a close look at the limits of city boundaries as a frame for measuring inclusion,arguing that the varied and fragmentary geography of cities is a poor lens for understanding actual  disparities,. Third, we explore a particular problem of using cities to measure change over time, showing that annexations and boundary changes easily confound measurement and comparisons. Fourth, we question whether racially homogenous cities in a deeply segregated metropolitan area can be regarded as meaningfully inclusive. Fifth, we ask whether it’s appropriate to rank some of the nation’s wealthiest suburbs as its “most inclusive” communities.

This post introduces the Urban Institute report, and considers discusses the difficult and often paradoxical connections between city inequality, diversity and inclusion.

 

The Urban Institute Report:  Measuring Inclusion

Earlier this year, the Urban Institute released a new report, “Measuring Inclusion in America’s Cities.” The study is based on developing a series of metrics of racial disparities, income disparities and economic performance of the nation’s 274 largest cities, and examining how these have changed over time. It aims to benchmark where cities stand on inclusion, understand how inclusion relates to economic growth, and provide lessons for policy makers.

The report attracted predictable attention.  CityLab‘s article “America’s Most Inclusive Cities, Mapped,” called the report a “roadmap for a deliberate effort to mitigate the forces that have created unequal communities.”  Next City’s story, “Why it matters who get’s to shape a city’s economy,” reported that Urban Institute’s researchers had identified four cities–Louisville, Lowell, Midland and Columbus, OH, that had experienced “inclusive recoveries,” i.e. growth their economies and made progress on measures of racial and economic inclusion. As CityLab related:

 The ten cities faring the best on the inclusion metrics in 2013 were also flourishing economically. “There is a strong relationship between the economic health of a city and a city’s ability to support inclusion for its residents,” the authors write in the report.

We’ve taken a close look at the report, and while well-documented and certainly well-intended, we’re concerned that some of the metrics it offers and some of the findings it presents make an already tortuously difficult policy area even more confusing.

Part 1. What constitutes “inclusion?”

Paradoxically, at the very local level equality is fundamentally at odds with inclusion

On its face, it seems like defining inclusion would be simple. It ought to be the absence of disparities in a community. But the reality its much more complicated. Measured economic disparities in a city can be very small, if for example, everyone is rich or everyone is poor.

Urban Institute’s report measures two different dimensions of inclusion, racial inclusion and economic inclusion. In the case of racial inclusion, they look at segregation (whether the white and non-white residents of a particular live in different or similar neighborhoods), and whether there are disparities in educational attainment and home-ownership between whites and non-whites. They also look at the total fraction of the population of a city that is non-white.

In almost every case, the Urban Institute report defines inter-group disparities as an indicator of a lack of inclusion. If, for example, homeownership rates differ greatly between persons of color and whites, that suggests an area isn’t inclusive.

With each of these measures, cities score highest if they have very little inter-group variation.  If white and non-white incomes, unemployment rates, and homeownership rates are very similar, the Urban Institute defines an city as “inclusive.” For example, if everyone in a community is high income, regardless of race or ethnicity, then it is “inclusive.”  Similarly, if everyone in a community is low income, regardless of race or ethnicity, then it is also “inclusive.”

Equality is not the same as inclusivity

There’s some merit to this idea, but it’s really focusing on “equality” rather than “inclusion.”  It’s entirely possible for a community to be “equal” without at all being inclusive.  In fact, communities that are exclusive tend to be highly equal.  If, for example, you have a community where all housing costs at least $500,000 and there are no apartments, , it’s unlikely that you will have many poor, or unemployed, or renters. And it may be that there are very limited economic disparities between residents of different racial and ethnic groups (everyone who can afford to live in such a community, regardless of race or ethnicity, almost certainly has a high income).

Conversely, very inclusive places, where people of widely varying incomes reside, almost by definition have high levels of inequality. A community composed of equal measures rich and poor, homeowners and renters, and with a wide variety of housing sizes and types, including mansions and public housing, will have larger measured disparities in incomes, in homeownership rates, in poverty and so on. It’s a seeming paradox: a place that is truly diverse and inclusive, whether measured by income or race and ethnicity, by definition needs to unequal.

This is not the first time this issue has arisen: We’ve pointed out that applying a broad standard of equality to small geographic areas produces a kind of weird parallax effect: places that have low levels of measure income disparity tend to be homogenous (usually all rich, or all poor), meaning that they are either exclusive or failing. We wrestled with this issue in our own recent report America’s Most Diverse, Mixed Income Neighborhoods rather than labeling them racially or economically “inclusive,” we opted for neutral, statistical language “diverse” in the case of racial/ethnic characteristics, and “mixed income” in the case of economic characteristics.

The bottom line is that a truly inclusive place may in fact have high levels of measured disparity. As a result, there’s an important conceptual flaw in metrics that focus solely on the localized presence of disparities to discuss inclusion.  We think that’s a key reason to question the usefulness of the Urban Institute’s metrics. We’ll explore how this conceptual problem plays out across metropolitan areas, in central cities, and in suburbs, in the next posts in this series.

Overselling localism is becoming an excuse to shed and shred federal responsibility

Our friend, and director of the Brookings Institution’s Metropolitan Policy Program, Amy Liu, weighs in with a timely commentary on the limits of localism. As regular readers of City Observatory will know, we’ve been concerned that the soaring rhetoric of those enamored of local solutions distracts attention from the way in which critical elements of the federal system are being dismantled. Chief among the proponents of localism have been Bruce Katz and Jeremy Nowak, authors of the book “The New Localism.”

Though she doesn’t mention Katz and Nowak by name (there is a link to an article they’ve written), Amy Liu lends her voice to those concerned about the limits of localism in her CityLab article “The limits of city power in the age of Trump.”  Her argument closely parallels the one we’ve made here:

. . . city boosterism can also go too far: Urging city leaders to go it alone celebrates a deep dysfunction in federalism—and it normalizes a self-destructive shift in politics and governance.

For instance, the Trump administration is using the narrative of increased local capacity to justify draconian cuts to federal support for cities, from transit programs, community development financing  to the entire Economic Development Administration.

We would hasten to add that likely cuts to social service programs, ranging from Food Stamps, to Medicare and Medicaid, and housing assistance will all amplify the problems faced by cities. In effect, the abdication of national responsibility for these core functions transforms these issues into “local” problems, ones that are disproportionately visited on some cities, and which in many cases are insoluble at the local level.

For reference, we’ve reproduced our original critique of The New Localism here.  We also invite our readers to read Bruce Katz and Jeremy Nowak’s response, which was published at CityLab.

We also want to take this opportunity to share with Bruce and the urbanist community our condolences for Jeremy’s passing. Jeremy was an intellectual force and an inspiration. He will be missed.

Why we’re skeptical of localism

As our name City Observatory suggests, we’re keen on cities. We believe they’re the right frame for tackling many of our most important problems, from concentrated poverty to housing affordability, from economic opportunity to more sustainable living. But enamored as we are of cities, we harbor no illusions that cities, by themselves, can solve our most pressing problems.

In the past year, a growing chorus of voices, disillusioned by growing polarization, has called for cities to be our saviors.

Take Richard Florida’s description of the latest of these “The New Localism.”

“In a time of national dysfunction and, frankly, gloom, our best hope for our society lies in our cities and metropolitan areas. That’s the message of the newly released book The New Localism, by Bruce Katz, the noted urbanist at the Brookings Institution, and Jeremy Nowak . . .”

In one of the oddest of imaginable odd couples, Florida himself co-authored a Daily Beast op-ed with perennial sparring partner Joel Kotkin, that called for us “To reunite America, liberate cities to govern themselves.”  The article effectively concedes that the divisions between the blue places and the red ones are irreconcilable, and each ought to be free to go its own way.

With control of the national government in the hands of a president of debatable competence and a Republican party seemingly intent on dismantling the federal government, it’s not surprising that many people are looking for reassuring alternatives. Hoping cities can save the day Is in many respects an effort to make a virtue of necessity. Katz and Nowak relate a litany of instances of Mayors and other civic leaders working above or across partisan and sectoral divides to tackle important problems their cities face.  Their approaches are refreshingly innovative, direct and often productive.

The productivity of these cities is equally attributable to the pragmatism of their leaders and the solidly blue political compositions of their polities. Large US cities are overwhelmingly blue. And to the extent you find Republicans in cities, they tend to be the most moderate kind. If you’re a Democrat, you find yourself wishing that all Republicans were like Mick Cornett or Michael Bloomberg.

There’s an understandable impulse in the face of growing national divisions and what for many was the shocking and unpleasant outcome of the 2016 national elections to retreat to a comforting cocoon of the like-minded. Blue cities will do all the things that a solidly Republican national government won’t do: respect LGBTQ rights, provide sanctuary for immigrants, denounce climate change, and tax themselves to pay for needed investments and public services. But withdrawing to the safety of agreeable blue localities cedes the important national battle at just the time when it needs to be contested.

It is well and good to celebrate the successes that mayors and local leaders are having. But transforming these heartening but small successes into a sweeping call for a new localism is misplaced when the fundamental functions of the national government are being steadily undermined. None of this works in a world in which the federal government is not simply rending holes in the safety net but knocking down its foundations.

We should remember that the federal government took on the roles it did almost entirely as a last resort. As Churchill reputedly remarked, “America can always be counted on to do the right thing, but only after it has exhausted all the other alternatives.”  While the rest of the world’s nation states adopted the trappings of modern social democracies, the U.S. was late to implement things like unemployment insurance, social security and universal health care. The New Deal, the Great Society and Obamacare were only enacted after various local and state programs to address these problems were simply overwhelmed.

What cities do badly or can’t do at all

Cities are not merely ill-equipped to tackle our major challenges on their own. Localism has an undeniable history of making many problems worse. Take two big issues of our time:  climate change and surging inequality. Mayors and cities can strike a pose and demonstrate effective tactics, but they lack the policy throw-weight to solve these problems.

Bravo for mayoral pledges to adhere to the Paris accords, but there’s precious little substance and sufficient scale. New York Mayor Bill de Blasio can sue the oil companies but is an ardent opponent of congestion pricing, a tangible, effective market-oriented step that would reduce the number one source of greenhouse gases. It’s almost impossible to imagine that we’ll take effective action to address climate change unless it’s done at a national level in cooperation with the rest of the world. Without a federally imposed carbon tax or cap and trade, localized efforts are likely simply to relocate the dirtiest pollution to the most permissive states.

Similarly, inequality—which has been dramatically worsened by changes to the federal tax code—dwarfs anything cities can do. Cities are constitutionally incapable of redistributing income because the wealthy have the option of exit (which they have regularly done.) Witness the exodus to suburban enclaves, a trend Robert Reich has termed the secession of the successful. Similarly, states and cities have been largely powerless to take on large corporations. Not only has globalization moved a considerable part of corporate earnings beyond the reach of state and local tax collectors (note Apple’s relocation of its profits to Ireland thanks to U.S. tax laws), but look at the way states and cities are falling over one another to offer tax holidays and subsidies to Amazon for its proposed HQ2.

It’s also worth noting that a key aspect of localism that has been effectively exempt from federal control—local control of zoning and land use—has worsened the economic segregation of our nation’s metropolitan areas.  In sprawling metros, separate suburban cities have used the power of land use regulation to exclude apartments, directly contributing to the problem of concentrated poverty that intensifies and perpetuates the worst aspects of income inequality. Cities have been implicated in the nation’s housing affordability and segregation problems, but that’s hardly mentioned in Katz & Nowak. The word “segregation” appears only once in the book (page 40). The word “zoning” occurs on 8 pages. Housing affordability is mentioned just once (page 28).

The root of the problem here is too much localism. The most localized governments have the strongest incentives to exclude neighborhood groups within cities lobby against density. Suburbs within metropolitan areas do the same. Only larger units of government have the incentives and ability to challenge this kind of parochialism. Notably, two initiatives of the Obama administration–HUD’s affirmatively furthering fair housing rule and the Council of Economic Adviser’s critique of local zoning–represented important national steps pushing local governments to confront this issue. Both are going nowhere under the current administration.

Assume we have a can-opener: Cities can’t do this without a strong federal government.

The danger here is that these calls to renewed localism effectively aid and abet the ongoing efforts to systematically dismantle federal programs.  The clarion call to act locally diverts our political attention from the national stage and perhaps, unwittingly, becomes an excuse to stand by and watch these foundational programs be destroyed. Katz and Nowak briefly address this question of the federal role early in their book:

“. . . the devolution of power and problem solving to local levels is not an argument against the importance of federal and state governments.  . .  The federal government must do things that only it can do, including safeguarding national security, providing a stronger social safety net than it presently does, providing guarantees of constitutional protections and civil rights, making smart national infrastructure investments, protecting natural resources, protecting the integrity of markets and funding scientific research, innovation, and postsecondary education to keep the nation competitive.” (Katz & Nowak, page 10).

Oh, is that all? This caveat swallows the book’s premise. Localism will work brilliantly–provided we have an extraordinarily competent, generous, fair and functional federal government.

In effect, it’s a reprise of the classic economics joke about the physicist, chemist and economist, trapped on a desert island with cases of canned food but no way to open them. The chemist proposes evaporating seawater into a potent brine and letting the salt solution rust the cans open. Too slow, says the physicist, who works out the exact angle from which to drop the cans onto sharp coral and cause them to split open. The economist waves them both away and says, “I have a simpler, much more elegant solution.  Let me explain:  First, assume we have a can-opener . . ”

A competent, generous, fair and functional federal government is the can-opener.

One more point should be made: Many of the innovative city strategies celebrated in this book are directly dependent on the ability of mayors and city institutions to tap into federal largesse. Take Pittsburgh, heralded as an exemplar of local innovation. Katz and Nowak acknowledge that Carnegie Mellon and the University of Pittsburgh receive more than $1 billion in federal research funding annually (page 75). Cities looking to exploit an “eds and meds” strategy can’t do it without huge federal support in the form of research grants, student aid, Medicare, Medicaid and the Affordable Care Act. A federal government that defunds these programs—as seems likely because of the new tax reform law—will make it all but impossible for cities to innovate.

Laboratories, not factories

Katz and Nowak marshal an impressive list of inspiring local innovations from cities, such as Indianapolis, Chattanooga, Oklahoma City and St. Louis. Mayors and civic leaders in these places are generally pragmatic and entrepreneurial and are developing solutions that cut across partisan and ideological lines. Cities are, as the saying goes, the laboratories of democracy. But for the most part, they are the small-scale, bench-test laboratories for incubating ideas and showing that they can work at a municipal scale. Implementing these ideas at a national scale is essential to their success.

The key lesson of policy experimentation is that while ideas can be tested and refined at the state or local level, they ultimately need to be national in scope. States experimented with minimum wage laws, unemployment insurance, and old age pensions, but none of these were began to address our problems until extended nationwide in the New Deal.

For a long time, we could take the federal government more or less for granted.  There was no hope that it would ride to the rescue, but at least it would keep doing what it had always done: cashing social security checks, bankrolling medical care for the poor and aged, enforcing a minimum of civil rights everywhere, engaging seriously with the rest of the world on global issues. Now, every one of those fundamental roles is very much in jeopardy.  If the poor lose health care, are turned out of subsidized housing, see their education prospects dim, that will directly add to the costs burdening states and cities. The pressure to fill in for a diminished federal presence will greatly handicap local innovation.

Like Localism? Time to fight for an effective national government

If you care about cities and believe local initiative can lead to solutions, you need to be marching on Washington and fighting for a federal government that does its job well.  The hollowing out of the federal government now underway is the clearest threat to creative, effective localism. Ultimately, the magic of our federal system is that both national and local government have important and complementary roles to play. It’s not either/or. It is both/and. Innovative cities require a supportive federal government.

Rather than turning their backs on the federal government and national debates, cities and civic leaders ought to be pooling their energy and efforts to kindle a new dialog about how we appropriately divide responsibilities between national and local governments. We must insist that the national government do its job well and that it provide the room and in some cases some of the resources to help cities tackle problems at a more local level. We need a 21st century federalism that envisions strong and mutually supporting actions at both the national and local levels, not a retreat to homogenous but balkanized localities.

 

 

Coffee and ice cream and jam (or traffic jams)

Just once, we are going to sugar-coat our commentary.

At City Observatory, we know that a lot of what we present is highly technical, especially when it comes to understanding the complex and dynamic problems of transportation. But when it comes to transportation policy, two of the most important lessons you can remember can be summarized in an analogy to a single beverage: the affogato.

The affogato, as you know, consists to two parts:  gelato and espresso.  You pour a freshly brewed espresso over a healthy dollop of gelato, and there you go.  To us, each of the ingredients of the affogato ties directly to a simple story about how transportation systems work.

Gelato:  The Ben and Jerry’s Theory of Traffic Congestion

The first part of our affogato theory is the gelato, or to American tastes, ice cream.  Here we have what we call our “Ben and Jerry’s Theory of Traffic Congestion,” which is inspired by this national ice cream chain’s annual practice of “Free Cone Day.” One day a year, the company gives away ice cream for free.  When they do, people are lined up around the block at Ben and Jerry’s stores.

Long queues for a “free” ice cream cones are exactly the same as traffic congestion. The reason that people are all waiting in line is because what they’re going to consume is way, way under-priced. Peak hour road delays occur because we don’t send price signals to consumers that its really expensive to provide road capacity at rush hour. And the Ben and Jerry’s model also tells us why state and city transportation agencies are chronically short of money: if you don’t charge people for your product, especially your most expensive product, you’re going to go broke pretty quickly. Free cone day only works because Ben and Jerry hold it one day a year:  your local highway department is trying to run free cone day every single day, with predictable results for traffic and their budget.

Espresso:  The Cappuccino Congestion Index

The second part of the affogato is the espresso, which in this case symbolizes our Cappuccino Congestion Index. Let me explain. Periodically, you’ll read scary sounding estimates of the economic costs of traffic congestion. Typically, they’re arrived at by computing how much longer a rush hour trip takes than one taken at say, 2 am, and then multiplying additional minutes of travel by some high value of travel time, and voila, you’re into the billions pretty quickly.

The troubles with this exercise, as we’ve pointed out before, are manifold, and we could point you to our 40 page critique of this research. But it’s simpler, and more memorable, we think, to point to the second part of our affogato analogy:  The Cappuccino Congestion Index.

If you’re like most Americans, you periodically, and often daily, patronize your local coffee shop for an espresso, a latte, or a cappuccino.  If you show up at say, 8:30 am or 10 am, its a virtual certainty you’re going to have to wait in line behind others who are also looking for their morning coffee fix. Using the same techniques that underlie the traffic congestion cost estimates, we were able to compute how much this cappuccino delay costs American coffee drinkers–it too, runs into the billions of dollars per year.

But just as with traffic congestion, there’s no feasible way that Starbucks (and your local coffee shops) will hire enough baristas and buy enough coffee machines and rent large enough storefronts that you’ll have a zero wait time during peak coffee consuming hours. And as a consumer you know that if you want your coffee at the same time as everyone else, you can expect to wait a couple of minutes.

It’s possible to compute how many minutes of time we spend waiting in lines (whether in our cars or not), and multiply that by a value of time and get very large numbers. But that doesn’t mean that there’s any feasible way to build enough capacity that we never encounter delays.

Transportation is a complex topic. But a couple of simple parables, one about free ice cream and the other about the every morning line at the coffee shop, tell us much of what we need to know about the economics of traffic congestion. Think about that the next time you order an affogato; you’ll probably have to stand in line for a while, but it’s worth the wait.