Local neighborhoods matter even more for black kids

The Equality of Opportunity Project shows local factors matter, but even more for black kids

We now have a rich understanding of how where you grow up influences your life prospects. As we reported last week, the new Opportunity Atlas shows down to the neighborhood level, using big data gleaned from anonymized tax records, how where you grow up influences intergenerational economic mobility.

One of the big questions is what geographic scale these effects play out:  Is it the state or region, the metropolitan area, the county, the neighborhood or the school?

Raj Chetty, Nate Hendren and the researchers at the Equality of Opportunity Project have used their new, very detailed tract level estimates to estimate the contributions of different geographies to economic success.  Essentially what they’ve done is to look to see how much more of the variation in individual outcomes is explained by looking at successively smaller geographies. So, for example, they look first at the variation in outcomes among “commuting zones”–large geographies that include metropolitan areas and surrounding rural counties.

Averaged across the whole US population, the variation in commuting zones explains about half of all the total variation in individual outcomes that’s attributable to geography.  The other half comes from more localized effects–i.e. things that are different about the county you live in in the metro area, or your neighborhood or school district.

For black kids, the neighborhood you grow up in is even more important than your metro area

While on average, half of all variation is from these finer, neighborhood effects, there are important differences across racial and ethnic groups. The most striking outlier is black children.  For black children, local neighborhood effects are even more important than larger regional ones.  Compare, for example, black and white kids.  For white kids, the commuting zone (metropolitan area) you grow up in determines about half (48.9 percent) of the geographic variation in your lifetime economic performance (local neighborhood factors make up the rest. For black kids, the commuting zone is far less important, making up less than a third (32.5 percent) of the variance.  What seems to matter most is the characteristics of the local census tract and high school catchment area, which together make up more than 55 percent of the difference.

As we noted earlier, the latest report from the Equality of Opportunity Project makes it clear that neighborhood factors, like the poverty rate of your neighborhood, what fraction of your neighbors have finished college, and what fraction of nearby adults have regular employment, is a big contributor to intergenerational economic mobility.  These highly localized  factors seem to be even more important to the lifetime economic prospects of black kids.

The effects of poverty are highly localized

The authors dig deep into their data to try to better understand how the geography of poverty influenced children’s life outcomes. Which of your neighbors, in what physical area seem to have an impact on your prospects?  Is it just those on your block or adjacent blocks, or do those who are further away have as great an impact. Using block level and tract level data, Chetty, Hendren, et al, compute a decay function (the rate at which the effect of neighborhood variables influences child outcomes declines with distance).  The following charts show the impact of having neighbors with income below the poverty line on a child’s earnings as adults by the distance (in miles) from the place the child grew up.  The negative numbers indicate that having neighbors living in poverty lowers adult income.  This effect is relatively great for nearby households, but after 2 or 3 miles declines to almost zero.

Having poor neighbors nearby has a statistically significant negative effect on a child’s earnings as an adult. They conclude:

In sum, neighborhood characteristics matter at a hyperlocal level. A child’s immediate surroundings – within about half a mile – are responsible for almost all of the association between children’s outcomes and neighborhood characteristics documented above.

The upshot of this work is a further confirmation that neighborhoods matter, and that if we’re serious about expanding opportunity for the poor, and especially poor children of color, breaking down the growing concentration of poverty in many of our urban neighborhoods has to be high on our agenda.

The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility∗ Raj Chetty, Harvard University and NBER John N. Friedman, Brown University and NBER Nathaniel Hendren, Harvard University and NBER Maggie R. Jones, U.S. Census Bureau Sonya R. Porter, U.S. Census Bureau October 2018

Unsafe Uber? Lethal Lyft? We’re skeptical

A new study claiming ride-hailing increases crashes and deaths leaves some questions unanswered.

A new study from the University of Chicago’s Booth School of Business makes the provocative claim that the advent of ride-hailing services like Lyft and Uber has actually led to an increase in car crashes, and related injuries and deaths. If true, this is a pretty stunning downside to this new technology.

We’re skeptical that this paper has it right, for three reasons:

  • The study leaves out the effect of lower gas prices and increased driving on crash rates.
  • Rural areas–which essentially don’t have ride-hailing services–saw even bigger increases in crashes than cities with ride-hailing.
  • And the study doesn’t try to correlate the increase in crashes to either the times or the places that ride-hailed vehicles are most used, which would be a much more powerful indicator of a safety effect.

The paper, The Cost of Convenience: Ridesharing and Traffic Fatalities, is written by John Barrios of the University of Chicago and Yael V. Hochberg and Livia Hanyi Yi of Rice University. It looks at the roll-out of ride hailing services to different cities and changes in local crash rates. The key method behind the study is a “difference in difference” analysis of crash trends across cities. The authors basically look at the date at which Uber and Lyft introduced their services in different cities and look to see if there’s any correlation between the addition of service and a change fatality rates. It finds that there has been a positive correlation between these two events. They conclude that the advent of ride-hailing is associated with about a 2-3 percent increase in fatal crashes. Their paper argues that ride-hailing has increased vehicle miles traveled, and therefore led to more crashes.

To be clear, the authors have labeled this a preliminary draft, which clearly indicates that they’re open to comments and criticism. In that spirit, we have some questions.

Leaving out gas prices and vehicle miles traveled

First, to be clear, this is a study that shows correlation, rather than causation.  Essentially, at the time that cities were adopting ride-hailing, there was an increase in fatal crash rates. Clearly, it’s possible that ride hailing was a contributor to the increased volume of traffic.  But other things were increasing traffic during that time, and moreover, the roll-out of ride hailing happened pretty much everywhere in a relatively short period of time. So one challenge for the statistical analysis is the actual dearth of difference among cities in introduction dates.  Following the well established “S-curve” of innovation, nearly all cities saw ride-hailing service introduced in just two years.  The fact that the service spread so rapidly means that there isn’t a huge amount of variation among cities on that factor. As the Barrios-Hochberg-Yi paper makes clear virtually all of the uptake in ride-hailing took place between early 2014 and the end of 2016.

Barrios, Hochberg & Yi


More importantly though, there was another big change that happened at exactly the same time that has a lot to do with crash rates. In the third quarter of 2014, gas prices fell precipitously.  And, as we’ve chronicled at City Observatory, the decline in gas prices led directly to an increase in driving. Here’s the data from the US Department of Energy (gas prices, red line) and US Department of Transportation (per person vehicle miles of travel (VMT), blue line).  When gas prices fell, driving increased.


More driving is a key reason why there’s been more dying. Moreover, there’s good work (pre-dating the existence of ride-hailing services) that shows that at the margin, the increase in driving occurs at those times and among those drivers who are riskiest. When gas prices get cheaper, both those who drive more, and the times at which they drive, are more prone to crashes. A detailed study of gas prices and crashes in Mississippi found that a 10 percent increase in gasoline prices was associated with a 1.5 percent decrease in crashes per capita, after a lag of about 9-10 months.

The decline in gas prices is a much more powerful explanation for the increase in vehicle miles traveled (and death rates) than is the advent of ride-hailing.  A study that observes a correlation between higher crash rates and ride hailing, and asserts that the mechanism by which ride-hailing has increased crash rates is higher VMT should sort out the contribution of gas prices. As far as we can tell, nothing in the Barrios-Hochberg-Yi paper consider the effects of gas prices on driving levels and crash rates. This seems like a major limitation in this paper.

A counterfactual:  Rural fatality rates rose even more

The Barrios-Hochberg-Yi paper makes much of the fact that crash and fatality rates were falling prior to the introduction of ride-hailing services and have increased since then.  As we’ve argued that has a lot to do with the big decline in gas prices.

A logical way of dis-entangling the relative contributions of gas prices and the advent of ride hailing to the increase in crashes and fatalities is to look at variations in crash trends between urban and rural areas.  Uber and Lyft are almost exclusively urban phenomena, and so rural areas, as a group, should be almost immune from whatever negative effects they cause on traffic crashes and deaths.

Here are the National Highway Traffic Safety Administration‘s data on urban and rural highway fatality rates  per 100 million miles traveled over the past decade.

These show a couple of things.  First, there’s a decline in fatality rates from 2007 through 2013, in both rural and urban areas, followed by an uptick afterwards.  Second, the increase in crash death rates in rural areas is actually even higher between 2014 and 2016 (up 7.7 percent from 1.82 to 1.96) than it is in urban areas (up 3.9 percent from .76 to .79).

If ridehailing were responsible for an acceleration in crashes and deaths beyond that attributable to increased driving generally because of lower gas prices, one would expect just the opposite pattern (i.e. that the urban crash death rate would rise faster than the rural crash death rate where Uber/Lyft were not available).

The fact that rural crash death rates also rose, and actually rose faster than urban crash death rates is a reason to be skeptical of the claim that ride-hailing caused more crashes and deaths in cities.

Time and date and location effects

Analyzing the impact of ride-hailing on urban transportation systems is complicated by the fact that Uber and Lyft are not always forthcoming with the detailed data that would be needed to conduct an analysis.  The authors of the Barrios-Hochberg-Yi paper weren’t able to get data on the number of drivers or riders or rides in individual cities over time from the two companies (which would have been the preferred way of measuring their impact on cities), and instead used the volume of google searches for the two company’s names as a proxy for the volume of ride-hailing activity over time.

That strikes us as a pretty crude measure.  Even in the absence of actual trip data, it should be possible to construct much more reasonable tests of the impact of ride hailing, given well-documented variations in the temporal and spatial patterns of ride-hailing activity.

Ride hailing trips are heavily concentrated in time (peak hours, and weekend nights) and in space (in downtown areas and near airports).  We reviewed a very detailed five city study on this in our commentary “Drinking,Flying, Parking, Peaking, Pricing.” As the report illustrates, there’s a strong pattern to ride-hailing use by time of day and day of week:

Feigon, S. and C. Murphy. 2018. Broadening Understanding of the Interplay Between Public Transit, Shared Mobility, and Personal Automobiles. Pre-publication draft of TCRP Research Report 195. Transportation Research Board, Washington, D.C.

One of the most valuable aspects of fatal crash data is that it is coded with the exact date, time and location at which a crash occurs.  Given that we know a great deal about the time and location of ride-hailing activity, and also about the time and location of fatal crashes, it should be possible to do a much more precise analysis of the correlation between ride-hailing and crash deaths that aggregating data at the city level by month or year.

For example, if the thesis of the Barrios-Hochberg-Yi paper is correct, and ride-hailing contributes to increased crashes, it ought to be correlated with the days of the week, times of the day, and locations at which ride-hailed vehicles are most present.  For example, a high proportion of all ride-hailed trips occur on Friday and Saturday nights, while only tiny fractions of such trips are taken on mid-days on Tuesdays and Wednesdays.  If ride-hailing were responsible for increased deaths, one would expect most of the increase to occur on those times when it was most active.

Similarly, ride-hailing activity is highly concentrated in city centers, and secondarily in and around airports.  This pattern has much to do with the fact that parking is priced in cities, and that travelers to and from airports may not own a car in the city in which they are traveling, or find it expensive or inconvenient to rent or park one.  Again, if our hypothesis is that ride-hailing has increased crashes, we would expect to find more crashes in those places in which ride hailing was prevalent, and expect no increase or a smaller increase in crashes where ride hailing was rare (i.e. low density suburbs).

More analysis is needed

The advent of ride-hailing is undoubtedly having some major effects on urban transportation, and deserves to be studied closely. It’s a hopeful sign that the author’s of this paper have characterized their work to date as “preliminary,” because there’s much more to examine. We hope that Uber and Lyft would recognize their interest in making more data available to researchers so that more precise analyses could be undertaken.

While this paper raises important and provocative questions, we think it needs to address three key questions before its conclusions can be taken seriously.

  • First, we need to explicitly address the role of declining gas prices on vehicle miles traveled and crash rates.
  • Second, we need to explain why rural crash death rates went up even more than urban ones.
  • Third, we need to make much better use of the detailed temporal and locational data on crashes and determine whether there’s any connection between the times and places where ride-hailing is most used and the increase in crashes.


Cities, talent and prosperity

America’s economy is increasingly driven by the concentration of talent in cities

The Economic Innovation Group (aka EIG, a DC-based think tank) has been compiling some interesting data on the relative economic performance of different parts of the US, in the form of their “Distressed Communities Index.”  The recently enacted federal opportunity zones program is a brain-child of EIG, so identifying which places are distressed is a key aspect of their worldview.

They’ve released a new report “From Great Recession to Great Re-shuffling” offering a highly detailed view of change in the US economy over the past decade. Their report is based on set of indicators measuring relative economic performance of more than 25,000 zip codes. EIG has assembled data on the job characteristics and demographics of these zip codes from federal employment and Census records. The result is an interesting pointillist portrait of where the economy is doing well (and where it isn’t). They’ve got an on-line map showing the relative economic economic health.  Best scoring zip codes are in blue, lowest scoring in orange and red.

This is a lot of data to make sense of, so the EIG report aggregates data for these 25,000 zip codes into five groups (with roughly 5,000 zip codes in each group), based on the relative performance of zip codes on a composite index of seven factors including income, poverty rates, education, business formation and job growth.  They’ve labeled the five groups “prosperous, comfortable, mid-tier, at-risk, distressed.”

EIG’s own analysis highlights a number of interesting results from this aggregation: a large swath of the country still has fewer business establishments now than it did before the Great Recession, most job creation and business formation has been concentrated in more populous areas, and there’s been a net loss of population from the bottom two-fifths of zip codes since 2007.

The importance of education

Well-down the EIG list of findings was the one we found the most telling:  The increasing concentration of talent in the most prosperous places. Here’s their chart showing the composition of the population of each of their five zip-code quintiles, based on educational attainment.

What’s striking is that each of these five groups has almost exactly the same number of people with less than a BA degree (about 30 million).  The pronounced difference among places is in the number of adults with a BA (light blue) and the number with a graduate, professional or doctoral degree (dark blue).  The most prosperous quintile of zip codes has 27.7 million adults with a bachelor’s degree or higher, nearly six times more than the 4.8 million that lived in distressed zip codes.

Even more striking, is the pattern of change over the past decade or so.  The EIG report compares American Community Survey data from two time periods (2007-11 and 2012-16).  They report that the number of advanced degree holders in the US increased by 3.7 million in that time. The increase in advanced degree holders was heavily concentrated in the most prosperous zip codes. Half of the increase in those with an advanced degree occurred in the top quintile of zip codes; only 5 percent of the increase was recorded in the lowest, “distressed” zip codes.

One one level, this data confirms the clustering of talent in the most prosperous places. Zip codes that have and attract well-educated workers are performing much better economically than those that don’t.  As we’ve stressed at City Observatory, much of what’s going on here is the clustering of talent in the largest metropolitan areas, and within those areas, in close-in urban neighborhoods. The EIG data are consistent with this analysis. Their report observes a strong correlation between the educational attainment of a metropolitan area and the share of its population that lives in top-tier “prosperous” zip codes:

Metro area findings reinforce the education advantage. Tellingly, seven of the 10 major metro areas in which the largest share of the population resided in a prosperous zip code also ranked in the top 10 for bachelor’s and advanced degree attainment. . . . Conversely, six of the 10 major metro areas with the largest shares of their population living in distressed zip codes ranked in the bottom 10 on college degree attainment nationally.

The limits of zip codes

This is rich and detailed data, but zip codes are far from ideal as the geography to characterize economic performance. They don’t represent complete economies in any sense. Some zip codes (a downtown business district or industrial areas) are job centers, typically with far more employed workers than residents. Other zip codes are primarily residential, with few jobs (other than some local retail and service jobs. Few people live and work in the same zip code; almost no one, especially in a large metropolitan area has their economic prospects defined by the number or kind of jobs that happen to be in their zip code.  For most Americans, one’s zip code reflects the kind of housing one can afford, rather than one’s place of employment. In important respects, zip code measures are really more revealing about sorting and economic segregation than they are about localized patterns of economic opportunity.

Let’s take a closer look at a couple of different metropolitan areas (Detroit and Orlando) to see the differences in geographic patterns of distress. First, here’s a map of the distress index for Southeast Michigan.  It shows high levels of distress in the City of Detroit proper (dark red), surrounded by areas of blue (with a fair amount of dark blue); illustrating a well-known disparity in economic conditions between the city and its suburbs. (At this level of detail, the maps shift to a more cubist appearance).

Distress Index, SE Michigan (EIG)

And in contrast, here’s the same map for the Central Florida region centered on Orlando.  Here the pattern is much more of a random patchwork, with few concentrations of extremely high performing or low performing zip codes in any particular area.  In contrast to the stark city/suburb divide in Detroit, high performing and low performing zip codes are found all over Central Florida.

Distress Index, Central FL (EIG)

The challenge in interpreting the data from the EIG report is that national level aggregations of zip codes don’t tell us anything about the spatial pattern of economic performance within metropolitan areas. One’s diagnosis of the economic problems of a “distressed” zip code in Detroit (surrounded by dozens of other distressed zip codes) should probably be very different from that of Orlando (where distressed zip codes are few and tend to be adjacent to healthy zip codes.

Get out! Why economic mobility might mean leaving home

Part of the disparity in intergenerational economic mobility may stem from a willingness to leave home

Raj Chetty, Nate Hendren and their colleagues at the Equality of Opportunity Project have crafted a rich picture of the role that community plays in long term economic opportunity. We’ve highlighted some of their findings in the past couple of weeks.  For example, proximity to jobs and nearby job creation doesn’t seem to have any positive impact on the rate of intergenerational economic mobility.  It also seems to be the case that for black children, the characteristics of the neighborhood they grow up in is even more important than for white children.


Daniel Kaluuya stars in Jordan Peele’s 2017 “Get Out”

The latest product of the Equality of Opportunity Project is their Opportunity Atlas, which provides a rich array of data on the characteristics and outcomes of neighborhoods throughout the nation. One feature of their new Atlas caught our eye.  They include a datapoint that measures the fraction of children who grew up in a city who continue to live their as adults. For clarity, “city” in these terms means something called a “commuting zone” or CZ, which is an area defined by the federal government to include a metropolitan area and its surrounding counties. The entire nation is part of one of more than 700 commuting zones, which makes them a useful sub-state unit for characterizing economic activity. Specifically, this variable measures the percent of kids who grew up in a commuting zone who live in that same commuting zone as adults.

One of the frequently cited motivations behind economic development programs, especially in small towns and rural areas, is the hope that by creating more jobs, or the right kind of jobs, the community will be able to hold onto its kids as they grow up and move into the workforce.

The Washington Post profiled Las Animas, a town in rural Colorado that’s seen struggling economy and steady out-migration. While parents may be stuck there, their children aren’t.

Most of their kids have already left town, for good reason.

“I’m just as guilty as the next,” says Frazier, a big guy in a Green Bay t-shirt. “I encouraged them — get out of here. There’s nothing here.”

The Opportunity Atlas bears out this observation:  Only about 52 percent of the kids who were raised in the Las Animas area sill live their, well below the median national rate of remaining in one’s commuting zone of 68 percent.

One of the interesting sidelights of the Opportunity Atlas is a rich new picture of where kids ended up living. Because they tracked children from the time they grew up until they were adults, Chetty, Hendren and colleagues have an unusually large longitudinal picture of migration trends. Their Opportunity Atlas shows what fraction of kids who grew up in an area still live their as adults.  Here’s the map for the United States.

There are some very strong regional patterns. In the Great Plains and Inter-Mountain West (Iowa, Nebraska, the Dakotas, Montana, Wyoming) a relatively small fraction of kids remains in town (the dark red areas)(.  In contrast, in much of the South, particularly in Appalachia and the Mississippi Delta, a high fraction of those who grew up locally still live in the same commuting zone (dark blues/greens).  Some big metropolitan areas (Los Angeles, Chicago, Houston, etc) also retain a high fraction of kids who grow up locally, but for different reasons than in rural areas.

Contrast this map with another one that should be very familiar to those who are familiar with the Chetty/Hendren work.  This map shows inter-generational economic mobility, the probably that kids who grew up in low income households achieved higher earnings as adults.  There’s a strikingly similar regional contrast, with relatively high economic mobility in the Great Plains states and relatively low economic mobility in Appalachia.  The following map shows children’s average income as adults, with darker blue and green colors representing relatively higher incomes and reds and oranges lower adult incomes.

This suggests to us a hypothesis:  One of the chief ways that an area can contribute to the economic prospects of its children may be to prepare them to go somewhere else to pursue their dreams. One of the reasons that children growing up in rural areas in the great plains do better as adults may be that they are more likely to move away as adults. Conversely, those in much of the rural South may find it difficult to improve their life prospects because they tend not to move too far from where they grew up. At this point, our observation is just a conjecture, but with great tools like the Opportunity Atlas, its something that we can get a much better handle on.

Finally, speaking of “Get Out,” be sure to get out and vote next Tuesday, November 6.  Your nation needs you.

The limits of job creation

Whether at the neighborhood or metropolitan level, more job growth doesn’t seem to improve economic mobility

There’s a seemingly un-questioned (and unquestionable) truth among economic development practitioners that more job creation is the universal answer to problems of economic opportunity. If our neighborhood (or city or region) could just grow more jobs, or grow them at a faster rate, there’d be lots more opportunity for the poor and disadvantaged to lead a better life. We support job creation efforts because we believe that the benefits will help those, especially at the bottom of the income spectrum.

The “proximity to jobs and job growth” argument is more than just a widely repeated shibboleth of economic development practitioners. For decades its been encapsulated in something called the “spatial mismatch” hypothesis, propounded by economist John Kain in 1968; he argued that the suburbanization of jobs meant that low skilled urban workers left in segregated low income urban neighborhoods were progressively further from jobs. As jobs moved away from cities, these workers suffered accordingly. The implication of this hypothesis is that if we could just get more jobs closer to these disadvantaged populations, they’d have more opportunity.

In the past few years, we’ve gotten a much clearer and more detailed picture of who’s flourishing (and where) thanks to the research of Raj Chetty, Nate Hendren, and their colleagues at the Equality of Opportunity Project. Using de-identified tax records, they’ve calculated the intergenerational economic mobility of Americans, identifying who has moved up. A core indicator is the extent to which children born to the poorest families move up in the income distribution and have higher relative incomes that their parents. It turns out that some cities and some neighborhoods do a much better job of enabling children to succeed as adults.

Their latest– The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility–examines data at the neighborhood level to judge the correlates of economic mobility. We highlighted the on-line Atlas they’ve created, which enables you to see which places do the best job of giving kids a chance to succeed economically. The accompanying research paper steps back and asks what we can learn from these patterns about the characteristics of local communities that seem to underlie economic  mobility.

On specific point of inquiry is using data from the Atlas to test the connection between job growth and intergenerational economic mobility. Does living in a neighborhood that has a wealth of jobs nearby improve the lifetime economic prospects of kids growing up there? The short answer is “no.”

The authors use data from the Census Bureau’s Local Employment and Housing Dynamics (LEHD) report to estimate the number of jobs within five miles of every census tract (neighborhood) in the US and then compare variations in job proximity to their measures of intergenerational economic mobility. They find that the density and growth of jobs bears no statistically significant relationship to lifetime earnings prospects of kids growing up nearby.

[The number of jobs within five miles] is slightly negatively associated with upward mobility, with a correlation of -0.175 (s.e. = 0.004). The number of “high-paying” (annual pre-tax wages above $40,000) jobs exhibits a similar pattern. We also find small correlations with the rate of job growth between 2004-2013, the period when children in our sample were entering the labor market. In short, there is little evidence of a positive association between local availability of jobs and upward mobility, challenging spatial mismatch theories of economic opportunity (Kain 1968).

The same finding holds at the metropolitan level.  Kids who grow up in regions or metropolitan areas where job growth is strong don’t tend to exhibit greater intergenerational economic mobility as adults than kids growing up in weaker labor markets.  Here’s a scatter diagram of data for the 50 largest commuting areas (major metropolitan areas and their surrounding commuting zones), showing intergenerational economic mobility on the vertical axis and job growth on the horizontal axis.  As the report notes, there is essentially no correlation between the two measures.

As the authors conclude:

The upshot of these findings is that a booming labor market does not automatically translate into greater upward mobility for local residents. Hence, policies targeted based on job growth rates would reach quite different areas from the places where upward mobility is lowest. More broadly, the factors that lead to highly productive labor markets with high rates of job, wage, and productivity growth apparently differ from the factors that promote human capital development and result in high levels of upward income mobility across generations.

What does matter?  While the number of local jobs doesn’t seem to make much difference to lifetime employment prospects, the share of neighbors who are employed does. Chetty, Hendren and co-authors look at the correlation between the rate of adult employment and the intergenerational mobility of children.  The bigger a fraction of the local adults who have jobs, the more likely it is that kids will be successful as adults:

. . . we find a strong positive correlation of 0.349 (s.e. 0.004) between the employment rates of the local residents in a neighborhood and the outcomes of children who grow up there. Evidently, what predicts upward mobility is not proximity to jobs, but growing up around people who have jobs.

They also find a positive relationship between neighborhood level measures of social capital, proxied by the fraction of the local population that returns its census forms by mail (i.e. not requiring a separate personal contact to elicit a response).  Children who grow up in neighborhoods with higher levels of social capital also have greater economic success as adults.

The non-existent relationship between economic mobility and local job growth poses a major intellectual challenge for many economic development programs and policies, particularly if they’re promoted as ways of redressing poverty and promoting greater equity. Take for example the recently enacted Opportunity Zone program, which confers tax breaks on investments in low income neighborhoods. Even if such measures do succeed in creating more nearby jobs, it may be that this does little to promote the lifetime prospects of kids growing up in these neighborhoods.

Instead, if we care about opportunity, we need to be looking for ways to improve these kids’ human capital (get them greater access to education), strengthen their personal networks (as exemplified by greater contact with peers, neighbors and friends who are employed), and building social capital. These are not the usual targets of many job creation strategies.

The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility∗ Raj Chetty, Harvard University and NBER John N. Friedman, Brown University and NBER Nathaniel Hendren, Harvard University and NBER Maggie R. Jones, U.S. Census Bureau Sonya R. Porter, U.S. Census Bureau October 2018

Fresh evidence for Portland’s green dividend

Building a city so its residents don’t have to drive so much powers economic growth

A decade ago, we coined the term “green dividend.”  We noted that among large US metropolitan areas, Portland residents drove significantly fewer miles per person each day, thanks to the city’s compact development pattern, strong economic integration, good transit system, and high levels of cycling. In 2007, we estimated that compared to the typical urban American, Portlander’s saved more than a billion dollars a year in the cost of fuel and vehicles because they drove about 20 percent less than the US average.

The existence of this billion dollar green dividend is invariably overlooked in superficial comparisons of living costs and housing affordability. Because Portlanders have a billion dollars more disposable income annually that they’re not spending on cars and gasoline, they have more to spend on other things they value, like rent and beer. Perhaps it’s not a coincidence that the Portland metro area has more restaurants per capita than all but two of the nation’s largest metro areas.

Recently, we ran across two new facts that buttress the case for the green dividend. The first comes from the Bureau of Economic Analysis state-level estimates of consumer expenditures.  This series estimates how much households spend on a variety of items. It breaks down expenditures by state, rather than metropolitan area. Portland is about 40 percent of Oregon’s population, and drives less per capita than the rest of the state, so the figures cited here probably understate the Green Dividend.

Oregon and US household spending on vehicles and gasoline, Five-year average (2011-2016).

Source:  BEA, Consumer Expenditure Survey

Over the past five years, the typical Oregon household spent about 16 percent less on motor vehicles and parts and about 15 percent less on gasoline and other energy than the typical America. (These are the two expenditure categories that most closely align with automobile expenditures). And the difference isn’t because Oregonians have less income to spend: per household spending in Oregon is almost exactly equal to the national average (less than a tenth of a percent difference), which means that the difference in spending is due to different choices, rather than lower incomes. Over the past five years, the typical Oregon family has spent about $390 per year less on owning and operating automobiles than the typical American household, a green dividend that helps stimulate the Oregon economy.

The second item is forward-looking. What if a city like Portland were to take the Green Dividend thinking seriously, and build new housing in a denser pattern? A new study prepared for Up for Growth (a housing advocacy group) by ECONorthwest looks at various scenarios for future development in the Portland metropolitan area. It considers the relative economic, social and environmental effects of adding housing units in a sprawling suburban development pattern, or a denser, more urban smart growth pattern. The report compares what would happen to the Portland area over the next two decades, depending on whether it chooses a “more of the same scenario” in which 70 percent of new housing is single family developments or a “smart growth scenario” in which 90 percent of new housing is in higher density, walkable, transit served multi-family housing.

One of the study’s key findings is that denser urban neighborhoods generate far fewer vehicle miles of travel (VMT) per resident than do more remote, lower density suburban neighborhoods. This map of Portland shows that central, transit connected neighborhoods have far lower VMT  than more peripheral locations.  (The black lines on the map show the location of Portland’s light rail and streetcar network).

In the scenario where more development is concentrated in denser neighborhoods, vehicle miles of travel falls appreciably. The report concludes

By locating housing in areas with low VMT, the Smart Growth scenario results in 1.5 million fewer miles travelled daily for commuters compared to the More of the Same scenario

While this is impressive in its own right, its worth considering the monetary value of this avoided travel. Our rule of thumb for computing car travel costs is roughly 50 cents per mile. Reducing travel by 1.5 million miles per day saves Portland area residents $187 million annually in the costs of fuel and vehicle costs. (The calculation is 1.5 million miles per commuting day multiplied by 250 commuting days, multiplied by 50 cents per mile). This money then is available to households to spend on other things that they value.

The cost savings are just the beginning of course. Less driving also means less dying; when we drive fewer miles there are fewer crashes, fewer injuries and fewer deaths.

Owning and operating cars is expensive. Building cities where people don’t have to rely so much on private cars for every trip and can generally travel shorter distances to reach common destinations saves households money. This green dividend is a powerful argument for investing in great urban neighborhoods and the infrastructure that supports them.

City Observatory’s Fourth Birthday

Today marks the fourth year since we launched City Observatory

On October 17, 2014, we started up City Observatory.

(Flickr: Till Westermayer)

Many thanks to all those who’ve made this endeavor possible over these past four years. This project simply wouldn’t have been possible without the efforts of our contributors and co-authors–including Daniel Kay Hertz, Dillon Mahmoudi, Michael Andersen, Alex Baca and Patty Stubel.

We’re grateful to the John S. and James L. Knight Foundation for its founding support fo City Observatory, and are pleased to add the Quicken Loans Community Fund as a current sponsor of City Observatory. We especially want to acknowledge Carol Coletta, who came up with the idea for City Observatory in the first place.

It’s been an exciting time to be in the thick of national discussions about cities. If you’re a regular follower of City Observatory, you’ll be familiar with many of the key themes and lessons we’ve been emphasizing.

The United States is facing a shortage of cities–we have a huge demand for great urban living that is only partly being met. What we observe as a shortage of housing and a widespread housing affordability problem is mostly a manifestation of the imbalance between the kinds of places people want to live and where housing has been built.

As our measures of the “Dow of Cities” emphasize, there’s been an increasing demand for central urban locations, and a relative decline for peripheral suburban ones. Home prices in central, and especially in walkable urban neighborhoods has gone up because these places are highly valued, and because, in many cases, a combination of density limits, apartment bans, parking requirements and arbitrary, NIMBY-dominated approval processes have essentially made it illegal to build more of these kinds of neighborhoods.

A key manifestation of this urban shift has been the locational preferences of young adults. We’ve shown that the “young and restless“–25 to 34 year olds with a four-year degree, are increasingly choosing to live in the close-in urban neighborhoods of the nation’s largest cities.

The growing desirability of cities has profoundly changed the rules of the economic development game. Corporate location decisions are increasingly dictated by the H.R. department:  which communities have strong concentrations of skilled young workers and are these places attractive to others we might recruit? The result has been an unprecedented resurgence in job growth in urban centers.

The shift back to cities hasn’t come without controversy. Change is hard, and many observers have reflexively associated cities with poverty and segregation. Neighborhoods that attract new residents are often labeled as gentrifiying, and as our colleague Todd Swanstrom wrote, the “g-word” becomes a conversation stopper.

But as we’ve shown at City Observatory, despite the outsized media attention it attracts, gentrification is extraordinarily rare. Of the 1,100 high poverty neighborhoods in the US in 1970, more than 90 percent are still high poverty areas today, with fewer than a tenth seeing reductions in poverty rates to less than the national average. Far more common–but much less remarked upon–has been the steady decline of formerly healthy neighobrhoods into places of concentrated poverty. The number of such neighborhoods has tripled in the past four decades.

In addition, not only is gentrification rare, but its effects are often benign or positive. Despite concerns that gentrification automatically implies displacement, there’s almost no statistically significant difference between out-movement rates of low income households in gentrifying and non-gentrifying neighborhoods.

Our new study, America’s Most Diverse, Mixed Income Neighborhoods, shows that the metropolitan areas where gentrification is a hot issue (San Francisco, Los Angeles and New York) have the highest concentrations of neighborhoods with high levels of both racial/ethnic and income diversity. In addition, some neighborhoods that are described as gentrifying–like Corktown in Detroit, and Bedford-Stuyvesant in New York–are among the most racially, ethnically and income diverse places in their respective metropolitan areas.

The most common reaction to concerns about gentrification–simply trying to block all change–simply makes the problem worse. Blocking new housing development only worsens the shortage of housing in neighborhoods experiencing change, and guarantees that wealthier, newer residents will outbid lower income occupants for housing. To some, it’s a seeming paradox, but if you want to minimize displacement, you need to build as much housing as you can, of all types. New market rate housing, even for high income households, leads to less bidding by higher income households for existing housing, and seems to help hold down rental price increases.

Our national challenge in the years ahead is to capitalize on the growing demand for urban living to create greater opportunity for all. For decades, economic opportunity and wealth were decentralizing, moving from the center to the suburbs, and leaving the poor and people of color cut off from upward mobility.  The movement back to the center creates a situation in which we can use new investment and added economic activity to revitalize urban neighborhoods, improve public services and increase opportunities for those who’ve often been left behind.

We hope you’ll continue to be with us in the year ahead.  Cheers!


Does your neighborhood help kids succeed?

The Opportunity Atlas: Stunning neighborhood maps of economic opportunity

Some of the most important research findings of the past decade have come from the work of Raj Chetty and his colleagues at the Equality of Opportunity Project. They’ve shown convincingly, the effect of community attributes on the life chances of kids. Their latest work, The Opportunity Atlas, is a masterpiece of data analysis, presentation, and accessibility.  It’s a detailed set of nationwide maps (with embedded data) that shows how individual neighborhoods influence the life chances of children. If you really want to understand how your neighborhood is–or isn’t–working for the kids growing up there, you’ll want to immediately go to this site, and spend a lot of time looking at what it shows.

One of the limits of most of our socioeconomic data is that it is based essentially on a series of disconnected, one-time snapshots of city or neighborhood conditions. But Chetty’s work is unique in that it is a longitudinal look at change over time, for example, looking at the adult earnings and other outcomes (employment marriage, incarceration) based on where children grew up. Another limitation of most analyses is that even our biggest data sets, like the American Community Survey, are based on sample data, so there’s a pretty noticeable margin of error, especially in estimates for small geographies.  Chetty and his researchers had access to the complete tax return data of Americans (anonymized, of course), to construct their Opportunity Atlas.  The Atlas is based on records for 20 million children born between 1978 and 1982, tracking their progress through their thirties. The data was assembled with the support and assistance of the Census Bureau. Taken together, this data gives us a unique and detailed view of the ways in which community characteristics influence intergenerational economic mobility and a range of social outcomes.

The Atlas of Opportunity takes this extraordinary analysis of lifetime outcomes to a whole new level:  the neighborhood level. While previous work used the geography of commuting zones (areas slightly larger than metropolitan areas) or counties to analyze variations in lifetime outcomes, this new work mines and presents data down to the neighborhood level using Census Tracts (areas that average a population of about 4,000).

In addition to the geographic detail, there are a wide range of measures of success. The data includes adult earnings, but also reports the fraction of persons incarcerated as adults–again based on the neighborhood in which they grew up.  There’s also data on marriage, college attendance and fertility.

And all their work is delivered transparently in an on-line resource that lets you look at neighborhood by neighborhood variation in outcomes by the income, race and gender of different households.  For example, you can look at within city variations in the adult earnings of girls from low income Hispanic families based on the neighborhood in which they were raised. There’s even data reporting what fraction of kids who grew up in a particular neighborhood remained in the same city as adults.

For example, here are a couple of detailed maps for the Detroit metropolitan area that compare the adult earnings of black kids and white kids based on the neighborhoods that they grew up in in the 1980s.  Reds and oranges correspond to relatively low adult earnings; blues and greens correspond to higher adult earnings.

Detroit:  Income of black kids who grew up in these neighborhoods

This map illustrates the relatively low adult earnings for black children who grew up in the City of Detroit.  Except for a handful of neighborhoods, adult incomes were in the bottom half of the distribution. Meanwhile, black children growing up in suburban neighborhoods, especially to the northwest and southwest of Detroit proper, earned more as adults.

Income of white kids who grew up in these neighborhoods

The second map shows the adult earnings of white children based on the neighborhoods they grew up in. Earnings tended to be lowest for those who grew up nearest to the city of Detroit (the city’s boundary is shown as a black line).  Those who grew up in more distant suburbs tended to have the highest adult earnings.

The negative space on these maps also clearly show one other feature of the Detroit area: the profound racial segregation of the city and its suburbs.  The gray areas on each map represent neighborhoods where there were too few observations (fewer than 20 children) to make statistically valid estimates of outcomes, i.e. too few black children (upper panel) or too few white children (lower panel). A huge swath of the suburbs to the North and to the West of Detroit had too few black children to produce estimates; a majority of neighborhoods in Detroit had too few white children to produce estimates. (A hat tip to New York Times Upshot reporter Emily Badger for pointing out how the Chetty work illustrates the neighborhood segregation.)

What we’ve shown here–adult incomes for kids growing up in just one city–is just a tiny fragment of what’s available and possible using this website. There’s so much more here than we can possibly describe in a single commentary. The website allows you download data for individual neighborhoods, upload your own data so that you can examine how other factors inter-relate to the opportunity measurements presented here. There are a series of case-study stories that describe different aspects of the data as they play out in different communities around the country.

This is truly one of the most extraordinary resources available for understanding cities.

Vision Zero: Moving from slogan to reality

Editor’s Note:  Vision Zero is an impressive sounding slogan, but whether it will amount to more than that is in the hands of city leaders. The choices they make about how to prioritize public space for those who walk and ride bikes (and scooters), will determine whether cities get safer, or whether the current epidemic of pedestrian and cyclist deaths continues. Alex Baca, a frequent contributor to City Observatory recently testified to the Washington DC Joint Public Roundtable on Vision Zero on behalf of the Coalition for Smarter Growth. Her testimony is presented offers a powerful personal and policy case for taking safety much more seriously.

My name is Alex Baca, and I am testifying on behalf of the Coalition for Smarter Growth, where I serve as engagement director. CSG promotes walkable, inclusive, and transit-oriented communities in the D.C. region.

It is not difficult to connect the dots between CSG’s priorities and Vision Zero. If people live in the types of places that we encourage them to live—which we do because dense, walkable neighborhoods promote affordability, equity, and environmental resilience—they are likely to bike, walk, or take transit.

I was urged by my colleagues to begin today by telling the council that drivers in D.C. have hit a third of our small staff. I, personally, have crashed my bike in D.C., resulting in a broken jaw and over $20,000 in medical expenses. It’s a privilege for me to say that I don’t care about the cost, because I’m grateful to be alive.

Because, evidently, it took the deaths of two people to call this hearing, and in the time that it took to convene it, two more people have been killed on our streets. That’s an indictment on you all as stewards of this city—stewards who could implement physically protected bike lanes, or signal priority for buses, or cordon pricing, but haven’t. You could have chosen to implement the kind of infrastructure that would have prevented the deaths of four people in less than that many months. But you haven’t. So, today, D.C. residents and organizational representatives like me will have to excoriate themselves publicly to attempt to convince you that safe streets are not a privilege for a class of newcomers but a right to be granted to all citizens without doubt.

Fundamentally, what comprises Vision Zero—evaluation, engineering, enforcement, education, and encouragement—is not technically difficult. It is politically difficult, because it changes the environment for, or takes away from, a constituency of people who drive and park in D.C.

You may not state it publicly, but your actions as a council and as a city demonstrate that your allegiance is to that constituency, not to the people who walk, bike, or take transit on the roads that you control. You have continually stalled on implementing CSG’s proposed parking cashout program—I believe that Allen Greenberg has a detailed testimony for you on how this proposal, considered to be unfriendly to businesses, would save on average 1.6 lives per year. Since building out the 2005 bike master plan, you have not meaningfully implemented any protected bike infrastructure. Notable proposed projects like the 26th Street NW bike lane are in political limbo, while the 16th Street bus lane plans are laughable, given DDOT’s, and your, shying away from removing enough parking to truly create dedicated lanes.

Both MoveDC and the city’s sustainability plan call for a bump to 25 percent in modeshare for pedestrians and bicyclists. So far, the District seems unwilling to achieve this target through any means other than asking people to bike or walk out of the goodness of their hearts. Induced demand doesn’t just apply to highways; women and people of color are more likely to ride bikes when there are protected bike lanes. Bike lanes slow down car traffic, which in turn creates streets that are safer for people who walk.

Though this is an organizational testimony, I began my statement with personal anecdotes, and I would be remiss if I did not reinforce that the city’s failure to take the hard steps to make Vision Zero, or something close to it, puts my life on the line. I began riding a bike for transportation in D.C., and doing so now cuts my costs substantially enough that I am able to afford to live here, on a nonprofit salary, and contribute to your tax base. Breaking my jaw on a D.C. street didn’t stop me from riding a bike. You can’t scare me. But your negligence is no doubt scaring others from making the same choice.

I should also note that I’m the person who sets up the action alerts with clickable form letters that result in what I’ve heard called “spam” in your inboxes. I’m the person who sends the emails to member lists encouraging people to contact you, our elected officials, and the administrators that you appoint, with pleas to take away space from cars, to slow down vehicular traffic, to dedicate space to bus lanes, to build more protected bike infrastructure rather than studying all of the above to death when national best practices for safe streets have long been established.

Maybe the deaths of four people in two months can do what no public input seems to have done, and convince you that you can no longer equivocate on this topic. Road space is limited, and making our streets safe for people who walk, bike, and take transit necessitates that you take space away from cars and their drivers. Cities own their streets: D.C.’s streets belong to you, Council, and to Mayor Bowser. That you won’t—not that you can’t, but that you have repeatedly demonstrated that you won’t—make the streets that you are in charge of safer for people who aren’t driving has left blood on your hands.

This region is growing; we can’t stop people from coming here, one of the few places in the country where you can reliably count on economic mobility in a world that is becoming increasingly stratified. More people will mean more injuries and more deaths unless you intervene. That you must convene a hearing to establish the way to do so is an opportunity that I’m grateful for, and I thank you for this time. But doing this, instead of moving to take space away from cars and their drivers to create dedicated, safe infrastructure for vulnerable road users—the thing that you know you must do—verges on negligence.

I don’t want to compel my organization’s supporters to send you any more emails. I don’t want to use our limited organizational capacity to stage demonstrations agitating over what you already know: That the blood on your hands is a choice. It’s within your capacity to choose a different future.

The Coalition for Smarter Growth has, and will continue to, freely and willingly provided suggestions for dedicated bike and bus infrastructure, transportation demand management, and pedestrian safety. We reliably and consistently turn out people to public meetings and encourage our supporters to submit 3 public comment, in part to give you the political cover you often say you need to make decisions that are perceived as conventionally unpopular.

People who move about [the city] in ways other than driving should not be forced to swim across a river to prove that they need a bridge.

It is difficult for me to conclude this testimony with anything other than a plea to you. People who move about D.C. in ways other than driving should not be forced to swim across a river to prove that they need a bridge.

Thank you for your time. I hope that in the next few months, I will be thanking you for the implementation of safer street infrastructure rather than calling you to the carpet once again for your fearfulness of doing the right thing.

Thank you again.

Testimony to the Transportation and the Environment/Judiciary and Public Safety Joint Public Roundtable on Vision Zero by Alex Baca on behalf of the Coalition for Smarter Growth September 27, 2018,

A Nobel Prize with a solution for climate change

Let’s put a price on using the atmosphere as a garbage dump for carbon

Earlier this week, Yale economist William Nordhaus was announced as this year’s co-recipient of the Nobel Prize in Economics (along with Paul Romer, who we profiled yesterday).  Nordhaus is a pioneer in environmental economics and has his research has laid the foundation behind using a carbon tax to counter climate change. While Romer’s research deals with knowledge as a “public good,” Nordhaus has explored climate as a public good. His views are summarized by global advocates for carbon pricing:

“Climate change is a member of a special kind of economic activity known as global public goods.” To solve this problem, “At a minimum, all countries should agree to penalize carbon and other GHG emissions by the agreed upon minimum price.”

Charging a fee for using the atmosphere as a garbage dump for carbon would create incentives both to cut down on damaging emissions, to invest in cleaner sources of energy and transportation, and to more quickly come up with ideas and technology for fighting global warming. While it seems like a heavy lift, the carbon tax would be the most subtle and systematic way to inform the decisions of producers, consumers and investors in a way that would lead to lower carbon emissions.

A simple analogy: a fee for disposable bags

For some time, Chicago has been charging shoppers a 7 cent fee for using disposable grocery bags. Rather than banning the bags outright, the city settled on the fee as a way to preserve consumer choice and yet encourage less use of plastic bags. Those who don’t bring their own bags to the store pay a the 7 cent fee, which is itemized on their receipt; grocers keeps 2 cents for their trouble, and the nickel per bag goes to the city. (Other places have enacted similar fees: in the UK, shoppers pay 5 pence for plastic bags).

If we’re willing to charge 7 cents for this, why not 2 cents per pound of carbon?

Initial reports offer a good news/bad news story about the impact of the fee. It’s generating substantially less revenue than the city had hoped, but that’s because with just this small financial incentive, shoppers have quickly changed their behavior. Consumers are bring their own re-usable bags to the store, and plastic bag consumption is down by more than 40 percent. The Chicago Sun Times quotes one of the researchers studying the impact of the bag fee on consumers:

They recognize “that this bag is something that was free, and now it’s not,” Palmer said. “Every time customers go to a grocery store, they see that 7-cents-a-bag tax on their receipt.”

The relative ease and simplicity of the bag fee got us thinking about how we might apply the same idea to another, somewhat more serious environmental problem: climate change. What would happen if we asked consumers to pay, say 2 cents per pound, for every pound of carbon that they emitted into the atmosphere? If consumers got some small signal that dumping carbon into the atmosphere wasn’t “free” then they’d have a strong incentive to change their behavior.

Of course, this actually isn’t a new idea. But how we package it is important. Carbon tax advocates have always talked about pricing in “dollars per ton” but that puts it a little bit out of the reach of daily life and the average consumer. Talking about pounds of carbon makes it a little bit more comprehensible, and puts it in the same context as the plastic bag fee. Is it unreasonable to ask everyone to pay, for example,  just two cents for every pound of carbon they emit?

And two cents is pretty darn close to the correct number. While there are various recommendations for the appropriate level for a carbon tax, currently a number of experts are suggesting something like a tax of $40 to $80 per ton.  Divide that number by roughly 2,000 (we’ll just ignore whether the experts want that tax for a metric or an imperial ton) and a $40 per ton tax on carbon works out to about a 2 cents per pound tax.

Just to put that in perspective with our shopping bag, recognize that a typical polyethylene shopping bag weighs about five or six grams. So Chicago is charging consumers about 1 cent per gram for their shopping bag.  That’s roughly 200 times more than a 2 cent per pound tax on carbon (about 450 grams in a pound, so our 2 cents per pound tax works out to less than .005 cents per gram).

What does that mean in practice? Consider our most common form of carbon emissions: driving a gas-powered car.  If your car gets 20 miles per gallon, it produces about one pound of carbon per mile. There are slightly more than twenty pounds of carbon generated by burning a gallon of gas, so a five-mile round-trip to the store would generate about five pounds of carbon, which would cost you a dime with our proposed  2 cents per pound carbon fee. So in this scenario, if you’re buying two bags of groceries, your bag fee (in Chicago) would be 14 cents and your carbon emission fee would be 10 cents. Although if instead of driving your car, you rode your bike, and brought your own bags, you could save almost a quarter.

As a result, the fee we’re talking about to save the planet is not out of line with what we’re perfectly willing to ask consumers to pay to discourage the visible, but largely nuisance effects, of plastic bags.

A small fee, say 2 cents a pound on carbon would send consumers small, but pervasive signals about the effects of their buying choices and travel behavior on the environment. Sometimes–just as when you forget to bring your own bag, you might be willing to spend the 7 cents to have the convenience of a plastic bag, you pay for the privilege (and in the case of a carbon fee, generate revenue that could be used to reduce our dependence on fossil fuel, and offset the regressive effects of the tax). But overall, the fee would bias consumer (and investor) decisions in favor of all kinds of things that resulted in lower carbon emissions. It would make solar energy, and electric cars, and walkable urban places more economical, and make fossil fuel, gas-powered cars, and sprawl even less attractive than they are today. It would automatically reward businesses, inventors, and investors who came up with lower carbon ways to get all of the goods and services we value. It would gradually, but powerfully push us in the direction of lower carbon emissions and greater sustainability.

Shopping bags are a visible, annoying form of pollution. The are a regular feature of litter almost everywhere in the world. And while they’re a blight, and an unnecessary one, the fact is we’re willing (at least in Chicago) to make consumers pay a fee that reflects the environmental damage they cause, and to give a gentle nudge to their behavior in a direction that is better for the environment. And it’s working–plastic bag use in Chicago has dropped 42 percent already.

So why aren’t we willing to do the same with carbon? Perhaps its as simple as this: Carbon dioxide (the most common form of carbon pollution) is invisible.  We can’t see it.  If you’re car exuded fist-sized lumps of carbon at the rate of one per mile and they cluttered the roadway, we’d probably acknowledge the problem and agree to do this almost instantly. But the carbon evanesces into an invisible–and global–atmosphere, slowly, but surely raising global carbon levels and steadily raising the planet’s temperature. Plastic shopping bags aren’t an existential threat to the planet, so why are we willing to charge consumers 200 times as much (per pound) for these bags as we would charge for carbon emissions?

Is a couple of pennies a pound for carbon pollution too much to ask? The work of Nobel Laureaute William Nordhaus suggests that it would be the cheapest and most effective way to make a difference on climate change.




The Week Observed, October 12, 2018

What City Observatory did this week

1. Carol Coletta on why cities need to embrace change. We publish Carol Coletta’s remarks to the Congress for the New Urbanism, outlining the case for thinking about cities in a more dynamic fashion.  There’s a temptation in much urban dialog to hope for stasis: that we can keep cities or particular neighborhoods just as they are. But there’s simply too much technological, economic and demographic change for that to happen, and trying to stand still can deprive cities of the opportunity to both adapt to and benefit from ongoing changes (which is how they’ve always thrived in the past). In particular, Coletta argues that achieving our goals of promoting equity hinge on making cities the kind of dynamic, thriving places that capitalize on these changes.

2. The Nobel Prize and Cities, Part 1:  Paul Romer. This week, the Royal Swedish Academy awarded its annual economic prize to two American economists. We’ve long thought that Paul Romer was a strong candidate for the award, based on his contributions to understanding the role that knowledge creation plays in driving economic growth. His recent work underscores the critical role that cities play in stimulating innovation. As Romer pointed out in an essay posted on his website this week:

Together, the city and the market let large groups of people cooperate by discovering new ideas, sharing them, and learning from each other. The benefits can show up as a new design for a coffee cup or wages for a worker that grow with experience acquired in jobs with a sequence of employers.

3. The Nobel Prize and Cities, Part 2:  William Nordhaus. The co-recipient of this year’s economic prize was environmental economist William Nordhaus. His work has focused on the role that carbon taxes could play in speeding our response to ongoing climate change. Carbon taxes would send subtle and pervasive signals to producers, consumers and investors and which actions would be most effective in reducing emissions, and would prompt the kinds of technological improvements and behavioral changes that we need to avert the adverse effects of global warming. As we’ve argued before at City Observatory, we’re willing to undertake similar measures with obvious local problems, like charging to discourage use of plastic grocery bags; all that’s needed is to expand that kind of solution to a far more serious, global problem.

Must read

1. Gentrification and the search for villains. We crave simple narratives for complex problems, and in the process lose sight of important issues. Daniel Herriges, writing at Strong Towns, compares this process to the old parable about the blind men describing and elephant. While it’s tempting to blame developers and new housing for rising housing costs and displacement, the underlying forces driving change are much more deep-seated, and simply attacking perceived villains (as in the case of a recent lawsuit blaming gentrification in Washington DC on the city’s to stimulate the local creative economy) only obscures our understanding of the real causes, and diverts attention from policies that might actually make a difference.

2. Yet another guide to gentrification. Enterprise Community Partners, a key player in the non-profit housing world, has published its own background paper on gentrification, wrestling with the widely varying definitions of the term, and presenting key findings from some of the research in the field. Called “Framing our Perceptions,” the report conveys the conflicting and incomplete picture that the current research:

. . many of our assumptions about gentrification and its effects on communities are subjective and dependent on where, when and hot it is studied. Yet even beyond the mixed findings from the academic literature, there remains much about gentrification that has not been conclusively assessed.”

3. The lingering economic effects of the housing bubble. Economists Atif Mian and Amir Sufi have written extensively about how mortgage debt fueled the housing bubble of the last decade, and led to the multi-trillion dollar loss of wealth for millions of American families. Their work also pointed to the devastating impact the bubble had on local economies. They’ve recently updated their analysis comparing unemployment rates in the frothiest markets before and after the collapse of the housing markets. The results show how severe and prolonged the damage to local economies has been.

Prior to the bubble, there was essentially no difference in unemployment rates between counties that were crushed by the housing collapse. When housing values fell, county unemployment rates went up most, and stayed higher longer in those places where housing values collapsed most severely.  At their peak, unemployment rates were much higher (12%) in these housing collapse counties) than in counties with stable housing markets (8%) Only now, more than a decade later, are unemployment rates in these counties approaching the levels seen elsewhere in the country.

New Knowledge

Using Facebook to measure connections between places. Last month, The New York Times Upshot reported on new research using big data to track personal connections between places. Researchers used anonymized Facebook data to look at the pattern of connections between different counties in the US based on Facebook Friends. The Times has produced an interactive map that lets you click on any county in the US and see which other counties have the strongest ties to that county. The key data point is how many more (or fewer) friend-pairings there are between counties than one would expect based on the population of the two counties. The following map shows places with disproportionately high numbers of friend-relationships with persons living in Wayne County (Detroit) Michigan.

Proximity plays an important role:  most ties are to adjacent or nearby counties, and usually in the same state. What’s more fascinating is the pattern of less proximate ties. Detroit, for example, has strong ties to the rest of Michigan, but also a network of ties that reach into the mid-South, reflecting both historical connections (The Great Migration) and the current geography of the automobile industry.


The Week Observed, October 19, 2018

What City Observatory did this week

1.  Now we are four. October 17 marked City Observatory’s fourth birthday. We celebrated with a shout-out to our founders, funders and partners, and reflected on what we think the most important lessons have been for cities in the past quadrennium. Regular readers will know that we view our key problem as a shortage of cities, in the face of growing demand for urban living. Problems that manifest themselves in the form of housing availability and affordability, and perceived issues of gentrification and displacement trace back to the fact that more and more Americans want to live in great urban neighborhoods, and that we haven’t built enough of them.

(Flickr: Til Westermayer)

2. Fresh evidence for Portland’s green dividend.  More than a decade ago, we coined the term “green dividend” to describe the economic benefit residents reap when they live in a city where they don’t have to drive everywhere, or long distances. Portland, for example, drives about percent less than the national average, which produces a cool one billion dollar per year economic savings for Portland households. Two new pieces of evidence confirm this green dividend calculation. Data from the Bureau of Economic Analysis shows that Oregonians spend about 15 percent less on cars and gasoline than their counterparts nationally. A new scenario planning exercise from Up for Growth–researched by Portland-based economic consulting firm ECONW–shows that shifting to a denser, smart growth pattern in Portland would reduce vehicle miles traveled, and the green dividend from this would be something on the order of $187 million per year.

3. Job creation seems to have little effect on economic mobility. There’s a widespread belief that job-creating economic development programs can help address address poverty, based on the “spatial mismatch” hypothesis, i.e. that poverty is caused by a lack of nearby jobs and job growth. Raj Chetty and his colleagues turn their big data on intergenerational economic mobility to answering this question and find a surprising answer.  There’s actually no correlation at either the neighborhood or the metropolitan level between proximity to jobs and job growth and the tendency of kids to escape poverty. Instead, the best predictors of intergenerational economic mobility seem to be whether people in the neighborhood are employed, and whether a neighborhood has strong social capital. These findings suggest that economic integration and building networks and the civic commons, rather than simply focusing on job creation, is the critical part of fighting poverty.

Must read

1. Why HUD is too feeble to get suburbs to drop exclusionary zoning. Lately, there’s been a lot of media attention to proposals that the federal Department of Housing and Urban Development could get cities and counties to back away from exclusionary zoning practices (like large minimum lot sizes and apartment bans), but threatening to withhold federal funds. The Brookings Institution’s Jenny Schuetz turns a careful accountant’s eye to that idea and finds that HUD has almost no leverage with the most exclusionary jurisdictions. The reason: only trivial amounts of federal funds go to the wealthy suburbs that are the worst offenders. Most HUD money, like community development block grants, goes to larger cities and urban counties, that are generally already shouldering more than their fair share of affordable housing.

2. Kids in cities? DePaul University’s Institute for Housing Studies has a detailed look at the steadily shrinking number of kids growing up in the City of Chicago. Since 2010, the city has lost more than 40,000 children. But the citywide declines mask a very uneven pattern of change. The number of children is actually increasing in some higher priced neighborhoods near the loop and on the city’s North side. Meanwhile, declines in the number of children have been greatest in lower-priced neighborhoods on the city’s South and West sides. The loss of kids (really, families with kids) is a dire sign for the future of these neighborhoods.

3. Rents down nationally.  Real estate analytics firm Zillow reports that nationally, over the past 12 months, average rents in the U.S. have declined–by about 0.2 percent.  That’s not a big number, but it comes after six years of steady increases, and is evidence that the cumulative additions to housing supply in the past few years are beginning to be felt in the marketplace. Per Zillow, Portland had the biggest decline in rents of any major metro, with a decline of 2.3 percent over the past 12 months.

4. Must watch:  Alan Mallach webinar on inequality in older cities. We’re big fans of Alan Mallach’s book The Divided City: Poverty and Prosperity in Urban America.” If you haven’t read it yet, you can get a peak at some of the author’s most important arguments in a free webinar sponsored by the Center for Community Progress. Registration information is here.

New Knowledge

Is congestion pricing fair?  A regular feature of debates about congestion pricing is that it is somehow unfair to the poor, and therefore inequitable A recent paper from Jonas Eliason, of the Swedish Royal Institute of Technology takes a direct look at this question using survey research from four different European cities, Stockholm, Helsinki, Gothenberg and Lyon. It finds that their is virtually no correlation between income level and public perception that road pricing is unfair.  The paper concludes:

. . . the equity variable is not significant (in any of the cities): there is, surprisingly, apparently no correlation between respondents’ opinions about equity and their opinions about congestion pricing. In the light of this, the preoccupation with congestion charges’ equity effects is rather remarkable – unless it is simply because supposedly negative equity effects is a more convenient argument against congestion charges in public debate than self-interest arguments.

These data suggest that while equity concerns make nice talking points, there’s little public sentiment behind that argument. The study finds that, regardless of income level, other values and beliefs, like self-interest (whether one would pay the toll or not), environmentalism and anti-tax sentiment are much bigger factors in shaping attitudes about road pricing than personal income.

Jonas Eliasson, Is congestion pricing fair? Consumer and citizen perspectives on equity effects,  Discussion Paper No. 2016-13, International Transport Forum, April 2016

In the News

The Columbus Dispatch featured the employment growth analysis from our Surging City Center Jobs report in an article examining that city’s battle with Austin, Texas to be the future home of the current MLS Columbus Crew.

The Week Observed, October 26, 2018

What City Observatory did this week

1. Cities talent and prosperity. The latest report from the Economic Innovation Group has some interesting zip code data on the relative economic performance of the nation’s neighborhoods. Their work divides the 25,000 most populated zip codes into five broad groups based on economic health. The leading characsteristic distinguishing the top performers from the distressed zip codes is–no surprise–educational attainment. There are about six times as many highly educated adults in the most prosperous quintile of zip codes as in the most distressed quintile.

While provocative, its useful to remember that zip codes don’t correspond in any meaningful way to functional economies. Much of what this exercise shows is the sorting of the most successful and best educated into some neighborhoods, and the least educated and most troubled into others. So what this is showing us in large part is residential economic segregation, rather than regional economic imbalances.

2. Does ride-hailing cause more car crashes? A new study from the University of Chicago’s Booth Business School finds a correlation between the advent of ride-hailing services and an increase in the number of crashes and fatalities. Despite the statistical association, we’re still skeptical of that ride-hailing caused more crashes. The growth of ride hailing from 2014 through 2016 coincides exactly with a big decline in gas prices and a big increase in vehicle miles and crash rates, a factor not controlled for in the study. Likewise, crash rates increased even more in rural areas (where ride-hailing is rare, if not non-existent) than in cities.

Finally, we could get a much clearer idea of the impact of ride-hailing on crash rates if we looked more closely at the time and location of crashes to see if they coincide with the times and places where ride-hailing is most prevalent.

Must read

1. Strangely, building more homes does reduce a housing shortage. From across the pond comes an insightful column from John Myers, aka London Yimby. Self-inflicted housing shortages seem to be a common element of the Anglo-Saxon heritage. Britain’s housing shortage and high prices, which are the most severe in and around London, trace back to strict limits on development:

If you are lucky enough to own a home in the south-east of the UK, the most expensive element is probably not the cost of building it. It is certainly not the land. It is probably the planning permission for that home to exist.

Land without building permission sells for around 10,000 pounds per acre. Even though the supply of land is fixed, we’ve long since perfected the technology to overcome this natural limitation.  Myers explains:

We have a shortage of housing, not land, and housing supply is highly elastic in many places because, as with so many other things since prehistory, we have invented technologies to do more with a limited input: to add more homes on a particular piece of land. You know those technologies as staircases, chimneys, terraced houses, mansion blocks and lifts.

2. Matt Yglesias thinks that California’s rent control initiative, Measure 10, deserves to lose.  Yglesias, famously the author of a book entitled “The Rent is Too Damn High,” seems to many like an ironic opponent of rent control. But–like us–he takes the view that rent control measures like those on offer in California cities are more likely to impede the addition of more housing units, which is the only long term answer to the housing shortage in the Golden State (and elsewhere).

. .  . what I want people to understand about rent control is that whatever happens with Proposition 10, rent control is not the answer — and certainly not the real answer — to America’s housing woes.

Rent control is, at its best, a regulatory policy that aims to manage scarcity. Many US cities developed housing scarcity during World War II as part of the legacy of the Depression-era collapse in homebuilding paired with wartime restrictions on civilian construction. A giant global war was a perfectly good reason to implement anti-building regulations, and rent control was a perfectly good response to the regulation-induced scarcity.

But modern-day scarcity-inducing regulations are not defeating Hitler. They are, at best, maintaining people’s privileged access to in-demand public schools.

He also forecasts the measure will lose, if only because it jeopardizes the financial interests of single-family homeowners (who are a wide majority of the electorate, and turn out to be more likely to vote than renters). Unfortunately it’s this same NIMBY-tinged voting pattern that makes it hard to reform land use planning in states like California in order to legalize the construction of housing in places where there is the most demand.

New Knowledge

A comprehensive look at the capricious inequity that is Proposition 13. As we’ve said before, California has, in effect, a neo-feudal system of property taxation, in which the amount one pays in property taxes is determined by how old one is, how long someone has been a property-owner, and whether they had the good fortune to be born to parents who owned property in California in 1978 or so. Property is only re-assessed to market value when its sold, and as a result, new purchasers can easily pay five or even ten times as much property tax as their neighbors in identical homes. A new report from CalMatters and several Bay Area public radio stations comprehensively maps the effects of these disparities, showing how much variation there is among Census tracts in the pay area (whole neighborhoods have effective property tax rates half as high as others in the same city).  There’s also a microscopic evaluation of tax differentials on a single–quite typical–block in in North Oakland.

Here, within a few hundred feet, effective tax rates vary by a factor of ten.

Decades-long owners of a 1,300 square foot home on one end of the block paid $1,168 in property taxes last year. New homeowners with a smaller home on the other end of the block paid almost 10 times that amount. Two very similar homes, two incredibly different property tax bills.

Prop. 13 has left California with a badly crippled system of public finance. And in two weeks, voters will be asked to add yet another codicil to a growing bundle of neo-feudal rights:  Proposition 5 will let homeowners freely transfer their artificially low property valuations to new homes when they move.

In the News

Strongtowns re-published Joe Cortright’s commentary on the limits of job creation, looking at the Equality of Opportunity Project’s latest findings showing the limited impact of local jobs on the lifetime economic prospects of children growing up nearby.

Paul Romer is awarded the Economics Nobel

Why the leading economist of innovation sees a central role for cities

Two years ago, in 2016, we did our best to nudge the Royal Swedish Academy of Sciences to give the Nobel Laureate in Economic Sciences to Paul Romer.  It turns out we were just a couple of years early. Yesterday, the Academy, announced Romer as the 2018 economics laureate (along with William Nordhaus).

This should be of far more than academic interest to urbanists. As we argued in our missive two year’s ago, Romer’s work has a lot to say about cities.  With typical modesty, Romer’s response to winning the prize was to move a short, non-technical post summarizing the work to the top of his personal blog. It features a prominent role for cities as engines of innovation, progress and wealth creation:

One of the biggest meta-ideas of modern life is to let people live together in dense urban agglomerations. A second is to allow market forces to guide most of the detailed decisions these people make about who they interact with each other. Together, the city and the market let large groups of people cooperate by discovering new ideas, sharing them, and learning from each other. The benefits can show up as a new design for a coffee cup or wages for a worker that grow with experience acquired in jobs with a sequence of employers. People living in a large city cooperate with residents there and through many forms of exchange, with residents in other cities too. Cities connect us all together. China’s growth reflects is rapid embrace of these two big meta-ideas, the market and the city.

We won’t try to summarize all of Romer’s work here.  Suffice it to say, he deserves enormous credit for focusing our attention on the importance of creating new ideas as a principal means of driving economic growth and improvements in well being. As the quote above illustrates, he sees a central role for institutions, like cities, in creating the environment in which knowledge creation can flourish. And he’s proven many times that his is a clear and outspoken voice for realizing the potential his theories describe.

Paul Romer at TED University. TED2011. February 28 – March 4, Long Beach, CA. Credit: James Duncan Davidson / TED

First, in a series of papers published a couple of decades ago, Romer was responsible for some of the key breakthroughs in what is called “New Growth Theory,” which re-writes the mechanics of long-term economic growth in a fundamental and optimistic way. We described the key insights from of these theories a couple of months ago at City Observatory. Romer’s long been short-listed for the prize on account of this work, awaiting it seems, only sufficient quantities of gray hair to take his turn.

Second, in the past few weeks, Romer has turned the economic world on its head with a scathing critique of deep flaws in the past two decades of macroeconomic theorizing. In a paper entitled, “The Trouble with Macroeconomics,” Romer indicts the state of macroeconomics, and its growing detachment from the real world. The abstract of this paper reads as follows:

For more than three decades, macroeconomics has gone backwards. The treatment of identification now is no more credible than in the early 1970s but escapes challenge because it is so much more opaque. Macroeconomic theorists dismiss mere facts by feigning an obtuse ignorance about such simple assertions as “tight monetary policy can cause a recession.” Their models attribute fluctuations in aggregate variables to imaginary causal forces that are not influenced by the action that any person takes. A parallel with string theory from physics hints at a general failure mode of science that is triggered when respect for highly regarded leaders evolves into a deference to authority that displaces objective fact from its position as the ultimate determinant of scientific truth.

You may never read economics papers: But you should read this one. The paper bluntly calls much of the published work in macroeconomics “unscientific” and Romer re-labels some widely used economic terms as “phlogiston” and “aether” and “caloric” and describes the entire fields as “post-real” macroeconomics.

In the academic world, Romer’s paper is the equivalent of Martin Luther’s having nailed his 95 theses to the door of the Wittenberg Cathedral (which, incidentally was 499 years ago, this month). As Romer himself has pointed out, few of his criticisms are new, but to date they’ve been stated largely in oblique terms and obscure quarters. This paper has generated considerable comment and controversy, and Romer has responded to criticism in a measured but forceful way. But now this debate is very much out in the open.

It may seem like the macroeconomics and the Nobel Prize for Economics is a bit far afield for an urban policy focused website like City Observatory. It isn’t. Getting the macroeconomy right is an essential precondition for healthy cities. In recent years, an austerity policies—predicated on the flawed theories of the real business cycle and the advice of its promulgators—has led national governments to throttle back economic growth. In the decade prior, flawed policies and a blind faith in the power of the market to discipline financial institutions produced both a wasteful bubble of housing investment and a subsequently devastating economic collapse. Macroeconomics matters deeply to cities. And as we’ve written, Romer’s work as drawn a clear line between the institutions and innovation of cities and the process of long term growth.

Speaking truth to power, in terms that cannot be misunderstood

Romer’s critique also raises an important question about tone and rhetoric. He’s taken the extraordinary step of bluntly and personally challenging some of the acknowledged leaders in field (including Nobel laureates). He has done so at not insubstantial risk to his own personal career. But as he argues, in the spirit of Voltaire, our primary allegiance has to be to the truth, and not to the favorable opinions of a cadre of peers.

Especially this year, when the rhetoric of the nation’s presidential campaign has fallen to an all-time low, it seems like a bad time to celebrate apparent incivility. Academic debates—at least those that appear in print—are supposed to be muted and polite disagreement, rather than a brawl. In practice, they are so opaque and inaccessible that few outside the profession can even understand that there’s a disagreement. For all scientists, but especially economists, its even more important that they write in a way that cannot possibly be misunderstood, even at the cost of offending someone.

Another Nobel Laureate in Economics, Paul Krugman reached a similar conclusion:

Outsider positions, like that of being an iconoclastic columnist at the New York Times, require a lot of effort to get peoples’ attention. It wasn’t nice to characterize the doctrine of expansionary austerity as belief in the confidence fairy, but I do believe that it focused the discussion in a way that a less caustic approach would not have achieved.

And one more point: writing effectively requires that you have a voice, that the passion shows — and too much self-censorship can get in the way, making the writing dull and stiff.   . . . pretending to respect views that you don’t isn’t, and shouldn’t, be part of the job description for economists trying to grapple with these important issues.

The Nobel prize sends a signal to the world–and to the scientific community–and to urbanists, about what matters.

Housing can’t both be a good investment and be affordable

A fundamental contradiction lies beneath most of our housing policy debates

At City Observatory, we’ve frequently made the case that promoting homeownership as an investment strategy is a risky proposition. No financial advisor would recommend going into debt in order to put such a massive part of your savings in any other single financial instrument—and one that, as we learned just a few years ago, carries a great deal of risk.

Even worse, that risk isn’t random: It falls most heavily on low-income, black, and Hispanic buyers, who are given worse mortgage terms, and whose neighborhoods are systematically more likely to see low or even falling home values, with devastating effects on the racial wealth gap.

But let’s put all that aside for a moment. What if housing were a low-risk, can’t-miss bet for growing your personal wealth? What would that world look like?

Well, in order for your home to offer you a real profit, its price would need to increase faster than the rate of inflation. Let’s pick something decent, but not too crazy—say, annual increases of 2.5 percent, taking inflation into account. So if you bought a home for $200,000 and sold it ten years later, you’d be looking at a healthy profit of just over $56,000.

Sound good? Well, what if I told you that such a city existed? What if I told you it was in a beautiful natural setting, with hills and views of the ocean? And a booming economy? And lots of organic produce?

Credit: Olivier ROUX, Flickr
Credit: Olivier ROUX, Flickr

Maybe you’ve guessed by now: The wonderland of ever-increasing housing prices is San Francisco. When researcher Eric Fischer went back to construct a database of rental prices there, he found that rents had been growing by about 2.5 percent, net of inflation, for about 60 years. And this Zillow data suggests that San Francisco owner-occupied home prices have been growing by just over 2.5 percent since 1980 as well.

Like I said, over ten years, that gives you a profit of just over 25 percent. But compound interest is an amazing thing, and the longer this consistent wealth-building goes on, the more out of hand housing prices get. In 1980, Zillow’s home price index for San Francisco home prices was about $310,000 (in 2015 dollars). By 2015, after 35 years of averaging 2.5 percent growth, home prices were over $750,000.

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Now, if all you cared about were wealth building, this would be fantastic news. The system works! (Although actually even this rosy scenario is missing some wrinkles: San Francisco real estate prices did suffer enormously, if briefly, during the late-2000s crash, and if you bought in the mid-2000s and had to sell in, say, 2010, you would have taken a massive loss.)

But this sort of wealth building is predicated on a never-ending stream of new people who are willing and able to pay current home owners increasingly absurd amounts of money for their homes. It is, in other words, a massive up-front transfer of wealth from younger people to older people, on the implicit promise that when those young people become old, there will be new young people willing to give them even more money. And of course, as prices rise, the only young people able to buy into this ponzi scheme are quite well-to-do themselves. And because we’re not talking about stocks, but homes, “buying into this ponzi scheme” means “able to live in San Francisco.”

In other words, possibly the only thing worse than a world in which homeownership doesn’t work as a wealth-building tool is a world in which it does work as a wealth-building tool.

This also means that the two stated pillars of American housing policy—homeownership as wealth-building and housing affordability—are fundamentally at odds. Mostly, American housing policy resolves this contradiction by quietly deciding that it really doesn’t care that much about affordability after all. While funds for low-income subsidized housing languish, much larger pots of money are set aside for promoting homeownership through subsidies like the mortgage interest deduction and capital gains exemption, most of which goes to upper-middle- or upper-class households.

But even markets with large amounts of affordable housing demonstrate the contradiction. Since at least the second half of the 20th century, the vast majority of actually affordable housing has been created via “filtering”: that is, the falling relative prices of market-rate housing as it ages, or its neighborhood loses social status, often as a result of racial changes. Low-income affordability, where it does exist, is predicated on large portions of the housing market acting as terrible investments.

And to the extent that low-income people do find a subsidized, price-fixed housing unit to live in, that means that they won’t be building any wealth, even as their richer, market-housing-dwelling neighbors do, increasing wealth inequality.

Even the community land trust, which seems to be a way of squaring the wealth-building/affordability circle, ultimately fails. Community land trusts typically provide subsidized or reduced price ownership opportunities to initial buyers, and assure longer term affordability by limiting the resale price of the home. In other words, CLT-financed homes remain affordable only because they restrict how much wealth building the initial owners are allowed to capture. The result is that CLT-financed homes only attract those who couldn’t otherwise purchase a home—which means that the lower-income people in CLTs will be building wealth more slowly than higher-income people in market-rate housing, a fundamentally inequality-increasing situation.

We say we want housing to be cheap and we want home ownership to be a great financial investment. Until we realize that these two objectives are mutually exclusive, we’ll continue to be frustrated by failed and oftentimes counterproductive housing policies.

Editors note: This City Observatory commentary was authored by Daniel Kay Hertz.  The version published on October 26 contained an incorrect reference to the author.  We regret the error.

Why cities need to embrace change

This is the text of a speech delivered in Detroit to the Congress for New Urbanism conference by Carol Coletta, a senior fellow at the Kresge Foundation’s American Cities Practice.

Could there be a more apt place to observe “The Transforming City” than Detroit?

On behalf of Rip Rapson and my colleagues at the Kresge Foundation, welcome to Detroit. If you travel to Detroit regularly, as I have over the past 15 years, you see that Detroit changes quickly.

The speed of change here sometimes takes your breath away.

Carol Coletta

How many of you have walked the Detroit Riverfront or ridden the Dequindre Cut?

Visited the expanding Eastern Market?

Seen the Q Line construction on Woodward?

Eaten a meal at Selden Standard or Wright & Company, one of those meals so special that it deserves its own social media channel?

Walked the streets of downtown or Midtown and discovered Great Lakes Coffee, City Bird, or the El-Moore Lodge?

Or met Claire Nelson at the Urban Consulate, or any one of Detroit’s arts and civic innovators responsible for some of the most exciting urban work in the country?

This is the Detroit you can see right outside this theatre.

But there is another Detroit, one that is harder to see. It’s the Detroit that feels threatened by the pace of change in the city, suspicious of newcomers eager to be part of the change, and wondering when their loyalty to Detroit will be rewarded.

Such feelings are not unique to Detroit. Every morning my Google Alerts brings a new batch of headlines from around the country detailing the gentrification battles.

Because “new urbanism” is the butt of some of this criticism, I want to spend the next few minutes unpacking the myths and the realities of gentrification and what those of us who care about great places can do about it.

First, let me share some numbers.

In 1970, about eleven hundred urban Census tracts were classified as high poverty.

By 2010—40 years later—the number of high poverty Census tracts in urban America had increased from 1100 to more than 3,000. (3165)

The number of people living in those high poverty Census tracts had increased from 5 million to almost 11 million. And the number of poor people in high poverty Census tracts had increased from 2 million to more than 4 million.

So over a 40-year period, the number of high poverty Census tracts in America’s core cities had tripled, their population had doubled, and the number of poor people in those neighborhoods had doubled.

Given that record, I’ll bet a lot of people are hoping for a little gentrification– if gentrification means new investment, new housing, new shops without displacement.

The idea that places might benefit from gentrification runs against the popular narrative. But here’s the really startling fact: only 105 of the eleven hundred Census tracts that were high poverty in 1970 had rebounded to below poverty status by 2010. That’s only ten percent! Over 40 years!

A similar study of Philadelphia by Pew found almost exactly the same result in that city’s neighborhoods. There, ten times as many poor neighborhoods (164) experienced real declines in income as experienced gentrification since 2000.

It is the lack of gentrification that we rarely count and never see. The deterioration happens too slowly for us to notice. But it doesn’t mean the deterioration isn’t devastating. In fact, the high poverty neighborhoods of 1970 lost 40 percent of their population in 40 years.

You could make the case that poor people are displaced from poor neighborhoods because of their poor schools, their lack of jobs, their more chaotic public spaces, their lack of opportunity.

Understand, this is not the fault of the people who live there. This is a public policy failure.

But… when a combination of government intervention, philanthropic support, community development, and market forces combine to change a place as quickly as Detroit—even when that change means new residents, new jobs, and new places to live—it also rightfully generates concern.

See, we are conflicted about change. Many of us wish we could fix place in time.

But neighborhoods do change. You know that. You change them. And when change results in mixed income neighborhoods—in other words, when we achieve investment without displacement — it’s good for everybody.

The research on this is quite clear: The ability of people to improve their economic status from one generation to the next is strongly correlated with mixed-income neighborhoods.

Many of the public policy interventions to achieve economically integrated neighborhoods have supported poor people moving to wealthier neighborhoods. But that is an expensive, slow political slog that is hard to scale.

But what if we flipped that script? What if… we could lure people with financial options about where they live to disinvested neighborhoods—resulting in the kinds of places that enable opportunity?

And what if we also made a special effort to insure that the people remaining in low-income neighborhoods—people without options about where they live—what if an extra effort were made to insure they benefited from new people and new investment in their neighborhoods?

The research tells us that mixed-income neighborhoods benefit poor people naturally. But can we double down to accelerate those benefits?

Think of it this way: Can we get gentrification with broadly-shared benefits.

I think so. But it’s not easy. Remember: Only 10 percent of high poverty neighborhoods “gentrified” over the past 40 years. And today we have triple the number of high poverty neighborhoods than we had 40 years ago.

Clearly, mixed income neighborhoods won’t happen if we don’t work at it.

So how can we do that?

First, let’s acknowledge that, for the first time in 50 years, the market is moving in our favor. People (and jobs) are moving to cities. We need to see that as the opportunity it is to get mixed-income neighborhoods and not fear good, thoughtful development.

That means we can’t let NIMBYs win the day. The same people who complain about high prices also complain when developers show up to build more supply. We have to make the connection between supply and demand for the protesters and the press.

But attention must be paid to creating more mixed income housing. Our success on this has been mixed, and I’m struck by the comparison on methods used in NYC and in Portland, Oregon’s Pearl District to create more affordable housing in mixed income settings.

As City Observatory reported, The City of New York, one of the nation’s hottest housing markets, has had inclusionary zoning for the past 10 years. And over that time, the city has produced an average of 280 units per year for a total of 2800 units.

In contrast, Portland took a very different approach. Portland used additional property tax revenue from construction in one neighborhood to subsidize affordable housing. Using just a third of such revenues from The Pearl District (along with Low Income Housing Tax Credits), Portland has built more than 2300 units of affordable housing—almost as many units as the much larger New York.

Portland’s Pearl District is an example of a desirable neighborhood. The cost of desirable neighborhoods goes up. And it is the fear of rising costs, new investment, (and sometimes a changing demographics) that spawned the “just green enough” movement.

Think about that: Disinvested neighborhoods lack access to parks and quality public space. But wait! Let’s not make it too nice for fear it will attract new investment. That’s craziness born out of legitimate frustration when prices start going up.

The fact that buyers and renters are willing to pay more for quality neighborhoods means we need to build more of them, not fewer of them.

How do we do that at scale?

When someone calls for new investments in infrastructure to stimulate the economy, will we be ready with a plan that defines infrastructure as something more than roads and bridges?

Why can’t “infrastructure” include new and redesigned parks and libraries, neighborhood community and cultural centers, trails and gardens—a reimagined civic commons? That’s the defining line I want to hear from our next president. I want so many desirable neighborhoods that people will have good choices at all price points.

The way we live today is changing so fast. We are decoupling and recoupling. We have mothers raising kids alone, and people delaying childbearing—some forever—who want to help. We are sharing jobs, cars and homes. We are retiring later and living longer. And our lives, increasingly, are lived in public.

We need to ready our cities for these changes. We need to figure out how to revalue what exists and give new life to the material, the buildings, the neighborhoods, the cities and the people we too often discard and write off.

Equity does not sit in opposition to a thriving, appealing city. It is central to it.

This is the work of CNU. This is your work. And that’s why I’m happy to be with you here in Detroit to celebrate and learn alongside you this week. Thank you for inviting me.