Road pricing is inherently fairer to the poor because it speeds up buses

As economists, we’re keen on the idea of road pricing. The reason we have congestion and delay is because we charge a price for peak hour road use (zero), that doesn’t come close to covering the costs of providing roadway capacity and reflecting the delays that road users impose on others with their choices of when and where to travel.

Invariably, though, we’ll hear claims that charging a price for the road, however small, poses an undue burden on the poor. (Strangely, we seldom hear these same people arguing that, in the interests of fairness, we ought to make bus travel free, but we digress).

Superficially, that argument sounds plausible:  a road user charge would impose a higher burden on a lower income driver than on a higher income driver.

But that claim misses some much larger points. As we’ve documented at City Observatory, low income workers are far less likely to drive at all, and much less likely to drive to work during peak commuting hours than are high income workers. The average income of peak hour car commuters in Portland, for example, is $74,000, compared to $45,000 for transit riders.

An even larger issue has to do with buses. A new analysis from the New York City Riders Alliance takes a close look at the effect of the proposed pricing of roads in Manhattan, using Charles Komanoff’s Balanced Transportation Analyzer. It shows that pricing Manhattan roads will increase travel speeds 20 percent in the central business district and about 7 percent elsewhere in the city.  This will mean faster travel times for city buses, and makes a big difference for this with long bus rides. For those who use express buses to commute into Manhattan from Brooklyn, the Bronx and Queens–a group that predominantly includes people living in neighborhoods with limited subway access–this analysis shows that road pricing will save them an hour or more of travel time each week.

Right away, these time savings translate into real benefits for these bus commuters–who tend to have far lower incomes than those who can afford to travel by car into Manhattan. Regardless of whether the money raised by road pricing is spent on transit or not, the faster speeds enabled by road pricing are a direct benefit to transit riders, especially those who are dependent on the bus system.

And that’s not all:  the productivity and cost of the bus system is directly tied to how rapidly it delivers riders to their destinations.  A bus that can travel faster has higher driver productivity (more rider miles per driver hour), lower bus costs (again, more fare-paying passengers per service hour). And because it delivers better service, it’s more likely to attract riders, creating a virtuous circle where faster bus service lures more people out of their cars.

The tragedy of the commons on the streets of New York has been that the limited, shared and un-priced space on the streets has been overwhelmed by demand, most recently by the advent and growth of ride-hailed vehicles. As we’ve noted at City Observatory, the growth of ride hailing is directly associated with the decline in average street speeds–and notably bus speeds–in Manhattan. The problem isn’t so much the ride-hailed vehicles themselves as the fact that street use isn’t priced; ride-hailing has simply circumvented the economic limits on the number of vehicles circulating in Manhattan due to the combination of expensive and scarce parking spaces and a tight lid on the number of taxi medallions.

The real equity issue on road pricing is that those who are dependent on buses for transportation–which typically include the lowest income citizens–bear the brunt of the costs of un-priced roads. They pay the same fare for their bus ride, and get worse service. The way to solve this problem is to price the use of the roadway at the peak hour. The buses will travel faster and that will be inherently more equitable to those with the least income and the fewest options.

A hat tip to Streetsblog New York for highlighting the New York Riders Alliance analysis.

A suburban campus with 10,000 parking spaces and virtually no transit isn’t walkable

A recent news item caught our eye:  The Fort Worth Star Telegram reported that American Airlines was putting a premium on promoting walkability as it built its new headquarters in that Texas city. The Star Telegram’s headline: “Why American Airlines doesn’t want car traffic at its huge new Fort Worth headquarters.”  According to the article, American Airlines site planners sound like budding new urbanists:

The $300 million campus is designed to encourage employees to walk between buildings, spend time in the fresh air and collaborate with co-workers from other departments, said Kirk Hotelling, American Airlines managing director of campus and airport affairs.

Intrigued, we read further.

It turns out that the new campus, while technically in the city limits (enough so to qualify for tax abatements offered by Fort Worth), is actually almost 20 miles east of its downtown, just southwest of the Dallas-Fort Worth Airport, on a 300 acre property bounded, as the newspaper reports, by freeways and highways on all four sides.  In our experience, big properties far from city centers are seldom very walkable. Does that hold for this development?

Walk Score = 20:  “Car Dependent”

Our go to measure of a place’s walkability is Walkscore.com.  A quick look at their website shows that the American Airlines headquarters is highly car dependent, and that while the campus itself may turn out to be walkable, there’s almost nothing around it that one could easily walk to.  The site has a Walk Score of 20, which translates to “car-dependent” meaning that almost all errands require a car.  If you work at the new American Airlines headquarters, you’re almost certainly going to commute by car, and if you need to do some simple errand–get a haircut, pick up dry cleaning, have a cup of coffee with a friend–you’re almost certain to need your car to do it. To the extent this is “walkable” it is purely in a controlled, corporate sense of the word–you can walk from one office or meeting to another; but if both of your trip-ends don’t happen to involve American Airlines business, you’ll be hard put to walk at all.

Walkscore’s heat map of the area shows that there’s very little walkability in this region, largely due to the paucity of possible destinations and the formidable barriers posed by the adjacent 360 freeway and other arterials.

If it had wanted to choose a walkable location, in contrast, it could have looked at downtown Fort Worth, much of which scores as highly walkable.  Here’s the same heat map for downtown Fort Worth.

Let ten thousand parking spaces bloom

It’s pretty apparent that despite the headline claims for the walk friendliness of the new campus, American Airlines has really chosen to develop this location to accomodate car travel.  Read down a few paragraphs in the story, and you’ll see the real transportation priorities.  The Star-Telegram says:

Sure, there are plenty of parking spaces (more than 10,000 of them) in garages on the perimeter of the property. But they are meant to be places where employees and guests can park their vehicles and forget about them until their day at the headquarters is done.

But they won’t have to walk very far to (or even necessarily out of doors) to reach their cars, because “American Airlines plans to build parking garages at each of the buildings on the property.”

There’s no word on whether American Airlines plans to charge its employees for parking in these garages (cynical air travelers will no doubt assume that anyone who can charge $25 for a carry-on bag will have no compunction about charging for parking, but that would be out of character with most suburban developments). As we’ve noted before, free parking is a powerful inducement to car travel, and its apparent that with 10,000 parking spaces, American Airlines thinks that nearly all of its employees will drive alone to work.

Extremely limited transit access

You’d think that with 12,000 people working in a single location, that a development like this would be a great candidate to be served by transit.  After all, most workers will be working in seven story buildings. But in addition to having enough parking so that almost everyone can drive alone to work, transit in this area is extremely thin.  In theory, the site is connected to the TRE commuter rail line that runs between Dallas and Fort Worth. That line stops at the Centreport Station, about 1.5 miles (and across the 360 freeway) from the campus location.  According to Google it’s about a 30 minute walk from the station to the campus location.

There’s a peak hour shuttle that runs between 6 and 8 a.m. and 3 and 6 p.m. on weekdays, taking about 8 to 12 minutes to travel between the rail station and the campus.

Finally: did I mention that there will be bicycles?  Yes, 100 of them.  It seems like an impressive number but its works out to fewer than 1 for every 100 employees. As the Walk Score data indicates, this isn’t a very bikeable location, and with 10,000 cars going in and out of the campuses garages, it’s unlikely to be a great place to be a cyclist.

Here’s the bottom line:  no matter how much your press release talks about miles of trails, or even a hundred bikes, if you build your new 12,000 person headquarters in a distant suburban greenfield, with hardly any transit or mixed land uses nearby, walled off from neighbors by freeways or major arterials, and plan for nearly one parking space for every employee, you’ve done almost nothing to create a walkable environment. Apparently American Airlines thinks that the new site plan will appeal to a younger generation of workers who wants more authentic walkability.  Maybe, but only if their definition of walkability is walking to or from their car or between office buildings on the company website.  People who want to walk, cycle or take transit from their homes to their workplaces will find it extremely difficult to realize that vision.

Hat tip to the estimable Jeff Wood for flagging this story at The Overhead Wire.

Wide variations in regional home price patterns tell us a lot about housing markets and cities

Yesterday, we looked at the path of inflation-adjusted home prices in the US.  While much attention has been paid to the fact that nominal prices of homes have, in many markets caught up to or surpassed levels recorded in the peak of the last decade, an apples-to-apples comparison that corrects housing prices for inflation shows that in most of the nation, home prices are still lower now than at the peak. But that’s just the national average. A more nuanced picture appears if we look, as we should, market-by-market across the nation.

Today, we trace out the different patterns of real home prices in different cities across the country.  While as a whole, real, inflation-adjusted home prices are below the level of the 2006 peak, there’s been substantial variation across markets.

Our data source today is the Case-Shiller home price index, which is calculated for major markets nationally on a monthly basis. We’re using the inflation-adjusted levels of the index, keyed to their year 2000 values, as reported by the real estate website Real Estate Decoded.com.  Values above 100 represent an increase in real home prices since 2000; values below 100 represent an inflation-adjusted decline.

First, let’s take a look at the national picture.  The housing bubble is very much in evidence from 2004 to 2006, as is the housing market collapse (with declining real values through early 2012.  Nationally, housing prices grew 54 percent from 2000 through early 2006 (to an index value of 154), and gave up all of those gains by the early part of 2012 (index value 99).  Since  then, real home prices have recovered to an index value of 138–about equal in inflation-adjusted terms to where they were in early 2004.

The experience of most cities falls into four categories.

Boom and Bust Markets

The most volatile housing markets have been in Florida, Arizona and Nevada. These places were the epicenter of the housing bubble, where loose mortgage lending fueled a building boom, and where the collapse was most dramatic. Phoenix, Las Vegas, Tampa and Miami all show an even more pronounced surge and even steeper decline than the nation as a whole.  They also have home values today that are still well below the inflation-adjusted peak.  Miami is still about 70 points lower on the index than at its peak; Phoenix and Las Vegas values are only about 20 percent higher than in the year 2000, after spending more than five years in sub-2000 values territory.

Constrained Markets

In several fast growing, tech centered metro areas, housing prices have risen rapidly in the past few years. In places where it’s been difficult to built more housing, economic growth has translated into rapidly growing home prices.  This tendency is apparent especially in San Francisco and Seattle, and to a somewhat lesser extent in Portland. Each of these markets bottomed out in real terms in 2012, and the appreciation since then has taken each of them back (or very nearly back) to their mid-2000’s peaks.

Lagging Markets

In some metropolitan areas with slower growing economies, home price gains have been much more muted. If we look at three Midwest metros–Chicago, Cleveland, Detroit–its apparent that real home prices haven’t recovered even to pre-2000 levels, much less their bubble era peaks.  In all three metro areas, the inflation-adjusted price of a home today is less than it was two decades ago. This means that housing has not been much of source of real wealth accumulation for long term buyers, and for those who bought during the bubble years, the real value of their investments has been negative, in inflation-adjusted terms. While there’s not a lot of good news here, Detroit’s housing market has recovered somewhat in the past five years: it was down to just over half of its year 2000 value in 1980, and is now at about 80 percent of year 2000 value.

Elastic Markets

Our final set of local markets include the Sunbelt cities where its relatively easy to build new housing in abundance. Interestingly, these places largely avoided most of the wild gyrations of the housing bubble. Prices neither rose nearly as much in the bubble years, nor did they fall as dramatically (again, in inflation-adjusted terms) in the years of the Great Recession. These cities include Charlotte, Dallas and Atlanta.  all of which have very muted price swings. The price of a home in Atlanta or Charlotte is roughly the same, adjusted for inflation, that it was in 2000.  Dallas homes have appreciated in the past few years, but over the two decades shown here, have are still gained less than the typical US home.

To paraphrase former House Speaker Tip O’Neill, all housing markets are local.  The health of the local economy, its amenities and desirability as a place to live, and whether land use and development regulations make it easy to add more housing all have a bearing on the trajectory of housing prices.

The experience of the last two decades shows that a housing boom, bubble, and bust were felt quite differently in different metropolitan areas depending on these factors. While a few places have recorded real increases in housing prices that bring home values back near to their housing bubble peaks, far more markets remain at inflation-adjusted price levels well below the peak, and as we’ve shown, in many markets, home prices are no greater today, adjusted for inflation than they were in the year 2000.

One of the places where socioeconomic mixing is highest

Despite deep concerns that America is increasingly divided along racial, ethnic and economic lines, there are some neighborhoods that have a diverse array of residents from different racial and ethnic groups and different economic strata. We know that segregation is devastating for the life prospects of kids growing up in segregated low income neighborhoods, and that socioeconomic mixing has been shown to reduce intergenerational poverty.

As we explained in our recent report-–America’s Most Diverse, Mixed Income Neighborhoods–-nearly seven million Americans live in one of the neighborhoods we’ve identified as America’s most racially and ethnically diverse and mixed income. While we’ve got copious amounts of data, and maps showing where these neighborhoods are located, what does a diverse, mixed income neighborhood look like at ground level?

To answer that question, we’ve profiled a handful of the 1,300 neighborhoods nationally that scored highest on our two measures of integration: the racial and ethnic diversity index and the income diversity index. The neighborhoods selected score in the top 20 percent of all urban neighborhoods in the US on each of these measures.

One of these highly diverse, mixed income neighborhoods is Corktown, in Detroit.

Corktown is one of Detroit’s oldest neighborhoods. It’s located just southwest of the city’s downtown, and draws its name from the Irish immigrants who populated the area in the late 19th and early 20th centuries. The neighborhood was home to some of the city’s most famous landmarks, the old Tiger stadium (since demolished) and the now vacant Michigan Central Station (pictured above).

Other neighborhood indicators show a mixing of homeowners (40%) and renters (60%), and Corktown is nearly evenly split between single family residents and apartment dwellers.  The neighborhood’s poverty rate is about 34 percent, more than double the metropolitan average, but lower than for the City of Detroit.  Median income is about $34,000, compared to an $58,000 for the overall Detroit metro area. Here’s a snapshot of Corktown’s scores on our racial/ethnic and income diversity indices, and a map showing its location:

It’s a seeming paradox that an area thought of as gentrifying turns out to the statistically the most diverse place in the city. But at the moment, Corktown has a very wide mix of incomes among its residents, and a similarly wide mix of races and ethnicities. As we’ve argued elsewhere, the concern about gentrification is often greatest in those places where people from visibly different socioeconomic groups live close together.

The big question for Corktown–and other neighborhoods experiencing revitalization–is whether they can retain their diverse mix of residents as they revitalize. Corktown is on the cusp of change; the old Michigan Central Station is scheduled to be rehabilitated for use as an office for Ford Motor Company. While we tend to view neighborhood’s tipping from one racial group to another as inevitable–based on the history of the 1960s–more recently it has been the case that once neighborhoods become racially diverse, they tend to stay that way. In Corktown, and elsewhere, much will depend on public policies that work to retain affordable housing as the neighborhood grows.

We’ve compiled similar profiles of selected neighborhoods in other metropolitan areas around the country. For example, you can explore the demographics of the St. Mary’s Park neighborhood in San Francisco, the Near South Side in Chicago, and Hillside,  Queens. We’ve also prepared profiles of neighborhoods in Philadelphia, Memphis and Akron.  It turns out that almost every large metropolitan area has at least one, and many time a handful of neighborhoods like Corktown, that embody high levels of both racial/ethnic and income diversity. Seeing where socioeconomic mixing is happening in your area may be one key to fashioning policies that support greater integration everywhere.

As City Observatory predicted in January, Amazon will select multiple locations for HQ2

The Wall Street Journal is reporting that Amazon’s much ballyhooed headquarters contest  will choose not one winner, but two.

Amazon.com Inc. plans to split its second headquarters evenly between two locations rather than picking one city for HQ2, according to a person familiar with the matter, a surprise decision that will spread the impact of a massive new office across two communities.

Some are calling it a surprise, but not us.  It’s exactly what we predicted in our January 22 commentary “Two things everyone has missed about Amazon’s HQ 2 decision.”

As we wrote at the time, much of the coverage about Amazon missed the point that it was very much in Amazon’s interest to have multiple locations rather than choose just one winner; we said:

Amazon is very likely to choose multiple locations (HQ2, HQ3, HQ4) to tap different city specializations, to minimize its negative effect on housing markets, and to continue to its negotiating leverage over “winners.”

But like any reality-TV show, there’s nothing that stops the producers from injecting a late-in-the-game plot twisting rule change. Don’t be surprised if later this year, Amazon announces that its going to have more than one HQ2

Our prediction was based on a careful analysis of the business implications of expanding beyond Amazon’s current Seattle headquarters, especially the challenges of operating multiple locations. We argued that Amazon would select cities that had the necessary base of talent, and whose industrial or knowledge specializations matched strategic directions the company was pursuing. Rather than duplicating its Seattle operations, we predicted Amazon would want its new headquarters locations to diversify its geographic and technological base. Once it crossed the Rubicon of moving some functions out of Seattle, we argued, there was little reason to restrict themselves to expanding in just a single location.

As current news reports have mentioned, having multiple locations also has the benefit of mitigating some of the negative effects of Amazon on local labor and housing markets.  Again:  exactly what we foretold in January:

Having several smaller HQ2, HQ3, and HQ4 locations would also work to Amazon’s advantage in minimizing its impact on housing affordability. Much has been made of a likely “winner’s curse:”  in addition to giving away substantial public subsidies, a city that suddenly got 50,000 highly paid jobs would likely see a substantial escalation of housing prices.  Splitting HQ2 among several different cities would lessen housing market dislocations . . .

In addition, choosing two cities keeps the “game” alive and maximizes Amazon’s negotiating leverage to secure incentives and concessions from the “winning” cities.  We wrote:

There’s another good reason to pick multiple cities. If a single winner is announced, and its competitors are dismissed, then Amazon’s negotiating position becomes much weaker. A city may not be able to deliver everything that’s promised (especially over time), and local political demands for Amazon to provide compensating benefits to the community in exchange for its subsidies are likely to escalate. Having multiple winners will allow Amazon to continue to keep each of them honest. This has been a lucrative game for Amazon: there’s no reason to end it now.

What this savvy seller has learned over the last year or so:  Pitting cities one against another to please its corporate whims has been a great move for Amazon, and it looks like it will be for some time to come.

What City Observatory did this week

1. If your corporate campus has 10,000 parking spaces, it isn’t really “walkable.” With great fanfare, American Airlines has announced its building a new corporate campus in Fort Worth.  While American calls it highly walkable–it will have pedestrian paths, parks and some bikes, it is surrounded by freeways, it’s in a suburban location distant from transit, has a current Walk Score of 20 (“car-dependent”) and offers about 10,000 parking spaces for its 12,000 employees.

2. The myth of the revealed preference for suburbs. One of the most frequently repeated arguments about the superiority of suburban living is the claim that because more Americans live in suburbs than in cities, it must be because they prefer suburban locations. But as we’ve argued at City Observatory, part of the reason for that disparity is our shortage of cities: we don’t have enough urban locations to accomodate all those who’d prefer to live in urban neighborhoods. That’s partly reflected in the growing premium buyers pay for central locations. Survey evidence marshaled by Jonathan Levine and his colleagues confirms we’ve have a lot more urban residents if we just built the space for them.

3. If you can’t see ’em, you can’t feel ’em. City Observatory friend Carol Coletta recently gave a keynote address at the Kinder Institute in Houston. We think its got some important messages for urbanists about how we use civic spaces to promote true inclusion.

Must read

1. Why Chicago should have a progressive real estate transfer tax. Two of our favorite Chicagoans, City Observatory alum Daniel Kay Hertz and Metropolitan Planning Council’s Marisa Novara, have an editorial in the Chicago Sun Times making the case for a progressive real estate transfer tax. The city now has a flat rate transfer tax, which funds housing programs and transit. Hertz and Novara argue that a transfer tax with higher rates for more valuable properties would be one key to raising more money to bolster the city’s housing programs, which now get only modest support from city general funds and tax increment financing.

2. Three policies for making driverless cars work in cities. Market Urbanism’s Emily Hamilton gives some serious thought to what cities might do to accomodate driverless cars in a way that makes cities more livable. She has three main recommendations:  First, pricing the roads to avoid congestion. Second, creating more shared streets that facilitate pedestrian movement, so that dense neighborhoods are more walkable. Third, eliminate parking requirements and auction off space now used for vehicle storage.

 Requiring new buildings, with lifespans of several decades, to include space for car storage in places where real estate is valuable is mandating an enormous waste of space and resources as demand for parking decreases.

3. Is San Francisco’s Inclusionary Zoning requirement throttling new construction? SPUR, the Bay Area think-tank has an analysis. In 2016, San Francisco voters approved Proposition C, which toughened the city’s existing inclusionary housing requirements, upping both the minimum share of affordable housing units developers must build if they construct new apartments in the city, as well as raising the fee for those who elect to have units constructed off-site. On the advice of its economists, the City Council backed of temporarily on raising the affordable unit set-aside to the voter-approved level of 25 percent, but didn’t reduce the off-site fees. The result appears to be a big slow down in new apartment construction proposals, and much lower fee revenues for the city’s off-site construction program. And that’s the rub with inclusionary requirements: they can easily be so high that they reduce the amount of market rate housing being built, putting further pressure on rents, and reduce funds for new affordable units as well.

4. Claims of vacant storefronts in NYC based on bad data. A September 6, 2018 New York Times article made it sound like there was a growing epidemic of retail vacancy in Manhattan, with overall vacancies tripling in the last few years, ostensibly, as greedy landlords evict long-time tenants and hold-out for more lucrative shops (one’s selling luxuries and who won’t provide for the basic needs of neighborhood residents. The story hinged critically on retail vacancy data attributed to Douglas-Elliman, a local real estate brokerage, claiming that vacancy rates had gone from 7% to 20% in Manhattan. That factoid was being used to buttress the case for imposing commercial rent control. But on closer inspection, that’s not what the data shows, according to a report in The Commercial Observer “What is the real vacancy rate for Manhattan storefronts? Not 20 Percent.”  (A hat tip to Market Urbanism for flagging this article).

New Knowledge

The impact of ride-hailing services on satisfaction with taxi service. The advent of ride-hailing services has generated much interest in how they affect city traffic congestion, which is primarily about the quantity of service they provide. But its seems likely that ride-hailed services, what with their app-dispatched, electronic payment and invited feedback on operator performance have changed rider expectations about the quality of service. A new paper investigates the connection between complaints about taxi service in New York and the expansion of Uber/Lyft service in various neighborhoods.

The authors find that the increased roll out of ride-hailing is associated with an increase in complaints against taxis for poor driving, a lack of cleanliness and driver discourtesy.

Much of the paper is devoted to trying to figure out why taxi service became worse with the advent of Uber and Lyft:  Were taxi driver’s left with the least desirable fares? Did the competition make them worse or less courteous drivers? Some of these explanations are plausible, we think there may be a simpler explanation:  rising customer expectations. While it’s possible that Uber and Lyft somehow made taxi service worse, it seems more plausible that the ready availability of a qualitatively better transport experience led customers to realize that better service was possible, and led them to complain when taxi service was not up the the higher standards set by Uber and Lyft.

Mishal Ahmed, Erik Johnson and Byung-Cheol Kim, “The Impact of Uber and Lyft on Taxi Service Quality:  Evidence from New York City.” http://www.netinst.org/Kim_18-16.pdf

In the News

The Portland Tribune featured a story on our correct prediction (made last January) that Amazon would split its much-anticipated HQ2 among at least two cities in their article “Portland economist predicted Amazon HQ2 split months ago.”

The BlockClub of Chicago linked to our analysis of claims that Oakland’s Fruitvale neighborhood had avoided gentrification, in their story “Can Chicago’s Gentrifying Neighborhoods Grow Without Leaving Longtime Residents Behind?”

What City Observatory did this week

1. The neighborhood you grow up shapes your life chances, especially for black kids. New research from the Equality of Opportunity Project shows the profound effect that neighborhoods have on lifetime economic results. Raj Chetty, Nate Hendren and their colleagues have calculated how much of the effect of place plays out at the regional (metropolitan or county level, compared to the very local level:  the school attendance area or neighborhood.  It turns out that for black kids, these very local effects are even stronger than for everyone else. Whereas local neighborhood effects account for a little more than 40 percent of the place-based effects on white children’s outcomes, they account for about 57 percent of the place based effects on black children.

2. Housing can’t both be a great investment and be affordable. There’s a deep contradiction that underlies housing policy in the US.  We firmly believe two incompatible things:  housing should be a great investment for the typical family and housing should be affordable. It turns out, though, that the only way housing is a great investment is that it increases in value faster than inflation, or incomes or alternative investments. And by definition, rising home prices that count as one group’s return on investment, turn out to be an affordability burden for everyone else.

3. Get out! Why it may be necessary for some people to leave the place they grew up in order to realize their fullest economic opportunities. We’ve been taking a close look at the Opportunity Atlas, a stunning new high definition picture of how the place you grew up correlates with your lifetime earnings. One feature of the Atlas is a map showing what fraction of kids who grew up in a place still lived their as adults. There’s a striking contrast between the Great Plains (which generally have high levels of economic mobility) and much of Appalachia (which have lower levels of intergenerational economic mobility).  These differences are also reflected in migration rates: kids in the Great Plains are much more likely to move away as adults. We think this willingness and ability to move may be one reason they do better economically as adults.

Must read

1. Revitalization without gentrification. Strongtowns has a fascinating interview with Dallas-based developer Derek Avery, who specializes in building mixed income housing in black neighborhoods. Avery tackles the issue of gentrification head-on, and has a three-pronged strategy for making sure his projects fit in with, and are widely seen as improving the neighborhood. According to Avery, the three keys are

• They build market rate and more affordable (smaller) housing.
• They make a point of talking with neighbors early on.
• They engage with local schools.

Avery’s strategy stresses building a long term commitment, aimed at creating a stronger, mixed income community that has a place both for current residents and newcomers.  He explains:

One of the things we settled in on is that to affect education and the social changes that we want, we have to approach it from the base level of how we design neighborhoods.

Typically we do projects in those high crime areas, close to the central business district. They are majority black neighborhoods. We said what we really wanted to do was activate the community and involve them in the revitalization. Because it’s easy to build houses. Everyone told me I was crazy for going there and building houses that were a little more expensive. They said I would be told I’m gentrifying, but the only thing that works is mixed income. That’s been proven time and time again. You can’t have concentrated poverty, but you can’t displace everyone. You have to preserve what’s there, but also bring in things in a controlled manner to inspire reinvestment.

2. Tech firms expanding outside the Bay Area.  Real estate firm CBRE has put together a series of compelling maps showing where various tech firms are leasing new office space away from their home base locations. The biggest demand is coming from firms headquartered in the famously expensive (and housing constrained) San Francisco/San Jose Bay Area.  Bay area headquartered tech firms are leasing millions of square feet in cities around the nation. And before you economic development types start salivating too much, notice where they’re headed:  largely to other major tech centers around the nation.  Seattle and New York top the list of destinations for big tech firms, confirming that while they’re looking beyond Silicon Valley, they’re most likely to choose locations that already have a strong technology workforce base.

3.  Fast, Furious and Fatal, the 85 percentile rule. We’ve been critical of many of the crazy rules of thumb that are routinely used by transportation planners, but which enshrine unsafe and unscientific ideas. One of the most pernicious examples of this kind of foolishness is the very mathy sounding “85th percentile” rule, that says speed limits on roadways should be set no lower than will cause more than 15 percent of observed road users to be violating the law.  So if 20 percent of the current users of a roadway are travelling at 45 miles per hour, the speed limit can’t be any lower than that level. California law which mandates use of the 85 percent rule actually required the city of Los Angeles to raise posted speed limits on many streets, when that would demonstrably make roads more dangerous. This insanity is explained in a recent brief from the State Smart Transportation Initiative, called “Fast, Furious and Fatal.”

4. The MicroTransit Mirage.  Jarrett Walker, one of the nation’s leading transit planning consultants, has a compelling essay on the limits of microtransit. Tech firms and some vendors are peddling a vision of transit in which multi-passenger vehicles provide dispatched, door-to-door service; instead of walking to a bus stop, you’ll get picked up an your home and dropped at your destination. While there’s a flashy new technological veneer for this idea, it is essentially the same as the existing dial-a-ride services that operate around the country. The limiting factor is one of economics, driven by the fact that such services typically manage only about four boarding rides per hour of service. That’s neither cost-competitive with bus transit, nor does it scale to provide service in dense urban environments. As Walker argues, you can’t beat the bus.

New Knowledge

More evidence that walkability is associated with higher values. A new study from Jeremy Gabe (University of Auckland), Spenser Robinson (Central Michigan University) and Drew Sanderford (University of Arizona), looks at the connection between various aspects of the built environment and the rental prices of multi-family apartments around the country.  Their model includes an estimate of the contribution of the EPA walkability index, and finds a positive and statistically significant relationship between apartment rents and walkability (people pay more to be in a walkable location.

The author’s qualify their finding by reporting that a slightly different specification of their model that includes a longer list of variables causes the walkability index to lose its statistical significance. We think that may have something to do with the fact that the variables that this larger model incorporates includes several components that are also part of the EPA walkability index (including, for example intersection density and mix of building types).  It shouldn’t be surprising that once one controls for these features directly that the EPA index is no longer significant. (We also question why the authors chose to use the EPA index, which is calculated based on just four variables at the block group level, rather than using Redfin’s WalksScore, which is available for individual addresses, and computes walkability based on the proximity of ten different categories of destinations. Despite these reservations, this work adds to a growing body of data showing that the features of the urban environment that support walkability are positively correlated with consumer’s willingness to pay.

Jeremy Gabe & Spenser Robinson & Andrew Sanderford, 2018. “Urban Sustainability Preferences Revealed Through Multifamily Rents,” ERES eres2018_103, European Real Estate Society (ERES).

In the News

Tampa’s ABC News cited our skepticism about a  recent study claiming ride-hailing was responsible for an increase in car crashes.

What City Observatory did this week

1. There will be two HQ2, just as we predicted. Back in January, we took a close look at the Amazon HQ2 location contest. We said that the decision to build a second headquarters wasn’t simply to clone a another version of the existing Seattle operations, but to diversify the firm’s technology and talent base in a way which would enable its further evolution into new lines of business. We also said that once the firm decided to locate some functions outside its Seattle home base, there was no reason why it would choose just one city. Amazon’s decision, announced this week to choose multiple cities is exactly what we predicted:

But like any reality-TV show, there’s nothing that stops the producers from injecting a late-in-the-game plot twisting rule change. Don’t be surprised if later this year, Amazon announces that its going to have more than one HQ2

2. Road pricing is inherently equitable because it makes the buses run faster. One common objection to the idea of road pricing is that it is somehow unfair to the poor because any toll will be a larger fraction of their income than for a higher income person. That misses the key point that the poor are far less likely to drive at all, and less likely to commute during peak hours. More importantly, though, road pricing helps low income people directly by helping buses to run faster. The poor are disproportionately dependent on transit, and a new analysis from New York shows that the peak period congestion charge proposed for Manhattan would shave as much as an hour a week off the average travel times of bus commuters in Queens and Brooklyn. Right now, there’s no way they can buy a faster trip, which is why peak period road pricing is inherently equitable.

3. Detroit’s Corktown: Portrait of a diverse neighborhood. Earlier this year, we released our new CityReport America’s Most Diverse, Mixed-Income Neighborhoods. That report used data from the Census to identify urban neighborhoods with the highest levels of racial, ethnic and economic mixing. In the Detroit metro area, Corktown is one of a handful of the most diverse neighborhoods. Corktown is a good illustration of how rapidly changing neighborhoods are often the most diverse places in any metropolitan area. The public policy challenge is to make sure they remain accessible to all as they revitalize.

4. The Growth Machine versus the Homevoter Hypothesis.  Daniel Kay Hertz puts two competing theories about the political economy of urban development on the scales and ask which is the most persuasive. One is Harvey Molotch’s Growth Machine theory, that argues that land-owners, developers and industries that thrive on local population growth constitute a formidable coalition on behlaf of policies to facilitate and subsidize more growth. It’s competitor is the Homevoter hypothesis, that individual homeowners cast their ballots in ways that maximize the value of their homes, typically by reining in further development, ostensibly to minimize impacts, but with the clear effect of limiting supply and driving up prices. The evidence of systematic down zonings in many American cities over the past few decades points to the dominance of the Homevoter model.

Must read

1. Michael Lewyn’s review of “The Battle of Lincoln Park.” As City Observatory followers will know, long-time contributor Daniel Kay Hertz has a new book out on neighborhood change in Chicago. Planetizen has published Michael Lewyn’s thoughts after having read the book. Lewyn highlights how the book chronicles the way in which new middle class residents moving into the neighborhood in the 1960s and 1970s lobbied for land use and other policy changes to lower density, and exclude multi-family housing.  It was these policy changes, rather than the influx of new residents that drove displacement from Lincoln Park in subsequent decades.

2. Emily Badger on Superstar Cities and Amazon.  We’re just beginning to see the first of a flood of post-mortems on the Amazon HQ2 decision. (City Observatory will have its own nuance to add soon). The New York Times’ Emily Badger hits the main point:  it’s all about the agglomeration of talent in leading cities. Amazon went not to the cheapest place to do business, but selected two of the cities (New York and Washington) with the largest agglomerations of well-educated workers (and especially the group we call the young and restless). In theory, it would be nice if Amazon had taken its high paying jobs to some distressed community, but knowledge-based firms and knowledge workers have similar motivations:  both thrive most if their in a place where there are lots of smart firms and smart workers.

3. Jenny Schuetz on Amazon’s choices and local housing markets. For some time, Brookings economist Jenny Schuetz has pinpointed the tight connection between the location chosen for Amazon’s HQ2 and local housing markets. With the news the Crystal City and Long Island City are the likely locations, she concludes that Amazon’s site selectors have really done their homework, choosing locations, that though within expensive and constrained metro areas, are ones that allow greater density near to Amazon’s preferred sites. As she says: “high density zoning is Amazon’s friend, NIMBY residents are not.”

4. The patriarchal suburb. Angie Schmidt of Streetsblog has a well-argued essay “Single-Family Housing Upholds the Patriarchy and Hurts Moms” about the effect of car-dependent suburbs on the child-raising burden that’s effectively foisted on women. While, as the saying goes, it takes a village to raise a child, in most suburban settings there is effectively no village because households are isolated one from another, nearly all trips require cars, and children are practically barred from unsupervised walking. The key problem, Schmidt relates, is that we lack the common and communal spaces where children and their caregivers can function as groups, rather than isolated individuals.

New Knowledge

Millennials are increasingly buying homes in close-in urban neighborhoods. A newly published paper from a trio of researchers at Clemson and the Atlanta Fed–Elora Lee Raymond, Jessica Dill and Yongsung Lee–looks at where within metropolitan areas millennials are buying homes. In contrast to previous generations, young homebuyers today are more likely to purchase homes close to downtown. Raymond, Dill and Lee used data from the the New York Federal Reserve Bank on 128,000 thousand mortgages issued to first-time homebuyers between 2001 and 2016. They performed a regression analysis to estimate the relative propensity of young buyers to purchase homes within one mile of the center of the central business district, controlling for a number of other factors including income, credit score, car-ownership and student debt.  They conclude that:

A common argument of those who are skeptical of the migration of young adults to cities is that urbanicity is mostly tied to renting, and that as Millennials increasing buy homes, they will move away. These data suggest that this generation is making different choices that its predecessors, and is more likely to buy homes in more urban locations, rather than suburban ones.

In the News

The New York Times “Was Amazon’s Headquarters contest a case of bait and switch: yes” credited City Observatory for correctly predicting last January that Amazon would split its much anticipated HQ2 among two different cities, they said: “At least one expert realized some time ago how the game would end.”

CityLab also reprised our analysis of Amazon’s rationale for choosing two locations rather than just one.

The Niskanen Center cited our recent commentary “Housing can’t be affordable and also be a great investment.”

NBCDFW, the Dallas television station used data from our report on the growth of city center jobs as part of a story on housing in Austin.

Editors Note: We’re offering an abbreviated Thanksgiving Week version of the Week Observed. Our regular features–must read, new knowledge, and in the news–will return next Friday.

What City Observatory did this week

1. The long tail of the housing bust. It’s been a little more than a decade since the collapse of the housing bubble, but its effects are still apparent in housing prices, particularly when we adjust housing prices for the effects of inflation. Whether housing is a good investment depends critically on when you buy; those who bought before 2000, or who had good enough credit to purchase homes when credit was tight and housing prices were low (as in 2010) myave have seen some real price appreciation. But those who bought at the top of the bubble are still a long way from seeing any real appreciation of their homes.

2. Regional variations in home price appreciation. We dig deeper into the change in real housing prices since the collapse of the housing bubble, noting that while homes in some strong coastal markets have set new inflation-adjusted highs, a majority of major metropolitan housing markets have real housing prices today that are lower than in 2006.  Housing has turned out to be a good investment, in terms of inflation-adjusted appreciation, only in places where demand is strong, and new housing is constrained, mostly by restrictive local zoning.

3. An “Immaculate Conception” view of your neighborhood. We reprise Daniel Kay Hertz’s classic essay exploring the myths we’ve constructed about how our existing housing stock came to be constructed, apparently without either developers, market incentives or class bias.  The truth is that while the names of the developers are long since lost to time, the housing stock that every city has inherited was the product of profit motivated builders making new housing, chiefly for middle and upper income households.

It’s naive to assume that existing housing stock sprang to life magically

(We’re pleased to reprise this classic essay from Daniel Kay Hertz, long-time contributor to City Observatory, and now author of the newly released Battle of Lincoln Park: Urban Renewal and Gentrification in Chicago).

A while back, a columnist in Seattle Magazine, Knute Berger, expressed his discontent with modern housing development. As Berger sees it, today’s homebuilding pales in comparison to the virtues of early 20th century bungalow development:

In a rapidly growing city where the haves have more and the have-nots are being squeezed out, the bungalows offer a lesson we ought to relearn. They recall a city figuring out a way to house its people affordably, without excess. To me, they reflect a lack of materialism, housing built not for profit, but for living in. They reflect a modest approach to life, one steeped in a conservation ethic—don’t use more than you need. Seattle culture needs to find a way to get back to those values, and create a built environment that reflects it.

This is one of the more eloquent expressions of something you might call the “immaculate conception theory” of neighborhood development. This narrative is common all around the country, in communities of many ages—from colonial Boston to postwar Minneapolis—and sets powerful background assumptions about what affordable, friendly neighborhoods can and should look like that inform many of our debates about housing. These assumptions mostly revolve around the idea that older housing was built the right way: ethically, modestly, with an eye to community rather than profit. These older values, in turn, highlight the faults of modern buildings: gaudy and wasteful, disruptive to existing communities, and motivated only by money.

Old building: virtuous. New building: villainous.

The problem with the immaculate conception theory is that, like parents swearing that they would never have behaved the way their kids do, it is conveniently forgetful about what actually happened in the past. Taking, just as an example, the kind of housing that Berger romanticizes—the early 20th century bungalow boom—a closer look reveals that it was defined not by mass affordability, efficiency, and respect for traditional communities, but something very nearly the opposite.

To begin with, many of the arbiters of taste at the Seattle Magazines of the bungalow era believed those new bungalow neighborhoods “ruined” the character of the places they were built, just as new apartment buildings are maligned today. They even had a snappy put-down for it: “bungalow disease.” “Tradition has broken down,” wrote the British planner Thomas Sharp, describing a proliferation of bungalows on both sides of the Atlantic, and “taste is utterly debased…. The old trees and hedgerows…have given place to concrete posts and avenues of telegraph poles, to hoardings and enamel advertising signs.” Closer to Berger’s home, Architectural Record reviewed Seattle’s building boom in 1912 and, in an otherwise positive article, pronounced the quality of its new homes “disappointing.”

Critics accused new bungalow neighborhoods not just of being ugly, but of ripping apart the social fabric of the city. One writer argued that in new neighborhoods full of many separate houses, “each building is treated in isolation, nothing binds it to the next one,” and as a result they lacked an “essential” “togetherness.” Another pointed out that the rise of bungalow neighborhoods coincided with the rise of decentralized business districts, as these sprawling areas—bungalows took up much more space per person than either the more modest single family homes or apartment buildings that had come before—encouraged outlying commercial development and car ownership.

Which brings us to our next point: Far from being based on an ethic of efficiency and conservation, early 1900s bungalows represented a dramatic leap to neighborhoods that required higher energy consumption than ever before. This was true, first of all, because bungalows tended to be much larger than existing homes. While Berger marvels that one 1910 bungalow was just 1,600 square feet, the average home size at the time was closer to 1,000 square feet—making the 60 percent larger home look like a veritable McMansion. In addition, many of these new single-family-home neighborhoods, which were built much further from job centers and at much lower densities than older communities, were enabled by the boom in energy-consuming automobiles, and encouraged their use. By the 1920s, one in every two American families had a car—a figure that was much higher in bungalow neighborhoods—and public transit began losing many of its customers to driving. In the same decade, suburban population growth outpaced that of cities for the first time ever.

Finally, the idea that bungalows represented a housing type that was affordable and open to all—and an ethic that valued community instead of money—simply doesn’t describe actual American cities in the 1910s or 20s. Home prices in the 1920s were rising rapidly, leading many people to talk about a housing crisis in terms not so terribly different from today’s. But as Gail Radford describes in her book Modern Housing for America, bungalows weren’t holding the line on cheap homes: in many cases, they represented the luxury housing of their day. Bungalows were so much more expensive than the more modest homes that had preceded them that while the overall cost of living increased by about a factor of two between the 1890s and 1920s, the cost of an entry-level home had increased by a factor of five and a half. Even before the economic crash of 1929, there was a growing foreclosure crisis, strongly suggesting that “housing costs were simply too high in relation to incomes for many families.”

Moreover, the bungalow era coincided with the development of zoning codes—codes that were essential, in fact, to preserving many bungalow neighborhoods’ all-single-family character. The people who advocated for these zoning codes did so by explicitly arguing that they were needed to protect the property values of homeowners and other landowners. In other words, the denizens of the early 20th century cared so much about their houses as a financial investment that they invented an entire new regulatory infrastructure to ensure that they wouldn’t lose their value.

And of course, “not losing their value” was very closely tied to excluding any kinds of people who might threaten the neighborhood’s desirability. It’s impossible to talk about the development of urban American neighborhoods in the early 20th century without acknowledging that this was the period in which modern residential racial segregation emerged—a system of exclusion enforced by covenants, zoning, and violence carried out by the residents of all kinds of neighborhoods. This isn’t some separate issue from how those who were excluding, rather than excluded, built their homes and communities: it’s an integral part of the story, without which those bungalow neighborhoods may have looked quite different.

Why have we forgotten all of this? Partly because all the people in these stories are gone. We can’t see the developers laying roads and streetcar tracks to open up huge new areas for subdivisions; we can’t see the disproportionately wealthy people who were able to buy homes in a pre-FHA era when required down payments routinely hit 50 percent. We can’t talk to the people who remember, and miss, what existed in these places before bungalows. All that’s left are the buildings, which over the years have lost their sheen of newness, often becoming more affordable in the process, and allowing us to imagine our own stories about where they came from.

The point here is not that bungalows are “bad.” Given what has happened in the intervening century, a return to bungalow-scale living would be a huge win for sustainability and efficient living in the many postwar suburbs and neighborhoods where homes have ballooned to much larger sizes, and development has become much more sprawling. In many urban communities, bungalows today represent a prized architectural tradition, and a form of single-family home that fits neatly into the kind of mixed urban neighborhood—along with small apartment buildings and local shopping districts—that we have long since made illegal.

But there are important lessons to be learned by looking at what the bungalow era actually looked like, rather than our romantic imagination of it.

One is that everything old was once new, and new things often provoke a backlash. We ought to be humble in believing that our opinions represent some timeless, objective truth, looking backwards or forwards. The same bungalows that seem to us quaint and charming were tacky and soulless to many of the people watching them be built; it seems more than possible that the new apartment buildings we vilify today will be thought of sentimentally by future generations who know them only as an important part of their city since they were born.

A second lesson is that American cities have an impressive history of growing to accommodate new arrivals. Berger leaves out of his column, as is frequently left out in “immaculate conception” stories, that the bungalow era was also the fastest period of urbanization in American history: Between 1900 and 1930, Seattle’s population grew more than fourfold, from 80,000 to over 360,000—a rate of growth approached or exceeded by many other American cities at the time. In the process, millions of rural Americans and immigrants were given the opportunity to live in newly industrializing cities where wages and quality of life were dramatically higher. Today, most of our cities have shut the door on that kind of growth. (Seattle’s growth rate today, while much higher than many other central cities, pales in comparison to the bungalow era Berger wishes we would return to.) As a result, our doors are no longer open to as many people, from this country and others, who would like to make better lives by moving to places where job openings and quality of life are high.

Finally, the bungalow era suggests that building new market-rate housing that’s affordable to working-class and low-income people in urban areas is hard, especially if that housing takes the form of single-family homes. And it’s worse today: while the bungalow builders had the advantage of lots of open land relatively close to center cities, today, that “frontier” has closed. And we’re well aware of the costs—environmental, social, and financial—of continuing to push all of our growth out further and further onto the fringe.

An old Seattle neighborhood with both bungalows and small apartment buildings—which were and are much more affordable and energy efficient.

Rather, the deeply affordable and decent homes of the bungalow era were largely in multifamily buildings. It’s curious that, though more than four in ten of the homes built in the 1920s were in apartment buildings, that kind of construction—and those kinds of people—are entirely absent from Berger’s romantic musings about the time. But they were a crucial source of urban accommodations for people of modest incomes. As the Sightline Institute has pointed out, rooming houses and other small, multifamily homes made up a huge proportion of the affordable housing stock in cities around the country in the early 20th century. Unfortunately, a combination of regulations and market conditions has virtually eliminated that stock in most places. If we want to go return to something the 1910s and 20s got right, bringing back modestly-sized homes in multifamily buildings is a good place to start.

The past does have lessons for us—we’ve made a point of championing the now-“illegal neighborhoods” that American cities built up through the bungalow era. But we have to look at it as it really was, and not through rose-colored glasses, if we want to get them right.

If so many people live in suburbs, it must be because that’s what they prefer, right? But the evidence is to the contrary.

One of the chief arguments in favor of the suburbs is simply that that is where millions and millions of people actually live. If so many Americans live in suburbs, this must be proof that they actually prefer suburban locations to urban ones. The counterargument, of course, is that people can only choose from among the options presented to them. And the options for most people are not evenly split between cities and suburbs, for a variety of reasons, including the subsidization of highways and parking, school policies, and the continuing legacies of racism, redlining, and segregation. One of the biggest reasons, of course, is restrictive zoning, which prohibits the construction of new urban neighborhoods all over the country.

But does zoning really act as a constraint on more compact, urban housing? Sure, some skeptics might say, it appears that local zoning laws prohibit denser housing and walkable retail districts. But in fact, city governments pass such strict laws because that’s what their constituents want. Especially within a metropolitan region with many different suburban municipalities, these governments are essentially competing for residents and businesses. If there were real demand for denser, walkable neighborhoods, wouldn’t some municipalities figure out that they could attract those people by allowing that type of development?

A 2005 study by Jonathan Levine—and explored further in Levine’s 2006 book, Zoned Out—seeks to answer this question. Are local governments just responding to “market” demand in ensuring that new development is low-density and auto-oriented? Or is there really pent-up demand for more urban neighborhoods that can’t be satisfied because of zoning?

Levine looks for the answer in two contrasting metropolitan areas: Boston and Atlanta. Boston, as a much older region, has a relatively higher number of dense, walkable neighborhoods, while in Atlanta, which mostly boomed after World War Two, urban neighborhoods are much more scarce. Levine hypothesizes that if dense housing is adequately supplied to match people’s preferences, you should find a pretty good match between the kinds of places people say they’d like to live, and the kinds of places they actually do live. But if zoning really creates a “shortage of cities,” then the greater the shortfall of urban neighborhoods, the worse the matchup between stated preferences and actual living arrangements.

This is an important wrinkle to the “revealed preference” arguments of many defenders of the suburban status quo. Recent Census population figures sparked what were only the latest of a long line of scuffles over whether, or to what extent, the “back to the city” movement is real. But if Levine’s argument is correct, measuring demand for urban areas simply by how many people end up living there is flawed, because some people who would like to live in more compact neighborhoods can’t do so because there aren’t enough to go around.

To begin his analysis, Levine classified neighborhoods in both the Boston and Atlanta metro areas according to their level of “urban-ness” on a five-point scale, with “A” neighborhoods being the densest and most urban, and “E” being the most sprawling and exurban. Levine and his researchers then conducted a survey of residents in each of the zones, asking about their housing preferences and satisfaction with their current housing situation.

In Boston, about 40 percent of respondents said they preferred denser, more pedestrian-friendly neighborhoods, while in Atlanta, just under 30 percent of respondents did so. (Auto-oriented neighborhoods were preferred by 29 percent of people in Boston and 41 percent of people in Atlanta, with remaining respondents neutral.)

And how well did these preferences match actual behavior? Well, in Boston—where neighborhoods in the three most urban categories made up over half of all housing—83 percent of people with strong preferences for urban neighborhoods lived in one of these three urban zones. In Atlanta—where the same top three urban categories make up barely over 10 percent of all housing—just 48 percent of people with strong preferences for urban neighborhoods lived in an urban zone.

In fact, all down the line, people whose stated preferences were more urban were much more likely to actually live in an urban neighborhood in the Boston area than in the Atlanta area—suggesting that in Atlanta something might be preventing them from satisfying their preferences. At the same time, people who expressed preferences for the most auto-oriented neighborhoods were able to satisfy that demand the vast majority of the time in both regions—about 95 percent of those in Atlanta, and 80-90 percent of those in Boston. More rigorous tests prove that this difference is statistically significant.

This seems like strong evidence that there is a “shortage of cities” in Atlanta. Why, otherwise, would there be such a gap between the number of people who satisfy their preferences for urban neighborhoods in the Boston and Atlanta metro areas—and much smaller gaps between people who can satisfy their preferences for more car-oriented areas?

If this is correct, it helps explain a other issues we see. If urban neighborhoods are undersupplied compared to demand for them, we would expect to see urban housing go to the people willing to outbid other households, increasing prices relative to auto-oriented neighborhoods, which are more plentiful. In a place like Atlanta, lots of urban housing would have to be built before this bidding war could be ended, returning prices to a “normal” market level.

It’s also notable that this kind of “shortage of cities” can occur even where there is no overall housing shortage. Atlanta, for example, is not a particularly high-cost region, but it has mostly added new housing on the suburban periphery. So while there’s no bidding war for housing in the metropolitan area as a whole, there is a bidding war for more urban housing, making walkable neighborhoods more expensive than they would have to be. Boston is almost the opposite: walkable neighborhoods appear to be less undersupplied relative to auto-oriented neighborhoods, but the region as a whole has very expensive housing, suggesting that the total supply of housing is too low. Boston could help bring down housing prices by building any housing at all—auto-oriented or more walkable. (Though walkable housing would have lower total location costs.)

Levine’s study ought to be known by anyone who works in urban planning or housing. It’s one of the strongest pieces of evidence that “revealed preferences”—the choices that people actually make about where to live—actually reveal the limited choices that people are given as a result of restrictive land use laws.

It’s election day, everyone.  If you haven’t voted, please do so. In honor of the election, today we’re please to reprise one of Daniel Kay Hertz’s essays on urban politics.  Daniel has just released his new book, The Battle of Lincoln Park: Urban Renewal and Gentrification in Chicago.

There are two big theories about who controls the pace of development in American cities and suburbs.

One is the “growth machine.” In this telling, developed by academics like Harvey Molotch in the 1970s, urban elected officials and zoning boards are highly influenced by coalitions of business and civic leaders interested mainly in economic growth and maximizing the price of the land they own.

The other, developed later by the economist William Fischel, is the “homevoter hypothesis.” Fischel argues that real power—at least in the small to moderately-sized municipalities in which the majority of Americans live—is held by homeowners, who are also interested primarily in maximizing the value of their property: their homes.

These two theories closely track two of the major camps in the debate about what’s wrong with American housing policy. If you believe in the growth machine, either because you’re a reader of Molotch or it just happens to coincide with your general worldview, you’ll probably believe that US cities suffer from too much development, pushed on an unwilling populace by a profit-driven elite for whom zoning and planning is an inconvenience at most.

If you’re in the homevoter camp, conversely, you’re likely to think that the problem is too little development, as NIMBY homeowners scare local elected officials into blocking any housing development that might compromise their property values—either simply by increasing the housing stock, and thus the number of “competing” sellers, or by introducing “undesirable” kinds of people or buildings.

As you can see, there’s quite a bit riding on which of these theories is right—or, more realistically, in what proportions, where, and in which ways, each is right and wrong. One suggests that development laws ought to be made more restrictive; the other that they ought to be less. One suggests that there may already be a broad democratic coalition in favor of a rational housing market, but that coalition is frustrated by a smaller number of more powerful interests; the other suggests that the broad democratic coalition of homeowners, at least at a hyper-local level, is getting exactly what it wants when home values spiral upwards.

A study published last year from Vicki Been, Josiah Madar, and Simon McDonnell of NYU took a crack at pitting these theories against each other to see which did a better job of explaining zoning changes in New York City from 2003 to 2009, under former mayor Michael Bloomberg.

As the authors themselves admit, their choice of place and time give the growth machine position a leg up: even Fischel, who coined the “homevoter” name, suggests that his theory probably applies best to smaller municipalities, without the huge business interests of major cities. It’s also most likely to matter in places where most people own their own homes—and New York City has one of the lowest homeownership rates in the country, with just 36 percent of homes being owner-occupied. Finally, the billionaire businessman Michael Bloomberg is, at least superficially, as good an avatar of the “growth machine” coalition as one can imagine.

To distinguish between the two theories, the study compared “upzones” (a zoning change that increases allowed density) and “downzones” (a zoning change that reduces allowed density) with several factors:

• First, land close to infrastructure and services, like rail stations and high-performing schools. If the growth machine theory is correct, these places should see more upzones, as developers try to take advantage of these valuable locations. If the homevoter theory is correct, these places might see more downzones, as homeowners try to protect the value of their property against other, competing homes.

• Second, market growth and rising home prices. The growth machine theory would suggest places with rising prices would also see more upzones.

• Neighborhood demographics. Growth machine theory might suggest that demographics associated with high real estate values, like wealthier and whiter neighborhoods, would see more upzones. Homevoter theory would say those places would see more downzones, as more powerful homeowners are more able to enact their anti-development orientation.

• Homeownership rates and voter turnout. Both high homeownership rates and turnout would result in more downzones, according to homevoter theory.

So what did the results looks like?

• Interestingly, proximity to high-quality infrastructure and services made land more likely to be changed in both directions—that is, land far from high-quality infrastructure and services was more likely to remain in its original zoning category. But in almost every case, proximity was especially likely to lead to more downzones. For example, parcels in high-performing school districts were 43 percent more likely than the typical parcel to be upzoned—but 392 percent more likely to be downzoned.

• Correlations with market growth were weaker—but they suggested that growing markets were associated with downzoning. Parcels in neighborhoods seeing rapid population growth were 41 percent more likely to be downzoned, for example. Parcels in neighborhoods seeing rapid home value increases were about 20 percent less likely to be upzoned, although they were also 27 percent less likely to be downzoned.

• Downzoning was very strongly correlated with whiter neighborhoods: parcels in Census tracts that were over 80 percent white were more than seven times more likely to be downzoned than parcels in tracts that were less than 20 percent white.

• Parcels in tracts with high homeownership rates were 43 percent more likely to be downzoned, and 25 percent less likely to be upzoned. Parcels in districts with high voter turnout were 230 percent more likely to be downzoned, and 53 percent less likely to be upzoned.

So what does this tell us? Well, in every case where the evidence clearly points to one theory or the other, the winner is the homevoter hypothesis. Homes near high-performing schools—sources of great value to which Fischel says homeowners pay particular attention—were overwhelmingly more likely to have their maximum density reduced, rather than increased, as developers and business interests would surely prefer. Neighborhoods with rising demand, similarly, tended to see more anti-development zoning, to the extent that a growing population tended to lead the government of New York City to allow fewer homes to be built. Very white neighborhoods were particularly likely to see density caps lowered. And homeownership and voter turnout rates had exactly the results expected by the homevoter theory. (Although the voter turnout results could, arguably, also be seen as compatible with the growth machine.)

These outcomes are all the more stunning because of where and when they took place: New York City under Michael Bloomberg, which, again, is one of the very last settings you would expect to find “homevoters” in charge of development.

Of course, none of this means that big landowners, businesses, and developers aren’t also trying to influence the development process in their favor, and sometimes succeeding. Perhaps the most fascinating results of the study actually suggest a somewhat more complex dynamic: if land near parks and high-performing schools are more likely to be both upzoned and downzoned, then you can imagine a story in which these amenities lead to increased competition between the growth machine and homevoters. According to this report, homevoters appear to win the vast majority of the time—but developers also score a few victories, getting more upzones than are granted (or, perhaps, requested) in less valuable territory.

As we wrote in our review of William Fischel’s new book, Zoning Rules!, and contra Ilya Somin’s argument about a growing pro-zoning-reform consensus, these findings also suggest that those who would like to moderate home price increases through smarter development policy may have a daunting political hill to climb. More about that in an upcoming post.

Today is famously “Cyber-Monday,” the day on which the nation’s consumers take to their web-browsers and started clicking for holiday shopping in earnest. Last year, its is estimated that online shoppers orders more than $3 billion worth of merchandise on this single day, and the expectation is this will grow even further this year.

The steady growth of e-commerce has many people worrying that urban streets will be overwhelmed by UPS and Fedex delivery trucks ferrying cardboard boxes from warehouses to homes.  One of these jeremiads was published by Quartz:  “Our Amazon addiction is clogging up our cities—and bikes might be the best solution.”  Benjamin Reider notes–correctly–that UPS and other are delivering an increasing volume of packages, and asserts–without any actual data–that truck deliveries are responsible for growing urban traffic congestion.

While there’s no question that it’s really irritating when there’s a UPS truck doubled-parked in front of you–it’s actually the case that on-balance, online shopping reduces traffic congestion.  The simple reason:  Online shopping reduces the number of car trips to stores.  Shoppers who buy online aren’t driving to stores, so more packages delivered by UPS and Fedex and the USPS mean fewer cars on the road to the mall and local stores. And here’s the bonus: this trend benefits from increased scale.  The more packages these companies deliver, the greater their deliver density–meaning that they travel fewer miles per package. So if we look at the whole picture, shifting to e-commerce actually reduces congestion.

We’ve sifted through the data on urban truck transport and package delivery economics, and here are four key takeaways:

• Urban truck traffic is flat to declining, even as Internet commerce has exploded.
• More e-commerce will result in greater efficiency and less urban traffic as delivery density increases
• We likely are overbuilt for freight infrastructure in an e-commerce era
• Time-series data on urban freight movements suffer from series breaks that make long term trend comparisons unreliable.

The rise of e-commerce and attendant residential deliveries has led to predictions that urban streets will be choked to gridlock by delivery trucks. A recent article in Forbes predicted that package deliveries would triple in a few years, adding to growing traffic congestion in cities around the world.

In our view, such fears are wildly overblown.  If anything they have the relationship between urban traffic patterns and e-commerce exactly backwards.  The evidence to date suggests that not only has the growth of e-commerce done nothing to fuel more urban truck trips, but on net, e-commerce coupled with package delivery is actually reducing total urban VMT and traffic congestion, as it cuts into the number and length of shopping trips that people take in urban areas. The first point is that, despite the rapid growth of e-commerce, truck traffic has been essentially flat.

E-Commerce is increasing rapidly; Urban truck travel is flat

The period since 2007 coincides with the big increase in e-commerce in the U.S.  From 2007 to 2017, Amazon‘s North American sales increased by a factor of 13, from $8 billion to $106 billion. Between 20007 and 2017, the total e-commerce revenues in the United States have tripled, from about $137 billion to about $448 billion according to the U.S. Department of Commerce.  But over this same time period, according to the US DOT data as tabulated by Brookings, truck traffic in urban areas has increased only about 3 percent.  All the increase in e-commerce appears to have very little net effect on urban truck traffic.

Does an increase in package deliveries mean increased urban traffic?

It actually seems like that increased deliveries will reduce urban traffic congestion, for two reasons.  First, in many cases, ordering on line substitutes for shopping trips.  Customers who get goods delivered at home forego personal car shopping trips.  And because the typical UPS delivery truck makes 120 or so deliveries a day, each delivery truck may be responsible for dozens of fewer car-based shopping trips.  At least one study suggests that the shift to e-commerce may reduce total VMT and carbon emissions.  And transportation scholars have noted a significant decrease in shopping trips and time spent shopping.

But there’s a second reason to welcome–and not fear–an expansion of e-commerce from a transportation perspective.  The efficiency of urban trucks is driven by “delivery density”–basically how closely spaced are each of a truck’s stops.  One of the industry’s key efficiency metrics is “stops per mile.”  The more stops per mile, according to the Institute for Supply Management, the greater the efficiency and the lower the cost of delivery.  As delivery volumes increase, delivery becomes progressively more efficient.  In the last several years, thanks to increased volumes — coupled with computerized routing algorithms — UPS has increased its number of stops per mile–stops increased by 3.6 percent but miles traveled increased by only about half as much, 1.9 percent.  UPS estimates that higher stops per mile saved an estimated 20 million vehicle miles of travel.  Or consider the experience of the U.S. Postal Service:  since 2008, its increased the number of packages it delivers by 700 million per year (up 21 percent) while its delivery fleet has decreased by 10,000 vehicles (about 5 percent).

As e-commerce and delivery volumes grow, stop density will increase and freight transport will become more efficient.  Because Jet.com is a rival internet shopping site to Amazon.com, and not a trucking company, its growth means more packages and greater delivery density for UPS and Fedex, not another rival delivery service putting trucks on the street.

So, far from putative cause of worry about transportation system capacity–and inevitably, a stalking horse for highway expansion projects in urban areas–the growth of e-commerce should be seen as another force that is likely to reduce total vehicle miles of travel, both by households (as they substitute on-line shopping for car travel) and as greater delivery density improves the efficiency of urban freight delivery. A study of the shopping and travel habits in the United Kingdom showed that those who used on-line shopping reduced the total number of shopping trips that they took, suggesting that package delivery stops substitute for personal shopping trips. The study concludes:

Crucially, having shopped online since the last shopping trip significantly reduces the likelihood of a physical shopping trip.

As David Levinson reports, data from detailed metropolitan level travel surveys and the national American Time Use Study show that time spent shopping  has declined by about a third in the past decade.    As Levinson concludes “. . . our 20th century retail infrastructure and supporting transportation system of roads and parking is overbuilt for the 21st century last-mile delivery problems in an era with growing internet shopping.”

So the next time you see one of those white or brown package delivery trucks think about how many car based shopping trips its taking off the road.