What City Observatory did this week

1. Philadelphia’s urban policy harmonic convergence. The proposal to build a multi-billion dollar expansion of University City adjacent to Drexel University and Philadelphia’s Center City brings a host of urban issues to the fore all in one small location. The city is making a big bet on knowledge-based economic development (hoping to possibly attract Amazon’s HQ2).  Its bumping up against a host of well-known urban problems, from a growing demand from young adults for urban housing, to concerns about displacement. Many of these challenges are closely inter-related, but seldom so dramatically in such a small space.

2. IoT: The irrelevance of thingies. Plenty of pixels are being spilled over the prospect of Smart Cities, and the idea that new technologies will disrupt or replace key elements of urban living. We’re skeptical. The evidence from the past two decades of technological change has been that better communication and faster computing have simply made proximity and personal and social interaction even more valuable than before. The much heralded “death of distance” hasn’t happened, and as we’ve documented at City Observatory, people, especially well-educated young people are increasingly concentrating in cities–and are paying a premium for the opportunity to do so. That makes it unlikely in our view that the next round or two of technological innovation will put a dent in the increasing economic and social importance of cities.

Must read

1. California’s Neo-Feudal property tax system. In California, thanks to Proposition 13, the tax you pay depends on when you–or your parents–bought their home. Prop. 13, limits assessment increases on property to 2 percent per year, and reassesses to market rates only when a house is sold; and parents can pass this tax break on to their kids. A new story from the Los Angeles Times reporters Liam Dillon and Ben Poston shows how the children of the wealthy (including, for example, heirs of Lloyd Bridges and Dom DeLuise) get enormous tax discounts on houses they inherited (and now operate as rental properties). More than 60 percent of these inherited homes are either second residences or are rented out. In all, this tax break costs Los Angeles County local governments more than $280 million a year in lost revenue, according to the state’s Legislative Analyst. It’s hard to think of a tax policy that’s more ageist, more racist, and more anti-immigrant than charging different tax rates to people based on whether they (or their family) were able to afford a home in California in 1978.

2. The Bi-Partisan Appeal of NIMBYism.  The New York Times’ Emily Badger digs deep into the politics and financial incentives that make NIMBYism such a powerful and nearly universal force in land use planning across the country. Americans may be deeply divided on other subjects, but Democrats and Republicans alike–especially homeowning ones–share an abiding commitment to making sure that development generally, and things like apartments and more intensive land uses, get built in somebody else’s backyard. Badger has a typically thorough and clear summary of the academic literature, mostly from political scientists, demonstrating the connection between homeownership, voting, and support for restrictive local land use controls.

3.  The perversity of “Levels of Service.” Writing at Strong Towns, Tulsa’s Sarah Kobos looks at the application of the traffic engineering profession’s “Level of Service” measurement to area roads and sidewalks. The widely used LOS measure ranks roads on how empty they are: the less-used the better, because it means cars can drive fast. Optimizing the road system for LOS means chronically over-investing in road capacity, and producing environments that are spectacularly hostile for other road users, especially pedestrians and cyclists. Sarah explains how highway engineers weirdly want to use the same metrics to plan for pedestrians (nearly empty sidewalks are rated “A”) and shows how intersections optimized for cars endanger everyone else.

New Knowledge

How easy credit fueled speculation during the housing bubble. Atif Mian and Amir Sufi have a new paper looking back at causes of last decades housing bubble. They track the growth of “private label securities” (PLS) the securitized home loans than dominated mortgage lending from 2002 to 2006. There was considerable geographic variation in the growth of lending by the non-bank lenders who issued PLS-backed loans, and Mian and Sufi show that the metro areas that saw the biggest increases in this lending had many of the hallmarks of speculation: a high proportion of loans went to borrowers with multiple mortgages.  The worst hit markets–like Las Vegas and Phoenix–saw a big increase in prices and a surge in home construction, and experienced an even larger and more sustained collapse in the housing bust. Credit-fueled speculation in this highly elastic markets allowed an irrational few to temporarily push the market higher.

Atif Mian and Amir Sufi, “Credit Supply and Housing Speculation,” National Bureau of Economic Research, Workpaper #24823, July 2018.

In the News

Curbed’s Alissa Walker has an in-depth story “Why US cities need more multi-racial, mixed income neighborhoods,”  describing the findings of our recent City Observatory report “America’s Most Diverse, Mixed Income Neighborhoods.”

Willamette Week quoted City Observatory director Joe Cortright in its story about declining rents in Portland. Landlords are offering free months of rent and even Amazon gift cards to new tenants.