What City Observatory this week

1. Calculating induced travel. Widening freeways to reduce traffic congestion in dense urban areas inevitably fails because of the scientifically demonstrated problem of induced demand; something so common and well-documented it’s called the “fundamental law of road congestion.” Experts at the UC Davis National Center for Sustainable Transportation have developed an “induced demand calculator” for California metro areas, and with their assistance, we’ve calibrated it for computing increased travel from capacity expansion in the Portland metro area.

The calculator shows that widening I-5 at Portland’s Rose Quarter would add between 17.8 and 34.6 million additional miles of vehicle travel and 7.8 to 15.6 thousand tons of greenhouse gases per year.  This calculation, based on an independent, peer-reviewed methodology disproves false claims made in Oregon Department of Transportation’s environment assessment that the project will have no effect on greenhouse gases.

2. America’s K-shaped housing market.  By now, you’ve probably heard our current economic downturn described as a K-shaped recession. The “K” refers to the diverging fortunes of low-wage and high-wage workers. Layoffs have been disproportionately concentrated among the lowest paid quarter of the workforce, where employment is down more than 20 percent; while employment among high income workers has actually increased. That’s reflected in the housing market, where rents are falling, while home prices are soaring.

The same dynamic is at work:  two-thirds of low-wage workers rent; while nearly 80 percent of high wage workers are homeowners (or homebuyers). The peculiar, and very different shape of the Covid-19 recession explains much of what’s happening in US housing markets.

3. Again, it’s Groundhog’s Day, again.  If it seems like we’re stuck in a loop, when it comes to climate change, it’s because we are.  The latest report of the Oregon Global Warming Commission is out, and it shows just what similar reports showed 2 and 4 years ago:  despite our stated goals of reducing greenhouse gases, we’re not anywhere close to being on track.  The main culprit:  increased emissions from driving, which according to the independent DARTE database have increased by about 1,000 pounds per person in the past five years.

We’re sure that this year’s report will stimulate another round of solemn declarations about the gravity of the climate emergency, but at this rate, we’ll be doing the Groundhog doom-loop for years to come as the planet burns around us.

Must read

1. Induced Travel from Parking.  The idea that added freeway capacity generates additional travel is well-established.  A new study also shows that building more parking also induces more car travel.  Sightline’s Michael Andersen highlights the study findings froma San Francisco housing lottery to filter out what researchers call “selection effects”—the idea that maybe people who tend to drive less anyhow gravitate toward places with fewer parking spots.  Because people were randomly assigned to different housing, the observed differences in driving can’t be attribution to this sorting effect.  And the study shows that indeed, people who lived in places with fewer parking spaces tended to own fewer cars and to drive less.

To economists, this makes perfect sense:  anything that lowers the cost of driving or car ownership tends to encourage more driving.  More space on roadways, more plentiful (and almost always free) parking spaces, low gasoline prices, and free use of the atmosphere as a dump for carbon and other pollutants, all subsidize car use and result in more miles driven.  The study is powerful evidence for the climate benefits of policies that eliminate parking requirements, and which more generally reduce the supply of parking.

2. Don’t Block Gentrification:  Use it to improve the neighborhood for all.  Pete Saunders, who blogs at Corner Side Yard has a provocative essay at Bloomberg Opinion.  As Saunders notes, gentrification is actually surprisingly rare; for the most part, in large US metro areas, rich neighborhoods are getting richer and poor neighborhoods are getting poorer.  While the few places that are transitioning between the two are the flashpoints for discontent, we should view them as finally providing the kind of investment many urban neighborhoods need to overcome poverty; as Saunders says:

Gentrification should be a chance to expand opportunity, not diminish it.

The key to this is having a process for encouraging engagement between long-time residents and newcomers, identifying and bolstering a community’s distinctive assets, and connecting long-time residents to expanding housing and job opportunities.  And, as he warns, just trying to block change wastes an incredible opportunity to utilize the investment in cities to provide wider benefits to those who’ve been cut off:

Plenty of cities have been starved for decades of revitalizing investment; they would benefit just as much from a concerted effort to increase opportunity and affordable housing, while preserving key institutions. One thing is certain: If we transition away from the back-to-the-city movement of the last 30 years without making moreof our cities better, we’ll be worse for it.

3. The dominance of the SUV.  One of the most important indicators for the future trajectory of greenhouse gas emissions is the size and weight of private vehicles.  Between 2004 and 2014, when gas prices were rising or high, consumers responded by buying more passenger vehicles which are generally smaller, more fuel efficient and less polluting than light trucks or sport utility vehicles (SUVs).  But since gas prices plunged in 2014, the market shart of these light trucks and SUV’s has steadily increased.  The latest data, tabulated by Calculated Risk’s Bill McBride makes this clear:

Back in 2008 and 2009, most of the vehicles sold were passenger cars.  Now the market share of SUVs and light trucks is quickly approaching 80 percent.  Many state greenhouse gas reduction plans were founded on the assumption that the passenger car share would increase, which it hasn’t. Moreover, because vehicles last 15 years or more, the heavy, polluting vehicles being purchased today will still be on the road in the 2030s, as the climate crisis becomes increasingly dire.

New Knowledge

Who really pays property taxes?  More than 100 million Americans rent their homes, and their landlords use a portion of the rent they pay to pay property taxes.  One of the key questions in thinking about local public finance is how much of the cost of local property taxes is borne by renters (i.e. simply passed on to renters in the form of higher rents) as opposed to being borne by landlords (in the form of lower profits).  The answer to this question has a lot to say about whether the property tax is regressive or not:  If renters bear all or most of the cost of property taxes, the tax tends to be regressive, because renters are generally lower income than the rest of the population.  Landlords are, on average, better off, so if they bear the cost of property taxes, that suggests that the tax is less regressive (and might even be proportional to income or progressive).
A new study from David J. Schwegman of American University John Yinger of Syracuse University aims to answer that question using some detailed micro-data from rental housing in Buffalo, New York City and Rochester.  The study’s key finding is that it is landlords, rather than tenants, who bear most of the cost of property taxes.  While many studies assume that the tax load is equally split between renters and landlords, the Schwegman/Yinger study suggests most of the burden of the property tax is borne by landlords:
. . . our results suggest that the owners of rental units, who are more likely to be higher-income individuals, bear the majority of a property tax increase. Thus, the property tax is, in fact, more likely to be a proportional tax over the income distribution than previously evaluated. .
This in turn suggests that the portion of rent paid that goes to pay property taxes is less than generally assumed.  On average, most states assume that about 18 percent of rent paid by renters goes to property taxes.  The Scwegman/Yinger estimates suggest that the real figure is much lower, around 9 percent.  This is important because several states have renter tax relief programs that are based on higher estimates.
David J. Schwegman and John Yinger, “The Shifting of the Property Tax on Urban Renters: Evidence from New York State’s Homestead Tax Option,” CES 20-43 December, 2020

In the News

Strong Towns republished our critique of self-styled “pedestrian infrastructure” in Houston which mostly prioritizes car travel and effectively perpetuates and worsens a  hazardous pedestrian hostile environment.