1. The market cap of cities. What’s the value of a city? We’ve taken a stab at answering that question—at least, the value of a city’s housing. Using a measure called market capitalization, or “market cap” in financial parlance, we can compare the economic weight of cities with major companies. Turns out San Francisco’s housing is worth more than three times as much as Microsoft, and all the housing in Columbus, Ohio is worth about as much as Bank of America. These comparisons may seem weird, but they do reflect real demand and value, and are a reminder of just how massively valuable our housing really is.
2. What is an “unequal” city? Higher levels of national economic inequality are bad. Higher levels of metropolitan area inequality are bad. So what about at the city or neighborhood level? Well, then it gets complicated. Given any level of metropolitan inequality, for some smaller part of that region to be less “unequal,” it would have to exclude some group of people: a neighborhood without rich people, or a municipality without anyone in poverty. But there’s a name for sorting people geographically according to their income: segregation. And segregation actually leads to worse economic mobility for the low-income. Ironically, then, fighting inequality at the local level means creating integrated neighborhoods that register higher levels of “inequality.”
3. Land use and transportation infrastructure: Two sides of a coin. When new highways are quickly filled up with cars, erasing any gains in the fight against congestion, those who want to continue building more and bigger roads sometimes point out that population growth along the highway interpret this as showing that things would have been even worse if it hadn’t been built. But this treats land use and transportation as if they are totally independent of each other—and they very much aren’t. Adding highway capacity out to the suburbs will encourage people to build more houses there; spending those same resources on improving more space-efficient transportation, like buses or trains, in the central city will encourage more development in the central city. That symbiotic relationship can’t be ignored.
4. In some cities, the construction boom is starting to pay off. After a long period of consistently fast rent growth, prices are flat or falling in Seattle, Denver, and Washington, DC, thanks in large part to an apartment construction boom in those cities. In fact, it’s a national phenomenon—the rate of rent growth has fallen by half in response to a 20 percent surge in apartment construction in 2015. Though the historical evidence connecting housing supply and prices is very strong, we had yet to see a housing boom correct price growth during this cycle—but now that evidence is arriving.
The week’s must reads
1. Nearly half of all states—23, to be exact—restrict the use of gas tax revenue for sustainable transportation projects, including transit, bike lanes, and sidewalks. AtStreetsblog, Angie Schmitt reports that dispiriting fact—but also that Colorado recently voted to reverse their own such restriction. That move, Schmitt argues, is one of “five things states can do to bring transportation out of the stone age.” The others: base project funding on clearly articulated goals; adopt more flexible street design standards; use transportation demand management; and give more resources to local governments.
2. We’ve written before about the power of smart transit investments—ones that create fast, reliable service that goes where people need to go, regardless of whether it’s by train or bus. Los Angeles may be seeing the results of the flip side of those policies, however, according to a blockbuster piece by Laura Nelson and Dan Weikel in the LA Times. As they report, the region is seeing dramatic decreases in public transit ridership in the midst of multi-billion-dollar investments in new rail lines. One possible culprit: significant cuts to bus service, which carries most riders in the region. Though it’s not mentioned in the article, the continued growth of parking supply—in part because of legal requirements—is also likely a factor.
3. In the least-in-demand neighborhoods of Baltimore, high-quality rowhomes might sell for just $50,000—but the cost of rehabbing an abandoned home can reach $100,000. Faced with those economics, Baltimore has joined the list of cities that see the demolition of vacant homes as a blight-fighting tool. But is such a plan actually in the long-term interest of the city? At Greater Greater Washington, a panel of writers and planners go back and forth on the virtues of demolition—and what might bring housing demand back to the city.
New knowledge
1. Via CityLab, Reid Ewing and colleagues at the University of Utah have used data from Raj Chetty’s Equality of Opportunity project to measure the effects of urban sprawl on intergenerational economic mobility. They find that upward mobility is significantly stronger in metropolitan areas that are less sprawling. As a region’s “compactness index” doubles, the chances of a child in the bottom quintile’s moving into the top quintile increase from 8 percent to 11.2 percent. Given that “perfect mobility” would be 20 percent, that’s a very meaningful effect.
2. The relationship between a piece of land’s “accessibility”—how quickly someone can get from there to valuable jobs and amenities—and its price is well known: better accessibility means more expensive land. But what’s less well known is howchanges in accessibility on a given piece of land affect its price. Michael Iacono and David Levinson of the University of Minnesota look into the issue, and find that there’s less of an effect than you might think, both for automobile and transit access. They argue that’s likely because American cities tend to have mature transportation networks, and so most new projects will only slightly change the accessibility calculus. For us, the takeaway is that a city’s most accessible areas today are likely to be its most accessible areas for some time to come—so if you want to increase the number of people in accessible locations, it may be most efficient to increase density there.
3. The Brookings Institution released a new Metro Monitor report on the economic status of America’s major metropolitan areas, breaking down progress on “Growth,” “Prosperity,” and “Inclusion.” There are some interesting regional patterns, such as how Texas cities score very high on “Growth” and “Prosperity” (which include metrics like total jobs and average wages) but more poorly on “Inclusion” (which includes metrics like median wages and the employment-population ratio).
The Week Observed is City Observatory’s weekly newsletter. Every Friday, we give you a quick review of the most important articles, blog posts, and scholarly research on American cities.
Our goal is to help you keep up with—and participate in—the ongoing debate about how to create prosperous, equitable, and livable cities, without having to wade through the hundreds of thousands of words produced on the subject every week by yourself.
If you have ideas for making The Week Observed better, we’d love to hear them! Let us know at jcortright@cityobservatory.org, dkhertz@cityobservatory.org, or on Twitter at @cityobs.
The Week Observed: January 29, 2016
What City Observatory did this week
1. The market cap of cities. What’s the value of a city? We’ve taken a stab at answering that question—at least, the value of a city’s housing. Using a measure called market capitalization, or “market cap” in financial parlance, we can compare the economic weight of cities with major companies. Turns out San Francisco’s housing is worth more than three times as much as Microsoft, and all the housing in Columbus, Ohio is worth about as much as Bank of America. These comparisons may seem weird, but they do reflect real demand and value, and are a reminder of just how massively valuable our housing really is.
2. What is an “unequal” city? Higher levels of national economic inequality are bad. Higher levels of metropolitan area inequality are bad. So what about at the city or neighborhood level? Well, then it gets complicated. Given any level of metropolitan inequality, for some smaller part of that region to be less “unequal,” it would have to exclude some group of people: a neighborhood without rich people, or a municipality without anyone in poverty. But there’s a name for sorting people geographically according to their income: segregation. And segregation actually leads to worse economic mobility for the low-income. Ironically, then, fighting inequality at the local level means creating integrated neighborhoods that register higher levels of “inequality.”
3. Land use and transportation infrastructure: Two sides of a coin. When new highways are quickly filled up with cars, erasing any gains in the fight against congestion, those who want to continue building more and bigger roads sometimes point out that population growth along the highway interpret this as showing that things would have been even worse if it hadn’t been built. But this treats land use and transportation as if they are totally independent of each other—and they very much aren’t. Adding highway capacity out to the suburbs will encourage people to build more houses there; spending those same resources on improving more space-efficient transportation, like buses or trains, in the central city will encourage more development in the central city. That symbiotic relationship can’t be ignored.
4. In some cities, the construction boom is starting to pay off. After a long period of consistently fast rent growth, prices are flat or falling in Seattle, Denver, and Washington, DC, thanks in large part to an apartment construction boom in those cities. In fact, it’s a national phenomenon—the rate of rent growth has fallen by half in response to a 20 percent surge in apartment construction in 2015. Though the historical evidence connecting housing supply and prices is very strong, we had yet to see a housing boom correct price growth during this cycle—but now that evidence is arriving.
The week’s must reads
1. Nearly half of all states—23, to be exact—restrict the use of gas tax revenue for sustainable transportation projects, including transit, bike lanes, and sidewalks. AtStreetsblog, Angie Schmitt reports that dispiriting fact—but also that Colorado recently voted to reverse their own such restriction. That move, Schmitt argues, is one of “five things states can do to bring transportation out of the stone age.” The others: base project funding on clearly articulated goals; adopt more flexible street design standards; use transportation demand management; and give more resources to local governments.
2. We’ve written before about the power of smart transit investments—ones that create fast, reliable service that goes where people need to go, regardless of whether it’s by train or bus. Los Angeles may be seeing the results of the flip side of those policies, however, according to a blockbuster piece by Laura Nelson and Dan Weikel in the LA Times. As they report, the region is seeing dramatic decreases in public transit ridership in the midst of multi-billion-dollar investments in new rail lines. One possible culprit: significant cuts to bus service, which carries most riders in the region. Though it’s not mentioned in the article, the continued growth of parking supply—in part because of legal requirements—is also likely a factor.
3. In the least-in-demand neighborhoods of Baltimore, high-quality rowhomes might sell for just $50,000—but the cost of rehabbing an abandoned home can reach $100,000. Faced with those economics, Baltimore has joined the list of cities that see the demolition of vacant homes as a blight-fighting tool. But is such a plan actually in the long-term interest of the city? At Greater Greater Washington, a panel of writers and planners go back and forth on the virtues of demolition—and what might bring housing demand back to the city.
New knowledge
1. Via CityLab, Reid Ewing and colleagues at the University of Utah have used data from Raj Chetty’s Equality of Opportunity project to measure the effects of urban sprawl on intergenerational economic mobility. They find that upward mobility is significantly stronger in metropolitan areas that are less sprawling. As a region’s “compactness index” doubles, the chances of a child in the bottom quintile’s moving into the top quintile increase from 8 percent to 11.2 percent. Given that “perfect mobility” would be 20 percent, that’s a very meaningful effect.
2. The relationship between a piece of land’s “accessibility”—how quickly someone can get from there to valuable jobs and amenities—and its price is well known: better accessibility means more expensive land. But what’s less well known is howchanges in accessibility on a given piece of land affect its price. Michael Iacono and David Levinson of the University of Minnesota look into the issue, and find that there’s less of an effect than you might think, both for automobile and transit access. They argue that’s likely because American cities tend to have mature transportation networks, and so most new projects will only slightly change the accessibility calculus. For us, the takeaway is that a city’s most accessible areas today are likely to be its most accessible areas for some time to come—so if you want to increase the number of people in accessible locations, it may be most efficient to increase density there.
3. The Brookings Institution released a new Metro Monitor report on the economic status of America’s major metropolitan areas, breaking down progress on “Growth,” “Prosperity,” and “Inclusion.” There are some interesting regional patterns, such as how Texas cities score very high on “Growth” and “Prosperity” (which include metrics like total jobs and average wages) but more poorly on “Inclusion” (which includes metrics like median wages and the employment-population ratio).
The Week Observed is City Observatory’s weekly newsletter. Every Friday, we give you a quick review of the most important articles, blog posts, and scholarly research on American cities.
Our goal is to help you keep up with—and participate in—the ongoing debate about how to create prosperous, equitable, and livable cities, without having to wade through the hundreds of thousands of words produced on the subject every week by yourself.
If you have ideas for making The Week Observed better, we’d love to hear them! Let us know at jcortright@cityobservatory.org, dkhertz@cityobservatory.org, or on Twitter at @cityobs.
Related Commentary