What City Observatory did this week

1. Achieving equitable transportation: Reallocate road space and price car travel. New York has recorded a kind of “Miracle on 14th Street.” By largely banning through car traffic, its speeded bus travel times 15 to 25 percent, with virtually no effect on traffic on adjacent streets. Buses now run faster, attract more passengers and are more efficient. And in effect, New York has priced car travel on 14th Street:  You’ll pay a $50 fine for driving there increasing by $50 for each subsequent violation. This miracle illustrates why reallocated and pricing road space is inherently equitable.  First, by making buses run faster (and carry more people) it helps all those who can’t afford to travel by car, which tends to be low income people.

2. Institutionalized racism in car insurance. It’s long been recognized that the real estate and mortgage lending industries did considerable damage to many neighborhoods through the process of red-lining, which dates back to the 1930s. Its now largely illegal to use geographic classifications to effectively discriminate against neighborhoods based on their racial composition. But a very similar practice still persists in automobile insurance. Auto insurance is generally mandatory, and roughly as costly as vehicle fuel, but the amount you pay depends significantly on where you live. A new study from Insurify shows that residents of Black neighborhoods pay considerably more than those in white neighborhoods; so much so that driver’s with clean records in Black neighborhoods pay more than bad drivers in white neighborhoods.

Insurance rating schemes have a higher up-charge for neighborhood characteristics than for bad driving:  the 5 percent of drivers classifed as “aggressive” pay about $350 more than safe drivers; those who live in Black neighborhoods pay about $700 more for their insurance. States could make automobile insurance more equitable by requiring insurers to use larger geographies that correspond to actual transportation markets, rather than using zip codes to effectively price discriminate.

Must read

1. Cities and Restaurants in the Wake of the Covid-19 pandemic.  New York Times economics columnist Eduardo Porter has a wide-ranging, well-informed and provocative analysis of how the pandemic is affecting the restaurant business, and why this is critically linked to the health of city economies. He provides a good overview of the economic literature demonstrating how urban amenities, particularly the opportunities for social interaction provided by bars and restaurants, have been a key to drawing well-educated workers to cities.

The New York Times

The need for social distancing due fight the spread of the Coronavirus has devastated restaurant sales, leading to widespread closures. With the advent of a third wave of infections, and the waning of federal stimulus payments, many restaurants are closing for good.  Porter explores how this is likely to affect city economies, and contemplates how long it will likely take to repair the damage.

2. A 15-minute city is going to require rethinking a lot of our policies.  Paris Mayor Anne Hidalgo has turned heads locally and around the world with her efforts to lessen urban car use and promote greater livability. Her headline initiative, “the 15 minute city” is getting considerable interest. Seattle’s Mike Eliason has an essay at Publicola pointing out that this will require Mayor’s and other city leaders to move beyond simply rhetorical flourishes. It’s easy to embrace the consumption convenience and clever illustrations of the 15-minute city messaging.

But realizing this vision will require bolder, broader and faster action. While cities like Seattle are implementing some slow streets, few if any are in commercial hubs. And simply including the 15-minute criteria in the long list of items to be addressed in future rounds of land use planning lacks scale and immediacy. Moreover, as Eliason argues, realizing actual 15 minute living implies a radical decentralization of a range of activities, ranging from health care to retailing, and will probably only be achieved with considerable increases in urban density, and if equity is to be achieved, much more social housing. It’s good to have a compelling goal and vision for urban growth, but we need to back it up with this kind of comprehensive thinking.

New Knowledge

Shocks vs. Fundamentals. In the wake of the Covid-19 pandemic there’s widespread speculation about the future of cities. The need for social distancing, coupled with much broader adoption of remote work has led some to speculate that urban locations will either decline or revive slowly.

How do cities respond to shocks like pandemics?  The historic record suggests that even severe shocks are mostly transitory, and that once the initial shock has subsided, the underlying fundamentals that shape urban growth (or decline) again predominate. Economist Amine Ouzad looks at two particular examples of severe shocks to city economies: the 2001 terrorist attacks on New York City, and the 1987 Loma Prieta Earthquake that damaged the San Francisco Bay Area.  In both cases the shocks produced considerable property damage, and for a time changed consumer, and investor perceptions of these markets.

Ouzad uses detailed statistics on metropolitan growth over the past few decades to analyze the relative impact of negative shocks—like natural disasters and civil disturbances—and long term fundamentals. He finds no significant impact of either disasters or disturbances on growth.  In contrast, fundamentals, like the educational attainment of the population, the industrial composition of the economy, and whether a region suffers from racial segregation, tend to be consistent and significant predictors of future growth.

Housing market data for New York and San Francisco show that shocks do have observable short-run effects, driving up vacancy rates and holding down prices.  But vacancies and prices tend to quickly revert to pre-shock trends and levels.

Ouzad concludes:

. . . over the span of four decades, metropolitan areas are remarkably resilient to shocks – fundamentals rather than short-run shocks drive long-run population trends. Such resilience of urban housing markets suggests that the benefits of agglomeration play a key role in residents’ welfare; sharing, matching, and learning are key motives that explain the desirability of urban living. These benefits have, over the long run, arguably been greater than the negative externalities of agglomeration. High levels of education, a diversified industrial composition, and racially integrated neighborhoods are keys to the resilience of metropolitan areas.

Amine Ouzad, Resilient Urban Housing Markets: Shocks vs. Fundamentals, Center for Interuniversity Research and Analysis on Organizations, Montreal. Cahier Scientifique 2020S-53, October 2020. https://cirano.qc.ca/files/publications/2020s-53.pdf