What City Observatory did this week

Must read

The housing theory of everything.  This is a long essay, but well worth the read (as the author’s say, it is a theory of everything.”)  Their core argument is that our housing policy failures spill over into everything from the wealth gap and inequality, to urban sprawl, political polarization and climate change.

The tight supply of housing in the nation’s most productive metropolitan areas has both equity and economic growth implications. The US economy is measurably smaller than it would be if more workers lived in the most productive places, and the high cost of housing has made it harder for lower income workers to migrate to the places with the greatest opportunity—and has limited their economic gains when they do move there.

The scope and subject matter of this essay (though perhaps not its style) is an echo of Kim May Cutler’s  magisterial essay “How burrowing owls lead to vomiting anarchists .”  Both works, in different ways, tie together in a compelling way urban problems that superficially seem disconnected.  It’s something you’ll want to read.

As the pandemic ebbs, driving rebounds.  Bryn Huxley-Reicher of the Frontier Group has published a great analysis of the rebound in driving in the past few months and frames a more important question:  what next?

Little surprise that the waning of the pandemic has produced a rebound in driving nearly as sharp as the decline we experienced starting in March 2020. Per capita driving has bounced back almost to the same level it was at prior to the pandemic. This is one important bit of evidence to suggest that at least some of the changes we observed during the pandemic are transitory—and it remains to be seen how much of other trends, particularly work at home, will revert to their pre-pandemic form.

The big question going forward, for climate and for the economy, is whether VMT per capita will increase in the years ahead. Increased driving makes attaining our climate goals harder, and also increases the financial burden on households. Huxley-Reicher helpfully looks back at previous forecasts of future VMT growth made by the US departments of energy and transportation. There’s a consistent “hockey stick” quality to these forecasts. Even though driving has been flattening out in recent years, the forecasts always predict a significant acceleration of driving, which never seems to happen. The black line showing “actual” VMT per capita is almost invariably lower than the low end of the federal forecasts. It’s indicative of the underlying bias in much of this modeling, and also fails to explicitly recognize that policy can, and given our climate crisis, should be making it possible for Americans to drive less—something we got a small taste of during the past two years.

Jerusalem Demsas on gentrification housing.  (Really, a “must watch.”) There’s a fair amount of folk wisdom when it comes to housing markets, notably a tendency to deny some of the fundamental precepts of market economics. For example, there’s a widespread and oft-repeated claim that the construction of new market rate housing in a neighborhood drives up prices for surrounding houses.  It’s common to single out the nearly ubiquitous “five over one” apartment buildings that are going up in cities around the country has harbingers of gentrificaiton and dispalcement.  This video challenges this view. i

Understandably, it is the kind of inference people can draw when they see new housing going up in “hot” neighborhoods. But this casual inference gets cause and effect backwards—it’s rising demand, signalled by rising prices, that prompts the new construction, not the other way round. And moreover, choking off the supply of new housing only further constraints supply and tends to push prices higher. Demsas offers some simple illustrations of how this works that despite their simplicity are grounded in some of the latest and most thorough academic research on the subject.

New Knowledge

Neighborhood effects:  What we know.   For decades, scholars have been studying how where you live influences your lifetime opportunities.  You’ve heard the aphorism that “zip codes are destiny,” and there are plainly patterns of poverty and prosperity, opportunity and struggle across the landscape of the nation, and within cities, among different neighborhoods.  What’s been difficult is separating out the effects that are due to sorting (successful people moving to prosperous places, and impoverished ones moving to, or trapped in places of concentrated poverty), from the causal effects of place.

Famously, the decision to undertake a kind of social science experiment triggered by the relocation of tenants from Chicago housing projects in the wake of a lawsuit challenging racial discrimination unleashed of flood of data and scholarship on the subject.  Two of the leading authors in the field, Lawrence Katz and Erik Chyn have written a summary of this evolving field for the Journal of Economic Literature.  It’s a great way to get familiar with what’s been learned about neighborhood effects in the past few decades.

There’s more here than can be summarized neatly, but one of the key findings has to do with differing results for children and adults.  It turns out that the kind of neighborhood you grow up in has profound and lifelong effects.  Kids who move to more opportunity rich locations, especially those who do so at an early age, tend to significantly outperform their otherwise similar peers to remain in disadvantaged neighborhoods, on a range of social and economic indicators.  But the older the child at the time they move to a stronger neighborhood, the smaller the effect.  And for adults, the literature shows that moving to an opportunity-rich neighborhood seldom has a statistically significant impact on key economic outcomes.  The perspectives and networks we establish in our formative, earlier years seem to have a lasting effect.  As the author’s conclude:

The Moving to Opportunity experiment generated beneficial impacts on long-run economic outcomes of moves to higher-opportunity areas only for younger children who received a larger “dosage” of childhood exposure to improved neighborhood environments relative to their older counterparts. Disruption costs of moves across different types of neighborhoods could potentially outweigh the small exposure gains for older children

This body of research is central to our thinking about poverty–especially understanding the devastating effects of neighborhoods of concentrated poverty–and related problems, like discrimination.  There’s much more here, and whether you’re looking for an introduction to the scholarship on the subject or a refresher and update, this is an indispensable article.

Erik Chyn and Lawrence Katz, “Neighborhoods Matter: Assessing the Evidence for Place Effects,” Journal of Economic Perspectives, Volume 35, Number 4, Fall 2021, pages 197–222