What City Observatory did this week
Fix it Last. The Oregon Department of Transportation claims that it has a “Fix-it” first policy–prioritizing spending funds to preserve existing roads and bridges. But their actual budget priorities make it clear that they routinely short change maintenance and repair in favor of costly and ineffective road expansion projects. While ODOT routinely blames the Legislature for this problem, it is actually a combination of ODOT systematically understating the costs of major capital projects, and then administratively reallocating funds that could be used for repairs to fund expanded highway
ODOT’s own federally required “Transportation Asset Management Plan” shows that the state is spending $320 million less per year than is needed to maintain the state’s roads and bridges at the current state of repair. And ODOT has cut funding for maintenance in its current budget, while at the same time proposing to spending billions on Portland area freeway widening projects that will plunge the state deeply into debt. ODOT continues to violate its own stated policies, and then tries to use the maintenance deficit it created (and ignored) to build a case that it be given even more money.
The Climate bill: All EVs and no urbanism. The big news out of Washington this week is that Democrats have reached a compromise with West Virginia Senator Joe Manchin about the outline of a pro-climate spending bill. It heavily focuses on subsidies to manufacturing electric vehicles. The Urban Institute’s Yonah Freemark has a quick take on the policy direction, fretting that the draft legislation would do nothing to:
—Encourage mode shift out of cars (it provides $0 for e-bikes & nothing for transit electrification);
—Encourage more environmentally sensitive land uses; and
—Reduce the resource intensity of the transport sector.
. . . one of the primary impacts of this bill is simply reaffirming the automobile dependency of the US, giving people huge incentives to invest in cars—and doing almost nothing for an alternative system.
Wealth determines homeownership in California. Our conventional way of describing housing affordability is to compare home prices to incomes, and by any measure, housing has become less affordable, especially in California. But Metrosight Economist Issi Romem points out that it’s now wealth, not income, that determines home ownership. California has the lowest homeownership of any state, and somewhat paradoxically has a higher fraction of homes that are owned free-and-clear (i.e. with no outstanding mortgage). It’s because the California housing market (and state law, in the form of Proposition 13) have enshrined accumulated wealth. Few young adults can afford homes without financial assistance from previous generations (something that skews homeownership to whiter, wealthier, long-time residents). As Romem explains:
The growth in free-and-clear ownership can be seen across all regions of the state. The trend extends to even the youngest households, with residents 24 and younger. In addition to reflecting the increasing concentration of the nation’s wealthy in California, this growth might be the result of more young adults living with their parents – or more young adults living in homes their parents bought them.
Such inherited or gifted houses lock in wealth for future generations, and in some cases keep a property itself in the family for generations. That’s particularly common in California owing to property tax laws – Prop. 13 and its extensions – and the practice keeps a sizable share of homes off the market interminably.
As Romem notes, neither rising incomes nor reduced down-payment requirements are effective in counteracting this dynamic. In California, supply restrictions, coupled with generous subsidies to long-time owner occupants have combined to make housing wealth a root to riches, but only for those with the wealth or family connections.
Oregon largely eliminates parking requirements. Coming on the heels of statewide legislation legalizing four-plex housing in most of the state’s single family residential areas, Oregon has adopted new rules eliminating or greatly reducing parking requirements in cities. Sightline’s Michael Andersen describes new rules adopted by the Land Conservation and Development Commission that give cities three options for phasing out or reducing parking requirements. As Anderson explains:
In some situations—within a half-mile of relatively frequent transit, for homes of 750 square feet or less, and for homes meeting affordability targets—minimum parking mandates will no longer apply for jurisdictions within Oregon’s eight largest metro areas. This doesn’t prevent parking lots from being built, but it does remove the current prevailing requirements to construct a specific number of stalls: one stall per bedroom, for example, or three per 1,000 square feet of retail space.
As Don Shoup observed years ago in his magisterial book, The High Cost of Free Parking, parking requirements essentially trump zoning for high density housing: Even when zoning codes technically allow apartments, the requirement to provide “free” off-street parking for each dwelling makes higher density construction uneconomical. When these units aren’t built, housing supply is constrained, and rents are pushed up higher. Oregon’s move is an essential part of a a comprehensive strategy to improve housing affordability. Other states should take notice.
The Covid Pandemic and the Donut Effect. The shift to work from home during the Covid-19 pandemic has triggered some noticeable changes in urban housing and labor markets. This study charts how increased work from home has affected population, rents and home prices between cities and suburbs in the first year following the pandemic.
The authors find that in the nation’s largest cities, increased work from home has triggered a relative decline in demand for central locations relative to suburban ones.
Rental rates in the central business districts (CBDs) of the largest 12 US metros have fallen almost 20 percentage points relative to the change in the bottom 50% of zip codes by population density.3 Similarly, home price growth in CBDs have realized losses of around 15 percentage points compared to changes in such lowdensity zip codes. Migration patterns as measured by the USPS show a similar pattern of reallocation. CBDs of the top 12 US cities have seen net population and business outflows cumulating to about 15% of their pre-pandemic levels. In contrast, the bottom 50% of zip codes by density have gained about 2% of their pre-pandemic stock for population and businesses.
This study provides a useful baseline of how the short-term effect of work from home. The authors point out that their findings don’t necessarily apply to all metro’s just the 12 largest. They also show that the migration effect is largely within metropolitan areas, rather than across them: to the extent people are moving as a result of increased work from home it seems to be primarily about people moving from the city center to the suburbs of that metropolitan area.
Nicholas Bloom Arjun Ramani, The donut effect of Covid-19 on cities, Centre for Ecoomic Performance, Working Paper, No.1793 September 2021, https://cep.lse.ac.uk/pubs/download/dp1793.pdf