Tim Harford, “What cities tell us about the economy“, Undercover Economist:
Jacobs is not the only person to argue that economic development may be profitably studied through a magnifying glass. A new research paper from three development economists, William Easterly, Laura Freschi and Steven Pennings, offers “A Long History of a Short Block” — a Shinohata-style tale of the economic development of a single 486ft block of Greene Street, between Houston and Prince Street in downtown Manhattan.
Easterly, a former World Bank researcher, is well known in development circles for his scepticism about how much development can ever be planned, and how much credit political leaders and their expert advisers deserve when things go well.
“Here’s a block where there is no leader; there’s no president or prime minister of this block,” he explained to me. Greene Street, he suggests, offers us a perspective on the more spontaneous, decentralised features of economic development.
The lessons of Greene Street? Getting the basic infrastructure right — streets, water, sanitation, policing — is a good idea. Aggressive planning, knocking down entire blocks in response to temporary weakness, is probably not. Predicting the process of economic development at a local level is a game for suckers. Most importantly, even a tremendous development success — the United States and, within it, New York City — is going to show some deep wrinkles to those who get in close.
Also from New York, here’s urban economist Ed Glaeser’s perspective on how that city could address its housing cost issues: “Build big, Bill“:
Mayor de Blasio’s focus on creating or preserving 200,000 “affordable units” over 10 years, many of which would come at the expense of market-rate units, offers the prospect of two permanently separate cities:
In one New York, the market-rate city, housing will be freely accessible to anyone willing to pay — but many will be priced out as increased affordability requirements raise building costs.
In the “affordable” New York, housing will be dribbled out unenthusiastically by lottery to lower-income renters by developers who have no incentive to treat them with respect but see them only as a cost of selling market-rate units that will be even more expensive to carry the subsidized ones.
The possibility of scoring a prized, below-market unit like the type the city creates through special carveout programs creates intense competition for these units; a flock of my graduate students once left class early to enter into the lottery for subsidized units in Boston’s new Mandarin Oriental.
Giving people a small shot of winning an affordable unit lottery is no substitute for encouraging the creation of a far more abundant supply of ordinary rental apartments. Radically upping that supply would leave far more New Yorkers able to rent something for a reasonable price on the free market, instead of allowing rents to continue to rise for most while a select few win access, via waitlists and lotteries, to a separate class of apartments at below-market rates.
Once upon a time, New York City understood this. In the early 1920s, we were building 100,000 new housing units, accessible to people across the economic spectrum, every year. As a result, the booming city remained affordable to working- and middle-class people like my grandparents.
How was this possible? For one, the city’s regulations back then were relatively modest, focusing primarily on safety and light. Thanks in no small part to that limited red tape, the cost of producing new units was relatively low, and — surprise, surprise — they got built.
— Sarah Burr (@SarahEHBurr) September 7, 2015
In a similar vein, the San Francisco Bay Area Renters Federation asks: “How does adding expensive housing help the little guy?” They’ve put together a quite neat mathematical model to illustrate the dynamics of the market:
A central question of our housing debate is whether building new (expensive) housing protects existing low-cost housing, or destroys it. I have had the great fortune over the last year and a half to discuss this question with hundreds of people. What we all have in common is whatever side we take, we believe the relationship is perfectly obvious.
In an effort to clarify my own thinking, and double check that my mental model didn’t have any hidden internal inconsistencies, Davi Caetano, Phil Nova, Matt Lichti, Avi Flamholz, Jean-Ezra Yeung and I wrote a simulation of a housing market. Our initial conditions were 15,000 people and 10,000 housing units. Our intervention was adding 2,000 more “luxury” units. What we found was that after adding luxury units, displacement decreased at every income level.
But who benefits from the new units? Is it only the higher income displaced people?
Let’s compare just the blue sections before and after the addition of the 2000 high-scoring units.
Displacement decreases in every income category, and completely disappears in the higher income categories. This is part of the result is particularly relevant to the conversation in San Francisco over whether to subsidize middle income housing, and whether to build “luxury” housing with abandon.
Renters who have very low and intermittent, or zero income – the elderly, people on disability, the temporarily unemployed – will need subsidies in order to afford to live in SF, or anywhere. That is uncontroversial. What’s phenomenal about the past few years in San Francisco is how many middle and higher income people are finding themselves displaced. Famous example: Kelly Dwyer. Dwyer works for the City of SF, and her husband is a firefighter. Nonetheless, they find they cannot afford the type of housing they want in San Francisco. Ironically, throughout her political career Dwyer has been an opponent of the rapid and substantial increases in residential housing capacity that would have enabled her to stay in SF.
Since we’re now in San Francisco, it’s worth reading Scott Weiner’s argument that “San Francisco should always have a subway under construction” in Medium. Weiner is a member of the SF Board of Supervisors, so his view carries some weight. Incidentally, while San Francisco is at the centre of an urban region of over 5 million people, the city itself has less than a million people. And it’s growing less rapidly than Auckland.
San Francisco is experiencing unprecedented growth. The city has 200,000 more people than in the early 1980s and 100,000 more than in the early 2000s. We are growing by about 10,000 people a year and are projected to add another 150,000 residents by 2040. We see the results of this growth on our streets every day, with more and more auto congestion and a harder time for our extensive bus network navigating the streets and meeting schedules. Indeed, Muni buses travel at the slowest average speed of any urban bus system in the country, at just over eight miles per hour on average.
We are working hard to make our surface transit system run more efficiently — reducing the number of cars on the road, increasing the number of buses and light rail vehicles, creating transit-only lanes and bus rapid transit lines. Yet, as important as this work is for our city, it isn’t enough. We need to move more transit underground, meaning we need more subways.
Subway construction is a critical part of the future of dense urban centers all over our country. New York, which is already served by an extensive subway system, is building the Second Avenue Subway to serve the east side of Manhattan. Los Angeles is expanding the Purple Line Subway, which will extend the city’s growing metro system from Downtown all the way to Westwood. Internationally, we have seen aggressive investments in subway systems pay off in places like Santiago, Chile, which has the second largest network in Latin America, after Mexico City…
If you read on, Weiner’s got some good ideas about institutional and funding changes needed to keep transport investment going.
Over at Washington Post’s Wonkblog, Emily Badger and Christopher Ingraham take a look at the most popular housing typologies in big US cities. A few interesting things pop out to me. Philadelphia and Baltimore are rowhouse cities (or terraced houses as they’re called in the UK and NZ) – pretty anomalous in the US situation. Los Angeles and Seattle have got a surprisingly large amount of large apartment blocks, but few rowhouses or small apartment blocks. And even some cities we think of as pretty sprawled out and subdivided – Atlanta, Houston, Denver – have a decent mix of apartments:
However, all households aren’t created equal. A reader pointed me towards this disturbing article on rental tenancies in Auckland. (I rent, but I’m lucky enough to have a good landlady and a dry apartment. You shouldn’t have to be lucky to have a decent place to live!) Jess McAllen, “Rental nightmare: Are our tenants second-class citizens?” Stuff:
Damp spongy floors, peeling wallpaper and the smell of “mud” and “pond water” are recognisable descriptors to anyone who has lived with mould – which, it turns out, seems to be most Auckland renters.
Andrew King from the Property Investors Federation, whose group represents about 6000 landlords owning 22,000 properties, says that some of the power to stop it is in their hands. He says tenants often do things that encourage mould, such as not heating homes and drying clothes on clothes racks.
“A lot of tenants actually keep their curtains closed during the day. Both parties need to take responsibility for mould.”
Similarly, Housing Minister Nick Smith is proposing a $1.5 million education programme as part of his Minimum Standards bill to educate tenants and landlords about mould.
“The Green Party says mould is solely the responsibility of landlords,” says Smith in response to their alternative draft amendment to the Residential Tenancies Act of 1986. “But professional advice I have received is that mould largely depends on the way tenants are ventilating their homes.”
But the renters Sunday Star-Times interviewed, at least, have gone above and beyond their duties in ventilation – often spending lots of money on dehumidifiers and heat pumps – and find Smith’s comment patronising.
The dire conditions are making them sick, they say. In the case of one 20-year-old, mould destroyed the possessions of her dead mother.
Over on the other end of town, housing is a challenge for different reasons. In his NZ Herald column, Bernard Hickey reminds us that location is an important, if costly, “status good” for families: “The lure of the ‘Double Grammar zone’“:
Is there any more powerful phrase in the minds and spreadsheets of Auckland’s real estate chatterati than “double Grammar zone”?
Just the thought of those three words plastered across a real estate billboard is enough to make any red-blooded agent salivate. It’s also enough to make any property developer in the zones see stars and dollar signs. That’s why as many as 1800 apartments are expected to be built in the Auckland Grammar zone over the next three years.
But those three words and the thought of all those apartments is also enough to make the principals of Epsom Girls Grammar School and Auckland Grammar School go green at the gills.
Hickey looks at a number of ways that the desirable schools could accommodate growth. His last option seems quite elegant – in fact, Act actually proposed something similar back in 2003. Perhaps it’s time for the local MP to stand up for his alleged libertarian principles:
The final option is to simply turn the schools private. There is certainly plenty of demand for such assets. Private equity group Pacific Equity Partners is reported to be in talks to buy Academic Colleges Group, which includes schools in Auckland, for $500 million.
Perhaps the free market Act party could get behind such a public asset sale? That would be a double-riot option with a sideshow lynching of the local MP.
All the options are ugly, but are the inevitable result of creating a resource with public money that is highly desirable and virtually free to all those able to buy into the zones.
On a completely different note, here’s a fantastic TED talk by Swedish transportation researcher Jonas Eliasson. He’s looking at the success of Stockholm’s congestion pricing scheme:
Eliasson draws a good analogy between road networks and other complex social systems:
Planning a complex social system is a very hard thing to do, and let me tell you a story. Back in 1989, when the Berlin Wall fell, an urban planner in London got a phone call from a colleague in Moscow saying, basically, “Hi, this is Vladimir. I’d like to know, who’s in charge of London’s bread supply?”
And the urban planner in London goes, “What do you mean, who’s in charge of London’s — I mean, no one is in charge.” “Oh, but surely someone must be in charge. I mean, it’s a very complicated system. Someone must control all of this.”
“No. No. No one is in charge. I mean, it basically — I haven’t really thought of it. It basically organizes itself.”
It organizes itself. That’s an example of a complex social system which has the ability of self-organizing, and this is a very deep insight. When you try to solve really complex social problems, the right thing to do is most of the time to create the incentives. You don’t plan the details, and people will figure out what to do, how to adapt to this new framework.
According to Eliasson, even rather small congestion charges can induce a big change in behaviour and hence congestion. Incidentally, the fact that a 1-2 euro charge got 20% of traffic off the road during rush hours means that those rush hour trips weren’t very valuable to the people taking them – an insight that transport agencies should take into account when planning to expand peak road capacity at a high cost:
Stockholm is a medium-sized city, roughly two million people, but Stockholm also has lots of water and lots of water means lots of bridges — narrow bridges, old bridges — which means lots of road congestion. And these red dots show the most congested parts, which are the bridges that lead into the inner city. And then someone came up with the idea that, apart from good public transport, apart from spending money on roads, let’s try to charge drivers one or two euros at these bottlenecks.
Now, one or two euros, that isn’t really a lot of money, I mean compared to parking charges and running costs, etc., so you would probably expect that car drivers wouldn’t really react to this fairly small charge. You would be wrong. One or two euros was enough to make 20 percent of cars disappear from rush hours. Now, 20 percent, well, that’s a fairly huge figure, you might think, but you’ve still got 80 percent left of the problem, right? Because you still have 80 percent of the traffic. Now, that’s also wrong, because traffic happens to be a nonlinear phenomenon, meaning that once you reach above a certain capacity threshold then congestion starts to increase really, really rapidly. But fortunately, it also works the other way around. If you can reduce traffic even somewhat, then congestion will go down much faster than you might think.