Welcome back to Sunday Reading. I’ll start here with Richard Florida’s take on the “Urban Crisis” where economic growth is concentrated into a handful of global cities that have become so unaffordable and inaccessible they have locked out regular people from the economic opportunities of big cities.

Richard Florida, “Confronting the New Urban Crisis“, City Lab.

In this new age of urbanized knowledge capitalism, place and class combine to reinforce and reproduce socioeconomic advantage. Those at the top locate in communities that afford them privileged access to the best schools, the best services, and the best economic opportunities, while the rest get the leftover neighborhoods, which have inferior versions of all of those things and hence offer less of a chance for moving up in life. The well-off, living in a relatively small number of advantaged cities, and an even smaller number of advantaged neighborhoods within them, capture a disproportionate share of the economic gains for themselves and their offspring.

He finishes with a solid list of policy advice that would not look out of place in Auckland.

Ultimately, the urbanism for all that is required to move us forward must take shape around seven key pillars:

  • Reform zoning and building codes, as well as tax policies, to ensure that the clustering force works to the benefit of all.
  • Invest in the infrastructure needed to spur density and clustering and limit costly and inefficient sprawl.
  • Build more affordable rental housing in central locations.
  • Expand the middle class by turning low-wage service jobs into family-supporting work.
  • Tackle concentrated poverty head-on by investing in people and places
  • Engage in a global effort to build stronger, more prosperous cities in rapidly urbanizing parts of the emerging world.
  • Empower communities and enable local leaders to strengthen their own economies and cope with the challenges of the New Urban Crisis.

Matthew Iglesias (Vox) describes the same problem and lands on similar solutions:  “The American economy isn’t actually becoming more concentrated“.

But as Jed Kolko, chief economist at Indeed.com, pointed out last September, the economy isn’t actually becoming more concentrated. Something much more insidious is happening. Economic opportunity is becoming more concentrated, but Americans’ ability to move to take advantage of that opportunity is declining. Consequently, the rising average incomes in big coastal cities are being offset by those cities’ declining share of the population.

Today, instead of heading to the metro areas that offer the highest wages, Americans are generally moving to places like Atlanta, Dallas, and Nashville, where economic opportunities are mediocre at best.

The problem can be fixed by providing housing and transport that supports clustering and density…

America also possesses the technological capacity to build the new rail lines, bus lanes, and congestion pricing systems that would make it possible for more people to commute through a given space.

We have largely chosen, however, not to deploy any of these state-of-the-art housing or transportation technologies, preferring to rely on detached single-family homes and unpriced car commuting. That naturally leads the population to migrate to sprawl-friendly geography despite relatively low pay. But if the situation turned around and we allowed more people to move to the most affluent areas, we would find that even as geographic concentration increased, opportunity and prosperity would be more widespread.

The big technology companies promise to change how we work and live in cities. It’s interesting to see how and where they set up their own shops. Starting from a high point in Sydney where a Google headquarters plan has been stopped due to the lack of public transportation.

Lisa Visentin, “Google pulls out of Bays Precinct, delivering blow to NSW government“, The Sydney Morning Herald.

Tech giant Google has pulled out of plans to base its headquarters at a repurposed White Bay power station in Sydney’s inner west, delivering a major blow to the state government’s aim to convert the area into a technology hub.

The failure to provide public transport upgrades to the Bays Precinct in Rozelle was cited as a reason for Google’s decision to withdraw from negotiations.

Meanwhile, in the Silicon Valley, Apple has created the mother of all traffic problems with a suburban campus that has more more parking than office space. Of course the building is super high tech and energy efficient, totally missing the point.

Alyssa Walker, “Apple’s new campus will have more parking spaces than office space“, Curbed.

A hyper-efficient building and a forest of 9,000 trees is certainly better than what was on the site before. (It used to be an aging Hewlett-Packard building surrounded by a huge surface parking lot.) Still, the company’s promise of “transforming miles of asphalt sprawl into a haven of green space” is really only partially true. Apple’s actually making the city’s sprawl worse, and cleverly distracting everyone from the issue with a giant black-glass donut.

It gets even funnier at Tesla in Palo Alto where there is a parking “supply” problem. Tim Higgins, “Elon Musk Has an Awkward Problem at Tesla: Employee Parking“, Wall Street Journal. In addition to shuttle services and transit passes,Tesla is now encouraging its employees to bike to work- “Tesla Pays Employees To Bike To Work After Slew Of Parking Problems“. In the end the technology that Tesla is working on may solve the problem since driverless cars won’t have to park, or at least park out front. Yay.

Magid said, “Ultimately, Tesla may solve this problem on their own. If they ever come out with self-driving cars, they can drop people off and go park themselves or pick someone else up.”

The idea of driverless vehicles ubiquitously circling on city streets sounds hellish, but here it is also suggested as a way for the struggling retail sector to provide on demand deliveries. Derek Thompson, “What in the World Is Causing the Retail Meltdown of 2017?”, The Atlantic.

Once autonomous vehicles are cheap, safe, and plentiful, retail and logistics companies could buy up millions, seeing that cars can be stores and streets are the ultimate real estate. In fact, self-driving cars could make shopping space nearly obsolete in some areas. CVS could have hundreds of self-driving minivans stocked with merchandise roving the suburbs all day and night, ready to be summoned to somebody’s home by smartphone. A new luxury-watch brand in 2025 might not spring for an Upper East Side storefront, but maybe its autonomous showroom vehicle could circle the neighborhood, waiting to be summoned to the doorstep of a tony apartment building. Autonomous retail will create new conveniences and traffic headaches, require new regulations, and inspire new business strategies that could take even more businesses out of commercial real estate. The future of retail could be even weirder yet.

Maybe one consolation for our awful housing situation is that it could be worse. Here’s a story from Toronto where the “the Great Former British Colonies Housing Bubble” housing has reached an extraordinary level.  Joe Castaldo, “How Canada completely lost its mind over real estate“, Maclean’s.

Canada is a country deeply reliant on real estate. The industry accounts for roughly 12 per cent of its gross domestic product. In British Columbia, real estate and related fields such as construction and finance make up an astounding 40 per cent of GDP. Vancouver is seeing prices rise again after numerous efforts to cool the market. And in Alberta, not even a recession and a nine per cent unemployment rate did much damage to house prices in Calgary and Edmonton. “It’s surprising how well it has held up, given the severity of two years of contraction,” says Todd Hirsch, chief economist at ATB Financial.

But in a country obsessed with real estate, the Toronto market is now the biggest problem—surpassing Vancouver as the epicentre of housing insanity­—and a troubling example of what happens when homes are no longer seen as just places to live, but as a path to riches. Even skeptics who once deployed euphemisms such as “robust” to describe Toronto real estate can no longer ignore the troubling forces at work. Douglas Porter, chief economist at BMO Financial Group, used to be in that camp. Now he says “bubble” is the only way to describe Toronto. “We’re trying to send a message to both policymakers and potential buyers that we are on the verge of getting into a dangerous place,” he says. Equally troubling is that economists don’t see anything on the near horizon that will reverse these trends. The housing market might just get even crazier.

The headline graphic is from “American energy use, in one diagram“, Vox.

That’s all for this week. Please leave your links in the comments below and have a great long weekend.

Share this

16 comments

  1. The Tech Sector in the last couple of decades seem to have no interest in anything but ‘the same but with computers|the internet|big data|sharing economy’. Standing on the shoulders of the creators of the current world, they act as if they have some incredible insight while they burn through fools’ money. They are myopic, lacking perspective of anything but ‘west coast rich white person’ – this is why all the products are about cars, traffic avoidance, delivering things and avoiding having to ‘support’ anyone that didn’t ‘earn’ it like they did (i.e. fair wages, healthcare, annual leave, etc), with a rollout that usual follows ‘SFA -> NY -> maybe USA -> good luck everyone else’

    The points here highlight the issue well, but it’s just as much the media who regurgitate crap without any critical thought – the Apple, Google and Tesla examples listed here being perfect. They claim to be able to solve the world’s problems and caring about the environment (Why else build a 173 star platinum yadda yadda level building) but meanwhile support sprawl, inefficient use of natural resources and energy etc etc. I suppose they all live in the Utopian bubble that technology (ergo them) will ‘iterate’ until they solve the worlds problems. Iteration just creates other new and exciting problems to solve.

    Solar Roofs and Electric cars are not what the world needs right now, it’s much more fundamental than that, but I don’t see that leadership coming from the tech sector. Do you trust someone who doesn’t understand the basics of human behaviour, the links to the environment and the survivability of the species to colonise mars? More like a retreat for rich people when they are done fucking this one over.

    I’m not suggestion that there are not good companies, people and products. The one’s currently being touted as the bringers of the future are just talented iterators that exist to make money, not make the world better. Most people, I suspect know this, but the breathless, uncritical reporting of their ‘feats’ grows tiresome and distracts from the challenges facing us.

  2. “the Great Former British Colonies Housing Bubble” is an interesting phrase – it does seem to be a phenomenon that is having an effect more on NZ, Oz, Canada, etc than in places like Germany, France, Mexico etc. There must be some reason for it, perhaps our monetary system, or particular bent for owning your own property. Any clues?

    1. Several reasons Guy:
      1) NZ, Oz, Canada all have relatively small populations/housing stocks so foreign buyers make up a bigger percentage easily.
      2) All have gone down the neo-liberalism road which doesn’t give a sh*t about the poor or middle class and is all about the wealthy. This translates into wealthy own the housing stock for wealth purposes or sell them to foreigners for top dollar.
      3) varying degrees of control on foreign ownership but pretty lax overall meaning the $2T (Trillion with a T) that has flowed out of Chiba recently has found a safe haven in these countries driving up the cost of housing to severely unaffordable levels for local people. The Chinese don’t care because it’s all about having assets out of reach of the Chinese government and that aren’t in virtually useless Yuan.
      4) in NZ The inability of local business to scale construction so that larger numbers can be built and at a cost effective price. A lot of this goes back to the first term of this National Government who did absolutely nothing to support workers or the building industry during the GFC. This meant that building almost stopped (big part of the shortage now), the tradies mostly left the industry or moved overseas, companies didn’t consolidate and move to more productive methods of construction.
      5) Immigration, all 3 of these countries have Let in a wave of immigration at levels not seen in decades. Of course that’s going to drive up the demand for housing.

  3. Here is another instalment in the saga of Sydney’s massively expensive WestConnex motorway: http://www.smh.com.au/nsw/new-motorways-and-road-upgrades-take-westconnex-bill-beyond-40-billion-council-20170414-gvl1pe.html

    The total cost will be mind-boggling and there will be terrible congestion on local roads. However it is likely to be an effective way to transfer public money into the hands of private toll road operators and trucking companies that travel from the port and airport to Western Sydney.

    WestConnex should be required study for anybody who starts talking about adding missing links in Auckland, or carving motorway-type roads through central Wellington.

  4. This is a bit off topic but I draw the attention of readers to the very informative and thoughtful Radio NZ Insight programme, broadcast this morning (16 April) entitled ” Keeping New Zealand Rail on the Tracks”.
    It is a 28 minute programme and is definitely worth a listen.

    Couldn’t help but come to the conclusion Transport Minister Bridges’ brief response to the current government policy regarding funding rail infrastructure was sub-par and hence one queries his suitability for the job.

    1. I don’t blame Bridges nor Peter R we all know the reason they have to make these half baked comments because they don’t really believe it but saying what they actually believe would put them on a collision course with Joyce.

      1. So are you saying that if Joyce wasn’t in the government you think we would have much different outcomes on PT and infrastructure?

  5. I’ll be generous that the reason the first writer has “zoning” as his first solution to the ills of capitalism is because that’s his background. However, I can’t recall any socialist revolution/takeover where the clarion call was “Death to height-to-boundary” rather than “Seize the commanding heights of the economy!”

  6. If tech companies wanted sites with no parking they would locate in a CBD somewhere. Of course they build parking spaces. The only surprise is that you can find so many writers who thought otherwise.

    1. No, the surprise is they thought that driving only pattern would work just fine… but then these are same people who think that they can change physical geometry with an app, so no surprise really.

    2. Except that there is no space in the San Francisco CBD due to restrictive zoning so they are forced to build in Palo Alto with enormous parking minimums.

  7. Ha. I just shared a link to a related Richard Florida article in the other thread before I saw this thread. Its a really interesting series. “Plutocratization”

Leave a Reply