Market Urbanism http://www.marketurbanism.com Liberalizing cities | From the bottom up Fri, 14 Sep 2018 21:52:09 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.8 https://i2.wp.com/www.marketurbanism.com/wp-content/uploads/2017/05/cropped-Market-Urbanism-icon.png?fit=32%2C32 Market Urbanism http://www.marketurbanism.com 32 32 3505127 The Foreign Buyers Are Taking Over (Not!) http://www.marketurbanism.com/2018/09/14/the-foreign-buyers-are-taking-over-not/ http://www.marketurbanism.com/2018/09/14/the-foreign-buyers-are-taking-over-not/#respond Fri, 14 Sep 2018 21:52:09 +0000 http://marketurbanism.com/?p=10313 A headline in the Boston Globe screams: “Boston’s new luxury towers appear to house few local residents.”   The headline is based on a report by the leftist Institute for Policy Studies, which claims that in twelve Boston condo buildings, “64 percent do not claim a residential exemption, a clear indication that the condo owners are […]

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A headline in the Boston Globe screams: “Boston’s new luxury towers appear to house few local residents.”   The headline is based on a report by the leftist Institute for Policy Studies, which claims that in twelve Boston condo buildings, “64 percent do not claim a residential exemption, a clear indication that the condo owners are not using their units as their primary residence.”*

The report accordingly concludes that these buildings do not “address Boston’s acute affordable housing crisis.” This seems to be another version of the common “foreign buyers” argument: that new housing does not hold down rents, because it will all be bought up by rich foreigners who will let the units sit unoccupied forever. Although the report does not explicitly endorse restrictive zoning, it does urge the city to require new residential buildings to be carbon-neutral- a rule that might make residential construction more difficult.

But this inference would be wrong.  If you own a condominium, you have three choices: (1) to live in it; (2) to sit on it and lose money on your mortgage; or (3) to rent it out.   Obviously, you make the most money through choice (3)- renting out the condo.  So even a condo owner who does not choose option (1) has a strong incentive to adopt choice (3).   Thus, it seems likely that at least some, if not all, of the condos will be rented out, thus increasing rather than decreasing regional housing supply, which in turn will have a positive effect on housing prices.

 

*The residential exemption saves Boston homeowners up to $2500 per year on their tax bill.  I would think that at least some owner-occupants are unaware of or forget to file for this exemption- but since I have no idea how common this is, I am reluctant to argue that this possibility alone makes the IPS report defective.  A Bostonian might want to chip in here.

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New Video: How Zoning Laws Are Holding Back America’s Cities http://www.marketurbanism.com/2018/09/13/new-video-how-zoning-laws-are-holding-back-americas-cities/ http://www.marketurbanism.com/2018/09/13/new-video-how-zoning-laws-are-holding-back-americas-cities/#respond Thu, 13 Sep 2018 14:10:04 +0000 http://marketurbanism.com/?p=10303 It’s an understatement to say that zoning is a dry subject. But in a new video for the Institute for Humane Studies, Josh Oldham and Professor Sanford Ikeda (a regular contributor to this blog) manage to breath new life into this subject, accessibly explaining how zoning has transformed America’s cities. From housing affordability to mobility […]

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It’s an understatement to say that zoning is a dry subject. But in a new video for the Institute for Humane Studies, Josh Oldham and Professor Sanford Ikeda (a regular contributor to this blog) manage to breath new life into this subject, accessibly explaining how zoning has transformed America’s cities. From housing affordability to mobility to economic and racial segregation to the Jacobs-Moses battle, they hit all the key notes in this succinct new video. If you need a go-to explainer video for the curious new urbanists, this is the one. Enjoy!

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Light and Air, Sound and Fury; or, Was the Equitable Life Building Panic Only About Shadows? http://www.marketurbanism.com/2018/09/06/nyc-zoning-1916-equitable-life-building/ http://www.marketurbanism.com/2018/09/06/nyc-zoning-1916-equitable-life-building/#respond Thu, 06 Sep 2018 14:00:06 +0000 http://marketurbanism.com/?p=10289 When I first became interested in urban planning, I believed a piece of professional mythology that went like this: “For all its faults, Euclidean zoning was a well-meaning effort to expand nuisance regulation in the face of the urban industrialization. It was later practitioners who used zoning for selfish and exclusionary purposes.”  While not totally […]

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Equitable Life Building from the street. It's imposing!

When I first became interested in urban planning, I believed a piece of professional mythology that went like this: “For all its faults, Euclidean zoning was a well-meaning effort to expand nuisance regulation in the face of the urban industrialization. It was later practitioners who used zoning for selfish and exclusionary purposes.”  While not totally without basis, I now think this view is wrong. Today I would like to show how the iconic example of a nuisance that supposedly motivated Euclidean zoning—the Equitable Life Building in New York City—was in large part controversial because it threatened the interests of existing landlords.

The Equitable Life Building at 120 Broadway was completed in 1915. A vanity project of an industrialist—Thomas Coleman duPont—as so many skyscrapers were and are, the projected stood 42-stories high across an entire block without setbacks, adding a startling one and a quarter million square feet of rentable office space to Lower Manhattan. Needless to say, some New Yorkers weren’t happy. But why?

The conventional wisdom holds that the Equitable Life Building caused such a stir because it literally cast a shadow over the rest of the neighborhood. Indeed, the building cast a shadow stretching nearly a fifth of a mile across Broadway. But it wasn’t just the shadows that made the Equitable Life Building so uniquely audacious—after all, it wasn’t the tallest building in the neighborhood (this honor would go to the Woolworth Building, completed four years earlier 1912) and it wasn’t the first skyscraper to take up an entire city block without setbacks (by this point, the Flatiron Building was already an icon of the city). Rather, what made the project especially upsetting, on top of standard concerns about light and air, was that it was adding so much floor space at a time when the Lower Manhattan office market was likely already seriously oversupplied.

As explained by Seymour I. Toll in the fantastic Zoned American, Louis J. Horowitz, the chief contractor on the project, reported that the most vigorous opposition to the Equitable Life Building came from affluent landlords of office properties in Lower Manhattan. These landlords even convened a neighborhood committee (stop me if you’ve heard this one already) to urge duPont to do the public-spirited thing: ‘Turn it into a park!’ Horowitz, acting on his boss’ behalf, replied that he loved the idea, and that these landlords could and should do the public-spirited thing and purchase the property from duPont at full market value and dedicate a new park. Needless to say, the landlords balked—then as now, the naysayers preferred to have their way free of charge—and the development went forward.

In retrospect, the neighboring landlords were right to be worried. Assessed valuations for all of the surrounding properties fell in the immediate aftermath of the Equitable Life Building’s completion, owing to a loss of rents. This was undoubtedly due to some degree to a loss of light and air, but also in large part due to an oversupply of office space, as the landlords themselves argued in their case to Horowitz. The Lower Manhattan landlords understood, as landlords today understand, that more supply in an environment of steady demand meant lower returns. They understood, as homeowners and landlords today understand, that blocking new development is key to protecting the value of their real estate.

In this way, the iconic example of zoning-as-nuisance-regulation is in fact partly a story about self-interested landlords trying to protect the value of their investments. Examples to this effect abound in the history of Euclidean zoning: as Richard Rothstein notes in The Color of Law, arguments in favor racial and economic segregation were always a mix of ideology and self-interest—keeping out those people will protect the value of your home. In city after city, zoning was pitched as a way to preserve property values. And as the Federal Housing Administration marched across the country as a kind of dark Johnny Appleseed for Euclidean zoning, demanding use segregation, single-family zoning, and low densities in exchange for subsidized mortgages, the agency always defended its demands as an attempt to protect property values.

The circus of today’s Bay Area homeowners protecting their financial interests by blocking new housing is hardly a new phenomenon. On the contrary, it’s the sinister impulse that lies at the heart of Euclidean zoning, with the nuisance regulation story more often than not acting as convenient cover.

P.S. A perverse irony here, as Charlie Gardner and Recivilization note, is that there’s really no good evidence that zoning preserves property values in actively declining neighborhoods, and almost certainly serves to suppress land values.

 

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California Legislation Threatens to Become Law and Build More Housing http://www.marketurbanism.com/2018/09/05/california-legislation-threatens-to-become-law-and-build-more-housing/ http://www.marketurbanism.com/2018/09/05/california-legislation-threatens-to-become-law-and-build-more-housing/#respond Wed, 05 Sep 2018 11:34:34 +0000 http://marketurbanism.com/?p=10284 On August 23rd, a California assembly bill aimed at increasing transit-oriented development, like housing, was passed by the state senate, confirmed by the assembly, and headed to Governor Jerry Brown’s desk for signing. The bill, AB 2923, specifically targets the San Francisco Bay Area—making it easier than ever for the Bay Area Rapid Transit (BART) […]

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BART train at the platform

On August 23rd, a California assembly bill aimed at increasing transit-oriented development, like housing, was passed by the state senate, confirmed by the assembly, and headed to Governor Jerry Brown’s desk for signing. The bill, AB 2923, specifically targets the San Francisco Bay Area—making it easier than ever for the Bay Area Rapid Transit (BART) to build housing on the land it owns around its transit stations.

Previously, housing developments on BART-owned land were still subject to local zoning rules, pushing projects through local processes to be approved before building began. This local control led to many delays, and, as a result, housing denials in the midst of an ongoing housing shortage—on that repeatedly spurs news headlines decrying four-plus hour super commutes, median home prices over $1 million, and neighborhoods blocking affordable housing. State bills like AB 2923 are a response to these reports, as well as the local control that led to them. If passed, AB 2923 and other bills like it, will bypass local control’s draconian rules to allow more housing to be built and ease the housing shortage.

Under current law, land owned by BART is often subject to discretionary review in Bay Area cities. This forces BART to become de facto experts in every municipality zoning code, an impossible task that would take away from their focus on improving their transit system. Even attempting to master the zoning codes of every municipality takes time. Ultimately, this causes delays in building housing that’s so sorely needed. But this could easily be avoided if BART could establish their own zoning rules under AB 2923. Housing and transit is intrinsically linked and, just like suburban home developers build the roads to best suit their development, urban transit authorities like BART must utilize their capacity to build the homes best suited for their transit lines.

For instance, in housing-friendly Oakland, a transit-oriented development has taken over a decade to begin its final phase—a 402-home tower nestled in an affordable housing building, along with a five-story parking garage. The MacArthur Transit Village gained approval in July 2008, over two years after a community meeting first discussed the project. By then, the recession hit and financing disappeared. It wasn’t until 2011 that the first phase of construction began. Two more years were required after that for the current 90 affordable homes to be completed. The final phase required a work-around for a neighborhood zoning mandate that capped building heights at 90 feet. Ultimately, it was only through developer concessions, neighborhood action in support of the project, and the lack of major appeals that this project is able to exist.

Aside from a delay in building housing, local control in the form of discretionary review is often at odds with the goals of the BART-owned land—and the transit system as a whole. Transit systems are made to provide not only transit but also ease of use in the form of dependable frequent service and convenient location to work, home, and other lifestyle needs. However, BART is best at providing convenience for drivers and their cars. But this aim is incompatible with the overall goal of efficiently transporting people.

Just up the road from Oakland is another BART station parking lot waiting patiently for a housing makeover. The land BART owns around the North Berkeley Station currently houses up to 822 cars. But, according to BART’s website, there are no current plans to develop this land into much-needed housing for people. It takes a law like AB 2923 to give BART power to develop their own enthusiasm and means of housing planning.

As it stands now, BART is at the mercy of a city council that’s woefully unkind to development.  For instance, the council decided to forego over $10 million for their affordable housing trust fund after two city council members filed an appeal against a project approval— one that ultimately ended in the developer soliciting offers in lieu of actually building. But all of that could change soon. AB 2923 could finally transform a high-ridership transit station from housing for cars to housing for Californians.

For too long, cities in the Bay Area have wrested control from the hands of BART in order to meet subjective needs of citizens who make their homes around these transit stations but balk at access for new people through the building of new housing next to stations. If the Bay Area is to meet its social goal of welcoming immigrants to sanctuary cities, their environmental goal of lowering CO2 emissions, and their political goal of showing that progressivism works, more housing near transit is non-negotiable. Turning BART-owned land from housing for cars or dirt pits into housing for people is one step toward reaching the noble goals professed by Bay Area residents.

Martha Ekdahl is a Young Voices Contributor who writes about urban policy. Follow her on Twitter.

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No, this study does NOT support refusal to build housing http://www.marketurbanism.com/2018/08/26/no-this-study-does-not-support-refusal-to-build-housing/ http://www.marketurbanism.com/2018/08/26/no-this-study-does-not-support-refusal-to-build-housing/#respond Sun, 26 Aug 2018 04:19:00 +0000 http://marketurbanism.com/?p=10261 A recent headline in the Forbes blog  screams: “Additional Housing Won’t Make City More Affordable, Says Fed Study.”  This blog post cites a Federal Reserve Study showing that adding 5 percent more housing in the most desirable urban neighborhoods would lower rents by only 0.5 percent. But if you read the study more carefully, it doesn’t […]

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A recent headline in the Forbes blog  screams: “Additional Housing Won’t Make City More Affordable, Says Fed Study.”  This blog post cites a Federal Reserve Study showing that adding 5 percent more housing in the most desirable urban neighborhoods would lower rents by only 0.5 percent.

But if you read the study more carefully, it doesn’t stand for what the headline says it stands for.  First of all, it refers only to increasing housing supply in the most expensive neighborhoods.  But housing markets are citywide- so of course if you increase housing supply in just one or two neighborhoods, you are not going to get significant rent reductions.  If you raised housing supply by 5 percent everywhere, presumably you would get more than a 0.5 percent rent reduction.

The study itself states: ” The papers that find large effects of regulation on house prices are not necessarily at odds with our findings in this paper, because regulations can have very large effects on the housing stock. For example, Jackson (2016) finds that an additional regulation reduces residential permits by 4 to 8 percent per year. Glaeser and Ward (2009) estimate even larger effects on supply. These effects on construction can accumulate into very large changes to the housing stock, especially when these regulations are in place for many years, as is often the case.” (p. 5)  In other words, the study admits that supply-limiting regulations do affect housing costs: precisely the opposite of what a careless reader might think from reading the Forbes headline.

Second of all, 5 percent is not exactly a huge increase.  Even the author of the Forbes blog post concedes that more aggressive supply increases might lead to more aggressive rent reductions.

Third, the study assumes a zero vacancy rate (p. 13) which seems to be an assumption that would obviously be untrue in the real world.

Fourth, the study states:  “In areas of the city where rents are
closer to construction costs, housing supply is likely to be more elastic due to more available land and fewer or less binding regulations in such areas ” (p. 7)  In other words, even if housing supply doesn’t affect rents much in the most desirable neighborhoods, it affects housing supply elsewhere.

So the study doesn’t really support supply-and-demand denialism.

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Two cheers for subsidized housing http://www.marketurbanism.com/2018/08/22/two-cheers-for-subsidized-housing/ Wed, 22 Aug 2018 23:33:37 +0000 http://marketurbanism.com/?p=10253 A pure libertarian might argue that in an ideal world, there’d be no need for government-subsidized housing for low- and moderate-income households.  Nevertheless, it seems to me that in the world we actually live in, even people generally opposed to the welfare state should favor more such housing.  This is so for several reasons. First, […]

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A pure libertarian might argue that in an ideal world, there’d be no need for government-subsidized housing for low- and moderate-income households.  Nevertheless, it seems to me that in the world we actually live in, even people generally opposed to the welfare state should favor more such housing.  This is so for several reasons.

First, government raises the cost of housing through a wide variety of regulations- some justified (e.g. building codes necessary for safety), some not-so-justified (e.g. exclusionary zoning).   These regulations, by raising the cost of housing, effectively take money from all households.  And because these restrictions aren’t based on ability to pay, they are especially painful for low-income households.  Public housing and similar programs, rather than being a subsidy to the undeserving poor, are merely compensation for this act of plunder.

Second, even if the United States abolished zoning tomorrow, it might take decades for housing supply to increase enough to bring rents down.  So in the interim, lower-income households would still be suffering from the effects of zoning, and would deserve compensation just as much as they do under the status quo.

Third, even if the United States abolished zoning and similar restrictions tomorrow, public health and safety might support certain restrictions that nevertheless increase the cost of housing- for example, some basic safety protections in building codes.  It seems to me that as a matter of justice, government should not be forcing people into homelessness,  so government should subsidize housing in order to make up for the costs imposed by even the most legitimate regulations.

Finally, even if there were no housing-related regulations at all, the cost of land would create a floor under housing costs, which means some people would be homeless without government support.   So if homelessness creates harmful social externalities of any kind, you might want social policies that prevent such homelessness.

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Turn New York’s Speed Cameras Back On http://www.marketurbanism.com/2018/08/15/turn-new-yorks-speed-cameras-back-on/ Wed, 15 Aug 2018 14:00:46 +0000 http://marketurbanism.com/?p=10231 On June 24 in Brooklyn, a driver in an SUV struck and killed four-year-old Luz Gonzalez, with many onlookers claiming the incident was a hit-and-run. The New York Police Department disagrees, and has refused to prosecute the driver, sparking multiple street protests. Beyond seeking justice for Gonzalez, activists demand that the city expand the use […]

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On June 24 in Brooklyn, a driver in an SUV struck and killed four-year-old Luz Gonzalez, with many onlookers claiming the incident was a hit-and-run. The New York Police Department disagrees, and has refused to prosecute the driver, sparking multiple street protests. Beyond seeking justice for Gonzalez, activists demand that the city expand the use of speed cameras in school zones, which they hope could prevent further tragedy. Yet precisely at the moment that the community is most sensitive to the risk that dangerous driving poses to children, the New York state legislature shut off 140 school zone speed cameras. Given their unambiguous success in improving traffic safety in school zones, legislators should act now to renew and expand the program.

While there is rare consensus among Governor Andrew Cuomo and Mayor Bill de Blasio on the need to preserve and even expand the traffic camera program to 290 cameras, the expansion faces opposition from some members in the Senate. Opposition to the cameras has been lead by Republican State Senator Martin J. Golden—himself a notorious school zone speeder, having received over 10 tickets since 2015 alone—and Democrat State Senator Simcha Felder, who ineffectively used the cameras as a bargaining chip to install police officers in schools.

Since their implementation in 2014 as part of the broader Vision Zero initiative, school zone speed cameras have already substantially improved pedestrian safety in New York’s school zones. According to one study by the New York City Department of Transportation, the number of people killed or seriously injured in crashes in schools zones has fallen by 21 percent to 142 since the cameras came online. This is due in part to the fact that speeding drivers are getting the message: in the first 14 months following implementation of cameras, speeding violations in school zones fell by 66 percent to 35, and have remained far below historical norms since. Among those who get do get tickets, 81 percent slow down after their first and don’t get any more.

Controlling speed is central to improving safety in these zones. An increase from 20 mph to 30 mph increases the risk of pedestrian fatality from five percent to as much as 45 percent. Increase that speed to 40 mph and the death of the stricken pedestrian is a near certainty. In this sense, the existing speed camera policy in New York City may even be too lenient, contrary to the concerns of critics. The current speed limit in all school zones in the city is set to 25 mph, and tickets aren’t administered until a driver is going 11 mph over this limit, a speed at which a stricken child would likely die.

Speed cameras draw on much of what we have learned from the economics of crime. The field began when future Nobel Laureate Gary Becker faced a natural dilemma: Should he park in an illegal spot that’s convenient or a legal spot that’s inconvenient? In that moment, Becker asked himself two further questions: how likely is it that he would be caught, and if caught, how severe would the fine be? In this moment of human laziness, Becker had an epiphany: criminals are rational actors just like anyone else, and they commit crimes when they believe that the benefits outweigh the costs.

This helps to explain why so many people speed. According to a recent study of drivers in Spain, most drivers think there is next to no risk of punishment. While many cities and states respond to speeding epidemics by cranking up the fines, the more effective solution may simply be to ensure that every single speeder will be caught. For this, speed cameras come in handy. This isn’t to say that increasing fines—and heavily publicizing their increase—won’t help to reduce speeding. But this is a much more complicated analysis: if drivers thinks that the risks of getting ticketed or slim to none, fines must hit astronomical highs before they will change their behavior. Worse yet, in the rare event that they are fined, they will receive an onerous bill that can be especially painful for low-income offenders. Speed cameras cut out all this guesswork by consistently and fairly administering a modest fine. This may help to explain the near universal finding that speed cameras reduce speeds and save lives.

Luz Gonzalez isn’t the only child to have been stricken and killed by a speeding driver this year. In the borough of Brooklyn alone, at least nine children have been killed since January. According to one report by the New York City Department of Health, car crashes are now the number one source of deaths resulting from injury for children under 13. Now simply isn’t the time to scale back traffic camera technology that has been proven to inexpensively, fairly, and efficiently save lives. Albany may be inclined to play games with every issue it handles—but legislators have an obligation to get the cameras back on for the millions of children across the Empire State walking home from school.

For future content and discussion, follow me on Twitter at @mnolangray.

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An interesting complementarity in a city: rich & poor http://www.marketurbanism.com/2018/07/31/an-interesting-complementarity-in-a-city-rich-poor/ Tue, 31 Jul 2018 15:55:11 +0000 http://marketurbanism.com/?p=10213 Here’s something I hadn’t thought of in quite this way (but many others probably have): In a living city, space is cheap enough so that people with wacky (often “terrible”) new ideas can test them out, while wealthier people in that city search for wacky new things to try out (because they’ve experienced a lot […]

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Here’s something I hadn’t thought of in quite this way (but many others probably have): In a living city, space is cheap enough so that people with wacky (often “terrible”) new ideas can test them out, while wealthier people in that city search for wacky new things to try out (because they’ve experienced a lot of other things). In “creative” markets, such as for art, the demand side complements the supply side across income groups in an interesting way.

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