Market Urbanism https://www.marketurbanism.com Liberalizing cities | From the bottom up Thu, 21 Nov 2024 17:59:11 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.1 https://i2.wp.com/www.marketurbanism.com/wp-content/uploads/2017/05/cropped-Market-Urbanism-icon.png?fit=32%2C32&ssl=1 Market Urbanism https://www.marketurbanism.com 32 32 3505127 Arlington Missing Middle lawsuit decision https://www.marketurbanism.com/2024/11/18/arlington-missing-middle-lawsuit-decision/ https://www.marketurbanism.com/2024/11/18/arlington-missing-middle-lawsuit-decision/#respond Mon, 18 Nov 2024 14:20:45 +0000 http://marketurbanism.com/?p=86815 Thanks to local journalist Margaret Barthel for finding and posting the elusive judicial decision that has struck down Arlington, Virginia's, missing middle ordinance, pending appeal.

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Thanks to local journalist Margaret Barthel for finding and posting the elusive judicial decision that has struck down Arlington, Virginia’s, missing middle ordinance, pending appeal. Retired judge David Schell, who will also hear a similar case against Alexandria, read the decision from the bench.

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Agenda: Dynamic congestion pricing for autonomous vehicles https://www.marketurbanism.com/2024/11/15/agenda-dynamic-congestion-pricing-for-autonomous-vehicles/ https://www.marketurbanism.com/2024/11/15/agenda-dynamic-congestion-pricing-for-autonomous-vehicles/#respond Fri, 15 Nov 2024 19:13:31 +0000 http://marketurbanism.com/?p=86810 Autonomous vehicles will cause a congestion apocalypse on downtown streets unless we price their use of the roads.

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Autonomous vehicles work. They are already replacing full-time service drivers in Uber, Lyft, and taxis.

Delivery vehicles might come soon. Corporate fleet vehicles. And the big jump, of course, will be when they’re available as private vehicles. It’s possible that the costs are high enough that won’t happen, or won’t happen for several decades. Let’s assume it does. What comes next?

Preferences

  1. Autonomous vehicles will vastly lower the opportunity cost of time spent driving.
    • Once the transition to an all or almost-all AV automobile fleet is complete, we will be able to redesign cars to be much more comfortable. In the ideal case, they’ll be like 1st class airplane berths or better. Being “stuck in traffic” will just mean “I’m in my mobile office” or “I’m binge-watching the 2040s Lord of the Rings remakes.”
    • Imagine having a self-driving Winnebago – for the cost of electricity, we’ll be able to take vacations anywhere on the continent without stopping work. Imagine how I’m going to spend my summers when I can shift from Quebec to Minneapolis to Moab to San Diego every day or two!!!
  2. Highways will be OK to great, because AVs will cut down on vehicle spacing at high speeds.
  3. Downtown streets will be a disaster. There isn’t much vehicle spacing to reduce. And AVs will be more conservative about “creative”
  4. But some people (and goods) will still have places to be. If they’re stuck in traffic with all the mobile-office-workers, mobile-movie-enjoyers, and mobile nappers, they’re going to incur just as much cost as people do today when they’re late.
  5. This is a recipe for extremely high congestion welfare costs. In cities, for sure. But also in desirable areas during peak seasons. Imagine the roads into the Rockies in summer if Denver office workers can get their work done while driving to their evening picnic spot
    • In case you’re tempted to think I’m exaggerating, remember that all our experience with congestion comes from people whose eyes, hands, and feet must remain attuned to the traffic, and whose vehicles are designed to keep them in safe seats.
    • AVs will enable higher highway capacity, where following distance is a major constraint. But the gains at intersections will be much smaller, and AVs will be programmed to be more cautious than human drivers on streets with pedestrians, etc. At least some places, likely including most downtown streets, will be much more congested.

Policy

  1. Obviously, the solution to this problem is road pricing, which can be quite sophisticated with AV. The traditional privacy concerns about segment-specific tolling are in the rearview mirror (there’s a metaphor with a terminal diagnosis) at the point that AV tech is in control.
  2. The default attitude toward regulation has been to treat parked cars with more skepticism than moving cars. That made sense when a moving car implied a driver paying a substantial opportunity cost to occupy public space. Solve for the equilibrium if downtown streets are free but downtown parking is market priced.
  3. The transition from driven vehicles to AVs deserves consideration but should be secondary to thinking about post-transition equilibrium.
by Ted McGrath (CC)

Politics

  1. Even when pricing has large, obvious benefits, voters resist it. We still can’t toll urban interstates even though 100% of experts think it’s a good idea in at least some cases. NYC’s kinda-sorta congestion pricing highlights how the bad politics of pricing intersect with the difficult technicalities of dynamically pricing traditional cars.
    • Congestion pricing for all cars, now, would be great, but it’s not realistic.
    • And many downtown streets that are OK now will collapse under the increase in driving that AVs will bring.
  2. Voters will resist tolling AVs after they have AVs.
  3. So the time to begin tolling AVs is now, when they have a handful of lobbyists but no grassroots.
  4. The initial price can be small – the key is to institute the architecture and expectation that AVs pay to use congested roads.
Drivers vote

Agenda

This is research that I’m thinking about with my more tech-savvy colleagues. It’s not urgent – mass ownership of AVs would take a decade or more even if they were available for individual ownership tomorrow. But it’s important.

Researchers need to model downtown traffic with AVs. We need to think about the correct scales, in time and geography, for dynamic pricing. And we need to convince policymakers that automated vehicles should pay to use congested roads.

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A Case for Urban Renewal https://www.marketurbanism.com/2024/10/28/a-case-for-urban-renewal/ Mon, 28 Oct 2024 20:53:38 +0000 http://marketurbanism.com/?p=86629 Is it even possible today to write a vigorous argument in favor of the urban renewal policies of the 1950s? I doubt it. Jeanne Lowe's 1967 "Cities in a Race with Time* is a sympathetic account of the urban renewal era in its own terms. How does it hold up?

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Is it even possible today to write a vigorous argument in favor of the urban renewal policies of the 1950s? I doubt it. So I was glad to stumble upon a copy of Jeanne Lowe’s 1967 book, Cities in a Race with Time. Lowe is a sympathetic – but not sycophantic – observer of the urban renewal era, writing just before inner cities curdled into the full-blown “urban crisis” of the 1970s and 80s.



The housing crisis

For 21st century urbanists, the hardest thing to remember about cities in 1950 is how bad the housing stock was. Lowe hardly mentions it because it’s the one thing every reader knew: old housing was awful. One New Haven resident complains about rehabilitation because his cold-water flat costs only $50 a month (equivalent to about $500 in 2024). To find conditions remarkable, she has to go to the worst streets of a Black ghetto:

Mary White, her husband and seven children were shoe-horned into a two-bedroom alley house that had no heat, electricity or hot water. They shared a backyard privy and faucet with neighbors

p. 215 (third printing, a Feb. 1968 hardcover)

Or to Pittsburgh:

Street and office lights used to burn all day when rivers vapors rose and held the region’s soft coal smoke in suspension over the city, casting a midnight gloom of smog throughout the day. Smog would turn office workers’ collars gray by noon; coughing and colds were an unhealthy commonplace in Pittsburgh. Even in the suburbs, housewives had to wash curtains weekly to cleanse them of soot. Airline pilots had a particular dread of landing at the Pittsburgh field with its “ceiling of black ink.”

p. 112

To me, and other 21st century skeptics, she would surely say what she says of Pittsburgh: “One needed to know the city as it had been to fully appreciate the extent of the change.” The steelman (or better, steelcity) case for urban renewal might be that it only looks like the worst villain around because it obliterated greater monsters.

1940s Pittsburgh at midday, University of Pittsburgh Library System

What is urban renewal?

This was urban renewal. The enactment of urban renewal [in 1954] as an expansion of Title I, coming so hard on the heels of the scarcely tried redevelopment program, caused even greater public confusion. Most people used the terms interchangeably, an error…

p. 34

What is urban renewal? It is a bundle of powers and funds that afford cities a uniquely versatile tool for bringing about many different kinds of planned changes and improvements in their blighted areas and for carrying out comprehensive development goals. While it is difficult enough to bring about these changes with renewal, such improvements would generally be impossible without it.

p. 560

Lowe opens her book with a narrow, technical understanding of the phrase “urban renewal”, and closes it with a capacious one. But the several case studies that compose most of the book’s considerable girth focus principally on the replacement of slum housing and the rebuilding of downtowns on modernist lines. Her final case, New Haven, is a single 150-page chapter that communicates the impossible weight of the task. Heroic mayor Richard C. Lee and his lieutenant Ed Logue threw everything at his city’s problems – a downtown highway, code enforcement, extensive residential rehabilitation, school investments, community programming. In Lowe’s judgment, New Haven is the true standout of the era. But she still worries that it’s unsustainable:

Will someone keep New Haven moving when Lee is no longer Mayor? Or will the city ride along on recent improvements until it sinks once more into decay…?

p. 546

Half a century on, Wikipedia has a short article about Mayor Lee. The pitiful section on his legacy notes that the downtown highway he built – the Oak Street Connector – is now named the Richard C. Lee Highway. But highways are a sidenote in Lowe’s narrative – there’s much more about the various approaches to replacing slum housing.

New Haven’s Richard C. Lee Highway (via Howard Gillette)

To eliminate this omnipresent evil

With the newly liberal Congress that was elected in 1936 and the Supreme Court’s broadened definition, in 1937, of the federal responsibility for the public welfare, the way appeared clear and the purpose justified for using federally collected income taxes to help financially disabled cities to eliminate this omnipresent evil.

p. 26

The new Congress responded to the consensus that cities needed “positive powers – especially eminent domain and public funds – to acquire and demolish slum buildings, as was being done in some European countries.” It passed the Housing Act of 1937, which established power and purse for demolishing slums and building public housing.

But this approach was too expensive. So Alvin Hansen and Guy Greer filled in the gap with the idea of “write-down” financing:

  1. With federal funding, a city buys slum dwellings via eminent domain , relocates the residents, and clears the land.
  2. The city offers the land for sale below market rate (the “write-down”)
  3. Developers create new, better, less-dense housing on the site

The willful disregard of economic information inherent in this formula is stunning. Not only were the new buildings economically inferior to the old; they were economically inferior to vacant land at market rates. The urban economy was screaming its need for density, but planners infected with the HowardCorbusier mindset wear deaf to its calls.

A photograph from Cities in a Race with Time

Making Title I Work

Hansen and Greer’s write-down became Title I of the Housing Act of 1949, although urban renewal work did not start in most cities until the Housing Act of 1954 made more funding available. One city – nay, one man – dominates the history of Title I.

[Robert] Moses created in New York the biggest Title I program in the country – one with more results by 1960 than all other cities combined.

p. 48

Moses already had experience with redevelopment; his 1949 Stuyvesant Town was a popular success (although “planners and architectural critics” condemned its high density) on a similar model.

But the greater reason New York got so much done so fast is that Moses rewrote the Hansen-Greer formula, daring Washington to withhold funding. The New York method was more efficient:

  1. A developer tells Robert Moses which piece of land he wants.
  2. Robert Moses buys it using eminent domain and sells it – uncleared and for much less – to the developer (the “write-down”).
  3. The developer milks the slum for a while, relocates the residents (maybe), and builds new, less-dense housing.

In 1957, federal administrator Albert Cole threatened publicly “to cut New York off from all federal housing funds”; Moses called his bluff in days. (p 91).

Lowe’s 50-page chapter on Moses is of unique interest because it predates Robert Caro’s The Power Broker by six years. But her biography and evaluation of the man are largely the same. In light of 2024’s re-appreciation of Moses and present-day concerns with finding people who can Get Things Done, her chapter’s conclusion (headed Men to Run Programs) is prescient:

Can a city today attract the talent needed to meet the demands of the new programs? Mediocrity at the technical-managerial level and lack of effective leadership at the top are major urban problems of today.

p. 109
Robert Moses (New York Times)

Gut the heart

What New Haven intended to do with federal aid under the Housing Act was to virtually gut the heart of its downtown – removing the crazy quilt of “taxpayers,” cobblers’ shops, gin mills and hundred-year-old half-empty lofts and unattractive buildings.

p. 432

Along with Philadelphia and Pittsburgh, Lowe praises New Haven for having the boldness to reimagine its central business district (“A DARING CONCEPT”). But the thirty-page tale is one of debilitatingly slow fits and starts: finances are promised and lost, offers are made and retracted. In the end, even upgrading a slummy center into high-end office and hotel space cannot pencil out:

That New Haven’s downtown redevelopment actually went through seems to be a commentary on Roger Stevens’ unusual character… [If] Stevens had been a conventional developer or an ordinary man, he would surely have walked away from the project long ago (as his close advisors had counseled). Even with redevelopment aid, the project was not a market place transaction and could not be done through conventional financing mechanisms…

Where special financial reserves or guarantees were available, things got built.

p. 463
The Chapel Square Mall, part of New Haven’s urban renewal, was converted to apartments in 2004 (Residence Court)

The more hopeful signs

Among the many virtues of extemporaneous reading is the chance to view the past as future. Lowe could hardly have picked a worse time to offer predictions about the future of cities. Just two months after my volume was printed, Martin Luther King, Jr.’s assassination lit the powder keg that 1960s urbanists had only half-acknowledged.

But for our purposes, her timing is ideal. She tries to see a hopeful future, with urban renewal dogging the heels of the spreading slums and abating their evils with clean, public or affordable housing. But even in 1967, doubts have crept in. She worried about the lack of talent and commitment among mayors and staff. “Urban renewal”, tightly defined in the 1950s, has opened out to encompass almost any urban policy.

There are only inklings, glimmers of the post-1970 urban crisis. She writes about “juvenile delinquency”, not “crime.” Drugs barely appear; firearms not at all. She has no idea that landlords will soon set the match to their own buildings. In the strangest passage of the book, she sees the colors of the new and terrible dawn and praises it as hope:

Many landlords found it cheaper to vacate a building than to continue operating a slum… The boarded-up houses, and the growing vacancy rate in these neighborhoods (almost double [Philadelphia’s] average of 6 per cent for rental housing) were among the more hopeful signs in the blighted inner city. The impressive improvement in housing revealed by the 1960 census could be attributed in part to this “slum cleansing operation.” When the gray areas are cleared, as called for by the comprehensive plan, it is hoped that the costs, both in human and site acquisition terms, would be greatly reduced.

p. 360
The costs, in site acquisition terms, have been greatly reduced (Reddit user Rayrayin2023)

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Master Classes https://www.marketurbanism.com/2024/10/15/master-classes/ Tue, 15 Oct 2024 19:20:03 +0000 http://marketurbanism.com/?p=86521 Check out Alain Bertaud's Master Class lecture at CEPT University in Ahmedabad, India.

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Check out Alain Bertaud’s Master Class lecture at CEPT University in Ahmedabad, India.

You can also see the talk I gave the same day:

Pro: When you speak to architects as a practitioner, they call it a “master class”, which is very flattering.

Cons: Don’t try to follow Alain Bertaud.

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Hot takes and pensées, #UEA2024 https://www.marketurbanism.com/2024/09/25/hot-takes-and-pensees-uea2024/ Wed, 25 Sep 2024 16:15:54 +0000 http://marketurbanism.com/?p=86269 Delete all Seattle's highways. Invent new neighborhoods. Explain macroeconomic trends with home size. Money flows uphill to water. Do NIMBYs really hate density? Urban economics is on a tear.

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The Urban Economics Association conference is always creative and constructive. Here are a few notes I wrote down, with apologies to the vast majority of researchers who presented work there which I didn’t see.


Alice Wang showed the most convincing evidence I’ve read on net costs of urban highways, using Seattle data. Smartphone data reveals that people avoid trips that either cross or use a highway. She estimates that replacing highways with surface roads would increase welfare by a massive 9%. Most of the gain is from improved access to urban destinations. But the suburbs would be a bit worse off. (One weakness: she doesn’t reckon with capacity constraints, so she’s probably missing low on the traffic costs).

Interestingly, burying the highways has basically the same result. That’s because the suburbs’ loss is mostly a function of the redistribution of businesses.

Cities win, suburbs lose if urban freeways are buried or replaced

Railroads and highways have equally large effects in terms of neighborhood fragmentation (Vikram Maheshri & Kenneth Whaley).

Aerial view of six-lane highway through a city.
New Rochelle is divided by both road and rail

Can we integrate these types of barriers into spatial social science? Evan Mast has built a new neighborhood/district geography that usually lines up with highways, rails, and rivers. But the basis for his new geography isn’t trips or maps, it’s moves. I didn’t realize many people move within a neighborhood, but it’s apparently quite common.


Seth Chizeck won the student prize for research showing that free transit vouchers didn’t help outcomes for beneficiaries much.


Urbanites save more of their money than suburbanites with equal incomes and demographic profiles. Daniel Murphy showed that city dwellers spend more on housing and eating out, but so much less on durable goods, maintenance, and utilities that they end up with a higher rate of savings. One possible explanation is that suburbanites own more land, which is a form of savings. But that doesn’t explain why urban renters save more than similar suburban renters.

Murphy’s explanation is home size, which correlates with savings rates across countries…

…and across time:

I will confess I had no idea that U.S. density had grown so much from 2010-2020.


HISDAC-US is an impressive dataset. It provides an estimate of built-up density nationwide at a 250 meter grid from 1810-2015, based on Zillow’s ZTRAX records. The estimates are from work by Stefan Leyk & Johannes Uhl.

The buildup of Boston. Leyk and Uhl, Figure 2

Texas counties that lost more soldiers in the Civil War had more urbanization from 1870-1900. (Phil Hoxie and Beatrice Lee).

Picture

Joshua Coven looks at the entry of institutional investors into Georgia’s housing market. They crowd out small investors, induce more construction, and decrease homeownership. The result is slightly higher prices, slightly lower rents, and more diversity in single-family neighborhoods.

Institutional investors own a few percent of the rental stock in a ring around Atlanta

In Colorado, water impact fees are a significant cost attached to every new home. Benji Edelstein showed how a shift from one-size-fits-all pricing to contextual pricing changed construction patterns. This research (not public yet) is well-timed: the Supreme Court’s Sheetz decision will make it hard to sustain flat pricing models when better data is readily available.


Raheem Chaudhry and Amanda Eng study children who grow up in NYCHA public housing – the largest and among the best-run in America. Children who move into NYCHA projects are more often than not moving from a worse neighborhood. And among children who live in NYCHA, those with more years are better off as adults.

Marcy Houses
Marcy Houses, NYCHA

Hector Blanco and Noémie Sportiche investigate Massachusetts’ “Chapter 40B” housing law, which allows mixed-income developments to bypass local zoning (after a tortuous process). Hector’s presentation interpreted the data in a YIMBY-friendly way: for most houses around most 40B sites, there is no measurable effect on prices or migration.

But you could flip it around: there is a large and significant loss of value for the immediate neighbors (up to 0.1 mile) of large 40B developments. And it makes renters, at least, more likely to move away.


By contrast, Joe Gyourko and Sean McCulloch reported a strong “Distaste for Density” using bordering municipalities (here’s an earlier version). Numerically, the distaste for neighbors’ density might be comparable to what Blanco and Sportiche found. But the authors framed it in the opposite way.


Each real estate listing belongs to one Multiple Listing Service (MLS) or another, sometimes with overlapping territory. When a sharing agreement between the Miami and Beaches MLS’s broke down, homes and buyers matched more slowly and prices fell. (Walter D’Lima presented this multi-author paper).


Rebecca Diamond’s keynote was a reminder that modeling choices matter. She thinks of permit process as a fixed cost that doesn’t vary with project size, an approach which yields predictably meh results.


Gordon Hanson’s keynote dealt with place-based policies. The most salient takeaway is that non-place-based policies, like Social Security and Medicaid, are more targeted to the poorest, neediest regions than the explicitly placed-based policies like tax incentives.


Urban economics is a rapidly growing discipline. Top students who wouldn’t have given it a thought twenty years ago are flooding into the discipline to take advantage of new data, powerful computers, and the gnarly-but-solvable public policy questions that 21st century cities present.

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Book Review: (de)Coding Mumbai https://www.marketurbanism.com/2024/09/19/book-review-decoding-mumbai/ Thu, 19 Sep 2024 16:54:23 +0000 http://marketurbanism.com/?p=86211 In Mumbai, there is a specific type of architect who has become the interpreter of regulations and there are those architects who are aestheticians working on building skins. As much as there is convenience in this split, it has taken away a big part of the agency of the architects in the city.

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On a recent visit to CEPT University, I received the generous gift of a few new books from CEPT University Press. One of these, (de)Coding Mumbai by Sameep Padora and Shreyank Khemalapure, is an attractive study of how Mumbai’s architecture is a product of its building and zoning codes. The application is to one city, but the lessons are universal. In particular, the authors show how incentive-laden zoning leads to architecture that undermines planners’ goals for the interface of private and public space.

[In] Mumbai, there is a specific type of architect who has become the interpreter of regulations and there are those architects who are aestheticians working on building skins. As much as there is convenience in this split, it has taken away a big part of the agency of the architects in the city…

One of the ways to change this situation is to start looking at architecture also as urban design exercise. Through the discipline of Urban Design…there is great potential to initiate dialogues and processes for neighbourhood-scale changes in the city.

(de)Coding Mumbai, p. 272

Medico-administrative era

Following Michel Foucault, the authors describe the origins of planning in British Bombay, triggered by the outbreak of the Bubonic Plague, which spread from inland China through Hong Kong and to ports around the world.

The Indian subcontinent suffered an estimated 12 million deaths, most of them in Bombay Province… According to some accounts, close to 2,000 people died every week in the city for over a year and more than 8,50,000 inhabitants fled the city… It is under these dire conditions that the provincial state established the Bombay Improvement Trust in 1898.

(de)Coding Mumbai, p. 23

The Trust widened roads to bring in clean sea air (although Pasteur had established the germ theory of disease, old ideas lingered). It demolished slums, replacing them with multistory, modern housing blocks. And it used land readjustment (called Town Planning Schemes in India) to expand the city.

Regulations and built form in the Dadar Parsi Colony (Scheme V & VI), 1898-1922

What Padora and Khemalapure add to this well-established history is how the granular text of the new regulatory documents dictated the form of now-historic neighborhoods.

Planning era

The authors skip ahead to the post-Independence era, which they call “urban sprawl.” For American usage, that’s the wrong phrase – the era was characterized by a legalistic approach to planning and the coexistence of both hostility to new migrants and a concern with equity and redistribution. The principle underlying those contradictory impulses was an overweening respect for planners and planning. Planners “knew” that cities should be moderately-sized just as they “knew” the necessities of life for the very poor.

To achieve both ends, planners discouraged high-rise growth in central Mumbai, with catastrophic consequences: incredibly high formal housing costs and about half the population living in unregulated slums.

One project the books covers is the World Bank’s “sites and services” neighborhood in Charkop, which Alain Bertaud helped design.

Charkop today

Market-oriented era

Since India’s turn toward market ideas in 1991, Mumbai regulations have begun to relax. But the relaxation is far from laissez-faire. Instead, the regulatory regime creates a high market value for floor space, which it then monetizes directly and indirectly.

By selling FSI, Mumbai’s regulators incentivize rehabilitation, slum replacement, preservation via transferable development rights (TDRs), private open space, and other priorities. The obvious tradeoff is that development is more expensive than it would be under a regime without FSI. But
Padora and Khemalapure are more interested in drawing our attention to another tradeoff: regulators lose their leverage to regulate the interface between private and public space. Of one project, they write:

The project is a clear example of how suburban areas have been utilized as pools to balance TDRs… The bye-laws and design of such projects however, make no attempt to rethink the high-speed interface between the buildings, between the neighboring plots and the adjacent highway.

(de)Coding Mumbai, p. 226
Mushroom Tower with podium parking, 2012

The high value also distorts construction toward uses that do not count against the Floor Space Index (FSI), such as structured parking. In summary, the authors condemn this Byzantine system:

Since 1991, FSI has become a form of currency that is used instead of monetary compensation by the State in Mumbai.

(de)Coding Mumbai, p. 249

New directions?

The authors spend just a few pages looking to the future – the first quote in this review is from that section. Theirs is more glimpse of the future than a vision. Clearly, they wish architects were doing something richer than regulatory interpretation and exterior decoration. The first step in that direction is to illuminate the current dispensation, and the authors have done so admirably.

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Toward an Erdmann synthesis https://www.marketurbanism.com/2024/09/06/toward-an-erdmann-synthesis/ Fri, 06 Sep 2024 16:21:35 +0000 http://marketurbanism.com/?p=86085 Kevin Erdmann argues that mortgage credit standards are too tight. Others say the federal government is subsidizing homeownership. Can they both be right?

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Kevin Erdmann has a good op-ed in the Washington Post today, arguing one of the two core points that have defined his work for the past several years: Fannie and Freddie have set credit standards too high since 2007. (His other core point, that “closed access” superstar cities have made it too hard to build, is clearly correct).

Although I’ve been Erdmann’s colleague for most of this time, I’ve maintained wide priors on the question of credit standards. Many other scholars, left and right, are skeptical of the broad, century-long trend of encouraging (and subsidizing) homeownership. Whether or not Fannie & Freddie’s mortgage securitization constitutes a subsidy, it’s hard to argue that it doesn’t influence who can buy a home.

c. 1940s postcard (Kalamazoo Public Library)

Too cheap to build

The excellent Kalamazoo Debate helped clarify things, probably because it isolates the credit issue from the supply issue.

  • Rent in Kalamazoo has become surprisingly high
  • But it’s not because of zoning-induced supply constraints
  • Houses are still cheap relative to incomes

With these facts, Kevin’s story sounds very plausible:

  • Regulators in 2007 shut off credit to marginal potential homebuyers
  • Builders could no longer find buyers for entry-level houses, so they stopped building as many
  • Rents have not been high enough to justify large-scale apartment construction
  • Marginal potential homebuyers were left competing for the fixed stock of rental housing

There are some holes in this argument. Homeownership in Kalamazoo hasn’t changed much over time. Would a temporary 2% drop really shut off the supply of new housing? But if we leave Kalamazoo aside, the national decrease was much larger and the rebound incomplete, so maybe Kevin’s right nationally, at least for post-2000 analysis.

The U.S. homeownership rate is low relative to the 2000s, but high relative to the 1970s-1990s

Filter-down economics

Can Kevin and the skeptics both be right? There’s no technical contradiction between these two points, they just have opposite vibes:

  • The federal government and GSEs have subsidized homeownership through a variety of means and the US has more homeowners than it would have if the feds were neutral.
  • Homeownership subsidies raise the price/rent ratio, keep construction brisk, and put downward pressure on rent.

(We can add: rental subsidies don’t boost construction much because they’re targeted to people who aren’t close to being able to afford new construction and/or because zoning limits the land available for multifamily construction.)

This doesn’t tell us whether subsidies are good or not. It wouldn’t exactly be a surprise if a milk subsidy made milk cheaper, right? Housing markets are weirder than milk markets, but it’s still not that weird to think that housing subsidies make housing cheaper.

Is this expensive new home subsidized? (Salim Furth)

MOAR MATH!

Just because the subsidy / filter synthesis is possible doesn’t mean it’s true. The pre-2000 homeownership rate was stable and lower than today’s. Was that just demographics? Is Kevin’s story correct for a working-class slice of the population but less central to the major trends than he believes?

It’s in big, general-equilibrium questions like this that we really need rigorous economic modeling. The facts are available. Can a model match these moments?

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Stone: Diversity didn’t cause the baby bust https://www.marketurbanism.com/2024/08/21/stone-diversity-didnt-cause-the-baby-bust/ Wed, 21 Aug 2024 12:55:05 +0000 http://marketurbanism.com/?p=85806 A new paper proposes that increasing diversity explains 90% of the recent decline in birthrates. Lyman Stone says it's nonsense.

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There’s a vigorous debate about whether various urban factors, like density, lower birth rates. In a new paper, Umit Gurun and David Solomon propose a new one that they claim accounts for 90% of the recent decline in birthrates:

E Pluribus, Pauciores (Out of Many, Fewer): Diversity and Birth Rates

Abstract: In the United States, local measures of racial and ethnic diversity are robustly associated with lower birth rates. A one standard deviation decrease in racial concentration (having people of many different races nearby) or increase in racial isolation (being from a numerically smaller race in that area) is associated with 0.064 and 0.044 fewer children, respectively, after controlling for many other drivers of birth rates. Racial isolation effects hold within an area and year, suggesting that they are not just proxies for omitted local characteristics. This pattern holds across racial groups, is present in different vintages of the US census data (including before the Civil War), and holds internationally. Diversity is associated with lower marriage rates and marrying later. These patterns are related to homophily (the tendency to marry people of the same race), as the effects are stronger in races that intermarry less and vary with sex differences in intermarriage. The rise in racial diversity in the US since 1970 explains 44% of the decline in birth rates during that period, and 89% of the drop since 2006.

I asked demographer Lyman Stone if I should take this seriously. His characteristically firm reply is below:

It’s nonsense.

1) They’re explaining change in kids-in-the-house, NOT fertility. Kids-in-house is more similar to completed fertility and has declined like 40% less than total fertility.

2) They include adult children living at home in their kids-in-house measure, so if adult-kids-at-home has risen (it has), that biases their estimates.

3) Regardless, it seems notable in table 3 that the effect gets bigger the more narrowly you define the categories. Ancestry has the biggest effect, it’s 50% bigger than race. They don’t tell us the standard errors, but from the t stats it seems ancestry is highly significantly higher than just race. This I think matters for interpretation: if German-Americans are declining to marry Irish-Americans in 2010… are we actually measuring homophily or are we measuring the degree of segmentation in social life? You can imagine a situation with no homophilous preferences at all, but where individuals just have highly segregated social lives, and so the results are as we see. I’m kinda skeptical the ancestry results are consistent with the idea that this is preference based since the ancestry categories are kind of ludicrously specific, cross-ancestry marriages in ACS are like…. 60% of marriages I think? and many people don’t even know somebody’s ancestry apart from race. And, spoiler: ancestry HHI hasn’t changed at all.

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Ancestry is much more diverse than race in the U.S.

4) One thing I do find interesting is the authors’ argument about self-ID. They suggest that it matters how we perceive ourselves: a huge share of increase in diversity is a shift in people who formerly would have been categorized as “black” or “white” now being coded as “multiracial.” I’m also concerned that they used inconsistent categories: the same population is more diverse using 2020 census form than using 2010 or using 2000 or 1960, etc.

5) They don’t show the first stage results or descriptives which is always a red flag to me.

6) They’re doing a weird thing with timing and fixed effects. Kids-in-house is a measure of completed fertility: those kids were born years or decades earlier. But they’re linking that completed fertility to diversity right now, not “diversity when the mother was 18” or whatever. They seem to think their huge array of fixed effects is addressing this issue, but it just seems totally wrong to me. They should be using diversity that obtained in mother’s state of birth over the course of the first 25 years of her life, not diversity right now after she had kids.

7) There’s a correlation of like 0.02 between any measure of diversity and any measure of fertility at the state level, in cross section or panel. For a variable that explains 90% of the decline, it’s amazing it has zero explanatory power in the descriptive data.

I appreciate that economists are willing to look into unpopular possibilities, such as diversity having downsides. And Lyman’s comments do not firmly establish that diversity has no effect on birthrates – merely that this research needs more work before we have to take it seriously.

The post Stone: Diversity didn’t cause the baby bust appeared first on Market Urbanism.

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