Market Urbanism https://www.marketurbanism.com Liberalizing cities | From the bottom up Wed, 10 Nov 2021 22:44:29 +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 The “outer boroughs” myth https://www.marketurbanism.com/2021/11/10/the-outer-boroughs-myth/ https://www.marketurbanism.com/2021/11/10/the-outer-boroughs-myth/#respond Wed, 10 Nov 2021 20:58:04 +0000 http://marketurbanism.com/?p=68388 One argument against bus lanes, bicycle lanes, congestion pricing, elimination of minimum parking requirements, or indeed almost any transportation improvement that gets in the way of high-speed automobile traffic is that such changes to the status quo might make sense in the Upper West Side, but that outer borough residents need cars. This argument is […]

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One argument against bus lanes, bicycle lanes, congestion pricing, elimination of minimum parking requirements, or indeed almost any transportation improvement that gets in the way of high-speed automobile traffic is that such changes to the status quo might make sense in the Upper West Side, but that outer borough residents need cars.

This argument is based on the assumption that almost anyplace outside Manhattan or brownstone Brooklyn is roughly akin to a suburb where all but the poorest households own cars and drive them everywhere. If this was true, outer borough car ownership rates and car commuting rates would be roughly akin to the rest of the United States.

But in fact, even at the outer edges of Queens and Brooklyn, a large minority of people don’t own cars, and a large majority of people do not use them regularly.

For example, let’s take Forest Hills in central Queens, where I lived for my first two years in New York City. In Forest Hills, about 40 percent of households own no car. (By contrast, in Central Islip, the impoverished suburb Long Island where I teach, about 9 percent of households are car-free- a percentage similar to the national average).

Moreover, most of the car owners in Forest Hills do not drive to work. According to the U.S. Census Bureau’s American Community Survey (ACS), only 28 percent of the neighborhood’s workers drive or carpool to work.

Admittedly, Forest Hills is one of the more transit-oriented outer borough neighborhoods. What about the city’s so-called transit deserts, where workers rely solely on buses?

One such neighborhood, a short ride from Forest Hills, is Kew Gardens Hills. In this middle-class, heavily Orthodox Jewish neighborhood, about 28 percent of households are car-free- not a majority, but again high by American or suburban standards. And even here, less than half of commuters drive or carpool to work (8479 out of 17,822, although the difference between this number and a 50 percent share is within the ACS statistical margin of error).

Even more right-wing parts of the outer boroughs are similar. The council district including Midwood, Sheepshead Bay, and Brighton Beach just elected a Republican (in fact, a former student of mine) with over 60 percent of the vote. In the Brighton Beach zip code, about 46 percent of households own no car even though this neighborhood is at the end of a subway line. Only about 35 percent of workers there drove or carpooled to work- and in Midwood, only 32 percent do so.

Moreover, many of the people who do drive to work may work in the suburbs (like many of my students). So the anti-congestion-pricing argument that a significant number of outer-borough-workers need to drive to Manhattan is not supported by any evidence. As of 2017, only 9 percent* of NYC resident who worked in Manhattan commuted by car, as opposed to 39 percent who commuted to other boroughs, and 68 percent who commuted to suburbs.

*See p.. 67 of relevant document. However, I have not found any documents breaking this data down by borough of residence.

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Getting to “Yes” https://www.marketurbanism.com/2021/11/02/case-studies/ Tue, 02 Nov 2021 15:33:51 +0000 http://marketurbanism.com/?p=68302 Case studies from several authors help explain the gritty politics of "Yes." The list includes three classics and will be expanded with reader submissions.

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In laudable news, the Pew Charitable Trusts have backed a research project at NYU’s Furman Center to commission and publish work “to understand how specific land use reforms…have affected outcomes on the ground, especially with respect to residential development.”

While looking forward to that series, I want to highlight a more dispersed, emerging body of work: political case studies of some of the major (or minor) land use reforms of the YIMBY era.

In a recent exercise, I asked a large number of YIMBY and pro-housing friends to rate the effectiveness and political attainability of 17 distinct types of reform. What I learned is that there is relatively little consensus – some people think that curbing parking minimums is easy, some hard. Some think it would be highly efficacious, others don’t. There’s a lot we don’t know – and that it’s important to learn. (If you’re interested in the results, you can email me and get them in exchange for contributing your own views).

In that spirit, here are a few case studies of the political process that led to some of the substantial reforms in cities and states in the last decade. The best of these follow the model I learned in political science classes: identifying the key actors and their interests, describing some of the wrangling and horse-trading in detail, giving glimpses into private moments where possible.

I’m also certain that there are other pieces in the genre that I’m missing – leave them in the comments or email me; I’ll update the piece accordingly.

  • Portland: Michael Andersen’s 2021 case study of the five-year process leading to Portland’s upzoning is rich with names and – thanks to Kayla Brock’s photography – faces. Andersen deftly deploys a listicle format to manage the tension between historical detail and narrative structure, basing his work on extensive interviews as well as his own recollections.
  • Minneapolis: Richard Kahlenberg’s 2019 report walks through the key arguments, the opposition, and the successful tactics that led Minneapolis to become the first big city to eliminate longstanding detached-only zoning.
  • California: A big story deserves book-length treatment, which Conor Dougherty’s Golden Gates provides. If the lesson from Minneapolis is that normal electoral politics can lead to YIMBY results, California’s story is of a very small number of people who created a major political movement ex nihilo starting around the time of Kim-Mai Cutler’s online classic, which is a case study in pre-reform statics that contrasts with the dynamics of the post-2016 reform era.

Aside from these essential works, there are smaller pieces that sketch the political process that took a city or state from “not in my backyard” to “yes!” With reader contributions, I hope to expand this list, but here are a few:

  • Tyson’s: Policy change in Tyson’s, Virginia, is attempting to redevelop a classic car-only “edge city” of malls and offices into something like a real city. Emily Hamilton’s dissertation chapter analyzed the politics of change using a public choice framework.
  • New Rochelle: An innovative process using a “master developer,” Generic Environmental Impact Study, and community benefits menu ignited a downtown building boom. Two case studies – at Better Cities Project and Up For Growth – have profiled it.

If we go too far back in time, this list will become unmanageable – and also distant from the YIMBY political moment of the present. But I can’t resist including two honorable mentions: recent case studies that frame 1990s reforms in contemporary terms.

  • Houston: In an academic paper, Nolan Gray and Adam Millsap explore the political economy of Houston’s 1998 subdivision reform, as well as its effects. To neutralize opposition, Houston allowed motivated NIMBYs to opt out of the reform on a block-by-block basis.
  • Vancouver: Thousands of basement units and divided suites existed outside the law. Alan Durning chronicles the city’s gradual toleration and embrace of its most iconic housing form, which has echoes of New York’s loft legalization.

Jake Antles speaks as part of a testimony and silent demonstration by the Cully Housing Action Team in Portland. Photo: Michael Andersen for Sightline.

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Getting Hasidim and cars wrong- and what we can learn from this https://www.marketurbanism.com/2021/10/19/getting-hasidim-and-cars-wrong-and-what-we-can-learn-from-this/ Tue, 19 Oct 2021 21:34:19 +0000 http://marketurbanism.com/?p=68162 I am currently reading A Fortress in Brooklyn, a (mostly) fine book about the relationship between Williamsburg’s Satmar Hasidim and real estate policy. One chapter discusses Satmar opposition to bike lanes in their neighborhood, and suggests that one cause of this opposition might be that “the Hasidic community in Williamsburg developed a pervasive and entrenched […]

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I am currently reading A Fortress in Brooklyn, a (mostly) fine book about the relationship between Williamsburg’s Satmar Hasidim and real estate policy.

One chapter discusses Satmar opposition to bike lanes in their neighborhood, and suggests that one cause of this opposition might be that “the Hasidic community in Williamsburg developed a pervasive and entrenched culture of driving automobiles.” In an otherwise heavily footnoted book, the authors supply no footnotes to support this claim.

Is it true? Let’s look at the 2019 Census data. There are three Census tracts that include the core of Lee Avenue (the main street of Hasidic Williamsburg): tracts 531, 533 and 535 in Brooklyn. According to the American Community Survey (ACS), the percentage of occupied housing units without automobiles ranged from 63 percent (tract 531) to 85 percent (tract 535). Admittedly, ACS data for anything smaller than a city is subject to a large margin of error; however, it is pretty common for car ownership to be low in neighborhoods that are (like Hasidic Williamsburg) close to Manhattan, have a 55 percent poverty rate, and have over 80,000 people per square mile. Another heavily Hasidic area, Borough Park, is further from Manhattan, more affluent, and less dense. (The primary zip code of Borough Park, 11219, has a 32 percent poverty rate, and has only 60,000 people per square mile). Yet even in the Boro Park zip code, most households lack a vehicle.

ACS commuting data is consistent with these figures. In all three Census tracts, fewer than 1/4 of workers drove or carpooled to work. Public transit use was roughly comparable, because the majority of workers worked in the neighborhood and walked to work.

To me the most interesting question is, why did these otherwise careful authors get it wrong? I have two theories. First, if they were focused on bike lanes, perhaps they spent more time talking to anti-bike-lane activists than to other Hasidim; perhaps bike-haters might be more likely to own cars than their more apathetic neighbors. Second, perhaps the authors’ stereotypes got in the way. In most of the United States, large families and large cars go together; perhaps the authors assumed without researching the point that this must be true in Williamsburg as well.

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Confounding Diversity with Segregation Again https://www.marketurbanism.com/2021/10/06/confounding-diversity-with-segregation-again/ Wed, 06 Oct 2021 20:47:41 +0000 http://marketurbanism.com/?p=68018 In July, I showed that an otherwise careful group of researchers at the Othering and Belonging Institute were using a measure of statistical racial segregation that confounds diversity with segregation. Briefly, regions with more variety in the racial makeup of their neighborhoods will show up as statistically “segregated.” Regions where all neighborhoods are pretty similar […]

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In July, I showed that an otherwise careful group of researchers at the Othering and Belonging Institute were using a measure of statistical racial segregation that confounds diversity with segregation. Briefly, regions with more variety in the racial makeup of their neighborhoods will show up as statistically “segregated.” Regions where all neighborhoods are pretty similar will show up as statistically “integrated.” To their credit, the study authors corresponded with me at length and adjusted their Technical Appendix to emphasize limitations that I had pointed out.

Today, Mark Zandi, Dante DeAntonio, Kwame Donaldson, and Matt Colyar of Moody’s Analytics released a much less careful study purporting to show the “macroeconomic benefits of racial integration.” But if one were to make the mistake of taking their study at all seriously it would lead one to the opposite conclusion: mostly-white counties do better economically. They discovered white privilege and mislabeled it “integration.”

(When economists talk about “segregation” statistically, they mean differences in racial proportions across neighborhoods. This is not the same as the de jure segregation regime imposed in the American South. It’s not even the de facto segregation that persists in some neighborhoods today.)

The easiest way to see Zandi et al’s mistake is to work backwards from the table of county results they (helpfully) published. The most integrated county in America, in their analysis, is Kennebec County, Maine. It’s 94.6% white. The rest of the most-integrated counties are similarly pallid – with the exception of Webb County, Texas, which is 95% Hispanic.

It’s leaf season in integrated Kennebec County, Maine
Photo: Kennebec Valley Tourism Council

In each of these counties, integration is a mathematical product of the lack of diversity. With hardly any minorities, hardly any neighborhood can diverge from the dominant group.

These extreme counties aren’t an accident. Whereas most researchers treat metropolitan areas together, Zandi’s team worked with counties. Several of their integration champions, like Livingston County MI, Jefferson County MO, Medina County OH, and Carroll County MD are very white exurbs at the fringe of some of America’s most segregated (in the real-world sense) cities.

The most segregated counties in their rankings are (of course) all of the most diverse and largest in the U.S. Some of those counties certainly are segregated, but what makes them show up on Zandi et al’s index is that they are diverse.

Now, the ghost of George Wallace might say, “Wow, this is a great study! Look at all these nice things that are attributable to racial homogeneity.” But that would be wrong statistically as well as morally. Simply put, Zandi’s team ran a few regressions without making any attempt to establish causal relationships and without controlling for spatial autocorrelation. There’s nothing to see here, move along.

A spurious correlation from Zandi et al.

The study’s four authors are surely well-meaning, smart men. But this embarrassment shows the need for all of us to give our work a reality check before clicking publish – especially when it relates to a topic with as much moral and emotional weight of segregation.

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The banks aren’t beating first time buyers – It’s the NIMBYs. https://www.marketurbanism.com/2021/09/13/the-banks-arent-beating-first-time-buyers-its-the-nimbys/ Mon, 13 Sep 2021 11:53:07 +0000 http://marketurbanism.com/?p=67736 A few weeks ago the Times reported that Lloyds Banking Group had purchased 45 new homes to let in Peterborough. This is part of a plan for Lloyds to own 50,000 homes by 2031. Given the median home in the City is now worth over 7 times the annual earnings of the typical resident, it […]

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A few weeks ago the Times reported that Lloyds Banking Group had purchased 45 new homes to let in Peterborough. This is part of a plan for Lloyds to own 50,000 homes by 2031. Given the median home in the City is now worth over 7 times the annual earnings of the typical resident, it is understandable why people would be upset.

Indeed, why should a huge corporation be able to buy up all the properties in the City, when its own residents can’t afford to buy a new home there? However, this outrage is misdirected. Lloyds buying a few thousand homes over a decade will do nothing compared to the astronomical effect that NIMBYism and our planning system has had on house prices. 

The reason for this lies in a piece of legislation called the Town and Country Planning Act. This law abolished the automatic right to develop regulatory compliant housing, and added an additional stage of planning permission. As a result, it became mandatory for one to require state permission to build on one’s own land. 

Over the years this system has morphed into an almost quasi-right to block others’ construction giving residents the ability to stop others from moving into their area. This chiefly benefits homeowners – the people who engage the most in the planning system – since new houses will slow down the speed their own home’s value increases. The effect is that almost no houses get built. For example, in London during the 2010s we built around 25,000 houses per year; in the 1930s before the Planning Act was introduced that number was 61,500. 

Sadly housing just behaves like any other scarce asset. When there’s a shortage the sellers have more bargaining power and consumers are forced to pay more to buy the goods. Given we’ve been maintaining a shortage since the Second World War, then it’s no surprise that average prices in London have risen from below £100,000 now to over £500,000 when adjusted for inflation since 1970. To put that in perspective, if the price of chicken behaved in the same way, then by 2013 a chicken would cost £51.81

If we’re ever to get out of this system, then we’re going to need to find solutions that protect democratic interests without solely empowering NIMBYs. One solution that seems to have almost universal admiration is street voting. This would allow each street – defined as an area of about 15 homes – to vote on a design code that they approve of. Any plans meeting this code will be automatically approved. 

The historian Robert Conquest once wrote that people are most conservative about what they know best, and that is the beauty of this policy. By empowering hyperlocal communities to determine what they want, certainty will be provided for developers allowing them the houses they need in a way that residents want. 

A Policy Exchange paper published earlier this year gave an excellent example of how this could work. Imagine a cul-de-sac of 26 bungalows decided to vote on, and implement a design plan to maximise the value of their collective property. In this small area alone they could dig Georgian-style basements, build three stories, plus extend onto the driveways. This is an extreme example with building costs in excess of £57 Million. However, the residents would still make £44 Million in profit after all costs are factored in. 

This could become a reality. With the Government poised to drop their zoning based planning system, there is an opportunity for street voting to return to the table. This is particularly important given the Presentation Bill that is being raised today by a group of MPs led by John Penrose and Bob Blackman. This largely mirrors street voting as it would allow the Housing Secretary to enact secondary legislation allowing street to vote on their own housing design and density rules. If the Government support this, then we may finally see more homes built and a return to sensible prices for homes. 

There are zero reasons why Lloyds buying a few thousand homes should have a substantial impact on our housing crisis, but in a shortage, it will worsen the crisis in many areas. However, the logical response isn’t to criticise the banks. They’re only doing the same as thousands of other landlords up and down the country. Instead, we should just take away the incentive for this to be done by allowing people to build more homes on their own property. Street voting is our best chance of doing that. 

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Financialization and housing costs https://www.marketurbanism.com/2021/08/21/financialization-and-housing-costs/ Sun, 22 Aug 2021 02:50:47 +0000 http://marketurbanism.com/?p=67410 One common explanation for high rents is something called “financialization.” Literally, this term of course makes no sense: any form of investment, good or bad, involves finances. But I think that the most common non-incoherent use of the term is something like this: rich people and corporations have decided that real estate is a good […]

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One common explanation for high rents is something called “financialization.” Literally, this term of course makes no sense: any form of investment, good or bad, involves finances.

But I think that the most common non-incoherent use of the term is something like this: rich people and corporations have decided that real estate is a good investment, and are buying it, thus driving up demand and making it more costly.

But if this is true, to blame financialization for high rents and sale prices is to confuse cause and effect. If real estate prices weren’t going up, it wouldn’t make sense to buy buildings as investment. Thus, high housing costs cause financialization, not vice versa.

In fact, if government did not restrict housing supply through zoning, financialization would be a force for good. Why? Because instead of buying existing buildings, people with money might be more willing to build new buildings for people to live in- which in turn might hold housing costs down.

PS I am running for Borough President of Manhattan, and am gradually creating a Youtube page that addresses anti-housing arguments in more detail.

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Reading Hayek in Holland https://www.marketurbanism.com/2021/08/19/reading-hayek-in-holland/ Thu, 19 Aug 2021 11:30:40 +0000 http://marketurbanism.com/?p=67349 Hayek says that planning is the road to serfdom. Holland may be the most thoroughly planned country on earth - and it's delightful. How does a market urbanist respond to excellent planning?

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Reading Hayek in Holland
Photo by Peter Furth

During a working vacation in the Netherlands, I had the dissonant experience of reading Friedrich Hayek’s The Road to Serfdom in one of the most comprehensively planned environments on earth. Hayek’s thesis is that central economic planning displaces competitive markets and, when broadly applied, paves the way for totalitarianism. The premise of Holland is that strict central planning is necessary to avoid being underwater. And the planning covers much more than water: in the Netherlands, centralized land use and transportation planning uphold a pleasant, sustainable lifestyle and growth pattern.

Although the Dutch experience is not a slam-dunk case against Serfdom, it certainly raises questions. It’s not only that the Netherlands has avoided becoming a totalitarian state, but it has largely produced an excellent built environment which the present author finds far more enjoyable than anything on offer in the U.S.

Several caveats are in order. Hayek did not predict that planning a single aspect of the national economy would lead to totalitarianism. He even offers ‘modern towns’ as an area where some planning is necessary (p. 48). One should read Serfdom with a sort of “inflation adjustment” for the apocalyptic rhetoric given that it was written during an apocalyptic era. Finally, I do not claim a unique level of expertise in either Hayek or Dutch spatial planning. This essay was informed by Barrie Needham’s book and conversations with planning officials from several Dutch cities.

Is it really central planning?

Unlike in the U.S., the Dutch built environment is centrally planned. Gemeenten (municipalities) are not free to diverge from national and provincial priorities, and any major greenfield development must win provincial and sometimes national approval. Regulation systematically imposes an integrated rational scheme totally unlike U.S. zoning.

Neptune’s bicycle
Photo by the author

Dutch spatial and transportation planning is the outcome of consensus decision-making within a fairly intimate professional class at various levels of government. This polycentricity may be part of the reason that the quality of the planning is so high and the system can execute across many domains (transport, development, water, etc.).

For example, Dutch governments at all levels have systematically prioritized cycling for decades, with strong public support. That priority is expressed not only in road building, but in all related domains. In a new Utrecht development, for instance, city planners are pushing the developers to provide five bike parking spaces per apartment, a costly proposition. With a less unified planning class, the whole system would become beset with bottlenecks.

There is no wizard behind the curtain directing the apparatus. But if this isn’t “central planning,” then we can dismiss that concept as a purely theoretical straw man.

In the U.S., by contrast, planning departments, zoning boards, water authorities, and state transportation departments frequently fail to communicate, let alone coordinate. For example, when the Metro was extended into Montgomery County, Maryland, in the 1970s, the county was under a moratorium on major new construction due to lack of sewer capacity. The county is still retrofitting its underdeveloped Metro station areas, which should have been primed for transit-oriented development from day one.

The Public Realm

The obvious tradeoff between American and Dutch cities is that the former provide generous quantities of private space while the latter offer an exceptionally attractive public realm. New subdivisions not only have thoughtfully executed walking, cycling, and driving access, they also have traditional waterways and open space. Somehow, even new subdivisions have mature trees.

The presence of cars in city centers has sharply declined since I lived in Holland in the late 1990s. One planner I spoke to said that although car ownership has risen during that period, kilometers driven has remained steady because the country has made large investments in improving transit and cycling infrastructure (it was already the best in the world, but it’s noticeably better now).

New subdivision in Brasserhout, the Hague
Photo by the author

Today, Dutch cities are designed to draw cars toward highways, which are often quite narrow. Car-oriented businesses and manufacturing zones cluster in business districts along the highways; no suburban residential district is car-oriented. Instead, suburban streets are narrow, low-speed spaces with limited sightlines and brick paving. Some streets feel more like shared driveways than streets in the American sense.

It is a commonplace among New Urbanists and other American city-lovers to point to medieval European towns as exemplars of mixed uses, walkability, and other virtues that American cities lack. This is fine, but contemporary Dutch urban design is much more relevant and almost as attractive as the medieval cities – which, in any case, have a larger share of 20th– and 21st-century buildings than you might expect.

How does a Dutch planner integrate modern dwellings into a medieval center? Among other things, by requiring the builder to vary the heights of floors and windows in neighboring townhouses. Nothing is built in the Netherlands today that does not meet – and exceed – the design goals of American New Urbanists.

Graaf Floriskade, a new development intended to extend the character of medieval Delft.
Photo by the author

Competence and Trust

In Amsterdam, the Houthavens redevelopment features multi-million euro condos in buildings that rise like piers from the city’s main waterway, the IJ. A friend from Delaware, James Wilson, pointed out the ground floor windows about six inches above the waterline. Americans could never do this, he said. We would not trust the builder to make a building so watertight. We would not trust the window manufacturer. We would not trust the water authority to keep the water level perfectly constant. Our insurers would not insure this. Our families would not buy it. Our regulators would not permit it. Our builders would not attempt it.

Houthavens, Amsterdam
Photo by Eriksw, CC BY-SA 4.0, via Wikimedia Commons

The Dutch expect an equal level of competence in spatial planning. For example, the Hague’s major Ypenburg expansion brought it into conflict with the existing semi-rural settlement pattern. One old road posed a traffic conundrum: it would be a natural cut-through for the new traffic. In the U.S., this situation would either result in the whole development being blocked – the NIMBY solution – or the road becoming congested and [trigger warning] its rural character forever destroyed. The Dutch found a technical solution: a grade-level intersection where turns are impossible. As the picture below shows, the intersection’s curbs are built right up to the lane lines so that the only choice is to drive straight.

In the U.S., civil engineers are not intellectually equipped to innovate. The professional culture is driven by compliance to universal standards, not situational problem-solving.

Grade crossing with no turns, Biesland, the Hague
Photo by Google Streetview

The Dutch expectation of competence extends to public life. One afternoon, I was enjoying a beer and sandwich at a sidewalk café. An SUV was parallel parking, at the same grade, a few inches from the back of my chair. It did not occur to me until afterwards that this would have made me very uncomfortable in America. Whereas Americans, blessed with abundant land, use physical distance to create safety in many contexts, the Dutch rely on universal competence.

[Edit: James Wilson points out a paradox here. Dutch road design does not assume competence, or attentiveness from users; instead, it uses physical design to minimize the consequences of driver carelessness. Most importantly, city streets are narrow and turn frequently so that speeding is near-impossible.]

The Housing Crisis

Despite radically different spatial regulatory and planning systems, the U.S. and the Netherlands (and many other countries) have arrived at the same system failure: high housing costs in major coastal cities. Just as in the U.S., already-high home prices were exacerbated by a pandemic-era spike.

The Netherlands’ primary tool for providing social housing is along the same lines as inclusionary zoning, claiming 10 to 40 percent of units in new developments. Large non-profits manage much of the country’s social housing. As in the U.S., requiring below-market units in any development lowers profitability. But the cost effect in the Netherlands is likely dwarfed by the basic scarcity of developable land. Because the central planners fully control the levers of housing supply , they can extract deep concessions in terms of design, social housing, and infrastructure – so long as prices remain far above construction costs.

Dutch regulation is in some ways the reverse of ours; they have minimum densities, not maximums. Since American regulations have no density minimums, deregulation can only increase density. But Dutch planners firmly believe that deregulation in their context would result in larger lots and bigger houses. That leaves a market urbanist a little lost in the Netherlands: I like what the planners are producing, but not the way they produce it.

The Bike Path to Serfdom

Remember Hayek? This is an essay about Hayek.

I don’t expect totalitarianism from clever intersection design or bicycle parking mandates. But Hayek argues that planning should lead to significantly different outcomes than mere regulation. And he lays out some of those consequences in Serfdom.

Decline in the Rule of Law. That is, different rules apply to different people. This is clearly endemic to the Netherlands’ spatial planning, although it may be that no system is immune to the favoritism or speculation that attend spatial decisions.

Frederik Hendriklaan, Statenkwartier, the Hague
Photo by the author

One of the Hague’s planning priorities is to improve its neighborhood shopping streets by (further) demoting cars. A planner showed me one street that had gotten fantastic treatment: traffic calming, stone sidewalks, art, parking spaces above street grade, and room for sidewalk cafes – all without disturbing the mature plane trees. Not surprisingly, this was the main shopping street of the Statenkwartier, one of the richest neighborhoods in the city.

A similar street in a nearby middle-class neighborhood received decidedly simpler treatment. And the shopping streets I saw in immigrant districts were unimproved. As my host admitted, every business district wanted the slow-street treatment, but those with political connections got the first places in line.

More consequentially, permitted greenfield development is so lucrative that speculators buy up likely parcels outside cities, and municipalities lobby hard for provincial permission to expand. This tug of war takes place out of public view and yields no vacation photos but it determines urban growth and form and makes fortunes and careers.

Departures from representative government. Development can also involve hardball politics, to the point of sweeping aside rival political institutions in order to execute a plan. The Province of South Holland wanted to address its housing shortage by building a dense urban center in a former airfield and farmland across several suburban municipalities. The suburbs would have happily developed the land, but not as densely and with less social housing than the province wanted.

Greenfield development, Ypenburg, the Hague
Photo by the author

So the province redrew the municipal boundaries, giving the site to the Hague. Four suburban municipalities consolidated into two in an attempt to stop the annexation, but to no avail. The province wanted dense, urban development, and the Hague was willing and able to execute the plan.

Mission creep. Hayek contends that once planning begins, it will inevitably creep into other spheres in order to keep the plan from failing. This has not largely occurred in the Netherlands. The Dutch plan space and transport in morbid detail but are open to trade, sectoral shifts, and – significantly, given the housing pressures – migration. There are conflicts between industry and spatial planners which are not always resolved in the latter’s favor. For instance, industrial interests at the provincial level want higher-clearance drawbridges over major canals. Raising the clearance of a bike bridge from 1.5 to 3 meters doubles its cost – but the city of Delft might have to build the high bridges anyway.

“The worst get on top.” Hayek argues that totalitarian systems favor the unscrupulous. It’s not clear from Serfdom whether he thinks that central planning institutions in more liberal contexts also attract bad actors. The more obvious, quotidian risk is that politically connected incompetents get positions of power. That’s clearly not happening in the Netherlands. The planners could fairly be called bureaucrats or even ideologues, but they are very good at their jobs.

Regulation or planning?

The failures of planning in the Netherlands – high housing costs, occasional favoritism, and political hardball – are all failures common to just about every other government system. The greatest weakness may be that the Dutch system relies on a level of technical competence and professional harmony from its planners that exceeds the standard practice in the U.S. and, I think, most developed countries.

A more interesting question, I think, is whether regulation is as preferable to central planning as Hayek suggests. As a consumer, I vastly prefer the carefully, competently planned Dutch cities to the regulated but uncoordinated American ones. I suspect builders feel the opposite way. But is there any way to separate the institutional choices from the culture of competence and land scarcity? What would it look like for a U.S. state – or even a county – to replace regulation with central planning? I suspect it would be a sloppy mess, since no entity has the power, experience, or persuasiveness to bring together every aspect of good city-building.

And how much would the Netherlands change if it replaced planning with regulation? There are simply too many variables.

You didn’t think I was going to leave out the windmills, did you?
Photo by the author

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Book review: Last Harvest https://www.marketurbanism.com/2021/07/12/book-review-last-harvest/ Mon, 12 Jul 2021 04:00:11 +0000 http://marketurbanism.com/?p=66897 In the standard urban growth model, a circular city lies in a featureless agricultural plain. When the price of land at the edge of the city rises above the value of agricultural land, “land conversion” occurs. In the real world, we’re more likely to call it “development” and it is, of course, a lot more […]

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In the standard urban growth model, a circular city lies in a featureless agricultural plain. When the price of land at the edge of the city rises above the value of agricultural land, “land conversion” occurs. In the real world, we’re more likely to call it “development” and it is, of course, a lot more complicated. Simplification is valuable and gives us more general insights. But is greenfield development complicated in ways that are interesting and might change the results of urban economic models? Or that might change the ways we think or talk about development policy?

Witold Rybczynski’s 2007 book Last Harvest helps answer these questions. It tracks a specific cornfield in Londonderry, Pennsylvania, from the retirement of the last farmer to the moving boxes of the first resident.

With its zoomed-in lens, Last Harvest answers (or at least raises) lots of questions that are interesting but not especially important in the grand scheme: Why do expensive homes mix some top-line finishes with cheap, plasticky ones? Why do anti-development communities permit any subdivisions at all? What is ‘community sewerage,’ and how does it work? Exactly who thinks it’s attractive to have brick and vinyl cladding on the same house? What’s it like to buy a house from a national homebuilder? Does Chester County really produce forty percent of America’s mushrooms?

Site map, from Arcadia Land Company

The Stack

Rybczynski does not use this term, but what he describes is part of what I call the “stack” of housing supply. One of the central facts of development is that it relies on a very long chain of industries and professions, each of which relies on every other part of the stack doing its job. If one part is left undone, nobody gets paid:

‘Without a water contract, we can’t get a permit for the water mains, and without a permit, the builders won’t buy any lots and start building their model homes,’ says Jason. ‘Everything is held up.’ (p. 223)

 This is an institutional outcome – I won’t say a ‘choice’ – and is not, strictly, necessary:

Americans take this for granted, but there are other ways to build communities. Some countries depend on centralized planning, in which the public authorities decide where people should live, and what kind of housing they should live in… The cities of the developing world, by contrast, depend on the unplanned and unregulated efforts of millions of individuals who build their own homes in so-called squatter or informal settlements, which eventually turn into urban neighborhoods. (p. 273)

Rybczynski calls this a “business” or “market” approach. The first term is clearly more accurate. The developing world is more of an open spot market, with many isolated, uninsured transactions and a very large number of decision makers. The American approach relies on predictable, tessellating business models.

Unlike in a simplified model, each stage of the work is done by a specialist who has to worry about reputation and liability. Joe Duckworth is the lead developer in Last Harvest, but the subdivision is planned by Bob Heuser and the architectural choices are the subject of an endless series of negotiations between the Londonderry Planning Commission, Duckworth, a loftily-titled ‘town architect’ (basically, a consultant), and the formula-driven homebuilders.  

The key source of tension in the book is that the township sought a neo-traditional development for the site, but would have preferred no development at all:

‘We’ve been doing conventional development and we hate it,’ [one public meeting attendee] says. ‘Why don’t we try something new, and if we don’t like it, we won’t do it anymore.’

‘Doing something new’ implies departures from the usual practice, and that creates problems throughout the stack. The drip irrigation sewage system is new to Chester County and takes longer to permit. The homebuilders stick to their standard marketing practices – advertising the interiors of homes – when the developer and township intended the exterior neighborhood to be the main draw.

Exurban new urbanism isn’t very urban and isn’t especially novel. But even its minor deviations put stress on several of the stack’s business models. So imagine the difficulty of trying to push through something really revolutionary!

The developer as a risk agglomerator

The business models in the stack are principally structured around the avoidance of risk. Even the largest, most liquid companies – the publicly traded “national” homebuilders – rarely buy a land parcel until they have a contract with a homebuyer. Their work is not riskless: they contract for parcel prices ahead of time, and a market decline can cut into their expected profits. But they can always walk away rather than take a substantial loss.

For most industries in the stack, participation is a simple fee-for-service. The businesses that provide site plans, utility connections, and lumber, for example, are all paid on delivery and expose themselves to very little risk.

The stack does as much as it can to offload risks to the farmer, the homebuyer, and various insurers. When the developer and farmer first strike a deal, it’s an option: the upside belongs to the developer, the downside to the farmer. The farmer is compensated, of course. But he cannot quickly receive the value of the site’s full potential. Rybczynski notes that conservation easements are attractive to farmers because they pay out immediately.

Years later, early homebuyers not only accept long-term market risk but also the risk that the site is not completed as (or when) planned.

In Last Harvest, the developer finally buys the land when the farmer refuses to renew the expiring option contract. The land has appreciated; both sides would like to capture those gains. Some of the increased site value comes from the general state of the market, but much is due to the developer’s work in shepherding a rezoning and development agreement through the township’s slow-moving approval processes. The final value depends primarily on how many homes can be built on the site, and township politics are mostly geared toward trying to reduce density.

For a few agonizing years, the developer owns the land. He pays for site improvements, strikes contracts with builders, and tries to time the market. The source of the risk, of course, is that an enormous amount of labor and capital must be sunk into the site before it becomes a habitable, valuable good. Until very late in the process, it’s possible for much of the investment to be lost to the vagaries of the market or the local government.

In a downturn, Rybczynski notes, about one in four developers go out of business. Even Robert Morris, the financier of the American Revolution, spent three and a half years in debtors prison (p. 47). Despite hitting the market at almost the worst possible moment (2007), the New Daleville subdivision survived.

Conclusion

So should all this detail – and I’ve only unpacked one aspect of the book – change the way we theorize housing construction? The importance of regulatory risk and the obvious risk aversion of all involved are clearly central to the internal mechanics of development. Slow permitting implies a disconnect between the price of land at the time a contract is written and the spot price that would prevail when the option is executed.

One paper (Mayer and Somerville 2000, JUE) incorporated this disconnect by modeling development as a two-stage process of land development and, subsequently, construction. They found that incorporating this complexity did not change the results appreciably.

The fragmented, interdependent ‘stack’ is likely more important to suburban reformers interested in changing what gets built. Incorporating accessory dwelling units, triplexes, or cottage courts into suburban development requires more than just regulatory reform. It also requires demonstrating to developers that no layer in the stack is going to fail them – and that everybody will ultimately get paid.

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