Market Urbanism https://www.marketurbanism.com Liberalizing cities | From the bottom up Wed, 25 May 2022 20:36:17 +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 Unpacking Emergent Tokyo with author Jorge Almazán https://www.marketurbanism.com/2022/05/25/unpacking-emergent-tokyo-with-author-jorge-almazan/ https://www.marketurbanism.com/2022/05/25/unpacking-emergent-tokyo-with-author-jorge-almazan/#respond Wed, 25 May 2022 20:14:41 +0000 http://marketurbanism.com/?p=70737 As foreigners, we are mesmerized by zakkyo buildings or yokocho, but within Japan, scholars, and authorities often ignore and neglect them as urban subproducts. In spite of their conspicuous presence and popularity, the official discourse still considers most of Emergent Tokyo as unsightly, dangerous, or underdeveloped. The book offers the Japanese readership a fresh view of their own everyday life environment as a valuable social, spatial, and even aesthetic legacy from which they could envision alternative futures.

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In my previous post, I reviewed an old book on Japan while teasing a new one:

If you read one book about Japan this year, it should be the beautiful, new Emergent Tokyo: Designing the Spontaneous City by Jorge Almazan and his Studiolab colleagues, including Joe McReynolds. But if you read two books about Japan, as you should, the second one should be André Sorensen’s essential The Making of Urban Japan.

And readers responded – buying both books:

Market Urbanism gets results

Now we get to delve into Emergent Tokyo. Here is my extended discussion with Professor Almazán, edited for length.

Midnight Diner – a celebration of yokocho

Salim Furth: I love your chapter on “yokocho”, alleys lined with tiny bars and restaurants like the one Americans see in the show Midnight Diner. Yokocho look a little like medieval Middle Eastern souks, but you point out that they originated as an orderly relocation strategy for postwar black markets, dictated and built by national authorities. Then proprietors took over, adding upper stories, changing uses, and personalizing. Is there enough space in 21st-century building codes and business models for continued physical evolution of yokocho? How is that occurring?

Jorge Almazán: The yokocho that were created to relocate post-war black marketeers are in fact still evolving. But let me address building codes and business models separately. In terms of physical evolution, it is true that current regulations would make it very difficult to add new floors, and therefore we cannot expect additional vertical growth. But the regulation allows owners to retrofit, reinforce and renovate current buildings. Many of the young owners, for example, are transforming their bars into more open and community-oriented configurations.

Yokocho spaces are small enough to allow fringe entrepreneurs – in this case, a Greek immigrant – a place for commercial expression

Building codes are not the result of allegedly pure and innocent building science. Like any other law, they are the result of ideological assumptions, political struggle, and lobby pressure (from the real estate construction industries). We can imagine future building codes responding to current social demands towards a more human-scale approach to urbanism, allowing more proactive preservation of historical yokocho and even the creation of new ones. We have already seen legal changes in Japan pointing in this direction (as new laws or deregulation of existing ones).

But beyond the physical evolution, yokocho potential to evolve is more interesting as an urban model. That is the realm where the restaurant industry is finding creative advantages and business opportunities. Many of the latest large-scale redevelopment projects have included commercial floors with yokocho-like arrangements of small bars and restaurants, like the Toranomon Yokocho or Shibuya Yokocho, offering the diversity of atmospheres, the ease of interaction among customers, and the intimacy of the historical yokocho. That said, most of these new pseudo-yokocho only reproduce the physical arrangement of the historical yokocho. What they lack is precisely the greatest urban and business potential of the authentic yokocho: a surprisingly rich and adaptable emergent urban entity created by a multiplicity of independent actors. In [true] yokocho, independent operators engage with each other in a non-hierarchical relation of cooperative competition, creating a localized economy of agglomeration that results in an urban place much greater than the sum of its tiny parts.

Quiet lanes emerged above former waterways

Salim Furth: In the first chapter, you draw a sharp distinction between “chaos” and “emergence”. Why is emergence a better concept than chaos for understanding Tokyo?

Jorge Almazán: “Emergence” is a property of “complex systems,” which are distinct “chaotic systems” (See Stephen Wolfram’s work.) Roughly speaking, complex systems’ behavior is not regular, but it isn’t chaotic either. Complex systems have structure, even if it is difficult to define. In this formal sense, cities (including Tokyo) are closer to emergent complex systems than purely chaotic systems.

At a more popular level, “chaos” is always mentioned when talking about Tokyo, especially outside Japan. “Chaos theory” was popularized among architects in the late 1980s, and it allowed Japanese architects to see Tokyo in a more positive light. But this narrative of chaos is a dead-end. It left many architects without critical tools to analyze the city and charter a vision for the future.


Is this chaos?

In the popular discourse, “chaos” is often understood as a complete lack of planning or design. That is a dangerous conclusion. We all like the vital and energetic disorder of Tokyo, but we should recognize the underlying structures that produced it over time. Disorder needs to be designed. The idea of emergence (the spontaneous creation of order and functionality from the bottom-up) is a promising approach for all cities in general, especially for cities with a heavy top-down planning tradition. Tokyo’s light urban planning combined with the small scale of land plots, and the creativity of many of its citizens produced a particularly fertile ground that accelerates bottom-up emergent urban phenomena.

Salim Furth: Some of the spaces in Emergent Tokyo benefit from well-placed trees or potted plants. Those are almost always delightful in a city, but there’s a tension between providing space and sunlight for plants and allowing for narrow passages and tall buildings. In the U.S., the Garden City movement’s love of greenery has led to a lot of dead, oversized urban spaces. What can we learn from Tokyo about including trees in small spaces?

Jorge Almazán: This is not only an American problem. The Modernist obsession with expansive open spaces left many European post-war recent developments with too large and too ill-located parks.

Tokyo does not excel in the creation and protection of public greenery. What is really intriguing is Tokyo’s informal greenery. In many neighborhoods, even the most densely built, each neighbor maintains a tiny garden, sometimes with trees but most often small greenery and potted plants. This is a bottom-up practice, there is no local ordinance forcing owners to maintain them. In spite of their tiny size, their presence throughout the whole neighborhood creates an overall sense of greenery. 

Emergent Tokyo is technical as well as winsome. This is just one of several panels showing uses, parking, street widths, and entrance patterns in a single neighborhood.

This phenomenon has cultural roots. But it serves contemporary functions beyond visual refreshment. It is a gentle way to demarcate property boundaries and create visual barriers to keep privacy, without aggressive elements like fences and walls.

It is a way to signify a commitment to embellish the neighborhood and express the individual personality of the homeowner. Some use a Victorian style with many flowers, some use bonsai and other Japanese elements, and some cover the whole building with ivy. Recently I see many Mediterranean greenery, even olive trees, and very often potted herbs for cooking.

In our interviews, we found that small greenery triggers conversations and interactions between neighbors too. Strangers and even neighbors are more likely to talk if there is a third element or stimulus that connect them. Using Holly Whyte’s terminology, greenery is this “triangulation” device that provides a social bond between people.

Greenery in tight places along Yoyogi Lane

Salim Furth: In Chapter 6 you convinced me that “dense, low-rise neighborhoods” are the most natural urban form in Tokyo. That is, this urban form tends to emerge from a variety of initial conditions, including planned garden suburbs (Higashi-Nakanobu), gridded artificial land (Tsukishima), and unplanned sprawl (North Shirokane).

Dense low-rise neighborhoods, a basic building block of urban Tokyo

Does this form dominate because of its intrinsic advantages or because land use institutions favored it? Several times, you describe these neighborhoods as a “delicate balance”, but it seems to me they’re more of a hardy weed.

Jorge Almazán: The reasons for the domination of this urban form are mixed. Low-rise construction has the intrinsic advantage that can be easily and cheaply designed and built, especially in wood (the dominant structural material of these neighborhoods). There is also a clear intention by planning authorities to create low-rise areas, at least in those many areas zoned as “low-rise exclusively residential areas,” with maximum heights of 10 or 12 m. What authorities probably did not foresee is the high ground coverage and population densities that many neighborhoods reached over time, as a result of disparate influences, like land subdivision to pay the high inheritance taxes, or the deregulation in FAR calculation methods.

This largely unintended result is a unique urban fabric that often strikes a balance between preserving a village-like small scale with the advantages of a metropolitan context. You are right that these urban fabrics grow and expand rapidly as weeds. But they are delicate because their best qualities can be easily damaged by internal dynamics (like the invasion of parking spaces replacing gardens); or external forces (like road widenings or large-scale redevelopments), turning them characterless and unwelcoming. Our book is a call to understand, cultivate, and harvest the beneficial effects of this native weed, rather than insisting on bulldozing and razing it.

Salim Furth: You and your colleagues are releasing a Japanese language edition later this year. How does the book serve Japanese and foreign audiences differently?

Both editions are practically identical, with a difference in framing. The English edition contextualizes Tokyo in the global discourse, emphasizing lessons that we can extract for other cities around the world. The Japanese version is framed within the internal discussions in Japan.

[Within Japan,] the relative attractiveness of Tokyo has decreased due to the recent wave of large-scale redevelopments, and there is a search for alternatives. Our book is a call to pay attention to the value of Tokyo’s own vernacular urbanism.

As foreigners, you and I are mesmerized by zakkyo buildings or yokocho, but within Japan, scholars, and authorities often ignore and neglect them as urban subproducts. In spite of their conspicuous presence and popularity, the official discourse still considers most of Emergent Tokyo as unsightly, dangerous, or underdeveloped. The book offers the Japanese readership a fresh view of their own everyday life environment as a valuable social, spatial, and even aesthetic legacy from which they could envision alternative futures.

Almazán hopes Japanese readers will see these ordinary Tokyo blocks in new light

Finally, the book uses one language that needs no translation: the lingua franca of graphics. We believe that new knowledge can be produced not only verbally or numerically, but also graphically. The discipline of scrupulously drawing all the case study areas obliged us to discard vapid rhetoric and focus on tangible aspects that can be mapped, drawn, and eventually designed. We also included numerous photographs, selected after years of fieldwork, building trust with locals, and obtaining rare permission to take bird’s-eye views and intimate interiors shots.

The language of graphics can be analytic as well as aesthetic

Salim Furth: I would ask where people should buy the book, but I think I know the answer. After reading Emergent Tokyo, one is more convinced than ever that it’s worth supporting local merchants. Small bookstores might need to special order. But the book is so visual, it deserves to be on display racks so people can touch it and flip through. It’s also available via Oro Editions and Amazon.

Jorge Almazán: Yes, and on the way home from your local bookseller, you might find a cozy café to read in.

Jimbocho book town, by Nicolas Marguet, CC BY 2.0

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Book Review: The Making of Urban Japan https://www.marketurbanism.com/2022/04/28/book-review-the-making-of-urban-japan/ https://www.marketurbanism.com/2022/04/28/book-review-the-making-of-urban-japan/#respond Thu, 28 Apr 2022 20:43:53 +0000 http://marketurbanism.com/?p=70569 American YIMBYs point to Tokyo as proof that nationalized zoning and a laissez faire building culture can protect affordability. But a great deal of that knowledge can be traced back to a classic 2014 Urban Kchoze blog post. As the YIMBY movement matures, it's time to go books deep into the fascinating details of Japan's land use institutions.

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If you read one book about Japan this year, it should be the beautiful, new Emergent Tokyo: Designing the Spontaneous City by Jorge Almazan and his Studiolab colleagues, including Joe McReynolds. But if you read two books about Japan, as you should, the second one should be André Sorensen’s essential The Making of Urban Japan.

American (and European) YIMBYs point to Tokyo as an icon and modelproof that nationalized zoning and a laissez faire building culture can protect affordability even when demand is very strong. But this body of work is over-reliant on a classic 2014 Urban Kchoze blog post. As the YIMBY movement matures, it’s time to go deep – books deep – into the fascinating details of Japan’s land use institutions.

Sorensen’s own drawings and photographs illustrate the text

Essentials

As with any complex social phenomenon, we are tempted to essentialize Japanese zoning. It works because it’s top-down. It works because Douglas MacArthur imposed strong property rights. It works because of Japanese traditions of impermanence. (If you’re a planner rather than a YIMBY, replace “it works” with “it’s broken”).

Sometimes – often – essential simplifications are useful. And there’s no type of book more boring than the one that promises to tell you how “everything you know about X is wrong,” and then proceeds to offer a bunch of minor caveats to the basically-correct narrative you already knew. Thankfully, this isn’t that kind of book.

Instead, what you come away with is an appreciation for how wrong each of these narratives is: Japanese land use is a delicately-balanced synthesis of centralized and scattered power. If you take away an essential story or lesson, it should be the contingency of outcomes. It works because the central planners were powerful enough to preempt local government but not powerful enough to sideline landowners. It works because local governments encouraged modernization but never had enough funding to execute urban renewal. It works because otherwise strong property rights coexisted along with Land Readjustment. It works because the postwar US and Japanese authorities did not fully enforce their own edicts. It works because of the mini-kaihatsu loophole.

It works because a very specific sequence of institutions rose and declined over a very eventful century, and none of them had the time, power, or money to fully execute its vision.

In the next sections I will draw four notable episodes or themes from the text. This is not a synoptic review – the closest you’ll get to a full narrative is the “it works” section above.

The MacArthur Myth

First off, let’s go all Harry Truman on Douglas MacArthur. One of those essential stories is that the postwar U.S.-written constitution imposed strong property rights. This isn’t just incomplete-wrong, it’s wrong-wrong.

Emperor Hirohito meets MacArthur. (Kyodo News via AP)

As Tsuru (1993) carefully explains…the American draft of the article on land rights was strongly resisted by the Japanese government. The original Article 28 in MacArthur’s draft read, “The ultimate fee to the land and to all natural resources reposes in the State as the collective representative of the people.”

Wait, what? “Reposes in the state”? Did the Soviets get there first?

This approach of the MacArthur draft was eventually replaced by the following wording suggested by the Japanese side which is now Article 29 of the Japanese constitution: “The right to own or to hold property is inviolable. Property rights shall be defined by law, in conformity with the public welfare…” Tsuru (1993:27) suggests that this wording is basically identical to the old Article 27 of the Meiji constitution, and is much more conservative in its protection of the rights of landowners and its weak conception of the public interest than the initial American draft.

Sorensen, p. 156.

Inviolable!

Land Readjustment

A country with inviolable property rights wouldn’t let a two-thirds majority of landowners force the minority to give up their land for a joint development scheme, would it?

¯\_(?)_/¯

I told you it was a delicately balanced synthesis.

The basic structure of LR is that two-thirds of owners representing two-thirds of land can vote to pool a specified area of land, overriding holdouts. Public ways and land are then laid out and the remaining land is redivided among the original property owners.

Planned growth in Japan has relied on Land Readjustment (LR) to an extraordinary degree. With no need for up-front funding and landowner votes as a check on bad ideas, LR may well be superior to eminent domain or land assembly for laying out new neighborhoods.

Sorensen characterizes suburban Japan as a patchwork of planned spaces, where LR succeeded, and “sprawl”, where uncoordinated rural development preceded planning via loopholes and political meddling.

Construction site, by gullevek

Mini-kaihatsu, here and there

One American myth of Japanese land use is that national bureaucrats keep local planners on a leash, preventing them from zoning more strictly. Where that’s correct, it’s almost accidentally so. National bureaucrats, in Sorensen’s telling, have consistently pushed for greater regulation. But when prefectures had the choice of setting a key regulatory threshold at 500 or 1,000 square meters, “only a few” took the stricter option (p. 236).

That 1,000 square meter threshold became the “mini-kaihatsu loophole”. In rural fringe areas, a development below 1,000 square meters did not need development permission.

A typical mini-kaihatsu development consists of 12 houses fronting on a narrow 4 metre lane running at right angles from an existing road.

Sorensen, p. 238

A common size for rice paddies was, “conveniently”, one tan, or 992 square meters.

Here’s a picture of a typical mini-kaihatsu:

Mini-kaihatsu, Houston

Oops, wrong photo. That’s Houston. Here are some Japanese examples from Google:

The concept is the same, and it’s no coincidence that both arise in places with light regulation, strong demand, and little public streets funding. As I wrote about Houston:

Houstonians achieve privacy by orienting many new townhouses onto a share courtyard-driveway, sometimes gated, which creates an intermediate space between the private home and the public street…
The courtyard-driveways also provide a shared play space, as evidenced by frequent basketball hoops. Despite what Jane Jacobs may have told you, city streets are not viable play spaces for 21st-century children. But cul-de-sacs can be. Houston’s courtyard-and-grid model may be the ideal blend, unlocking the connectivity of a city while delivering the secure sociability of a cul-de-sac to a large share of homes.

Ancient alleys

Cul-de-sac alleyways played an important role in pre-modern urban Japan. Sorensen calls them “back-alley nagaya” (shacks or tenements) and notes that the “landowner would often manage and live above a shop fronting the street,” while their employees, or poor artisans lived in the rear areas accessed by a narrow covered lane.”

Other authors have put a more romantic gloss on the alleys. Jinnai Hidenobu says that “designs displayed a sensitivity to what Maki Fumihiko has called ‘hidden depth'”.

[New] groups of urban dwellers, such as factory workers and low-wage white-collar workers, also made their homes in the backstreets. At the entrance to the alley, a wooden wicket was placed, clearly demarcating the main street (public) from the backstreet (semi-public) spaces… In such backstreets, not only could landlords and tenants form a trusting relationship, but tenants themselves lived with one another on the most neighborly terms.

…In Edo, it was in such micro-spaces that a certain degree of self-government took shape; it was in these same back alleys that the foundation of stable society was laid.

Jinnai, Tokyo: A Spatial Anthropology, pp. 124-125.

Jordan Sand’s Tokyo Vernacular: Common Spaces, Local Histories, Found Objects includes a chapter on how alley exploration and appreciation helped form one neighborhood’s identity in 1980s Tokyo.

Most recently, Almazan and Studiolab’s Emergent Tokyo profiles Tsukishima, a modern neighborhood “famous for its narrow roji alleyways.”

[Roji] are often used almost as an extension of the domestic space. As in so many Tokyo neighborhoods, in Tsukishima one sees subtle transitions along the spectrum of public to private space rather than a hard division between the two.

Almazan & Studiolab, p. 172

American urbanists generally hate cul-de-sacs, which prevent connectivity. But residents, especially those with children, love them. And even New Urbanists have re-invented them, calling them “cottage courts.” The “Houston mini-kaihatsu” is a proven economic model for an urban form too universal to be dismissed.

The planner’s gaze

It isn’t just alleys that Sorensen judges more harshly than other writers do. In fact, he has a hard time finding anything good to say about Japan’s land use.

Sorensen’s virtue is his stolid Canadian insistence on presenting facts clearly and with a minimum of emotion. As a reader, one senses that Sorensen’s prejudices seep into the text against his will. (And one trembles to think what unreadable diatribes would have been produced by someone with his sensibilities but not his restraint).

A key example comes on pp. 222-223, where Sorensen nets up the effects of Japan’s zoning code, which allows very mixed uses. He has a long paragraph noting the positive effects – but the words are all in others’ mouths. He cites Jane Jacobs, Jinnai, and six others who point out “very positive consequences of Japan’s radically inclusive approach to land use zoning.” In the next two paragraphs, however, he provides the counterpoint – in his own voice, with only one citation.

It is hard not to feel that Sorensen is favorably disposed toward anything planned and skeptical, if not hostile, to anything unplanned. To Sorensen, “sprawl” denotes unplanned, “haphazard” growth (p. 326). Planned growth, at the same densities, in the same areas, is not sprawl. The same bias pervades his (otherwise excellent!) 2001 article, Building Suburbs in Japan.

He rarely defends his planner’s-eye view. He doesn’t holistically compare planned to unplanned areas and find the latter lacking. Nor does he define key metrics of urban success (e.g. pollution levels, commute times, and housing costs). Instead, he seems to have an intuitive desire to see plans made and brought to fruition, regardless of the merits.

In an era when Tokyo stands as “humanity’s greatest urban achievement,” the institutions that created it deserve a little more credit. But even if Sorensen doesn’t like them, he reports their workings faithfully – and that makes his book a must-read for Tokyophile market urbanists.

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Review: Homelessness is a Housing Problem https://www.marketurbanism.com/2022/04/19/review-homelessness-is-a-housing-problem/ Tue, 19 Apr 2022 21:44:22 +0000 http://marketurbanism.com/?p=70453 In Homelessness is a Housing Problem, Prof. Gregg Colburn and data scientist Clayton Page Aldern seek to answer the question: why is homelessness much more common in some cities than in others? They find that only two factors are significant: 1) overall rents and 2) rental vacancy rates. Where housing is scarce and rents are […]

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In Homelessness is a Housing Problem, Prof. Gregg Colburn and data scientist Clayton Page Aldern seek to answer the question: why is homelessness much more common in some cities than in others?

They find that only two factors are significant: 1) overall rents and 2) rental vacancy rates. Where housing is scarce and rents are high, lots of people are homeless. Where rents are lower, fewer people are homeless, even in very poor places. (In fact, high city incomes correlate positively with homelessness, because more and better jobs lead to higher demand for housing).

By contrast, many other factors that one might think are related to homelessness in fact are not correlated on a citywide basis. For example, since homeless people are generally poor, one might think that places with high poverty rates or high unemployment rates have lots of homelessness. The authors show that this is not the case. Where most people are poor, there is less demand for housing, which translates into lower rents and less homelessness.

One might also think that places with warm weather have lots of homelessness, because homeless people might be attracted to them. But high-rent cold cities like Boston have above-average levels of homelessness, while cheaper warm-weather cities like Orlando and Charlotte do not. However, homeless people are more likely to have temporary shelter in cold cities than in expensive warm-weather cities like San Diego- either because city governments are less motivated to build homeless shelters when no one is at risk of freezing to death, or because the homeless themselves are less eager to use shelters. I suspect that if the authors focused only on highly visible unsheltered homelessness, they might have found a stronger correlation with weather).

It might be argued that shelters themselves (or other social services) attract the destitute. However, the authors find that “a region’s proportion of in-migrants with incomes below the federal poverty line … is entirely unrelated, statistically speaker, to per capita rates of homelessness.”

What about drug use and mental illness? The authors were unable to unearth any city-level data on the frequency of either- but state-level data do not show a strong correlation between the amount of drug use or mental illness and homelessness rates. I didn’t find this surprising, because even if half of homeless people are mentally ill and/or addicted, even some people in these categories might be functional enough that they could find cheap housing if such housing existed. (Having said that, it seems to me possible that unsheltered homeless people might be more severely impaired- so I wonder if the authors would find similar results if they focused on the number of unsheltered homeless).

The last chapter, on policy responses, mentions in passing that reducing zoning regulations might increase housing supply. However, the authors are more focused on infusing money into local governments to support lower-income housing. As a result, their treatment of land use regulation is a bit shallow; they criticize single-family zoning, but housing supply is constrained by a much wider variety of regulations. For example, even in areas zoned for multifamily housing, government limits housing supply by limiting the number of units that can be built on a parcel and requiring land to be used for parking that could otherwise be used for more housing.

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Land Value Taxation and Intertemporal Tradeoffs https://www.marketurbanism.com/2022/04/18/land-value-taxation-and-intertemporal-tradeoffs/ Mon, 18 Apr 2022 14:24:21 +0000 http://marketurbanism.com/?p=70383 Georgists assert that a Land Value Tax (LVT) ensures land is always put to its most efficient use. They claim that increased carrying costs deter speculation. And if valuable land is never held out of use, society is better off. I think the story about incentives is correct. But I question whether pulling development forward […]

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Georgists assert that a Land Value Tax (LVT) ensures land is always put to its most efficient use. They claim that increased carrying costs deter speculation. And if valuable land is never held out of use, society is better off.

I think the story about incentives is correct. But I question whether pulling development forward in time is definitionally more efficient. In a world with transaction costs, tradeoffs abound and it’s worth thinking through the implications of an LVT.

A Tale of Two Cities 

Picture a growing local economy with increasing land values and an LVT. Now suppose we split the time stream and create two parallel universes with different tax rates. In scenario A, we apply an LVT at 75%; in scenario B the LVT is set at 25%.

There are two important questions here:

1) When will a given parcel be forced into development?

2) What intensity of development will the parcel support at the moment it’s put into productive use?

To answer our first question, we look at the tax curves and make some assumptions. Suppose carrying costs push land into productive use at $250 psqft in LVT costs, scenario (a)’s parcel goes into development around year 9 at a $331 psqft. Scenario (b)’s parcel doesn’t see development until year 20 and a ~$1K psqft value.

Given the delta between year 9 and year 20’s psqft valuations, we could expect to see different intensities of development. We’re now left with the question of whether a duplex in nine years is better than a mid-rise in twenty.

Appropriating the full rental value of land would pull development forward, but that doesn’t definitionally lead to it being put to its highest and best use. Highest and best is contingent upon what time scale we’re optimizing for and that choice of time scale is an inherently normative decision.

Terms & Conditions

Now the caveats. This is a simplified thought experiment and all the numbers are completely arbitrary. I’m not making the case that there’s a specific choice between development densities at particular tax burdens. The case I am making, though, is that in a world with transaction costs an LVT would force us to make important tradeoffs.

Also, several things that exist in the real world – but not in this fictional account – complicate our story.

  • Carrying costs are impacted by more than taxes. An aggressive LVT might very well become the lion’s share of carrying costs, but factors like interest rates would matter as well.
  • Liquidity preferences aren’t uniform. There wouldn’t be one psqft LVT cost at which all landholders are pushed to develop parcels. Differences in access to capital and risk appetite would make for a range of values.
  • Land use regulations limit options. Being limited to commercial or varying types of residential or whatever’s specified in zoning would impact potential return and likely developer behavior.
  • Technology could make the tradeoff disappear. If we were able to incrementally densify a parcel without losing the value of the existing structure, there’s not really any intertemporal tradeoff. To my knowledge, this only (kinda sorta) applies to informal developments in Latin America.

All said, I remain a fan of Georgist ideas. Capturing land rents for common infrastructure – whether through an LVT or by other means – is still an idea I support. But when we think about policy prescriptions, we need to recognize their limitations and that tradeoffs always and everywhere abound.

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Entrepreneurs and the Changing Political Economy of Housing https://www.marketurbanism.com/2022/04/06/entrepreneurs-and-the-changing-political-economy-of-housing/ Wed, 06 Apr 2022 14:48:53 +0000 http://marketurbanism.com/?p=70161 Discussions about land use reform focus on policy – as they should. Overcoming NIMBYism will require deep legal, political, and regulatory reform. That said, entrepreneurs may be helping to short circuit the perverse incentives that give rise to NIMBYism in the first place. New companies may be encouraging homeowners to embrace density and helping to […]

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Discussions about land use reform focus on policy – as they should. Overcoming NIMBYism will require deep legal, political, and regulatory reform. That said, entrepreneurs may be helping to short circuit the perverse incentives that give rise to NIMBYism in the first place. New companies may be encouraging homeowners to embrace density and helping to break the tie between homeownership and anti-deveolpment attitudes in the process.

Creating Demand for Density

Belong is an early stage startup making it easier for homeowners to rent out their single family home. The main use case is that of a homeowner renting (instead of selling) after a move.

A lot goes into becoming a landlord and Belong’s elevator pitch is that they simplify the process. The company’s customers access insurance, connect to contractors for repair and renovation, get help with listing, and find anything else they need all in one place.

Belong’s platform puts everything needed for property management in one place

To the extent they’re successful, they’ll be creating a class of small scale landlords with every reason to develop missing middle housing. Transforming the family home from a speculative asset to one producing a monthly stream of revenue makes ADUs and duplexes more attractive. More units mean more tenants and therefore better monthly returns. And once an owner is no longer an owner-occupier, “neighborhood character” concerns become less salient as well.

That said, this is admittedly speculative. Whether single property landlords will be as YIMBY as I suspect is an empirical question for the future. More immediate, though, are the incentives another new startup is creating for homeowners across California.

Densification as the Path to Homeownership

Homestead is a property developer that’s using legislation like California’s SB9 and SB10 to build housing. They work with homeowners interested in the upside of doing a lot split and adding housing like a duplex or an ADU. They also market to prospective homebuyers. California home prices being that they are (obscene), doing a lot split to offset the initial purchase cost is attractive.

Homestead helps buyers climb on the housing ladder by developing and selling half their parcel

While Homestead is a developer, a lot of what they do is reduce cognitive overhead. California permitting processes are byzantine at best and while reforms like SB9 and SB10 have made them better, it’s still like playing snakes and ladders. Making it easier for people to take advantage of hard fought legislative victories is great. Showing a new generation of homeowners that density can be good may be even better.

Short Circuiting NIMBYism

No startup is going to unilaterally fix the housing crisis. That was always going to take major legal, regulatory, and political reform. Still, companies like Homestead and Belong could help shift homeowner attitudes in favor of density. Giving homeowners the personal financial incentive to develop missing middle housing in low density residential neighborhoods would be great for increasing supply. It would also help normalize densification, clearing the way for further development and greater reforms.

Convincing people to support housing on policy grounds is good and necessary. But not everyone spends their Friday night reading Vox explainers. For normal folks who neither know nor care what housing twitter is, creating opportunities to benefit from a pro-supply housing regime will matter. And although we all understand supply elastic housing markets will make society better off on the whole, anything that makes that upside more immediate and tangible for folks just living their lives is only going to help.

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Protecting Housing Affordability by Protecting the Right to Build Housing https://www.marketurbanism.com/2022/04/01/protecting-housing-affordability-by-protecting-the-right-to-build-housing/ Fri, 01 Apr 2022 14:53:51 +0000 http://marketurbanism.com/?p=70075 Legislators in Colorado and Tennessee have introduced bills modeled on Arizona’s Private Property Rights Protection Act, a law that requires municipal governments to compensate landowners when new land use regulations make land less valuable. Both states already have areas with housing affordability problems due in part to land use regulations that are already on the […]

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Legislators in Colorado and Tennessee have introduced bills modeled on Arizona’s Private Property Rights Protection Act, a law that requires municipal governments to compensate landowners when new land use regulations make land less valuable. Both states already have areas with housing affordability problems due in part to land use regulations that are already on the books. Requiring local policymakers to compensate property owners for downzoning going forward won’t do anything to reduce existing barriers to housing construction, but they can at least help prevent the problem from getting worse. 

Though the Fifth and Fourteenth Amendments to the Constitution state that Americans must be compensated when private property is taken by the government, the Supreme Court has long held that state and municipal governments generally don’t have to compensate property owners when land use restrictions reduce their property values, even the rules eliminate nearly the entire value of the property in question. In 1926, the Supreme Court ruled in Euclid v. Ambler that local governments’ police powers, delegated to them by their states, give them the authority to restrict real estate development. The 1978 decision Penn Central v. New York further entrenched this authority. The Court found that land use restrictions are not takings requiring compensation for property owners so long as the property maintains any economic value at all. In Smyth v. Falmouth, the Court held that even a building permit denial that reduced a property’s value by 91% didn’t require the locality to compensate the owner.

Law professor Ilya Somin points out that it wasn’t always this way. The District Court that heard Euclid prior to the Supreme Court determined that local governments were required to compensate property owners for regulatory takings just as with eminent domain. Their opinion stated: 

The argument supporting this ordinance proceeds, it seems to me, both on a mistaken view of what is property and of what is police power. Property, generally speaking, defendant’s counsel concede, is protected against a taking without compensation, by the guaranties of the Ohio and United States Constitutions. But their view seems to be that so long as the owner remains clothed with the legal title thereto and is not ousted from the physical possession thereof, his property is not taken, no matter to what extent his right to use it is invaded or destroyed or its present or prospective value is depreciated. This is an erroneous view. The right to property, as used in the Constitution, has no such limited meaning. As has often been said is substance by the Supreme Court: ‘There can be no conception of property aside from its control and use, and upon its use depends its value.’

In overruling the District Court, the Supreme Court determined that zoning restrictions including single-family zoning was a valid use of police power. This has allowed local governments to consider the benefits of land use regulations, including rules limiting residential development to exclusively expensive single-family houses on large lots, without factoring in the cost that taking away the right to develop denser housing has for property owners. The wide authority states and localities have to implement land use restrictions without compensating property owners has created the conditions for housing supply constraints and affordability challenges that many parts of the U.S. are dealing with today. In an alternative world where the Court required localities to compensate property owners for the regulatory takings of zoning, local policymakers would have faced different incentives in implementing land use regulation. They would have had to weigh the benefits of restrictions on development against the cost of compensating property owners for taking away development rights, and reducing their property values, with tax dollars. This alternative world has existed in Arizona since voters approved the Private Property Rights Protection Act in 2006. The state law requires governments to compensate property owners for regulatory takings, such as implementing a new restriction on how a parcel of land can be used, and it has prevented several downzonings to date.

Since the Property Ownership Fairness Act passed, policymakers have rejected multiple proposals for downzoning after realizing that taking away property owners’ development rights would require large outlays. When Tucson neighbors called for a ban on housing construction near the University of Arizona that was affordable to students, policymakers determined that downzoning wouldn’t be worth the cost.

Elsewhere in the country, policymakers have repeatedly downzoned neighborhoods just when infill redevelopment becomes financially feasible. The DC Zoning Commission recently downzoned my neighborhood after developers began replacing rowhouses, duplexes, and fourplexes with larger stickplexes. At the same time, they upzoned a nearby commercial corridor, but it’s not yet clear how much new development will be feasible to build there. This follows the pattern of the Bloomberg Administration in New York, which downzoned many neighborhoods that were experiencing gradual infill redevelopment while upzoning smaller commercial corridor areas for higher density. Under a law like Arizona’s, upzoning would remain feasible, but downzoning would require difficult budgetary tradeoffs.

The Supreme Court’s finding that most land use restrictions are not takings has allowed local governments to set vast limits on the right to build housing, contributing to the widespread housing affordability challenges the U.S. faces today. The Private Property Rights Protection Act has proven to be a way to prevent further limits on housing construction by requiring policymakers to consider the costs of land use restrictions in addition to the benefits.

Edit: Thanks to Ilya Somin for two corrections to this post!

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Reasons to be a Census skeptic https://www.marketurbanism.com/2022/03/28/reasons-to-be-a-census-skeptic/ Tue, 29 Mar 2022 01:45:33 +0000 http://marketurbanism.com/?p=70000 Over the past week, the press was chock full of 2020-style headlines like “Census Bureau Confirms Pandemic Exodus from SF.” That’s because according to the Census Bureau, virtually every urban county in the U.S. (even urban counties in growing metros like Dallas and Atlanta) lost population between July 2020 and July 2021. But is the […]

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Over the past week, the press was chock full of 2020-style headlines like “Census Bureau Confirms Pandemic Exodus from SF.” That’s because according to the Census Bureau, virtually every urban county in the U.S. (even urban counties in growing metros like Dallas and Atlanta) lost population between July 2020 and July 2021. But is the hype justified?

I suspect not, for a variety of reasons. First of all, Census Department estimates have, in recent years, tended to underestimate urban populations, at least in some cities. For example, in 2019 the Census estimated Manhattan’s population as 1.628 million, while the actual count of 2020 showed 1.694 million residents- an underestimation of over 65,000 people. The Census estimated Brooklyn’s population at 2.559 million, but the actual count showed 2.736 million- an underestimate of over 150,000. (On the other hand, the 2020 population count was actually a bit lower than the 2019 estimates for Washington and San Francisco).

Second, even the 2020 Census probably undercounted cities more than it undercounted suburbs. How do we know this? Because according to the Census Bureau itself, it undercounted Blacks by 3 percent and Hispanics by 5 percent, while slightly overcounting whites. These groups tend to be more urban than suburban (at least compared to whites) – so if the Census undercounted these groups, it probably undercounted urban population generally.

Third, the timing of the Census Bureau’s estimates does not quite make sense to me. By July 2021, rents had already began to rise in Manhattan; the low rents of February and March were already disappearing. This suggests that by July, population (and thus demand) was increasing.

Fourth, even if the Census Bureau’s population estimates were valid for the summer of 2021, they certainly aren’t valid any more. How do we know? It seems pretty obvious that in New York City, rents have skyrocketed to pre-COVID levels and beyond. According to streeteasy.com, rents in New York City bottomed out in January 2021, reached pre-COVID levels in December 2021, and have continued to rise. If rent is rising, it seems likely that demand is rising as well.

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Are there places in America with diversity *and* equality? https://www.marketurbanism.com/2022/03/28/are-there-places-in-america-with-diversity-and-equality/ Mon, 28 Mar 2022 18:28:52 +0000 http://marketurbanism.com/?p=69965 Are there diverse places in the U.S. where racial differences among residents are small enough to be undetectable to a typical resident? Places where Roger Starr's ideal of "integration without tears" might be a reality, where people of different races socialize as equals, share culture and priorities, and work in the same range of occupations?

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The relationship between blacks and whites in the residential subdivisions out beyond the suburban ring suggests that middle-class people of both races recognize each other as equals. Among middleclass Americans, at least in the special circumstances of these Pennsylvania communities and others like them around the country, the terrible burden of race has been lightened greatly.

Roger Starr, Integration Without Tears, 1994

We know there are large and persistent gaps between the principal racial and ethnic groups in the U.S. Those gaps feel especially stark to people who live in gentrifying neighborhoods, which punch above their weight in national discourse.

But are there diverse places in the U.S. where racial differences among residents are small enough to be undetectable to a typical resident? Places where Roger Starr’s ideal of “integration without tears” might be a reality, where people of different races socialize as equals, share culture and priorities, and work in the same range of occupations?

Monochrome suburb. Photo: Wayne S. Grazio

I don’t have enough data to drill down to neighborhoods. But the American Community Survey allows a comparison of Public Use Microdata Area (PUMAs). Here are the national results:

I investigate white, Black, and Latino heads of households (HH) in PUMAs in which at least 20% of HH are white and at least 25% are Black or Latino. I measure inequality as the sum of log differences between whites and nonwhites across several dimensions:

  • Income at the 25th and 75th percentiles, for HH age 30-65
  • High school-or-less education, for HH age 30-55
  • Homeownership share, for HH age 40-70
  • Home value, for all homeowning HH
  • Median age, for all HH

These were intuitive choices to me, and the age cutoffs are intended to avoid compositional effects driven by age differences. The final dimension, age, differs much less than the others across racial groups.

At 100,000 people or more, most PUMAs are big enough to contain several towns and many neighborhoods, some of which might be quite diverse and others monochromatic. But the results can at least tell us where we might be likely to find diverse-and-equal neighborhoods. The rest of this post zooms in on a few regions.

Atlanta

There’s only one PUMA in the nation that qualified as fully “equal” according to my rubric, the area around Stockbridge, Georgia, in the southern Atlanta exurbs. There are some differences among the races here, but they cancel each out. Whites have higher incomes and homeownership rates than nonwhites, but lower educational attainment and home values.

Because Atlanta has a large Black population, it has many diverse PUMAs, including 3 (out of 15 nationwide) that I rated as “nearly equal”. Atlanta shows the pattern I expected to find in many metros: highly unequal centers, relatively equal exurbs.

Is exurban Atlanta the land of equality?

Texas Triangle

Texas cities are similar to Atlanta in some ways – diverse Sunbelt cities with rapid exurban growth. But in Texas, Latinos are the principal minority. And the central-exurban pattern breaks down. The “extremely unequal” sections of Houston and Dallas are not downtown; they’re the elite neighborhoods stretching west and north of downtown, respectively for quite a distance. Unlike in Atlanta and most other U.S. cities, though, those elite neighborhoods allow plenty of cheap multifamily housing at their edges. As a result, they have large enough nonwhite populations to get onto the map. What shows up as a concentration of extreme inequality could be reframed as extreme diversity.

The Texas Triangle

San Antonio is quite unlike Dallas and Houston. It has a wide swath of nearly-equal northern suburbs. A potential reason is that white San Antonians are less affluent. The Houston-San Antonio median income difference is $16,000 for whites but only $2,000 for Latinos.

The great white North

This analytical approach also highlights how little diversity exists in northern cities, relative to national averages. Another map, showing white population share, can be a useful reference. But in cities from Boston to Seattle, this exercise is not very useful. Instead, it’s a reminder that “diversity” is contextual.

Bringing it home

This exercise was partly inspired by my children’s rarified experience of race in America. Their playmates, at church and our homeschool co-op, are racially diverse but appear relatively equal in other regards. So I was chagrined to learn that our home PUMA is 26th highest for inequality among the 803 diverse PUMAs.

D.C. and Baltimore: Equality as the inverse of coolness

The District of Columbia is even more extreme, and it shows the age inversion common to affluent urban cores. In most PUMAs, white HH are slightly older than Black and Latino HH, but the difference is small. In central D.C., Baltimore, and similar cities, the pattern is inverted: white HH are substantially younger (median age 38) than their Black neighbors (57) in the Northeast DC PUMA.

Integration without tears?

Since diversity and equality have strongly positive connotations, it would be easy to identify the green areas on the map as “good” and the brown areas as “bad.” But the kind of equality profiled here implies a lack of diversity across non-racial dimensions.

Reducing national inequality implies lifting people up; reducing local inequality implies keeping them out. I began this article with a Roger Starr quote. It’s worth noting that his praise of woodsy Monroe County, Pennsylvania, came in the context of his increasing pessimism about integration in urban neighborhoods.

Whatever Starr’s other faults, he knew what he was looking at. In this exercise, I found that his Monroe County has the greatest similarity between races of any PUMA in the country.

Roger Starr’s America

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