Throwing the Poor Out of Suburbs

(cross-posted from cnu.org)

Much has been written about gentrification and about the specter of poor people being displaced from cities- despite the fact that nearly every central city still has higher poverty rates than most of its suburbs.

But the City Observatory blog has an interesting post about one Atlanta suburb’s attempt to gentrify not through market forces, but by using public money to buy up and destroy an apartment complex domianted by low-income African-Americans.   On other words, the city’s goal isn’t gentrification that might result in displacement- it is displacement as a goal in itself, gentrification or no gentrification.

Are Foreigners to Blame for High Housing Prices?

(cross-posted from planetizen.com)

Every so often I read an argument that says something like this: “There’s no way that rents can ever go down in expensive cities like New York and San Francisco, because rich foreigners are buying up everything, and as a result demand is essentially infinite. So there’s really no reason to allow new apartments because the foreigners will just buy them all.”

This argument could certainly be true in theory: for example, if an entire city were so expensive that only wealthy foreign investors could afford to live there. But it doesn’t seem to fit the social reality of the expensive city I am most familiar with (New York).

If demand was essentially infinite, there would be some evidence of this fact other than high real estate prices. For example, if New York was growing faster than any city in the United States, there might be a credible argument that new demand is truly insatiable. In fact, many low-cost cities are growing far more rapidly than New York and yet have cheaper rents. Between 2000 and 2010, Austin and Raleigh (both of which are far cheaper than New York) grew by 20 and 46 percent, respectively, while New York grew by less than 10 percent.

It could be argued that New York is dissimilar to other high-growth cities, because the number of wealthy foreigners is so huge that it makes New York a high-growth city. For example, if New York had to accommodate not only half a million new residents per decade but also three million wealthy foreigners seeking second homes, its housing-consuming population would have grown by about 45 percent over the past decade, about the same level of population increase as Raleigh. But are there really that many wealthy foreigners in the New York housing market?

I suspect not. According to a New York Times article about the evils of foreign investment in New York housing, “About $8 billion is spent each year for New York City residences that cost more than $5 million each.” Using the magic of long division, I calculate that even if each residence cost only $5 million and not a penny more, there would be 1600 such residences. In fact, some residences cost far more, so the actual number if super-expensive residences is lower (and of course, the number of such residences purchased by foreigners is lower still). In a city with 8 million people (and thus a few million households), a thousand or so really rich people seems to be like a drop in the bucket, even if their wealth does give them disproportionate influence and notoriety.

Moreover, it seems to me that if New York was really flooded with millions of foreign billionaires, housing prices would be even more expensive than they are. During my last year in New York (2013-14), I lived in a 448-square-foot studio in Midtown and paid $2330 a month in rent  (The same apartment would cost $2680 today). This rent is very expensive by the standards of Planet Earth—but by the standards of Planet Foreign Billionaire Oligarch (FBO), it is nothing. What self-respecting FBO lives in a 450 square foot studio? And what self-respecting FBO pays less than $3000 in rent? I don’t know how much FBOs make, but I’m guessing that the median FBO income was at least $10 million per year (1 percent interest of $1 billion in wealth)—which means that any self-respecting FBO should be able to afford $60,000 per month (the price of the most expensive New York apartment I found on zillow.com).

And I wasn’t even living in the neighborhood’s cheap housing: had I chosen to live in a walkup, I could have paid around $1700-1800 per month—not exactly billionaire rents. And in the supposedly oligarch-ridden Upper East Side, rents are even cheaper.

And these non-FBO-friendly rents are in the nice parts of Manhattan; rents are even cheaper in most of the outer boroughs. Thus, it is pretty clear that to live in New York (even in the nice parts of Manhattan) you don’t have to be a FBO.

In sum, the overwhelming majority of people who are living in, and bidding up the price of, New York real estate are not FBOs. There is no reason, other than government regulation (and the technical difficulties of building housing in a city that is already “built out”) why supply could not rise to meet demand more effectively.

Having said that, there is two grains of truth in the “insatiable demand” argument.  First, even if New York only has a thousand FBOs, it has lots of domestic rich people- not just billionaires, but “ordinary” people earning in the high six figures, people who cannot afford to pay $60,000 per month but can afford to pay $5,000.  The more rich people a city has, the more money that will be used to bid up real estate prices- which in turn means the city has to work harder to keep supply growing.

Second, even if an adequate building supply keeps rents down, it might be that no politically feasible policies will increase supply enough to restrain rents. But as readers of this blog are probably aware by now, “policies I favor” and “politically feasible policies” are two concepts that rarely intersect.

The Case Against Jaywalking Laws, Part 2

(cross posted from planetizen.com)

Some months ago, I wrote that laws against so-called “jaywalking” (that is, crossing in places other than crosswalks or where traffic lights encourage pedestrians to cross) fail to promote safety, because traffic lights are inadequate guides to safety. When crossing midblock, a pedestrian need only watch out for traffic coming in one direction—right toward her. By contrast, when crossing at a light, a pedestrian may be in less danger from cars coming straight at him, but may be attacked by cars making left and right turns. Moreover, it is not at all clear that jaywalking is a major cause of pedestrian fatalities; although most crashes do occur outside intersections, these crashes often occur in places where there is no easily available crosswalk. According to traffic writer Tom Vanderbilt, “While jaywalking is often cited as a cause of pedestrian accidents, less than 20 percent of fatalities occurred where a pedestrian was crossing outside an easily available crosswalk.” And even where a pedestrian is jaywalking, a crash may be caused primarily by driver misconduct.

However, my article did not fully address the social harms caused by these laws. I did mention that to the extent these laws discourage walking, they increase traffic danger, because more cars mean more potential crashes.

But even if this was not the case, the social benefits of jaywalking laws might be outweighed from their costs. In particular, jaywalking laws are harmful from a public health perspective, a social equity perspective, and a libertarian perspective.

The public health costs from increased driving have been amply discussed in smart growth literature. But just to summarize the key issue, when we drive instead of walk, we create two major types of public health risks. First, we harm ourselves. Less walking means less exercise, which means an elevated risk of many diseases; for example, the risk of type 2 diabetes is 31 percent lower for participants who engaged in regular moderate-intensity physical activity such as walking. Second, people who drive more and walk less endanger the rest of society. Even leaving aside the risks of climate change, particulate matter and other pollutants emitted from motor vehicles create significant costs. For example, one study found that particulate matter emitted from motor vehicles creates $211.6 million of health care costs in Auckland, New Zealand alone. So to the extent jaywalking laws reduce walking, they create increased risks of harm for both their intended beneficiaries and for society as a whole.

From a social equity perspective, jaywalking laws disproportionately harm the poor in two ways. First, poverty-level households are less likely to own cars than the average household, which means they walk more and thus are more likely to be ticketed.  20.4% of all poor people live in households with no access to a car, more than twice the national average. In urban areas, these percentages are higher: for example, in New Orleans, 46.7 percent of the poor live in such households, including the majority of the black poor.

Second, even if all Americans walked equally, jaywalking fines would harm poor pedestrians more than everyone else because these fines tend to be quite large (often in the $100-200 range) and are unrelated to ability to pay. This is especially true in cities where fines can lead to other legal consequences. For example, Ferguson, Missouri is notorious for its aggressive use of fines. If a Ferguson resident is fined and is more than a few minutes late* for a court date, she is arrested and charged additional fines totaling at least $170 ($120 for the main fine plus a $50 fee for an arrest warrant) and if she cannot afford to pay her fines she is imprisoned until the next court session. Because the relevant local court is in session three days per month, this unlucky resident may spend weeks in a local jail—for which privilege she is fined yet again!

Finally, such laws make no sense from a libertarian perspective. The ordinary (albeit oft-violated) norm of American public policy is that people should be at liberty when they are not harming others; for example, we allow smoking because smoking primarily harms only the smoker. Despite the fact that smoking creates indirect health consequences such as health care costs that affect society as a whole, society treats smoking more leniently than walking.

Where jaywalking laws are not enforced, these laws may not do much harm. But to the extent these laws are actually enforced, they create pollution and disease by reducing walking, and redistribute money from poor pedestrians to not-so-poor local governments.

*Technically, the resident must be absent from court for these additional fines to apply.  However, courtroom doors close just five minutes after a court session starts, according to a recent Harvard Law Review article.

Maybe Urban Schools Aren’t So Bad

(cross-posted from cnu.org)

It is conventional wisdom that big cities have problems retaining the middle class because of poor schools.  But many older cities labor under a disadvantage that their suburbs don’t have- lots of students from underprivileged background.

A recent study suggests that when one controls for social class, Chicago schools are actually not so bad. This study compared the test scores of Chicago’s elementary schools with those of other Illinois schools with similar poverty rates, and calculated a “Poverty-Achievement Index” (PAI) based on this comparison.  As it happens, 55 of the 100 schools with the best PAIs were in Chicago- which is to say, their test scores were better than those of suburban or small-city schools with similar student bodies.

Cookie Cutter? What Cookie Cutter?

suburban_mcdonalds
by James A. Bacon

McDonalds is one of those American companies that the fashionable set love to hate. Critics gripe about everything from the nutritional quality of its food to the way it sources its beef. One recurring source of scorn is how the restaurant chain undermines community character by building loud, garish stores, typically surrounded by asphalt on locations accessible only by automobile. It’s not clear to me whether McDonalds is imposing some atrocious architectural template upon its stores nationwide or whether the template is imposed upon McDonalds by the Euclidian zoning codes of jurisdictions across the United States. Regardless, there is nothing inevitable about the red roofs, golden arches and ticky-tack decor.

Ed McMahon, whose work on Virginia tourism and land use I highlighted in a recent blog post, responded to a comment in that post to the effect that “McDonalds didn’t make billions by letting locals operate different restaurants under a common banner.” Actually, he says, McDonalds is more flexible than most people realize.

“I just wanted to point out that McDonald’s does indeed allow locals to operate  restaurants that are totally different architecturally from what most Americans are used to seeing,” he says. By way of proof, he offers some of the photos he has collected of McDonalds restaurants around North America and Europe.

Norway

Norway

Continue reading

Housing Affordability for Millennials

millennial_affordability

by James A. Bacon

As the global epicenter of technology innovation, Silicon Valley creates a massive amount of wealth — but the housing supply, hemmed in by geography and zoning regulations, is incredibly restricted. The resulting housing crunch is so severe that Millennials are hard pressed to live there. The median income for Millennials in the San Jose metropolitan area is the highest of any of the 50 largest metropolitan regions in the country — $53,000. But the median home value of $925,000 requires an income of $133,000 to pay a mortgage (not to mention a 20% down payment). The earnings gap, according to a new housing index published by Bloomberg, is $80,000!

If Millennials are the life-blood of creativity and innovation for metropolitan economies, the cost of housing could be Silicon Valley’s Achilles heel. The housing supply is so out of whack, as it is in neighboring San Francisco, that, as much as Millennials are drawn to the excitement and glamour of working at companies like Apple and Google, they simply can’t afford it unless they’re willing to live five or six to an apartment.

According to Bloomberg, housing is unaffordable for thirteen of the 50 largest U.S. metros. The biggest affordability gaps are on the West Coast, but Boston, Washington and New York are on the list as well. Young people are willing to tolerate sub-par living conditions for a while, especially while they are single. One of my daughters shared a tiny rental apartment with four roommates while living in Jackson,Wyoming, which, due to its awesomeness, has similar affordability issues. But she rented her own place when she moved back to Richmond. And now that she is getting married, she and her fiance have no trouble affording a comfortable starter home in a nice neighborhood near the University of Richmond. When educated Millennials are ready to get married and start families, the idea of sharing a house with four or five roommates is not a serious option. Continue reading

What Robert Moses Got Right (and Kansas City Gets Wrong)

by Michael Lewyn

Robert Moses is most famous (or perhaps infamous) for paving over large chunks of New York City with highways. But he also built and rehabilitated thousands of acres of parks and playgrounds; and in this area his contribution to the city was more unambiguously positive.

Moses believed parks should be used not just for leisurely contemplation but for active recreation; for example, he added eighteen playgrounds to Central Park alone. Moses also commonly added ballfields, tennis courts and other sports-oriented spaces to city parks.

By contrast, Kansas City has many chunks of lawn that include no active uses whatsoever; some of them don’t even include benches to sit on. These grasslands (see here for an example) waste lawn that could be used for housing or commerce, artificially reducing city density and value without creating any compensating value.

(Cross-posted at cnu.org)