Urbanists and Evidence

I have several goals in publishing The Gated City. I hope to bring an awareness of the economic importance of cities to a wider audience. I hope to teach economists something about cities. And I hope to teach urbanists something about economics.

It’s disappointing to see that, to at least some extent, the evidence continues to bounce off of urbanist writers. Lloyd Alter strangely cites underdevelopment of many New York neighborhoods as evidence against my thesis — that tight development rules are preventing rich cities from adding enough new housing. He doesn’t appear to be aware that in places like New York, there is quite a large housing premium over and above construction costs; the difference in housing costs is not primarily about the difference in construction costs.

Alter falls into arguing that because a place builds a lot it must somehow have built enough — an argument I anticipate and respond to in my book. He confuses cause and effect, arguing that cities with new, tall buildings are less culturally interesting because of those new buildings. That’s not correct; developers build expensive high rises in response to high levels of demand, and it’s the failure to respond adequately to that demand that drives real estate costs up, forcing out marginal businesses — including independent stores and other charming firms. He defends tight limits on housing on the grounds that they prevented a big collapse in housing markets during the housing bust. This is simply wrong — prices in San Francisco have fallen 40% from their bubble peak — and it also ignores the critical role tight housing markets played in turning rising incomes in places like San Francisco and New York into a nation-wide housing bubble.

Alter winds up essentially endorsing the dynamic I find so troubling:

I am sorry, That’s backwards, they are the richest and most productive cities because of those limits, because they are attractive and exciting and nice places to live, with history and culture and old buildings and leafy streets. They attract the best and the brightest and the most ambitious, every Liza Minelli singing “If I can make it here, I’ll make it anywhere”, and are Darwinian in their effectiveness at picking the successes and turfing the failures. Take that away and you have nothing. Or maybe Houston, same thing.

Houston is boring, he seems to argue, because its residents weren’t smart or ambitious enough to make the piles of money necessary to afford a life in New York. Sorry chumps, you just lost the Darwinian struggle!

I like Alter, and I enjoy reading his work on urban design. It’s very important, however, that urbanists heed the evidence and understand the damage that development restrictions do to middle-class mobility and the national economy. If you love the look of the place so much that you’re willing to ignore its impact on people, you’re going to wind up with bad places and poorer people.

Comments

  1. Daniel says:

    Funny, just before this post popped up in my RSS feed I bought your Kindle Single. Now I’m even more excited to read it!

  2. Lloyd Alter says:

    Thanks for your very quick response to my post. I do worry about the future of housing for the middle class, but primarily because it is threatened with becoming extinct. I still believe that there are lots of low density brownfields and industrial sites that can be upgraded, and that it is not yet necessary to demolish those places that we love for high density. Nonetheless I am properly chastened.

  3. chrismealy says:

    I think people would be more accepting of new development if it wasn’t always the case that the new development was uglier and more brutal than whatever was there before (except for Portland’s Pearl District).

  4. Luke says:

    Promoting density by getting into an argument over Manhattan is like trying to improve the performance of our schools by badgering the students with 3.9 GPAs. Why not rather target states like New Hampshire which try to maintain rural densities across the state? Even typical suburban densities are the exception there (apart from the uniformly low density, NH cannot be considered to be a rural state).

    Consider the New Housing Characteristics data in the census. The average lot size of a single family home built in the Norteast over the last decade was more than 3 times the average lot size in the West (median lot size of new single family homes in the Northeast was more than 1/3 acres, average lot size was 3/4 acres). Forget high rises, many communities consider suburban densities to be too dense.

  5. Rick Hills says:

    As I noted in this post on your book, it is a misconception to believe that, because cities like New York City add large residential developments to their housing mix, that, therefore, housing supply is meeting demand. In fact, the larger developers are counting on zoning restrictions to keep supply low enough to make their new units (often located in suboptimal industrial zones, far from parks or public transit) marketable.
    Luke is incorrect to say that NYC is adequately meeting housing demand on the theory that, after all, NYC is very dense. Required density has to be measured relative to demand: NYC actually has kept its zoning envelope very tight, allowing a miniscule number of new permits — 25,000-35,000 or so over the last decade — in response to extraordinary demand.

  6. NoeValleyJim says:

    Prices in San Francisco have *not* fallen 40% from the peak. They have fallen that much in the entire MSRP, but in the City of San Francisco proper, much less than that, more like 20-25%.

    Prices when up faster in the suburbs during the boom as well, particularly for marginal exurban communities.

    So growth restrictions have flattened the boom/bust cycle, at least here.

  7. Mixner says:

    He doesn’t appear to be aware that in places like New York, there is quite a large housing premium over and above construction costs; the difference in housing costs is not primarily about the difference in construction costs.

    Both land costs and construction costs are higher in New York. Another reason for higher prices is that it’s…NEW YORK. There’s only one NYC. Its unique set of amenities make it uniquely attractive.

    In order to determine how much the regulations that you oppose increase housing prices, you need to control for all these other factors that inflate housing prices in New York.

    Then and only then might you be in a position to argue that the cost of those regulations exceeds their benefit in terms of limiting noise, congestion, crowding, pollution, and the other negative externalities of higher density.

  8. Luke says:

    Rick,

    I never suggested NYC was meeting demand, and as a free marketer I believe it is fair to criticize them and Californian cities for their restrictions. However most people have a comfort level wrt to density, at which point they are going to want restrictions. I am just more willing to be forgiving of people living at 70000/sq mile wanting restrictions than of people who want to maintain sub 1000/sq mile densities.

  9. Kent says:

    I haven’t read your book yet. One problem I have with relaxed regulation is that it incentivizes inaction. If someone owns a shitty low-rise building, why would they bother rebuilding when they can simply reap the benefits of upzoning via land value?? I think a better solution is capping heights and then providing incentives for building to that set height.

  10. Both Ryan and Lloyd are correct in some ways. Loosening development restrictions can lower prices and make migration easier. But loosening development restrictions can also have the unfortunate effect of degrading the beauty and desirability of a location. In other words, development limits have both benefits and costs.

    I have seen economic studies of the value of historic preservation for individual buildings, but I’m not aware of studies that quantify the impacts at larger scales, like neighborhoods and cities. Also, quality of life factors are notoriously disputable and difficult to quantify for economic studies.

    That’s why planning and zoning rules are usually hashed out in the political arena. Economic studies can help to inform, but values and visions are codified by the political process.

  11. Alex B. says:

    @Laurence

    I think there’s a key difference in absolute restrictions on development and density, and with the process those regulations use.

    The argument should be not just to make development easier (though that’s part of it), but to change the path of least resistance for any development project to achieve a better outcome. Chris Leinberger often uses the phrase “make doing the right thing easy.” Too often, what we’d describe as ‘good’ development projects have to jump through extra regulatory hurdles.

    On one level, we need to reduce those barriers in total (certainly in the case of some density restrictions). On another level, we need to change the process so that it’s clear and transparent and predictable, but also so that it encourages better outcomes in terms of design and quality of development.

  12. Mixner says:

    Alex B,

    Perhaps there are some density restrictions that we would be better off without, but simply asserting that there are isn’t evidence that it’s true. You have to show it. Laurence’s point that the “quality of life” benefits of restricting density are very hard to measure and quantify means that it would be difficult for you to demonstrate in any kind of rigorous way that density restrictions do more harm than good. I know Ed Glaeser has tried to do this, but I find his estimates of the costs of restrictions extremely dubious.

    As for changing the process, what specific changes do you propose? Land use regulations are generally done at the local level, and seems to me generally more open and transparent and participatory than decisions made at higher levels of government. But if you have a proposal for improving the process, let’s see it.