Law Library. CC image from Janet Lindenmuth

Via the always interesting Land Use Law Professors blog, I came across this summary from interfluidity (written by Steve Waldman) of the main points of Avent, Glaeser, and Yglesias.  Dubbed the econourbanists, Waldman summarizes their arguments:

In a nutshell, the econourbanists’ case is pretty simple: Cities are really important, as engines of the broad economy via industrial clustering, as enablers of efficiency-enhancing specialization and trade, as sources of customers to whom each of us might sell services. Contrary to many predictions, technological change seems to be making human density more rather than less important to prosperity in the developed world… The value of human work is increasingly in collaborative information production and direct personal services, all of which benefit from the proximity of diverse multitudes. Unfortunately, in the United States at least, actual patterns of demographic change have involved people moving away from high density, high productivity cities and towards the suburbanized sunbelt, where the weather is nice and the housing is cheap. This “moving to stagnation”, in Avent’s memorable phrase, constitutes a macroeconomic problem whose microeconomic cause can be found in regulatory barriers that keep dense and productive cities prohibitively expensive for most people to live in. It is not that people are “voting with their feet” because they dislike New York living. If people didn’t want to live in New York, housing would be cheap there. It isn’t cheap. Housing costs are stratospheric, despite the chilly winters. People are voting with their pocketbooks when they flee to the sun. (“The rent is too damned high!”) Exurban refugees would rush back, and our general prosperity would increase, if the clear demand for high-density urban living could be met with an inexpensive supply of housing and transportation. The technology to provide inexpensive, high quality urban housing is readily available. If “the market” were not frustrated by regulatory barriers and “NIMBY” politics, profit-seeking housing developers would build to sell into expensive markets, and this problem would solve itself.

Waldman, however, is skeptical of how effective these solutions would be:

One should always be careful of claims that problems could be solved if only we “let the market do its work”. I don’t mean to go all PoMo, but to the degree that there exists an institution we might refer to as “the market”, it is doing its work and it is not doing the work Ygesias and Avent ask of it.

Far be it from me to play down the role of unintended consequences.  However, what would ‘letting the market do its work’ actually look like?  Letting the market work isn’t a binary choice, either – our housing and real estate markets “work” now in one fashion under a certain regulatory regime, and they would continue to do so in a changed regulatory environment – perhaps with wild changes in outcomes, or perhaps not.

The most likely outcomes, however, would be via incremental changes to the regulatory process – not fundamental ones. In The Atlantic Cities, Charles Wolfe discusses proposed land use reforms in Seattle, such as:

• Allow Small Commercial Uses in Multifamily Zones and Bring Back the Corner Store
• Concentrate Street-Level Commercial Uses in Core Pedestrian Zones Near Transit and Allow Residential, Live-Work or Commercial Uses in Other Areas Based on Market Demand
• Enhance the Flexibility of Parking Requirements
• Change Environmental Review Thresholds
• Encourage Home Entrepreneurship
• Expand Options for Accessory Dwelling Units and Rental Incomes
• Expand Allowance of Temporary Uses

These are the kinds of reforms that stand realistic chances of approval.  They are marginal changes, tweaks to regulations that loosen some aspects and tighten others.  Allowing small-scale commercial uses and home entrepreneurship in residential zones is a minor change in the allowed uses; legalizing accessory dwelling units is a minor change to allowed unit densities (and not necessarily a change in built space); adjusting thresholds for environmental review is a matter of process.

Waldman argues that the “thicket” of zoning and process is a de facto property right for a landowner, ensuring controlled change under certain parameters for the surrounding land – and that changing these de facto rights is not easy, nor should it be:

If we reform away urban zoning restrictions, are we going to invalidate the restrictive covenants of suburban developments? Affluent urban property owners would have almost certainly evolved institutions that perform the functions of community associations if they were not able to rely upon the good offices of municipal government for the same. If restrictions on higher-density development are illegitimate, then should the state refuse to enforce such restrictions when they are embedded in private contracts? Perhaps the answer is an enthuastic “Yes!” After all, over the last 60 years, the state intervened very nobly to eliminate a “property right” enshrined in restrictive covenants and designed to exclude people of certain races from their neighborhoods. Three-thousand cheers for that! But state refusal to enforce previously legal contracts sounds a lot less like “letting the market work” and a lot more like deliberate government action.

This passage raises two issues.  First, as seen in the Seattle example, no reformer is realistically proposing to reform away all zoning restrictions.  Indeed, many of the proposed solutions actually involve changing the processes involved in making those decisions (and adjusting them over time) to allow for more incremental changes over time.

In other cases, legitimate concerns are often mis-matched with the available regulatory tools.  Zoning can easily regulate form, and more broadly, use – but is it the proper mechanism to regulate the locations of yoga studios (bonus points for headline puns)?  Historic preservation processes can easily be co-opted out of a broader desire for some kind of design review, as another example.

Second, the idea of some ideal, free-market outcome is misplaced. There’s no doubt that the forms of our cities are shaped by all kinds of regulation and legal structure.  Rather than pushing the result of reform as a move towards some free(r) market ideal, I think these attempts at reform instead reflect a growing understanding of how markets work and how market forces can be used in public policy (see Chris Bradford on the role of economics education in urban planning and other public policy professions).

Likewise, the move towards using market forces to better allocate scarce parking resources in San Francisco is perfectly valid, if not economically pure.  At Market Urbanism, Emily Washington summarizes this disconnect:

He points out that assigning prices to spots is not equivalent to allowing a market to determine a price. For a real price to emerge capital (the parking space) cannot be state-owned.

Sandy points out that the “shortage” of parking arises because no one owns street parking, so the appropriate incentives are not in place for someone to charge an equilibrium price for parking. While the San Francisco program may be a step in the right direction, he explains that “more intervention usually doesn’t solve the problems that were themselves the result of a prior intervention.” In this case, the city is trying to set a price for something that it could instead auction off to eliminate the original intervention.

I’d reject that view.  As ‘Danny’ notes in the comments, the government can be (and is) an economic actor.  The goal with SF Park isn’t to “eliminate the original intervention,” but rather to better manage on-street parking.  The goal is inherently about incremental change, and that’s what any realistic regulatory reform will also look like.