Tag Archives: San Francisco

The challenges of adding housing in single family neighborhoods

Too often, news articles on housing prices fall into easy traps and cliché, whether in discussing gentrification or city vs. suburb tropes. But Conor Daugherty’s piece in the New York Times (The Great American Single Family Home Problem) hits all the right notes.

In it, he tells the tale of a modest redevelopment proposal to redevelop a single family home into three units on the same lot. The political opposition is fierce, leading to years of delay and legal proceedings. And this is for a parcel already zoned for additional density; this particular saga doesn’t even touch on the challenges of rezoning an area currently occupied by single-family homes.

A couple of things stand out to me:

The missing middle: The author frames the cost trade offs well. Lots of cities allow downtown and highrise development, but this requires expensive construction techniques, and thus requires pricey rents to pencil out. Smaller-scale development (low-rise apartments, duplexes, townhomes, etc) can pencil at much lower prices – the thorny issue is the politics of building in existing single-family neighborhoods.

The problem is that smaller and generally more affordable quarters like duplexes and small apartment buildings, where young families get their start, are being built at a slower rate. Such projects hold vast potential to provide lots of housing — and reduce sprawl — by adding density to the rings of neighborhoods that sit close to job centers but remain dominated by larger lots and single-family homes.

Neighborhoods in which single-family homes make up 90 percent of the housing stock account for a little over half the land mass in both the Bay Area and Los Angeles metropolitan areas, according to Issi Romem, BuildZoom’s chief economist. There are similar or higher percentages in virtually every American city, making these neighborhoods an obvious place to tackle the affordable-housing problem.

“Single-family neighborhoods are where the opportunity is, but building there is taboo,” Mr. Romem said. As long as single-family-homeowners are loath to add more housing on their blocks, he said, the economic logic will always be undone by local politics.

Capital-A Affordable, vs. affordable: The three units proposed for the lot wouldn’t be cheap, but (crucially) they’d be cheaper than a re-habbed SFH on the same lot – and there’d be more of them.

They are estimated to sell for around $1 million. But this is an illustration of the economist’s argument that more housing will lower prices. The cost of a rehabilitated single-family home in the area — which is what many of the neighbors preferred to see on the lot — runs to $1.4 million or more.

The “economist’s argument” might be sound, but it’s a hard sell for the neighbors.

This kind of evolutionary redevelopment would’ve been completely natural and non controversial before the advent of zoning.

It’s always worth remembering how different the Bay Area’s housing market dynamics are. Daniel Kay Hertz notes that many of the same issues are in play in weaker regional markets, though the way things play out is quite different:

In Chicago, without a regionwide housing shortage, the issue is somewhat different: Build up in already-wealthy core where "shortage" exists, or hold down housing growth there, spilling high-end demand to more neighborhoods https://t.co/wTObIgVi9M

— Daniel Kay Hertz (@DanielKayHertz) December 2, 2017

Aaron Renn doesn’t think much of the Bay Area’s strategy of generating affordability through redevelopment of single-family housing:

https://twitter.com/urbanophile/status/937159416847175680

First, it’s hard to say this is a cogent strategy; the vast majority of single family homes aren’t going to be rezoned anytime soon.

Second, Renn is correct, historically – at least since the advent of zoning. This was true for the Bay Area, too – suburban development offered a then-cheap and cost-effective way to add housing to the region’s supply. But that was decades ago (the NYT article includes maps showing the expansion of the suburbs over the recent decades), and the region has run out of room for new/expanded suburbs within a reasonable commuting distance.

Renn’s implied regional strategy isn’t going to work well in the Bay Area, either. Consider the recent articles on Bay Area super commuters. Relying on Stockton to be San Franscisco’s bedroom community has severe costs, after all.

Affordable housing and the law of supply and demand

CC image from Thomas Hawk.

Some great articles on the challenges to affordable housing in high-demand cities over the past few days, worthy of some reflection:

San Francisco’s Housing Crisis Explained – an epic long-form article from Tech Crunch looking at just about every angle of San Francisco’s affordability issues.
The Spectre Haunting San Francisco – Ryan Avent’s reaction in The Economist.
Sorry Progressives – Supply Matters – reaction from Let’s Go LA concerning the tendency to ignore and/or purposefully discount the supply side of housing markets.

Kim-Mai Cutler’s epic Tech Crunch article addresses all sides of the affordability problems facing San Francisco: noting that the situation isn’t unique to the Bay Area nor is it caused solely by tech-industry demand; the regulatory and political constraints to growth not just in the city but in the entire region; rent control, Prop 13, evictions, etc. After thorough documentation of this complex and multifaceted issue, Cutler circles back to the core issue of supply and demand:

[W]ithout serious additions to the entire region’s housing supply, these crisis measures just make San Francisco’s existing middle- and working-class a highly-protected, but endangered population in the long-run. With such limited rental stock available on the market at any time, what kind of person can afford to move here today when the city’s median rent is $3,350?

For the more extreme groups, you cannot logically fight both development and displacement. The real estate speculation running through the city right now is just as much a bet on political paralysis in the face of a long-term housing shortage as it is on San Francisco’s desirability as a place to live.

Cutler’s article lists a whole host of other potential actions, but concludes that any path forward must work towards adding more housing units to the region’s overall supply.Unfortunately, even this broad conclusion isn’t shared by everyone. In section #5 of Cutler’s article, she notes “parts of the progressive community do not believe in supply and demand.”

Ryan Avent notes that this denial of the market dynamics, no matter the motive, is not only misguided but also counter-productive: “ However altruistic they perceive their mission to be, the result is similar to what you’d get if fat cat industrialists lobbied the government to drive their competition out of business.” This extraction of economic rent from those that own the land and embrace tight land use regulations only aids those with capital:

The housing dynamic in San Francisco raises the capital intensity of consumption. That contributes to an increase in the capital share of income and to the stock of wealth in the economy. Zoning restrictions are a tool of the oligarchy, effectively. I’m only one-fourth kidding. But they are; they are a means by which owners of capital extract an outsized share of the surplus generated by job creation.

Emphasis added. Yet, not everyone is convinced.

This exact denial of economics confounds Let’s Go LA:

It’s important to recognize that the “supply and demand doesn’t apply” argument is wrong, because if we don’t identify the right problems, we can’t develop solutions that work. And in fact, the housing markets in places like LA and SF are operating pretty much how you’d expect them to work if you accept the basic principles of supply and demand as constrained by the regulatory environment.

For example, why are developers only building markets for the high end of the market? Well, the zoning and permitting requirements make it difficult, time-consuming, and costly to build. Therefore, only a little new supply is going to get built every year.

This point is particularly important, because without agreement on the nature of the problem, it’s hard to even talk about potential policy solutions. And there are a whole host of potential policy solutions once we get over that hump. Unfortunately, discussion about supply constraints in cities (via exclusionary zoning, high construction costs, neighborhood opposition to development, etc) means the conversation naturally focuses on the constraint. Advocating for loosening the constraints can easily be mistaken for (or misconstrued as) mere supply-side economics, a kind of trickle-down urbanism.

This doesn’t need to be the case. Let’s Go LA writes:

Admitting that supply matters doesn’t mean you have to favor unrestrained urban development…

Admitting that supply matters also doesn’t mean you have to favor eliminating existing rent-controlled or rent-stabilized units, and it doesn’t mean that no government intervention is necessary…

Finally, this doesn’t mean that we don’t understand and appreciate the efforts of affordable housing advocates and planners operating within the current zoning and regulatory environment, trying to make sure that low income folks have at least some access to the opportunity of the city…

Another definitional problem when talking about affordability is the very term itself: are we talking about affordable housing? Or are we talking about Affordable Housing? As Dan Keshet notes, affordable housing (lowercase) refers simply to housing that people can afford at market rates – it is both relative to a household’s income (and therefore represents something slightly different for everyone) and also the kind of affordability important to the middle class. Affordable Housing, however, refers to a broad set of subsidized housing programs, ranging from rapid rehousing for the homeless to inclusionary zoning to housing units available for families at 80% of the Area Median Income ($68,500 for a family of four in DC).

Perhaps it’s because of a desire to frame these various subsidy programs more favorably (“affordable housing” sells better than “public housing” or “housing subsidies” – who would be against housing that is affordable?), but the same language that frames subsidy policies favorably can confuse the issue analytically.

The same can be said for housing supply in cities – perhaps the analytic focus isn’t a great selling point or a way to frame the issue.

Challenges to affordable housing in growing cities and regions

Suburban Apartments and Estates – Now Renting. CC image from moominsean.

Call it gentrification, call it renewal, call it anything you like. Intense demand for city living is putting tremendous pressure on urban housing markets. Meeting that demand with new development reshapes the physical fabric of the city, but preserving the physical status quo in the face of that demand leads to rising prices in the existing housing stock.

David Byrne issued an ultimatum to New York: if gentrification from the 1% stifles the city’s creativity, he’s “out of here.” At the same time, Ed Glaeser remarks that New York should celebrate it’s ability to attract the rich – this kind of agglomeration of skills and talent is what makes cities special places. It’s not the fact that the rich are coming back to the city that’s problematic, but that the city isn’t still able to provide opportunities at all price points. David Madden notes that gentrification’s current pace is not trickling down to the middle and lower classes.

All the demand for urban living presents the ‘good problem to have.’ But good problems still represent problems.

Gabriel Metcalf, executive director of San Francisco based non-profit SPUR, stepped into the fray with an essay for Atlantic Cities on the failure to relieve the demand-side pressure and the resulting consequences: his friends keep moving to Oakland because they can no longer afford San Francisco:

A great quality of life and a lot of high-paying professional jobs meant that a lot of people wanted to live here. And they still do.

But the city did not allow its housing supply to keep up with demand. San Francisco was down-zoned (that is, the density of housing or permitted expansion of construction was reduced) to protect the “character” that people loved…

Whatever the merits of this strategy might be in terms of preserving the historic fabric of the city, it very clearly accelerated the rise in housing prices. As more people move to the Bay Area, the demand for housing continues to increase far faster than supply.

Metcalf expanded on the idea in an interview with SFGate.com:

Now, should there be places for middle-income folks to live? Absolutely. But it can’t be done with the existing housing stock. Smart new places will have to be built.

That includes high-density buildings, micro-units and new construction. It also means getting a grip on the incredibly complex and restricting planning process that stalls every development. The whoa-on-growth movement began in the early ’70s, and there’s a direct corelation between that and higher prices.

“Up until the mid-’70s,” Metcalf says, “our housing prices tracked right at the national average.”

Over the past 20 years, Metcalf says San Francisco has produced an average of 1,500 new housing units a year. Compare that with Seattle, which is averaging 3,000 units a year with a smaller population. And even that wouldn’t be enough.

Increasing density and allowing the market to meet the demand for new space is part of the solution. In a high-demand place like San Francisco, it’s probably best characterized as a necessary-but-not-sufficient condition. Part of the challenge is that center cities can liberalize their zoning regulations a great deal and still not seem to make much headway in affordability. The regional nature of housing markets, spanning across multiple jurisdictions with multiple regulatory structures, makes it difficult for any one jurisdiction alone to make a dent in the supply.

Consider the case of Long Island: a September New York Times article on Long Island’s lack of available apartments looks to a recent report from the Regional Plan Association to underscore the challenge:

According to a new report from the Regional Plan Association, an urban research and policy group, 55 percent of all 20- to 34-year-olds on Long Island still live with their parents, which is up 11 percent in a decade and appears to be one of the highest rates in the country.

But while some may actively choose to sleep in full view of their teenage posters and trophies, most are there because there are few other places they can go.

The article closes with an anecdote that illustrates the assymetry of demand in the housing market and the regional impacts it can have:

Peter Ottaviano, 24, who graduated from college two years ago, has been living at his parents’ home in Cold Spring Harbor and working for a public relations firm in Great Neck. He looked at some Long Island apartments, but said he wasn’t impressed by the offerings. He signed a lease this month on a two-bedroom in Bedford-Stuyvesant, Brooklyn, where he and a friend will live for about $2,000 a month, and reverse-commute.

For Mr. Ottaviano, it came down to a paradox: young people aren’t likely to put down roots on Long Island until there are more young people on Long Island. “I want to be where my friends are, where there’s a lot going on, in the middle of everything,” he said. “That’s why I’m moving to New York.”

Long Island – home to the kind of mass produced suburban housing that provided the market-rate affordability for American cities in their suburban booms is now facing the same kinds of challenges that older places encounter.

As the 24-year-old Ottaviano’s housing decision shows, part of the question is if the suburbs can develop the kind of quality places that will attract a broader demographic, rather than just a release valve for housing demand. Outside of DC, Montogmery County is explicity looking to attract younger residents – and while reform of the county’s liquor laws alone won’t likely do it (or help the County chase the nebulous “hip” demographics), it can’t hurt.

But still need to build the additional density. Proposals for efficiency apartments in Fairfax County face strong opposition (including an elected official insinuating that affordable housing will bring gang violence and sexual predators); a transit-oriented, mixed-use apartment project was recommended for rejection by staff due to (among other things) having too little parking (a still-generous 161 spaces for 141 units) for the County’s taste – despite sitting a stone’s throw away from the Huntington station.

At the same time, we have substantial evidence of the benefits that affordable suburban apartments can bring. David Kirp in the New York Times celebrates the ten year anniversary of suburban New Jersey apartments built under the Mount Laurel doctrine:

“I wish other places could learn from our example,” says Mr. McCaffrey, the former mayor, but that hasn’t happened. Affordable housing is still too rare in suburbia, as zoning laws continue to segregate poor and working-class families. Despite the track record in Mount Laurel and the promise it holds for neighborhoods around the country, it’s hard to imagine that the suburban drawbridge will be lowered anytime soon.

Link dump – all things ‘affordable housing’

DC Construction that comes up on a Flickr search for Inclusionary Zoning – CC image from Adam Fagen.

I’ve got far too many tabs sitting open in my browser, awaiting some form of linkage in the blog (the dates of publication might show how long they’ve been sitting). But, I want to put some of these out there rather than hog my browser’s memory.

I’ve attempted to cluster them together topically – a whole host on affordable housing policies and market-rate development.

“Winning upzoning in the bay” – from PriceRoads.com. The paralysis of urban development is part of a procedural tragedy of the commons, a side-effect of the decision-making architecture that we’ve adopted over time.

I now believe that California is not especially resistant to change, but rather that we’re seeing the tragedy of the commons that results when unified housing market is divided into dozens of cities. In short: when each city constitutes a tiny fraction of the habitable part of the metro area, no city can individually change housing prices much by allowing more development, but it can control the crowding within its borders.

So, what’s a potential solution to this impasse? Just buy people off.

Maybe the best dollar-for-dollar policy initiative of our time was Race to the Top. For $5 billion, the Obama administration bribed hundreds of thousands of charter-school students into existence. Race to the Top gave a lot of firepower to charter school proponents, allowing them to accuse teachers of turning down money for students…reversing the normal debate in which charter schools are accused of sapping money from traditional public schools.

The best way to deregulate cities would be to bribe key constituencies in a way that gives easy fodder for debate. I propose the following: California should triple the solar tax credit for seniors in communities that substantially ease zoning regulations. Any deregulation policy has to neutralize the most ardent opponents of development: seniors and environmentalists. This one would not funnel money through bureaucrats and would show up in anyone’s pocketbook as soon as they asked for the solar panels.

“NIMBYism will lead to economic stagnation” – an Op-Ed in the SF Examiner

Instead of fostering policies that discourage job formation, real estate development and economic growth, policymakers should be encouraging greater densities, and greater heights for new housing, especially along BART and Muni lines. If we are to get more people to live and work in San Francisco, then we must reject NIMBYism as a selfish luxury we cannot afford. The City badly needs an expanding tax base to fund financial promises it has made to public employees and to pay for its essential municipal services. New developments add mightily to the public’s well-being through contributions to The City’s funds for affordable housing, parks, transportation and the like. All of this comes from economic growth and a sensible balance between what we are now and what we need to be moving forward.

“Report finds a city incentive is not producing enough affordable housing” – New York Times

The report… found that the optional program known as inclusionary zoning had generated about 2,700 permanently affordable units since 2005, or less than 2 percent of all apartments developed in the city during the same period.

Under the program, the city allows developers of market-rate housing to build more units than would normally be allowed when neighborhoods are rezoned for new development, as long as they make 20 percent of the new homes affordable.

But Bill de Blasio, the city’s public advocate, argues in his housing platform for “converting incentives to hard-and-fast rules,” saying that 50,000 additional affordable units could be built over 10 years with a mandatory program.

Mandatory IZ might not be the fix New York is looking for. DC has it, yet we’re still looking elsewhere for inspiration.

“In New York, the rent doesn’t have to be ‘too damn high’ “ – Reihan Salam in Reuters

A century later, neighborhoods like the one I grew up in seem frozen in amber. The faces are different, to be sure, and so are the languages spoken by the locals. Crime has gone down and property values have gone up, and New York City is as desirable as it’s ever been. Yet we’ve had nothing like the building boom of the 1910s and 1920s that transformed the face of the city. Millions of low- and middle-income New Yorkers thus find themselves squeezed by skyrocketing rents, and hundreds of thousands of others who want to make their home in New York can’t afford to do so.

…

The first and most obvious thing to do is to broaden area in which housing can be built. For example, Schleicher and Roderick Hills Jr. of New York University Law School observe that cities like New York use “non-cumulative zoning” to dedicate desirable locations to low-value industrial uses. They propose allowing developers to replace empty warehouses, barely-used shipping facilities, and heavily subsidized factories with housing. Historical preservation districts severely restrict new housing development in many of New York City’s most desirable residential neighborhoods, which has contributed to rising housing prices. Though hardly anyone proposes getting rid of historical preservation districts entirely, the Harvard economist Edward Glaeser has made a strong case for limiting their growth.

Is NYC “Landmarking Away” Its Future? – ArchDaily

A recent study by the Real Estate Board of New York (REBNY) concluded that by preserving 27.7% of buildings in Manhattan, “the city is landmarking away its economic future.” REBNY is challenging the Landmarks Preservation Commission, arguing it has too much power when it comes to planning decisions, and that by making business so difficult for developers it is stifling the growth of the city.

…

Preservation, on the other hand, limits new supply and also creates a ‘cultural commodity’ of preserved buildings, both of which would increase the cost of living. How is it, then, that Francis Morrone cites new development as part of the problem, rather than the solution to rising costs?

Quite simply, the members of REBNY are building the wrong type of development: where developers do get the opportunity to build without restriction, they are too often building luxury apartments that are only an option for the super-rich. This may be good for their short-term profit margins, but it is bad for the long-term vitality of the city, as those who are not astoundingly wealthy are forced to leave – and the city becomes less diverse and less productive as a result.

Both sides overplay their hand a bit here. Landmarking alone isn’t what constrains New York real estate development (nor is it the case in other cities), and other constraints are also what push market-clearing prices so high (hence why all new apartments seem to be luxury ones). Affordability over time also involves filtering – yesterday’s luxury apartments have filtered down to more affordable price points. If you don’t build enough housing, you’ll see those older buildings filter up.

“In Defense Of The ‘Poor Door’: Why It’s Fine For A Luxury Condo Developer To Keep Its Low-Income Units Separate” – from Josh Barro at Business Insider, where he goes through a thought experiment about applying the same logic of IZ to that of SNAP benefits.

We require and incent developers who build market-rate housing to also sell or rent some units in the same developments at cut-rate prices. The idea is that affordable housing shouldn’t just be affordable and livable; it should be substantially similar in location and character to new luxury housing. If rich people are getting brand new apartments overlooking the Hudson River, so should some lucky winners of affordable housing lotteries.

Hence the outrage over the “poor door” at a planned luxury condo project that Extell will build on Manhattan’s Upper West Side: market-rate buyers will use one entrance, while tenants in the project’s affordable housing component will use another. Affordable apartments will also be on low floors and, unlike many of the market-rate units, they won’t face the Hudson River.

Getting mad about the “poor door” is absurd. The only real outrage is that Extell had to build affordable units at all.

New York’s housing advocates are right about one very important thing: upzonings are a windfall for landowners and the city should be asking for something in exchange for allowing more development. But what it should be asking for isn’t luxury apartments with river views to give out by lottery. It should be asking for cash.

Now, the reason for IZ isn’t solely about affordable housing, but about preserving and providing for mixed-income communities and for permanently affordable housing. All worthy goals, but the can come with a great deal of procedural headaches.

Prescriptive urbanism vs. market urbanism – the tension between demand for more housing and the desire to curate great cities

San Francisco skyline w/ crane. CC image from Omar Omar

Tales from two cities:

San Francisco: From Ilan Greenberg in The New Republic – San Francisco’s Gentrification Problem isn’t Gentrification. Greenberg compares the public debate (often writen, and discussed previously here) in San Francisco compared to more the more familiar narrative in other cities.

Here, the debate is dominated by fierce new champions of the anti-gentrification cause who aren’t concerned so much about the truly poor being forced from—or tempted out of—their neighborhoods. In their view, the victims of gentrification are also affluent, just less so than the people moving in. And the consequences are supposedly catastrophic not only to these relatively well-off people who are living amidst people even more well-off, but a mortal threat to nothing less than the rebel soul of San Francisco.

While the conversation may not fall into the same narrative as other cities, that doesn’t make it more useful. Greenberg notes that the San Francisco conversation can “suck the air out of a reality-based conversation” about affordability.

Greenberg spoke with Peter Cohen, a San Francisco housing advocate:

Sitting in the worn lobby of a hotel patrolled by security guards near Twitter’s new corporate headquarters, and armed with documents showing statistics on skyrocketing rents and rising tenant evictions, Cohen came to talk about disenfranchised people struggling to keep financially afloat and about the legal intricacies of deed-restricted affordable housing. He said he expects to have an uphill climb to reach new residents obsessed with buzzy restaurants and city officials in thrall to new tech business interests, but now also struggles to be heard over the din of middle-class residents moaning about the “gentrification” of their neighborhoods—residents who themselves may have been gentrifiers, or more likely followed in gentrifiers’ footsteps.

Greenberg writes of this narrative as if it were inevitable: “The compact city has a long history of clubby NIMBYism and knee-jerk preservationist politics that torpedoes even the most sensible development projects.” In addition to the outright opposition, fees and a long approvals process increases barriers to new housing supply in the city.

Some opposition to new development is that it makes the city dull. This isn’t the first time such arugments have come up. Inga Saffron, also writing in The New Republic made the same case that gentrifcation brings monotony. Writing specifically of San Francisco, Charles Hubert decries the “homogenization” of the city.

Part of the challenge is that rebuffing that monotony probably requires more development to meet the demand, not less. It’s a somewhat counter-intuitive proposition. Another challenge is the notion that cities do not (or should not) change, when history says otherwise.

Brooklyn: San Francisco’s experience is not to say that fears of monotonous development aren’t somewhat warranted. Unleashing the market alone won’t solve all urban ills. The Wall Street Journal looks at the results of one of New York City’s rezonings, ten years later, with some detrimental effects on 4th Avenue in Brooklyn:

But the Planning Department lacked such foresight in 2003 when it rezoned the noisy avenue to take advantage of the demand for apartments spilling over Park Slope to the east and Boerum Hill and Gowanus to the west. Focused primarily on residential development, it didn’t require developers to incorporate ground-level commercial businesses into their plans, and allowed them to cut sidewalks along Fourth Avenue for entrances to ground-level garages.

Developers got the message. With the re-zoning coinciding with the real-estate boom, they put up more than a dozen apartment towers, many of them cheap looking and with no retail at the street level, effectively killing off the avenue’s vibrancy for blocks at a time.

The city finally got wise and passed another zoning change last year, correcting some of these mistakes.

The shortcomings on 4th Avenue show the tension between market urbanism and proscriptive/prescriptive urbanism (and both words probably apply) but it also shows the power of incentives and how development tends to follow the path of least resistance. But it’s not like this outcome is solely a product of the market.

Some of the architects responsible for middle-brow architecture along Fourth Avenue are surprisingly candid about the other cause: They pass the buck to the developers who hired them and the pressure they faced to cut costs at the expense of aesthetics.

“I try to do my best for my clients and try to get them as big a building as possible,” says Henry Radusky, a partner with Bricolage Architecture and Designs LLC, which has built nine buildings along Fourth Avenue in the last decade.

One of Mr. Radusky’s buildings was 586 President St., one of three buildings on the same two-block stretch of the avenue that contribute to its canyon of mediocrity look. Another is the Novo Park Slope, at Fourth Avenue and 5th Street, a pallid, prison-like structure with parking and a medical facility at ground level that towers menacingly over its next-door neighbors.

That parking, of course, is the product of prescriptive regulation. Market pressures might impact some design choices, but the relative impact of those decisions (compared against higher quality materials or prioritizing retail uses on the ground floor) likely pales in comparison to the cost and spatial needs of parking.

Back in San Francisco, Peter Cohen is looking for ways to mesh the market and prescriptive elements together:

Even housing advocates like Cohen concede a hard ideological approach loses hearts and minds. “I also understand that we have a changed disposition toward cities. How can you find a sweet spot between these two forces—how do you bring in this creative class, but also make sure that people who toiled in the weeds are not simply squeezed out? How can you sort it without just saying that the market will take care of everyone, when obviously it won’t?”

Middle class in Manhattan?

Manhattan. CC image from sakeeb.

Breaking news! Last week, the New York Times reported that it is expensive to live in Manhattan. The Times frames the question through the lens of the middle class, asking what the definition means in the context of they city’s densest borough.

In a city like New York, where everything is superlative, who exactly is middle class? What kind of salary are we talking about? Where does a middle-class person live? And could the relentless rise in real estate prices push the middle class to extinction?

There’s lots of discussion in the article about incomes in New York, as well as the high cost of living – particularly for housing. The article notes that the New York, urban context makes the traditional symbols of the American Dream (e.g. home ownership) less applicable, and most of the text is spent searching for some other indicator of middle-class-ness. Matt Yglesias notes that such a search for a single metric isn’t always useful. Likewise, it’s not as if this is a new topic in New York, or even for the Times.

There’s lots of discussion about housing costs and the demand for living in a place like Manhattan, but not a single word about housing supply. I understand the author is looking to explore the perception of what constitutes the middle class, but a word about the supply of housing is warranted. Even a short mention of the constraints to supply would be a worthwhile addition to these kinds of articles.

David Schleicher’s twitter response asked that same question, and provided a link to Glaeser, Gyourko, and Saks’ work on regulatory constraints to housing supply in New York. From the paper’s abstract:

Home building is a highly competitive industry with almost no natural barriers to entry, yet prices in Manhattan currently appear to be more than twice their supply costs. We argue that land use restrictions are the natural explanation of this gap. We also present evidence consistent with our hypothesis that regulation is constraining the supply of housing so that increased demand leads to much higher prices, not many more units, in a number of other high price housing markets across the country.

As noted, Manhattan certainly isn’t the only place with these kinds of constraints. Another recent article focuses on San Francisco, this one from tech writer Farhad Manjoo. Manjoo makes the case that San Francisco needs to grow in the face of tremendous demand for urban living. More importantly, he argues that opponents to growth, those who fear how growth might change the things they love about San Francisco, need to get over themselves.

Don’t look good fortune in the mouth. Yes, growth will bring some problems. But they’re not nearly as bad as the problems you’ll find in decline (ask Detroit). Instead of complaining or blocking growth, San Francisco’s old-guard would do better to propose ways to ease the city’s transition into its digital future. This doesn’t mean opposing newcomers. It means recognizing a new reality, that San Francisco needs to become much larger and more accommodating place than it is. And it means adopting polices that will make that reality a pretty good one.

In particular, for San Francisco, adopting that reality means one thing above all: It needs to build more buildings.

As an example of the fear of change, Manjoo links to this article by David Talbot, blaming the influx of tech workers to the city for forcing things to change – forcing the city to battle for its own soul.

One point that Talbot ignores is that obstructing the physical change in the city (e.g. blocking development) will not save the idealized city he loves. In fact, it might even accelerate the process of gentrification. Some level of change is inevitable. Fighting any kind of change to the physical environment might even accelerate changes to the city’s socioeconomic environment.

While the overall thrust of Manjoo’s policiy is correct, it’s not hard to see why many fear for the loss of San Francisco’s soul. Manjoo laments that the city has not built more densely, and implies that old Victorian houses are the culprit: “this city is defined by, and reveres, its famous Victorian houses” he writes. “Those houses are very pretty. They’re also very inefficient. Collectively, they take up a lot of space, but don’t house very many people.”

The truth is that San Francisco could add a great deal of new housing supply without touching those houses that are worthy of preservation. Consider this thought experiment from Keep Houston Houston for transit improvements and upzoning in the Sunset District:

All of this in one neighborhood, and without straying from the basic SF vernacular architecture of low/mid-rise, wood-framed buildings. Apply this same rubric to the rest of the city, allow towers in a few places, you could easily accommodate 200,000 more people.

Likewise, Stephen Smith makes the case for dramatic upzoning in large parts of Brooklyn, but not on the borough’s brownstone blocks:

In some neighborhoods, this sort of conservative zoning makes sense. The tree-lined blocks of Brooklyn Heights and Park Slope, for example, thick with brownstones and pre-war apartment houses, are urban treasures worth preserving.

But northern Brooklyn is not brownstone Brooklyn.

We’ve seen the same thing in DC (and seen the impacts of zoning). And we’ve also seen anecdotes of what adding new supply can do to downmarket properties, thanks to the process of filtering.

Each of these strategies at least hold the promise of keeping the market rate housing prices within reach for the middle class. Obviously, the dynamics of these markets are quite complex, and the nature of neighborhood change is not well-understood (not in a way we can forecast, anyway) and the housing market for a given metro area is larger than any one jurisdiction, but the macro signs are quite clear. Given the constraints to supply in the Zoned Zone, removing these regulatory constraints on the market’s ability to add supply seems like an obvious prerequisite to a change in policy.

To Charles Marohn’s concerns about density, and those that fear for San Francisco’s soul: will this new development ensure a quality place? No, probably not. But allowing this kind of growth is a necessary-but-not-sufficient condition.

Urban density and innovation

CC image from Seth Waite

One more round on density – this time focusing on affordability via the tangentially related prospect of innovative and creative economies.

Richard Florida chimed in at The Atlantic Cities, asking this:

Stop and think for a moment: What kind of environments spur new innovation, start-ups and high-tech industries? Can you name one instance, one, of this sort of creative destruction occurring in high-rise office or residential towers, in skyscraper districts? The answer is no. High-rise districts typically house either corporate office functions or residences. During the post-war era, while they were building these towers for their corporate functions, large U.S. companies housed their research scientists in green, low-rise R&D campuses, where the scientists could interact more freely.

The backlash on Twitter was swift and merciless – with plenty of anecdotes of innovative, creative destruction going on in high rise office towers. Timothy Lee at Forbes noted that Florida is probably a bit sloppy with his terminology here, equating a high rise with an expensive building. Citing Jane Jacobs, he writes:

While Jacobs framed this principle as being about old buildings, it was really about cheap buildings. Young innovators need to keep their expenses down to maximize the time they can spend on their project and minimize time spent waiting tables. And when they start companies, they need to minimize their rent to maximize their chances of reaching profitability before they run out of money.

So Florida is right that innovators almost never start their careers in gleaming office towers. But it’s a mistake to conclude from that that an excess of skyscrapers makes a city bad for innovation. The innovators themselves won’t move into the skyscrapers, but the construction of more housing units places general downward pressure on rents. That allows innovators to move into the less swanky, more affordable, homes and offices that were abandoned by the people who do move into the skyscrapers.

That is, those older high rises will filter down to lower rents and therefore be attractive to startups and other innovative uses (see the case of Silicon Alley in New York – Florida mentions it as a ‘low rise’ example, but equating that to a Sunnyvale office park is quite a leap). The actual form of the building doesn’t play nearly as much of a role as Florida would imply. The jury is out on the role of the city form and urban design (though I have my guesses).

As mentioned above, Florida was a bit sloppy in what he considered a high rise, later commenting that 14-20 stories is fine, but taller heights might not work. Perhaps it’s my time in DC that’s shifted my perspective on tall buildings, but I would argue that 14-20 stories is plenty tall enough to be considered a high rise. Regardless of my definition of a high rise, the question is then – what is tall enough, dense enough? David Schleicher and Ryan Avent make the case that you can’t know that in advance.

Some more back and forth shifted the discussion to the tradeoffs inherent to density, but in DC that discussion of density can’t be considered in isolation of other constraints on development – the kind that see low rent buildings redeveloped rather than letting them filter down where innovation might take hold (given several other key ingredients). The gleaming new corporate office tower reduce rent pressure on the older high rise office buildings, as well as smaller and shorter legacy structures.

It’s somewhat curious to see a discussion about the power of markets to foster innovation when talking about the massive constraints on real estate. The creative destruction of capitalism at its best in the idealized start-up office park Florida described, yet that physical outcome is anything but a free market outcome. Timothy Lee makes the case that if the real estate markets were more free to operate, the Bay Area would have 4 million more people living there today. The Bay Area’s natural geography limits sprawl and favors density, as well – if given the chance to grow.

That, of course, is a big if. Matt Yglesias takes note of some dense residential construction proposed for Downtown San Jose – precisely the kind of place that you would expect to grow more densely if allowed:

The San Jose and San Francisco metropolitan areas are ground zero for the phenomenon of regulations that provide for an insufficient quantity of construction in America’s high-value areas, so I was somewhat surprised to read an article about the municipality of San Jose implementing an incentive program to encourage more residential investment in the city. Why are incentives needed? The incentives, however, all turn out to be nothing more than temporary relaxation of anti-development rules:

The incentive package includes a 50 percent break in construction taxes; a 50 percent reduction in fees that downtown residential developers must set aside for a park as a portion of their project costs; expedited reviews by the planning department staff and eliminating a city requirement for an expensive air container system for firefighters in high-rise buildings.

What you have here are an explicit tax on construction, a de facto tax on construction, a regulatory barrier to construction, and a second regulatory barrier to construction. The “incentives” are relief from those barriers if your projects breaks ground by 2013.

From Wired (cited in Timothy Lee’s piece above):

As an investor Hartz points to the usual signs of too much money-chasing deals. The billboards on highway 101 between San Francisco and Silicon Valley touting startups no one has heard of. The bus stop signs in tech-heavy locales like Mountain View and Palo Alto advertising scads of engineering jobs.

“Everyone is competing for the same people, going after the same real estate, the same support services,” Hartz says. “The natural resources of the startup world are getting scarcer and scarcer, and the cost is getting higher and higher. It’s all an outgrowth of an abundance of capital.”

Lee’s point (same as Yglesias’s) is that the constraints on some of those resources aren’t as natural as you might think.

What would land use regulatory reform look like?

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.

Parking, lots and lots of parking!

There’s been a horde of great parking posts in the last few days:

First, Jarrett Walker documents San Francisco’s new adventure in market pricing for on-street spaces:

The goal is to ensure that there’s always a space available, so that people stop endlessly driving in circles looking for parking. People will be able to check online to find out the current parking cost in the place they intend to visit. Parking garages will have a better chance of undercutting on-street rates, so that those garages can fill. If you’ve ever driven in San Francisco, you know that it’s hard to decide to use a garage because, well, if you just drive around the block once more, you might get lucky. Under SF Park, if you just drive around the block once more, you’ll probably find a space, but it will cost more than a garage, especially if you’ll be there for a while. So drivers are more likely to fill up the garages.

Jarrett illuminates some of the problems with truly dynamic pricing – ideally, you’d want to have a price set for a given location and time so that a driver knows what they’ll likely have to pay prior to beginning their trip. This is similar to all sorts of other goods, where the prices are fixed for consumers, even if the actual prices fluctuate more often.

Jarrett also notes the potential for San Francisco to predict and target prices based on the data these meters will collect. The city has collected lots of useful parking data, the question is now about using that data and infrastructure effectively. Walker notes:

In a recent post on congestion, I observed that current road-pricing policy requires us to save money, a renewable resource, by expending time, the least renewable resource of all. If you’ve ever circled a block looking for parking, while missing or being late for something that’s important to you, you know that the same absurdity is true of our on-street parking policy. SF Park deserves close watching. And if it doesn’t work well, ask yourself: “Is it because it doesn’t make sense to charging for parking based on demand, or is it because they were too timid to do it completely?” The answer will almost certainly be the latter. The policy itself relies only on free-market principles that already govern many parts of our economies, because they work.

Indeed, market forces do work. Similarly, Tyler Cowen raised the subject in this weekend’s New York Times. Cowen focused on all aspects of Donald Shoup’s excellent book The High Cost of Free Parking. In addition to market pricing for parking spaces in order to ensure efficient use, Cowen also addresses parking development requirements:

If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price — or a higher one than it does now — and people would be more careful about when and where they drove.

The subsidies are largely invisible to drivers who park their cars — and thus free or cheap parking spaces feel like natural outcomes of the market, or perhaps even an entitlement. Yet the law is allocating this land rather than letting market prices adjudicate whether we need more parking, and whether that parking should be free. We end up overusing land for cars — and overusing cars too. You don’t have to hate sprawl, or automobiles, to want to stop subsidizing that way of life.

Market Urbanism chimes in specifically about minimum parking requirements, taking note of New York City’s efforts to change their laws (including references to Streetsblog’s coverage of the issue earlier this year). Many more also chime in, including Cowen’s personal blog – with posts expounding on his NYT article, Arnold Kling’s response, and Cowen’s response to the response – all worth reading. As usual, Ryan Avent also responds.

In a similar vein to the parking discussion, Ryan Avent also offered this paper up for review, drawing the conclusion that congestion pricing works best in places that have good transit networks – i.e. where there is an effective alternative to driving. The abstract notes that the two congestion pricing successes had solid transit systems to rely on. Ryan notes that congestion pricing can be used for improving transit, but it might be politically necessary to front the costs of those transit improvements prior to implementing the congestion charge.

The limited polling prior to the death of New York’s congestion pricing plan also suggested this – dedication of revenues to transit improvements was crucial for garnering public support. New York, of course, has the advantage of a transit system as an alternative means of transport. If a city without such infrastructure were to implement such a plan, might some borrowing against future revenues (similar to Los Angeles’ 30/10 plan) be in order?

Observations from San Francisco

As a nice respite to DC’s heat, I was able to spend the last week in California – including several days in San Francisco. Some thoughts and observations from the trip:

Hills and Grids: Gridded streets have plenty of benefits, to be sure – but the downside is that they do not react to topography. San Francisco provides the extreme example. The city has even preserved the right of way where topography makes streets impossible. My own adventure to the top of Telegraph Hill included ascending the Greenwich Street stairs.

Surely, relaxing the grid would offer opportunities for a more understanding development pattern. Nevertheless, the spaces along the staircases are certainly interesting, as are some of the extremely steep streets. Such a pattern would not work in a colder climate that has to deal with ice and snow on a regular basis, however – lest you end up like these poor folks in Portland.

Trucks and Buses not advised. Um, yeah.

Trolleybuses: As a direct response to the city’s grade issues, the electric-powered trolley buses are a great solution. The overhead wires for the buses can be a little obtrusive – but they are not nearly as much of a visual blight as the broader patchwork of utility wires strung from house to house and pole to pole.

Zero emissions, but the wires (like rails) do act as a visual cue for a newcomer to the city (like myself) to find a bus line when I need one. That’s a plus.

Signage: Actual signs telling you where you are or what transit line to take, however, are sorely lacking – particularly for Muni and BART.

We can do better than this – the BART platform at Montgomery station. The boarding signs for various train lengths is nice, but not all that intuitive – but actually determining which station you’re at when the train arrives is another challenge entirely. Similarly, on the Muni lines that turn into streetcar routes in the outer neighborhoods, signage at the larger stations is almost non-existent – certainly not useful for a first time rider.

That said – Muni’s route symbology is incredibly easy to understand. Each line is assigned a name (corresponding to the main street it travels on), a letter (as a single symbol) and a color. It’s something I think Metro could learn from as its route structure becomes more and more complex.

Wayfinding signage around town, however, was much better. Kiosks offered maps, highlighted transit routes, and in general provided very useful information – even potential ferry routes, for example:

My favorite ‘signs’, however, where the ones doing double duty – the public toilets:

Granted, the actual map here is faded and hard to read, but the presence of a self-cleaning public toilet in a popular tourist area like this is priceless. Thanks to nature’s urges, I never had a chance to actually use one – but the process seems quite self-explanatory. If not, there are simple instructions:

This particular toilet is from JCDecaux, the same outdoor advertising firm that operates Paris’ Velib bikesharing system.

Streetcars: The F Market line’s heritage streetcars are both interesting to see on the street and also an effective part of the transit network. They’re also quite popular:

One note about these old PCC cars – when you’re standing (as I was while taking this picture), it’s extremely difficult to see out the small windows of these old rail cars to determine where you are – especially with Muni’s aforementioned lack of quickly visible signage. The PCC car wiki page talks about “standee windows,” but these weren’t of much help to me.

From the outside, the diverse colors of the various liveries from around the world Muni opts to use are fantastic.

The liveries include this lovely pastel DC Transit paint job.

More (perhaps) to come later.

City Block

a work in progress…