Monday, October 31, 2005

Flawed study on smart growth and home prices

A recently released study (article and full report) claims that more centralized cities have lower housing costs, and therefore putting urban boundary growth controls in place should not increase housing costs, and should even lower them.

The researchers found that increasing population in the center of an area by 10 percent reduced median housing prices by 2.7 percent. They concluded that measures to reduce sprawl and concentrate growth in the urban core tends to make fewer large homes on big lots available, pushing buyers to smaller homes on smaller lots.

"Our findings show that smart-growth policies designed to control sprawl in and of themselves do not raise housing prices in a region," said Robert Wassmer, a professor of public policy and administration at Sacramento State. He conducted the research with Michelle Baass as part of her master's thesis; the study is to appear in an upcoming issue of the Journal of Policy Analysis and Management.

"Sprawl affects the way we live," Wassmer said in a news release from the university about the research. "Sprawl has been blamed for traffic congestion, air pollution, loss of open space, and economic, racial and ethnic segregation. But sprawl also enables people to buy the bigger homes they often desire in the suburban places they view as far away from the problems of the central locations."

Many regions, including the capital through the Sacramento Area Council Of Governments and its Blue Print Project, are encouraging so-called "smart growth" approaches. Such approaches emphasize higher housing density and placing residences close to jobs and transit -- as a way to reduce sprawl and congestion. Critics complain that growth limits to protect open space force development to more expensive sites and limit the supply of new homes, driving up costs.

Wassmer and Baass looked at U.S. Census data for more than 450 urbanized areas to study the relationship between concentration of population in the urban center and housing prices. "Our evidence shows that greater centralization in an urban area results in a reduced proportion of upper-priced homes in that urban area and a lower median priced house for the entire area," Wassmer said.

This seems to me to be another case of Mark Twain's "lies, damned lies, and statistics." Other studies have shown that cities that restrict housing supply create a sharp increase in housing costs, with Portland being a prime example. This study cleverly avoids that fact by broadly looking at 450 cities rather than just those that have and have not created supply restrictions and doing a direct comparison. How does that help? Well, it adds hundreds of old, stagnant, and declining cities in the northeast and midwest to the statistical database. Those cities were mostly developed in the pre-1950 pedestrian age, and are naturally more dense and concentrated - but also have very poor housing values. Voila, you get a statistical correlation between central city concentration and lower housing costs. The tip-off for me was the "reduced proportion of upper-priced homes" quote: if you've ever been to one of those cities, you know that you don't see many wealthy people or expensive houses.

But this simple correlation says nothing about cause and effect of supply and demand, which has been pretty well vetted by the economics community. It's pretty simple, folks: if you restrict supply below demand, prices will rise to bring them into balance. You can't get around the laws of economics. Ask a Russian.

Sunday, October 30, 2005

WSJ on conserving energy in Houston

The Wall Street Journal recently had a page one article on why conserving energy is hard, with Houston as their case study. A few Houston-related excerpts:
In Texas Suburbs, Conserving Energy Doesn't Come Easy

HOUSTON -- As director of an environmental organization here, David Gresham urges others to cut their use of fossil fuels. It's a tough sell.

At home, in a subdivision on Houston's suburban edge, Mr. Gresham tries to practice what he preaches. That's even harder.

His front lawn is yellower than its bright-green neighbors, because he and his wife don't water it often and don't use chemical fertilizers. His roof's underside is covered with a shiny sheet of metal foil that reflects the sun's heat, reducing his need for air conditioning. All told, his house uses about 40% less electricity than a typical home of its size in the Houston area, his electric utility estimates.

Yet when he requested a metal roof, which would have reflected even more sunlight, his builder said the subdivision allowed only shingles made of asphalt -- a petroleum product. When Mr. Gresham proposed covering his front yard with rocks and native plants that don't need watering, his subdivision's homeowners association told him he had to stick with grass. "It protects their property values," explains Diana Barak, director of operations for PCMI, a Houston firm that helps administer the homeowners association.
The reality is that public policy, the private market and the lure of personal comfort all work against Americans trying to live on less energy. The hurdles are particularly evident in Houston, the self-described oil capital of the world. Transportation accounts for a bigger chunk of the average household's total spending in Houston than in any other major U.S. metropolitan area, a result of Houston's sprawl. A local saying goes that summer is the coldest time in this hot, humid city, because that's when the air conditioners are running hard.

Visits with Mr. Gresham and three other environmentally minded Houstonians offer a sobering look at what it takes to try to live energy-efficiently in one of the world's most energy-intensive cultures. The lesson: It's possible, but it's a slog.
Mr. Gresham grew up in the 1960s and 1970s on what was then Houston's outer orbit. In 2002, he and his wife, Diane Meredith, bought an empty lot in Cole's Crossing, a big subdivision under construction northwest of Houston. That earned him some chiding from his environmentalist friends. One ribbed him for living in "Plasticville." "To a certain degree, she's right," he says.

But the decision was a financial no-brainer. The lot and the three-bedroom house, which has about 3,800 feet of air-conditioned space, cost about $260,000, less than half what he figures a similar house nearer his office would have cost. He has a 50-mile daily round-trip commute, but even the higher price of gas doesn't outweigh his lower mortgage. "There's a balance you have to reach between how much you pay and how much you have to consume," Mr. Gresham explains.

The whole article is pretty interesting, but it's too long to post here and I think you have to be a subscriber for the link to work. Try here or here for a Google cache of the article.

Continuing the theme of saving energy, a separate WSJ article on building better bike paths also caught my eye, but not for anything Houston-related. It talks about bike paths becoming too crowded, esp. with non-bikers, and that pretty serious accidents are occurring. One of the solutions is "traffic calming" for bikes - intentionally designing paths to slow them down.

Now, how much sense does that make? It's already a stretch to ask people to give up their cars to bike to work or run errands, and now you want to slow them down and make them even less convenient? Time for a re-think on that strategy. Separate, parallel paths for bikers and everybody else seems like a better solution - or even just better signage on path safety rules. Lots of federal money headed this direction, and I believe Houston is going after a fair share of it. The bayous and old rail right-of-ways are perfect for bike paths - although I think more of an effort should be made for the paths to dip under bridges along bayou banks rather than crossing the streets, so riders have to stop less often at crossings. I would hope there are no unreasonable liability or safety issues that would prevent this approach, i.e. inattentive bikers plunging into the bayous when they're full after a rainstorm. But our legal liability system is a topic for another time...

Friday, October 28, 2005

Venture capital accelerating in Houston

Just got back from a keynote address at Rice University by a partner at Austin Ventures, which is by far the largest venture capital firm in Texas. Venture capital as a whole is struggling to meet the return expectations of their investors (too much money, too few good startups), but he noted that they are more active in Houston now than ever before. They feel very good about the activity they're seeing in Houston, both technologies and management teams, and more and more of their investments are here. The really suprising fact? He said they're now doing more business here than in Dallas, which is incredible if you know how far Houston has traditionally been behind Austin and Dallas in tech entrepreneurship.

Thursday, October 27, 2005

New Census numbers on daytime population

Last week the Census Bureau released new numbers estimating the daytime population of various cities and counties - meaning the resident population plus incoming commuters for the day. The goal is to have better data for transportation and disaster planning. If an evacuation situation occurs in a city, you have to evacuate all those daytime commuters in addition to the resident population. Just looking at the normal residential population would be misleading.

Various data tables are also available. Table 1 is particularly interesting, with a comparison of the top 10 cities. Houston has the third-largest numerical daytime population increase in the nation, with 403,313 new people coming in each day (a 20% increase), not far behind #2 DC at 410,794 and #1 NY at 563,060. Those three cities are significantly ahead of all the other large cities, which range from around a 100 to 260 thousand. Even cities with substantial heavy rail transit systems like Boston, SF, Philly, and Chicago don't bring in nearly as many commuters as we do.

Houston also has the highest employment to resident ratio of the ten largest cities at 1.48. Dallas is a close #2 at 1.42, but everybody else is way down between 1.09 and 1.24. What does this mean? It means we've been able to hold on to the lion's share of the metro job base (and the resulting commercial tax base), rather than it leaking out to the suburbs. We've been able to do this with a combination of annexation and massive freeway and HOV transportation investments into the core. Los Angeles has the worst traffic congestion of the top ten cities, and also has the lowest ratio at 1.09 - their jobs and employers have dispersed out to the suburbs.

Wednesday, October 26, 2005

My travels with Joel

Just finished a couple days of driving noted urbanist and author Joel Kotkin around Houston for all sorts of interesting meetings. He's based in LA, but I think Houston is starting to grow on him, and he might even be toying with slight possibility of a relocation. He certainly wouldn't be the first person charmed into moving here after spending a while here. Anyway, here's a random collection of observations and highlights:
  • Focus group with Tulane and Southern social-work students who are now at UH: when asked to name to biggest difference between Houston and New Orleans, they almost in unison said one word: Opportunity. Houston has much more opportunity to do something productive with yourself and your education - no critical social connections needed.
  • Exploring a potential joint study with TSU on Houston as an engine of upward social mobility. Very exciting stuff. Stay tuned.
  • I have a whole new appreciation for the incredible job done by church volunteers during the Katrina evacuation after hearing the details by pastor Ed Young at Second Baptist, the largest Baptist congregation in the nation. Houston should be very proud, and FEMA should take notes.
  • Got to meet former Mayor Bob Lanier at a book signing and lunch, who has an excellent idea for future hurricane evacuations: make the HOV lanes outbound, restrict them to 4+ passengers, and use orange cones to extend them out to distant points beyond the city by reversing the inbound lanes - maybe even all the way to San Antonio, Austin, and Dallas (will require a very large orange-cone inventory!). Since the average car only carries slightly more than one person, that single HOV lane could carry the equivalent of 4 normal lanes. Oh, and one more thing: hype those lanes to the media. People will have to decide: crawling in normal traffic, or form carpools and fly to their destination. Mix this with reversing the inbound lanes 24 hours earlier than they did with Rita, and I think the worst traffic nightmares could be avoided in the future.
  • Focus group with successful local immigrant entrepreneurs as part of a study comparing NY, LA, and Houston. Bottom line: Houston is the best small business environment in the nation for immigrant entrepreneurs, mainly because of the lack of bureaucracy, corruption, regulations, zoning, and permitting - resulting in plenty of very affordable commercial space and easy and affordable startups. But we have to stay vigilant against creeping local regulation that grows year after year, often well-meaning but with corrosive side effects.
  • It was noted that Houston seems to have just the right balance of high wealth and insecurity vs. other cities to really fuel our non-profit/charitable sector. Nice to see our well-known world-class insecurity has an upside.
  • Extremely high marks for Houston's philanthropic spirit and generosity from the head of the local Red Cross chapter. They went from 6,000 volunteers to 19,000 during Katrina, which is unprecedented in the history of the US Red Cross. Also of note: we are one of the five top-tier largest Red Cross chapters along with NY, LA, SF, and Chicago.
Well, I those are the highlights I can remember off the top of my head. Apologies if I left anything or anybody out. It was a very fun and stimulating couple of days, but now it's time to get back my "real" work that's been piling up...

Tuesday, October 25, 2005

Smart growth and housing affordability in Portland vs. Houston

Len Gilroy has a great post at the Reason Out of Control blog on this topic. Read the whole thing. One excerpt:
Randal also points out another glaring piece of the article -- a discussion with a broker whose claims that their new project of 1,200 sq. ft. townhouses priced between $279,000 and $310,000 "is perfect for first-time homebuyers." What?! Maybe if your household is pulling in over $100K per year, but how many first-time homebuyers fall into that category? Don't homes under $150K sound a bit more feasible for first-timers? Here in Houston, you can pick up a brand new single-family suburban home for under $150. Randal hits it right on when he points out that less land use regulation tends to equate with regional housing affordability. Too bad that Portland planners don't get this.
Most people know Houston has inexpensive housing, but I'll bet you didn't know they could be $150 cheap, did you? I think I'll hit the ATM tomorrow and buy a couple as an investment... ;-)

Monday, October 24, 2005

Houston's focal point?

Marginal Revolution has an interesting discussion of focal points, the classic of which is, "You are meeting someone in New York on a given day, but don't know a time or place. Where would you go and when?" The surprisingly common answer is "under the clock at Grand Central Station at noon." Interesting variants include the country (Washington Monument in DC?) or the world (the entrance to the United Nations in New York?).

So, of course, this got me thinking about Houston. What's our focal point? And I think I'd like to propose two variants:
  1. Where would two locals most likely meet?
  2. Where would two people from out-of-town most likely meet?
Assuming noon is the most common meeting time, I'd guess the Transco/Williams water wall for number 1 and the NASA rocket park for number 2. For #2, arguments could also be made for the steps of city hall or its visitor center, or maybe the Astrodome. Although it's certainly lost its centrality the last few years, it's one of the few landmarks in Houston known by many outside of Houston. If I'm unfamiliar with a city, the city hall (or visitor's center, if there is one) seems like an obvious choice, even though it's a little boring.

The harder question is the first one, with two locals, who are very unlikely to think of city hall, the visitor's center, the Astrodome, or NASA. I kind of think of both the Galleria and Transco/Williams tower as beacons (in their own way), and the water wall as an obvious specific meeting point by both of those beacons. I don't think it's as obvious as the clock at Grand Central Station, but it's the best I could come up with. There are several points downtown that could make arguments, as well as the main entrance and reflecting pool at Hermann Park. I'm curious to hear other proposals in the comments.

Sunday, October 23, 2005

Houston, meet your older brother Chicago

I really liked Rick Casey's column today noting the similarities between Houston and Chicago, something I've noted before here.
Chicago fans may not be aware of it, but when they come to Houston this week they will be visiting their younger brother.

Houston is, in so many ways, a strapping adolescent version of Chicago.

Consider some similarities:
  • •Both are cities that work. Despite traffic problems (you wouldn't swap rush hour on the Katy Freeway for rush hour on the Dan Ryan Expressway), these are cities where the trash gets picked up, the police control crowds and things get built.
  • •Both are cities for workers. As I've noted before, Mayor Bill White talks about Houston as a city where nobody comes to retire. The same is true of Chicago. They are places of ambition, whether for blue-collar workers, entrepreneurs or executives.
  • •Both have, by design, strong mayors. They want their elected leaders to be able to get things done. Both are Democratic cities in Republican states.
  • Both are great immigrant cities. Chicago was a magnet in the late 19th and early 20th centuries to hundreds of thousands of Poles, Czechs, Italians, Irish and others. Houston is today attracting hundreds of thousands of Asians, Latin Americans, Africans and others. ...
  • Both are great restaurant towns. We have fabulous high-dollar restaurants because there is plenty of money to support them and wonderful inexpensive restaurants because of the immigrants.
Where I think I'd disagree with Rick is on characterizing Houston as an "adolescent" in comparison to Chicago. I'd characterize Chicago as an older gentleman: moderately healthy, but past his prime and beginning a genteel decline (at least decline relative to fast-growth cities in the south and west). It's certainly in better shape than most of its Midwestern brethern, but that's not saying much. It's the slow-growth capital of a stagnant and even declining region as its industrial base migrates around the world. (imho, bankrupt GM-supplier Delphi asking for 2/3 pay cuts (!) while GM and Ford lose billions is the beginning of a very painful reckoning for the high-pay union-labor manufacturing base of the Midwest).

In my mind, Houston's adolescence and young adulthood was from the NASA and Astrodome 60s through the urban-cowboy, oil-boom days of the 70s and very early 80s. We're now more like a 30-something: still young, but much more mature - and still a good distance from our peak.

Thursday, October 20, 2005

Misc items of the week

A lot of little things that sum up to some good news for Houston.
  • We're scoring well in national Inc. 500 and D&T Fast 500 rankings, with 32 Texas/9 Houston in the Inc. 500 and 41 Texas/7 Houston on the Fast tech 500.
    "Texas is clearly coming into its own as a technology center," says Skip Moore, regional managing partner of technology, media & telecommunications for Deloitte & Touche LLP. "I am encouraged not only by the number of companies and higher rankings as compared to previous years, but also by the variety of industry sectors and representation of companies across the state." When compared with Massachusetts and Silicon Valley -- which are acknowledged U.S. technology centers -- Texas (41) is tied with Massachusetts for most companies on the annual listing, while Silicon Valley has 54 companies.

    The number of Texas companies represented on Deloitte's Technology Fast 500 has increased every year since 2002, while the number of Silicon Valley companies on the list has declined.

  • $60+ oil is creating a boom in local travel from the oil industry, with KLM now offering all-business-class flights from Houston to their global connecting hub in Amsterdam, and Continental offering a new non-stop to Buenos Aires, which is a major new international destination for Houston. High fuel costs are certainly hammering Continental, but I'll bet they're also selling a whole lot more of those big $, full-fare international business-class tickets to oil execs...
  • Texas is scoring reasonably well with new biotech jobs, with the seventh-most new jobs in the nation in August - mostly in Houston, I suspect. Still nowhere near the coasts though - needs to grow a lot more. Thanks to Obi for the link.
  • Oh yeah, I almost forgot to mention one other tiny piece of good news: THE ASTROS ARE IN THE WORLD SERIES FOR THE FIRST TIME IN FRANCHISE HISTORY!
Would love to see them take one in Chicago and win it all at home. Just a better celebration atmosphere than those cricket-quiet away stadiums. But that may be an unrealistic fantasy in what looks to be a long, tough series. Dammit, why couldn't the National League win the All-Star game this year so we could get games 6 and 7 here?

A rational/left-brain thought on professional sports: If I told you I was some random rich guy, and I'm going to hire some other random soon-to-be-rich guys to play a recreational sport in Houston, and your feelings of self-worth will be tied up in our winning and losing - well, you'd probably laugh or curse at me or both. Who the hell do I think I am? What gives me the right think I can yank your emotional state up or down? And why are you dumb enough to let me do it? Yet, somehow, we let ourselves fall into the cult (myself included, or at least my emotional/right brain). I personally think it's some sort of tribal-loyalty thing evolutionarily hard-wired into our prehistoric brains, but what do I know?

Go 'stros!

Astros win the National League Championship

Savor it...

Tuesday, October 18, 2005

The good news on property tax reform failure in Texas

The Marginal Revolution blog has an interesting post today on housing economics based on a NY Times article. Three scary facts come out of it:
  1. Europeans on average pay seven times their income for half as much housing as Americans, who spend 3.5 times their income. This could mean rising home prices longer term in the US if we start to match Europe, especially on the coasts.
  2. "Toll agrees with Glaeser et al. that the key force driving up prices is zoning and growth regulations. In New Jersey it now takes Toll Brothers up to two million dollars in legal fees and ten years in time to get the permits necessary to build. " Ouch.
  3. "Susan Wachter, a housing economist at the Wharton School at the University of Pennsylvania, has an interesting public choice insight about why zoning is worse in Europe.

    European towns also have less incentive to encourage development, Wachter says, because they generally do not, unlike their American equivalents, depend on their local tax base to pay for education and services, which tend to be federalized.

    This implies that towns in states that reduce their reliance on the property tax - often done, as in CA, in order to "equalize" school funding or other expenditure - will soon restrict development."
That last one is a major warning flag for Houston and Texas. Basically you have a free rider problem: when localities don't get much out of local property taxes, they will stop encouraging development and even stifle it, counting on getting the necessary revenue from elsewhere in the state (i.e. let some other guy pay my way). Had property tax reform passed in the legislature this year, we could have seen Texas heading down this path, as more school funding would have shifted from local property taxes to state-level assessed taxes. Now maybe there's some appropriate state-local balance here, but this downside never came up during the debate (at least not that I know of). I would hate to see us as financially dysfunctional as California.

Monday, October 17, 2005

Houston reasonably safe from housing slump

Business Week has an article and a graphic on which cities are most at risk economically if a housing construction slump begins due to rising mortgage rates and flattening or declining house prices. They do this by looking at what percentage of recent job growth in a city is construction-related. High percentage = lots of risk. Fortunately, Houston and Texas are in pretty good shape:
Other regions would also come through a housing downturn relatively unscathed. Most Texas cities, for instance, are doubly insulated from a downturn. Housing price hikes been moderate, and construction is a small part of payroll growth: 2% in Dallas, 9% in Houston, and -2% in San Antonio, where construction employment has fallen.
I find the Houston vs. Dallas difference to be odd considering that both metros seem to be growing at about the same rate. I suspect that these are city numbers, not metro area. Houston is larger and still has substantial construction inside the city limits. Dallas is smaller, built-out, and most construction seems to be in the suburban cities around it. Houston's lack of zoning may also contribute to more redevelopment and construction: just look at all the inner-loop townhomes going up. Just another indicator that we have a more vital core than Dallas does right now.

But beyond that, I even question their core thesis. Would new housing construction really drop that much if home prices flattened or declined on the coasts? I'm not so sure. A lot of those high-construction cities they list are where people are fleeing from expensive cities. Even if the average Orange County or Bay Area house drops from $600K to $500K, is that really going to slow the exodus to Riverside-SB, Phoenix, and Vegas all that much? I do think they would slow down a little bit, if only because people will have trouble cashing out of their CA house at an "acceptable" price to move to those cities. But no matter how you look at it, demand is far outrunning supply out there (and in some other parts of the country), and while a slump might close the gap somewhat, I have trouble seeing it bringing supply and demand back to equilibrium. But maybe I'm thinking about this wrong? Would love to hear other thoughts in the comments.

Thanks to Erik for the link.

Sunday, October 16, 2005

Silver with a cloudy lining

The front page of today's Sunday Chronicle has an article on Latin American home purchases in Houston:

Security concerns and economic instability in many nations south of the U.S.-Mexico border are driving many Latin Americans to scoop up real estate in the United States, with cities such as Miami, New York and Houston among the most popular markets for foreign investors.

...local real estate agents said Houston is becoming a haven for investors who are worried about the economy of their nations, primarily those from Mexico and South American countries.

Though some Latin Americans prefer to buy condominiums in Miami for the city's beaches or in New York for its designer boutiques, Houston is a hot destination because of its affordable real estate market, upscale shops, respected Medical Center and proximity to their native countries.

With so many airlines connecting to Latin American cities, Houston is popular with investors who want to spend the weekend in their vacation homes in the Bayou City.

"With Houston being so multicultural, it attracts that clientele, especially with us being so close to the border," said Christine Garza Rayburn, of Rayburn & Associates Realty in Houston.

As you can see, it's clearly a "good news/bad news" story. The good news is Houston's attractiveness and the money flowing into local retail and real estate. The bad news is the need to flee bad political and economic conditions in their home countries, best summed up in the final paragraph:
"I always wanted to start my own business, and Houston seemed like a good place to do it," Sanchez said. "Mexico is not a country where I can build a business and have it grow."
On the whole, I'd prefer to give up that money coming into Houston if it could be productively invested in developing Latin American economies, with the benefit to Houston coming from trade rather than elite wealth fleeing instability.

(P.S. - Go 'stros!)

Thursday, October 13, 2005

The Creative Class as saviors of old cities

I've been doing some thinking about Richard Florida's Creative Class strategy for cities (his site), and why it became so popular so fast with cities all across the country. Part of it was the allure of the Internet boom, which it perfectly complimented. Everybody wants to be the next Silicon Valley. But I think there's a bigger-picture, longer-term story of cities that explains why the ground was so fertile for a Creative-Class-type theory to be accepted so rapidly across such a large swath of the country.

I think the nutshell story for a lot of cities over the last 60 years is as follows:
  1. People keep moving farther out for bigger, newer, cheaper houses
  2. This suburban growth leads to traffic congestion and transit hassles
  3. Employers move to the suburban "edge cities" to follow their employees and reduce commutes
  4. Old core cities are left with a deteriorating tax base as jobs move out, lower income families (often immigrants) move into their old housing stock, and inner city schools continue to decline relative to the suburbs
The result is a stagnant or even declining central city in a thriving metro. If you're the mayor of one of these cities, what can you do? Everything requires money, so how do you increase the tax base? You have nothing of interest to employers. They're comfortably ensconced in their suburban towns on the fringe, usually along the beltways. And any middle class or higher family takes one look at the schools and says "no thanks."

Into this desperate situation comes Dr. Florida with the miracle cure: attract well-off childless households like singles, young or empty-nest couples, and gays. "Childless household" is not a very sexy term, so they become the "creative class" - and who doesn't want to be a part of that? This demographic is the perfect target customer for old cities: they provide tax base, don't care about schools, and are looking for something different from the plain-jane, child-safe, Disney-approved suburb. Voilà! A match made in heaven. Just revitalize a few funky neighborhoods here or there, have the feds build you some cool light rail, get some nightlife, arts organizations, and a few gay bars and you're good to go. Sure, you have to get crime under control, at least in those neighborhoods, but a little focused police attention for a while should do the trick.

So the new metro model can be thought of as three concentric circles:
  1. A core of creative class, immigrants, and low-income neighborhoods with older housing stock and mediocre schools (although hopefully on an improving track)
  2. A ring of employers, usually along the loops and beltways
  3. The suburbs and exurbs of families

This model is very transit-unfriendly because the employers tend to be dispersed along the rim. But even if those in the core have to drive to work, they probably have a not-so-bad reverse commute. And hopefully those core creatives are paying taxes that will help the old city upgrade its infrastructure, neighborhoods, and schools.

The counter-argument to the creative class theory tends to sum up as "forget the fluff, focus on fundamentals like taxes, schools, crime, mobility, and infrastructure." And I think that's absolutely the right strategy on a metro-area basis, but before old core cities can have the money to reduce taxes, improve schools, reduce crime, increase mobility, and upgrade infrastructure, they have to have the tax base to pay for it, and the creative class approach is the easiest way to get there. The "low hanging fruit," if you will.

Houston has been lucky enough to avoid some elements of this story. First, we invested a whole lot in freeways and HOV transit to help keep employers in the core. Second, for those employers that did leave, annexation allowed us to keep growing the city limits to include them so we didn't lose the tax base (Greenspoint, Clear Lake, Energy Corridor, Westchase, Willowbrook/HP, etc.). This is why you don't hear quite as much about the creative class here as in many other cities: we never declined to the point we were that desperate to attract tax base. There was some talk during the Internet bubble about Houston having trouble attracting top talent nationally, but that seemed to fade away with the bubble collapse and the recession: jobs trumped coolness. And anybody who's watched our core evolve the last 10 years or so can see that we've come a long, long way on the coolness factor, which the rest of the country is just barely starting to notice.

So what does all this mean? I think it means that Houston has a real shot at becoming one of the next great world cities. We're making a lot of progress on attracting the creative class tax base, and we still have most of the employers in the core due to strong mobility investments, and HISD is one of the best urban school districts in the nation, and our lack of zoning makes core redevelopment of our housing and commercial building stock much easier than most cities, and we're the lowest cost-of-living major city in America. That gives us a tremendous financial base we can use to tackle any problems and invest in "great city" infrastructure like museums, parks, transit, stadiums, education, charities, libraries, top restaurants, and arts and entertainment organizations. If we keep up this momentum, we should expect to see great things in the coming decades...

Wednesday, October 12, 2005

Misc items of the week

Every once in a while I collect enough small items to justify a collective post.
  • Hot Town, Cool Cities - I love this site. They want to make a web site, a "treasure map", and a film about cool places and experiences in Houston. Don't miss the 12 min downloadable video teaser. Please pass this link on - they're looking for sponsors. Thanks to Howell for the pointer.
  • The Chronicle article from Sunday on how The Woodlands is becoming "Galleria North" with upscale retail in a New Urbanist town center setting.
  • A Chronicle article from last Friday about how the Westchase District has become the hot office market in town (mainly energy companies), while downtown and uptown struggle with high vacancies. Houston's center of gravity for commercial activity keeps shifting west, from downtown to uptown to Westchase. Although it's good that the jobs are at least staying within the city of Houston, it's a troubling trend if you're rooting for an urban renaissance in the core or hoping that commuter rail might actually work one day in Houston. Lack of mobility to the core is playing a major role in the shift:

Experts said west Houston has become a magnet for companies in the energy industry because of its proximity to major roadways, nearby housing and the ability to work close to clients.

"We decided a lot of our employee base and customer base was on the west side," Watson said.

In recent years, companies have been relocating to Westchase from pricier, congested office centers like downtown and the Galleria area.

Part of what's drawn companies has been lower land prices out west, which have allowed companies to have office campuses with ample parking and room for growth.

  • Finally, in the "Dallas vs. Houston" department, an interesting post on Virginia Postrel's blog about the culture of the two cities as seen through recruiting by their law firms, with Houston focusing on merit/academics and Dallas being more concerned with elite social connections. If it's true, I'm certainly glad to be in Houston.

Tuesday, October 11, 2005

Houston demographics and growth update

Brookings has a new report on the demographics of US cities since 2000. That link is to the abstract, this one is to the full 28-page pdf. I don't think you'll find too much that's surprising (news flash: people are moving to the south and west). If you want the fast overview relevant to Houston, I recommend going to the pdf and then searching on "Houston" - then skim the 15 results that come back. A few highlights:
  • We're the 15th fastest growing metro since 2000 at 9.3%, very close to #13 Atlanta and #14 DFW. The faster growers are generally much smaller metros than Houston.
  • We're the 14th fastest growing metro from 1960 to 2004, clocking in at 224% from 1.6M to 5.2M, also very close to #13 Atlanta and #15 DFW and with smaller metros growing at faster percentages.
  • We've passed up SF and DC for attracting foreign immigrants. Now #6 behind NY, LA, Miami, Chicago, and DFW.
  • Most of our growth is foreign immigration and natural growth, but we do still have positive domestic migration, unlike other big US metros that are hemorrhaging domestically: NY, Chicago, LA, SF, Boston, and Detroit.
So, building on the debate in the comments of one of my recent posts: if New Urbanist living is under-supplied and in such demand, why do the cities that offer the most of it have such a huge outflow of domestic migration? And why are the fastest growing cities from domestic migration sprawlvilles of the south and west like Riverside-SB, Phoenix, Vegas, Tampa, Atlanta, Orlando, and Dallas?

Please don't misunderstand me: I think Houston definitely needs some more New Urbanist/TOD developments and neighborhoods, and I think there is some demand there. I just disagree with the assumption that there is a massive unmet demand there, and that the suburbs are just chock full of dissatisfied people who would move to walkable/New Urbanist/TOD neighborhoods if they were available. They are available in a lot of cities, and people are moving out, not in.

Monday, October 10, 2005

Why "peak oil" does not equal the death of the suburbs

Way back in March, I laid out my arguments debunking James Howard Kunstler's "Long Emergency" theory that peak oil would mean the end of the suburbs (not to mention modern civilization). Now Randal O'Toole at The Thoreau Institute has laid out a complimentary set of debunking arguments that are truly devastating to Kunstler's case.

While I disagree with Randal using the "New Urbanist" label for this group, the logic is basically sound. "Anti-Suburban Radicals" would be a more accurate term, because they are truly the extreme fringe beyond more moderate and realistic New Urbanists and Smart Growthers. His executive summary:

As promoted by New Urbanists such as James Howard Kunstler, the peak-oil theory holds that we are running out of oil and that apocalyptically high energy prices will totally disrupt the American way of life. Based on this theory, the New Urbanists advocate more government regulation of land use and lifestyles and diversion of more highway revenues to rail transit.

The peak-oil argument, however, critically depends on four strong assumptions:

  1. We are running out of oil
  2. There are no substitutes for oil
  3. Higher prices will lead people to drive less
  4. Less driving will force people to return to the cities

If any one of these assumptions is wrong, Kunstler's argument falls apart. This paper shows that all four assumptions are questionable.

  1. While extraction costs may moderately increase fuel prices, the world has sufficient known reserves to last for many decades.
  2. Substitutes include solar, nuclear, and coal, but the first "substitute" will be the use of more fuel-efficient cars.
  3. Americans will respond to sustained higher fuel costs more by cutting back on other transport costs, such as by keeping their cars a little longer or buying less luxurious cars, than by driving less (staying around the 9% of household expenses average).
  4. To the extent that people do drive less, they could actually accelerate the suburbanization and exurbanization trends that the New Urbanists oppose. (telecommuting, job dispersion, and preference for big box stores to minimize trips)

Government policies based on a presumption of peak oil are likely to do far more harm than good to our cities and our economy.

Randal goes into deep statistical depth on each of these arguments here.

Kunstler will actually be speaking at Rice the evening of Thurs Nov 3rd. I'd love to see him in a debate with Mr. O'Toole, but, given that's not likely to happen, I'm hoping myself or others will be able to raise these arguments with him that evening during Q&A.

Sunday, October 09, 2005

Astros accelerate aging of local blogger (updated)

So, I'll admit up front I'm not much of a sports guy. I find most games really stress me out, and stress is not something I'm looking to add to my life. If a local game is important, I like to try and tune-in near the end. If they're winning, great, I like to watch them close it out. If they're losing big, no problem, move on to other activities. And if it's a close, nail-biter game, well, I'll only pound my heart for a short time.

So, with that in mind, I tune into the Astros-Atlanta Game 4 of the playoffs today during the seventh inning, just after two o'clock. The Astros are down 5 to 1. Clearly time to move on to other activities and hope for a good Game 5. But I don't this time. I get this week's stack of Wall Street Journals and plop down in front of the TV, and see if, maybe, the Astros will start to pull it out. Worst case, a couple innings and I'm done.

Uh-huh. Right.

Observation at this point: Wall Street Journal reading slows to a trickle when you alternate between watching pitches and reading single paragraphs, especially when you easily lose track of the last paragraph you read. An afternoon of reading in slo-mo.

Braves get another run in the top of the eighth. Now 6 to 1. Why am I watching this?

Then Berkman gets his Grand Slam in the bottom of the 8th. 6 to 5. Whoa, this got interesting fast. Heart thumping. Relax, for Christ's sake. It's just a baseball game!

Bottom of the 9th. Two outs. Not looking good, but at least it'll be over soon. Brad Asmus hits a walk-off homer, literally an inch over the yellow home run line on the wall. Stadium goes wild. 6-6 game. Yea! But also now it's "Oh crap, I wasn't planning on extra innings." Heart continues to pound away, not responding to any conscious directives to the contrary.

OK. No problem. Both teams are digging deep in their bullpens. Pitching is getting shaky. The Astros are on a hitting streak. This should wrap up soon. Time noted near 3pm.

Then both sides firm up their pitching and bats go cold.

I'm trapped. Clearly, I'm their good luck charm, right? They were down 6 to 1 when I started watching, and made an amazing comeback in just two innings. I can't bail on them now. I have to watch no matter how long it takes. It's bad enough I can't relax and stop my heart palpitations - I have to have a damn Cro-Magnon-man superstitious brain!

The Astros pull up their last remaining pitcher in the 16th: Roger Clemens. That's it. The bullpen is deserted. How long can he go when he just pitched on Thursday? Will this thing never end?

They then proceed to surpass the longest postseason game in baseball history: the 1986 Astros loss to the NY Mets in 16 innings.

Finally, at almost 6pm, nearly four hours after I started watching and six hours into the game, Chris Burke hits an incredible walk-off home run in the bottom of the 18th (!) inning ("Two games for the price of one!" - the records will say they won in four games, but it was really five). And suddenly, it's over. The stadium goes wild. They empty the bench and mob him at home plate. The Astros have won and get to move on to play the St. Louis Cardinals for the National League Championship (2004 deja vu, anyone?). Relief. Heart slows down to its normal rate, an untold number of gray hairs later. Hey, but I productively cleared out five backlogged days of the Wall Street Journal, right?

Go 'stros!

(Update: NPR All Things Considered story on the game)

Thursday, October 06, 2005

States pursuing the mirage of biotech?

The Houston Business Journal has an interesting web-only article on how states and cities are desperate to be the next big biotech cluster.

States spend millions in feverish pursuit of biotech

Like a contagious virus, biotech fever is sweeping across America, leading states and municipalities to spend millions of dollars courting an industry that has never been profitable and is highly concentrated in just a few areas of the country.

Officials infected with the fever often see visions of high-paying jobs and dramatic impact on economic development - not to mention revolutionary advances in health care and agriculture. And the cure may come only after sufferers have wasted years and millions in taxpayer dollars chasing after the mirage.

That's the skeptic's view of the economic development community's current obsession with biotechnology. Four years ago, just 14 states had targeted biotech as a way to grow their economies. Today, 41 states are chasing the business.

"That says a lot more about the herd instinct of people who do economic development in this country than the economics of biotechnology," says Joseph Cortright, a Portland, Ore.-based economist who co-authored a 2002 Brookings Institute study on biotech.

A decade ago, every region wanted to be the next Silicon Valley, Cortright says. A few years later, dot-coms were all the rage.

"Biotechnology is the latest 'It Girl,' '' says Rob DeRocker, executive vice president of Development Counsellors International, a New York City-based firm that works with economic development organizations around the world.


Areas that don't have an existing biotech infrastructure won't be able to compete on cost alone. Instead, DeRocker says, they need "the political will and financial wherewithal" to spend decades beefing up their medical research institutions and commercialization capacity.

Many places now chasing biotech won't have that kind of patience, he predicts. "Some of these locations," he says, "will wake up and smell the coffee."

"Quite frankly," DeVol says, "most of them aren't going to be successful in the bigger scheme of things."

The good news is that we all get to benefit from these new biotech therapies being generously subsidized by local governments.

All this focus is in spite of the fact that biotech companies tend to have few employees, a small payroll, are rarely profitable, and usually don't expand much as they outsource production, sales, and other support services to big pharma - which they cover in a sidebar article. Their conclusion:

Economic developers' fascination with biotech also could lead them to neglect other strategies that could pay off better for their communities.

DeRocker says the "blocking and tackling" of economic development - things like work force retraining and helping existing businesses grow - "could be lost for the sake of trying to reach the end zone with one pass" via biotech.

Cortright advises economic developers against looking for "magic bullets."

"Everybody assumes there's one next big thing," he says. "There really are lots and lots of little next things. The hard part is figuring out what are the little next things that you can have a big piece of."

Houston already has an incredible research base in the Texas Medical Center, the largest in the world, and has been trying to increase commercialization via the non-profit BioHouston organization, with some mild success, inc. attracting some local biotech VC. There also seems to be a developing niche for Houston around the intersection of bio and nanotech, with Rice pushing aggressively in that direction and building a collaborative research center with the TMC at Main and University. Then there's Governor Perry's Emerging Technology Fund. So, to some extent, we're as guilty as the rest of them, although I think we might a bit more conservative: fewer subsidies (relatively), less obsessive focus, a more "real" chance of making it work.

Wednesday, October 05, 2005

Houston in the national media

I finally caught up on some of my email newsletters, and came across a couple interesting blurbs on Houston buried in some Hurricane Katrina articles from the national media. They probably don't tell you anything you don't already know, but it's always interesting to follow the national image of Houston in the media.

The first is from the Christian Science Monitor on the post-Katrina migration:

Texas has long received the largest share of New Orleans' outmigration, notes Mr. Berube. It's true for Katrina evacuees as well. The Lone Star State now has more than half of the shelter-based displaced population.

At Houston's Toyota Center this week, thousands of evacuees came to inquire about jobs, apartments, legal aid, and medical care. At a job fair people were getting help with their resumes, browsing bulletin boards, and slurping free ice cream.

Gaston Duronslet is standing in front of the bulletin board, scanning it for information technology postings. A single dad with three kids, he worked for DuPont in New Orleans before the storm.

His children are already enrolled in Texas schools. He's received an apartment rent-free for a month while he looks for a job. So far, he's been overwhelmed by Texan generosity; noticing his Louisiana license plates, one couple followed him until he stopped at a deli for dinner and paid for his meal. "I've already written New Orleans off," says Mr. Duronslet, whose family has lived there since the mid-1800s.

A big city like Houston is unlikely to be changed very much by an influx of Louisianans. Urban areas in the US are already largely populated by people transplanted from elsewhere. But the smaller the community that receives new residents, the larger the corresponding effect.

"The impact in cities like Houston and Miami won't be very big," says Chris Girard, a professor in the department of sociology and anthropology at Florida International University. "But in rural communities and states that are more homogeneous, there will be a much bigger impact and there will be some culture shock."

It goes on to talk about how the relative impact on Baton Rouge will be much more visible and substantial than in a city like Houston, where a 100,000 potential new residents added to a metro of 5 million is not as noticeable.

The second is from an article in the Washington Post on New Orleans' future:

This is not the first time that harsh realities have reshaped cities along the Gulf of Mexico.

The historic analogy for New Orleans is Galveston. For 60 years in the 1800s, that coastal city was the most advanced in Texas. It had the state's first post office, first naval base, first bakery, first gaslights, first opera house, first telephones, first electric lights and first medical school.

Then came the hurricane of Sept. 8, 1900. As yet unsurpassed as the deadliest natural disaster in American history, it washed away at least 6,000 souls. Civic leaders responded with heroic determination, building a seawall seven miles long and 17 feet high. Homes were jacked up. Dredges poured four to six feet of sand under them.

Galveston today is a charming tourist and entertainment destination, but it never returned to its old commercial glory. In part, that's because the leaders of Houston took one look at what the hurricane had wrought and concluded a barrier island might not be the best place to build the major metropolis that a growing east central Texas was going to need.

They responded with an equally Lone-Star-scale project, the 50-mile-long Ship Channel. It made inland Houston a world port. In the wake of the Spindletop gusher that launched the Texas oil industry, Houston became the capital of the world petroleum industry. As the leaders of the "awl bidness" were fond of saying, "Don't matter if the oil is in Siberia or the South China Sea -- you buy your rig in Houston or dig for it with a silver spoon." Houston went on to become a finance, medical, university, biotech and now nanotech center. The first word from the surface of the moon was not "Galveston." It was "Houston."

You can also thank annexation for that last one, otherwise it could have been "Clear Lake, the Eagle has landed." How goofy would that have sounded?

The national media frequently mentions energy, NASA, and the medical center when talking about Houston, but this is the first time I've ever seen us acknowledged for our bio and nanotech. Hopefully it will just be the first of many.

Tuesday, October 04, 2005

The Virtues of Sprawl

Interesting article in the Boston Globe on the virtues of sprawl (thanks to the Out of Control blog for the pointer). A lot of good thoughts in here, so I'm gonna go overboard on the excerpts (highlights mine):

But is all that a bad rap? Maybe, says Robert Bruegmann, a professor of art history, planning and architecture at the University of Illinois at Chicago, who identifies many good things about sprawl. ''It's no better or no worse than any other settlement pattern," Bruegmann says. ''It works because it satisfies a lot of needs. When people have been able to afford it, people move out of cities. We now have tens of millions of people who can do what only a small minority once could do."

Bruegmann, whose new book, ''Sprawl: A Compact History" (Chicago), will be published this month, joins consultant and author Joel Kotkin, New York Times columnist David Brooks, and others in finding inspiration in the subdivisions, like a Jane Jacobs of suburbia. The embrace of dispersal follows a long tradition started by Thomas Jefferson and followed by Frank Lloyd Wright. Today Bruegmann and others feel it's important to identify what's good about spread-out development because sprawl has been hammered for over two decades by activists urging ''smart growth" and New Urbanism, the latter an architectural movement promoting compact traditional neighborhood design.

Sprawl gives us ''decentralization and democratization," Bruegmann says—an orderly use of land that draws in working-class and middle-class people and allows them to head upward in the economy and society. Homes in new subdivisions in the South and West commonly start at $120,000. To try to curb sprawl is to stand in the way of the flourishing of the American dream.

''It's a way to get things once possessed by only a few," Bruegmann says. ''Privacy, mobility—social and physical—and choice."

Nor is sprawl a new phenomenon. From ancient Rome and China to 19th-century London to Paris and Los Angeles today, society has spread out during economic good times. ''There's a massive out-migration as soon as people can afford it," Bruegmann says. Accordingly, maybe we should all stop worrying and learn to love the subdivision.


Most smart-growth activists today don't spend a lot of time criticizing sprawl or predicting suburbia's demise. Their main focus is providing more choice for those people who don't want to live in sprawl—changing outdated zoning that prevents compact, mixed-use development near train stations, for example.

''Smart growth doesn't say all sprawl is awful," says John Frece, associate director of the National Center for Smart Growth Research at the University of Maryland. ''It's not about taking away the ability to develop sprawl—just to add the ability to do different kinds of development and put that on equal footing. Then let the market decide."

Bruegmann says he's quite open to the idea that Americans choose different living arrangements at different times of life. And, just to complicate everyone's thinking a little further, he also predicts that as societies get ever more affluent, more people want to come back to cities. It's just a matter of understanding how wealth drives the popularity of different physical landscapes.

''If you have enough money, living at high density is very alluring," he says. ''I think there will always be some people who will want to live in suburban settings no matter what. But if you have a spacious apartment on Fifth Avenue with a doorman, and you can get in a taxi or walk to the Metropolitan Museum of Art...millions of people would love to do that."

Ultimately, says Kotkin, author of ''The City: A Global History" (2005), ''The problems of sprawl have to be solved within the context of sprawl. You're not going to stop it. You can't reengineer society by getting everyone to move back to Boston. Forget about it. It's not happening."

Sprawl is getting better, Kotkin says—more dense, and eventually featuring a better mix of uses, with stores and workplaces closer to homes. Kotkin predicts more of these kinds of suburban villages, which he calls ''the new suburbanism," a deliberate echo of the New Urbanism. With the help of technology, more people will be able to work from home or closer to home. Car trips will still be necessary, but they could be shorter and done using hybrid and energy-efficient vehicles.

''In southern California we've been saying this for years: 'It's just a different kind of city,"' Kotkin says. ''It's like someone from Florence coming to 19th-century Manchester. They'd say, 'Where's the church in the middle?' It's just different. The urbanization of suburbia is the great challenge of land-use planning in early 21st-century America."

I think the smart growth movement realized they really poked a stick in the hornets' nest by being so anti-suburbs, so now they're backing off and focusing on providing higher-density housing and lifestyle choices for those who want to live that way - which I happen to totally agree with. Help remove barriers to attractive and practical new urbanism and transit-oriented development, and hopefully it will flourish.

I'm glad to see that others are also starting to point out the important linkages between sprawl, housing affordability, and social and economic mobility. Home ownership is a proven path to a financially stable middle class family lifestyle - and a lot of unaffordable smart growth communities have cut off that path. But smart growthers shouldn't worry too much: inevitably, the kids of those families will bore of the suburbs and desire to move into the fast-paced, amenity-rich city when they become young adults.

Monday, October 03, 2005

Councilman Michael Berry on Houston's national image

Councilman (and former Mayoral candidate) Michael Berry will be talking about Houston's national image before and after Hurricanes Katrina and Rita on KTRH NewsRadio 740am on the Sam Malone show between 10am and noon on Tues Oct 4th. You can listen on the Internet here. Michael's a very sharp guy with an amazing knowledge of the history, governance, and policy issues of Houston. Should be a good listen.

Sunday, October 02, 2005

Attracting jobs to match our population growth

It's one of those chicken and egg problems: Do new jobs attract new residents? Or do new residents create and attract new jobs? The answer is a little bit of both. For instance, Austin and DFW have continued to add lots of residents over the last 5 years even after they lost a ton of jobs in the Internet bubble crash. And Houston has been adding population at a much faster rate than new jobs. Obviously, those need to come into balance eventually or you've got a problem. This blurb from last week's Houston Business Journal indicates that Texas is positioning itself well to add jobs to match the incoming population. As you can see, the Sunbelt South dominates.
Survey: Texas ranked as best state for business

Texas and North Carolina have the most favorable business climates in the United States, according to a latest survey of 207 senior-level U.S. corporate executives and the site selection consultants who advise them on matters of expansion and relocation.

Rounding out the top five are South Carolina, Georgia, and Nevada. The survey was conducted by Development Counsellors International, an economic development marketing firm that has worked with more than 375 cities, states, regions and countries throughout the world to attract investors and visitors.

Credited for a favorable tax climate, business-friendly attitude and low cost of business, Texas claimed the Best State for Business title for the third consecutive survey, with 33 percent of the respondents giving the Lone Star State highest marks.

September highlights

Time again for the monthly ritual. Near the first of every month, I'll be adding a post highlighting key posts from the previous month(s), with a particular focus on significant ideas I'd like to see kept alive for discussion and action. The main page will only show about a month's worth of entries, and I know most new readers won't go back into the monthly archives linked at the bottom of the right-side column, so here are the highlights:

September: A month dominated by posts on Hurricanes Katrina and Rita, so not many long-term "keepers".
Highlights from previous months can be found here.

As always, thanks for your interest in Houston Strategies.