Houston Strategies

Portland: Myth and Reality

Monday the Gulf Coast Institute had a presentation on "Portland: Myth and Reality" by Robert Liberty, who has played in integral part in shaping Portland over recent decades through multiple organizations there, including Metro Councilor (their all-powerful regional metropolitan planning organization). It was quite interesting. Len and I attended out of simple curiosity, realizing only after we had been there a while that Mr. Liberty was responding directly to our Chronicle op-ed on planning a few weeks ago - to the point of including quotes in his slides. Unfortunately, the presentation doesn't seem to have made it to their web site yet, and my notes are sketchy, so my responses won't be as detailed as I'd like - but here it goes.

Overall, I felt like our arguments were countered somewhat obliquely (the reasoning was not straightforward to me), and with very selective data. Mr. Liberty was very pleasant (and humorous), said some nice things about Houston (more on that later), and I enjoyed the presentation - but I didn't find the arguments very convincing, and felt some of the more pointed questions by the audience were dodged.

I particularly disagreed with the mobility/congestion comparisons to Houston. You simply can't compare a metro of 5.5m with a metro of 2m - they're just not on the same scale. Of course Houston is going to have more hours of delay. More interesting to note is that Portland's delay has increased faster - by 32 hours per year per person since 1982 vs. 24 for Houston. Also worth noting is that Houston has a travel time index of 1.42 (ratio of rush hour travel time to off-peak), which is in the middle for a "very large city", wheras Portland has a TTI of 1.37, near the very upper end of the "large city" category (i.e. cities that are fairly comparable to Portland). Austin is down in the "medium city" category, and has a lower TTI of 1.33 - if that gives you a reference point - and I find Austin's traffic quite painful. In sum, Houston is doing quite well for a metro of its size, and Portland is doing quite badly for one of its size.

I will give Portland credit in one respect though. Most cities let NIMBYs dominate development decisions, making density very hard to achieve (most neighborhoods fight it tooth and nail). Portland's all-powerful Metro seems to have been able to push the NIMBY's aside and get substantial density built along the rail lines, including affordable units. Houston has also been able to densify (with apartments, townhomes, condos, etc.), but with a polar opposite approach of minimal land-use controls, instead of very strong controls like in Portland.

Here are some things he noted that he had seen and liked in Houston:

• "Neat land uses" in Montrose from a lack of zoning
• Dense corridor development along Westheimer near Montrose
• Allen Parkway
• And, of course, the Main St. light rail line.

Summing up my views on Portland: It's a nice town. It really is. I just visited last summer and quite enjoyed it. They made an explicit decision as a community to preserve open space and wilderness outside the urban growth boundry, discourage car use, maximize transit, and densify in the core like a European city. My objections are two-fold:

1. They don't seem to acknowledge the high costs of their decision: unaffordable housing, people forced to rent most or all of their lives, driving out the middle class that want to own a home, traffic congestion and parking nightmares, heavy development and transit subsidies, a steep drop in families with children, most growth shifting to the Vancouver/WA side, compromised property rights and the Prop 37 backlash, etc.
   
2. It's not a model appropriate to Houston, which lacks the people-drawing scenic beauty/mountains/wilderness and relatively pedestrian-friendly weather (they have lots of London-like drizzle, but that's pedestrian-tolerable, a category I do not put our May-Sept summer heat/storms in). Throw in our independent, anti-big-government culture, and we'd have an open revolt on our hands if we tried to do what Portland's doing (and it sounds like even they're facing somewhat of a revolt - with prop 37 plus he described the development commission as "under assault").
   

As the session wrapped up, Barry Klein gave out handouts with a link to a site titled "Debunking Portland - The Facts Behind Portland's Claims", if you want to drill down in more detail.

posted by Tory Gattis @ 10:28 PM 37 comments

Seven reasons why government planning fails

Randal O'Toole of The Thoreau Institute recently started a new blog called The Antiplanner. It can be a bit extreme at times for my tastes, but it did have a few recent posts that give the best summary I've seen to-date on the inherent problems of planning and visioning - a recent area of debate in Houston. The first post starts with seven concise reasons government planning usually fails:

1. The Data Problem: The amount of data needed to write a truly comprehensive plan is more than any planning agency can afford to collect. Even if collected, it is more than anyone, even with the help of computers, can comprehend.
2. The Future Problem: Writing a long-range plan requires information about the future that is unknowable, such as future technologies, costs, and personal preferences.
3. The Modeling Problem: All planning requires models, but before a model becomes complicated enough to be useful for comprehensive planning, it becomes too complicated for anyone to understand.
4. The Pace of Change Problem: By the time planners collect all available data and go through the public process of writing a comprehensive plan, conditions have changed so much that the plan is obsolete.
5. The Incentive Problem: Government planners who deal with other people’s resources, whether their land or their tax dollars, have no incentive to find the right answers because the costs of their mistakes will be imposed mostly on others.
6. The Political Problem: Ultimately, the final decision in any government plan will be made through the political process, a process which is hardly rational.
7. The Special Interest Problem: Any time you give a government agency the power to write plans for other people’s money and resources, you create incentives for special-interest groups to lobby in favor of plans that primarily benefit them. Such interest groups will not provide a balanced view; in particular, taxpayers will be underrepresented.

In a later post, he articulates problems with the visioning process that often goes along with planning:

In lieu of accurately predicting the future, planners use a technique they call visioning in which they ask people to imagine what they would like their city to look like in the future. They then try to plan for that city.

Visioning has numerous flaws. Most obviously, the people doing the visioning still have no special knowledge of the future. So it is most likely that their visions will really be based on a nostalgic view of the past.

Second, visioning results in a mandate for coercive planning. After all, if you can imagine the best possible future for your city, you would not want to risk that future to the uncertainties of the free market or people’s short-term preferences.

Finally, the people writing the vision do not represent all of the people who will live in that future. If they make mistakes, the cost of those mistakes will be shared with others, so they have little incentive to try to get it right.

For all these reasons, visioning is the wrong solution to planners’ inability to predict the future. Instead, in many cases, it just become one more excuse for planners to impose their own nostalgic ideas on their cities.

I'd add to that list that's easy to "vision" a utopia where everybody conforms to what you personally want, because a vision doesn't cost you anything or demand any tradeoffs. It lets you appropriate something from somebody else (like their property rights or taxes) for your personal benefit.

Finally, he dissects Denver's Metro Vision 2030 plan, and really exposes the flaws above in a real-world case. It's long enough that my excerpts can't do it justice, so I highly recommend reading the whole thing. Here are a few of the nuggets that jumped out at me:

Contrary to what some planners believe, increasing density increases rather than reduces congestion. Planners like to believe that people will drive less if everything is closer together, but the truth is that an X percent increase in density results in less than an X percent decline in per capita driving (so car trips per sq.mile, and thus congestion, still increase substantially). Even the latest in rapid transit and pedestrian-friendly design cannot help. DRCOG predicts elsewhere that its plan will increase congestion (measured in hours of delay) by 73 percent by 2025.

With added congestion comes more air pollution because cars pollute more in stop-and-go traffic. ...

The associated Metro Vision Regional Transportation Plan calls for spending $5.8 billion on regional road improvements (at least part of which will be privately funded) and $4.2 billion on rapid transit (all of which will be taxpayer subsidized). In other words, 42 percent of the region’s transportation capital funds will go for transit, even though DRCOG predicts that by 2025 transit will carry less than 3 percent of passenger travel (see p. 24). Contrary to wishful thinking, blowing a lot of money on transit will not reduce congestion.

The Metro Vision plan imposes other costs on taxpayers. Many of the 70 high-density, mixed-use areas will require subsidies in the form of tax-increment financing (TIF). Some planners claim TIF is not a subsidy, but the new development it funds imposes costs on fire, police, and other urban services without providing any revenues to cover those costs.

...

Planners consider large yards to be destructive of open space, yet Americans regard large yards as some of the open spaces that they enjoy the most. Taking people’s yards away by mandating compact development effectively reduces the amount of open space people use on a daily basis.

Metro Vision 2030 imposes another hidden cost on residents: unaffordable housing. The emphasis on multifamily and compact development means there will be plenty of these types of housing, but the housing that most people want — single-family homes with a yard they can use for gardens, play, and entertainment — is already priced out of sight in parts of the Denver area. Coldwell Banker says that a house that costs $155,000 in Houston would cost $357,000 in Denver and $536,000 in Boulder. DRCOG’s Metro Vision plan will only make this worse.

In short, DRCOG’s plan calls for making most if not all of the major problems it identifies — congestion, air pollution, tax burdens, and open space — worse, not better. It will also impose high housing costs on the region. DRCOG is committing billions of dollars to subsidies for rapid transit, high-density housing, and infrastruction for infill. It is adding billions of dollars to the cost of housing.

Why does this happen? Because there is no scientific basis for regional planning. Instead (to quote a paper cited by Dan in response to a previous post), DRCOG relied on “visioning, scenario-building, and persuasive storytelling”.

In what sense can this planning be called “rational”? DRCOG is not planning for what people want — people don’t want congestion and high housing prices. It is not planning for any particular future needs — Colorado is not going to run out of open space any century soon. This planning is merely some people trying to impose their preferences on other people. That is not rational planning. It is authoritarian government. It is exactly what Americans are supposed to be against.

posted by Tory Gattis @ 6:47 PM 36 comments

What's up at HCTRA

Last month, I got a very generous invitation by fellow Rice MBA alum Fred Philipson to visit with upper management at the Harris County Toll Road Authority. Being a transportation nerd, I of course immediately accepted, and had to also invite along fellow nerds Christof and Erik (and I mean that in the nicest possible way, guys). It was an extremely engaging free-ranging discussion that covered many topics. I took a lot of notes, and now I get to pass them along to you. If I miss something important, I hope they might chime-in in the comments.

• Long-term plans include extending the Hardy all the way to Conroe
• Shorter-term priorities include the Grand Parkway on the northwest side
  
• On the southern end, the Hardy extension into downtown is still in "coordination" among all the different entities. 4 lanes total, with a connection to Metro's new Intermodal station north of downtown (Christof noted this would be great for express bus service to IAH from the Intermodal station). They speculate that the extension might be ready in around 5 years (!), about 1.5 years of rail relocation, and then 2-3 years of construction. I'd always thought it was on a faster track than that.
  
• The extension of the Ft. Bend tollway to the southwest corner of 610 is on indefinite hold. Evidently, connecting to 610 via 90A is considered "good enough" for now, especially given the tight right-of-way and neighborhood resistance connecting up to 610. I think it's only a matter of time though. The direct 610 connection just makes way too much sense. The interchange is already built!
  
• A public meeting on the 290 corridor, including the new toll road along Hempstead, will be held in March.
• The planned Red Bluff toll road from Beltway 8 through Pasadena to Seabrook is expected to get more active consideration soon as the Bayport expansion creates tons of new truck traffic. I'm a big fan of this one and hope it happens sooner rather than later. I think it would help take a pretty hefty load off of 45S.
• Metro may consider giving the Westpark RoW it reserved to HCTRA for reversable HOT lanes (used free by commuter buses, of course). I think this would get great utilization, creating extra capacity in the rush hour direction for a tiny, already-strained 4-lane Westpark tollway.
• If you suffer at the screwed-up exit from BW8 east to 249 north, the good news is they're looking at a complete exit reconfiguration there soon. For those who don't drive up there, EZ-taggers are the only ones that can use the ramp (and they can't get on the feeder), while everyone else is forced to the feeder and through the lights.

We also learned a lot about the EZ-tag system:

• Metro will use the same system on its HOV-to-HOT lane conversions, and you'll get a single unified bill (hurray for inter-agency cooperation!)
• You'll be able to use your EZ-tag to pay for parking at the airports. It also has the potential to be used in private parking garages/lots and for access control to subdivisions.
• In the future, there will be universal tag readers that can read any of the different toll tags across the nation, and eventually you'll be able to drive anywhere and pay tolls with your tag. This will also drive greater adoption by rental car agencies, who are constantly moving cars among locations, so committing to one brand of tag for a car doesn't really work. Right now, a system is being put in place called "plate pass" that will use camera image recognition of rental car plates to route charges back to the renter, so car renters won't have to wait in the long cash lines.
  
• Tags don't read 2.3% of the time. Fortunately, they can use the license plate cameras to look up your account and charge you appropriately, although it costs them 11 cents each time they do this (labor cost, I think, of having humans verify the plate).
• The EZ-tag reads database has tighter privacy protections than your bank account (according to them)
• Occassionally they do get subpoenas for EZ-tag records. 99 times in 100, it's for an accident investigation. 1 time in 100, it's for a criminal investigation. Lesson: if you're planning on committing a crime, see if you can get a friend to drive your EZ-tagged car through a few readers on the opposite side of town while you're doing it. Makes a great alibi!
• It is officially against state law to use EZ-tag calculated speeds for traffic law enforcement. Covered 10 miles between readers in 5 minutes? No worries!
  

Overall, I was very impressed by the technology side. Far more sophisticated than you usually find in a public agency. Kudos to HCTRA for running themselves more like an efficient business than a typical government bureaucracy.

The most important development? Congestion pricing. It's under study, and will probably be at least piloted by this summer, probably on Westpark. It will probably be straight time-of-day pricing there, but the toll lanes down the middle of the new I10 will be dynamically priced in real-time based on demand. Let's hope it's popular and spreads quickly.

One more thing, and this is all my own observation/opinion - nothing from the HCTRA execs. HCTRA is still in heated negotiations over extortion payments to TXDoT to use their right-of-way for future projects. This used to be essentially free, but new state laws allow TXDoT to sell to the highest bidder, public or private. If this makes you as ill as it does me (the big-brother state essentially beating money out of its little local siblings), complain to your state representatives, and maybe this can get fixed during this legislative session. Local transportation infrastructure improvements should not be held hostage to TXDoT payoffs.

posted by Tory Gattis @ 8:44 PM 12 comments

Mayor White's State of the City address

I don't normally directly cover local news, but, through the generosity of the Greater Houston Partnership, I was able to attend Mayor White's State of the City luncheon today as a member of the media (we get the tables in the very, very back corner). Overall, I liked just about everything I heard. I took a lot of notes, and plan on passing most of them along (one of the perks of a blog vs. the limitations of TV and print news).

I think Mayor White remains as popular as ever, but he does have one issue. He's one of those Mayors trying to get the city to do all the less visible "little things" right that add up to one well-managed city (especially when it comes to infrastructure), rather than focus on big-PR "ribbon-cutting" events/accomplishments. That's absolutely the right thing to do (Lanier was like that too). The problem is, when you talk to people, it's clear they like him, but they have trouble naming the things he's done, other than accept the Katrina evacuees (now considered a mixed blessing). This will be a bigger problem if he decides to run for higher office in 2010, like governor. I think he must've heard the same things I have, because the speech was very clear and forceful in articulating his accomplishments at the halfway point of his expected six years in office before term limiting out.

Some miscellaneous accomplishments he noted:

• Crime is down significantly from a year ago (the post-Katrina surge)
• Big investments in neighborhood drainage, as well as water and sewer infrastructure overhauls
• Parks and libraries have longer hours
• 42 point mobility plan, including light syncing, SafeClear, and promotion of flex work hours (next are rapid mobility response teams)
• Substantial congestion reduction from accidents and 18% fewer freeway accidents (SafeClear)
  
• Unfunded pension liabilities fixed
• 58% reduction in toxic emissions from a targeted plant
• Public personnel policies reformed (including incentive pay)
• New downtown park, privately funded
• 2,500 tax delinquent foreclosures, 900 of which have had title transferred for new use as affordable housing
• Smoke free ordinance
• 5 new non-profit preventative health clinics
• Rapid transit plan with 3 new starts this year
• Got 1,300 dropouts back into HISD, with a 95% graduation rate for those in the program
• Citywide wireless internet access coming soon
• More city services along with tax discipline
  

He also talked about how we haven't had to resort to tax incentives as many cities have to attract jobs, which he labeled as discriminatory against existing employers (which they definitely are). Instead, the better way to attract growth is through quality of life, cost of living, good education, and a good entrepreneurial/business culture that's not overregulated. It's given us job growth about double the national rate.

Some programs he's pushing for 2007:

• "Apartments to standard"
• Big plan to reduce billboards
• Better incentives for historical preservation
• Rapid mobility response teams
• Privately-funded summer scholarships to increase student retention and performance
• Penalties for city contractors that don't provide health insurance (he called it "leveling the competitive playing field" because some contractors push the health care cost of their employees on the city/state/feds - didn't catch the details of this one)

The centerpiece push seems to be energy efficiency and conservation. He spent quite a while on it, and clearly wants Houston to be a leader in energy conservation, not just production. Some points he made:

• The home weatherizing program they did in a poor neighborhood last year saved on average $355 per home over about six months (if I heard right). That's definitely big savings for a low income household. He wants to expand that to 10% of all Houston houses, or about 30,000 homes, over the next 5 years. Lower utility bills makes home ownership more affordable.
  
• Wants a goal of an overall 5% drop in energy usage per capita (? - or was it per GNP) over the next 5 years - both fixed and mobile.
  
• This will also help with emissions and Clean Air Act compliance, and reduce the need for new plants (most likely to be coal-fired)
• Called for us to join NY and CA on car fuel efficiency and emission standards
• Also wants to cut our solid waste output by a similar amount (we have massive landfills)
  
• Wants TXDoT's budget delinked from gas consumed via the gas tax (it means fuel efficiency cuts needed funding for roads)
• Says Wal-Mart is targeting even larger percentage reductions (20-25%) in energy, fuel, and waste, so our goals are modest
  
• Energy savings put more discretionary income in citizens' pockets, which further helps those citizens and the city. This mirrors a favorite point of mine: affordability = discretionary income = vibrancy and opportunity.
  
• Is planning a major summit of local leaders at the GRB in September to build a plan around these goals.
  

As usual, he used the term "city of opportunity" a lot - a great theme and identity for Houston.

He asked for two things from each citizen of Houston:

1. A renewed commitment to supporting our nonprofits
2. Reaching out to others different from yourself; embracing diversity and unifying in civic cooperation
   

Putting in my own two cents, my favorite proposal to support both his goals of improved mobility and energy conservation is here, based on the three "keys to unlock our gridlock" op-ed and posts:

1. Network of high-speed, congestion-priced MaX Lanes (probably involving the conversion of many freeway left lanes and/or HOV lanes)
2. Competitive, privatized, subsidized express commuter transit services (bus and vanpool) from park-and-ride lots all over the city to all of our multiple employment centers
3. Cash-out parking at major job centers to incentivize transit ridership and carpooling (employer charges for parking, but gives you an equivalent amount of cash you can either use for parking or keep for yourself if you find an alternate way to work)
   

I honestly think the combined impact could be huge on congestion reduction, transit ridership, and energy savings, not to mention increased discretionary income from reduced transportation spending. Truly it would be an accomplishment with state and national prominence, and even a few ribbons to cut... ;-)

Update: Chronicle's story and op-ed

posted by Tory Gattis @ 9:03 PM 43 comments

Wrapping up Superstar Cities week: solutions

So, recapping the first two posts:

• "Superstar cities" have high housing demand and limited supply, leading to high housing prices and ultimately driving out the middle class and some of the poor, leaving a bipolar community of wealthy and poor.
• Employers needing middle class employees leave, creating a gap in the opportunity ladder for the poor trying to move up. This creates growing frustration for the poor and guilt for the wealthy, leading to more welfare state politics and policies.
  
• A better label would be closed, restricted, limited, or constrained cities to better reflect the mixed bag this status brings, rather than the excessively positive connotations of "superstar".

So how can cities avoid this fate? The basic approach has to be aggressively increasing the housing supply. One way to accomplish this is via high-speed long-distance transportation infrastructure (freeways or transit) that open up new suburban land within commute range of the city's jobs. My long-time readers know that I don't think commuter rail is very cost effective or compatible with modern decentralized/distributed cities, so a network of express lanes and buses/vanpools is probably a better solution for most metros. This solution will be the most effective one for holding onto middle class families, since they prefer stand-alone houses in areas with good schools.

Another approach is to allow higher density developments inside the city. Mixing these developments with some sort of transit infrastructure helps minimize the traffic impacts (thus the new trend towards transit-oriented development). Neighborhood NIMBYs are a big problem blocking density. This implies too much land use power resides at the local level. Higher level entities - metro, region, state, or federal - have to recognize this problem and create counter-balancing forces/processes/authorities. To give a Houston example, the very important Bayport expansion would never have happened if only residents of Seabrook voted on it, but since it was a Harris County voter referendum, it passed, bringing substantial benefits to the region.

Houston has a pretty unique approach to the NIMBY problem: no zoning, but with voluntary deed restrictions. This gives NIMBYs few paths to block new dense development. Thus our recent townhome boom, plus an abundance of apartments and high-rise condos. This flexibility allows a small old house on a valuable piece of land to get replaced by a few affordable townhomes rather than a single $600K+ McMansion as is (economically) required in zoned/controlled cities like Bellaire and West University. Voila, housing supply keeps in balance with demand.

Other cities are unlikely to eliminate zoning completely, but they might get some of the benefits by aggressively designating free market zones that would be allowed to densify with little permitting or NIMBY interference. Anaheim did exactly this with its downtown, and the results have been impressive. The density answer is not so effective with middle class families (who generally prefer the detached-home suburbs), but can be an effective housing answer for all sorts of other middle class households: young singles or couples as well as empty nesters.

Some cities have tried "inclusionary zoning" to force developers to include affordable housing in their developments. Most studies show this backfires by dramatically reducing overall housing production, while making the new units that are built even more costly. The reality is that every new market-rate unit allows somebody in an older/smaller/lesser home to upgrade, and then somebody can upgrade into their space, and so on - a domino effect that ultimately creates more affordable housing at the bottom. This implies it's probably better to just let the free market work and encourage as much market-rate housing production as possible.

Those are my best suggestions for solutions. Other options welcomed in the comments. To sum up, the United States has worked pretty hard at remaining a nation of opportunity and advancement while avoiding the social welfare-state model of Europe. It would be sad if this were undermined, not by bad federal or state policies, but by local anti-growth decisions made by an increasing number of major cities (even neighborhoods), all seeming to make sense in their local context, but slowly creating a social mobility crisis of national proportions. Truly it would be a "death by a thousand cuts."

posted by Tory Gattis @ 6:03 PM 13 comments

Superstar Cities part 2: thoughts and analysis

Continuing Superstar Cities week, today we get into my thoughts and analysis (part 1 was mostly excerpts). I'll note in advance that I can't take credit for all these thoughts/observations. Others have noted some of them before, most notably Joel Kotkin and his observations on ephemeral/boutique cities.

My first and most prominent thought is that I hate the label. Superstar City sounds like a great thing, right? Who doesn't want to be one? But they specifically define it as cities that have cut off the supply of new housing, either from lack of land, or transportation infrastructure (to new suburbs), or political resistance to growth and density. Those are not good things. For example, Portland seems well on its way towards earning the superstar label simply by drawing an urban growth boundry and restricting the new supply of market-demand housing. If Houston wanted to, it could do the same thing: go on an annexation rampage of all open land and then deny permits to develop on it. We still have quite a few high-growth industries and migration, so then we'd quickly become a "superstar." But why would we want to encourage this? A better label would be "closed", "restricted", "constrained", or "limited" cities. Then cities wouldn't be so quick to want to see themselves on the list. But, then again, this paper probably wouldn't be getting so much attention without its provocative title.

Although you might not expect it, there is definitely evidence of this model in Houston. An excerpt:

These patterns are repeated when we compare superstar towns to other towns within their metropolitan areas. “Superstar suburbs” typically have more high-income households and fewer poor ones, and experience a greater rightward shift in their income distributions and more rapid growth in their house prices when the number of high-income households in their MSAs rises. They, too, have higher price-to-rent ratios.

Can you say: Bellaire, West University, River Oaks, and the westside villages? All have run out of land and are in high demand by high-income households.

So let's explore the system of forces involved here. A city fills up. NIMBYs fight any new density, putting even more pressure on home prices. This causes skyrocketing property taxes, and the voter backlash usually guts it (see CA prop 13). With revenue constrained from residential property taxes, city governments lose the incentive to create more of it, and they especially don't want more of any housing that would actually cost them money, like for the poor (who need more services) or families (that have kids that need educating).

Now, the report talks about the poor being driven out by increasing home prices. But if you really look at their data and graphs, you'll notice something: the real displacement is the middle class. The middle class actually own homes they can cash out of (and move away) and sell to upper income families that can afford to move in. The poor mostly rent, and, as the report noted, rents stay relatively more affordable, so they can stick around. In economic theory, landlords should tear down the low-income apartment complexes and replace them with upper-income housing, but city governments, NIMBYs, and the residents themselves tend to pretty actively discourage this - and, in any case, they're not usually in neighborhoods desired by upper-income households. This meshes well with a recent Brookings study noting that middle class neighborhoods have declined substantially as a percentage in cities, while upper-income and poor neighborhoods have increased. Middle-income neighborhoods seem somewhat unstable - they tend to "tip" one direction or the other: either the wealthy move in and gentrify, or the middle class flee as it declines.

The result is that a "superstar city" ends up with a very polarized population of wealthy and poor (usually with service jobs to the rich), and almost nobody in the middle. Employers who need middle class workers leave or outsource those operations elsewhere. That leaves a sizable gap in the social mobility opportunity ladder (both jobs and home ownership). With no middle class jobs to aspire to, the poor are stuck and frustrated, and the wealthy feel guilty. You then get the blue welfare state phenomena to "warehouse" the poor in comfort and assuage rich guilt. This is common in Europe too - note the poor tenement immigrant population of Paris that rioted.

I think you can even see evidence of this in the MA and CA universal health care plans: put the burden of health care for the poor on employers. Most of the middle class employers have already left, but the remaining employers on the margin will leave. The wealthy don't care, and will bear the cost additionally in higher prices by low-end personal services where the employers are now mandated to provide health care to all employees (essentially a giant increase in the minimum wage). It actually works as long as you don't care about attracting mobile mid-level jobs and you have a wealthy population that isn't likely to leave and can absorb the burden (i.e. a close match to the definition of superstar cites, which pretty much cover MA and CA). The downside is it rips even more middle rungs out of the opportunity ladder, further locking in the poor population.

So, if you value upward social mobility and opportunity, superstar cities and employer-sponsored universal health care don't seem... well, very healthy. Thursday night in concluding part 3 we'll explore solutions to this situation (um, assuming I can come up with some between now and then...).

posted by Tory Gattis @ 10:01 PM 3 comments

Superstar Cities week (and Galveston rail)

This week I'm going to focus on a very interesting academic paper by three authors from Wharton and Columbia titled "Superstar Cities". There's just too much here for one post, so we'll spread it over the week. Today, I'll focus on interesting excerpts so you get a feel for the themes of the paper. Tuesday I'll give my thoughts and describe the larger system of urban forces I think they're describing, and Thursday we'll explore possible solutions. If "superstar city" doesn't sound to you like something that needs a "solution," just wait and you'll see what I mean.

Before we get started, if you didn't see Alan Kolodny's op-ed on Galveston rail in Sunday's Chronicle Outlook section, be sure to check it out. It's related to this post of mine from a few weeks ago. Although I'm usually not a fan of commuter rail, this route has a lot of potential for five reasons:

1. local transit at both ends to get you to your final destination
2. highly populated corridor with heavy traffic flows both directions
   
3. regular congestion on the existing freeway
4. tourism potential in addition to commuters (better overall utilization for the capital cost)
5. existing tracks that make the cost much more reasonable

Getting back to superstar cities (their definition: "some cities and towns have turned into scarce luxury goods, which we label superstar cities"), here's the somewhat academic abstract:

Differences in house price and income growth rates between 1950 and 2000 across metropolitan areas have led to an ever-widening gap in housing values and incomes between the typical and highest-priced locations. We show that the growing spatial skewness in house prices and incomes are related and can be explained, at least in part, by inelastic supply of land in some attractive locations combined with an increasing number of high-income households nationally. Scarce land leads to a bidding-up of land prices and a sorting of high-income families relatively more into those desirable, unique, low housing construction markets, which we label “superstar cities.” Continued growth in the number of high-income families in the U.S. provides support for ever-larger differences in house prices across inelastically supplied locations and income-based spatial sorting. Our empirical work confirms a number of equilibrium relationships implied by the superstar cities framework and shows that it occurs both at the metropolitan area level and at the sub-MSA level, controlling for MSA characteristics.

OK, for those of you out there who don't use "skewness" and "inelastically" in your everyday language, hopefully some of these excerpts will help clarify (highlights mine).

Over time, the gap in house prices between cities can keep increasing. Even if each family individually is willing to pay only a fixed premium for a location, when the absolute number of rich families in the country increases and their incomes rise, there are more families who will pay a higher premium for the same perceived difference between cities. Thus, a changing composition of residents in supply-constrained cities toward higher income families supports the growth in land prices.
...
Indeed, the inelastically supplied city need not be more desirable on average than any other city, nor do workers in the city need to enjoy increased productivity by moving there. As long as the city appeals to a large enough clientele of families, a growing price gap and a shifting of the local income distribution to the right will occur. We label metropolitan areas and towns where demand exceeds supply and supply growth is limited, “superstars.” These superstar cities and towns are ones in which residents are willing to pay a premium to live and into which high income superstar-earners disproportionately sort. These markets do not allow for increasing density through construction, cannot infinitely expand their borders, and have few close substitute locations.
...
Consistent with the model’s predictions, once an elastically supplied city or town “fills up” and future supply growth becomes limited, price-to-rent ratios increase, and income sorting and house price dispersion accelerates. A number of jurisdictions in our sample undergo this transition into superstar status. For example, Los Angeles and San Francisco are the first major metropolitan areas to become supply-limited, and that happened between 1960 and 1980. The areas around Boston and New York followed between 1970 and 1990.
...
The superstar cities model suggests that rising incomes in a city are due to a changing composition of families within superstar cities from an influx of highly productive high-income workers, rather than through gains in existing residents’ productivity.
...
In this framework, house prices do not rise in superstar cities because there is increasing value from amenities or productivity benefits. Instead, the composition of families living in superstar cities shifts to those who are willing to pay more as high-income families become more numerous.
...
...most existing superstar cities could expand supply by increasing density, but choose not to. The political economy behind that decision is only just beginning to be studied.

In addition, this dynamic has profound implications for the evolution of urban areas because it implies that even large metropolitan areas might evolve into communities that are affordable only by the rich, just as exclusive resort areas have done. Is such an MSA sustainable, or does it lose the vibrancy that makes it unique? Should public policy ensure that living in a particular city is available to all families or, since superstar cities and towns are like luxury goods, is it reasonable that low income workers can no longer afford to buy homes in superstar cities?

There are also a lot of very interesting graphs worth perusing in the back.

That's enough for today. To be continued Tuesday night...

posted by Tory Gattis @ 9:38 PM 5 comments

The Wrong Way to Reform Property Taxes

Property tax reform has been a regular topic on this blog, including very recently as the Governor's reform commission sent their recommendations to the Legislature. I've also passed along a lot of Otis White's posts from his Urban Notebook blog. Well, he's retired from blogging as of the beginning of this year (Governing is working on a replacement), but he did a wonderful farewell post that summed up his insights over the years (I don't fully agree with all of them, but that's grist for a future post). One of his final posts on property tax reform does a great job at summing up the arguments (still lacking permalinks, so posting in full). Let's hope the Texas Legislature listens very carefully and doesn't walk off the same essentially-irreversable cliff as California or Florida, among others.

Dumdum Laws
The Wrong Way to Reform Property Taxes

Said it before, say it again: The vast majority of efforts to reform property taxes makes things worse — sometimes much worse. Perfect example of lunkheaded reform: Florida’s disastrous “Save Our Homes” law.

A review for those who came late to class: Property taxes may be the most unloved levy in America, but they’re actually the homeowner’s friend. Reason: They reward local governments for doing the right thing. Think about it. The surest way of increasing government revenues without raising tax rates is ... what? Answer: Do things to raise the value of real estate, including owner-occupied housing. Hence, services like public safety, sidewalks, parks, playgrounds, tree plantings and litter control can be seen not as expenses but investments in an improving tax digest.

Property tax “reforms” sever this feedback loop between government actions and tax receipts. (At some point, city officials say to themselves: We keep putting money into neighborhood parks but see nothing in return.) But some of these dumdum laws are far more damaging: They actually punish homeowners who improve their property and cement others into their houses, often to their own and their neighborhood’s detriment.

Florida has one of these truly stupid laws, its 1995 “Save Our Homes” act. To see how stupid, you have to go to the street level, as the Tampa Tribune did recently. The newspaper picked a single street in south Tampa, Corona Street, a nicely mixed, older area with young couples and retirees living side by side. There you’ll find Charles and Glenda LaFaye, who’ve owned a home on Corona since the 1970s. Not long ago, the LaFayes tore down their house and built a 3,900-square-foot “dream home” in its place. Their reward: A tax bill that soared from $3,275 a year to $14,821. Charles, who’s 74, works part time as a bailiff. But, he told the Tribune, “I’m looking for a full-time job because I can’t afford the taxes.”

Wander down the street to where Mary Fultz lives. A 72-year-old widow, she lives in the house she and her husband bought 35 years ago. Her tax bill: $1,098 a year. “My daughter wanted me to sell and get a condo,” she told the newspaper, “and I said no.” The reason: she would end up paying more taxes.

So there you have it: One senior citizen who gets walloped for improving his house (and the neighborhood as a whole), another who’d like to leave but fears doing so. The reason is the cap that the Save Our Homes law put in place. Under the act (which was modeled after the granddaddy of brain-dead property tax reforms, California’s Proposition 13) assessments cannot increase more than 3 percent a year, no matter how fast actual property values are rising, unless the house is sold or substantially changed. Then the tax bill skyrockets, punishing young couples moving onto Corona Street and older owners, like the LaFayes, who want a bigger and better house.

Not all property types are protected from rising assessments by the Save Our Homes law, and these land uses are getting slammed in Florida. Commercial real estate, in particular, is being stuck with the tax bill homeowners aren’t paying. Take the funeral home at one end of Corona Street. Its property tax bill has risen more than $9,800 in the last three years, to $24,835, the Tribune reported. “Who is going to pay for that?” the owner asked the newspaper. “If you can’t get it from the homeowner, you get it from the business owner. And if the homeowner doesn’t pay for it themselves, they’re going to pay for it eventually through the services you use, through the funeral home, the hotel next door to me, the dry cleaner.” Keep this in mind the next time you visit Florida and buy a souvenir or pay for a three-night hotel stay. A growing part of the bill you pay goes to subsidizing a favored group of homeowners.

Another ironic twist: Laws like Save Our Homes and Prop. 13 make governments less willing to zone for owner-occupied housing, since it’s such a drain on the treasury. Many bad things happen when land use is distorted, but one of the first is the disappearance of affordable housing. And what is Florida suffering from these days? You guessed it, a roaring affordable-housing crisis.

To paraphrase Shakespeare, the fault, dear Floridians, is not in your stars but in your statutes. Repeal Save Our Homes, and you might just save your homes, as well as your neighborhoods and cities.

In a section of his final farewell post, Otis sums up his thoughts on property taxes:

Save the property tax. Al Gore has global warming; I have the property tax. Turns out, Gore was right about climate change, and I think time will prove me right about the value of taxing property — including owner-occupied housing.

As you know, though, we are marching in the wrong direction. From coast to coast, state governments are restricting localities’ ability to tax homesteads, with disastrous consequences.

The three greatest: These simple-minded “tax limitation” laws punish newcomers or those improving their property, as this column explains. They encourage governments to restrict owner-occupied housing, as this column explains, fanning our affordable-housing crisis. And they reward governments that pursue land uses that make up the shortfall. One of my favorite illustrations of what some call “cash-box zoning” is from Phoenix, where a suburban mayor said that the way cities in his region battled over retailers reminded him of “two fat kids fighting over a single piece of chocolate cake.” To learn what the fat kids of Phoenix were fighting over, click here.

posted by Tory Gattis @ 5:56 PM 6 comments

LAT on Houston and SF parking rage

Well, I ended up blowing most of my evening watching the Steve Jobs' MacWorld keynote video demo of the new Apple iPhone, so we're going to do a couple quick pass-alongs tonight. If you get a chance, check it out. It completely redefines the mobile phone, and it definitely looks to be as big a milestone as the original Mac or iPod.

The first item is an LA Times story on the oil boom titled "Houston is feeling energized" (thanks to Hugh for the link).

"When the rest of the country is doing well, it seems like Houston is often struggling. But when the rest of the country is struggling, it seems like Houston is often doing well."

High oil, natural gas and electricity prices may bring pain to families and business owners elsewhere, but in America's energy capital, they bring prosperity.

Two out of every five Houstonians owe their jobs to energy — many big oil and gas companies have their world or American headquarters in Houston — and the industry's spectacular profits in recent years have helped the nation's fourth-largest city outdistance the country as a whole in economic growth.

Los Angeles and most big cities are seeing slowdowns in their real estate markets this year, but Houston's is still climbing: For 34 months straight, area home sales have increased compared with the same month a year earlier. Yet Houston's housing remains surprisingly affordable: The median home sales price in November was $147,000, compared with $487,000 for the Los Angeles region.

The city is on pace to add 75,000 jobs this year, an increase of about 3.5%, or more than twice the national average. Though that growth rate falls short of Las Vegas and a few other large American cities, experts say it is remarkable that Houston's economy continued to expand even after one of its largest white-collar employers, Enron Corp., collapsed from a financial scandal and declared bankruptcy in 2001.

"A petroleum engineer coming out of Texas A&M now gets about $87,000 a year and a $30,000 signing bonus, and that's for someone with no experience," said Robert W. Gilmer, a senior economist for the Federal Reserve Bank of Dallas. "Houston has heated up to the point where it spreads all the way through the employment sector, to plant operators and truck drivers."
...
Houston's economy is much more diverse than it was two decades ago, when roughly 80% of all jobs were tied to energy; the city now has a thriving port and a rapidly expanding medical district known for some of the best specialized care in the South. Still, veterans of Houston's boom-and-bust energy economy are mindful that fortunes could turn quickly, like they did in the 1980s, when a sudden swoon in crude oil prices sent the city's economy crashing.
...
HOUSTON, like other Sun Belt cities, remains relatively affordable. Its cost of living is 24% less than other metro regions of 2 million or more people, according to the Council for Community and Economic Research, a national group that compares basic costs such as housing, groceries and utility bills.

So after paying their bills, many still have money to spend.

Those benefiting most from the current energy boom are behaving demurely compared with past generations of Houstonians, who giddily spent small fortunes on jewelry, 12-cylinder Jaguar sedans and lizard-skin cowboy boots when oil prices were high, only to sulk in shame when they bottomed out. A bumper sticker popular in Houston's sober aftermath read, "Please Lord, give me one more oil boom. I promise not to blow it next time."
...
Houstonians also love going out to eat — and they do so more than big-city dwellers anywhere else in the country. The Zagat Survey this year found that Houston residents dined at restaurants 4.2 times a week, compared with 3.4 times for New Yorkers and 3.2 times for Americans overall.

Other parts of the article profile Tony's restaurant, twentysomethings buying real estate, and energy headhunters in a frenzy. As always, it's kind of interesting to read how outsiders perceive the city.

The second item is an interesting NY Times story on San Francisco "parking rage" that will give you yet another reason to be happy you live in Houston. Evidently it's gotten so bad that violence has erupted several times between motorists and parking control officers, as well as fights over spaces (including one killing). Somehow they even manage to get a dig in on Houston because we have convenient parking.

Many local planners say the lack of parking is in part an unfortunate byproduct of the city’s popularity.

“Any city that is worth visiting is going to have a terrible parking problem,” said Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, a public policy center. “If you don’t want it to be Disneyland or Houston, you’re going to be experiencing a parking shortage.”

Mr. Metcalf added, however, that the density of San Francisco, with an estimated 740,000 residents in 49 square miles, also put in a different category from New York, which is also known for its parking nightmares.

“It’s too dense for people to drive easily and not dense enough for really great public transit,” he said. “So the result is frustration.”

That opinion was seconded by Donald Shoup, a professor of urban planning at the University of California, Los Angeles, widely considered something of a parking theory guru. (His fans are called Shoupistas.)

Professor Shoup said the chronic lack of parking here was a result of a decision to encourage a bustling downtown free of atmosphere-killing parking lots, a phenomenon echoed in other parking-challenged — and popular — cities like Boston, Chicago and New York.

“Whenever someone from San Francisco calls to whine about the fact there’s no parking,” he said, “I always say, ‘Well, you have to choose, do you want to be more like San Francisco or more like L.A.?’ And that usually ends the conversation.”

That said, Professor Shoup noted that San Francisco had some questionable parking policies, namely cheap on-street parking and expensive garages and lots, a dynamic that encourages drivers to look endlessly for meters rather than pay for the privilege of parking off the street.

Wow, San Francisco is not dense enough for good transit? That's kind of a frightening thought. Sort of the "worst of both worlds." Essentially a "Valley of Death" density between comfortable surban levels and workable transit levels. Getting the urban core of Houston across that valley is an intimidating thought.

posted by Tory Gattis @ 10:39 PM 1 comments

Boston disillusionment with commuter rail

I have noted this study before, but a new Boston Globe op-ed came out last week that sums up the problems amazingly concisely. As a matter of fact, after going through it to pull out the best excerpts, I realized it was so short and packed with good points (including the concluding recommendations), it really makes sense to just bring over the whole thing below (I don't trust newspaper link permanency). The full Harvard report is here, if you're interested in the detail.

If a city with the density, planning, and regulations of Boston can't really make commuter rail work, doesn't that imply it's a really bad choice for a city like Houston? (with the possible exception of Galveston - see the bottom half of this post) If it's not working in Boston with 25% of the metro's jobs downtown, why would it fare any better in Houston with only 7% of metro jobs downtown? If a 100 years (!) can't generate high-density urbanism around stations, maybe that's a pretty serious indication of a flaw in the model?

If, after reading this, you're interested in digging deeper, here's my op-ed on the flaws of Houston commuter rail, and the better solution.

Commuter Rail's False Promise
Why more rail lines won't prod more folks to take the train - and why we should make peace with cars.

By Tom Keane | December 31, 2006

As we all know, commuter rail is a Good Thing and the automobile is a Bad Thing. Trains are clean, provide cheap transportation, and get us to our destination quickly and efficiently. They discourage sprawl, with each station serving as a nexus for the "smart growth" so beloved by the new urbanist crowd. Cars, on the other hand, are the polluting, expensive, congestion-producing banes of the environment. These are the certainties that have been behind much of our public transportation policy and are behind, for example, the state’s $500 million investment in the soon-to-be-opened Greenbush Line.

In fact, though, many of these certainties may be untrue. A surprising analysis by Harvard-educated urban planner Eric Beaton adds more meat to the bones of some faint but persuasive arguments that call into question the value of fixed-rail mass-transit systems. Beaton looked at development patterns around commuter-rail terminals over the past 100 years. His study, published in September by the Rappaport Institute for Greater Boston, contained some disconcerting results. (Disclosure: I’m an unpaid member of Rappaport’s board of advisers.) One would think, for instance, that new commuter-rail stations might encourage development nearby. It turns out they don’t. Areas around train stations are only modestly more developed than anywhere else. One would also think that new stations might encourage more use of public transit. That is also untrue. The number of people using transit to get to work is largely unchanged by the addition of new stations.

Those results may seem counterintuitive but, upon reflection, make enormous sense. Take a look at the MBTA’s lovely color-coded maps of its rail system. All lines run into Boston. That would be smart planning if Boston were where all of the employers were. However, though that may have been largely true a century ago, today just a quarter of the jobs in the metropolitan region are downtown. Instead, you’ll find them along the beltways – Route 128 and Interstate 495 – and at office parks in between.

Besides, according to the Bureau of Labor Statistics, a typical worker holds a job for just four years. So, when it comes time to buy a house, there is little value in getting something close to a rail station. After all, most jobs can’t be accessed from one (try, for example, taking the T from Medway to the Westborough Technology Park – it can’t be done). And even if your current job happens to be downtown, the odds are that your next job will be elsewhere.

There’s more. Commuter rail is skewed toward serving the affluent. Unlike buses or subways, rail largely connects well-off suburbanites to downtown jobs in high-paid fields such as finance and law. Moreover, new rail stations have a trivial effect on automobile use, meaning they do little to help the environment. (In fact, according to the MBTA’s own data, commuter rail – which relies on diesel-powered trains – often increases the emissions of nitrogen oxides, which can contribute to the formation of smog.) And travel by rail is not as inexpensive as its advocates would have you believe. If you own a car already, the cost of driving may actually be cheaper.

Yet, what’s the alternative? More cars? Perhaps. As Beaton’s study points out, back before widespread adoption of the automobile, rail stations were popular places for development. But cars changed the ways we live and work. Employers began to locate outside of cities, where land was cheap. People moved to the suburbs, lured by the prospect of owning their own plot of land. Today, even with high gas prices and crowded roads, people love the privacy, comfort, and extraordinary freedom they get from their automobiles.

Can we put the genie back in the bottle? I doubt it. And if that’s the case, rather than fruitlessly trying to get people out of their cars, perhaps we should simply concede the battle and make the best of it. Encourage carpooling and hybrids, raise fuel standards, introduce congestion pricing on toll roads, and (I know this makes some gasp) expand our highway system. But more commuter rail? That’s just a train in vain.

Tom Keane, a Boston-based freelance writer, contributes regularly to the Globe Magazine. E-mail him at tomkeane@tomkeane.com.

(thanks to Cities On A Hill for the pointers)

posted by Tory Gattis @ 7:59 PM 15 comments

Good news on Houston housing and property tax reform

Three pieces of good news to pass along today. The first is about the strength of our real estate market from a couple excerpts on Houston in a recent Wall Street Journal article talking about the decline in land prices nationally.

Not all markets are experiencing steep declines, according to data from multiple-listing services and brokers. In Houston, for example, where the oil and gas industry is going strong and creating new jobs, median lot prices grew 15.8% in the third quarter of 2006 compared with the same period last year, while median home prices rose 5.5%.
...
Land prices aren't falling everywhere in the country, of course. In hot markets like Houston, it's the buyers who are feeling the pinch. Michael Pearce wants to build a home with a big backyard so his two white Russian wolfhounds, Romeo and Rosalyn, have room to roam. The 34-year-old attorney has been shopping for property near his downtown workplace, but so far, the only lots he's been able to find in neighborhoods that he likes are about 5,000 square feet and cost between $200,000 and $300,000. That's more than he wanted to pay, for less space than he really wants. But since prices have doubled since he first started shopping a year ago, he plans to make an offer soon. "I feel under pressure to buy," he says.

The reason those prices have doubled is because they're hot properties for townhome developers, who can afford to pay that for raw land and make it up by selling several units. I think if he was willing to move even slightly outside the loop, maybe 10-15 minutes from downtown, he could find much more affordable lots.

The second piece of good news is the extreme competitiveness of the local homebuilding market as expressed by Trendmaker Homes President Will Holder in his Nancy Sarnoff interview in the Chronicle last week (my highlights).

Q: Why is the housing market here doing better than other big cities?

A: The slowdown is not happening because there's job growth here. And price drops are not occurring because Houston home prices have been able to inflate only slightly above the cost of construction. I've been building here for 25 years, and this market has always been a pure cost-plus market. There are very thin margins in Houston.

Q: So what kind of environment does that create for builders and buyers?

A: It's really not as profitable a market as other markets in the country... The return on investment earned in Houston has always been only slightly above the cost of capital. It's only high enough to attract capital; it's not high enough to be extraordinary. I think in some of these markets where they have a constrained supply, the pricing strategy has recently been whatever the market will bear, but it has never been that way in Houston.

You can see that Houston is the most affordable metro area in the entire country. It's a result of it being a supply-rich market. The real plus for home buyers is not just the affordability, but it's created a highly competitive home product. What you get in a home is quite lavish in Houston relative to other cities. You get an all brick home with granite countertops and very elegant finish features and you get a lot of square footage. If you go to another market you might end up with vinyl floors, Formica countertops, features that if you put them in Houston, you would fail. It would be noncompetitive.
...
Buyers have enormous choices. That is healthy and it's OK. We operate in Houston right at the edge. If I hadn't been here for so long I would be worried about it. But if you live at the edge year in and year out, you realize the edge is OK.

Fewer profits for homebuilders means lower housing costs for you, and you get a larger and better quality home to boot! I imagine that's part of the reason I hear so many anecdotes about expats trying to get back to Houston: they had to trade down to live elsewhere (smaller, older, lower quality home), and they want to get back to what they had or better.

The final piece of good news is that the governor's special task force for property tax reform has clearheadedly decided to not recommend lowering the appraisal cap from it's current 10%. I've written many times before on the dangers of too-low appraisal caps. But they do want to offer relief in more practical and less market-distorting ways:

Pauken said the committee's recommendations will focus on slowing the growth of government spending.

He said it will recommend that any local government spending of property tax revenues that exceeds 5 percent growth in a year would be automatically subject to voter approval.

At present, growth of 8 percent or more can be subject to a property tax rate rollback election, but the election is not automatic.

Those wishing to hold a rollback election must gather petition signatures to force the election.

"All this is is a change in the threshold, changing the threshold from 8 percent to 5 percent," Pauken said.

Local governments also would have the option of a half-cent sales tax increase that could be dedicated to property tax relief. He said the money could be used to buy down rising appraisals or to increase homestead exemptions.

An automatic rollback election is a great way to contain excessive local government spending. The sales tax is regressive, but increasing the homestead exemption is a good way to counter it, since a high homestead exemption helps the poor much more than the rich and makes housing more affordable for them. The increased sales tax discourages consumption while the increased homestead exemption encourages savings through home ownership - and we've all heard how much Americans need to spend less and save more. A healthy tradeoff in my opinion.

Update: Kuff's reaction here, including a link to a Statesman article that says the 5% cap option is still in there if linked to an offsetting sales tax increase. Ugh!

posted by Tory Gattis @ 7:35 PM 1 comments

2006 Highlights

Time not only for the Fall 4Q06 Highlights, but to sum up all the highlights of 2006. These posts have been chosen with a particular focus on significant ideas I'd like to see kept alive for discussion and action, and they're mainly targeted at new readers who want to get caught up with a quick overview of the Houston Strategies landscape (now almost two years old).

Don't forget we offer an email option for the thrice/week posts - see the Google Groups subscription signup box in the right sidebar. As always, thanks for your readership, and I'm looking forward to a great 2007.

From Fall 4Q06:

December 2006

• Planning: Panacea, Poison Pill, or just Purgatory?
• Metro narrows down the University Line options
• Upgrading Galveston tourism with commuter rail
• Are "lifestyle centers" real TOD?
• Summary links on property tax reform and the problems of appraisal caps
  

November 2006

• Improving new urbanism in Midtown with a tunnel
• Research questions the value of commuter rail (part 1, part 2, part 3)

October 2006

• Advice to Metro on HOV tolling
• An innovation tailor-made for Houston: flexible sidewalks
• The Economist on handling population growth, Houston-style (300m)
• Otis White: How property tax limits are like rent control
• More Houston branding: Greenest City in the Southwest
  

From Summer 3Q06:

September 2006

• Demolition for another Houston treasure? (Save the Downtown Elevated!)
  
• Kotkin on cities as engines of upward social mobility
• Leveraging small dollars for big improvements in public education
• Preservation vs. dynamic renewal
• New petition to save the Alabama Theater Bookstop
• Reason on Why Mobility Matters

August 2006

• Challenges to Urbanism in Houston, parts 1, 2, and 3 (urban corridor planning)
• Lemons to Lemonade: Salvaging the Metro Universities line

July 2006

• Houston's identity: Global Village, American Dream, Texas Spirit (lead-up posts: strategy and previous branding attempts, why brand a city?)

From Spring 2Q06:

June

• Transportation Lessons from Houston: Part 1, Part 2
  

May

• A Tropical Texas image strategy
• Density, Vibrancy, and Opportunity Zones
• Opportunity Cities vs. Pleasantvilles
• Applying Jane Jacobs' 4 tenets of vibrant neighborhoods to car-based cities (mobility/draw-zones for vibrancy)
• Opportunity dollars for upward social mobility (bottom half of the post)
  

April

• Live from the Astrodome
• Metro settles Universities/Westpark/Richmond rail alignment (April Fool's)
  

And from Winter 1Q06:

March

• Houston makes the cover story of Governing magazine, exposing questionable TIRZ practices
  
• Is money in politics always bad?
  
• Public-private partnerships for parks
  
• Growing cities, sun, sprawl, cars, commutes, skills, youth, the zoning tax and housing costs
  
• Another option for Houston's branding identity (Engineering City)
  

February

• Houston's potential for mixed-use pedestrian districts
  
• Mayor White on what makes Houston special
  
• Winning acceptance for Richmond rail
  
• Managed competition for Houston city services?
  
• New Urbanism and the value of mobility
  
• Partial-day telecommuting to relieve rush hour congestion

January

• The return on mobility investments
  
• Houston lessons from the updated "Dallas at the Tipping Point"
  
• High-density smart growth = population implosion?
  
• GHP strategic plan and marketing Houston (Open City)
• City identity and attracting educated youth
  
• Are income disparities in Texas a bad thing?

2005 Highlights can be found here.

posted by Tory Gattis @ 4:42 PM 1 comments

Planning: Panacea, Poison Pill, or just Purgatory?

OK, after a crazy-busy holiday week of extended-family and over-eating, I finally have a break to start blogging again. Sorry for the extended absence. I was looking forward to upgrading to the new-and-improved Blogger for the new year, but this recent post about migration problems has caused me to reconsider. I think I'll wait a few more weeks and let the kinks get worked out.

Most of you probably saw the planning op-ed by Len Gilroy and I in yesterday's Sunday Outlook paired up with a David Crossley piece (alternate link). I've had trouble in the past with Chronicle links being less than permanent, so I'll be including the full text below if you didn't get a chance to see it. That piece is also why I didn't blog earlier on the Garcia/Brown planning op-ed (alternate link) from the previous Sunday. We had already written and submitted it the previous week, and expected the Chronicle might consider running it later to continue the dialogue. I thought I'd hold off blogging on it until everything was out.

I have to say the Garcia/Brown op-ed seemed to oversell comprehensive planning just a tad, in the same way that beer commercials slightly exaggerate the number of beautiful women that will immediately surround you if you drink their beer. Comprehensive planning can solve our education, poverty, inequality, and crime problems? I'm sure Abe Saavedra at HISD and Chief Hurtt at HPD will be relieved that their troubles are so easily resolved.

I understand the allure of "here's utopia, here's us - all we need are a few plans and regulations, and we'll get there." But if utopia came from planning, and almost all cities are doing it, wouldn't we see one by now? I think part of the problem is that the real world involves tradeoffs, and "shared visions" don't value tradeoffs and differing individual preferences, markets do (i.e. I'm willing to give up a little A, but not B, to get C). "Shared visions" describe an ideal world, but we have limited resources, and some issues have to take priority over others. In other cases, two priorities can directly conflict. For instance, the Garcia/Brown op-ed is clearly calling for huge investments (infrastructure, mobility, transit, open space, etc.), yet is also calling for a AAA city bond rating and a lower property tax burden. Everything they list is a good thing, but the question is, at what cost? (in direct dollars and indirect regulations)

I guess I'm just more a fan of the Toyota approach of continuous improvement rather than the mega-master-plan. How can we keep moving towards more of the things we want without compromising the strengths we have? If we want something, what are willing to give up to get it? (including higher taxes) I also kind of like the idea of different agencies and departments focused on their own specific issue (like Metro on transit), and if they need cooperation from other agencies or departments, they should ask for it (and use the political process if necessary - that's what it's there for: to resolve these kinds of conflicts). Sort of a "balance of powers," with politicians sensing the priorities of the voters to resolve tradeoffs (go ahead, call me naive). When planning leads to a single all-powerful bureaucratic empire (like Portland's Metro), it's a scary thing. And, of course, valuable citizen input like Blueprint Houston should absolutely help guide individual agencies, including the city council.

All right, I've rambled on enough. On to the op-ed itself. Looking forward to the comments.

A city without a plan
Before process heads in different directions, here's a path to avoid
By LEONARD GILROY and TORY GATTIS

The best-laid plans of mice and men often go awry, as the saying goes. Though Robert Burns may have had the vagaries of life in mind when he penned this line over two centuries ago, he probably didn't anticipate that this sentiment would hold equally true for cities and urban economies. However, modern urban planners have yet to realize this, and Houstonians could learn this lesson the hard way.

Houston has recently begun to take significant steps down the road of urban planning by embarking on two major projects. In the first, a committee has recently released a "plan to plan" for the Planning Commission and City Council. The plan outlines a process for creating a general plan for Houston's future development. So far, the process seems wisely focused on Houston's top two critical planning-related issues: mobility and drainage (education and crime falling outside of planner's expertise). But additional committees on other issues may steer the effort in new directions in 2007.

Simultaneously, the city has embarked on an effort to reshape neighborhoods and commercial areas along Houston's urban transit corridors, primarily those served by the expanding light rail system. This planning process will spur changes to city ordinances and regulations to promote "transit-oriented development" — high-density, pedestrian-friendly development around transit stops that blends commercial and residential uses. Think of Brooklyn, New York, and you have a good idea of what they want for the future.

According to local leaders and planning advocates, these efforts are not a backdoor attempt to introduce zoning, nor are they a smokescreen for the imposition of draconian government regulations. Rather, they explain, these efforts are simply aimed at setting priorities for the use of public resources to implement a shared vision of our city's future. (Please see "Houstonians, we need a plan" by Councilmen Adrian Garcia and Peter Brown, Outlook, Dec. 24.)

It's hard to fault proponents for these noble intentions. After all, they share the same civic spirit that infuses the entirety of the urban planning profession. However, it is important to dig beneath the rhetorical surface to understand the motivations behind these projects and place them in the broader national planning context.

First, it is an accepted mantra among planners that a plan without the tools to implement its vision is a document destined for the bookshelf of history. And all planners know that the major implementation tool is zoning.

In fact, legions of planning students in leading universities are introduced to Houston as the biggest American city without zoning, a fact that leads to no small amount of consternation, bewilderment and derision. Put simply, planners are taught that unzoned Houston is the antithesis of rational design and the triumph of excess, an urban free-for-all of boundless sprawl. They would likely be dumbfounded to find out that most Houstonians actually cherish this eclectic city, the economic opportunities it provides, and the quality of life it affords.

Planners also face a sort of cognitive dissonance when they discover that the types of urban characteristics the profession now promotes — such as the density of Manhattan or the compact, Southern charm of neighborhoods in New Orleans, Charleston, or Savannah — were largely the product of free-market forces in the days before municipal planning and zoning were introduced. Houston is a modern-day example that demonstrates that planning and zoning are not essential to the viability or the livability of a city.

Houstonians have wisely rejected zoning several times over the last century. In the process, it has established itself as one the most vibrant and dynamic cities of the 21st century. Research has shown that development patterns in Houston are not dissimilar to those in other more regulated cities like Dallas and Atlanta, but the lack of strong regulatory barriers to new development has kept housing costs low and allowed the real estate market to keep apace with the demands of a growing and diverse population.

Not surprisingly, Houston ranks among the most affordable major metros in the country. That, in turn, enables the American Dream of home ownership for hundreds of thousands of middle- and working-class families. It also gives all of us increased discretionary income that can be pumped back into the local economy to support other jobs, small businesses, charities, restaurants, culture, amenities, higher education and all-around vibrancy.

Contrast Houston with its polar opposite — Portland, Ore., held by planners as the Mecca of highly prescriptive and restrictive urban planning.

While Portland has succeeded in creating a handful of attractive neighborhoods for young, childless professionals, some of the side effects have been disturbing. Given broad latitude in shaping the city through policy and regulation, its planners have worked for decades to force people to adapt to the plan.

For example, the Portland region has intentionally disinvested in highways to make driving more difficult (i.e., forced congestion) in order to encourage transit usage. Yet this plan has backfired. Portland's heavily subsidized light-rail system only accounts for a paltry 1 percent of the city's total travel, and the city has seen one of the country's largest increases in traffic congestion, a slowly tightening noose around the regional economy.

Even worse, planners have used zoning to reduce the range of consumer housing options by effectively outlawing new suburban and exurban development, forcing families into higher density living environments (i.e., smaller, tightly packed homes on smaller lots). By simultaneously preventing development on surrounding farm and forest land, the city's 30 years of "smart growth" policies have created an artificial land shortage, constricting the supply of new housing, inflating home prices and reducing economic opportunities for working families. By the turn of the century, Portland had become one of the least affordable housing markets in the nation, and its homeownership rate lagged behind the national average. According to Coldwell Banker, a 2,200 square foot, four-bedroom home that costs $155,000 today in the Houston area would cost $357,000 in Portland.

None of this is to say that Houston's current planning efforts are inherently misguided or that planning will take us down the Portland path. To the extent that the process could lead to a loosening of outdated and counterproductive city development regulations — such as minimum lot size requirements, building setback specifications and formulaic rules dictating the amount of parking spaces — the process could introduce more flexibility into urban design and allow the market to provide a wider range of development options to meet the increasingly varied housing preferences of consumers.

For example, some of us want to live in a medium-density Inner Loop townhouse development, while others may prefer a lower-density suburban setting with a larger house and yard. Planning should remain agnostic on urban form and instead create the conditions in which developers can respond to the changing demands for both types of product. In other words, planning should facilitate urban dynamism, not stifle it through stringent rules and the micromanagement of land use.

However, if the end result is the imposition of a decision-making and regulatory bureaucracy on top of something that currently works well, it could create imbalances and inefficiencies that would try to force the wrong things in the wrong places at the wrong time. Current planning tools tend to be too inflexible, static and resistant to economic changes. Houston needs flexibility and adaptability to allow dynamic growth and urban evolution.

For city leaders, the challenge will be to move from the abstract to the concrete. What exactly are the problems that planning is trying to fix, and would the ultimate policy prescriptions create unintended negative side effects or even exacerbate the symptoms? Can we fix them with narrowly targeted ordinances that cause minimal distortion to real estate markets? Would planning in Houston result in a process that facilitates and accommodates changes in the market, or would it stifle the dynamism that makes this such a great city? Is any step forward possibly a step backward, given the limitations in the current tools available in planning? Almost every policy "solution" will be more prescriptive than what's available in Houston now. How exactly will the "planning vision" be enforced in a city without zoning? Or is this a slippery slope to zoning (or to the regulatory equivalent of zoning without actually using the provocative z-word), what Dr. Edward Glaeser of Harvard refers to as "a highly regressive form of taxation"?

No doubt there are things Houston could do better when it comes to infrastructure and development. The key is addressing those issues while being aware of the risks and without making the same mistakes made by other cities. And, in the end, when it comes to "establishing a shared vision for the city," we hope that Houston moves forward as an Enabler rather than a Dictator.

Leonard Gilroy is a Houston-based certified planner and senior policy analyst with the Reason Foundation. Tory Gattis is editor of the Houston Strategies Web log.

posted by Tory Gattis @ 10:50 PM 39 comments