Tuesday, September 27, 2011

Rank your own livable cities, H-town vs. Dallas, randy Rice, and more

Some smaller items this week followed by some amusing rankings analysis:
Those with delicate sensibilities should stop reading the post here.  I'm serious.  Stop reading.  You know who you are.  Don't say you weren't warned...

And concluding with a little amusing news, Newsweek ranked Rice #3 in the nation for both Happiest (nightlife, dining, housing, weather, indebtedness) and Horniest students.  Do those things seem mutually incompatible to anyone else?  Turns out the problem is their definition for the horniest schools: "Schools with high marks for student looks and low marks for campus strictness."  Assuming horny = frustrated, kind of the opposite of horniest, right?  "Horniest" would mean hot students and *high* campus strictness (see "Animal House").  Sounds like they really meant "randy", "hornless" (?) or "sexually satisfied" - which certainly seems like it would boost the Happiness ranking too ;-)  And, yes, upon taking a second look, 4 of the 5 schools overlap on those two Top 5 lists.  Wesleyan is horny without being happy, and Harvard is happy without being horny.  I'll let you draw your own conclusions about what that means for their campus cultures...

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Tuesday, September 20, 2011

Houston housing model attracting worldwide attention

"Look to Texas to solve Australian housing supply" by the Unconventional Economist (hat tip to Hugh)

Originally, I was just going to include that link among many in another misc items post, but there is so much good material in here, it deserves its own post.  Sometimes we forget how good we have it here and exactly why it works so well.  It takes an outsider to see and articulate the power of our model, kinda like how it took a Frenchman (Alexis de Tocqueville) to describe America in the 19th century.  I highly recommend the whole thing, but here are the Houston-relevant excerpts:
Following on from my recent articles on land-use regulations and housing affordability, I want to take readers through Texas’ deregulated and innovative urban planning system, and how this system has assisted in providing Texans with housing that is among the most affordable in the Western world despite very high population growth and easy access to credit.
Finally, because of the low-cost housing in Texas, in addition to the lower rents on offer to businesses (because of lower urban land prices), the cost of living in Texas (as well as Georgia, which operates similar land-use policies) is far lower than the rest of the country. For example, Houston’s overall after-tax living costs are 9% below the nationwide average and 19% below the average for large metro areas (see table).

What makes Texas’ housing situation unique is the way in which it:
  1. Enables a plentiful supply of affordable land for housing and operates speedy housing approval processes; and
  2. Ensures housing-related infrastucture is adequately financed and provided in order to support the provision of affordable housing.
The following extracts from two seperate papers summarise the Texan housing model well. The first paper, which comes from the Cato Institute’s Randall O’Toole, describes how land-supply is provided and infrastructure financed in Houston, Texas:   
Houston is an example of a place where, with minimal government regulation, the supply curve for housing is almost perfectly elastic. Houston and surrounding areas have no zoning, so developers face minimal regulation when building on vacant land. Once built, most developers add deed restrictions to their properties in order to enhance their value for buyers who want assurance that the neighborhood will maintain a positive character. But these deed restrictions do not impede further growth, as there is plenty of land in the region without such restrictions.
In the suburbs of Houston, developers often assemble parcels of 5,000 to 10,000 acres, subdivide them into lots for houses, apartments, shops, offices, schools, parks, and other uses, and then sell the lots to builders. The developers provide the roads, water, sewer, and other infrastructure using municipal utility districts, which allow homebuyers to repay their share of the costs over 30 years. At any given moment, hundreds of thousands of home sites might be available, allowing builders to quickly respond to changing demand by building both on speculation and for custom buyers…
Houston developers allow homebuyers to pay off infrastructure costs over 30 years, impact fees or development charges require up-front payments often totaling tens of thousands of dollars. The difference is crucial for housing affordability: since development charges increase the cost of new housing, sellers of existing homes can get a windfall by raising the price of their houses by an amount equal to those charges, thus reducing the general level of housing affordability.
Increasing land and housing costs make other things more expensive as well. When housing is more expensive, for example, businesses must pay their employees more so that workers can afford to live in the region…
If lower interest rates increase demand for housing, Houston-area homebuilders respond by building more homes; [by contrast, in supply-restricted cities like the] San Francisco-area, builders respond by filing more applications, which may wait several years for approval. If government purchase of a large block of land for a park or open space restricts supply, Houston-area builders can simply go somewhere else nearby; in the San Francisco area, the nearest alternative building location is more than 50 miles away.
Notice that inelastic supply not only makes housing prices rapidly increase with small increases in demand; it also makes housing prices rapidly fall with small decreases in demand. This is exacerbated by lengthy permitting periods that can put homebuilders out of phase with the market. Thus, land-use restrictions create conditions ripe for housing bubbles.
As mentioned in the above extract, a key feature of the Texan housing system is the Municipal Utility District (MUD) financing system for housing-related infrastructure and services. Here’s a break-down of how the MUD system works:
  • Utilities are installed and maintained by the companies (electricity, telephone etc) since they receive the revenue.
  • The developer has to install the roads.
  • Large subdivisions are allocated areas for parks and schools.
  • The developer installs the sewerage and water and gets it back from the Municipal Utility District.
  • MUD is a special-purpose district that provides public utilities (such as electricity, natural gas, sewage treatment, water, and waste collection/management) to the residents of that district.
  • MUDs are formed by a vote of the area, and represented by board of directors who are voted on by the local people.
  • The MUD borrows money via the bond market to pay for building (via the developer) and operating (via the MUD) these services. The MUD bonds are then repaid via taxes on the home owners of around 1% of the home values per year.
  • Schools are also built and funded via bonds and repaid via the same taxes on the homeowner.
Note that Texas does not levy infrastructure charges up-front which, when combined with the absence of artificial regulatory constraints on land supply, enables generous-sized serviced housing blocks to be provided for only $US30,000 to $40,000, with brand-new family-sized house and land packages available for only $US150,000.
       The second article, which comes from the Dallas Federal Reserve, also provides a great summary of the Texas housing system:
In the first phase of the U.S. housing market boom and bust, many large cities (primarily on the East and West coasts) saw a prolonged run-up in prices. Demand for housing, driven by low interest rates and a growing economy, combined with supply restrictions—such as zoning laws, high permitting costs and “not in my backyard” regulations—to contribute to rapid price appreciation…These price increases then fed off themselves. Rising prices—whether for gold, corn or houses—often foster a bubble mentality, contributing to speculative demand…
Atlanta [Georgia], Dallas and Houston [Texas]…weathered increased demand largely with new construction rather than price appreciation because of the ease of building new homes. While some are dismissive of this developer-friendly attitude that allows such rapid construction, the approach clearly carries significant benefits for the homebuyer…
The Houston Example:
Houston saw tremendous job and population growth over the last decade, ranking it high among the 12 largest U.S. metropolitan areas in both metrics…
Given that Houstonians had access to the same new types of mortgages as the rest of the country and that Houston has had greater population growth than other large metros, we might expect price appreciation to be stronger in Houston than elsewhere. However, the opposite has been true.
Houston’s large supply of land means that demand growth primarily results in more construction, not higher prices. Construction levels are limited by the availability of two kinds of developable land: the previously undeveloped, generally found on a metro’s outskirts, and the redeveloping, usually in a city’s interior. In both cases, Houston’s policies are relatively permissive, making the metro friendly toward development.
The most fundamental difference between Houston and other cities lies in how they provide (or in Houston’s case, do not provide) water, sewer and drainage to developments on the urban fringe. In Houston, developers can create a municipal utility district, or MUD, to provide these services on their properties and can finance these with tax-free bonds. Houston requires developers to build MUDs in such a way that they eventually could be connected to the city’s corresponding infrastructure, but they begin as self-sufficient enterprises.
In other cities, developments must be connected to the city’s water and sewer lines, confining new projects to nearby or adjacent land since the cost of building lengthy lines is prohibitive. In metro Houston, by contrast, virtually any large parcel of land can become a new suburb, especially given the metro’s expansive highway system…
Much of the land in metro Houston is not assigned a specific use. So much land is available in Houston that the cost of each incremental unit rises slowly and keeps the average cost below that of more restrictive metros. Even in the face of significant population growth, this large supply keeps land prices in Houston stable, which over time contributes to lower home prices…
Indeed, Houston and other metros such as Dallas and Atlanta that have relatively more permissive development policies have lower housing prices than more restrictive places do.
So let’s sum-up Texas’ housing achievements:
  • high quality housing that is less than half the cost of equivalent Australian homes;
  • price stability – since Texan homes never bubbled then busted, unlike the supply-restricted US states;
  • low levels of household debt – due to the low cost of Texan housing; and
  • macroeconomic stability – resulting from Texas’ price stability and low debt levels.
Remember, also, that Texas has less land, more people, higher population growth, and crams a larger proportion of its population into its five largest cities than Australia. Yet, it has still managed to achieve affordable and stable house prices.
From where I am sitting, the Texan model of urban planning seems far superior to the dysfunctional, prescriptive mess currently presiding across Australia. Having the opportunity to purchase a new family home for $150,000 would be a dream come true for many Australians, many of whom are instead required to load-up on debt to buy smaller homes at twice the cost.

The question you, the reader, needs to ask yourself is why aren’t Australia’s policy makers undertaking study tours to learn from their counterparts in Texas, instead of throwing endless sums of taxpayer dollars into demand-side measures – like the first home buyers grants and negative gearing tax concessions – which throw the demand-supply balance further out of kilter and makes homes even less affordable?

Saturday, September 17, 2011

The Human Project

A couple friends of mine are raising money for a very cool project: an application to enable a conversation on the future of our species (yes, I wish they'd think a little bigger too ;-)  They're in the last few days of Kickstarter crowdsourced funding, so check out the video and then support as you're inspired - even if it's just a tweet or Facebook "like" to spread the word.  Thanks.

Tuesday, September 13, 2011

Major Texas Metro Areas Are Confirming Failures in Rail Transit

Despite the success of the Main St. line, I've been concerned for a long time now that the next set of rail lines will essentially bankrupt Metro while providing minimal benefit (except for possibly the Universities line, which has moderate benefits, but may not get built anytime soon because of the money drain of the other lines being built first).  Now the Coalition On Sustainable Transportation (COST) has come out with the numbers from other cities (especially Dallas) that don't bode well for Houston at all.  Some key excerpts (I know it's a lot, but there are some really good points in here):
For example: Dallas will pay increasing debt service for many years and has 30 plus year bonds and commercial paper for its almost $4 billion of debt. Their debt service is considered annual operating costs in the chart below, because: By the time current bonds are paid, the rail system will be at the end of its service life and will need replacement through the creation of a new round of bonds, continuing this high bond expense for as long as the system operates. While other Texas cities have not yet reached this Dallas level of bond debt and expense, Houston is rapidly moving in the same direction and Austin’s planning is pointing in this direction. Currently Dallas’s debt service is about 3 times Houston’s and almost 40 times Austin’s.
One may look at the data in the table above in many ways, but, none of the conclusions seem to be positive for rail transit. Dallas, Houston, San Antonio and Austin are all among the top 20 fastest growing major cities in the nation. However, the three cities with various levels of rail transit, Dallas, Houston and Austin, all have declining transit ridership trends and have fewer absolute transit riders today than they had a dozen years ago. They have spent billions to implement and promote transit with a heavy focus on rail transit.

These data highlight a number of broader Texas Metro Area negative transit trends:

1. Metro areas with more rail transit have significantly higher costs and higher taxpayer subsidies per ride.
2. Metro areas with more rail transit have fewer total transit boardings per capita.
3. Metro areas with higher densities have fewer transit riders (boardings) per capita.
4. Dallas has the largest population and greatest population density but the least cost effective transit system: Higher cost per ride (boarding) and fewer boardings per capita.
5. Increasing the proportion of a region’s transit funds being spent on rail transit leads to less cost effective overall transit and degraded transit for the majority of transit riders who still ride busses.

Some Major Texas City Metro Areas comparisons/observations regarding transit data:

1. Dallas-Ft. Worth Metro’s population is more than 3 times San Antonio’s and Dallas’ annual transit operating expense is 4.4 times San Antonio’s but Dallas has only 1.6 times the transit ridership of San Antonio.
2. Dallas-Ft. Worth Metro’s population is 3.8 times that of Austin and Dallas’ annual transit operating expense is 3.7 times the transit expense of Austin but Dallas-Ft. Worth has only 1.9 times Austin’s ridership.
3. Dallas has the most invested, more than $4 billion, in light rail and it has the highest cost per transit ride at 2.8 times San Antonio’s costs and almost 2 times Austin’s. Dallas has the least boardings per capita, about one-half of San Antonio and Austin.
4. San Antonio’s bus only transit system has 1.2 times Austin’s ridership but only 82% of Austin’s annual operating expense.
5. San Antonio’s ‘cost per transit rider’ is about one-third of Dallas-Ft. Worth’s and San Antonio has 2 times as many transit riders per capita as Dallas-Ft Worth.
6. Dallas’ 2011 net debt service (principal and interest) budget of $153 million is greater than San Antonio’s total 2011 budgeted operating costs of $141.3 million and almost as much as Austin’s $168.2 million.

It is no surprise that Dallas has hit a transit financial wall causing it to pause and curtail, at least temporarily, further light rail expansion. It seems, the more light rail Dallas implements, the more inefficient and expensive its transit becomes. This is an often occurring trend when regions implement rail transit and is a serious problem trend now developing in Houston and Austin. The result is overall degradation of transit service as exorbitantly expensive rail transit and resulting debt absorb increasingly higher percentages of transit funds. This, in turn, results in increasing transit fares and reductions in bus service which have disproportionately negative quality-of-life impacts on lower income citizens. Almost everyone forgets that the majority of transit riders still ride busses even after such massive investments in rail transit such as in Dallas or in Portland, the Mecca of train transit, where well over one-half of the transit rides are on busses. More importantly, this wasteful spending on ineffective trains ‘bleeds dry’ taxpayer funds which could be used to make positive contributions in serving communities’ many, higher priority needs for all citizens. (like express commuter bus services from all neighborhoods to all job centers, as I've been advocating)
Much experience has shown that once a cycle of high cost rail transit is implemented, the agency becomes heavily burdened with debt for a very long time. It is highly probable that the very high debt service (principle and interest) will become a permanent and major part of the transit agency’s annual operating costs. When one issue of bonds is paid down, it becomes time for another round of debt to replace aging equipment. This, in turn results in very poor cost effectiveness and degradation of the overall transit system as it serves fewer riders at higher costs. This high debt can never be paid-off without major increases in local taxes. Transit agencies cannot responsibly project and achieve enough ridership to make rail transit cost-effective. This has even less credibility in light of the national declining trend in the use of transit and the fact that the use of transit in Texas’ major metro areas has a declining trend over the past dozen years. As Dallas and other major cities have experienced, this results in a spiraling decline in transit performance and effectiveness, degradation of mobility for low income citizens and, often, cutbacks in other higher priority city services. This results in reducing overall quality-of-life.
Is this the future we really want for Houston?  Because it's not too late to stop it now, but it will be too late very, very soon, and then we will be stuck with the same harsh reality as Dallas for decades to come...

Tuesday, September 06, 2011

What makes Houston Houston?

Lisa Gray at the Chronicle (who I don't always agree with) had a great article a week ago with quotes from people on "what makes Houston Houston?".  Long time readers know this has been a regular theme of mine.  Here are just some of my related posts:

Here are some of my favorite excerpts from the story. Bold highlights mine.

Rachel Dvoretzky: "Friendly, energetic, unpretentious, hard-working. ... Always international, but not cosmopolitan."
Margaret Luellen Briggs: "A friend from NYC once told me, 'People always say New York is a great place to visit, but they wouldn't want to live there. Well, Houston is the flip side. It's a terrible place to visit, but a great place to live.'"
Ann Rosenwinkel: "Everything is at hand. From Starbucks, you don't even have to cross the street to get to pornography just around the corner from the most beautiful and rarefied art museums. In Houston, we can't isolate ourselves from the riffraff, from the pain and richness of human experience because we've chosen not to. Dr. John Lienhard called cities 'human exoskeletons,' and it's not surprising he's a Houstonian."
Gary Woods: "Competent governance."
John Gonzales: "We have to remember that Houston was a miserable place all those many decades ago when Sam Houston walked our streets. Back then, if you didn't die in a homicide, yellow fever might have killed you. And if you lived through that you could at least look forward to rats gnawing on your face at night. But Houstonians didn't care. We moved on. We moved on after the Civil War stunted our growth. We moved on after Carla, Alicia, Enron, Allison, Ike, the Challenger disaster, Dean Corll, the floods of the 1930s, the oil bust of the 1980s, polio scares, tornadoes, the odd petrochemical plant explosion. We just shake it off and move on. And that can be a good thing and a bad thing."
David Nathan: "... There's a great BBQ joint, taqueria and Chinese food place within 10 minutes of anywhere..."
Igor George Alexander: "Well, Houston is the only city in the USA that I know of where you can choose whether you want to go out to eat in a Southern Nigerian-style restaurant or a Northern Nigerian-style restaurant. But, mostly what makes Houston Houston is the lack of zoning."
Susan Buchanan: "Houston is always a surprise. Visitors are surprised by both the diversity of the population and the depth of the opportunities for work, entertainment and education. Natives are surprised because we turn around and there's something new."
Herman Kluge: "It always galls me when out-of-towners arrive, take a look around and exclaim, 'OMG, Houston has CULTURE! Well, of course we do, Bucko. Plus we're a friendly bunch and can find food that's fit to eat."
Deborah Mann Lake: "We don't riot after our teams win or lose. In fact, we don't riot at all. Maybe it's too hot. Maybe it's because we'd rather have fun. But it's definitely a Houston trait."
Dene Hofheinz Anton: "The FIRST indoor all-purpose sports stadium still stands. Our Eighth Wonder of the World, as the Rev. Billy Graham called her. Let's put her back to work for all of us!" (like this or this)
Michael Emerson: "No zoning, every backyard a fence, social mobility, heat and humidity, strip malls, friendly people."
Sherrie Edwards Glass: "Maybe it is because we like each other."
Just makes you proud to be a Houstonian, eh?  Your own thoughts welcome in the comments.

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