Houston's general plan and the real source of wealth inequality: housing and land-use regulationThis week I have three items that all touch on the same theme: the risks of overly restrictive local land use regulation. The first is an amazing paper by a 26-year-old MIT graduate turning heads over his theory that income inequality is actually all about housing (all summarized in one graph). (hat tips to Payton and Josh)
"Rognlie is attacking the idea that rich capitalists have an unfair ability to turn their current wealth into a lazy dynasty of self-reinforcing investments. This theory, made famous by French economist Thomas Piketty, argues that wealth is concentrating in the 1% because more money can be made by investing in machines and land (capital) than paying people to perform work (wages). Because capital is worth more than wages, those with an advantage to invest now in capital become the source of long-term dynasties of wealth and inequality.
Rognlie’s blockbuster rebuttal to Piketty is that “recent trends in both capital wealth and income are driven almost entirely by housing.” Software, robots, and other modern investments all depreciate in price as fast as the iPod. Technology doesn’t hold value like it used to, so it’s misleading to believe that investments in capital now will give rich folks a long-term advantage.
Land/housing is really one of the only investments that give wealthy people a long-term leg up. According to the Economist, this changes how we should rethink policy related to income inequality.
Rather than taxing businesses and wealthy investors, “policy-makers should deal with the planning regulations and NIMBYism that inhibit housebuilding and which allow homeowners to capture super-normal returns on their investments.” In other words, the government should focus more on housing policy and less on taxing the wealthy, if it wants to properly deal with the inequality problem."The second item is how Community Control Is Destroying America’s Cities. Finally there is some recognition that excessive neighborhood NIBMY power is strangling the ability of cities to grow and spiraling housing costs out of control. Houston gets mentioned as a good alternative model with our lack of zoning - thank goodness we haven't slipped down that slope of ever-expanding land use development controls... but are we about to?...
That leads to the third piece by Scott Beyer in Forbes about the general plan Houston is developing, which even gives me a short shout out. There's a lot of good stuff in here, hence the long excerpts:
"Does Houston need this? For those who dislike messing with success, the answer should be no.
As geographer Joel Kotkin has repeatedly noted here and in other publications, Houston’s pro-growth mentality—which is distinct from the “Smart Growth” ethos of government planners—is central to its success. While many highly-regulated cities have declined, Houston has in the last two decades fostered booming oil, health, housing and manufacturing sectors. Since 1990, its population has grown by 29%, five percentage points above the national average, and it has become the de facto Gulf Coast capital.
Along with this growth has come increased quality of life. According to data from Praxis Strategy Group, a consultancy affiliated with Kotkin, Houston residents have the nation’s highest standard of living when combining average salary with cost of living, something attributed to its unregulated—and thus cheap—housing market.
If the plan’s point is really just to pursue these goals through more data and coordination, so that officials know, for example, where to build parks and fill potholes, then it should prove benign. But that is rarely the way master plans are interpreted. Instead, their lofty goals are used by officials to justify expanded government. What results is the generic list of Smart Growth measures that planners use to try converting automobile-oriented cities into dense, “sustainable,” European-style ones.
The plan may also encourage expansion of the light rail system, which Tory Gattis, Kotkin’s colleague, believes is inadequate for the spread-out city, especially compared to the growing taxi and ride-sharing industries. If the plan adds an ambitious open-space preservation program, then Houston can kiss goodbye its pro-development climate. All these policies have been used in heavily-planned cities like San Francisco and Portland, contributing to their high taxes and lack of affordability.
The ironic thing is that Houston’s outward growth and congestion has already created demand for development inside the I-610 loop, which encompasses downtown and surrounding neighborhoods. Given this organic urbanization, master plans may be unnecessary, or even counterproductive. The city’s lack of zoning, after all, has made it inviting for such infill projects. But if the plan creates a litany of new regulations, they could be used by neighborhood activists to discourage development, as happens in planning-oriented cities. If city officials are really interested in greater density—along with other urbanist goals like increasing wealth, job creation, and diversity—perhaps they should scrap the plan and keep Houston like it is."I think he raises some good points about the risks of this plan, but I also know that there are people actively involved with the general plan development process that are making sure we don't make those mistakes. Officials are more aware than ever before of Houston's strengths and are being careful not to compromise them as we continue to improve the city. But vigilance will always be required...
More on Houston's new general plan here and my own thoughts here.