Judge Glock has a very sobering piece in the City Journal on "How Debt Ate Chicago - Mounting liabilities are the greatest threat to the city’s survival." Chicago is a few decades ahead of Houston on the urban maturity curve, but it's critical that Houston act now to make sure we don't end up on the same path to stagnation (which is almost impossible to stop once momentum builds). Some key points to indicate just how screwed they are, some of which I think you'll recognize as starting to happen in Houston as well:
Chicago faces a severe police shortage, with over half of high-priority 911 calls going unanswered due to a lack of available officers.
The city's financial woes stem from a massive debt burden, reaching $43,000 per taxpayer, the second-worst in the nation, further compounded by Illinois's own high debt load.
Chicago's tax burden is among the highest in the nation, with combined city and state taxes exceeding 12% of a median family income, placing a heavy strain on both residents and businesses.
Chicago's economic fundamentals are weakening, with downtown office vacancies reaching record highs and companies relocating due to high taxes, leading to a shrinking population and a decline in median household income.
Newly elected Mayor Brandon Johnson, a former Chicago Teachers Union member, has pledged to increase spending on progressive initiatives, including a "Green New Deal" and expanded social programs, despite the city's dire financial situation.
Johnson's plan to raise revenue through taxes on the "ultra-rich" and a "mansion tax" has faced resistance and has been deemed impractical or politically unfeasible.
Chicago's financial woes are exacerbated by a high percentage of its budget being dedicated to fixed costs like pensions and bond interest, leaving little room for flexibility.
Chicago's pension debt is particularly concerning, reaching $34 billion, with assets covering only 25% of obligations, placing a significant burden on the city's finances.
The city's complex governance structure, with overlapping agencies and bodies like the school district, park district, and county, further complicates the debt situation and adds to the financial burden on taxpayers.
Chicago has a history of using debt to finance political projects and social causes, leveraging its financial distress to push for progressive agendas, leading to concerns about the long-term sustainability of its financial strategy.
Concluding:
"Chicago has been bailed out by miracles before, but its current problems are structural and seem to have no clear solution. That doesn’t mean that the city will necessarily suffer Detroit’s fate and find itself in bankruptcy. The dangers of insolvency are real, but, just as with the exploding federal debt, too much focus has been put on the possibility of a single disaster and too little on the more obvious cost: deepening decline. Chicago could keep paying off its bondholders and retirees by bleeding public services, hiking taxes, and driving out still more residents, but it would become a shell of its former self. A debt-ridden Chicago wouldn’t be the first, or last, great American city to become a byword for lost possibilities."
One of the common mistakes I make with this blog happens when I come across a really good, important, long article that I want to discuss more in-depth than my usual bullet points, because I usually set it aside to get back to later when I have more time, and sometimes later ends up being a year and a half, as is the case this week (apologies). It's a City Journal piece by Ed Glaeser titled "How to Fix American Capitalism - End insider privileges by renewing the freedoms to build, to work, to sell, and to learn." His opening:
"February 2019 Harris poll found that roughly half of younger Americans would “prefer living in a socialist country.” Millennials may not fully grasp the consequences of the government owning the means of production, but they certainly don’t like how American capitalism is working for them. They have a point. Over the past 40 years, insiders have increasingly captured the American economy—from homeowners opposed to new housing construction near them to incumbent firms that benefit from the overregulation of employment to interest groups that have transformed the federal government into the equivalent of a pension system with a nuclear arsenal. The young are usually outsiders; the bill for the insiders’ triumph has been laid in their laps. ...
What many young people today don’t realize is that socialism is a machine for empowering insiders. Few insiders have ever been rewarded more assiduously than the nomenklatura of the Soviet Union. Few governments have been as gray—in every sense of the word—as the Brezhnev regime. A vast expansion of the American government, as imagined by today’s Democratic Socialists, would create its own privileged elite.
From its inception, by contrast, capitalism was designed for outsiders. Its original apostles, such as Adam Smith, argued that entrepreneurs needed freedom from the royal regulations that limited trade and the formation of new enterprises. When the government controls decisions to work or to start a business, political pull becomes a prerequisite for success. The whole point of economic freedom is that all people—not just the connected—can use their talents to help themselves and, potentially, to change the world.
These days, capitalism’s advocates often focus more on defending the status quo than on promoting outsider opportunity. If capitalism is to win over the young, that must change—and a new freedom agenda can help make that happen. In January 1941, Franklin Roosevelt announced his four freedoms (of speech and worship, from want and fear) that helped frame his objectives for World War II, which the nation would enter before the end of that year. Our contemporary outsiders would benefit from a renewal of four key freedoms: to build, to work, to sell, and to learn. The young need fewer land-use restrictions that make it tough to provide affordable housing in productive areas. They need fewer employment rules that limit their ability to find work, as well as fewer business regulations that suppress entrepreneurial energies. And—even before these other important things—they need new educational options that liberate them from underperforming educational monopolies.
In 1981, the social scientist Mancur Olson published his magisterial The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities... His thesis: nations lost dynamism when insiders managed to stack the rules against disruptive outsiders."
His classic example is how well Germany and Japan have done since their society went through a complete reset after WW2, while Great Britain has been much more stagnant. Glaeser then proceeds to focus on onerous land-use regulation wielded by NIMBYs, often with the cover story of environmentalism or historical preservation:
"As Olson suggested, collective action takes time and skill, and better-educated suburbs have proved particularly effective at blocking development. To succeed, though, antidevelopment groups need rallying cries that go beyond self-interest, and green causes have frequently provided them....
Because areas like lower Manhattan and Berkeley have enjoyed enormous economic growth, limiting construction there means that fewer people can benefit from that growth. In the past, Americans could move to booming places because it was easy, for instance, to put up cheap balloon-frame houses on the frontier or erect tenements on the Lower East Side of Manhattan. Today, starter homes in Silicon Valley go for more than $1 million, while townhouses in Greenwich Village, a neighborhood that preservationists fought to keep pristine, now routinely sell for $5 million and up."
Next, he gets into how onerous local licensing laws restrict small business and entrepreneurship.
"One of the most egregious ways that government favors insiders is occupational licensing, typically presented as a way to protect consumers. Economists Morris Kleiner and Alan Krueger documented that, in the late 1950s, less than 5 percent of American workers needed some form of occupational license. Licensing in fields with a real public-health impact—pharmacy, say—may protect some consumers, but it’s hard to see why the person selling you flowers or your eyeglass frames needs certification.
Licensing can deter someone from starting a new job or experimenting with new occupations. If you think that you might like to be a florist, you could just try it out, in a free environment. If floristry requires a long process of certification, though, you’re more likely to stick with your current job. Occupational licensing also makes it harder to move across states to seek work, since licensing requirements vary."
His next biggie is employee unions, especially public ones, as well as public entitlements that resist reform:
"Private-sector unions have weakened, but public-sector unions remain strong—and they protect older and established insiders....
Twenty-four percent of the national budget now goes toward Social Security, and another 8 percent funds benefits for retired public workers, including veterans. Another 15 percent is spent on Medicare. Altogether, spending on the elderly now makes up 47 percent of the federal budget.
Some form of old-age pension system is a matter of basic decency, and no one wants to see the elderly on the streets without decent health care. But the political might of older voters—who live disproportionately in the crucial swing state of Florida—has been strikingly effective at blocking sensible reforms that could reduce the cost of the system for younger voters. When Social Security began in 1935, American life expectancy was 61, and only 7.8 million Americans were over 65. Today, life expectancy is 79, and 49.2 million Americans are over 65. Raising the retirement age would obviously make retirement benefits more financially sustainable. Yet older voters’ power has made such a change almost impossible....
Younger Americans see the massive flow of public spending toward the old, and they understand the difficulties facing reform. They thus find themselves attracted to politicians, like Bernie Sanders, who promise more spending on them. Visions of Medicare for All seem far more plausible to young voters than proposals to cut benefits already enjoyed by the elderly. But America needs policies that will empower the young, not make them a new generation on the dole."
And the final biggie at the foundation of it all and my personal reform passion, education:
"Insiders’ power to block change has been a steady feature of the education-reform wars over the last 20 years. "
And finally, his solutions:
"An effective alternative to the status quo and social democracy must, I believe, focus on empowering outsiders... To build a political agenda around the four freedoms of learning, working, selling, and building, four specific policies would provide a good start.
Start with the right to learn, which precedes the other freedoms. Insider control over traditional K–12 education is, at present, too strong to achieve any radical reform within existing schools. Charter schools sadly remain a niche product, so pushing for their expansion—and for greater school-choice options more broadly—is necessary. Another alternative that could open up new education opportunities would be vocational training that bypasses the school system entirely. Washington could pay for programs inculcating marketable skills—from plumbing to computer programming. These programs could be competitively sourced, meaning that labor unions and community colleges and for-profit entrepreneurs could compete to offer them. But providers would get paid only if students learned real skills. Access to vocational vouchers could go not only to teenagers but also to displaced workers, or to anyone without a solid job.
Second, we should establish a stronger right to work. All employment regulations should undergo rigorous cost-benefit analysis and have automatic sunset provisions. The Social Security system should also be made friendlier to the young. The payroll taxes that fund Social Security could be eliminated for those under 30 and phased in later in life. Younger workers and their employers would initially pay nothing into the system. That shift would eliminate a large tax-related barrier to hiring the young and make it more financially attractive for young people to work. That reform would reduce revenues, true; but raising the age of retirement could offset the lost funds.
Third, Americans need greater freedom to sell and to launch new businesses, especially of the non-digital kind. The Internet’s platforms may make it easy to sell goods these days, but services and experiences are provided live and thus are often highly regulated. The next generation’s entrepreneurs should be able to create abundant opportunities outside of eBay—above all, in poorer areas. The path to liberating physical entrepreneurialism is clearer in cities, since more customers are clustered together for creative local service providers. But starting a business should be easier everywhere.
The need to ease business regulations is particularly acute as America attempts to recover from the economic dislocation caused by Covid-19...
As with employment regulations, a top-to-bottom review of business regulations, subjecting them to ruthless cost-benefit analysis, would be welcome, but that could take years. A speedier approach might be to experiment with entrepreneurship districts. They could combine one-stop permitting with shared maker spaces and targeted training programs. The permitter could be made accountable for the speed of the process.
Fourth, we need more freedom to build. Since the Clinton administration, I have regularly interacted with officials at the Department of Housing and Urban Development, and they’ve always wanted to reduce the local barriers to building that push up prices. Their wishes have had almost no influence, largely because land-use decisions at the local level are not easy to control from Washington—and the notion that HUD would preside over local building permits is a little scary, anyway. State legislatures are the natural intermediate institutions that can push localities to build more. In many cases already, state governments have reduced the power of local land-use controls. The best federal approach in this area would be to deploy financial incentives to encourage state legislatures to do the right thing. Federal transportation spending is partially meant to build the infrastructure needed by new construction. If a state isn’t allowing any construction in high-demand areas, shouldn’t the federal government reduce its infrastructure support? Use money to nudge states—and let states nudge communities.
Today, capitalism seems unattractive to the young because it is stacked against them. America’s current outsiders will have far better lives in a free system, however, than in any new socialism, which would invariably privilege connected apparatchiks (among the other failings it would bring). The cause of freedom will need to present itself as a radical break with the status quo to win the hearts and minds of a new generation.
Even with these extensive excerpts, I'm not really doing the piece justice - I really recommend taking the time to read the whole thing. I can't think of a more important agenda for America.
Niche 2021 Best Cities to Live in America. The Woodlands ranked the #1 Best City to Live in America. Houston gets an A-, not bad for a major metro, pulled down by crime. Hat tip to George.
"Seven decades later, I'm amazed to hear that some still think of Houston as part of "flyover country" when it has become one of the world's great art cities. What would it take to wake people up to all that diverse, sophisticated Houston has to offer?"
“Messrs. Glaeser and Cutler see nothing less than “the rapid-fire deurbanization of our world.”
“Uncontrolled pandemic,” the authors write, poses “an existential threat” to the urban world. Nor is the coronavirus the only problem that cities face. “A Pandora’s Box of urban woes has emerged,” they continue, “including overly expensive housing, violent conflict over gentrification, persistently low levels of upward mobility, and outrage over brutal and racially targeted policing and long prison sentences for minor drug crimes.” These are not disparate problems. Rather, they “all stem from a common root: our cities protect insiders and leave outsiders to suffer.”
In Messrs. Glaeser and Cutler’s view, something has gone deeply wrong with how policy is set in many American cities. Insiders have captured control of how cities operate—and used that control to enrich themselves while providing limited opportunities for newer, younger residents."
I think Houston is better than most cities on these problems, but I'd be curious to hear what you think in the comments...
"Silicon Valley is a perfect example of the long-term problem. According to the Bureau of Economic Analysis, four counties in northern California—Marin, San Francisco, San Mateo and Santa Clara—have per capita incomes over $100,000. Given that extraordinary prosperity, you might think that people would be flooding into the region, as they did after gold was discovered at Sutter’s Mill in 1848. Yet they are not. Taken together, those counties’ population grew by only 6.5% between 2010 and 2020, below the average growth rate for large counties. For comparison, Harris County, Texas, where Houston is located, has 35% less land than the four California counties, but in the 2010s its population grew 175% faster.
The reason for this is not hard to find. House prices in Silicon Valley make living there prohibitive for all but the very wealthy. Data from the National Association of Realtors show that in the second quarter of 2021, the median sales price for a new home was $1.7 million in San Jose and $1.4 million in San Francisco. In Houston, the median sales price was $307,000. Given the ease of building in greater Houston, house prices there may actually decline once we get through the pandemic. There is little chance that prices will fall in Silicon Valley.
Harris County is growing so rapidly because it is a place where housing and entrepreneurship are still largely unfettered. In contrast, coastal California is the capital of insider privilege. In 1982, the economist Mancur Olson published “The Rise and Decline of Nations,” in which he argued that in every society, cliques and special interest groups pass laws that limit competition and prevent change."
Reasonably fair assessment putting Houston and Miami in the next two slots of America's global cities behind NYC, LA, and SF (but why is energy independence bad for us? It's great!). We're still the most affordable global city in America. Dallas not even mentioned... ;-)
Cities Investing the Most in New Housing: Texas Triangle dominates. Houston #5 on a relative-to-population basis (Austin #1), but #1 in total volume, #2 in total value (behind DFW), and #2 most affordable housing (behind San Antonio).
Any state high in migrants is also going to have a higher renter percentage
A fixed $800 rent price point will naturally have units decline under it over time just due to natural inflation
Our cost ratios are just matching the US as a whole
But mainly I expect everything to (eventually) get more affordable under covid (see previous item). It will certainly free up a lot of workers from service industries for construction, which has been a major issue for builders. And people being free from commutes reduces price premium of close-in properties and opens up exurban ones.
Fix our pensions like AZ, passing Chicago for #3? avoiding over-regulation, MaX Lanes, and more
I want to open this week by getting a little contrary with this call for more planning, control, and zoning in Houston to prevent future flooding problems. While I'm sure there's more we can do to make sure new developments retain their runoff, I get a little tired of the call for more controls and regulations every time an averse event happens. This is how stultifying bureaucracies get built, and once built they're almost impossible to remove. Repeat after me: "planning does not lead to utopia" (if it did, please point to such a city for me). If strong centralized planning led to thriving communities without disasters, then the USSR would have won the Cold War and Chernobyl would never have happened. (mic drop)
"What would happen if your city, in the name of progress, started giving poorer residents vouchers for landline telephones rather than smartphones? Or if, rather than stocking public libraries with computers, so that people could write emails, your city installed fax machines? You would consider these unnecessary expenditures on outdated technologies. Yet when it comes to public transit, many cities splurge on modes designed for a different time and place—namely light rail.
...
Instead these officials, often backed by federal grants, are throwing money into a century-old transportation concept that is unfit for most U.S. cities. This is a lazy approach, and insofar as it perpetuates the congestion crisis, it undermines the urbanist cause, by making dense living less convenient. It’s time for transportation planners to emphasize the future over the past."
"And Houston, which lacks a formal zoning code, has become a city that, contrary to its reputation, features numerous skyscraper clusters and whole neighborhoods dominated by new townhomes.
These trends point out a glaring contradiction in modern urbanist thinking. The people who claim they like density—such as planners, architects, environmentalists, and self-described progressives—also tend to prefer government centralization for cities. And they tend to oppose, as a broader principle, ideas that are market-oriented, anti-regulatory, capitalist, and pro-growth. But they seem not to have pondered how any of these variegated ideas actually work in practice within cities. Centralization has led to a stifling regulatory climate—most notably zoning—that prevents cities from adding new buildings and people, a point demonstrated by the New York Times. A hands-off approach, meanwhile, is what has proven to liberalize cities for this human influx, making them dense and dynamic."
The Economist tallies the cost of excessive land-use regulation
A couple of months ago, The Economist magazine had a cover story on "Space and the City: Poor land use in the world’s greatest cities carries a huge cost," and I'm finally getting around to writing a complete post about this excellent piece (rather than including it in my usual lists of smaller items). It included both an opening editorial leader and an in-depth briefing article, and reiterates several of the long-term themes of both this blog and The Center for Opportunity Urbanism around the high cost of excessive land-use regulation. Since most of you may not have the time or the subscriber access to read the whole thing, here are what I think are the most key excerpts below. I realize this it is a bit long, but it just goes to show how many good points there are here:
"...land-use regulations in the West End of London inflate the price of office space by about 800%; in Milan and Paris the rules push up prices by around 300%. Most of the enormous value captured by landowners exists because it is well-nigh impossible to build new offices to compete those profits away.
The costs of this misfiring property market are huge, mainly because of their effects on individuals. High housing prices force workers towards cheaper but less productive places. According to one study, employment in the Bay Area around San Francisco would be about five times larger than it is but for tight limits on construction. Tot up these costs in lost earnings and unrealised human potential, and the figures become dizzying. Lifting all the barriers to urban growth in America could raise the country’s GDP by between 6.5% and 13.5%, or by about $1 trillion-2 trillion. It is difficult to think of many other policies that would yield anything like that. ... San Francisco could squeeze in twice as many and remain half as dense as Manhattan. ... Zoning codes were conceived as a way to balance the social good of a growing, productive city and the private costs that growth sometimes imposes. But land-use rules have evolved into something more pernicious: a mechanism through which landowners are handed both unwarranted windfalls and the means to prevent others from exercising control over their property. Even small steps to restore a healthier balance between private and public good would yield handsome returns. ... One estimate suggests that since the 1960s such distortions have reduced America’s GDP by more than 13%. ... ...in America land accounts for a third of total housing costs, and close to half in some metropolitan areas. A high share of land in housing costs results in the creation of large rents for landowners.
If regulatory limits on building heights and density were relaxed, fewer plots of land would be needed to satisfy a given level of demand. That would reduce the rents collected by landowners, since any uptick in demand could quickly be met by new development. Just as soaring agricultural productivity led to a decline in the relative economic power of rural landowners in the 19th and 20th centuries, the relaxation of strict limits on development would lead to a decline in property wealth relative to the economy as a whole. More of the gains of economic activity would flow to workers and investors.
Instead building regulations keep urban-land productivity low, and the costs are staggering. A 2005 study by Mr Glaeser and Raven Saks, of America’s Federal Reserve, and Joseph Gyourko, of the University of Pennsylvania, attempted to derive the share of property costs attributable to regulatory limits on supply. In 1998 this “shadow tax”, as they call it, was about 20% in Washington, DC, and Boston and about 50% in San Francisco and Manhattan. Matters have almost certainly got worse since then. Similar work by Paul Cheshire and Christian Hilber, of the London School of Economics, estimated that in the early 2000s this regulatory shadow tax was roughly 300% in Milan and Paris, 450% in the City of London, and 800% in its West End. The lion’s share of the value of commercial real estate in Europe’s most economically important cities is thus attributable to rules that make building difficult.
One may find it hard to sympathise with Mayfair hedge funds facing high rents. But the net effect of these costs is felt more by the poor than by the rich. Take American homeowners. The fact that 60% of households own property might seem to suggest that rising house prices and inflated land values were good for a large swathe of the middle class. Yet Edward Wolff of New York University notes that the middle class enjoyed much less of a boost to wealth because of an accompanying rise in mortgage debt (see chart 3). Meanwhile poorer Americans, who rent their homes, experienced soaring housing prices as a large and sustained increase in their cost of living.
Housing wealth has played a critical role in rising inequality, to which Thomas Piketty, an economist at the Paris School of Economics, drew attention in his bestselling book “Capital in the Twenty-First Century”. In a recent paper Matthew Rognlie, a doctoral student at MIT, noted that the rising share of national income flowing to owners of capital, rather than workers, is largely attributable to increased payments to owners of housing. Capital income from housing accounted for just 3% of the total in 1950 but is responsible for about 10% today. ... Growth in the rents available to property owners fuels corruption and wastes resources. Landowners work to strengthen development restrictions while politicians cash in on their ability, through selective development approval, to grant fortunate supplicants a windfall. In economies where political corruption is already a problem the renaissance of land may be especially corrosive. In October 2014 the Times of India reported that the bribes required to clear the various stages of the planning-permission process in central Mumbai could add up to as much as half of basic building costs. ... ...American GDP in 2009 was as much as 13.5% lower than it otherwise could have been. At current levels of output that is a cost of more than $2 trillion a year, or nearly $10,000 per person.
The good news is that the world’s urban-land scarcity is largely an artificial problem. ... Those already blessed with property may also object to the other obvious approach to the problem: faster and higher-capacity transport links allowing the benefits to be spread farther afield."
To paraphrase Goode Co., you may want to to thank your lucky stars you live in unzoned, relatively free market Houston, Texas...
First, I criticized Dallas' decision to build a very expensive light rail line to DFW airport, and it doesn't seem to be getting much ridership traction, nor do their downtown rail lines seem to be doing as well as our very full HOV express buses:
Here’s the crazy thing: She was the only one who got off the train at DART’s Terminal A station. She said she looked up and down the rail cars and station platform, and not one other person disembarked.
I was surprised, for two reasons:
1) About 60,000 people work at D/FW. That includes airline workers, concessions employees, parking people, security personnel, folks with badges and everything. With all those thousands punching the clock there, you’d think one or two might have been heading there at 8 a.m. from the 13-city DART service area. Strange.
2) The sheer volume of outgoing local passengers, about 30,000 a day. (That’s based on 31 million enplanements a year, with 35 percent of fliers with local origination/destination — all figures provided by David Magana, D/FW’s PIO. Blame me, not him, for any bad math.)
Not all of those tens of thousands of fliers come from the Dallas side of the airport, but still. A pile of them do.
I hope DART reaches and exceeds 1,200 passengers a day at D/FW. I’d like to think the line to the airport was worth the civic investment. It makes sense, on the face of it. But we’re a car-loving metro area, and it’s rare that I see a DART park-n-ride approaching half full on my way to work each day.
Public transit can be a hard sell in these parts.
Secondly, I mentioned the Aaron Renn's Urbanophile series on city corruption a couple of weeks ago, linking to part one, and now parts two, three, and four are out, listed here along with interesting excerpts from part two on fixing corruption:
"The authors’ basic formula for corruption is simple: C = M + D – A. That is Corruption = Monopoly power + Discretion by officials – Accountability. Resultingly, as they put it:
A strategy against corruption, therefore, should not begin or end with fulmination about ethics or the need for a new set of attitudes. Instead, it should look cold-bloodedly at ways to reduce monopoly power, limit and clarify discretion, and increase transparency, all the while taking account of the costs, both direct and indirect, of these ways.
There is another crucial point in designing an anti-corruption strategy: Corruption is a crime of calculation, not of passion. People will tend to engage in corruption when the risks are low, the penalties mild, and the rewards great. This insight overlaps the formula just mentioned because the rewards will be greater as monopoly power increases. But it adds the idea that incentives at the margin are what determine the calculations of corrupt and potentially corrupt official and citizens. Change information and incentives, and you change corruption.
... The book is also notable for being against what would appear to be one of the most popular responses to incidents of corruption, namely adding more rules. This often just makes it easier for corruption to flourish. As they put it, “Corruption loves multiple and complex regulations.” We also see in the US that more regulation increase the rent seeking returns to corruption and leads to regulatory capture, either by regulated industries or activists (or some combination of both). They also say that corruption shouldn’t be looked at in isolation or as the sole aim, but rather that anti-corruption efforts should be seen as a tool for reinventing and improving the delivery of public services... ... Among their recommended approaches in the fight against corruption are having a point person with a high profile and public accountability for delivering results, creating an independent anti-corruption office (such as an inspector general type organization), starting by picking low-hanging fruit, eliminating the perception of impunity by “frying big fish” via prosecuting senior officials , working with and not against the bureaucracy, and many other things. "
Dallas vs. Houston in two words, HSR loses its sweet spot, how cities decline, and more
This week's items:
Dallas finally added a rail connection to DFW and thinks this helps qualify them as a world class city, even though downtown Dallas only has a tiny percentage of metro employment and it will take an hour to get there. I've always heard a big differentiator between Dallas and Houston is that Dallas is much more image conscious about appearances (sort of an LA of Texas), and this really drives it home for me. We're more pragmatic and are not worried about being considered world class (at this point, we already know we're there). We tried express bus connecting downtown to IAH (far faster than a rail line), and it flopped, with only 2-3 riders per trip on average. With that low of a demand, why would we build a multi-billion dollar rail line to the aiport that would be even slower?! That may very well sum up Dallas vs. Houston in two words: prestige vs. pragmatic. A few years ago I laid out the case here for why rail to the airport rarely makes sense.
Aaron Renn kicks off a 3-post series with a devastating description of how declining cities get into a viciously reinforcing cycle of decline driven by corrupt vulturous interests in real estate, construction, and legal services. The short version of the argument is that big local banks used to influence local politics to get broad economic growth, but those banks got rolled up into national firms and the business interests that are left really are mostly looking for narrow contracts subsidized by the taxpayer - they don't have the broader interests of the city at heart. It is a scary and depressing trap that is almost impossible for a city to get out of once it starts (Detroit and Cleveland being two examples). So far Houston seems to have avoided this fate, but it's certainly something we have to stay vigilant about...
"Whatever views one may hold about a city without zoning, it’s hard to deny that Houston has done pretty well for itself over the past generation or so. Its population has grown faster than that of almost any other American city. Its unemployment rate is among the lowest. It continues to attract new businesses no matter what slogan it chooses to adopt for itself. And a growing number of scholars, notably the urbanologist Edward Glaeser, have argued that Houston has done well precisely because it imposes so few restrictions on development."
"By 2023, Houston's gross regional product (GRP) will approach $1.1 trillion, more than double where it stands today. The region will add nearly 1.2 million residents, more than 700,000 jobs, and $300 billion in personal income."
Revising the city charter, low CoL = high SoL, peak sprawl, big exports, big data, and save the birds
Getting back to our backlog of smaller misc items this week:
Do you agree or disagree on Bradford and Robinson's suggestions for a Houston City Charter Review Commission? Bill King is also in favor. The Chronicle editorial board weighed in as well. I'm no expert on local governance, but my general thought is that Houston seems to be working pretty well as a city compared to our peers nationally, so we should be very careful changing it. I definitely disagree with the city manager idea - it hobbles the power of the mayor to get things done, which is why we elect them. My other thought would be to make sure we do pretty much the opposite of how Chicago is run, based on everything I've heard and read about their corruption and dysfunction. Comments welcome.
Finally, a small plug for a good cause. When was the last time you dressed up with the significant other and went to a fun fancy charity gala? Houston Audubon is having their annual fundraising "For the Birds" gala this Thursday at the Houston Country Club and tickets are still available at $100 - very reasonable compared to most Houston charity galas. You might even get a sweet deal at their charity auction while you're there. Do some good and earn bonus points with the S.O. at the same time - two birds with one stone, so to speak, although the actual stoning of birds at the event is significantly frowned upon... ;-)
Free Hobby!, mobility's economic boost, Jane Jacobs for car-based cities, top rankings
This kind of Chicago corruption coming to Houston is so depressing I don't really feel like posting this week (evidently United has contributed to all of the City Council members re-election campaigns), but I will press on. Please don't forget to sign the petition and share it with all of your social media channels. The City Council really must feel the pressure from the voters or they will just fall in line with what United tells them to do.
On to some of the ever-growing stack of smaller items.
The Urbanophile reposted two of my favorite old posts on rethinking Jane Jacobs' tenets for car-based cities and density, vibrancy, and opportunity zones. They must be provocative because they set off a firestorm in the comments - woo-eee did they. Poked a hornet's nest there. People clearly don't like their sacred cows getting tipped. Aaron may be re-thinking re-posting me... ;-)
Finally, a strong item from Bob Poole's Surface Transportation Innovations newsletter at Reason on why Houston needs to keep making mobility investments, especially in freeways and congestion pricing. The benefits are strong. A truly devastating argument against the "it'll just fill up again anyway" crowd:
Congestion’s Impact on Urban Economies
Several years ago in this newsletter I reported on the work of economists Remy Prud'homme and Chang-Woon Lee. Using data on travel times and labor productivity from cities in France and South Korea, they found a robust relationship. The effective size of an urban region's labor market is bounded by how long it takes to make a typical journey to work. When shorter travel times increase the size of the labor market by 10%, the productivity of the metro area increased by1.3%. In the United States, Robert Cervero of UC Berkeley found that a 10% increase in commuting speed in the San Francisco Bay Area increased economic output by 1%. And more recent studies by David Hartgen and Gregory Fields, using data for eight U.S. metro areas, found similar effects—specifically, that the ability to go 10% farther in a commuting time of 25 minutes would lead to a 1% increase in regional economic productivity.
I recently came across another study addressing basically the same question, using a different methodological approach. The paper is "Does Traffic Congestion Reduce Employment Growth?" by Kent Hymel, then at UC Irvine and now at Cal State University Northridge. It appeared in the March 2009 issue of the Journal of Urban Economics. Hymel employs an econometric approach drawn from the city growth literature, which focuses on the economics of agglomeration. He sets out to assess whether there is empirical evidence for the hypothesis that congestion reduces employment growth in a metro area. This turns out to be more complicated than it sounds because, as he notes in the introduction to the paper, the two variables interact: employment growth leads to more workers, who generate congestion, and congestion then "discourages [further] employment growth by raising workers' reservation wages and increasing shipping costs for goods." So he comes up with a number of clever methodological approaches to deal with this problem. Since I am not an econometrician, I will not attempt to summarize them for you, but will skip to his conclusions.
The last table in the paper provides results for the 10 most-congested metro areas in 1990 (based on data from the Texas Transportation Institute's Urban Mobility Reports. For each of them, he provides an elasticity of congestion with respect to freeway capacity and an elasticity of employment growth with respect to congestion. This allows him to compare actual employment growth from 1990 to 2003 with two counter-factuals—a 10% increase in freeway capacity and a set of congestion tolls that would reduce congestion by 50%. For Los Angeles—then as now the most congested metro area—estimated employment growth would have been 8% greater if there had been a 10% increase in freeway capacity. Even more impressive, if congestion pricing reduced congestion by 50%, employment growth would have been 23% greater.
I get frustrated when elected officials tout infrastructure projects because of "jobs, jobs, jobs"—by which they generally mean short-term construction jobs (which could also be generated by building pyramids or by digging holes and filling them in again). By contrast, productive infrastructure investments are those which make an economy more productive, generating an increased gross regional product. Hymel's findings join those discussed above in bolstering the case for investing wisely to reduce commuting time in urban regions.
In a stunning development, the City of Houston announced today that it will begin the process of closing Hobby airport, while shifting control of Intercontinental to United, which will further enable the closing of the city's aviation department yielding substantial savings to taxpayers. The new plan emerged from discussions with United regarding Southwest's request to allow competing international service at Hobby. United pointed out that competition from Southwest would reduce the obscenely profitable fares they charge Houston residents on most international nonstops from Houston, meaning they might have to reduce some service. The City, easily convinced by this argument, asked if they might get more international service if they removed international competition at IAH from carriers like British Airways, KLM, Air France, and Emirates. United assured them they would. The City, intrigued by this possibility, asked if the same would be true for domestic service. United assured them that it also would, although the competition from Southwest at Hobby would limit the potential for additional domestic service. To maximize the potential, Hobby would need to be closed too.
So a plan was developed to close Hobby and turn over complete, exclusive control of IAH to United. Giving United a monopoly franchise on all air service to Houston will allow United to substantially increase the size of their hub here. As an added benefit to the citizens of Houston, the "very modest" fare increases that United expects will reduce the crowding on flights, allowing even half-empty flights to be profitable for the airline. Residents that can afford the $700 fares will enjoy their roomy, comfortable flights to Dallas.
Spokespersons for both the City and United called the landmark agreement a "win?-WIN!!!" for both sides.
Hope you enjoyed this year's April Fools post (after I skipped a few years). Here are previous years if you missed 'em and would like a chuckle:
Getting serious, Kuff's wife has a great analysis of the United vs. Southwest controversy over internationalizing Hobby. My own thoughts: The bottom line is that this will lower fares for Houstonians, and that's a good thing. Yes, United will no longer be able to gouge the locals with the only nonstops to a few nearby destinations - it will mildly hit their profitability. But they have no other hub even remotely as well positioned to serve the Latin America market, and as the world's largest airline, they have to serve it just for the sake of their network. So they're not going anywhere. And I do want to see them continue to do well and grow here, but I think they burned their goodwill here when they moved the HQ (both executive and operations) to Chicago. On the other hand, Southwest has plenty of other options to connect people to Mexico, Central America and the Caribbean, including Orlando, Ft. Lauderdale, Atlanta, Austin, or San Antonio. It will definitely be our loss if we turn them away. In fact, I can't really believe this is up for serious debate. If city council does anything other than heartily endorse Southwest's generous offer to fund their own international expansion at Hobby, I will be sorely disappointed. It would mean that United has successfully exported Chicago's infamous government corruption back to Houston.
Ashby, top rankings, smarter city, vs. Chicago way, importing talent, and more
Just back from a family visit to SoCal, and the smaller items have been stacking up fast...
NYT op-ed on how young people are less and less willing to move. I think the rise of the Internet is a big factor - it can satisfy those bouts of boredom or restlessness that push people to move, either virtually or by helping you discover new options in your own region - plus I think we might also be learning the true value of social networks and how they relate to our happiness. In any case, it means Houston will need to work harder on growing our own highly educated talent, because importing it is just getting harder and harder. UPDATE: NYT story on the depressing long-term homesickness often found in people who move for economic reasons.
"...the report documents a pattern of crime that has become synonymous with the Chicago or Illinois “way” of doing things. All the corrupt governors and 26 of the aldermen had tried to extract bribes from builders, developers, business owners and those seeking to do business with the city or the state. Those who paid bribes either assumed, or were told, that payment was necessary for zoning changes, building permits or any other government action."
Houston most diverse city in the country. I wish the Chronicle had put comparative U.S. metros and local cities data graphs from the print edition online. They were pretty interesting.
I was lucky enough to get to attend the premiere of Dr. Stephen Klineberg's new "Interesting Times" documentary (from Rice's Kinder Institute for Urban Research) on the past and future of Houston at the MFA. It is very well done - compelling and engaging - but unfortunately they are holding back from putting it online, at least for now (just an excerpt here). I'll let you know if that changes. In the meantime, you can read CultureMap's excellent coverage here or the Chronicle's here.
Pretty interesting NYT story on the topic of "how many people can Manhattan hold?" It's nowhere near full compared to some of the denser cities of the world.
The mayor has announced a settlement of the lawsuit, and the Ashby high-rise is moving forward. South Hampton residents should take solace in the fact that there are several high-rise towers around River Oaks, yet property values and quality of life are holding up quite fine there. And if the true concern was traffic, they should be thankful they didn't stick something much worse there, or even just a Whole Foods...
An open dialogue on serious strategies for making Houston a better city, as well as a coalition-builder to make them happen. All comments, email, and support welcome.
