Minimum Lot Size Reforms big win for Houston, AI-resistant HTX economy, 'Abundance' and Housing, and Cloud Streets!
Life has been busy and I haven't posted in a while, so the smaller items have gotten backlogged:
Abundance and Housing: Ezra Klein has a new book out called "Abundance," and Evan covered it at Houstonia. The core idea is that we need more of things – housing, clean energy, etc. – and that often means overcoming local opposition and regulatory hurdles. Sounds familiar, right? Houston's approach, particularly on housing, often feels like a practical application of this "abundance" mindset compared to more restrictive cities. Separately, Evan notes the interesting political dynamic where YIMBYism (Yes In My Backyard) focused on housing abundance is finding allies across the traditional political spectrum, driven by the sheer need for more housing.
Minimum Lot Size Reforms: Speaking of housing abundance, the Pew Trusts did an analysis last year highlighting Houston's success with minimum lot size reform. They found it significantly unlocked affordable homeownership opportunities. Key takeaways include that these reforms allowed for thousands of new, more affordable homes closer to job centers without subsidies, providing a market-driven solution to affordability challenges. It's a prime example of how lighter regulations can yield positive results. Some key points:
The reform led to the construction of over 34,000 townhouses from 2007-2020, mostly on commercial, industrial, or multifamily properties.
The resulting townhouses provided more affordable family-sized housing in the urban core compared to other new homes.
The townhouses were larger than the single-family homes they replaced, offering more living space.
The increased housing supply did not lead to displacement of Black and Hispanic residents; instead, Houston saw population growth in these demographics.
An opt-out provision (block votes) helped minimize opposition to the reform but also limited development in some areas.
Houston's experience shows land-use reforms can spur housing, offer affordable options, and limit displacement.
Houston: AI-Resistant, Educated, and Affordable? An interesting academic paper analyzing metropolitan areas based on education levels, exposure to AI disruption, and housing costs puts Houston in a very strong position. According to the analysis (Table 5.1, p.23 of this SSRN paper, also mentioned in the NY Times), Houston stands out. Among large metros with high education, low AI job exposure, and affordable housing, Houston is by far the largest (7.5 million population vs. 1.5 million for the next largest). This suggests Houston may be uniquely positioned for resilience and growth in the coming AI-driven economic shifts.
Cloud Streets! On a final lighter note, Space City Weather was kind enough to post some cool "cloud street" photos I took during some interesting weather patterns. They were pretty cool and like nothing I've seen before.
"More than 25,000 establishments relocated to Texas from 2010 to 2019, bringing more than 281,000 jobs with them and resulting in a gain of nearly 103,000 jobs for the state, data compiled by the Federal Reserve Bank shows.
The report said Texas appeals to relocating businesses for a variety of reasons, including its central location in the continental U.S., access to multiple large cities and business-friendly environment...
However, research from the Federal Reserve Bank of Dallas found that attractive economic fundamentals — like low taxes, low regulations, a growing population, a relatively lower cost of living and less union activity — are far more important than incentive packages when businesses make location and expansion decisions."
Salim Furth at Mercatus: "How much are #Houston's different lot sizes in different eras showing up in real houses for real people? Here are single family houses built in the 22 years before reform, and the 22 years after - same scale." When minimum lot sizes shrank, a whole lot more small-lot houses got built because that's what the market wanted.
"Founded in Houston, Cart moved its headquarters to Austin in 2021, only to return to Houston in November.
The company moved to Austin to hire software developers, says co-founder Remington Tonar. But Cart is a logistics company as well as an e-commerce services provider, and its leaders found the company’s rapid growth required a bigger city with a larger and more diverse talent pool, including skills that go beyond just software development.
“If I’m looking for front-end software devs who can build beautiful tools to perform one task, a place like San Fran or Austin may be better,” says Tonar. “But if I need people who can integrate digital and physical systems, Houston is a lot more attractive, because people are coming out of logistics and energy.”
California’s state and local government revenues and spending are 60 percent higher than Texas on a per-resident basis.
On economic performance — both have much to celebrate. Population and employment surged in Texas while California’s per-capita income and GDP have soared in recent years.
But both have plenty of room to improve. California stands out for its high rate of homelessness and low air quality. Texas has a larger share of residents without health insurance than any other state.
Crime rates and renewable energy production are similar in the two states despite very different policies. And while K-12 spending per student is much higher in California, student outcomes are if anything better in Texas. (point that out next time someone says the solution to Texas' education issues is more money)
“This finding runs counter to the narrative that people are behaving irrationally by owning a car because they underestimate the true cost. Instead, we find that people value owning the car high enough to make the private cost worthwhile. Indeed, 58% of this value is in owning the car, compared with 42% in using it, suggesting that the value of the car goes well beyond the trips that it provides.”
This paper sheds some useful light on the failure of decades-long efforts to “get people out of their cars and onto transit” and more recent attempts to greatly increase urban density in the quest for a “15-minute city.”
Three big Wall Street banks began new Dallas campuses in 2023
Post-pandemic relocations have been a boon for Texas city
"Now the country’s fourth-largest metro, Dallas-Fort Worth surpassed Chicago and Los Angeles during the pandemic to become the No. 2 city for finance jobs. It’s home to more than 380,000 who work in the industry, according to data from the Bureau of Labor Statistics. That compares with 323,000 in Chicago, the home of CME Group Inc., Cboe and other derivatives firms that form the backbone of that city’s finance industry. New York is still No. 1, with 809,000 people employed in that sector."
"Techstars isn’t the only entity scaling back in Austin, either. In November, unicorn Cart announced that it was moving its headquarters back to Houston after relocating to Austin in late 2021. The company, which describes itself as an e-commerce-as-a-service business, reached a $1.2 billion valuation in June after raising a $60 million Series C round of funding.
Mitch Goulding, director of communications at Cart, told TechCrunch via email that the company had originally relocated its headquarters to Austin “with the explicit goal of attracting more software talent.” But as the company continues to scale (it claims to have seen its revenue climb by 9x since the end of 2021), it decided it needs to “augment other areas of the company,” including HR, finance, accounting and legal.
“We feel the move to Houston will unlock a deeper talent pool in these areas based on its position as a hub for major business,” Goulding said.
It’s also a matter of cost and convenience.
“Costs in Austin are high relative to Houston’s affordability, [and] Houston is also more accessible,” Goulding said. “It is typically easier and cheaper for employees flying in. It also tends to be easier for employees who drive in from across the state.”
"In Houston, Black-owned businesses have been thriving, with the city now rivaling Atlanta as a destination for Black families and young people.
“Everyone is coming to Houston,” said Victoria Walsh, 30, who moved from New Orleans for a restaurant job in 2018. “There’s a whole lot of jobs, a whole lot of new concepts, a new pop-up each week.”...
The city of Houston has long had thriving Black communities, but in recent years, the new arrivals have driven a kind of renaissance that is fueled, in large part, by who they are: middle-class Black people from other states with good jobs and business ideas. ...
“When you look at other cities, they’re not as diverse as Houston,” he said. “They don’t have as many opportunities.”
"Now, Houston’s transformation to an international hub for a growing number of multinational corporations — backed by one of the nation’s busiest international airports and global shipping ports — has helped propel the city to the top of the second annual FT-Nikkei Investing in America rankings. ...
That reputation has drawn in businesses both big and small. The Houston area is home to 26 Fortune 500 companies, making it the third-ranking metro area in the country. ...
The transition to green energy is helped by the knowhow that made it a centre for oil and gas. Houston boasts unrivalled technical expertise in energy, including manufacturing, engineering, trading markets, and complex industrial project management. It also has a robust energy infrastructure and the nation’s biggest port by tonnage. ...
“Increasingly, people working in the energy transition space are saying, you know, actually where the action is, is here,” says Tudor. “It’s not really San Francisco. It’s not really Boston. It’s Houston, Texas.”
Pros 👍: pleasantly surprised by Houston; plays up affordability, inner loop density, diversity, and the amazing food scene ("strong candidate for best food city in the US")
Cons 👎: bike and anti-car snob, toured Houston on bike in wonderful late October - maybe try coming in August sometime and see how bike-over-A/C'd-car you are then?... 🥵🙄 I've said it before and I'll say it again: Houston was built around the car because it's the only way to bring an air conditioner with you everywhere you go!
Google optimizing traffic signals, idea for HTX office to residential conversions, Why Texas is Becoming America's Most Powerful State, NYT on Houston winning vs homelessness, and more
Just catching up on some backlogged smaller items this week...
"Google AI models that can autonomously optimize the traffic timing at that intersection, reducing idle times as well as the amount of braking and accelerating vehicles have to do there."
And I'd be happy to help get METRO on a better path while they're at it?...
WSJ: America’s Downtowns Are Empty. Fixing Them Will Be Expensive. - Lonely sidewalks and closed storefronts inspire proposals to recast office districts into neighborhoods where people live, work and raise families. A chart shows over 25% of downtown Houston's office space is vacant and only 7.5% of it could be easily converted to residential. A Hines exec at a GHPartnership event last week said that: converting empty offices to residential creates Class B apartments that don't pencil out. But maybe Habitat for Humanity could make that equation work with volunteer labor for affordable Class B condos?
"Dallas officials were prickly when I toured their city and asked them pointedly why Houston was doing better...
The lesson I take from Houston and Dallas is that success doesn’t come from repeating bromides about how housing is a human right; homelessness is indifferent to earnestness but does respond to hard work and meticulous execution. Houston has succeeded because it has strong political leadership that gathers data, follows evidence and herds nonprofits in the same direction. It is relentless."
Finally I'll end with this really well-done video on the population, economic, and energy boom in Texas, which is on track to pass California by the 2040s: Why Texas is Becoming America's Most Powerful State
Missing middle land use reform in HTX, Austin copying Houston min lot sizes, surveying home preferences, mapping zoning authority by state, distressed offices, and more
Some smaller items this week:
Who Zones? Mapping Land-Use Authority across the US. TX, OK, and AL are the only states that don't let unincorporated counties zone, which is very good for housing supply and affordability. Hat tip to George.
Vox: The future of cities, according to the experts - Cities aren’t going anywhere, but they do need to change. This is all over the place. “Cities are fine without families but should work to attract families.” 🙄 I do buy the argument young singles want vibrant cities, but I don’t buy the old empty nesters argument - they prefer to stay in place and have plenty of room for the grandkids to visit, not cram themselves in a 1 bedroom apartment downtown.
"Among the 68 Houston-area office properties included in the Business Journals analysis, 57 were flagged for performance issues or concerns over a borrower's ability to stay current on their mortgage."
"Reducing minimum lot sizes has worked elsewhere in Texas to boost housing construction. Houston has significantly increased its housing supply since cutting its minimum home lot size from 5,000 to 1,400 square feet in 1998. The policy change has allowed almost 80,000 new homes to be built on these smaller lots."...
"The Austin resolution draws important lessons from the Houston case that small lot single-family is something that's proven to work well for homebuyers and home builders,"
Affordable Sprawl vs. Costly Walkability. A better survey question would be, “Would you rather live in a large, affordable home with space between you and your neighbors but with multiple stores and other shops competing for your business with a wide selection of low-priced goods within easy driving distance, or would you prefer a smaller but much more expensive home with little space between you and your neighbors but with a limited selection, high-priced grocery store and a few restaurants and cafes within walking distance?” That would definitely be a more accurate description of reality.
BRT Should Use Shared Not Dedicated Lanes, HTX #1 real estate market, college grads flee the superstar cities, cutting zoning reduces housing costs, and more
A few smaller misc items this week:
BRT Should Use Shared, Not Dedicated Lanes. Everything in here absolutely applies to the planned METRO Universities BRT line, especially on Richmond inside the loop. 'Lite BRT' would be a great option for that line.
"Dedicating two of the six lanes on major streets in Chandler, Mesa, Scottsdale, and Tempe exclusively to buses would be a complete waste, says a new report released last week by the Arizona Free Enterprise Club and two other groups in the Phoenix area. Each of the lanes that Valley Metro would take for buses typically move roughly three to four times as many people per day as would have taken the bus before the pandemic, and bus ridership has fallen by 50 percent since the pandemic. ...
Instead of dedicated lanes, the report recommends the Valley Metro experiment with “lite BRT,” which means running frequent buses in shared lanes and coordinating traffic signals so everyone can minimize the number of stops they have to make. If these modest improvements significantly increase ridership, Valley Metro could experiment with other improvements, but if they don’t, “then it is unlikely that . . . dedicated lanes and traffic signal priority would do any better.”
"In 2004, Denver voters approved spending $4.8 billion building six new rail transit lines, and the first line opened ten years ago. This was soon followed by four more to the gushing praise of various outsiders.
Inside Denver, however, people are beginning to realize that the whole thing was a miserable failure, suffering massive cost overruns and never attaining its ridership projections. The West line, which had its tenth anniversary last week, never carried as many passengers as were projected in its first year. It’s too bad that the reporters who are questioning this now weren’t asking the same questions in 2004."
"Policymakers have debated whether allowing more market-rate—meaning unsubsidized—housing improves overall affordability in a market. The evidence indicates that adding more housing of any kind helps slow rent growth. "
NYT: Coastal Cities Priced Out Low-Wage Workers. Now College Graduates Are Leaving, Too (link gets past paywall). Educated workers are increasingly migrating away from the country’s most expensive major metros — and have been since before the pandemic. Really good in-depth article. Lots of stats/graphs. Tide is really turning against the expensive coastal cities, even with educated workers.
The decisive argument for school choice, transit agencies go insane, stop road diets, HTX tops home building and affordability, and more
A lot of smaller items to catch up on this week...
Houston #1 for single-family home building permits, and a close #2 for total permits behind DFW. Austin gets the hype but Houston and DFW have the numbers. Hat tip to Oscar. Click/tap on graph for a larger version.
The best argument I've seen for school choice: in states that have implemented it, public schools for low-income students have gotten dramatically better even while not losing many students!
Fortune: The $300,000 starter home is going extinct (archive link): ‘A renter society not because of choice but because of force’ Affordability has collapsed across the country, although Houston and San Antonio continue to outperform. The Dallas collapse is surprising - almost as bad as Austin. Percentage of new homes under construction which are priced under $300,000, according to Zonda Home: (click/tap on graph for a larger version)
Transit Agencies Go Insane. These numbers are absolutely bonkers and yet are getting no media coverage whatsoever:
"In the 1990s, light-rail lines that cost $50 million a mile ($100 million in today’s dollars) were considered extravagantly expensive. A decade ago, the average light-rail line cost about $125 million a mile ($160 million in today’s dollars). Last year, average light-rail construction costs had risen to $278 million a mile (about $310 million today).
This year, the average light-rail cost has grown to $384 million a mile. Average commuter-rail costs have grown from $232 million a mile last year to $447 million a mile. Average heavy-rail costs have exploded from $974 million a mile to $1.4 billion a mile."
"On November 2020, in the midst of the pandemic, Austin voters foolishly agreed to raise property taxes in order to build 28 miles of light rail at a projected cost of $5.8 billion. To avoid congestion, the downtown portion of light-rail lines would go through a four-mile-long tunnel.
No one reading this blog will be surprised to know that, in the short amount of time since then, projected costs have nearly doubled to $10.3 billion. Early this week, the city’s transit planners announced a new plan that would build fewer than half as many miles of light rail."
Cost of living disparities mostly come down to housing. Really great interactive graphs that unfortunately won't copy over to the blog, so be sure to check them out. Houston is the only major city in the lower left quadrant with both housing and non-housing costs below the national average.
Problem, we have a Houston - Houstonians got a free $18k from min lot size reform, METRO 2nd worst for rail crime, The Economist loves Texas, HTX tops std of living, Houston sliding towards zoning? and more
Lots of good smaller items again this week:
Resources for Reformers: Houston’s minimum lot sizes - Problem, we have a Houston (clever twist!) "The lot size reform was equivalent to a one-time gift of $18,000 to every Houston household living in a single-family home. That adds up to about $8 billion."
The Economist: Why America is going to look more like Texas (archive link) - Lessons from the surge of the Lone Star State (followed by the more in-depth article "Texas’s latest boom is its biggest yet" - archive link). Key takeaways: Texas gets 1/3 of all net new US jobs(!), +500k people/year, #1 most Fortune 500 HQs, will pass CA for the #1 state in the 2040s, largest budget surplus ever at $33B (larger than the total budgets of 24 states) without needing an income tax to do it.
"Most of the nation’s major cities face a daunting future as middle-class taxpayers join an exodus to the suburbs, opting to work remotely as they exit downtowns marred by empty offices, vacant retail space and a deteriorating tax base."
"Firms like to open factories and offices in cities with plenty of skilled workers. When choosing between cities, they typically run an analysis to see how many potential employees live within a reasonable commute of a site. Poor traffic shrinks the radius, and by extension the labor pool, hurting a city’s chances of attracting companies."
“Although sometimes overshadowed by the cachet of Dallas, Austin, and San Antonio, Houston is absolutely a tech hub in its own right, attracting a mix of major tech companies and VC-backed startups to join its already established base of aerospace, defense, and energy companies,” Dice says.
Governing: Few Mayors Connect the Dots Between Zoning and Homelessness. Restrictive codes can severely limit housing development, but a new survey of mayors finds that few take them into account in their plans to address homelessness. This is definitely a major factor in Houston's relative success in alleviating homelessness vs. other major cities. Hat tip to Judah.
The Atlantic: Everything Is About the Housing Market (archive link) - High urban rents make life worse for everyone in countless ways. I expect this “housing theory of everything” to continue to catch on because it’s absolutely right. It’s related to what I’ve been talking about for years with the four factors that go into Opportunity Urbanism, including discretionary income that determine how vibrant a city can be. If you pay too much for your house, you don’t have money to put into other things. That has been covered up for decades now by the wealth accumulated by those homeowners, but that’s a short-term effect that’s diminishing.
"I can’t help but think that Vision Zero is really more about inconveniencing auto drivers than increasing safety. Just three policies — a motorcycle helmet law, bicycle boulevards, and moving homeless people away from major arterials — would save far more lives than anything in the adopted plan."
The Value of VMT (Vehicle Miles Traveled), and why trying to reduce them takes our economy the wrong direction:
"There is clear research showing that faster travel speeds means higher per capita incomes because such speeds give people access to more jobs and employers access to a larger pool of workers, which means more people can do the job that fits them the best.
...
Even if it was a good idea, no urban area anywhere has found policies, short of war or natural disaster, that can significantly reduce VMT. Yet planners keep spouting the same rhetoric while ignoring the fact that good intentions are meaningless, if not outright harmful, if they don’t produce actual results.
The lesson we need to stress to public officials is that it makes a lot more sense to make better automobiles and highways than it does to try to reduce driving. Since 1970, automobiles have become 50 percent more fuel efficient, 70 percent less likely to be involved in a fatal accident, and 95 percent less polluting of toxic chemicals. If anything, efforts to reduce driving have made these problems worse by forcing people to drive in more congested traffic where cars use more energy and produce more pollution.
I strongly suspect there is some class warfare going on here. Urban planners are by definition college educated and middle class. They probably drive cars, but the cars they drive are likely to be electrics, hybrids, or other high fuel-economy vehicles. The vehicles driven by the working class are more likely pickups, vans, and other large vehicles, partly because they need such vehicles for their work, but the planners see them as the deplorable enemy. So while planners pay lip service to low-income people and the working class, they want to design a society that has no room for them.
Those who truly care about helping low-income people and building healthy, wealthy urban areas need to take a stand in favor of more automobile ownership, more miles of driving, and better roads for those automobiles to drive on."
“Knowledge workers like me, who move out of the city, make urban spaces more affordable for essential workers who staff hospitals and restaurants. Meanwhile, small towns and cities that were hollowed out by deindustrialization over the last 30 years get an influx of new residents to support their tax base. Again, the majority of jobs don’t allow for remote work, but a great deal of wealth is concentrated among the jobs that do. Empowering or even encouraging those workers to live wherever they want could have a positive impact on the affordability of cities and the economic health of rural communities.”
Finally, a short funny video well worth your time on Houston vs. LA. It's awesome and actually well-balanced. Matches my experience with CA vs. TX (and particularly Houston) as well. My blog readers will particularly appreciate the 3:55 (traffic) and 16:19 points (feeders) ;-) but I really appreciated the point about the purple political diversity. Hat tip to George.
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.
"The urban form has shifted throughout history. This has been critical to its success. Today we are on the cusp of another transition, ushered in by new technologies and changing demographics, and accelerated by a devastating pandemic. Although these forces affect all geographies, the best chance of success and growth lies in what we define as The Next American City.
This newly released report from Urban Reform Institute examines the places that offer opportunity for a revitalized American Dream for more citizens.
The Next American City offers an answer to the problem plaguing those living in and around major cities. Offering a combination of affordability, amenities, and proximity to the large cities, but without the burdensome, heavy-handed regulations of local government or many of the social ills running rampant in our cities, these places – like The Woodlands and Bridgeland – are quickly shaping up to be the urban destinations of the future."
“The Urban Reform Institute, which advocates for market-oriented city planning, recently argued that the new models for American city living are developer-designed suburb and exurb communities such as The Woodlands, Bridgeland and Cinco Ranch, and there are a lot of reasons to suggest they are right. Development ever outward will almost certainly continue, particularly in Houston where there are no constraints and plenty of land.
Adding to the expectation for further suburban expansion are the evolving norms around remote/hybrid work, meaning long commutes will be less of a drawback for some workers. Looking even further forward, technologies such as autonomous vehicles could actually encourage more sprawl, which researchers are beginning to anticipate.
The pandemic certainly accelerated this trend. Based on our estimates from USPS data, tens of thousands more Houstonians left the city than moved here in 2020, and most of the move-outs stayed in the metro area, opting to live in one of the suburbs instead.”
Houston No. 1 in U.S. for home sales in master-planned communities, says survey: "According to a survey by real estate consulting firm RCLCO, 20% of the country’s 50 top-selling master-planned communities last year are in the Houston metro area. In that category, Houston ranks first among all of the metro areas represented on the list"
Great analysis from Kinder on Houston ADUs. Reducing barriers to more is great, but they will always have a hard time competing with the amenities and scale of Houston's super-competitive apartment market.
Bloomberg: The Global Housing Market Is Broken, and It’s Dividing Entire Countries - The dream of owning a home is increasingly out of reach. Democratic and authoritarian governments alike are struggling with the consequences. I've been arguing this for a long time: government housing constraints are popular with voters in the short-term, but come back to haunt cities long-term, which is why Houston's lack of zoning and open housing market is so important and is a critical long-term competitive advantage.
“All Texans should be able to start their own business without jumping through hoops that serve no purpose. This minimum parking ordinance isn’t just harmful to small business owners; it also violates the Texas Constitution.”
"There may be a few cases where sidewalks can increase the level with which one engages with local communal amenities. But at large, sidewalks hardly impact community connectedness, a drastic departure from common thinking, which has long seen sidewalks as critical public infrastructure connecting the private world directly with the public. These data are particularly noteworthy for they were collected during the COVID-19 pandemic when outdoor life has dramatically increased. Even though the pandemic has driven social life for many from dining, to strolling and making outdoor displays, and increased opportunities for chance encounters, the presence of sidewalks is not changing perceptions about community social capital whatsoever.
While no one is suggesting sidewalks be eliminated, urban theorists, scholars, and planners must acknowledge that sidewalk life may not be as powerful and vibrant as the various ethnographic stories make them out to be. There may be other factors --- like homeownership, tenure of residents, or the presence of families --- that may also play a role."
Road subsidies: "According to the 2015 report, the average U.S. household spends around $1,100 a year to “subsidize” drivers’ road use — that’s on top of what individuals already pay in gas taxes and tolls." False. It's not a subsidy. Your property is plugged into a road network that gets you and your stuff (and emergency services) to and from your property whether or not you own a car, so it's perfectly reasonable for property taxes to pay for access to that network. It's not optional.
"In fact, a recent update of a U.S. DOT study estimating the actual federal subsidy by mode (federal spending minus the mode’s user taxes) found the following:
"Her internal GPS, calibrated for the Low Countries, told her that they were driving from Amsterdam to Antwerp or Rotterdam, but of course nothing of the sort was happening - they were just moving around between different parts of Houston, a metro the size of Belgium."
Carbon capture subscriptions, climate entrepreneurs, CA moves to HTX more than Austin, and more
Big idea of the week on Houston adapting to climate change: what if automakers sold a subscription with their cars that reported back monthly gas usage and sequestered that much carbon? Great new product for oil & gas companies to sell automakers...
Moving on to some smaller items to catch up on this week:
“Every day I meet another oil and gas guy who is now a climate entrepreneur. I think there is going to be an explosion of clean energy activity out of the O&G sector, and we’ll be stunned in the next 5-7 years by how many of these problems they handle.”
City Journal: Lone Star Waste - Two Texas transit projects embrace extravagance. Politically connected groups extract surplus from Austin LRT and Texas Central HSR.
City Journal: A Bridge Too Far - Pete Buttigieg’s remarks on Robert Moses’s “racist bridges” flatten history in service to an ideological fad. Hat tip to Jay.
WSJ: How Working From Home Could Change Where Innovation Happens - For decades, ‘superstar cities’ have been attracting talent and money. But thanks to remote work, their status is likely to change in unexpected ways, bringing tech expertise to places that have long tried to attract it. Profiles a tech exec moving from San Francisco to Houston/Katy for a better quality of life.
Aaron Renn, Governing: The Poor Places That Made Our Cities Richer - Dense, often dilapidated neighborhoods were routes to prosperity for an earlier generation of low-income urbanites. Their destruction has hurt us all. Key excerpt:
"This was cheap housing, but that didn’t just mean cheaper rents. It meant the opportunity for ownership. A key characteristic of many of these neighborhoods was what Husock labels “owner presence.” Even in crowded neighborhoods, apartment buildings like the Boston triple-decker or Chicago two-flats allowed residents to buy the building and live in one unit, while renting out the other to earn income. A surprisingly high share of people who rented in these places lived in buildings where the owner was also living. The owners accumulated wealth in the form of equity in their real estate that was a key to their ability to move up economically.
One common factor in these places was a tolerance for housing that reformers judged substandard. Tenements on the Lower East Side, for example, often lacked baths. Levittown houses were tiny, identical boxes on concrete slabs. But the policy response to the legitimate problems of some of these neighborhoods was a cure often worse than the disease. Mass slum clearance and the construction of huge high-rise public housing projects are the most infamous examples.
The replacement of “slum” housing with public housing was not only a quality-of-life disaster, it also locked its residents into permanent rentership. Detroit’s Black Bottom neighborhood may have been segregated, but it gave Black residents the opportunity to own real estate and own and operate businesses. In public housing, Black residents could do neither, cutting off critical avenues of wealth creation."
Infrastructure bill problems, Dallas TOD failure, CA vs TX, why transit has trouble competing, and more
I apologize for the sporadic posts over the summer while I was out-of-town with family, but I'm back and looking forward to catching up on a big backlog of smaller items that will probably take several weekly posts to get through.
"In short, TOD is simply a scam. Like Portland’s light-rail mafia, which guided subsidies to favored developers who would build TODs, Dallas light rail and TODs are merely a way of transferring money from taxpayers to developers."
"This page is not calling for abandonment of transit or extolling the virtues of the automobile. It is an attempt to lay out what transit is up against if it is to succeed. Pretending that the economic issues I describe can be made to go away is a guaranteed recipe for failure."
“Right now market forces are telling California, ‘Get your s-- together,’ ” said report co-author Mark Duggan, director of the Stanford Institute for Economic Policy Research. “This exodus thing — I think it’s a risk.”
"the number of companies relocating their HQs out of CA is running at twice the rate of recent years and is showing no signs of slowing...The winning state is Texas, which for many years has been the most popular destination for CA company relocations"
"Like many other tech executives, I think Texas is positioned to outpace California due to its proximity to the world's top companies in energy, healthcare, and aerospace, to name a few, and its willingness to innovate with technology in those industries."
Painted Into a Corner - It could be time to reconsider land-use laws that contribute to runaway housing costs. Hat tip to George. Really glad to see Houston avoid a lot of these issues. Conclusion:
"The role of cities in the 21st century has not yet been determined. Cities with outdated housing policies may no longer be aspirational. The future of successful cities must begin with enabling a broad set of people to live there, which necessitates affordable housing. Making housing affordable to a large set of people with a range of incomes has its advantages.
This allows people who have lower-paying, service-industry jobs to live near where they work. It promotes a broader set of cultures within a city. Multiculturalism should be one of the values of large cities. When a city is large enough, it can support such things as museums, art galleries, performing arts and professional sports franchises. The greatest thing that a city can provide is social mobility."
WSJ: Mass Spending for Mass Transit - Democrats want the GOP to rescue big-city rail and public unions. This is why I have mixed feelings about the $1T infrastructure bill - a whole heap of the money will be going into a black hole, especially Amtrak.
"A new study from the fDi Intelligence division of the Financial Times places Houston at No. 7 among the top major cities of the future for 2021-22 across North, South, and Central America. Among major cities in the Americas, Houston appears at No. 3 for business friendliness and No. 4 for connectivity."
Market Urbanist Scott Beyer at Catalyst: Is Texas the U.S. Capital of Logistics?Free trade, a business-friendly climate, and urban agglomeration allows freight to thrive in Texas.
"America's political class seems to believe that, due to automation, we will enter an era of secular stagnation and need welfare schemes like UBI to support people.
Texas, as the U.S. leader in trade & logistics, is a giant rebuttal to that.
Texas shows how through low taxes, loose land/housing regs, natural resource extraction, and open trade, a state can foster blue-collar jobs and upward mobility."
More from Scott Beyer: Will Texas Get a Fifth Large Metro?Texas’ “Big 4” metro areas—Dallas, Houston, Austin and San Antonio—have all exploded with growth. Will a 5th sleeper one emerge? His conclusion? If it will be anywhere, it will be in the I-35 corridor between Austin and San Antonio at the edge of the Hill Country. Not so much a fifth metro as the gradual merger of two of them. Eventually Austin-San Antonio may be right up there with Dallas-Ft. Worth and Houston in size. I agree with his assessment. The most compelling value proposition for most people moving to Texas is the suburb of an existing Triangle metro, where they'll have access to all that metro's jobs and amenities (including a major airport). Check out the cool maps he has of the largest Texas metros and their relative growth rates.
Joel Kotkin: The Next Entrepreneurial Revolution - The pandemic’s economic destruction has also created new winners. One of his profiles is based in Houston:
"Out of the wreckage, some restaurant entrepreneurs are finding new ways to survive—and even thrive—by using the kinds of technology Jaffe sells. But what’s mattered most, suggested Chris Williams, owner of Houston’s famed Lucille’s soul food house, has been finding ways to stay in touch with customers through the pandemic. Faced with closures, Williams, unlike many of his counterparts, decided to keep all his staff. Instead of cutting personnel costs, he innovated, changing the menu to make it friendlier to online delivery, instituting a delivered Easter brunch, making extensive use of the yard adjacent to the restaurant, and having his employees make the deliveries, rather than rely on expensive services like Uber Eats. He also made a very public effort to feed thousands of hungry people in Houston, which was also hit hard by a cratering in oil prices.
“The lesson of 2020,” Williams said, “is you do best to invest in your employees and your company. The community is your business. People see what we are doing and order from us. The community work turned out to be a dual-purpose dollar.”
A few weeks ago I interviewed Washington Post journalist David Byler on the drivers of Texas' growth, which resulted in an excellent piece he published last week with great analytics, map animations, graphs, and articulation of the drivers: Texas’s population and political power are growing. Here’s why. It concludes with this excerpt:
"Texas has found a simple formula for success — economic opportunity and a low cost of living — and stuck with it. People want simple things: good jobs, affordable housing and room for kids. And they’re willing to move to states that offer them."
For this post, I wanted to pass along the four growth drivers I shared:
Texas does not allow zoning/land use regulation in unincorporated counties on the edges of cities, so developers build large, affordable, amenity-rich master-planned communities that attract lots of people using Texas Municipal Utility Districts (MUDs), where a developer can float private bonds to build the infrastructure (streets, utilities) paid back by taxes in that community. It creates a thriving, competitive free market in housing development – much more than you’d see between incorporated cities. The Woodlands is one of the most famous of these, but there are hundreds (Bridgelands and Cinco Ranch as large examples). Here’s a giant one going up near DFW.
High standard of living, especially shared among immigrant networks: they know what kinds of houses their extended family members can afford all over the country, and they see the newest and biggest at the most affordable price in Texas (combined with job opportunities). They end up choosing Texas when they come to America. (and remember it’s more than just median house prices – it’s what you get for that price: that $635k in California gets a very old, small house – in Texas $278k gets you a larger, newer house)
Family-friendly: Declining fertility is a problem all over the developed world, most especially in places where housing has grown expensive. If families can’t afford more space, they shrink the family size to compensate. In Texas, it’s very affordable and common to get large 4, 5, even 6 bedroom homes in the suburbs with good school districts, which keeps the birth rate up here.
Texas and HTX growth secret, what kind of Texan are you? major climate change solution, TX miracle is more than oil, and more
My lead item this week is a comment I made on the Market Urbanism Report Facebook group:
Going beyond all the usual reasons given for Texas' high growth, here's the technical overlooked one that I think is a big key: Texas does not allow unincorporated counties to regulate land use (i.e. create zoning), which creates pretty much a totally free market in development just outside cities. Combine that with MUDs (municipal utility districts) that allow private developers to float bonds to pay for master-planned community infrastructure paid back by property taxes on that development, and there is complete flexibility in the suburban/exurban housing market. And those master-planned communities compete fiercely on price and amenities (far more than incorporated cities do). That, in turn, forces the core incorporated cities to "compete" for private development dollars by not over-regulating - otherwise they'll just jump outside the city limits. It's an overall balance of forces that keeps welcoming development and newcomers with a strong value proposition (high amenities with relatively low costs).
Moving on to some smaller items this week:
I took this Threads of Texas quiz and came out a Civic Pragmatist - not much surprise there, lol. Let me know your own results and thoughts in the comments.
"Civic Pragmatists are optimistic yet pragmatic when they think about a changing Texas. Their ideal Texas is one where the state is a leader in the knowledge-economy industries, as well as a Texas where everyone feels safe and like they belong."
National Review: Biden’s Infrastructure Bill Aims to End Single-Family Zoning (hat tip to Bill). Looks like they editorialize against federal intervention to force the elimination of local SFZ, which I would agree is problematic, but not necessarily against all zoning reform:
“The zoning issue is tough and complex. It balances principled libertarian objections to zoning and the interests of developers, on the one hand, against core principles of federalism and local control, on the other.”
I’d say Houston’s secret sauce is less about not having SFZ (deed restrictions are pretty much the same) than allowing pretty much anything else everywhere that’s not single-family: apartments, towers, retail, mixed-use, offices, you name it.
The Federalist: The Texas Miracle Isn’t All About Oil - Given that oil prices remain less than half of what they were at their peak, all those arguing that the Texas model will fail are just wrong.
"In India alone, the equivalent of a city the size of Chicago will have to be developed every year to meet demand for housing. ...
Michael Ramage of the University of Cambridge told the meeting of a 300-square-metre four-storey wooden building constructed in that city. Erecting this generated 126 tonnes of co2. Had it been made with concrete the tally would have risen to 310 tonnes. If steel had been used, emissions would have topped 498 tonnes. Indeed, from one point of view, this building might actually be viewed as “carbon negative”. When trees grow they lock carbon up in their wood—in this case the equivalent of 540 tonnes of co2. Preserved in Cambridge rather than recycled by beetles, fungi and bacteria, that carbon represents a long-term subtraction of co2 from the atmosphere.
If building with wood takes off, it does raise concern about there being enough trees to go round. But with sustainably managed forests that should not be a problem, says Dr. Ramage. A family-sized apartment requires about 30 cubic metres of timber, and he estimates Europe’s sustainable forests alone grow that amount every seven seconds. Nor is fire a risk, for engineered timber does not burn easily."
"So Vyas picked another metropolis that's increasingly become young people's next-best option — Houston.
Now 34, Vyas, a tech worker, has lived in Houston since 2013. "I knew I didn’t like New York, so this was the next best thing,” Vyas said. “There are a lot of things you want to try when you are younger -- you want to try new things. Houston gives you that, whether it’s food, people or dating. And it’s cheap to live in.”
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.
