"I would be the first to argue that if an economist claims to know of a cure-all policy — a reliable way to relieve a long list of social ills in one fell swoop — common sense tells you to stop listening.
So it is awkward for me to declare that I know of something close to a panacea policy: one big reform that would raise living standards, reduce wealth inequality, increase productivity, raise social mobility, help struggling men without college degrees, clean the planet and raise birth rates. It’s a sweeping reform that Democrats and Republicans, progressives and conservatives could all proudly support.
The panacea policy I have in mind is housing deregulation. Research confirms that there are large benefits in saying yes to tall buildings, yes to multifamily structures, yes to dense single-family development and yes to speedy permitting. The growing YIMBY (Yes In My Backyard) movement already has high-profile wins in Minnesota, Oregon, California and beyond, but even YIMBY devotees rarely appreciate the scope of the merits of loosening rules on housing.
The economic argument for housing deregulation rests on basic supply and demand principles: allowing more construction leads to lower prices. This is evident in historical data, showing that housing prices were relatively stable before stricter regulations in the 1970s, while rising significantly afterwards.
Housing deregulation would directly improve the standard of living by significantly lowering housing costs, which currently represent a significant portion of the average American's budget.
The distributional effects of deregulation would be impactful in reducing wealth inequality, as rising home values have been a key driver of the growing disparity between the rich and the poor.
Deregulation would enhance social mobility by removing barriers to moving to higher-wage areas. Current strict regulations often make the cost of living in such regions outweigh any potential wage gains, discouraging relocation for many.
Deregulation would create numerous job opportunities in the construction sector, a large and well-paying industry, particularly benefiting men without college degrees, who have faced challenges in the job market.
Environmental protection is a common rationale for restricting construction, but deregulation can actually lead to more sustainable practices by encouraging denser housing in urban areas, resulting in lower carbon emissions.
While concerns exist about homeowner resistance, the bigger obstacle to deregulation is public misunderstanding of basic economic principles, with many believing that increased housing supply will not lead to lower prices.
Neither Democrats nor Republicans have embraced housing deregulation yet. YIMBY activists lean left, but they are only one voice in the progressive coalition. Republican states usually have less housing regulation, but more from tradition than from principle. Yet, given housing deregulation’s many demonstrated benefits, this policy agenda deserves bipartisan support. Democrats should cheer the effects on equality, social mobility and the environment. Republicans should be delighted to see free markets spreading broad prosperity, creating new working-class opportunities and fostering family formation. In a rational world, the panacea policy of housing deregulation would be a done deal. Hopefully whoever wins the next election will agree."
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."
Political guide for moving to Texas (America's Future), Houston no-zoning video, TX HSR re-route? population growth and building permits, airport wins
Continuing from last week on catch-up items...
From Twitter: My oversimplified political guide for moving to Texas: progressives to Austin, conservatives to DFW, and pragmatic centrists and independents to Houston.
"But if you’re really looking for a bellwether state that offers a glimpse into the country’s economic future and engines of growth as well as its political fault lines in the long run, it’s not California. It’s Texas."
"For every new white resident that Texas welcomed over the past decade, there have been three Black residents, three Asians, three people with multiracial backgrounds and 11 Hispanics. Dallas-Fort Worth, Austin and Houston also have large L.G.B.T.Q. populations."
City Beautiful covers the details of Houston's lack of zoning in this 10 min video. Mostly pretty good, but I think he misses some of the densification and affordability benefits. He talks about affordability, but only on a metro level, ignoring how we're able to increase access and affordability for the most desirable core neighborhoods through new townhomes, apartments, and residential towers.
Passing this great graph along from Scott Beyer at the Market Urbanism Report: "A decade after the recession, and peak permits are still down in almost every major metro except in one state. Any mystery why this state remains affordable even as millions of people move there?" I'm impressed to see we're holding steady vs. our crazy-high peak building during a previous oil boom.
"Data from the 2020 Census released August 12 shows Houston at No. 5 (20.3 percent) among the country's 50 largest metro areas in the biggest jump in population from 2010 to 2020.
Houston maintains its position at No. 5 (7,122,240 residents), the Census data notes. For some perspective, Houston was No. 8 (4,944,332) in the 2010 Census.
The Bayou City is also one of the three U.S. metro areas to gain at least 1.2 million residents over the decade. (Dallas-Fort Worth and New York are the others.)"
My online event Tues, HTX #1 BBQ and #2 tech growth, R voters moving to TX, post-pandemic city shifts, ATX vs. HTX home prices, housing craziness humor, and more
Before we get to this week's items, just a reminder that my Mercatus online panel event on Land Use without Planning is 2pm CT on Tuesday. I'll be covering some of Houston's land use and zoning history as well as what other cities can learn from Houston. You can learn more and register here.
Moving on to a large backlog of items for this week:
NYT: There’s an Exodus From the ‘Star Cities,’ and I Have Good News and Bad News. Excellent summary of many different analyses forecasting post-pandemic urban geography. I’m not sure they’re right that pandemic migration will push R counties/states more D though. A lot of frustrated Rs are using the pandemic to escape D states and move to R states. For every D techie moving from SF to Austin, I'd bet 2 frustrated California Rs are moving to Texas. Actually, a recent survey found 57% of California migrants to Houston voted for Ted Cruz, which validates what I've been hearing. Here’s the most upvoted comment:
"Kotkin nails it 'Meanwhile, the working class struggles to pay rent, possesses no demonstrable path to a better life and, as a result, often migrates elsewhere.' I mean seriously is there anything worse than being poor in New York City, working a job in food service, barely able to pay your rent, knowing that you'll never own anything but an endless struggle against being evicted? Or you can move to Georgia, live cheaply in a far larger house / apt, and work towards gaining equity of something. No smart poor person would ever stay in NYC."
Excellent analysis video and paper showing that even where the land values are the same in Austin and Houston (i.e. same market demand), Austin houses are far more expensive due to over-regulation. Thanks Kevin!
"Houston ranks second among 14 major U.S. labor markets for the number of relocating software and IT workers between March 2020 and February 2021 compared with the same period a year earlier.
Miami grabs the No. 1 spot for the gain in software and IT workers (up 15.4 percent) between the two periods, with Houston in second place (10.4 percent) and Dallas-Fort Worth in third place (8.6 percent), according to the LinkedIn data."
"The big story among the nation’s major metros over the past decade has been the persistence of urban core out-migration and suburban in-migration...Houston had the 2nd-largest gain at 1.2 million, with a 20.8% increase, and remains the 5th largest metro."
"Certainly, Houstonians will be pleased with that result, but the notion that Austin might be Texas' third best city for barbecue will likely cause considerable agita in the state capital." ;-D
"It’s a melting pot, and that’s one of the things that stood out that I absolutely loved about the city. The fact that there’s a lot of positivity going on and people doing great things here, those are really some of the main reasons I stayed in the city.
Their turkey legs are decadent, sure. Like other rodeo-adjacent foods, they’re large, indulgent and full of flavor. They, in essence, are Houston."
The future of superstar cities and Houston, CA's problems, warehouse glut, why tech in HTX?
Hope everyone's staying safe and warm during this way-way-way-too-cold Valentines+Presidents Day winter storm. The lead item this week is a really interesting piece my friend George sent me on the future of superstar cities by Matthew Yglesias. I think his observations are directionally correct, but he’s missing some pretty important nuances.
First, he’s completely ignoring extended family pulls that bring people back to regions.
Second, he’s seeing everything thru the lens of the footloose and fancy-free celebrity rich (the Matt Damon and NBA references), and that is an incredibly tiny part of the population. His alternate lens is 20-something tech startups – also a pretty narrow niche. Normal people have family ties and different reasons for picking places. A lot of the NYC/LA amenities he thinks are so key aren’t that valuable to families, and they’re the ones most likely to leave.
Third, he’s ignoring the *relative* impact of remote work. NYC and LA have a mix of people who want to be there for lifestyle and have to be there for work. Once the work reason is gone, a lot of them have left and will continue to leave (look at the Wall Street types moving to Miami). The lifestyle people may stay, but those cities are still declining relative to what they were when they could hold onto both groups. They will face massive budget deficits which will push them to raise taxes which will push even more people to leave.
As far as Houston, we’re not on the national media radar, but I have personally seen a *ton* of out-of-state plates around recently. The media forgets that they don’t drive most people’s location decisions – it’s what they hear from friends and family, and most Houstonians like it here and plug it to their extended friend/family networks (including talking about the kind of home they can afford), and those friends/family decide to move here based on that recommendation. But obviously the weak oil industry is not helping, and the GHP is absolutely right we need to diversify our economy and build our innovation economy (my latest idea for that). But our core engine is a good sustainable one – not oil, but having a great lifestyle (esp restaurants) at an affordable price (from lack of zoning) that people tell their networks about. As long as we sustain and keep improving that, we will keep growing, even as ‘hotter’ cities like Austin and Miami become ever more crowded and unaffordable. As long as articles like this are being written about us, we’ll do just fine:
Moving on to this week's items:
NYT: The Californians Are Coming. So Is Their Housing Crisis. 'Is it possible to import growth without also importing housing problems? “I can’t point to a city that has done it right,” said Lauren McLean, Boise’s Democratic mayor.'
Houston. Houston has done it right. (one of my more popular tweets) More of these cities should look to our model for handing rapid growth without unaffordable housing.
Ezra Klein in NYT: California Is Making Liberals Squirm. If progressivism can’t work there, why should the country believe it can work anywhere else?
"Conservatives do not resist many regulations of the sort seen in California because we want cities to be horrible or because we secretly are in the pockets of developers who for some reason want their cities to be horrible; rather, we are skeptical of such schemes because they tend to create artificial shortages, distort markets and investment decisions, and prevent solutions from emerging organically. “Markets work!” is cartoon libertarianism, but you know what? Markets work. And if you don’t let them work, you end up with artificial scarcity, high prices, and rationing."
"In some ways, Houston is anomalous. Its business-friendly regulation puts very few restrictions on building. “There’s no zoning,” said Ryan Byrd, a principal of Colliers International Houston. “If there’s land that doesn’t have a pipeline, wetlands or is in a flood plain, you can build a building in less than one year.”
Is historic preservation zoning? Houstonians support each other during flooding, HTX relative economic and physical size, and more
Lots of smaller items this week:
3D Map: The U.S. Cities With the Highest Economic Output. Houston at #7 is not bad, although I've seen it higher when oil is up. We're #5 population but SF tech and DC govt move their GDP ahead (your tax $ at work). The Texas economy is equal to Canada.
"So the three policies I propose to define the “neoliberal agenda” for the 2020s are YIMBYism (support for more housing), support for more immigration, and support for a carbon tax... A “neoliberal agenda” focused on these things would be a club, not a party: you can be a neoliberal Republican, a neoliberal Labourite, a neoliberal priest, a neoliberal Green, or whatever. There are loads of other issues that I think are incredibly important that don’t fit here, but these three policy priorities would get you a huge amount of the potential economic and social progress we can make with public policy besides those. Not only are these, in my view, the core of what modern neoliberals really do care about, they are some of the most powerful of all possible policies we could enact to improve the lives of people around the world."
"a recent study by epidemiologists from Johns Hopkins University has concluded that, even after “adjusting for social distancing,” “public transit use . . . remained significantly associated with SARS-CoV-2 infection.” The study found that “NPIs” (non-pharmaceutical interventions, e.g., masks & social distancing) “while visiting indoor and outdoor venues helps reduce SARS-CoV-2 transmission.” However, the two exceptions were public transport and places of worship. “Even NPIs may not be possible or sufficient” to prevent the virus’ spread on public transit, the study concludes."
Could Houston get Google? converting the 59 Spur to a linear park, housing crisis drives socialism, millennials are driving, Houston is the future, and more
Apologies for the delay between posts - I've had some busy travel recently. Before getting to this week's items, a couple thoughts on the City's consideration of turning the Bagby and Brazos portions of Spur 527 off 59 into a park. I live in Midtown, so this affects me directly. I've managed to adapt ok to losing the Brazos exit since the bridge closed for repairs - Louisiana is inconvenient but works - but losing Bagby's southbound entrance is a bigger deal. I've thought quite a bit about this. At first I was totally opposed, then I figured I could live with it via Smith and Louisiana but still moderately opposed (even with the benefits of Bagby traffic reduction). I do think it will substantially negatively affect some of the businesses along Bagby and Brazos that rely on drive-by traffic like Spec's, CVS, and especially the new Midtown Whole Foods (which is already struggling in what was previously a food desert), as well as thousands of commuters that connect between 59 and 45 (which, in turn, will make the already-messy 59-45-288 interchange even worse). In fact, I'd argue the optics look pretty bad: sacrifice the commutes of a lot of working-class folks on the north and east sides commuting to jobs in the southwest so a few wealthy white people in gated Courtlandt Place can have a pocket park. Not a good look. And I think it is very likely that a City-maintained linear pocket park will turn into a homeless camp (sad, but that's the reality these days) - something I hope the neighbors have considered in their support. They may come to really regret it...
Mapped: The Salary Needed to Buy a Home in 50 U.S. Metro Areas. The only top ten metro less expensive than Houston is Atlanta. Texas as a whole does quite well, especially when our incredible growth rate is considered (the least expensive metros tend to also be growing the slowest).
When this guy talks down our downtown tunnel system, my response is that I would bet, five months of the year, downtown workers are willing to travel a lot farther to shop or visit a cool restaurant for lunch if they can use the tunnels than if they had to walk outside. Downtown vibrancy would actually decline without the tunnel system.
“If we keep forcing them to pay for housing and parks, they will go to Houston or Austin.”
I think the advantages for a Google office here would be pretty strong. Tons of oil-and-gas tech/IT talent that’s easy to poach, a city willing to do anything to land them, plus deep expat communities from nations all over the world that could handle some global functions (esp. Latin America). It would also work well if Google is considering any health care plays, with the world's largest med center right down the way in the innovation corridor.
Another thought is, what if you wanted to have a US office where you could bring H1B visa talent from all over the world, and they would be able to afford to live there as well as find a comfortable expat community from their nation? Houston would be a great location for that: huge Asian, Latin American, African, Middle Eastern, and even European communities - many from the long history of the global oil industry here.
This is a fantastic interview with Ed Glaeser that directly relates to COU’s mission. Great short video too. Really gets to how the housing crisis has led to the rise of socialism’s popularity among the young. "The entrenched vs. newcomers."
Government policies limit millennials’ prosperity, Harvard economist Edward Glaeser argues. Will they realize more of the same isn’t the answer?
“The right answer for this is not universal basic income. The right answer is freedom. Allow people to use their property the way they want to use it.”
Millennials hitting road at fast pace - "It turns out millennials don’t hate driving, after all." Remember when everyone thought Millenials were going to avoid driver's licenses and car ownership? Well, they did for a while, then they grew up and started forming families.
"New supply is one reason the median home price in Texas is currently $207,301, while in California, it’s nearly triple that, $605,280. California’s drought in new home production has been caused in part by land-use regulations and the state’s myriad environmental laws.
...
A Zillow-backed survey of economists and housing analysts predicted that in 2020, Texas’s relatively affordable big cities (Houston, San Antonio, Dallas, and especially Austin) will outperform the market average in home value growth, while overpriced California metros like San Francisco, Sacramento, and Los Angeles will fare poorly.
...
The California housing situation, on the other hand, is a multifaceted mess. Prices have skyrocketed. A new apartment in San Francisco costs an average of $700,000 to build—including materials, labor, and land—triple the cost of a decade ago. The average value of a home in Los Angeles County is $635,000—almost double the median price in Austin and nearly triple the median price in Dallas—and many neighborhoods have seen average prices more than double in the last decade. According to the United Way, one in three Californians, or 3.3 million families, don’t have incomes to meet their basic cost of living, and most struggle with high housing costs. The state’s 150,000 homeless residents represent a quarter of the nation’s homeless population. The nonpartisan Legislative Analyst’s Office estimates it would cost “in excess of $250 billion” to provide affordable housing for all of the state’s 1.7 million rent-burdened households."
MetroNext kudos and tensions, HTX traffic is better than you'd expect, road diets kill businesses, the aging affordable housing pipeline, and more
Before getting to this week's items, some thoughts on last week's MetroNext board workshop I attended (presentation slides here). First off, kudos to Metro (and Chair Carrin Patman) for sticking to its guns on the value of BRT over LRT. They can build three miles of BRT for the cost of one mile of LRT, getting more service to more areas more quickly and cost-effectively. People keep asking for fantasyland LRT service everywhere without understanding the economic tradeoffs, and it's good to see Metro have the backbone to say no.
As Dug's Chronicle story mentioned, there was tension on the Hobby line routing between the board and Houston City Councilmember Gallegos. He doesn't want it to come down 75th Street even though that's the most efficient routing with the best service, including bringing people to a renovated Mason Park (he's worried about right-of-way loss, which Metro thinks would be absolutely minimal if any). He's insisting on a longer routing that hits the new botanic gardens but misses shopping and restaurants of Gulfgate, which I guarantee generates 100x the trips the botanic garden does. How often do you eat or shop vs. go to tourist attractions? (probably in about the same proportion as you go to work vs. go to the airport!) Metro's plan includes an autonomous shuttle that would run from a stop near Reveille and Telephone along Sims Bayou to offer connectivity to the botanic gardens at Glenbrook Park, which I think could be an attraction in itself. It makes total sense.
Moving on to this week's items:
Houston #2 best city in Texas behind Flower Mound, and the only major city among the top five. Actually, neither Dallas nor Austin are in the top 100!
Houston is very good at this process of keeping up a steady supply of new housing that eventually becomes affordable older housing: Market Urbanism Report - Why the used housing market should be like the used car market - "As with the car market, the creation of new housing means used housing can filter down, to be bought or rented by lower income groups."
"There’s room for a new politics that recognizes that the path to actual social justice lies primarily in expanding opportunities for a broad range of jobs and housing options. But this can only be done by confronting the current approach to social justice that results in conditions demonstrably unjust."
"The new TomTom Traffic Index puts Houston at No. 204 globally and No. 18 nationally for traffic congestion, as well as No. 2 in Texas.
In Houston, drivers spent an average of 23 percent extra travel time stuck in traffic last year, according to TomTom. The worst day in 2018 for traffic congestion in Houston: October 31 (44 percent). The best: Christmas Day (1 percent)."
Bush and Houston, #1 take-home pay, Europe's rail fail, increasing access to jobs, zoning as crony capitalism, transit's decline, Houston beats Austin and Dallas for affordable housing, and more
Apologies for the long gap between posts due to travel. Catching up on many smaller items:
"So Dallas has decided to legalize the granny flat — subject to enough rules and regulations to ensure that this has approximately zero impact on the housing market. The political mind at work again: Dallas studied Austin’s granny-flat liberalization program, which over the course of several years saw 200 units come onto the market, some of them new construction but mostly the rental of properties that hadn’t been rented before. Austin has almost 1 million people. Dallas copied the Austin model — on purpose, knowing that it would produce negligible results.
Let’s summarize: The city, having prohibited a common form of affordable housing, decided to reverse that prohibition in the hopes of bringing back some of that affordable housing by following the example of another city whose efforts produced basically no affordable housing. Ingenious!
Down the road a bit in Houston, they’ve had some success with a radically different approach: building houses."
"For decades transit planning agencies and public officials (including when I served on the Los Angeles County Transportation Commission) have claimed that new transit rail systems can materially reduce traffic congestion. The development of access metrics should put an end to such misconceptions (Note 3).
Regional planning agencies, transportation agencies and public officials should use the access metrics to direct funding to strategies that improve 30 minute access throughout cities. That principally means attention to improving the highway system. It’s time to develop a metric for urban transportation investments to address the fundamental goal of improving access, specifically the cost per new percentage point of job access. Getting people more access is critical to strong economies and reducing poverty, and deserves an assessment based on facts, not wishful thinking or mythology."
Why Passenger Trains Don’t Work in Europe. Mainly because they don't get that much more market share than in America yet they have displaced heavy freight to trucks that would be much better shipped on trains. America focused rail on freight, and that was the right decision.
"Five cities—New York, Chicago, Dallas, Houston, San Francisco—accounted for a third of all Fortune 500 headquarters and half of Fortune 500 firms’ profits last year"
Finally, a moment of remembrance for a great Houstonian, George H.W. Bush, whose statue I was admiring at the airport just hours before his death hit the news. And a quote I love from the NYT piece talking about his relationship with Houston:
"Mr. Bush and Houston — both a little quirky, a little square, a little misunderstood — were a natural fit. "
45N+downtown and transportation updates from the Texas legislative session (guest post)
Today's guest post is from Oscar Slotboom of Houston Freeways. A bit longer than usual posts here, but with some great updates.
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North Houston Highway Improvement Project (including downtown)
In conjunction with public hearings in May and release of the Draft Environmental Impact Statement, TxDOT recently released updated schematics for the North Houston Highway Improvement Project, which includes the planned total rebuild of downtown freeways. I attended two of the three public meetings, and there were about 10-15 speakers at each meeting, with minimal or negligible opposition among the speakers. So this project appears to have community support.
TxDOT and its consultant HNTB have continued the process of ongoing improvement of the design, with incremental refinements mostly on the north side of downtown. The numerous improvements on the northwest side of downtown and downtown access spur (on the west side of downtown) combine to provide a significant improvement in that area. These changes are most easily viewed in the green annotations I added to the official schematic here.
I have updated my detailed analysis of the design on HoustonFreeways.com, noting the improvements but also identifying 12 remaining items of concern in the design. Some of these concerns have been submitted to TxDOT during previous comment periods, so they likely have already been evaluated with no action taken. Nevertheless, I included the complete list of all issues, new and previous, to provide an overall summary of remaining concerns.
With a price tag of $4 billion for the downtown work and around $7 billion for the overall project, it certainly makes sense for TxDOT to take a look at every possible opportunity for improvement to ensure we get the best possible design for the huge expenditure. What Could Have Been
I also prepared this map of a potential relocation of the IH 45 main lanes to create space to bring managed lanes through downtown. This option was not formally studied, although it may have been rejected very early in the process. It is now too late to consider this option, but I think this would be the only way to create a north-south corridor of managed lanes through downtown, assuming the Pierce Elevated will be removed. (see previous post on MaX Lanes)
Texas Legislature
Transportation was not expected to be an issue receiving much attention in the session which ended Monday, and that was mostly true. Here’s a summary of the results for this session.
Funding
The main question for this session was whether the legislature would fully fund the transfers of general revenue to TxDOT as specified in Proposition 7, approved by voters in 2015. The answer turned out to be no, but the immediate impact is expected to be minimal. TxDOT was slated to receive $4.7 billion in Proposition 7 funding in the next budget cycle, but that amount was reduced to $2.9 billion due to a delay in the transfer of $1.8 billion. Exact Proposition 7 amounts in the budget document are $2.205 billion in fiscal 2018 and $700 million in fiscal 2019.
However, the delay in the $1.8 billion is reportedly only one month, from August 2019 to September 2019, an accounting gimmick to move the money to the next budget cycle. So this one-month delay is not expected to affect projects being planned with Proposition 7 funds. But it is not clear if and when funding will catch up to restore the $1.8 billion, or if the $1.8 billion is permanently deferred. According to a report in the Dallas Morning News, House Appropriations chief John Zerwas, R-Richmond, said the legislature is committed to restoring the $1.8 billion when budget conditions allow.
The budget covers fiscal years 2018 (September 2017-August 2018) and fiscal year 2019.
2018 budget amount: $12.4 billion
2019 budget amount: $14.2 billion
Debt service is high and rapidly increasing, $815 million in FY 18 and $1.23 billion in FY 19. Nearly all of this increase is the result of shifting certain interest payments from the general budget to the TxDOT budget as a result of Proposition 7. Total financing costs in the biennium are listed at $2.3 billion.
A big increase in expenditures for professional fees and services, from $1.06 billion in FY 18 to$1.80 billion in FY 19. Presumably, this large increase is due to planning and engineering services for Proposition 7 projects.
The budget document instructs TxDOT to expand Houston’s Green Ribbon program to other areas of the state
Comprehensive Development Agreement Failure
House bill 2861 called for authorizing 18 projects statewide to be developed using comprehensive development agreements, including two in Houston, the proposed Hempstead Tollway and Interstate 45 between Interstate 10 and Beltway 8, which is all of the North Houston Highway Improvement project outside of the downtown area. Comprehensive Development Agreements, called public-private partnerships in most places outside Texas, use private money to finance projects, with the private funding entity receiving the toll payments. The SH 288 toll lanes are the only project being built with this arrangement in Houston. The bill moved steadily through the legislative process, but the House soundly defeated the bill on May 5. According to remarks by the North Central Texas Council of Governments, it was believed to have failed due to general anti-toll sentiment in the House and a desire to wait and see what happens at the federal level, with President Trump’s infrastructure plan still a work in progress. So TxDOT cannot pursue the two Houston projects or any other projects as new CDAs in the next two years.
Anti-Toll Legislation
Numerous bills seeking to limit or curtail toll roads were filed, mostly in the House, but all of these bills died, most with little or no progress. However, three anti-toll provisions did become amendments on the TxDOT sunset bill.
TxDOT Sunset Legislation and Other Bills
The legislature must periodically review all state departments to authorize their continued existence, the so-called sunset process. This year TxDOT was subject to the sunset review process, and the TxDOT reauthorization bill was a must-pass bill which was approved on Saturday and sent to the governor. Due to the legislative procedural meltdown earlier this month, many bills died and the TxDOT sunset reauthorization became a vehicle for including provisions as amendments on the bill (final conference committee report). While there were no amendments specific to Houston, some amendments of statewide interest include the following:
Tolls will be removed on State Highway 255 in Laredo, which is formerly the Camino-Columbia private toll road which went bankrupt and was purchased by TxDOT and now operates as a TxDOT toll road. To the best of my knowledge, this will be the first removal of tolls in Texas since the Dallas-Fort Worth Turnpike became a freeway in 1978.
There is a provision to accommodate the potential removal of tolls on the Loop 375 managed lanes in El Paso, which (if implemented) would be the first removal of tolls from managed lanes in Texas. The Loop 375 managed lanes have been a failure, generating negligible traffic and revenue.
A requirement that any TxDOT funds used for financing toll roads must be repaid by the tolling agency managing the project (non-retroactive)
Imposes new rules on delinquent toll collection, including limits on administrative fees
Imposes a large number of reporting and administrative requirements on TxDOT relating to project cost, schedule, performance measures, online reporting and coordination with MPOs
Requires TxDOT contractors to use E-Verify to verify legal status for employment
Other bills sent to the governor (not signed as of May 29) include:
SB 2205 defines rules and regulations for fully-autonomous self-driving cars. This will clarify the legal issues, an important step toward actually having autonomous vehicles on the road.
HB 2646 which authorizes TxDOT to purchase right-of-way for a project before it receives a record of decision of environmental clearance. This will be a useful tool, especially for projects where environmental clearance can take many years.
Legislation Targeting Houston-Dallas High Speed Rail
SB 975 requires operators of high-speed rail service to meet strict security requirement to ensure safety
SB 977 prohibits the use of state funds to plan, build or operate high speed rail operated by a private entity
Neither of these laws is expected to have a significant effect on Texas Central’s plans. The bill which probably posed the greatest threat to the project was SB981, which would have required the project to be compatible with more than one type of train technology. Since the project is being designed to use Japanese technology, this could have been a show stopper. But the bill died in mid-April. So the Houston-Dallas high speed rail project is alive and well.
During the presidential campaign, Trump spoke about a trillion-dollar infrastructure investment, but the plan is still being developed and details are not expected until the third quarter of this year (here and here). Preliminary indications are that it will focus on public-private partnerships, which of course translates to toll roads. Preliminary numbers mentioned are for $200 billion in new federal money to be used to attract $800 billion in private funds. Michael Morris, head of the North Texas Council of Governments, has commented that the completed Dallas-Fort Worth PPP projects (LBJ Texpress and North Tarrant Texpress) are being used as a model in formulating the plan, and the DFW projects also used the 4-to-1 private/public money leverage ratio.
There are many reasons to be skeptical that this will plan will move forward in any shape or form, even massively downsized as a token effort.
The long delay in developing a plan suggests there is difficulty getting a consensus on a plan which can get sufficient support for approval.
President Trump’s influence on Capitol Hill is weak and probably getting weaker, so persuading Congress to adopt a sea change in infrastructure finance will be difficult.
PPPs are not consistent with the values of Congress. House and Senate members generally want to bring home the goods (some would say pork) to their district. Bringing home a PPP which imposes hefty tolls on their constituents and privatizes previously public assets is not necessarily good politics, and could be bad politics.
Congress has shown minimal interest in PPPs and tolling in recent transportation reauthorizations.
Previous reauthorizations of transportation legislation have been difficult and were delayed by numerous short-term stopgap reauthorizations, even though the current FAST Act (expiring in 2020) generally continued long-established policies.
Passing a sweeping PPP-heavy plan would likely rely exclusively on Republican votes, and as we’ve seen, holding together the slim Republican majorities in the House and Senate will be very difficult.
Financing $200 billion for the public share of PPPs will be difficult or impossible without increasing the deficit or raising fuel taxes.
PPPs financed by project revenue are generally suitable for toll roads only and will do little or nothing to help aging urban rail systems with massive deferred maintenance costs, particularly in Washington DC, Boston, New York and Chicago. Without funding for those political interests, the base of potential support is reduced.
Congress is still going to be focused on other issues like Affordable Care Act repeal/replacement tax code reform and another budget battle looming at the end of September.
You may have read about President Obama's "dead on arrival" budget proposal of a $10/barrel oil tax. How could it be modified for bipartisan support? Change it to an import tariff, just as the Chronicle recently proposed:
"Ed Hirs, a University of Houston energy economist, has pointed to an oil import tariff or quota as a way for the United States to stabilize prices and avoid the economic hit that comes with global price swings. A healthy price floor for domestic oil, or even a price agreement with Canada and Mexico, would ensure steady business for oil producers without hurting downstream refiners or your routine gas station fill-up.
"It is protectionist," Hirs told the Houston Chronicle editorial board. "But it is a net gain for us."
Politicians who have a gut instinct for free markets need to check that feeling when it comes to oil. Global prices are literally controlled by a cartel, and right now it looks like OPEC nations are dumping their product below cost in a fight for market share. That's not a free market, that's a trade war.
Thanks to the fracking revolution, the United States is producing oil at rates not seen since the 1970s. Changing facts led Congress to change the law about oil exports at the end of last year. The next step logical step would reinstate oil import regulations. After all, import restrictions successfully bolstered the domestic oil industry from 1959 until 1974 and the Arab Oil Crisis.
It is clearly true that Saudi Arabia is dumping oil to destroy the U.S. oil industry, just as China did with steel at one time. Why are we ok with this?! An import tariff would support a higher oil price for increased domestic production.
Here's what the Democrats get:
Increased cost of oil which reduces usage and carbon emissions to meet the new Paris climate treaty goals
Domestic jobs in red states (Texas, North Dakota, and others)
A revitalized domestic oil and gas industry (major funders of the Republican party)
Domestic energy security and self-sufficiency (which is also a military priority)
Stick it to OPEC in general and the Middle East in particular
Oh, and if there are WTO or other restrictions that limit tariffs, then call it an oil unloading fee or whatever creative designation it needs (hat tip to Cary). Or make it a general oil tax with offsetting credits for domestic production. As far as branding, call it an OPEC Tax - that will be popular!
It's hard to imagine there's an issue that both the left and the right might agree on in these days of polarized politics, but this definitely seems like one of them. Maybe a few congressmen from both parties in Houston could get together to sponsor a bill through Congress? As always, please forward this post along if you know the right people (or even just to your congressman).
The emerging cross-ideological consensus on excessive zoning and land-use regulations
There seems to be a growing awareness of the downsides of zoning and excessive land regulation in cities, as evidenced by these five recent items. Apologies for the long excerpts, but these articles are making important points I really want to convey the essence of.
A really important article in the Washington Post about "The emerging cross-ideological consensus on zoning." Enough good stuff in here to justify some pretty extensive excerpts, including mentions of Houston:
"In recent years, and especially over the last few months, economists and other public policy experts across the political spectrum have come to realize that zoning rules are a major obstacle to affordable housing and economic opportunity for the poor and lower middle class. By artificially restricting new construction, zoning and other similar land-use restrictions greatly increase the price of housing, and prevents the market from adjusting to increasing demand.
...
[E]xcessive or unnecessary land use or zoning regulations have consequences that go beyond the housing market to impede mobility and thus contribute to rising inequality and declining productivity growth…
[S]ome land use regulations can be beneficial… But in other cases, zoning regulations and other local barriers to housing development allow a small number of individuals to capture the economic benefits of living in a community, thus limiting diversity and mobility. The artificial upward pressure that zoning places on house prices — primarily by functioning as a supply constraint — also may undermine the market forces that would otherwise determine how much housing to build, where to build, and what type to build, leading to a mismatch between the types of housing that households want, what they can afford, and what is available to buy or rent….
Zoning and other land use regulations, by restricting the supply of housing and so increasing its cost,may make it difficult for individuals to move to areas with better-paying jobs and higher-quality schools.
...
Among those who support reform, there is disagreement between advocates of a more technocratic approach to limiting zoning, and those like Edward Glaeser and myself who would prefer to follow the excellent example of Houston, and abolish zoning altogether. In my view, the latter solution is preferable in a world of widespread voter ignorance, where the public is unlikely to be able to monitor the extremely complex details of zoning closely to ensure that it will not serve narrow interest groups at the expense of the general public.
Despite its limitations, the growing cross-ideological agreement on zoning is a valuable development. Similar cross-ideological agreement among experts helped set the stage for airline deregulation in the late 1970s, creating enormous benefits for consumers. The potential benefits of zoning deregulation – greatly increased housing and job opportunities for millions of people – might be even greater.
...
UPDATE #2: This post responds to me by arguing that Houston, despite its lack of zoning, has a variety of other dysfunctional land-use restrictions. That is true. But Houston still has much less in the way of regulatory obstacles to development than other large cities, which do have restrictive zoning. That is one of the reasons why many people are “voting with their feet” for Houston and other cities with similar policies. The point is not that Houston is perfect (it is far from it), but that following its example would be a huge improvement for many other cities."
Aaron Renn (The Urbanophile) wrote on a similar theme in the City Journal last Spring (hat tip to Scott): "Libertarians of Convenience - Urban progressives favor deregulation—but only for things they like or want to do."
"In Texas’s cities, by contrast, progressives often share, to some degree, the state’s pro-freedom, pro-market ethos. That’s why Houston, though hardly without restrictions on building, has no zoning per se and a pro-market Democrat, Annise Parker, for mayor. Unsurprisingly, it remains an affordable place to live, as do other low-regulation cities, such as Indianapolis."
"Zoning has shaped American cities since 1916, when New York City adopted the first comprehensive ordinance. It has remained a popular and widely used institution, particularly for homeowners wishing to protect the value of their homes. As values have soared in recent years, however, this protection has accelerated to the degree that new housing development has become unreasonably difficult and costly. The widespread Not in My Backyard (NIMBY) syndrome is driven by voters’ excessive concern about their home values and creates barriers to growth that reach beyond individual communities. Those barriers contribute to suburban sprawl, entrench income and racial segregation, retard regional immigration to the most productive cities, add to national wealth inequality, and slow the growth of the American economy. Zoning Rules, an update of Fischel’s 1985 classic book The Economics of Zoning, examines this history while offering solutions to the unintended consequences of zoning."
"After many decades of essentially ignoring the role of land, economists are starting to reconsider. Some are worried that landlords are hurting growth by making it too expensive to live in highly productive cities. Now, some are starting to think about how land figures in the rise in inequality.
The basic idea is that landlords use their local political power to stack the deck. Using their money and connections to sway local elections, they can influence politicians to enact land-use regulations that keep out other people and businesses. That gives them a so-called first mover advantage that shuts out the competition. At first, people who want to move to for work or to start a business can move to other, newer cities where local landlords are not as politically entrenched and regulation not yet as onerous. But eventually the country fills up with powerful landowners, and the options for cheap relocation become limited. Stuck in dying cities or far away from job opportunities, potential employees languish in poverty.
...
According to Furman, some of the change may be due to more zoning. Since the late 1970s, land-use regulation has skyrocketed in the U.S. That has caused housing prices to go up at a much faster rate than construction costs -- something sure to please existing homeowners, but which locks potential homeowners out of the market. The more zoned a city is, the less affordable it tends to be.
...
Lack of affordability doesn’t just create inequality among individuals, it creates inequality across regions. Furman shows that states with more constrained housing supply have seen much slower income convergence between different cities. That strongly implies that land-use restrictions are effectively keeping people penned up in bad locations.
--
If it turns out that zoning really is a major drain on the U.S. economy, it opens the possibility of a bipartisan coalition. Conservatives are interested in limiting regulation overall, while liberals would like to reduce inequality. Since this is one of the clearest cases where regulation is increasing inequality, politicians on both sides of the ideological divide should figure out a way to come together to work out reforms."
"Cities get ranked in numerous ways — by income, hipness, tech-savviness and livability — but there may be nothing more revealing about the shifting fortunes of our largest metropolitan areas than patterns of domestic migration.
Bright lights and culture may attract some, but people generally move to places with greater economic opportunity and a reasonable cost of living, particularly affordable housing."
Yet another major company giving up on the core and moving to the suburbs (more here) - in this case Schlumberger moving out to Sugar Land. When is Houston going to take this seriously? I'm looking at you, Metro and TXDoT. We need comprehensive MaX lanes and express services to every job center, or more employers are going to give up on traffic and move to the suburbs, slowly bleeding Houston's tax and job base...
John Tierney over at the NY Times does a clear-eyed rational analysis of our nation's near-religious dogmatic obsession with recycling and shows the benefits have declined to the point of even becoming negatives (i.e. it's actually worse for the environment to recycle than landfill for some items). I'm an avid recycler myself, but it looks like Houston does it at the right levels with the right materials vs. extravagant "zero waste" initiatives in places like NYC, SF, and Seattle. I also have my own somewhat unique perspective on this, which is that in a few decades we'll have smart cheap robots that can easily sort through landfills to recycle what makes sense. Start thinking of landfills as temporary holding places until the technology gets better, and suddenly they seem a lot more reasonable, especially with all of the environmental safeguards they now have in place (linings, methane recapture for electricity production, etc.). Worried about the lost land for landfills? How about this factoid: "all the trash generated by Americans for the next 1,000 years would fit on one-tenth of 1 percent of the land available for grazing."
"Here it is in a nutshell: Fort Worth hates Dallas. Houston hates Dallas and Austin. San Antonio hates Austin. Austin wishes all the rest of us would just go away, and Dallas pretends that none of the rest of us even exist."
... As East Dallas resident Mamie Joseph puts it, “Dallas is too busy hating itself to notice anybody else.”
That observation was borne out four years back when I wrote a piece for the Houston Press and Dallas Observer about how those two cities were getting cooler while Austin was becoming more business-like and big city. The piece was met with near-universal praise in Houston, but about half of the feedback I got from Dallas was that I was a lunatic to think that way, and that only their jobs were keeping them from escaping to Austin ASAP. Meanwhile, Houstonians were printing up T-shirts with slogans like “I’m Not Moving to Austin” and “Keep Austin 170 Miles from Houston.”
Then some more good Austin myth-busting and...
"In reality, Austin is no more “weird” or liberal than inner-loop Houston is. In fact, when I was growing up in Houston during the 70’s and early 80’s, Austin’s brand of “weird”, or bohemian culture as it were… seemed pretty tame compared to the Montrose area of inner-loop Houston. Montrose has since been heavily gentrified, but I’d say it’s still on par with Austin’s most liberal/Bohemian areas, which are hardly a majority of Austin as a whole. Houston just doesn’t toot it’s horn constantly about these things, the way Austin does."
Others will ride it which will clear up the road for me (never happens - transit does not reduce traffic congestion, all of the big transit cities also have big traffic congestion)
The perfect route to my workplace will be created and it will be faster than my drive now with convenient schedules (rarely happens)
Not arguing against good, cost-effective transit - it is absolutely very important - just saying you have to take support surveys with a grain of salt and make intelligent, pragmatic decisions about road vs. transit investments based on real-world usage.
"I ask Glassman a few times in a few different ways, What makes Houston Houston? There's a "misfit tinkerer" mystique to the place, he finally answers. "Think of the Astrodome," he says. "The Art Car Parade. Wes Anderson. The Orange Show. The Beer Can House ... "
"We’ve all heard the claim that a rail line can move as many people as an eight- (or sometimes ten-) lane freeway. Not so much. Orlando’s billion-dollar commuter-rail line carries less than 2,000 people to work each weekday morning and home in the evenings. (Amortized over 30 years at 3 percent, it would have cost less to buy every single daily round-trip rider a new Prius every year for the next 30 years.)"
I generally like to avoid politics on the blog, but found this a compelling argument that the Republicans should adopt an urban policy of openness and affordability (second item). Hear, hear! Would love to see the Democrats adopt it as well!
"As a result of decades of Democratic governance and misplaced priorities…American cities do not offer the opportunities for success and growth that they should, especially for those looking to climb the socio-economic ladder. In many cases, city governments are utterly dysfunctional. And the reason for this dysfunction is that our cities are too often closed—closed to businesses and closed to outsiders. For the middle class and those striving to make it up the ladder, the taxes, housing, and other costs leave cities simply too expensive to afford—especially with a family. Excessive regulation makes it difficult, if not downright impossible, to get the permits necessary to start a business. Cronyism and a lack of transparency make it difficult to know whether anyone is trying to fix the situation."
...and...
"Housing regulations have been used by the urban left to restrict new construction, as if city neighborhoods are gated country clubs that should never allow change or new people. The liberal business elite have fortified the business permitting process so much that, in many cities, it is nearly-impossible for competing entrepreneurs to enter basic professions like hair-styling. And to carve out a voting bloc, the left has defended unionized public monopolies that deliver services at far higher cost, and less efficiency, than is necessary.
To the authors, making cities more “open” would mean embracing economic and administrative liberalization. They call for housing deregulation, so that cities can accommodate growing populations; one-stop shops for business permitting; and civil service reform, so that bureaucracies are either held to better standards, or replaced through privatization. They also call for better online data, so that residents can easily view info on their cities’ spending and debt, and gain access to officials."
"There's a lot of talk in Washington about inequality, income inequality. But there is a lot less talk about the inequality that arises from the high cost of everyday life. In blue state coastal cities you have these strict zoning laws, environmental regulations that have prevented buildings from expanding the housing supply. And that may be great for the venture capitalist who wants to keep a nice view of San Francisco Bay. But it’s not so great for the single mother working two jobs in order to pay rent and still put food on the table for her kids.
It's not just about how many dollars you earn, though there are still pretty substantial opportunities for that in the State of Texas. It's also about how far each dollar that you do earn can take you. After you’ve paid your taxes, you’ve paid your rent, your tuition, your grocery bills. "
Sprawl wins in a solar world, bribing commuters to ride transit, new option to Dallas, downtown's progress, lessons from Chicago and Atlanta
First, an event announcement: long-time readers know I don't do official political endorsements (this is a policy blog), but I have admired Bill King's strong stand on the city's pension crisis (among others), a topic most politicians seem to shy away from. You can learn more about his Back-to-Basics campaign and ask all the questions you like (the man can definitely engage seriously on policy discussions) at his kickoff fundraiser Monday from 5:30 to 7 at Cadillac Bar. Details here.
Moving on to this week's items:
Vonlane's luxury bus service is finally opening on the Dallas-Houston route, although without many frequencies to start. They're having trouble building the buses fast enough. I suspect this will be a popular service. I am hearing increasing complaints about packed crowds and bad service on Megabus, although it is clearly popular.
The Atlanta Journal Constitution has done a major series of articles critiquing Atlanta as falling far behind its peer cities. Everybody knows the worst case scenario for a city is Detroit, but Atlanta is a more realistic cautionary tale for Houston: a city that can't unify to solve big problems like transportation, infrastructure, and education. It has especially underinvested in their freeway network - including a lack of loops/beltways - which is coming back to haunt them. Had we not done Beltway 8 and now the Grand Parkway, we could be in the same situation. They also did in-depth profiles of two peer competitor cities doing much better than them: Dallas and Charlotte, including well done short profile videos. I'm not surprised they didn't choose Houston, where the comparison is muddied by the oil boom (Dallas much less so). And if you're curious for more backstory, Aaron Renn (the Urbanophile) wrote a prescient piece on Atlanta's decline back in 2010.
The solution to these issues, as proposed by Townsend, is "solar-powered, self-driving sprawl." The thinking goes like this: sprawl is the ideal land use pattern for developing a solar grid that can power the electric cars of residents while still providing the electricity that the region needs to function. He quotes from a paper issued in 2013 by University of Auckland researchers:
"[S]uburbia is not only the most efficient collector of solar energy but that enough excess electricity can be generated to power daily transport needs of suburbia and also contribute to peak daytime electrical loads in the city centre... While a compact city may be more efficient for the internal combustion engine vehicles, a dispersed city is more efficient when distributed generation of electricity by [photovoltaic solar cells] is the main energy source and [electric vehicles] are the means of transport."
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.
