Phoenix has long been a close competitor to Houston for fastest growing metros (closer escape for Californians, lol), but it looks like that's about to come to an end as they run out of readily available water:
"Arizona has determined that there is not enough groundwater for all of the housing construction that has already been approved in the Phoenix area, and will stop developers from building some new subdivisions, a sign of looming trouble in the West and other places where overuse, drought and climate change are straining water supplies.
The decision by state officials very likely means the beginning of the end to the explosive development that has made the Phoenix area the fastest growing metropolitan region in the country. …
The decision means cities and developers must look for alternative sources of water to support future development — for example, by trying to buy access to river water from farmers or Native American tribes, many of whom are facing their own shortages. That rush to buy water is likely to rattle the real estate market in Arizona, making homes more expensive and threatening the relatively low housing costs that had made the region a magnet for people from across the country.
“Housing affordability will be a challenge moving forward,” said Spencer Kamps, vice president of legislative affairs for the Home Builders Association of Central Arizona, an industry group. He noted that even as the state limits home construction, commercial buildings, factories and other kinds of development can continue."
“Many cities face a difficult choice. If they cut certain services, they could become less attractive and trigger a possible “urban doom loop” that pushes even more people away, hurts revenue, and perpetuates a cycle of decline. If they raise taxes, they could alienate wealthy residents, who are now more mobile than ever. Residents making $200,000 or more contributed 71 percent of New York State’s income taxes in 2019. Losing wealthy residents to low-tax states such as Florida and Texas is already taking a toll on New York and California. The income-tax base of both states has shrunk by tens of billions since the pandemic began.”
…
“As more leases and loans come due, the bulk of the pain is still ahead of us. Over the next two years, many downtowns will find that dozens of buildings are no longer fit for purpose. Municipal services will likely deteriorate, and more people might leave. The worst-case scenario is a return to the 1970s, with bankrupt municipal governments, rising crime, and the flight of (primarily white) upper-middle-class residents. Landlords like to point out that “New York always comes back.” But some cities—like Detroit or Pittsburgh—never recovered from the previous waves of technological change. And even in New York, a comeback may take decades.”
…
“In the ’90s, the internet helped cities come back. As the economy became more dependent on innovation and creativity, many of the largest and densest downtowns boomed. In 2007, the world’s preeminent urban economist, Ed Glaeser, called it a “central paradox of our time” that cities remain “remarkably vital despite ever easier movement of goods and knowledge across space.” Economists have been busy explaining this paradox up until the current crisis. As the theory goes, companies require the rapid exchange of ideas and specialized division of labor that large cities provide. In addition, companies want access to the largest possible talent pool, and top talent likes to live in large cities because of lifestyle considerations.
The consensus among economists was that as technology and media expanded, economic activity would consolidate within a select few superstar cities. But even before COVID, the theory started to crack as some of the top-performing cities saw population decreases, tech giants started distributing their offices across smaller cities, and the office market was propped up by WeWork’s irrational, venture-capital-funded expansion.
The pre-COVID consensus wasn’t wrong, but the leading thinkers did not consider the full implications of their own theories. Once the quality of online collaboration crossed a crucial threshold, the internet itself became the largest talent pool and the premier facilitator of human interaction. And once highly educated individuals could earn a nice living from anywhere, lifestyle preferences became more diverse. This does not mean that superstar cities are doomed, but it does mean that their previously captive audience now has more options.
Cities will have to survive and adapt. In a world of consumer choice, locations must think like consumer products. One way to win is to double down on what only the biggest cities can offer—walkable streets, car-free transportation, and cultural and intellectual diversity. But smaller cities can emphasize shorter commutes, ample parking, proximity to nature, better schools, and lower taxes.”
Honestly, I think that last part is why the suburbs of Houston are booming so much - they get some of the best of both worlds. Fortunately for us, I don't think the City of Houston is quite as dependent on office building property taxes. Our office values weren't as over-inflated either, our return-to-office rates are higher, and we continue to grow quickly (which should fill in some of that office space over time).
Warren Buffet calls bs on rail, remote work permanence, induced demand idiocy, HTX tech + construction + port growth, Ike Dike, and more
Happy new year everyone! Hope you all had a good holiday season and didn't get caught up in the Southwest airlines chaos. Sadly, I accidentally wiped out all my backlog of post topics and blogspot does not have any recovery functionality (why can't it keep history like Google Docs?!). So I'm combing back through my tweets to try to find at least some of them:
Richard Florida: “When I started with the creative class, places didn’t care about young people, they were only trying to attract a family with children to the lovely suburbs, and I’m saying, ‘No, no, no, no, no,’” Mr. Florida said in an interview. “Twenty years later, people forgot about the families. And now here’s a whole generation leaving cities again, for metropolitan or virtual suburbs.” ...
"A few feet away from her, another group of young workers was playing Jenga. One by one, they took blocks away from the structure, making way for the inevitable collapse."
NYT idiotically parrots the induced demand argument, including mentioning I10 and I45. Which type of infrastructure should government invest in: transit nobody will use, or lanes everybody will use? 🤔 Induced demand is a false argument. Nobody says "don't build a new airport runway - it will just fill up with new flights" 🙄
AP: Warren Buffett jumps into local politics to fight streetcar: "Billionaire investor Warren Buffett broke with his practice of staying out of local politics to urge his hometown of Omaha to abandon its planned streetcar project because he says it's too expensive and not as flexible as buses."
WSJ: The Blue State Exodus Continues: "Texas and Florida make up about 15% of the U.S. population but accounted for 70% of its population growth this past year. "
Houston ranks as the top market for tech job growth: “Although sometimes overshadowed by the cachet of Dallas, Austin, & San Antonio, Houston is absolutely a tech hub in its own right, attracting a mix of major tech companies & VC-backed startups + established base of aerospace, defense, & energy companies”
WSJ: California Long Ruled U.S. Shipping. Importers Are Drifting East. - Companies that depended on the West Coast as a point of entry for their goods are turning to other parts of the country as global trade gets upended. A chart inside shows Houston #1 in the country for port growth in containers. Looks like the port expansion is paying off!
"Bloom provided data showing strong economic incentives for both corporations and their employees to continue the work-from-home revolution if their jobs allow it:
First, “Saved commute time working from home averages about 70 minutes a day, of which about 40 percent (30 minutes) goes into extra work.” Second, “Research finds hybrid working from home increases average productivity around 5 percent and this is growing.” And third, “Employees also really value hybrid working from home, at about the same as an 8 percent pay increase on average.”
“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.
“ A paper published this week by two California economists calculated that the mass shift to remote work accounted for 15.1 percentage points of the 24% increase in U.S. home prices between November 2019 and 2021.”
“There are lots of places in America with jobs and lower climate risks or jobs and racial diversity, but if you want all three, Texas will take care of you best,” The NYTimes noted in 2021.
“Many of us move to big cities and spend little time in nature — also not a path to happiness. A study by the economists Ed Glaeser and Josh Gottlieb ranked the happiness of every American metropolitan area. They found that New York City was just about the least happy. Boston, Los Angeles and San Francisco also scored low. The happiest places include Flagstaff, Ariz.; Naples, Fla., and pretty much all of Hawaii. And when people move out of unhappy cities to happy places, they report increased happiness.”
And a little humor, lol: "The data-driven answer to life is as follows: Be with your love, on an 80-degree and sunny day, overlooking a beautiful body of water, having sex."
And here are the academic paper details behind that excerpt: Unhappy Cities. People are the least happy in some of America's largest cities like NYC, LA, SF, Boston, and Chicago. Oddly, Dallas and Houston are not included, although Galveston scores surprisingly high (#16).
"Abstract: There are persistent differences in self-reported subjective well-being across U.S. metropolitan areas, and residents of declining cities appear less happy than other Americans. Newer residents of these cities appear to be as unhappy as longer term residents, and yet some people continue to move to these areas. While the historical data on happiness are limited, the available facts suggest that cities that are now declining were also unhappy in their more prosperous past. One interpretation of these facts is that individuals do not aim to maximize self-reported well-being, or happiness, as measured in surveys, and they willingly endure less happiness in exchange for higher incomes or lower housing costs. In this view, subjective well-being is better viewed as one of many arguments of the utility function, rather than the utility function itself, and individuals make trade-offs among competing objectives, including but not limited to happiness."
A really steep toll increase for 288, and this is where my “I told you so” kicks in: they should have made it 4 lanes one-way inbound in the mornings and outbound in the evenings to match demand, instead of 2x2.
"As a result of the region’s booming population, Houston tops the list of major U.S. metro areas with the most construction permits issued for single-family homes from 2012 through 2021, according to new data from self-storage marketplace StorageCafe. During that period, 392,136 permits for single-family homes were handed out in the region.
“Houston has been the primary destination for newcomers moving to Texas, especially Californians who find respite in Harris County’s lower home prices and tax rates, cheaper land, and sound economy,” StorageCafe says in explaining the demand for more homes in the area.
From 2012 through 2021, Houston also led the country’s 50 biggest metros for new retail space (more than 51.8 million square feet). Here’s how Houston ranks in other segments for newly built commercial real estate:
Third for new office space (nearly 44.3 million square feet).
Third for new self-storage space (nearly 17.6 million square feet).
Fourth for multifamily construction permits (170,817).
Fourth for new industrial space (more than 153.3 million square feet).
Houston ranks second for construction activity across all six property types from 2012 through 2021.
"In fact, a primary reason Texas is growing so fast is that we tend to stick around as compared to natives of other states, meaning there’s less out-migration to offset the in-migration. About 82 percent of people born in Texas still live here, making it the so-called stickiest state in the country."
American Affairs Journal: Exurbia Rising by Joel Kotkin, packed with great stats. Here's the opening paragraph:
"Perhaps nowhere is the gap between America’s cognitive elite and its populace larger than in their preferred urban forms. For nearly a century—interrupted only by the Depression and the Second World War—Americans have been heading further from the urban core, seeking affordable and safe communities with good schools, parks, and a generally more tranquil lifestyle. We keep pushing out despite the contrary desires of planners, academic experts, and some real estate interests. In 1950, the core cities accounted for nearly 24 percent of the U.S. population; today, the share is under 15 percent, according to demographer Wendell Cox. Between 2010 and 2020, the suburbs and exurbs of the major metropolitan areas gained 2.0 million net domestic migrants, while the urban core counties lost 2.7 million."
"Lessons from history and from the relative success stories of the present point to clear priorities for today’s cities:
Get the urban basics right: schools, safety, livability.
Strengthen local anchor institutions in higher education, health care, and other areas.
Invest aggressively in local quality-of-life amenities.
Rebuild and expand critical infrastructure.
Work toward openness, diversity, inclusion, and a welcoming approach to newcomers.
Ensure a high degree of economic freedom.
Emphasize housing affordability and work to build an opportunity-rich physical environment."
WSJ: People Are Going Out Again, but Not to the Office - Only a third of U.S. employees have returned to the office, as workers prefer remote and companies fear ordering them back. Companies that force employees to the office will have to pay more (including office costs) for inferior talent from a more limited local talent pool. Excerpts:
"Elected officials are imploring companies to send workers back to the office.
“Business leaders, tell everybody to come back,” said New York Gov. Kathy Hochul, in remarks before a civic organization earlier this month. “Give them a bonus to burn the Zoom app and come on back to work.”
The gap between public enthusiasm for office return and other activities underscores the wide range of factors other than health considerations that are slowing the return to work. After close to two years of working from home, surveys suggest most employees simply prefer it to the office, which often requires lengthy commutes and gives workers less flexibility in how they spend their days.
Employers have also been reluctant to insist that workers return for fear of driving employees away during a labor shortage, corporate surveys show. Many managers feel remote work disrupts efforts to promote a corporate culture and collaboration, but they aren’t applying much pressure because studies have shown that many workers are as productive—or even more productive—when they work remotely.
“They feel like remote work isn’t perfect, but it’s working pretty OK,” said Brian Kropp, chief of human-resources research for the advisory and research firm Gartner. “There’s not a real urgency to change it.”
Houston #2 for tree cover among major metros (just behind Atlanta) with 30% tree canopy coverage in the metro. Technically it shows Austin as higher (34%), but their number is from the early 90s, and we all know how much development has happened in Austin since then!
"We’re not going to double urban densities, especially when the doing so will fail to eliminate driving anyway. As urban economist Edward Glaeser once wrote (as quoted by Bertaud), the 15-minute city “should be recognized as a dead-end which would stop cities from fulfilling their true rôle as engines of opportunity.”
Finally, I'd like to end with this video on why Pakistanis are moving to Houston (hat tip to George). Although I wish it didn’t have the politics. She has some fair points about parts of rural Texas, but it muddles the video. I also think it completely misses the impact of lack of zoning and development regs that allowed those ethnic suburbs and shopping areas to develop. A lot of more regulated and zoned cities would have subtly (and not so subtly) prevented that from happening.
Houston's blob is about to eat even more of East Texas... and we should embrace it
I recently submitted this op-ed to the Houston Chronicle:
The Chronicle’s recent article debating the sustainability of Houston’s traditional “build more” approach to growth (“Houston became 'the blob that ate East Texas' by building big. Is it time for that to change?” August 27) frames the debate as if Houston can dictate whether people drive cars in the suburbs or ride transit in the densifying core, when in reality people make their own choices which we can accommodate and thrive or ignore and decline.
The debate completely misses the reality of our post-pandemic world. Remote work is now a permanent part of our economy, and it is creating a tidal wave of suburban and exurban growth as people realize they’ll no longer need to commute into the city on a daily basis. Houston can’t stop it, even if it wanted to. All we can do is try to accommodate it while keeping the core healthy and accessible to attract their dollars for discretionary shopping, restaurants, entertainment, events, health care, philanthropy, office visits, and more. And if we don’t maintain that accessibility - including prudent transportation investments - not only are they unlikely to visit, their employers are likely to leave as well along with their much-needed local property and sales tax contributions.
Houston’s great strength has always been embracing growth - suburban, urban, and the freeways to connect it all together. That formula has kept us the most affordable major metro in the country and always near the top in growth rankings. In other words, we’ve made ourselves extremely attractive to newcomers, especially diverse people of color and immigrants looking for affordable opportunity. We’ve got a product people want. Why would we want to radically change that? Especially to models like California with urban growth boundaries, constrained development, astronomical housing costs, traffic gridlock, and wasteful transit spending (LA has spent upwards of $20 billion only to lose 21% of its ridership pre-pandemic) resulting in a mass exodus of both people and businesses.
What Houston’s formula needs is tweaking, not throwing out the baby with the bathwater. For example, with growing concerns about flooding, the answer is not banning new development, but tightening runoff regulations on new suburban developments so they don’t flood us downstream. Every new development should have enough detention that the land releases even less water during a hard rain than it did undeveloped - then every new development would actually reduce flooding!
And when it comes to transportation investments, yes, many freeways are reaching realistic width limits, but that doesn’t mean we should give up growth for perpetual congestion or old, slow transit. We’ve proposed - and TXDoT is planning - an innovative next-generation mobility strategy: a network of MaX Lanes (Managed eXpress Lanes) 'moving the maximum number of people at maximum speed' by allowing direct point-to-point single-seat high-speed trips by transit buses and other shared-ride vehicles today, and even higher-speed zero-emission autonomous vehicles in the future. The network would enable Houston’s seven core job centers to scale from 626,000 jobs today to over one million jobs in the future while drawing employees from all across our ever-expanding region with a reasonable commute (even if they’re doing that commute less often in a remote work world). This is the type of climate-friendly innovative mobility solution that could attract substantial federal funding while also embracing suburban and exurban trends rather than hopelessly fighting them.
Finally, Houston’s unzoned urban core can continue to naturally densify as it has been doing successfully for at least two decades now - not because we’re trying to force it to, but because people - especially diverse young people - choose it. They choose it because we allow the free market to build and cater to that demand, including townhomes, apartments, residential towers, and walkable mixed-use complexes.
Which brings us full circle to Houston’s secret sauce: building what people want rather than what academic urban planners deem the ‘right’ way to live and get around. That strategy will always be a winner.
Tory Gattis is a Founding Senior Fellow with the Urban Reform Institute - A Center for Opportunity Urbanism, and the Editor of the Houston Strategies blog.
“I feel like we have more friends here now than we’ve ever had in California,” Josh Rubbicco said. “People were so welcoming and friendly.” ...
“The pricing power of Austin, which is number one in the country, is driven by California, plain and simple,” Toll Brothers CEO Douglas Yearley said on an earnings call last month. “The phenomenon is fascinating. We’ve never seen migration like this.”
WSJ: Remote work is the new signing bonus (and only 2% of VMWare employees showed up when offices re-opened!). This has a ton of ramifications, and not just to cities. Talent will migrate to a lot of more flexible competitors. Companies that insist on in-office will be less competitive – JP Morgan may lose waves of bankers, and competitors will be eager to poach. Maybe ultra-wealthy companies like Apple will just throw money at employees until they work in the office, but most companies won’t have that option. The old extroverted execs that mastered office politics will try to push everybody back into the office, but it will cost them dearly, in talent (lost and paying a premium to keep) and in office space. They won’t just lose the talent competition, but the cost competition. There will be major changes in the competitive landscape of a lot of industries. And it’ll be interesting to see if these hybrid models hold up over time. I think the Adobe total flexibility model is more likely to dominate. Employers with the hybrid model will soon make exceptions for key talent that want to be more remote. Once they do that, existing employees will ask for the same flexibility out of fairness. And then they’re on a slippery slope to the Adobe flexible model.
Building in 100y and 500y floodplains is only bad if buildings are not properly elevated, which they should be under current regulations.
I'm not sure comparing renter incomes to the median house price is the right comparison. Renters fall on the lower end of the income spectrum, so shouldn't the relevant question be if they can afford houses one or two standard deviations below the median house price? Or put another way, if renters on average earn X% of the region's median income, the question shouldn't be if they can afford the median house, but houses at X% of the median price.
"Should cities only allow new housing on the condition that the developers of that housing deliver public benefits in return? This idea is often called “value capture”, and is used to justify — among other things — various forms of inclusionary zoning. The author argues in this essay that value capture is conceptually and logically flawed. It rests on the idea that new housing is not by itself a public benefit, and on the assumption that not building housing is socially harmless. Most of all, it inverts one of the most important insights in urban economics and urban public finance: that value rests primarily in land, and that development is an important way to share and redistribute land value."
Finally, we'll end with a little fun. This map is wild - so many Houstons! (how many can you count?!) And I think I might inquire about buying a shack in Beverly Hills, TX just so I can tell people "I have a 2nd home in Beverly Hills", lol ;-D
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.
