A simple solution to help Houston traffic, our tax-debt-spend problem, HSR bankrupted Japan, Austin builds towards affordability, METRO comedy!
Just a few small items this week:
Charles Blain in City Journal: Saddled With Taxes and Debt - Houston-area leadership is losing touch with the fiscal restraint and pragmatism that made the city an engine of growth.
"I worried from afar that my hometown would meet the same fate as San Francisco, the poster child of the housing shortage and all its associated woes. I feared that Austin would become known as a playground for the rich, a city where displacement and mind-boggling home prices marred the natural beauty that once made it such a draw. In my hand-wringing, though, I'd overlooked one crucial detail: Texas is better at building homes than almost anywhere else in the country.”
There are differences between Austin (and Texas) and San Francisco that, if not changed will continue to make it possible to build in Austin (and Texas) and nearly impossible in San Francisco (and California). Unincorporated county territory in Texas is unzoned. That means that, barring environmental difficulties, developers and builders can build. By contrast, in the San Francisco metro, and virtually all of California, draconian state and local regulations make it very difficult to build on greenfield sites, where land prices would be much lower if the market were permitted to operate."
Caught my eye from Y-Combinator Demo day: XTraffic
What it does: Reduces congestion and accidents with smart traffic lights
Why it’s a fave: Controlling traffic lights with AI sounds like the perfect application of this technology. XTraffic says that it’s already doing it in several cities in Texas. I hope they make it to my town in California, too, because I sure am tired of waiting for the light to turn green when there are no other cars around.
“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).
Is the 18yr rebuild of 45N actually a good thing or will it kill downtown? Plus what's wrong with NYC?
A couple items this week:
Chronicle: Nearly two decades: The long, long journey ahead for $9.7B rebuild of I-45. It is a crazy long schedule (see graphic below). What I can’t tell from this schedule is if the extended length is specifically because TXDoT wants to minimize disruption? Generally speaking, faster projects are more disruptive with more lane closures. Maybe they’re stretching it out so they don’t have to do that? If they’re not, that would be my advice to TXDoT: commit to keeping all existing lane capacity open throughout the construction process, even if that requires stretching the schedule. One silver lining of the rise of remote and hybrid work during the pandemic is that it may actually help employers endure the construction without moving because their employees can be more flexible about what hours and days they come in. If that can help reduce and stretch out rush hours, it can minimize the pain. I got quoted in this one:
“Past freeway projects typically only affected one or two spokes at a time, and downtown employers just dealt with it since it only affected a portion of their employee base,” said Tory Gattis, a senior fellow at the Urban Reform Institute, which advocates for business-focused downtown development. “But with the normalization of remote and hybrid work, as well as this project affecting all the freeways coming into downtown, it could definitely be the tipping point to major employers following Exxon to the suburbs or just going more remote so their employees won’t have to fight their way downtown as often.”
NYT: What’s the Matter With New York? Krugman keeps writing defensive articles about failed Blue city policies, but they’re not very convincing. He does support my case on housing though:
“For the middle class, however, living in New York really is hard to afford — not so much because of taxes, but because of housing costs. Here’s a very rough indicator (I’m sure that experts can produce a more accurate measure, but the conclusions surely won’t change): Zillow says that the median apartment rent in New York is $3,500, about $1,500 more than the median rent in, say, Dallas. Since median household income in New York is about $70,000 a year, the “housing tax” middle-class families pay for living in New York is on the order of 20 percent of their income, several times as large as the difference in actual taxes. And if you want to buy a house, the price gap is similar: Dallas is about 40 percent cheaper.
...
A major reason developers don’t build more housing in the New York area, and hence the reason living here is expensive, is that they aren’t allowed to thanks to zoning, land-use restrictions and — especially in the suburbs — community opposition.
In other words, never mind the lurid right-wing fantasies: NIMBYism, not crime or taxes, is the New York area’s main problem."
Krugman argues the high NY taxes are manageable, but the most upvoted comment strongly disagrees:
"Former Prosecutor, NYC:
I beg to differ Mr. Krugman. Taxes are killing NY and in a big way. You see, my wife and I are senior citizens in upstate NY about 1.5 hours north of NYC. Forty years ago we built our house and raised our 5 children. We love our home. We want to die here. But, NY State has made that impossible. Our property and school taxes are out of control. Yes, we do receive enhanced STAR but it is not enough. Our pensions and savings are not enough to keep up with the rising costs of taxes here in NY. In January we get our property tax bill that included the town, county and fire taxes. Then in September, the dreaded school tax bill comes and it’s a killer. Every senior citizen I know has moved out of NY and headed to Florida, Tennessee and the Carolinas. We worked hard, paid out taxes and are being forced to sell our dream home. Is that right? Is that American? Is that constitutional? It sure doesn’t feel like NY is trying to save Seniors. AND, the poor young people who want to buy our home or live in the area are burdened with the same problem, taxes. Lots of taxes. We don’t own a mansion. We don’t live large. We don’t have fancy cars. We live a modest life and want to stay near our children and grandchildren. I love NY Mr. Krugman but NY doesn’t love me or any senior citizens who want to stay, contribute and live out our lives in the state we love. But, its impossible. Other states are way more affordable and unfortunately, we are being taxes out of our home and must move. Un American"
McKinsey: Restoring public transit amid COVID-19: What European cities can learn from one another. I think the biggest impact locally will be the park-and-ride service, but Metro should be able to manage overall. But I truly don't see how NYC will be able to operate anywhere close to normal. DC, Chicago, Boston, Philly, SF, and others will also be significantly affected.
"Physical distancing will cut transit capacity to 15-25% of normal, but use of PPE could increase capacity to 40%."
NYT: The Agonizing Question: Is New York City Worth It Anymore?For many, the call of an easier, safer and more affordable life beckons. But die-hard New Yorkers find the city more appealing than ever. The new Escape from New York... 420,000 already gone in three months is a staggering number! Obviously many are temporary. But there are also probably tons of people still there that have decided to leave but are waiting out their leases.
“New Yorkers have been fleeing for months. But the fear some residents have of the violent reactions to the protests here is adding a new challenge to those asking themselves whether they can hack the city. Many are deciding not to return.
It’s a decision that must be made individually and privately, one that some 420,000 New Yorkers with the resources to do so had already made between March and May in reaction to the pandemic, according to cellphone data analyzed by the Times.”
"For some, it’s a chance to be closer to family, which feels more urgent in the midst of a global health scare. For a large swath of people in the country’s most expensive cities, it’s a way to get more living space and be closer to nature, something increasingly made possible by the growing trend of remote work. And for many others it’s not really a decision at all, but a necessity in the face of growing job losses and still sky-high rents.
… And people in cities hit hard by the pandemic — New York, San Francisco and Seattle — are searching for remote work opportunities significantly more than the rest of the country, LinkedIn data shows. Some real estate data suggests many are already considering or making a move to a smaller town or suburb. Real estate company Redfin said page views of homes in small towns more than doubled during the last week of April compared with last year.
... She said she’s hearing from mostly young families — professionals with small children — who want to trade the confines of a locked down New York City for houses with home offices and yards.
“It’s no longer temporary. People are saying, ‘I’m not going back. This could happen again and we don’t know when it’s going to end,’” said Bernstein.
“New York doesn’t feel worth it anymore,” he said."
The convention business is cratering, and cities are getting stuck with the bill. I'm not sure how our bonds are structured, but I'm guessing Houston and Harris County will be hit pretty hard by this. We've used hotel taxes to subsidize GRB, NRG, and stadium expansions, and now those hotels are bringing in very little revenue. I'm assuming taxpayers are on the hook to make the payments...
"Houston and NYC both issued around 61k permits in 2019. But metro New York City is nearly 3 times bigger than metro Houston, meaning its construction activity in 2019 (30.4 permits per 10k residents) was much less than Houston’s (88.3 permits per 10k)."
Click to enlarge
Cities With the Most Self-Employed Workers. Houston is #15 by percentage, but #3 by total numbers with 330,415, behind NYC and LA. Miami is #1, I assume because drug smugglers are considered "self-employed" (just kidding! watched too much Miami Vice as a kid, lol ;-)
City Combined Taxpayer Burden Report 2020. Houston has a combined local government debt burden of $25,800 per taxpayer, which is the 4th lowest of the top ten cities, and far better than NYC at $83,600 and Chicago at a whopping $122,100! Looking at their math, they have ~681k taxpayer households for Houston, which sounds about right for a city of 2.3m. Hat tip to Charles.
Finally, I wanted to end with a short video from the KAS Strong Cities 2030 project that I've been involved with the last couple of years. They put together clips of how different cities are dealing with the Covid-19 crisis, including yours truly at the 1:49 point (albeit recorded a couple of months ago and a bit dated at this point).
Houston Is Now Less Affordable Than New York City?!
"There are three kinds of lies: lies, damned lies, and statistics." -Mark Twain
This week the big Houston ruse was uncovered - the illusion unveiled. I know you're thinking I'm talking about a certain baseball team, but I'm talking about Texas Monthly's expose that Houston is less affordable than New York City. Evidently Houston has been suckering millions of people to move here with the false promise of affordability - and they all fell for it! (I guess because they're all bad at math?) Suckering that many people has to be one of the greatest frauds perpetrated in history, right? Well played, Houston, well played. But now the truth is out and it's all going to come crashing down.
As news gets around, hundreds of thousands of Houstonians will soon be putting their house on the market to move to NYC. Why wouldn't they? Clearly it's cheaper to live there. Texas Monthly and an "unbiased" nonprofit say so.
"Martha, call our real estate agent: we're selling the home and moving the family! It says right here we can give up our four-bedroom house and two SUVS, move to a one-bedroom apartment in the Bronx, and come out ahead!"
"Oh Bill, that's a great idea! I'm so ready to trade in the Escalade for standing-room-only subway rides - we'll save a fortune! But what about the taxes?"
"Well, it doesn't look like the study says anything about taxes, so they must not be an issue in New York..."
April Fools came early this year. Thanks, Texas Monthly.
Now we can move on to the dry, fact-based part of the response to the study:
There is absolutely no normalization of size or quality of what people get for what they pay - all they look at is what people are actually spending. In NYC, you might get a cramped apartment with roommates vs. your own house in Houston. Same with the transportation: tax-subsidized subway fares (and those taxes are ignored in the calculations) vs. your own nice car/truck/SUV.
By the calculations in this study, if you move from NYC to Houston and spend the tax savings on a better house and car, your life got worse because their percentage of your income went up! 🙄
Conversely, using the methodology of this study, NYC can zoom up to #1 by jacking up their taxes high enough to leave less than 40% of income available to their citizens for housing and transportation!
As I've said on this blog before, spending on a luxury vehicle (including depreciation) is *not* a basic cost of transportation, yet they include it in their figures. A person can get around Houston quite cheaply with a used Toyota Prius if they choose to. The fact that lots of people choose to splurge their extra discretionary income on a nice ride does not mean Houston is an expensive city to get around! The same line of thinking would say that people in West Hollywood spend a lot on clothes, so they must not have access to affordable clothing! 😅
According to this study, if you move from Houston to LA, you'll actually save money! Could that be because, after taxes, you'll just have less money to spend?
Also according to this study, if you move from Houston to San Francisco, you'll reduce housing and transportation from 49% of your income to 42% of your income! And yet for some reason, masses of Houstonians don't seem to be picking up and moving to San Francisco?
Comparison
of the costs of living in Houston v New York (MSA)
The test
of whether one metropolitan area is more expensive than another is the cost of
living --- the cost of all goods and services, not only housing and
transportation. The latest regional price parity (RPP) data from the US
Department of Commerce, Bureau of Economic Analysis indicate that the New York
metropolitan area has an RPP of 122.3 for all items (100.0 being the national
average). The Houston metropolitan area has an RPP of 101.7. The cost of living
for renters is thus 20 percent higher in New York than in Houston.
Other
factors would make this difference even more. The just-issued 16th Annual Demographia International
Housing Affordability Surveyindicates that the median house cost in
New York is 50 percent more expensive than in Houston (comparison of the Median
Multiple, the median house price divided by the median household income). This
is a bigger difference than among renters, with New York median rentals being
30 percent higher than in Houston, according to the 2018 American Community
Survey.
Finally,
state and local taxes are far higher in New York than in Texas. According to 24/7
Wall Street, New York taxation is about two thirds higher than in Texas.
New York has the highest state and local taxes according to this analysis,
while Texas ranks 45th.
Finally, just a self-reflection question for Texas Monthly: are you still actual critical-thinking journalists, or just clickbait publishers now?...
Three perfect days in HTX, growth forecasts, increasing our density, reducing homelessness, protesting property taxes, and more
Happy New Year/Decade everyone! Hope you enjoyed your holidays as much as I did (OC/LA w/ family). Lots of backlogged smaller items, but before we get to them, a short word about our sponsor: if one of your new year's resolutions is to save big money on electricity this year, My Best Plan is incredible at absolutely optimizing the lowest-cost electricity plan for you. I've known David over there for years (fellow Rice MBA), and his optimization algorithm is the best, bar none. And completely unbiased too, which can't be said for some of the other optimizers out there that have been uncovered as fronts for electricity marketing companies. Send him (or me) your latest electricity bill to get an estimate of your potential savings - it's free, and you have nothing to lose while potentially saving hundreds or even thousands of dollars (as he's saved me over the years).
On to this week's items:
The Greater Houston Partnership has released its 2020 Employment Forecast. Only time will tell if their vision is 20/20... (sorry, couldn't help myself! ;-)
Speaking of density, the City is moving forward with plans to allow more density (reduced setbacks and parking) near transit, but Michael Skelly doesn't think they're going far enough. I think it's a modest start that can be expanded incrementally to minimize opposition.
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).
ULI finally respects Houston, better federal transit funding, growth, rankings, New Zealand, and more
Lots of big news this week about TXDoT's proposed expansion and revamping of I45N, including eliminating the Pierce Elevated downtown, but I'm going to hold off posting about it until I get a chance to go to the Tuesday public meeting information session. Instead let's clear out some smaller misc items this week:
ULI writes a positive article about Houston! (who would have predicted?) I think planner attitudes are starting to turn our way as they see how vibrant and diverse our open approach is. Goes into detail about Houston’s approach to land-use regulation. Whenever you hear criticisms of the "Houston way" of development, send them this article. Hat tip to Josh.
“Proponents of “the Houston way” argue that its combination of patchwork regulation and local control provides valuable flexibility to respond quickly to market shifts and reduces costs for developers, while still protecting neighborhoods’ character and ensuring quality in the built environment.”
GHP released their new April Economy at a Glance report with a deep analysis of Houston's population growth over history and where we've ranked over time as well as job and airport growth updates.
Speaking of airport growth, the Wall Street Journal did a good article on the expansion of international flying from Houston. The newest example is that Air New Zealand is coming to Houston! A big international feather in the cap for Houston. It will allow easy routings between ANZ and the eastern and southern U.S. as well as parts of Latin America and the Caribbean. So with this Air New Zealand flight Houston is one of five cities in the world connected to all continents except Antarctica (treating ANZ as one continental region), and the only one in the U.S.! (if you're wondering how that's possible, it's because the other U.S. cities with flights to Australia or New Zealand - LA, SF, DFW - don't have flights to Africa, and we do)
"Some of the others in our top 10 are not as renowned as tech centers, but have experienced rapid growth over the past decade. The biggest surprise may be No. 4 Houston, which enjoyed a 42.3% expansion of jobs in tech industries and a big 37.8% boost in STEM jobs from 2004-14. Much of the growth was in the now sputtering energy industry, but also medical-related technology, which continues to grow rapidly. Houston is the home to the Texas Medical Center, the world’s largest concentration of medical facilities. It also ranks second to San Jose in engineers per capita."
Surprisingly simple congestion solution, Houston dominates web hosting (?!), H-town accolades, low taxes, and more
It's been a while since the last post with smaller misc items, and they've been stacking up so much I'll need to spread them over at least two posts and possibly more. Here we go with the first round:
Event announcement: Jeb Brugmann will be speaking on "Can India’s Cities Be Made to Work?" this Wednesday night at Asia Society Texas. Details here.
Great Chronicle op-ed today by a Rice student on how they came to love Houston over their four years here.
Excerpt: "Where I had once seen a homogenized concrete blanket, I now see a diverse quilt with intricate and innumerable connections. Each section of Houston, from Chinatown to Midtown, not only forms a distinct and unique town unto itself but adds to the color and character of the rest of the city. Taken together, they form the most dynamic city in America. My hometown of Albuquerque might cherish its past and tradition, but Houston constantly evolves toward the future. To outsiders, this makes Houston look like an unplanned mess, but those who live here know to embrace the lack of predestined plan. It is why the city eschews zoning laws with pride."
In the surprising stats category, Houston is the #1 web hosting city, with 1 out of every 20 sites (out of the million most popular) hosted here. Hat tip to Nathan.
Finally, let me end with this great TED talk on reducing traffic congestion based on the congestion charge experiment in Stockholm (hat tip to Jay). A token 1-2 euro congestion fee in the core reduced cars by 20% and nearly eliminated congestion. Because traffic congestion is nonlinear, just a small reduction in cars can lead to a large reduction in congestion. It incentivized a lot of people with schedule flexibility to shift their trips outside of rush hour. Also, even though it was very unpopular at first, it quickly became overwhelmingly popular with 70+% support. I suspect it's politically impossible, but I think something similar for freeways coming inside the loop or getting on the loop at rush hour could have a similar impact here. Something to ponder...
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.
