Monday, March 27, 2006

Growing cities, sun, sprawl, cars, commutes, skills, youth, the zoning tax and housing costs

How's that for a laundry list of themes? They're from a fantastic NYT profile of one of the biggest thinkers in urban economics today: Harvard professor Edward L. Glaeser. It's a long one (prints to about 10 pages), but well worth taking the time to read. I highlighted huge swaths of my printed copy, but will try to pare it down to the most key excerpts here.
...he has spent almost his entire professional life walking around, and thinking about, cities — seeking explanations why some metropolitan areas thrive and some suffer and what factors make some places pricey and some cheap.
Almost as a rule, Glaeser is skeptical of the lack-of-land argument (driving up housing costs). He has previously noted (with a collaborator, Matthew Kahn) that 95 percent of the United States remains undeveloped and that if every American were given a house on a quarter acre, so that every family of four had a full acre, that distribution would not use up half the land in Texas.
In the years since coming to Harvard — and in the years that have preceded his current work on real estate — Glaeser has methodically examined how transportation, education, crime, weather and sprawl affect the fortunes of America's cities, as if turning over tarot cards one by one... Until recently, cities existed to economize on transportation costs — hence their locations near industries or agriculture to reduce the expense of shipping products by sea or by train. Yet because transport (mainly trucking) costs dropped significantly during the 20th century, location has become irrelevant. In Glaeser's view, cities now exist so that people can have face-to-face interactions or be entertained or consume products and services. For businesses, cities are a place to benefit from a spillover in ideas and to reduce costs by being near other companies.

This evolution, of course, has coincided with a vast American migration toward regions of sun and sprawl. Glaeser likes to point out the close correlation between a city's average January temperature and its urban growth; he also notes that cars per capita in 1990 is among the best indicators of how well a city has fared over the past 15 years. The more cars, the better — a conclusion that seems perfectly logical to Glaeser. Car-based cities enable residents to buy cheaper, bigger houses. And commuters in car-based cities tend to get to work faster than commuters in cities that rely on public transit. (The average car commute is about 24 minutes; on public transportation, it is around 48 minutes.) While many of his academic peers were looking at, and denigrating, how the majority of Americans have chosen to live, Glaeser (though no fan of the aesthetics of sprawl himself) didn't think an economist should allow taste to affect judgment. "You shouldn't go around thinking that all these people are just jackasses for deciding to drive an automobile," he says.

In any case, Glaeser discovered that there can be more to urban success than cars and palm trees. For a city without warm weather and a car-friendly environment, skills are destiny. That is why New York and Minneapolis, with vast numbers of college graduates, have done so well. "Boston would be just another declining, cold, manufacturing city if it weren't for its preponderance of human capital," Glaeser says. And his studies suggest that the more skilled a city's population, the more skilled it is becoming, as entrepreneurs attract skilled workers who in turn attract entrepreneurs. Americans, as a result, are sorting themselves through education and geography more and more with each passing year.
Glaeser has come to believe that changes in zoning regulations may be the most important transformation in the American real-estate market since the mass acceptance of the automobile. In his view, these regulations have essentially created a "zoning tax" that has pushed prices far above construction costs. Very, very far above construction costs.
This is not to suggest that Glaeser wants New York or Boston to become another Houston or Phoenix, where developers build without hindrance and housing, as a result, stays cheap. "I'm pretty sure that Boston and California have gone too far to one extreme," he says. "But I'm not sure that Texas hasn't gone too far to the other extreme." He says he tends to think that officials in the Boston and New York metro areas need to allow for more housing when the market gets tighter again. At the very least, he says, officials should discuss the long-term effects of restricting home building. And there is a bigger point here anyway, he says. Zoning and housing supply ultimately determine not only who lives in a city but also the very nature of these places. Boston, San Francisco and Manhattan are obviously becoming rarefied destinations, mostly for America's elites (Glaeser calls the cities "luxury goods"), with housing floating beyond the reach of the young and the middle class. These cities' economies are in the process of becoming boutique, too, accommodating only the most skilled and privileged. Their desire to limit construction and grow not in buildings and population but in prices has, in effect, begun to shape their destiny. "A healthy city is one that has a healthy mix of demographic groups," Glaeser says. "Shutting out your 25-to-40 year-olds? That feels like a bad strategy for urban innovation."
Homeowners, he points out, have a strong incentive to stop new development, both because it can be an inconvenience and also because, like any monopolist, stopping supply drives up the price of their own homes. "Lack of affordable housing isn't a problem to homeowners," Glaeser says; that's exactly what they want. "The thing you want most is to make sure that your home is not affordable if you own it. And for that reason, there's absolutely no reason to think that little suburban communities with no businesses that are run essentially by their homeowners will make the right decisions for the state as a whole, for the business in the area, for the country as a whole."
Basically, his ideas are, for the most part, a giant endorsement of Houston's situation and approach (including a lack of zoning), despite that caveat paragraph. Our one weak point has been attracting skills, based on perceived weaknesses in quality of life (heat, humidity, bugs, aesthetics, air pollution, etc.), but there is a lot of work going on in this area at the highest levels in our city, and improvements are being made pretty rapidly (well, except for the heat and humidity - but there are rumors Mayor White is developing a super-secret "Mega-Dome" plan under the code name "SafeClearCoolDry" - to be billed to FEMA, of course... ;-)


At 8:41 PM, March 27, 2006, Anonymous Anonymous said...

Going along with his train of thought is something I've been thinking about recently. Why are education and income numbers in Houston and other sunbelt cities not climbing as fast as those numbers found in California and New England. Our economies are booming yet incomes in New England are growing faster than ours by a good measure.

Houston is of course absorbing large numbers of poor uneducated immigrants, but it doesn't explain everything. It is true that many sunbelt cities are receiving out migration from New England and California. However, the individuals who have the most to gain from moving are those whose expendable incomes are the lowest. Cost of living makes a huge difference for them. Upper incomes earners (usually higher educated) aren't as effected by high home prices and thus have less to gain from moving.

The sunbelt gets flooded with average or below average income earners and average and below average education levels from the northeast and California.

However, I don't think this is only a here and there situation. You can point to areas of Houston that have consistently high growth rates in property values (the Villages, West U, Bellaire) that mimic Boston, etc., but on a smaller scale.

At 10:42 PM, March 27, 2006, Blogger Tory Gattis said...

Well, keep in mind that as their middle to lower incomes move here, it lowers our average income and increases theirs. But, like Glaeser said, wiping out your young and middle class doesn't seem like a good long-term recipe for urban vibrancy. They're your pipeline to the future, and growing businesses seek them out as employees. I've heard MA being referred to now as the "Granny State".


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