Monday, October 23, 2023

Strong Towns is a weird urbanist cult + Tokyo's Houston-like minimal land use regulation

Strong Towns is a weird urbanist cult that can’t produce hard numbers to back up their assertions suburbia is financially unsustainable (how many suburban municipality bankruptcies have you heard of?). If you really think about it, every suburban home has a few tens of thousands of dollars of city infrastructure that go with it (some pavement and pipes), a very reasonable replacement burden from property taxes spread over 30+ years on a multi-$100k home (and most infrastructure will not need to be replaced that often).

That said, this author is not wrong describing what’s happening in Houston with the adapting, densification, and wearing away of deed restrictions. But I would call the statement below a gross over-exaggeration: 
“A municipality deep in decline, facing decaying infrastructure and accelerating poverty can hardly afford lengthy legal battles.”
The metro is booming. The City has challenges but is doing ok, especially vs. many other similar-sized municipalities. The accelerating poverty comment is flat-out wrong – immigrants move here, make a life, and move up and out to the suburbs to be replaced by a new wave of immigrants. And many parts of town are positively booming. Property values move up every year and the City laments the tax cap forcing them to cut the tax rate to keep overall revenue at inflation + population growth – does that sound like “accelerating poverty”? 🙄


A couple of interesting pieces on Tokyo this week along with some excerpts I pulled.
"The median Japanese tenant spends about 20% of their disposable income on rent (in America it's 30%). Rent for a studio or one-bedroom apartment in Tokyo, which Americans are fawning over as "the new Paris," is a quarter of what it is in New York.

In September, when New York City Mayor Eric Adams unveiled his plan to build 100,000 new homes, he pointed enviously to Tokyo's ability to keep "housing costs down by increasing the supply of housing." "How are we allowing Tokyo to do things better than us?" he asked."
"Most American consumers probably wouldn't want to live in the studio or one-bedroom apartments that Japanese people just sort of take for granted," Schuetz said. But, she added, we shouldn't have many of the minimum size regulations we have. Instead, we should let consumers decide what tradeoffs they're willing to make. "Allow the market to build stuff, and the market will figure out what people are willing to pay for," she says. 
Just like Houston does...
"As housing prices have soared in major cities across the United States and throughout much of the developed world, it has become normal for people to move away from the places with the strongest economies and best jobs because those places are unaffordable. Prosperous cities increasingly operate like private clubs, auctioning off a limited number of homes to the highest bidders.

Tokyo is different.

In the past half century, by investing in transit and allowing development, the city has added more housing units than the total number of units in New York City. It has remained affordable by becoming the world’s largest city. It has become the world’s largest city by remaining affordable.
But the benefits are profound. Those who want to live in Tokyo generally can afford to do so. There is little homelessness here. The city remains economically diverse, preserving broad access to urban amenities and opportunities. And because rent consumes a smaller share of income, people have more money for other things — or they can get by on smaller salaries — which helps to preserve the city’s vibrant fabric of small restaurants, businesses and craft workshops. (sound familiar? ;-)
In Tokyo, by contrast, there is little public or subsidized housing. Instead, the government has focused on making it easy for developers to build. A national zoning law, for example, sharply limits the ability of local governments to impede development. Instead of allowing the people who live in a neighborhood to prevent others from living there, Japan has shifted decision-making to the representatives of the entire population, allowing a better balance between the interests of current residents and of everyone who might live in that place. Small apartment buildings can be built almost anywhere, and larger structures are allowed on a vast majority of urban land. Even in areas designated for offices, homes are permitted (this is one of my easy recommendations for traditionally zoned cities). After Tokyo’s office market crashed in the 1990s, developers started building apartments on land they had purchased for office buildings.

“In progressive cities we are maybe too critical of private initiative,” said Christian Dimmer, an urban studies professor at Waseda University and a longtime Tokyo resident. “I don’t want to advocate a neoliberal perspective, but in Tokyo, good things have been created through private initiative.”

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Wednesday, October 04, 2023

Building the New America and Texas' winning approach to housing supply and affordability

Our think tank, The Urban Reform Institute - A Center for Opportunity Urbanism, just released a new report, "Building the New America":

This new report examines the housing trends that are driving today’s migration of people and jobs, and suggests a strategy that better fits the aspirations of most Americans. 

You can download the whole report here.

It includes my sidebar on Texas' winning approach to housing supply and affordability, which I'm including in full below for this week's post:


Texas, renowned for its vast landscapes and independent spirit, has adopted a unique approach to housing development and affordability that sets it apart from many other states. Embracing a decentralized and market-driven approach, Texas utilizes three key strategies to keep housing plentiful and affordable:

  1. Texas does not grant counties restrictive zoning authority (only cities)
  2. Texas enables municipal utility districts (MUDs) to finance development
  3. Texas encourages the competitive growth of private master-planned communities

This distinctive approach has numerous virtues that contribute to a flourishing housing market that is significantly more affordable than most states. 

Texas does not grant counties restrictive zoning authority

Texas stands out among states by not granting zoning authority to counties, preferring a decentralized system that places greater power in the hands of property owners and developers. This approach fosters innovation, flexibility, and adaptability in housing development. Developers have the freedom to respond to market demands efficiently, resulting in a more diverse range of housing options that can cater to various income levels and preferences.  By not having zoning authority, developers are able to build homes and apartments without the restrictions that are often imposed by local governments. This has allowed Texas to build more homes and apartments than other states, which has helped keep housing prices down.

Instead of traditional zoning, neighborhoods are protected after development by private deed restrictions attached to the land and enforced by home-owner associations (HOAs).

Texas enables municipal utility districts (MUDs) to finance development

Municipal Utility Districts (MUDs) play a crucial role in financing development in Texas. MUDs are special governmental entities that provide essential infrastructure, such as water, sewer, and roads, to new communities. They issue tax-exempt bonds to finance these infrastructure projects, which are then repaid by homeowners through property taxes or utility fees. This financing mechanism allows developers to build necessary infrastructure upfront, expediting the development process and reducing risk and financial burdens on local governments. 

Like cities, MUDs build and operate water, sewer and drainage facilities; enforce water and sewer rules; enforce deed restrictions; collect garbage; hire law enforcement officers to protect MUD property; buy and sell water rights; finance roads and firefighting facilities; use the power of eminent domain on a limited basis; and own and operate parks and recreational facilities.   They have shown themselves capable of providing high levels of service for everything from wastewater and solid waste treatment to flood control and emergency services.

MUDs are tightly regulated by the Texas Commission on Environmental Quality, and they are subject to the same laws as cities and counties with respect to open meetings, open records, public bids, nepotism, elections, public official ethics, attorney general approval of bonds, investment of public funds, setting debt service and maintenance tax rates, limitations on expenditures of public funds, and conflicts of interest.

By leveraging MUDs, Texas promotes the timely development of new communities and the expansion of existing ones. This approach not only ensures that residents have access to essential services from day one but also encourages developers to create well-planned communities with amenities demanded by the market. The ability to finance infrastructure development independently contributes to the overall affordability of housing in Texas, as the cost burden is shared among residents over time, rather than being shouldered entirely by developers or taxpayers.

“MUDs have been crucial in allowing an adequate housing supply and keeping home prices lower than in other high-growth states. Without MUDs, or some other means of financing local infrastructure to accommodate a rapidly expanding population and escalating housing demand, new-home construction would be severely limited and much more expensive and overall housing costs would escalate. That’s what happened in such high-growth areas as California and Florida, where supply was constrained by local infrastructure development and highly restrictive, costly land-use regulations.”

- Dr James Gaines, chief economist of the Real Estate Center at Texas A&M University

Texas encourages the competitive growth of private master-planned communities

Texas is renowned for its thriving master-planned communities, which offer an enticing combination of amenities, housing options, and quality of life. These communities, developed by private entities utilizing MUDs for infrastructure financing, compete to attract homebuyers by providing well-designed neighborhoods, recreational facilities, parks, and commercial centers. By focusing on a comprehensive approach to community development, master-planned communities foster a high quality of life and a sense of belonging.

The competitive nature of these developments promotes efficiency and innovation, resulting in a wide range of housing options to suit different budgets and lifestyles. From affordable starter homes to luxury residences, master-planned communities provide diverse opportunities for individuals and families to find their ideal living arrangements. The competition between these developers has helped keep prices down and quality up.

In summary, Texas’ approach to housing development and affordability is unique in that it allows developers more freedom than other states. By not giving counties zoning authority, developers are able to build homes and apartments without the restrictions that are often imposed by local governments. Municipal utility districts (MUDs) also play an important role in Texas housing development by providing infrastructure funding without requiring upfront payment from developers. Master-planned communities have also contributed to Texas’ success in housing development by competing fiercely with one another to offer a variety of amenities at an affordable price.  These are the three essential elements of Texas’ housing competitive advantage.

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