Austin Contrarian

Legacy costs

2009-07-18T15:43:56-05:00

Here's a thoughtful piece from Aaron Renn on an unintended consequence of the Clean Water Act. EPA mandates are forcing Cleveland to spend $5 billion to overhaul its sewer system. That's a lot of money for any city, but especially for a struggling rust-belt town. Cleveland will be forced to raise water and sewer rates dramatically, and probably a bunch of other taxes, too.

Cleveland can't go anywhere, but its residents can. (This is a city where the police and firefighters openly celebrated an Ohio Supreme Court ruling that allows them to move to the suburbs.) Renn predicts -- accurately, I think -- that the higher taxes will speed up the depopulation of Cleveland as homeowners have one more reason to move to the suburbs. In fact, the mandate will kick the city twice: Cleveland must not only raise taxes, but it will lose money that it could have spent on other improvements that would have attracted suburbanites back to the city.

Cleveland needed to make dramatic improvements in water quality; after all, this is the city whose river famously caught fire in 1969 (which itself provided much of the momentum for the Clean Water Act). But the Cuyahoga is now clean; residents fish from it, in fact. Spending another $5 billion to get that last 10% improvement is a bad use of money when Cleveland has more pressing needs. And it is counter-productive to drive residents to the suburbs to leave rotting infrastructure sitting unused in the central city.

Renn suggests that the federal government assume the cost of replacing ancient sewer systems. That might be the only solution. The federal government has no incentive to weigh costs and benefits accurately when it can simply issue a mandate. And the moral hazard risk is smaller than one might think: the city's main "crime" is being old enough to need a new sewer system.

Guarding against strategic behavior by a city is tricky anyway since, again, its residents can simply move when things get bad. Rather than stick central cities with crippling legacy costs, it makes more sense for the federal government to issue reasonable regulations and pick up the tab for unforeseen costs.

Here's a strategy for preserving the Warehouse District

2009-07-18T14:47:10-05:00

I’ve seen only two serious proposals for preserving the Warehouse District. Neither, it seems to me, has much chance of working.<

Both involve preserving the entire district (the precise boundary of which has yet to be defined). The first strategy is to designate the district as a historic district, which would give the property owners tax abatements but no other compensation. The second is preserve district properties but compensate property owners with transferable development rights. These would be credits for additional floor-to-area ratio (FAR) that could be sold to developers elsewhere to increase their entitlements.

But I think the property owners would bitterly resist both. Neither provides enough compensation to make them happy. Transferable development rights would have little value because FAR is not particularly scarce downtown. Because approving a district over the property owners’ objection would require a super-majority vote on Council, neither is likely to happen.

But I think there might be a way for the city could do this on the cheap without any contentious public hearings.

The individual lots in the Warehouse District are too small to redevelop unless they are assembled into larger lots because you can’t get much density with just a partial block. Because the blocks in this district are so short (only 300’ or so), a developer would probably have to assemble most or all of a half-block. If the city were to purchase conservation easements from strategically located property owners — in the middle of the blocks, say — it could forestall the assembly of large parcels and thus the possibility of redevelopment.

At first blush, this might seem an expensive strategy. Property owners would demand a premium to sell a conservation easement on their lots. After all, if a developer were to approach them to assemble a large tract, they would demand a premium — which the developer would have to pay because it would need every lot on the block.

But a conservation easement would be different. The city would only need one or two per block. Once it bought one easement, the redevelopment premium for the other properties would vanish.

Suppose the city were to approach three owners of centrally-located lots. It could offer the following deal: “We will buy one, and only one, conservation easement. We will compensate you with tax abatements and no more than $_________ in cash. Let the (open, multi-round) bidding begin.”

And property owners should bid down the price. Getting cash and a permanent tax abatement in exchange for continuing business as usual is a pretty sweet deal. But even if a property owner wanted to hold out for a redevelopment premium someday, he’d have to worry about his neighbor. If his neighbor took the deal, then the property owner would lose forever any chance of a redevelopment premium and the cash and tax abatements. No, he’d be better off trying to underbid his neighbor.

Open, multi-round bidding would drive down the cost of the conservation easement. In fact, I’m not sure there’s an equilibrium price above zero.

Note this strategy would not require any rezoning, special districts or even public hearing, other than authorization and approval of the purchase.

Perhaps the property owners could collude to avoid being pitted against one another. A high initial offer might cause one to break ranks, though.

If this strategy succeeded, I’d still offer all of the property owners tax abatements in exchange for agreeing to a historic district. The city shouldn’t be too prickish.

Reburbia

2009-07-17T00:54:39-05:00

Jude points to the Reburbia competition, a design competition "dedicated to re-envisioning the suburbs." From the competition website:

In a future where limited natural resources will force us to find better solutions for density and efficiency, what will become of the cul-de-sacs, cookie-cutter tract houses and generic strip malls that have long upheld the diffuse infrastructure of suburbia? How can we redirect these existing spaces to promote sustainability, walkability, and community? It’s a problem that demands a visionary design solution and we want you to create the vision!

"Visionary design" is all well and good when you're working on a blank slate, but it matters very little when you're trying to retrofit whole subdivisions. Rising energy prices might create demand for denser and more efficient suburbs someday. That doesn't mean we will get denser and more efficient suburbs, though. The obstacle will be the homeowners who like things the way they are, and there will always be lots of homeowners like that. Sure, they might agree that other homeowners should live in denser and more efficient suburbs, but they won't want their own subdivisions retrofitted with greater density, no matter how visionary the design.

As energy becomes more expensive, those who want to live closer to work or to live in smaller, more efficient apartments or condos will move. Those who stay won't want their neighborhoods to change. I don't believe that central Austin neighborhoods, for example, will ever welcome greater density in the neighborhood interiors, no matter how high land prices get. If density can't get any traction in central neighborhoods where density makes the most sense today, I don't see it ever getting any traction in suburban neighborhoods. Great design won't entice homeowners in suburban subdivisions to cancel covenants, support rezonings, and make the other hundred changes that would be necessary.

Or perhaps I'm just too pessimistic.

Watch what people do, not what they say

2009-07-15T16:21:09-05:00

A mischievous Katherine Gregor posted this piece about Berkeley’s environmentalist NIMBYs on the ANC listserve just before the 4th of July weekend. The debate over there is just now petering out.

The point of the piece was not that all environmentalists are NIMBYs. Just the opposite, in fact. Berkeley activists have blocked new housing and development for many years using environmentalist and affordability rhetoric. It finally occurred to the more thoughtful environmentalists in the area -- the sort of people who, you know, actually worry about the environment -- that if Berkeley doesn’t make room for newcomers, those turned away will not teleport into another dimension but instead will find some other place to live. Probably in distant suburbs where they will eat a lot of green space and burn a lot of gasoline. It nicely illustrates the principle that you should watch what people do, not what they say. If you are a green then you will fight for denser infill development at least some of the time. If you claim you are a green but fight infill density tooth and claw, then you are not a green; you are merely anti-growth.

We don’t normally see environmentalist rhetoric deployed in small, garden-variety neighborhood spats. Homeowners in those kinds of disputes are likely to be perfectly honest about the fact that they don’t want new people or a different class of people in their neighborhood, or that they like things just the way they are, or that they’re worried about their property values. It’s not always pretty, but at least it’s honest.

An infill developer's perspective

2009-07-15T12:28:41-05:00

I do not have any firsthand experience with the development or permitting process in Austin. Frequent commenter "Don Johnson," a local infill developer, does. He left the following comment in response to my entry on Austin's gerrymandered zoning districts. I think an infill developer's perspective on the development process in Austin is interesting, so I repost it here.

If I may take this opportunity to vent a little more about our subdivision process here in Austin and why central urban infill is so difficult. The owner of Red Bird is in store for much more than this zoning fight. Even if they are granted SF3 they can look forward to a subdivision process where they dump about $20k fee-in-lieu of water quality controls and detention if they can't get a waiver. They will need to hire an engineer. It boggles my mind that Austin Code currently expects residential lots to make room for detention ponds and water quality controls and how high the fees are to bypass this. Imagine your residential street actually lined with big pits in every front yard like you see outside of commercial properties. Not to mention the argument that this piecemeal approach to detention can actually have negative effects on downstream flow. "Regional" detention and WQ seems more rational; i.e., build a larger facility to serve the neighborhood as a whole (which allows for a more macro design approach).

Then you have the ten subdivision reviewers who seemingly have conflicting goals in what they want to commandeer or impose on the applicant. You have the ROW reviewer wanting to commandeer 10' of property at the frontage, the transportation reviewer wanting you to build sidewalks to nowhere, the electric reviewer wanting to commandeer another 10' in easements, and heaven forbid you have any trees because you can't build near them or cut them down (although the electric company may cut it down after you try to save it). Then throw building set back requirements, impervious cover limits, and the McMansion envelope on top of everything. Your clean palate dwindles down to an unworkable anomaly in the end and hence some of the weird $400k houses around town with single car carports and terrible layouts. I won’t even go into some of the funny catch-22 scenarios that come up between reviewers leaving the applicant to sort it out in order to move forward.

What you end up with is really difficult use of space, and you are in it for about $20k to $30k in city fees and related expenses as well as 6 months minimum in holding costs before you even start really. Or maybe you are in for more than that if you were smart enough to include an architect in the process so that you can start heading off the design problems early. All this for something with such subtle impact as taking a 20,000sf lot and cutting it in half to build two duplexes instead of one (and really with the same exact limits of construction pre and post subdivision, just with an extra two residents).

You would also be amazed at how many lots the city considers "illegal". Go look at any TCAD plat map and look around for "tildes" that bring portions of lots together. Or when the lot legal description reads as part of two lots (Examle: W25ft of lot 24 and E25ft of lot 23.) This would be filed under the "landmine" comment [in this entry -- AC] as well. This can take you down many an unexpected road due to grandfathering scenarios, and notification issues that are built into code, as well as more carrying costs as it gets sorted out. I won't get into it, but beware. Trust me.

It sure is fun I'll tell you what. The sad part is that by the time you actually start concentrating on the house design and construction, you have used up about 60% of your juice (energy and emotion), and really you need everything you’ve got in construction.

People not involved in this stuff will brush all of this off and paint builders/developers as greedy for complaining, but I'm telling you it is almost impossible to get from old stock to newer up to code stock in a streamlined affordable manner because of our system in Austin. All the while the neighbors are nipping at your heels on top of this. And this is why you see trees go down on Saturday. The builders would love to stay off trees (they add value), but every other code seemingly begs you to cut down trees. That is simply one negative manifestation, though.

Gerrymandering

2009-07-14T23:03:27-05:00

Although I've been paying a lot of attention to the Red Bird Lane case lately, there is nothing unusual about it. Austin homeowners are always up in arms over proposed zoning changes. And who can blame them? Our land-use regulations have conditioned homeowners to expect "protection" from every piddling change in use.

Take our residential zoning. Ignoring the Lake Austin district, there is Rural Residence, SF-1, SF-2, SF-3, SF-4A, SF-4B, SF-5 and SF-6. If I counted right, that's eight. And then we have six different multi-family districts. Fourteen grades of residential districts. Oops. I forgot the mobile home district.

But fifteen districts apparently are not enough for us to make the really fine distinctions needed for a happy, harmonious city. No, we also have historic district overlays, waterfront overlays, mixed-use and VMU overlays (these aren't the same thing), NP combining districts, traditional neighborhood districts, neighborhood conservation combining districts, transit oriented development -- many of which we had to invent because we had squeezed too much flexibility out of the land-use code. Then there is the raft of special uses, including "urban homes," "cottages" and "secondary apartment special uses." The McMansion ordinance that applies to central Austin. And let's not forget all of the private and public covenants extracted over the years in exchange for rezonings, the equivalent of land mines abandoned in an old battlefield.

We make these fine distinctions, of course, so we can vary the permitted uses from block to block, sometimes from lot to lot. (Here's an example of gerrymandered commercial uses on South Lamar.) An SF-2 lot sits next to an SF-3 lot with a restrictive covenant. Both are in an NP-combining district that allows secondary apartment special uses but not urban homes or cottages. On the rear of the block are three different flavors of commercial mixed-use-NP and multi-family zoning, while one block over from that is a mixture of MF-2 and MF-3 and SF-5, and a block over from that a small infill "urban home" neighborhood. Four-plexes here, duplexes and single-family homes there. If you kick a can in this town, it will land in a different district. This is not "zoning"; it is gerrymandering.

We don't need to create a separate district for every flavor of housing. That has just gotten us a byzantine patchwork of stifling micro-regulation. I see no evidence that it has enhanced the quality of our housing stock or the appearance or livability of our neighborhoods. And this over-regulation ultimately is self-defeating. Regulations shape expectations. If every lot in a neighborhood can accommodate a single-family home and a duplex, then the average homeowner won't get mad when a neighbor starts building a duplex. But eliminate the duplex entitlement and that same homeowner will go ballistic if someone asks for it. Zoning entitlements have a strong endowment effect, which should be no surprise since they are in a sense a collective property right. We've created the expectation that we can and will recognize trivial distinctions between uses. It is no wonder that land-use issues are so contentious in this town.

Back and forth

2009-07-14T05:23:08-05:00

It never surprises me to hear suburban commuters bash congestion tolls. But I am surprised when a sophisticated transit blogger bashes them. Yonah Freemark, who writes the very good the transport politic, is the guilty party. He and Ryan Avent have been going back and forth and back again.

Yonah's objection is equity:

A huge percentage of the U.S. population pays far too much for transportation; to put it simply, most working adults have no choice other than to own a vehicle and often to drive it dozens of miles every day. Making driving more expensive is a great way to devastate the already impoverished.

It’s true, tolling highways would save “money, time, lives, and emissions.” But it would also sacrifice the mobility of a large segment of America, because the reduced congestion would be a result of the poor and the middle class choosing not to drive because of expense, not because of choices made by the wealthy.

He argues that our public transit systems are too underdeveloped in most places to cure this inequity.

Ryan responds with several good points, but I want to elaborate on why the regressivity argument leaves me cold.

First, congestion tolls are less regressive than toll opponents claims. The low-income do pay tolls, which means they value the time savings more than the price of the toll. Plenty of low-income drivers take the toll lanes on SR 91 in California, for example. The reason many do is that they have little flexibility in their schedules. They have to be at work or at the daycare center at a specific time. To compensate for congestion, they must leave much earlier to guarantee a timely arrival. They thus suffer two types of costs: scheduling delays and travel delays. (The value of scheduling delays is very hard to measure, which means that studies like the TTI report almost surely understate the cost of congestion.) Affluent professionals often have more flexibility.

Second, tolls encourage a number of shifts. Yes, shifts to transit, which seems to be Yonah's main concern, at least when the transit system is underdeveloped. But they encourage other shifts, too. Shifts to other routes and shifts to other times. Commuters are the least likely to be nudged to other routes or times. The most sensitive are those who use congested roads for local trips. Take the soccer mom who hops in the SUV and enters a congested highway to get to the grocery store a mile down the road. She imposes enormous costs on others. Tolls make her internalize those costs and nudge her to use the local streets.

Perhaps this is regressive. But it doesn't evoke much sympathy from me. A congestion toll is a charge for getting in everyone else's way. Behind every claim of regressivity is the assumption that drivers are entitled to get in everyone else's way even when it is not worth all that much to them.

And that leads to my last point. The regressivity argument wouldn't move me even if it were true. This is one of those cases in which our desire for efficiency should trump our concern with regressivity.

Here's an apt analogy. An amusement park owner decides to throw open the gate to all comers on a first-come, first-serve. Naturally, a long line forms. But this isn't a typical line where newcomers go to the back of the line. No, in this queue, newcomers elbow their way to the front of the line and force everyone behind them to wait a little longer.
Naturally, chaos ensues. No one leaves for the park knowing how long it will take to get in. There is "queue rage" and general aggravation. The park owner loses business. And many low-income parents find themselves worse off because they have a smaller window of free time and dislike the chaos and aggravation as much as anyone else. (I've always thought it patronizing to assume that low-income drivers put such a low value on their time and aggravation.)

Now, in the real world, the queue would never work this way. Those at the rear of the line would use informal sanctions (fist fights) to deter queue jumpers. And, in fact, there would be only a short line to get into the park in the first place because the owner would charge for admission.

But this is exactly the crazy system we use to ration highway access. For whatever reason, our cultural norms have evolved to tolerate a free-for-all. In almost every other situation we ration scarce goods using price. Sure, that's regressive in the sense that the poor have less money to spend on things. But we tolerate some regressivity elsewhere because we recognize that (1) the gains in efficiency outweigh the equity concerns; and (2) there are better ways to ensure an egalitarian distribution of wealth than creating artificial shortages, chaos and mayhem.

Regressivity is not the be all and end all.
Cross-posted at Urban Returns.

TTI hyperbole

2009-07-14T05:15:45-05:00

There is no question that congestion is a serious problem in this country -- and a crippling problem in some cities. Nor is there any question that congestion is much worse than it was ten years ago, even if high gas prices and the recession have caused it to level off in some places.

But the Texas Transportation Institute is guilty of a bit of hyperbole when it announces that "[t]he overall cost [of congestion](based on wasted fuel and lost productivity) reached $87.2 billion in 2007 – more than $750 for every U.S. traveler."

TTI uses free-flow traffic as its baseline for measuring congestion. In particular, it defines "Delay per Peak Traveler" to be "[t]he extra time spent traveling at congested speeds rather than free-flow speeds divided by the number of persons making a trip during the peak period." (Summary report p.1)

Honestly, free-flow speed is not the right baseline. There is no realistic, hypothetical state of the world in which we would experience perfect, free-flow traffic everywhere. It would not be feasible to build enough roads (or charge enough for them), particularly since free-flow speeds would entice more drivers onto the road. So to imply that there is $87 billion of waste to be saved -- and I think TTI does imply this -- is simply wrong. The TTI report makes the news every year thanks to this spectacular estimate, but this one probably belongs on the tabloid pages.

Anthony Downs makes this point in Still Stuck in Traffic, pp. 23-24 (available on-line at Google Books). He makes several other reasonable criticisms of TTI's methodology. Hedoes recognize that TTI's methodology and findings are useful, and he does not dispute (nor do I) that congestion is a serious problem that we can't simply build our way out of.

(Edited and cross-posted from Urban Returns.)

Density and congestion, etc.

2009-07-14T05:02:38-05:00

Whenever I see new data on cities, I'm always tempted to match them to the cities' weighted densities, if for no other reason than no one else does it. And so with the Texas Transportation Institute's latest report on city congestion. TTI found a wide range in hours lost due to congestion per year -- e.g., in 2007, Lost Angeles drivers lost an average of 70 hours per year to congestion; Cleveland drivers, just 12. (The relevant TTI table is here (pdf).) Does weighted density partly explain this variation?

The answer is "No," based on my admittedly simplistic analysis.

Below the jump I have three charts plotting, for 33 cities, weighted density, standard density and total population against hours lost per traveler to congestion. (The 33 cities include the 31 largest urbanized areas -- excluding New York City, which is always an outlier -- and Austin and Honolulu.)

As the scatter plot shows, weighted density explains virtually none of the variation in congestion (adjusted R² = .06). Standard density explains a bit more (adjusted R² = .19). And total population, a bit more than standard density (adjusted R² = .28).

I expected weighted density to be a key explanatory variable. And it would have been more exciting to announce that weighted density matters, either one way or the other. But the first chart suggests it does not -- a city with a high weighted density is no more likely to be highly congested than a city with a low weighted density (and vice versa). While not particularly exciting, the fact that weighted density doesn't seem to matter is important, too.

As I routinely say when I put out stuff like this, don't take it too seriously. This is a small sample. More importantly, some very smart people have employed some very sophisticated methods to analyze the variation in congestion. The absolute size of the metropolitan area population is a key factor. The rate of growth matters a lot, too, since fast-growing cities have trouble keeping up with rising demand for roads. Higher standard densities are associated with increased congestion, although the strength of the association is disputed, I think. And, of course, economic vitality plays a big role -- peak-period congestion means a lot of people with somewhere to go, which implies a healthy economy. (Anthony Downs has a good discussion of these issues in Chapter Three of his book, Still Stuck in Traffic, most of which Google Books has helpfully published on-line.)

(I've uploaded to Google docs a spreadsheet showing total population, weighted density, standard density and annual hours per traveler lost to congestion.)

Sorting

2009-07-14T03:56:59-05:00

I've written recently about Glaeser and Resseger's research showing that workers in skilled cities tend to become more productive as their cities grow while workers in unskilled cities do not. I've also written about Abel et al.'s paper showing that while workers in all cities tend to become more productive as their cities grow denser, workers in skilled cities are especially likely to benefit. The latter receive, on average, three times the productivity gains of workers in the least skilled cities. Growth and densification are good if yours is a highly skilled city.

But the Glaeser and Abel papers also raise another possibility: perhaps skilled cities are better off keeping out the unskilled than growing without bound.

This is arguably an implication of their work. (And one I don't like, by the way.) Both Glaeser and Abel define highly skilled cities to be those with high percentages of college-educated workers. The higher the ratio of B.A.s to high school grads, the more skilled the city under their definition -- and the more the workers benefit as the city grows.

One way to keep a high ratio of skilled to unskilled is to price out the unskilled. The most effective way to price unskilled workers out of a city is to keep the cost of housing high. And, indeed, the highly-skilled cities on the coasts are adept at (and notorious for) using rigid land-use regulations to inflate home prices. (Or were until recently; more on that later.) The incumbent homeowners in these cities of course benefit from a tight housing supply since it raises the value of their properties. But perhaps their skilled workers benefit too.

I speculated about this last October without the benefit of Glaeser ir Abel's research:

Perhaps the elites in the superstar cities sense it is better to surround themselves with a uniformly high-quality workforce. They want to spend their time with other elites; letting in lots of less-skilled workers would introduce so much static, just as if Harvard were to throw open its doors to anyone with a half-decent high school transcript. In other words, an influx of less-skilled workers might dilute the experience for the high-skilled.

I got my undergraduate degree from Ole Miss and my law degree from Yale. I studied harder at Ole Miss, took harder classes and spent a lot more time with my professors. I thought law school was mostly boring and had a suburban home and the premium cable channels by my third year. But I probably got a better education at Yale than Ole Miss merely by hanging around a bunch of people who were smarter than me. There were economists, physicians, mathematicians, political scientists, a Broadway actor, an Olympic miler and, of course, a bunch of smart new college graduates from all over the country (but mostly from the Ivy League, Standford and Berkeley.). It was a small class of 175. It was impossible not to keep up with new ideas or trends because someone you bumped into would know about them. I wasn't paying a gazillion dollars for the law school classes, I was paying for the spillovers. It was a fair price.

The housing markets in LA, San Francisco and New York function as giant sorting machines. By setting home prices so high, they weed out all but the most skilled -- except for the class of relatively unskilled who are supported by price controls or subsidies. They're using the Ivy League model.

So are they better off? Yes, clearly, if they can shunt the less skilled elsewhere and continue to grow and densify. But it's hard to do both. High prices, in fact, require that the housing supply be kept tight in order for prices to stay high. Otherwise, the new supply of housing would drop home prices and the riff-raff (from their perspective) would come flooding back in. But perhaps merely increasing the density of skilled workers will yield the productivity gains yielded by growth and densification. Their motto could be, "We get smarter, not bigger."

I think this is probably wrong, though. What matters is being close to other people with the same skill set; that's where the knowledge and productivity spills occur. A software developer benefits from having a lot of other smart software developers around; a musician benefits from having a lot of other good musicians around. Adding more software developers or musicians who aren't quite as skilled shouldn't dilute this benefit because we city-dwellers largely control whom we interact with. Firms, in fact, segregate themselves by quality all the time. Deepening the labor pool simply can't hurt. I think cities like San Francisco and New York would be even more productive if they loosened their growth restrictions and allowed in more people.

And even if were true that the San Francisco model can achieve greater productivity without growth, there's always the risk that its sorting machine might break. To wit, a housing market collapse. Skilled workers cash out what they can and move elsewhere. Lower home prices attract the less-skilled who had been priced out of the market. A political and regulatory climate makes the city less hospitable entrepreneurs, who benefit from cheap space and light regulation.

It will be interesting to see what happens to productivity in these wealthy, slow-growth cities as the recession wears on. My guess is that they will have to begin growing vigorously again if they want to recapture the productivity they had at the peak of the housing boom.