Sunday, April 24, 2016

Pointless Urbanism: YIMBYs Are The New Yuppies

We need bigger cities because suburbs are bad. The only people who know suburbs are bad lived there with silver spoons in their mouths. The folks who poo-poo suburbs have a geographic choice. Damn all ye working class African-Americans dreaming of a green lawn and a white picket fence but redlined urban for decades.

In light of such a legacy, which land use morphology makes sense? What is geographically just? A rich world defined by arcs of urban epochs:

In 19th-century Paris, photographers rushed to document the last moments of medieval streets and intimate alleys. In London, most urban construction today is perceived as a nuisance rather than a sign of progress, greeted not with nostalgia for the old but frustration in the moment: a closed Tube station, a road diversion, a racket. As the capital grows, it goes through waves of rebuilding, each purporting to address a dominant issue. In the late 19th century it was slum clearance; after the second world war it was the rebuilding of a city devastated by bombing as a physical expression of a new welfare state; in the 1980s the rebuilding was an effort to revitalise the city as a global financial centre. And now — what exactly?

What exactly, indeed. Today's rationale is real estate development as economic development, with the young white, college-educated elites leading the charge. Where oh where will the well-born millennial find the safe suburban in the urban jungle at an affordable price? In the same place where the career banks of boomers find attractive, that's where. The sons and daughters of one big generation fight their dads and moms over urban space. Once again, the privileged decide the fate of the city, as they always have done.

Today's affordable urban hood is yesterday's slum clearance or new financial district. Make way for the YIMBY, today's version of the YUPPIE. Tiny houses cater to the millennial ego the way cooperative living appealed to the boomer sense of social justice. Both approaches made shelter affordable to poor (for the time being) idealists.

As the Yuppies became reviled, so will the YIMBYs. Both groups shout, "gentrification beats concentrated poverty!" Boomer and millennial work together. They sound the same. Both can win as long as everybody else loses.

In the gap generations, the same is true. The impact isn't felt because the demographics are small by relative comparison. The beats and the slackers worked together to monopolize the crumbs of urbanism left over from the boomers and millennials. The same silver spoon critique applies. The numbers fail to add up.

Thursday, April 21, 2016

The Geography of Market Innovation

Government shouldn't pick winners. Deregulate and unleash the market. Taxes distort the economy. Why aren't my free market friends shouting down noncompete clauses?

So the argument goes, without noncompetes, innovation suffers. California mocks that position. California discourages noncompetes. Silicon Valley innovates just fine and thank you. Squash noncompetes and don't worry about innovation. The defense [department] could rest right here.

The obvious rationale for banning noncompetes seems lost on libertarian-leaning Republicans. California is a high-tax state. Fight high-tax states. Since California is tax and spend liberal, banning noncompetes must be bad. Never mind that Silicon Valley anything disproves any devolution fantasy. Big Government birthed Big Tech. Without nonprofit Stanford, the private market chases the diminishing returns of manufacturing.

Noncompete contracts serve the interests of big business. As Ben Chinitiz once wrote, serving the interests of big business hurts the regional economy. Competition is good.

What's good for the goose is good for the gander. How competition saved New York, competition for talent could save the United States. Make America great again. Stop subsidizing captive labor for lazy industry.

Wednesday, April 20, 2016

Before Suburbs, When Cities Were Great

Once upon a time, there were cities with Daniel Hudson Burnham ambition. Published in 1890, the great Alfred Marshall wrote:

When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously.

I love the smell of urban agglomeration in the morning. The very air of the city promises innovation, prosperity, and productivity. Why oh why would we kill the goose laying the golden eggs with sprawl? Proximity, dammit, that's the ticket.

That air the children smelled to learn a trade smelled like dirty, filthy trash. But if the godfather of cluster theory says it is magic, who am I to quibble? Before the automobile, cities used to be so awesome:

There are some photographs taken for Harper’s Weekly, before and after photos of street corners in New York in 1893 and then in 1895. And the before pictures are pretty astonishing, people were literally shin-high or knee-high in this muck that was a combination of street gunk, horse urine and manure, dead animals, food waste, and furniture crap.

Good times. Why would anyone want to leave? Talk to anyone who has a living memory of working in a city manufacturing mill and you'll know. It's like exile in the rural hinterlands. From day 1, everyone tells you to get out of the city as fast as you can. But don't run far. Baba still wants to play with her grandchildren. To complicate that narrative, James Parton (1966):

There is one evening scene in Pittsburg which no visitor should miss. Owing to the abruptness of the hill behind the town, there is a street along the edge of the bluff, from which you can look directly down upon the part of the city which lies low, near the level of the rivers. On the evening of this dark day, we were conducted to the edge of the abyss, and looked over the iron railing upon the most striking spectacle we ever beheld ... It is an unprofitable business, view-hunting; but if any one would enjoy a spectacle as striking as Niagara, he may do so by simply walking up a long hill to Cliff Street in Pittsburg, and looking over into -- hell with the lid taken off.

The city was terribly beautiful. The terrible part is the legacy of the passage. It was terrible. It was beautiful.

The anti-sprawl crowd celebrates the beautiful without acknowledging the dead horses in the street illuminated at night by the blast furnaces. My wife's father grew up in urban Pittsburgh. My father grew up in urban Erie, in poverty. Neither one ever told me to go back to the city. Both were proud they escaped. Fear the city. That's how I was raised.

Today, I don't fear the city. I love the city. I went through some years hating my suburban upbringing, feeling ashamed. I love the suburbs, too. The rural? That was my geography of rebellion. I ran off a few times and did the off-the-grid commune. I felt the Bern. Been there. Done that. Celebrate your normative geography of choice.

Early in the 20th century, the geography of choice:

Following World War I, as the United States grew into a more industrial, urbanized country with a diverse immigrant population, this pastoral ideal became associated with places where the white upper classes would go to retreat from the realities of the city. “Eventually,” Mozingo says, “it became associated with middle-class values, turning the single-family house in the pastoral suburb into an aspirational American object. It’s still quite powerful.” At the time, most corporate offices were still in large skyscrapers near a city’s central business district or in a nearby industrial zone alongside the company’s manufacturing facilities. “Executives were often cheek by jowl with their blue-collar workers,” Mozingo says, “even though they were in generally a nicer building of some kind.”

The migrant is passive, duped into leaving the urban for the suburban. Don't forget, following World War I, the city sucked. For most of time, the city sucks. For most of time, being alive sucked. Let's not get all warm and fuzzy about the romantic rural of the 19th century. Let's be aware of how the romantic rural impacted migration.

The migrant isn't passive. She's the agent of globalization. The world turns on her education. The world turns on her migration.

The move from the urban core to the suburban greenfield wasn't some grand conspiracy concocted by Dwight D. Interstate. People wanted out. Some could. Most could not. To this day, African-Americans desire the suburban dream. Make their suburban dream come true.

Monday, April 18, 2016

Why New York City Is Dying

Population growth is a negative economic indicator. I'm serious, unlike when I write some city is dying. In the United States, the largest metros with the weakest population growth do much better in terms of prosperity than the largest metros with the strongest population growth. Such "dying cities" can and do perform better than "thriving cities". The boom in Reading's (Pennsylvania) population came with a dramatic climb in poverty rate. Last time I checked, a higher poverty rate was a negative economic indicator. Setting population growth as a policy goal might be the pinnacle of idiocy. I'm happy to leave such concerns to economist Ed Glaeser.

After I have turned population growth on its head, Luke Juday (Demographics Research Group, University of Virginia) does me a solid and turns net positive domestic migration on its head:

While domestic migration is still a good indicator of demand and growth in most counties, it’s less helpful in counties that specialize in a particular age group. Dense cities with limited ability to grow may attract young migrants, causing them to have high natural increase, which in turn pushes out older migrants, lowering the city’s death rate. Conversely, many rural and exurban counties that have become retirement havens are experiencing the opposite effect. Loss of (and inability to gain back) a young adult population has left them with chronically low birth rates and an aging population. This results in rapid natural decrease and population loss, which is then offset by a constant influx of older adults and retirees taking advantage of the low cost of living and slow pace of life.

Because New York City is a magnet for the young and well-educated, it is dying (net outmigration). Every community wants to attract and retain young adults with college degrees. But without robust immigration, succeeding could inform demographic decline. That's right. Plugging the brain drain will cause your town to start dying.

A better way to stop brain drain is to stop educating residents. Less educated young adults are less likely to leave home. Have brain gain cake and eat it too without fear of population loss. Hooray!

In the case of New York, domestic outmigration indicates economic vitality and success. If the population of college grads started going down, I would get concerned. For now, there's the deep talent pool of NYC and then there is everywhere else. Dying never looked so good.

Wednesday, April 13, 2016

Exceptional Texas Cities Join the Rust Belt in Legacy Cost Hell

As Chicago grapples with its Detroit moment of infamy, a larger and more structural problem emerges nationwide. Yes, both the City of Chicago and the State of Illinois struggle with pension funding. They have company that includes a few surprises:

The Stanford study found that the states of Illinois, Arizona, Ohio and Nevada, and the cities of Chicago, Dallas, Houston and El Paso have the largest pension holes compared with their own revenues. ...

... Several cities and states, including California, Illinois, New Jersey, Chicago and Austin, would need to put at least 20 per cent of their revenues into their pension plans to prevent a rise in their deficits, while Nevada would have to contribute almost 40 per cent.

What's up with the debt mess in Texas? Dallas, Houston, and El Paso are in the same league as Chicago concerning the "largest pension holes". Greenfields are the new brownfields. The Sun Belt looks great until legacy costs catch up with the boom towns. The Texas Triangle may soon resemble one gigantic Rust Belt inner-ring suburb.

The Sun Belt boom is larger scale sprawl, moving where the land is cheaper. The land is cheaper because the politics are nascent. An old favorite of mine, "China's Golden Cities":

Being near the coast is a help in China, because of access to external ideas and because coastal areas were permitted to experiment with reform first. An intriguing pattern is that governance is best in coastal cities that had very little industry when reform began in 1978. Shenzhen now has the highest per capita GDP in China. The same holds in Jiangmen, Dongguan, Suzhou--all were industrial backwaters in 1978, and responded to China's opening by creating good environments for private investment and learning from outsiders. Cities that already had industry tended to protect what they had and reform less aggressively.

To repeat, "Cities that already had industry tended to protect what they had and reform less aggressively." In some ways, Houston is like Shenzhen. Economic life was elsewhere. Texas was a backwater. Meanwhile, the Rust Belt already had industry and tended to protect what it had. Remember Lee Iacocca and the Chrysler bailout. Detroit kicked the legacy cost can down the road. Houston responded by creating good environments for private investment and learning from outsiders.

Now the tables have turned. Rust Belt cities must respond by creating good environments for private investment and learning from outsiders. Houston, and other Texas cities, protects what it has and reforms less aggressively. Greenfields are the new brownfields.

Tuesday, April 12, 2016

Consumer Vs. Producer University and Urban Real Estate

Students consume higher education services. Universities also produce knowledge. An urban campus promotes the consumer university, but restricts the producer university. The city as an amenity attracts patrons from outside of the regional market, effectively exporting college. Whereas the city serves to confine the producer ambitions (see the excellent "Cities of Knowledge"). London modelling the trend:

A number of high profile moves and plans for expansion suggest, however, that the role of universities in London’s urban form is beginning to change. For many of London’s institutions, building up or out is simply not an option. As a result, a number of universities are expanding beyond the sector’s traditional central London heartland, often to areas where land is cheaper – or at least more readily available – thanks to industrial restructuring, land assembly, and public intervention.

By way of example, Imperial College London’s new White City Campus is planned as a centre for research, innovation and the translation of pure research into practical applications. On the other side of London, UCL and the University of the Arts London are joining Loughborough University in opening new facilities in Queen Elizabeth Olympic Park: all this is part of the mayor’s “Olympicopolis” vision for a new cultural and educational quarter in Stratford.

Many of these developments are taking place despite – or perhaps even on account of – a greater emphasis on student-based university funding. The lifting of the government cap on student numbers, coupled with tuition fee increases and students’ increased expectations of high-quality facilities, means that universities are now competing more strongly to attract students.

London is a boon to the consumer university. London is a drag on the producer university. Of course, the Cult of Jane Jacobs insists that uber dense, global London will stoke the fires of innovation. Anyone who knows just a bit about the history of the university will recognize the absurdity of such an assertion. Research has long been more monastic than social. On the other hand, the draw for deep-pocketed undergraduates is undeniable.

In the Rust Belt, "land is cheaper – or at least more readily available – thanks to industrial restructuring". Cities such as Pittsburgh are well-positioned to grow the urban producer university. The "translation of pure research into practical applications" attracts private firms such as Google, which in turn can dangle the city as an amenity to prospective employees. Such an arrangement gives the illusion that urban density begets knowledge production. But Uber would chase Carnegie Mellon University robotics talent out into the rural hinterlands, if need be.

Demographics define the ceiling of the consumer university approach. More and more regions face a decline of local high school graduates. Which means, more and more universities will rely upon exporting higher education services. This zero-sum game benefits the biggest brands in a winner-take-all economy.

The producer university approach enjoys a positive-sum game. Knowledge is non-rivalrous, benefiting a growing number of people in a world increasingly experiencing demographic decline. The downside is that research universities are "anchored" to a community that has grown around it. Expanding the footprint is politically difficult and economically expensive.

Sunday, April 10, 2016

Chicago: Where Globalization Fears to Tread

Almost a decade ago, I spoke with someone who helped shape Chicago into (in the Saskia Sassen sense of the term) a global city. I was bullish on Pittsburgh. He tried to curb my enthusiasm. No way, no how could Pittsburgh pull a Chicago. Luckily for Pittsburgh, he was right.

Pulling a Chicago carries a different connotation these days. It's much closer to Rust Belt failure than Rust Belt savior. It's more Detroit than Pittsburgh. Could Chicago pull a Pittsburgh? I doubt it.

Chicago went all in on its global self with massive expenditures on world class amenities. By every account I am aware of, the gambit worked. Globalization had its way with the urban core. The crown jewel of the Rust Belt, the city sucked up all the talent in between the coasts. Middle America could be cosmopolitan, too.

Chicago ... you have a Houston problem. Chicago is no longer the only global game not on the Atlantic or Pacific seaboard. The Texas Triangle beckons Iowa college grads. Regional hubs such as Minneapolis or Kansas City offer a step up from Des Moines. Heck, even Des Moines offers a step up from Des Moines just a decade ago. Cut Chicago out of the migratory loop, lose nothing in the experience.

To be sure, the talent still streams into Global Chicago. But this influx doesn't scale. Those still moving there are chasing yesterday, the 1990s. The region has hit peak globalization:

"Until a year and a half ago, Chicago's rates of home price appreciation were comparable with the rest of the US," Stiff said.

But since early 2015, "Chicago has slowed down significantly," he said, suggesting that the area's slow job growth has been a drag on the housing market's recovery.

In the global core, Chicago still looks good. But that global core no longer can carry the region, let alone the state. The architects of Global Chicago sold the city's soul for a magic Bean that benefited a few and left most others behind. Globalization didn't trickle down. It moved on.

Thursday, April 07, 2016

What Density Dividend?

All hail Texas exceptionalism. Because business friendly tax policies as well as general deregulation (e.g. lack of zoning), the state thrives. This meme gets trotted out by boosters whenever there is a demographic data dump or some company moves its headquarters from a place such as tax and spend liberal California. The celebration glosses over the massive subsidies Texas has to dole out in order to win the day. Business friendly isn't good enough. Texas isn't exceptional, save for large public expenditures.

All hail urban density exceptionalism. I can trace the greater-density-begets-more-innovation back to Jane Jacobs and then Alfred Marshall. While in graduate school during the late 1990s, I noted that Jacobs and Saskia Sassen were very popular among urban geographers. This was new to me because I received the tradition discourse of urban geography as an undergrad, von Th√ľnen and the like. I eagerly digested the seminar readings and didn't think much about them (save Sassen) after the semester ended. I was at the University of Colorado to learn about globalization and democratization. Jacobs didn't apply, or so I thought (geographer Peter Taylor says otherwise).

Whatever your stance on Jane Jacobs, Richard Florida has done a great deal to popularize her ideas. Florida now stands at the forefront of a movement that insists that dense cities are best suited for innovative (i.e. creative) activities. Last November, Florida promoting an urban agenda to the incoming Trudeau regime:

Over the past few years, however, venture capital and high-flying tech startups have undergone a fundamental urban shift that works to the advantage of Canada’s big cities. The locus of venture capital and entrepreneurial innovation has shifted from Silicon Valley’s sprawling suburban campuses and office parks to vibrant urban neighbourhoods in San Francisco, New York and London. These dense, diverse, urban neighbourhoods are home to the great research universities, key industries and consumers, and the top tech and creative talent that power innovation.

I argue that wherever you find great research universities, urban localities be damned, you can find a concentration of venture capital and innovation. All I hear is Jane Jacobs when I read "dense, diverse, urban neighbourhoods". Her prescription is Florida's. Thus, the shift of venture capital away from suburban sprawl to dense urbanity is rational.

More recently, Florida applies the Jacobs template to explain the migration of General Electric from suburban Connecticut to urban Massachusetts (Boston):

General Electric is the latest company to give up the suburbs for the city. News of GE’s move from its 1970s-style corporate campus in suburban Fairfield, Connecticut, to downtown Boston’s Seaport District has urbanists like me swooning. After all, it confirms much of what we’ve been saying for years: a massive corporation is moving to a dense, vibrant, walkable city center with abundant transit, lots of talent, superb universities, and great quality of place.

The basic geographic facts are irrefutable. But the rationale of the move is up for debate. Whatever the supposed density dividend is, GE moved to Boston thanks to bribery:

City Hall initially developed a property tax abatement valued at $8 million to $12 million in mid-November, according to documents the Walsh administration released Wednesday in response to a public records request from the Boston Globe. Over the next several weeks Boston officials increased the upper limit of the abatement to $15 million, and then again to a $20 million offer that was included in a memo addressed to a GE official dated Nov. 30.

The amount was subsequently increased to as much as $25 million over 20 years.

The urban revolution will be heavily subsidized. Like Texas exceptionalism, turns out that urban density exceptionalism isn't so exceptional after all. “We didn’t want them to walk away...At the end of the day, we wanted to make sure we closed the deal.

Sunday, April 03, 2016

Exploring Vertical Urban Geography

Along the usual horizontal plane, I see a big shift in the rationale for urban geography. Since human capital is the most important scarce good, a downtown locale might bestow a competitive advantage in the war for talent. Well, what about the vertical? Stuart S. Rosenthal:

As you move up in a tall building, the cost of accessing the space increases. What we observe and document for the first time is a positive rent gradient. Once you get up above the 2nd floor, rents rise, and they rise at an increasing rate.

The only way that can happen in a commercial office building that is populated by for-profit companies is if there's something about being high up off the ground that is valuable. One possibility is the amenity effect: Workers value the spectacular view from the 50th floor. Another possibility is a signaling effect. Anecdotally, we've heard if you're anybody, you want that office high up. It's more impressive.

My take, the horizontal and the vertical demonstrate rational choice in the same way. Worth noting, Rosenthal takes pains to run the reader through urban geography 101 before exploring the altitudinal variation. The old rules don't seem to apply going up at the same point of latitude and longitude. Such a disconnect raises a red flag. This 3-dimensional view of urban geography is incoherent.

Lots of land value in the urban core where we find high densities thanks to tall buildings results from, concerning Rosenthal's research, the amenity and/or signalling effects. Above the second floor, real estate prices do not rise as a result of enhanced productivity and the other supposed density dividends. At the very least, the 2-dimensional view overstates the benefits of laboring in the city.

Poking another hole in the innovation district boondoggle is Jed Kolko's latest effort to debunk the urban revolution propaganda. The rather popular narrative touts the move back to the city, where ideas more readily have sex and workers are more productive. That sounds great save for the fact that this bit of population dynamics is going in the opposite direction. Bummer.

Lastly, the suburbs have been the dominant geography of innovation for many decades. Wherever talent wants to go, R&D firms will accommodate. It's a war for talent, not greater productivity. Perhaps telling, as the world has become more urban in recent history, productivity "slumped". The hype works wonders for real estate development, but not economic development. Most importantly, it's nothing more than hype.