New Geography

Category: housing

  • The Uniqueness of Detroit’s Housing Stock

    Last week, as part of my series on planning reasons behind Detroit’s decline, part 2 of the nine-part series was about the city’s poor housing stock.  I started to play with some numbers to see if there was any validity to my opinions about the city’s housing, and I found some very intriguing things.  Detroit’s housing stock is definitely unique among its Midwestern and Rust Belt peer cities, and perhaps among cities nationwide.  Let’s examine.

    Grouping the cities by population figures from the 2013 U.S. Census population estimates, and housing data from the 2008-2012 American Community Survey, I looked at housing age and single family detached housing data for 15 Midwest/Rust Belt cities with populations above 250,000.  One city I typically include in an analysis like this, Louisville, was not included due to a lack of ACS data.  Data for the Twin Cities of Minneapolis and St. Paul were aggregated into one (sorry, Minneapolis and St. Paul) because they jointly function as the core city for their region.  Here’s the big table with all the data:



    That’s a lot to digest, so I’ll take the data piece by piece.  First, let’s look at the cities ranked by their percentage of housing units built in 1969 or earlier:

    You’ll see here that, perhaps following the general national perception of Detroit housing, the Motor City has an older housing stock.  Only Buffalo has a higher percentage of older housing. Generally speaking, the cities at the top half of this list have older housing because they lack redevelopment activity that replaces older housing, while cities at the bottom half consists of cities with decent levels of redevelopment activity, or more recently built housing that’s been annexed into the city in recent decades.  Here, Detroit does seem to fit the pattern.

    But does it really?  If you look at the Census’ earliest category for age of structure, 1939 or earlier, Detroit drops considerably on the list:

    Instead of ranking second as in the earlier table, Detroit falls to tenth.  The rest generally hold the same spots they occupied from the previous table as well. The only ones ranking lower than Detroit here are smaller cities (Omaha, Ft. Wayne) and the cities that annexed large amounts of land post 1970 (Kansas City, Indianapolis, Columbus).

    Next, let’s look at how the cities rank in terms of their concentrations of single family detached homes:

    Detroit shows up here with the second highest percentage of single family detached homes, comprising nearly two-thirds of the city’s housing stock.  Once again, the only comparable cities are the smaller cities and the big annexers.

    Clearly, most observers believe Detroit has more in common with Buffalo, Cleveland and Pittsburgh than with Ft. Wayne, Kansas City and Indianapolis.  What happened to Detroit’s housing stock that gave it such an odd profile?

    To understand, let’s pull out a specific category on the age of structure table, the 1950-1959 category:

    Here, we find that Detroit has, by far, the highest concentration of housing units built between 1950-59 of all its peer cities.  Nearly one in four homes in Detroit were built during this period.  In fact, Detroit, along with Milwaukee and Toledo, occupies a strange space among Midwestern/Rust Belt cities.  (Side note: the more I study Detroit against other Midwestern cities, the more I find that Detroit and Milwaukee are virtually the same city.  And it doesn’t surprise me that Toledo, just 75 miles from Detroit, would share its characteristics as well).  Detroit, Milwaukee and Toledo all added their greatest numbers of housing at the outset of the modern suburban development period, what I’ve called the Levittown Period in my so-called Big Theory of American Urban Development.  This supports my thinking that if anyone was ever interested in establishing a Levittown-style national historic district, Detroit would be a good candidate.  The Motor City has perhaps more small Cape Cod-style, three-bedroom, one-bath single family homes than any city in the nation.

    How did Detroit get this way?  Housing demolition likely had some role in a city that lost so much.  Detroit likely lost older single family homes and multifamily buildings over the last few decades, leading to skewed numbers.  The same is also true of Indianapolis, Kansas City and Columbus, cities that annexed large undeveloped areas after 1970 and built new housing there.  Keep in mind, though, that Milwaukee and Toledo, Detroit’s comparables, may not have had the same level of demolition loss that Detroit had, yet they still match the Motor City well.

    That leads me to believe that a concentration of housing development at a unique time is a crucial piece in understanding Detroit’s housing stock.

    Here’s another way of looking at this.  I grouped the cities by age and single family home concentration and came up with interesting groupings:

    Here it becomes clearer that Detroit and Toledo stand alone as locations for old or moderately old structures that are largely single family.  Also, Milwaukee’s greater mix of single family and multifamily units begins to set it apart from Detroit and Toledo, even when it has a similar concentration of Levittown-style housing.

    Finally, let’s consider housing adaptability as part of the housing stock analysis.  Chicago, the region’s largest city and lone “global city” member of the group, comfortably rests in the middle of all tables except for the single family detached table, where it shows the lowest concentration of single family homes.  My guess is that Chicago’s continued desirability means more newer housing has been built, and that its lower single family housing numbers mean that other housing types (lofts, condos and the ubiquitous 2-flat and 3-flat) created a more flexible and adaptable housing development landscape.

    Assuming that younger structures are more often suitable to renovation for adaptability, moderately old structures require more intense rehabs, and older types are more often subject to demolition and rebuilding, I reorganized the previous table in terms of housing adaptability:

    And if I put in the cities next to this adaptability scale, it’s easy to see the magnitude of Detroit’s housing challenges:

    Detroit is such a unique city in so many ways.  The Motor City needs more research and analysis that highlights its uniqueness and adds to our understanding of the what led to its downfall, and less of our ire and contempt.

    The more I study Detroit, the more I see the seeds of a similar downfall in other cities nationwide.

    This post originally appeared in Corner Side Yard on July 6, 2014.

    Pete Saunders is a Detroit native who has worked as a public and private sector urban planner in the Chicago area for more than twenty years.  He is also the author of “The Corner Side Yard,” an urban planning blog that focuses on the redevelopment and revitalization of Rust Belt cities.

    Lead photo: A scene from the Grixdale neighborhood on Detroit’s northeast side.  Source: Google Earth.

  • Agrarianism Without Agriculture?

    The ever-surprising Ralph Nader has recently been reading some paleo-conservative sources, and has written a book entitled Unstoppable; the Emerging Left-Right Alliance to Dismantle the Corporate State. In the Acknowledgements at the end, he specifically thanks Intercollegiate Studies Institute, a conservative think tank, for keeping in print a tome from the 1930s called Who Owns America? A New Declaration of Independence. Nader devotes the seventh chapter of his book to a discussion of this volume. He quotes Edward Shapiro’s 1999 foreword at some length:

    In his 1999 foreword to the reissued edition, historian Edward S. Shapiro called Who Owns America? “one of the most significant conservative books published in the United States during the 1930s” for its “message of demographic, political, and economic decentralization and the widespread ownership of property” in opposition “to the growth of corporate farming, the decay of the small town, and the expansion of centralized political and economic authority.” ……

    In this mix, there was espoused a political economy for grass-roots America that neither Wall Street nor the socialists nor the New Dealers would find acceptable. It came largely out of the agrarian South, casting a baleful eye on both Wall Street and Washington, D. C. To these decentralists, the concentrated power of bigness would produce its plutocratic injustices whether regulated through the centralization of political authority in Washington or left to its own monopolistic and cyclical failures. They were quite aware of both the corporate state fast maturing in both Italy and Nazi Germany and the Marxists in the Soviet Union ……

    Nor did they believe that a federal government with sufficient political authority to modestly tame the plutocracy and what they called “monopoly capitalism” could work, because its struggle would end either in surrender or with the replacing of one set of autocrats with another. As Shapiro wrote in the foreward, “while the plutocrats wanted to shift control over property to themselves, the Marxists wanted to shift this control to government bureaucrats. Liberty would be sacrificed in either case. Only the restoration of the widespread ownership of property, Tate said, could ‘create a decent society in terms of American history.’”

    Although the decentralists were dismissed by their critics as impractical ….. their views have a remarkable contemporary resonance given today’s globalized gigantism, absentee control, and intricate corporate statism, which are undermining both economies and workers. They started with the effects of concentrated corporate power and its decades-long dispossession of farmers and small business. They rejected abstract theories by focusing instead on such intensifying trends as the separation of ownership from control; the real economy of production in contrast to the manipulative paper economy of finance; and the growth of “wage slavery,” farm tenancy, and corporate farming. One can only imagine what they would say today! (Nader, pp. 139-141.)

    I apologize for the long quote. These people advocated doing away with the “joint stock corporation” for the most part, to be replaced by cooperatives. I’m not sure about the liability of members of these cooperatives, but that’s a major issue. Without limited liability, I would hesitate to co-invest in any project unless all the partners were as liquid and wealthy as myself, otherwise guess who ends up holding the bag! And it is to be noted that many insurance companies, and some savings and loans, including, until the 1980s, all federally chartered ones, were in fact “mutual” and owned by their depositors or policy holders.

    They did not succeed as far as agricultural land was concerned. The concentration of agricultural land under fewer and fewer owners, and even more the oligopolies of processing food through such entities as Cargill, Tyson, and Archer Daniels Midland, proceeded apace. But “widely distributed property ownership” resurfaced on another front; the urban-suburban one. The New Deal first chartered the Federal Housing Administration to underwrite and guarantee loans for homes, and in Truman’s time the Veterans Administration and other reforms brought this regime into full flower. So instead of their forty acres and a mule, people got their ¼ acre and an automobile, the only practical way to travel from their ¼ acre to wherever they wanted to go.

    Eventually people came to see their ¼ acre with a house on it as an “investment,” and further, a “source of wealth.” But this was not a truly agrarian source of wealth. Farms depend for their value on the quality of their soil and their productivity as farms. They are truly commercial real estate. But residences depend for their value only to a minor degree on what is on the property itself, but rather on what is around it; and suburbanites demanded that covenants, or the Government in the form of City Hall or County Hall, control their neighbors and what is around them. Part of the reason for living in the suburbs, after all, is the presence of trees and green space. (The suburbanites have therefore been friendly to the environmental cause, as long as it did not touch their automobiles.) There was also the factor that just as printing money dilutes its value, “printing” a large number of houses in an area dilutes their value as well. And, the more development, the more traffic comes to resemble that of the centralized portion of the city and one’s automobile gets stuck in it. Fact: the borough of Irvine, where my office is, imposes a “cap and trade” system on those who would desire to build or repair commercial structures, and what one buys in this marketplace is not carbon or pollution, but potential car trips that one’s project might be potentially using. The suburban model, in the end, demanded that to preserve suburban values, that the building of suburbs be stopped! That’s the irony of the whole thing.

    Howard Ahmanson of Fieldstead and Company, a private management firm, has been interested in these issues for many years.

  • Don’t be so Dense About Housing

    Southern California faces a crisis of confidence. A region that once imagined itself as a new model of urbanity – what the early 20th century minister and writer Dana Bartlett called “the better city” – is increasingly being told that, to succeed, it must abandon its old model and become something more akin to dense Eastern cities, or to Portland or San Francisco.

    This has touched off a “density craze,” in which developers and regulators work overtime to create a future dramatically different from the region’s past. This kind of social engineering appeals to many pundits, planners and developers, but may scare the dickens out of many residents. They may also be concerned that the political class, rather than investing in improving our neighborhoods, seems determined to use our dollars to subsidize densification and support vanity projects, like a new Downtown Los Angeles football stadium. At same time, policymakers seek to all but ban suburban building, a misguided and extraordinarily costly extension of their climate-change agenda.

    This effort works against the region’s basic DNA. Our Downtown, for all its promotion, is not a dominant business or cultural center. It accounts for barely 1/10th the share of regional employment that Manhattan – at more than 20 percent – provides for its region and less than one-sixth the share of regional jobs accounted for by San Francisco, less than one-third that of much-maligned, spread-out Houston.

    Some people contend that, by investing heavily in mass transit, we can re-engineer our region towards a more-19th century model, which Los Angeles, as a 20th century city, never had. Some, like economics and political blogger Matt Yglesias, suggest Los Angeles’ $8 billion-plus investment in rail is making it the “the next great transit city.”

    Well, after 30 years of relentless spending on subways and light rail, the share of transit commuters in the region (comprising Los Angeles and Orange counties, the Inland Empire and Ventura County) is about where it was in 1980 – roughly 5 percent – compared with greater New York’s 27 percent or Chicago’s 11 percent.

    Village people

    Transit has limited effect in Southern California because this region functions best as a network of “villages,” some more urban than others, connected primarily by freeways and an enviable arterial street system. Inside our villages, we can find the human scale and comfort that can be so elusive in a megacity. This arrangement allows many Southern Californians to live in a quiet neighborhood that also is within one of the world’s most diverse – and important – cities.

    These villages span all the vast diversity of Southern California. Some areas, like Downtown Los Angeles, increasingly appeal to young professionals who seek a version of dense urban living. They share a universe with cohorts found in many older cities: young hipsters, a small sample of empty nesters and a sizable population of homeless who live on the edges of the gentrification zone.

    But Downtown hardly provides a template for the rest of the region. Mostly we live in lower-density villages, many of which – in the San Gabriel Valley, East Los Angeles, Santa Ana, Westminster and L.A.’s Leimart Park, for example – reflect largely ethnic cultures with deeply established roots.

    Even newer areas, like Irvine – which still ranks among America’s fastest-growing cities – are now majority Asian and Latino. Irvine’s appeal is largely the much- dissed suburban virtues of clean streets, good parks and excellent schools.

    Some areas are almost insanely eclectic. My neighborhood in the San Fernando Valley – sometimes referred to as Valley Village or Valley Glen – includes many people in the film and television business, but is increasingly dominated by Orthodox Jews, Armenians and Israelis. In summer, barely clad acting folk pass Orthodox haredim dressed in impossibly warm black suits and hats.

    Walk one direction from my house, and you run into Armenian businesses, including alavash bakery and several kabob restaurants. Walk the other direction, and you enter akashrut world, with signs in both English and Hebrew; you even can get panhandled by an odd Jewish beggar, something you encounter in Israel and parts of Brooklyn but not too often in California.

    Outdoor living

    What holds these neighborhoods together is a desire for a particular quality of life, usually associated with the single-family home. These, along with modestly sized garden apartments, long have been the primary choice of Southern Californians. Such housing facilitates enjoying this region’s arguably greatest asset: its weather. Residents value a place for backyard barbecues, swimming pools, small soccer pitches for the kids and an element of seclusion.

    Unable to afford the pricier L.A. or O.C. neighborhoods, many Southern Californians, to the consternation of the urban planners and some developers, head for a newer village on the regional periphery. Indeed, more than 99 percent of the region’s growth has taken place far from central L.A. For every yuppie who moves Downtown, or into now-fashionable closer-in neighborhoods, a hundred or more move out to Rancho Cucamonga, Valencia, Mission Viejo or scores of other outlying communities.

    This article first appeared in the Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • There Will Be No Real Recovery Without The Middle Class

    What if they gave a recovery, and the middle class were never invited? Well, that’s an experiment we are running now, and, even with the recent strengthening of the jobs market, it’s not looking very good.

    Over the last five years, Wall Street and the investor class have been on a bull run, but the economy has been, at best, torpid for the vast majority of the population. Despite blather about our “democratic capitalism,” stock ownership is increasingly concentrated with the wealthy as the middle class retrenches. The big returns that hedge funds, real estate trusts or venture capitalist receive are simply outside the reach of the vast majority.

    A recent study by the Russell Sage Foundation suggests these patterns of inequality, which have been developing over the last several decades, have become more pronounced in the post-Recession years. In 2013 the wealth of those at the 90th and 95thpercentiles was actually higher than 10 years ago. Everyone else is lower.

    The labor market may be strengthening, with the unemployment rate falling to 6.1% last month, but too many of the new jobs are low wage or part time. They aren’t providing the kick the economy got in the last, more broad-based expansion from robust consumer spending.

    Wage growth has been weak, rising 2.5% annually since 2009, according to Bloomberg, compared with a 4.3% annual rise from 2001 to 2007. Consumer spending, which makes up roughly 70% of the economy, has expanded an average 2.2% since the recession ended, behind the 3% advance in the prior expansion.

    And many working-age people are still sitting discouraged on the sidelines – the labor force participation rate remains the lowest since 1979.

    People in marginal or part-time jobs are not likely to drive consumer spending. Instead we have seen the emergence of a new, top-heavy consumer market. Since 1992 the top 5% of households have increased their share of total spending to almost 40%, up from 27% in 1992.

    Former Citigroup economist Anjay Kapur has described this situation as a “plutonomy,” in which the economy is increasingly based on the global wealthy and their tastes and predilections.

    Meanwhile broader consumer confidence remains weak. Last year some two-thirds of Americans polled by the Washington Post and the Miller Center said they felt life had become tougher over the last five years compared to just 7% who thought theirs had improved. Pollsters also have found almost two-thirds of parents felt their children would do worse in life, a stunning shift from far more optimistic readings back in 1999.

    The Housing Market

    Historically housing has been the primary asset held by the middle and working class. Despite government efforts to keep mortgages affordable, post-crash, growth has been slow, and much of the buying restricted to investors, including major financial interests. Particularly damaging, there has been a marked decline in the “trade up market” and even more so, sales to first-time buyers, whose share of the market has declined to under 30%, well below the historic average of 40%. This reflects the weak economy, tighter lending standards, and, for younger customers, the heavy burden of student loans.

    Some on Wall Street hope to profit from a perceived shift in America to a “rentership society.” Housing more of the population in rental apartments would do little to improve social mobility, as people end up working not for their own equity but to pay the mortgage of their landlords. Nor can the economic payoff from apartment construction come close to that of single-family homes. According to the National Association of Home Builders, building 100 new single-family homes adds 324 jobs to the average metropolitan economy in the year of their construction and 53 jobs annually in the following years. This compares to 122 jobs per 100 new apartments in the year of construction and 32 in the following years. With home starts at less than a third their 2005 level, lack of construction employment also deals a body blow to one of the primary sources of higher-paying blue collar jobs.

    The Emasculation Of Small Business

    In previous recoveries, small businesses have provided much of the spark and job creation. Not so this time. Small business start-ups have declined as a portion of all business growth from 50% in the early 1980s to 35% in 2010, while its share of employment dropped down from 20% to 12%. Indeed, a 2014 Brookings report revealed that small business “dynamism,” measured by the growth of new firms compared with the closing of older ones, has declined significantly over the past decade, with more firms closing than starting for the first time in a quarter century.

    Nor is the future prognosis too good. The rise of the regulatory state, including the Affordable Care Act and higher taxes, amplified in deep blue states such as California, has hit smaller businesses hard. The gradual culling of smaller banks, traditional lenders to entrepreneurs, and the growing concentration of assets in the “too big to fail” banks, historically unfocused on the needs of small companies or individual proprietors, suggests credit may remain tough for grassroots entrepreneurs.

    Needed: A New Paradigm

    The recession and the weak recovery have taught us you cannot have strong economic growth without the participation of the vast majority of Americans. We’ve run an experiment under Bernanke, Bush and Obama to pump up the economy from above, and what we’ve done is squash the aspirations of those middle orders, particularly small business and the self-employed.

    This issue should be at the center of the political debate.  I would welcome suggestions from the right and left about how best to restart a broad-based economic recovery. The best ideas may come from across the spectrum, such as flatter taxes, supported by many conservatives, as well as new spending on major infrastructure projects as improved roads, rivers and ports that generally come from more liberal groups.

    The good news is the fundamentals for a broader-based prosperity, including the creation of high-paying blue-collar jobs, remain in place. Progress is already evident in the energy and some manufacturing-oriented regions. Restarting the housing sector — particularly the single-family home component — would do wonders for middle and working class people in many regional economies, as can be seen, for example, in Houston, where more homes will be built this year than in the entire state of California. Nationwide, the gap between  between demand and potential housing, according to the NAB, is roughly 1 million homes, which translates into close to 3 million jobs.

    How to drive growth to these and other productive sectors may require not only changes in government policy but also reacquainting the investor class with the virtues of long-term growth, productivity and the revival of the mass economy. Perhaps once they do investors might earn something other than intense dislike from the rest of the population.

    This story originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

  • Dispersing Millennials

    The very centers of urban cores in many major metropolitan areas are experiencing a resurgence of residential development, including new construction in volumes not seen for decades. There is a general impression, put forward by retro–urbanists (Note 1) and various press outlets that the urban core resurgence reflects a change in the living preferences of younger people – today’s Millennials – who they claim are rejecting the suburban and exurban residential choices of their parents and grandparents.

    There is no question that the millennial population has risen in urban cores in recent years. Yet the growth in the younger population in urban cores masks far larger increases in the same population group in other parts of major metropolitan areas and in the nation in general.

    Functional Analysis of Metropolitan Areas

    This article continues a series examining the 52 major metropolitan areas (those with more than 1,000,000 residents) using the City Sector Model, which allows a more representative functional analysis of urban core, suburban, and exurban areas, by using smaller areas, rather than using municipal boundaries. The City Sector Model thus eliminates the over-statement of urban core data that occurs in conventional analyses, which rely on historical core municipalities, most of which encompass considerable suburbanization.

    The City Sector Model classifies 9,000 major metropolitan area zip code tabulation areas using urban form, density, and travel behavior characteristics. There are four functional classifications: the urban core, earlier suburban areas, later suburban areas, and exurban areas. The urban cores have higher densities, older housing and substantially greater reliance on transit, similar to the urban cores that preceded the great automobile oriented post-World War Two suburbanization. Exurban areas are beyond the built up urban areas. The suburban areas constitute the balance of the major metropolitan areas. Earlier suburbs include areas with a median house construction date before 1980. Later suburban areas have later median house construction dates (Note 2).

    20-29s and the Urban Core

    The age band best approximating millennials for the period of 2000 to 2010 is people of from 20 to 29 years of age.

    Between 2000 and 2010, the total population of 20-29’s living in the functional urban cores increased by 300,000, from 4.3 million to 4.6 million from 2000 to 2010. Yet, the share of 20-29s living in the urban cores actually declined over the decade.

    In 2000, 20.2 percent of the major metropolitan area 20- to 29-year-old population was in the urban core. By 2010, it had dropped to 19.3 percent, a 4.4 percent share reduction. This happened because the 300,000 increase in 20-29s in the urban core was dwarfed by the overall 2.6 million increase in the same age group throughout the major metropolitan areas. As a result, only 12 percent of the 20-29 population growth was in the urban core, 40 percent below its 2000 share.

    While 80 percent of the 20-29s lived outside the urban cores in 2000, 88 percent of the 20-29 population growth was outside the urban core between 2000 and 2010 (Figure 1). Overall, the suburban and exurban millennial population grew nearly 8 times than in the urban core.

    The 20-29s and the Balance of Major Metropolitan Areas

    The trend among the 20-29s also tended away from the areas adjacent to the urban cores. These tend to be   earlier suburban areas (generally with median house construction dates before 1980). Between 2000 and 2010, the share of 20-29s living in the earlier suburbs fell from 46.1 percent to 42.0 percent. This was double the urban core loss noted above (4.4 percent), at 8.9 percent.

    At the same time, millennials, long said to hate suburbs, have embraced dispersion. The more recently built suburban areas saw their share of 20-29s rise from 20.6 percent to 24.4, an 18 percent gain. A smaller gain was registered in exurban areas, where the share of 20-29s rose from 13.2 percent to 14.3 percent; an 8 percent share gains (Figure 2).

    The net effect from 2000 and 2010: a full five percent more of all 20-29s in major metropolitan areas lived in the later suburban and exurban areas, while 5 percent fewer lived in the urban cores and earlier suburbs. The later suburbs and exurbs added 1,500,000 more 20-29s than the urban core and earlier suburbs.

    Millennials and the Nation

    The numbers of 20-29s continued to increase in the rest of the nation’s small towns and cities, as well as rural areas. In 2000, approximately 44.6 percent of the 20-29 population lived outside the major metropolitan areas. In the next decade, these areas added 20-29s at a lower rate (40.9 percent of the increase), yet this was enough to keep the share of 20-29s at 44.2 percent. In 2010, more than four times as many 20-29s lived outside the major metropolitan areas as lived in the urban cores. Between 2000 and 2010, the growth in 20-29’s living outside the major metropolitan areas was almost six times the growth in the urban cores (Figure 3).

    Overall, only 7 percent of the growth in the 20-29 age group was in the functional urban cores between 2000 and 2010. That left 93 percent of the growth to be outside the urban core (Figure 4).

    Consistency with Other Research

    The trend among the 20-29s in the urban core may seem surprising. However, it is consistent with an analysis of 2000-2010 data by the US Census Bureau, which indicated that the population gains within two miles of the city halls of the largest cities were more than offset by losses in the ring between two and five miles from City Hall. While the gains in the course of the urban cores are impressive, they are much smaller when considered in the context of the entire urban core and even smaller in the context of the entire metropolitan area.

    More recent data suggests the dispersion of Millennials is continuing. According to Jed Kolko, Chief Economist at Trulia.com Millennials located in larger numbers in suburban areas  than in the urban cores between 2012 and 2013 (more recent data for the city sector analysis is not yet available) 

    Dispersing, But Not Quite as Quickly

    Essentially what we see here is myopic prejudices of contemporary journalism. More than 300,000 new 20-29 residents in the urban cores was more than enough to be noticed by analysts and reporters, since that’s where many of them spend much of their time. Moreover, the share of 20-29s living in urban cores dropped less than one-half the rate for all ages in the urban core.

    Simply put, despite the conventional wisdom, 20-29s are not abandoning the suburbs and exurbs for the urban core. The data indicates that the 20-29s have been more inclined to choose the urban core than other age groups, but not enough to prevent their overwhelming numbers living in suburban and exurban communities. Nor has this inclination been sufficient to counter the continuing relative decline in the urban core among the 20-29s.

    ————-

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Note 1: The term retro-urbanist is applied to the currently popular strain of urban planning that favors urban cores over the rest of the urban area and metropolitan area (the suburbs and exurbs).

    Note 2:. The previous articles in this series are:
    From Jurisdictional to Functional Analyses of Urban Cores & Suburbs
    The Long Term: Metro American Goes from 82 percent to 86 percent Suburban Since 1990
    New York, Legacy Cities Dominate Transit Urban Core Gains
    Functional v. Jurisdictional Analysis of Metropolitan Areas
    City Sector Model Small Area Criteria

  • Dallas: A City in Transition

    I was in Dallas this recently for the New Cities Summit, so it’s a good time to post an update on the city.

    I don’t think many of us realize the scale to which Sunbelt mega-boomtowns like Dallas have grown. The Dallas-Ft. Worth metro area is now the fourth largest in the United States with 6.8 million people, and it continues to pile on people and jobs at a fiendish clip.

    Many urbanists are not fans of DFW, and it’s easy to understand why. But I think it’s unfair to judge the quality of a city without considering where it is at in its lifecycle. Dallas has been around since the 1800s, but the metroplex is only just now starting to come into its own as a region. It is still in the hypergrowth and wealth building stage, similar to where a place like Chicago was back in the late 19th century. Unsurprisingly, filthy, crass, money-grubbing, unsophisticated Chicago did not appeal to the sophisticates of its day either. But once Chicago got rich, it decided to get classy. Its business booster class endowed first rate cultural institutions like the Art Institute, and tremendous efforts were made to upgrade the quality of the city and deal with the congestion, pollution, substandard housing, and fallout from rapid growth, which threatened to choke off the city’s future success. At some point in its journey, Chicago reached an inflection point where it transitioned to a more mature state. One can perhaps see the 1909 Burnham Plan as the best symbol of this. In addition to addressing practical concerns like street congestion, the Burnham Plan also sought to create a city that could hold its own among the world’s elite. And you’d have to argue the city largely succeeded in that vision.

    The DFW area is now at that transition point. They realize that as a city they need to be about more than just growth and money making. They need to have quality and they need to address issues in the system. Much like Burnham Plan era Chicago, this perhaps makes DFW a potentially very exciting place to be. It’s not everyday when you can be part of building a new aspirational future for a city that’s already been a successful boomtown. The locals I talked to were pretty pumped about their city and where it’s going.

    How true this is I don’t know, but some people have attributed a change in mindset to the loss in the competition to land Boeing’s headquarters. Boeing ended up choosing Chicago over Dallas. In part this was because Chicago bought the business with lavish subsidies that far outclassed what Dallas put on the table. But it was also because Boeing saw Chicago as a more congenial environment for global company C-suite and other top executives to be, both from a lifestyle perspective and that of access to other globally elite firms and workers available in Chicago.

    Meanwhile, the cracks in the DFW growth model were becoming apparent, especially in the core city of Dallas. Ten years ago the Dallas Morning News ran a series called “Dallas at a Tipping Point: A Roadmap For Renewal.” This series was underpinned by a report prepared by the consulting firm Booz Allen. This report is well worth reading by almost anyone today as it is a rare example of a city that was able to get insight and recommendations from the type of tier one strategy firm used by major corporations. Booz Allen was direct in their findings, though perhaps with a bit of hyperbole in the Detroit comparison:

    Dallas stands at the verge of entering a cycle of decline…On its current path, Dallas will, in the next 20 years, go the way of declining cities like Detroit – a hollow core abandoned by the middle class and surrounded by suburbs that outperform the city but inevitably are dragged down by it.
    ….
    If the City of Dallas were a corporate client, we would note that it has fallen significantly behind its competitors. We would warn that its product offering is becoming less and less compelling to its core group of target customers…We would further caution the management that they are in an especially dangerous position because overall growth in the market…is masking the depth of its underlying problems. We would explain that in our experience, companies in fast growing markets are often those most at risk because they frequently do not realize they are falling behind until the situation is irreversible.

    Put into the language of business, we would note that Dallas is under-investing in its core product, has not embraced best practices throughout its management or operations, and is fast becoming burdened by long term liabilities that could bankrupt the company if the market takes a downturn.

    The city responded in a number of ways, some of which were similar to Chicago at its inflection point. Many of these involve various urbanist “best practices” or conventional wisdom type trends.

    By far the most important of these was adopting modern statistically driven policing approaches. As crime plummeted in places like New York during the 1990s, Dallas did not see a decline of its own. But with the expansion of police headcount and adoption of new strategies by new police chief David Kunkle in 2004 – and no doubt some help from national trends – crime fell steeply during the 2000s. The Dallas Morning News says that the city’s violent and property crime rates fell by a greater percentage than any other city with over one million residents over the last decade. In 2013, Dallas had its overall lowest crime rate in 47 years.

    This is critical because nothing else matters without safe streets. I’ve had many a jousting match with other urbanists on discussion boards about where crime falls on the list of priorities. In my view it’s clearly #1 – even more so than education. It’s simply a prerequisite to almost any other systemic good happening in your cities. Students can’t learn effectively if they live and attend school in dangerous environments, for example. NYU economist Paul Romer made this point forcefully in his New Cities keynote, saying that fighting crime is the most important function of government and that if you don’t deliver on crime control your city will go into decline. Fortunately, Dallas seems to have gotten the message.

    But there’s been attention to physical infrastructure as well. The area has built America’s largest light rail system (which was in the works since the early 1980s).



    Dallas Area Rapid Transit (DART) light rail train. Source: Wikipedia

    Both the city and region remain fundamentally auto-centric, however, and this is unlikely to change.

    There’s been a significant investment in quality green spaces. A major initiative called theTrinity River Project is designed to reclaim the Trinity River corridor through the city as a recreational amenity. This is underway but proceeding slowing. Among the aspects of the project is a series of three planned signature bridges designed by Santiago Calatrava. The only one completed is the Margaret Hunt Hill Bridge.



    The Margaret Hunt Hill Bridge in Downtown Dallas. Designed by Santiago Calatrava. Source: Wikipedia

    The single bridge tower is quite an imposing presence on the skyline. However, the size of the bridge creates an awkward contrast with the glorified creek that is the Trinity River. It looks to me like they significantly over-engineered what should have been a fairly straightforward flood plain to span just so they could create a major structure.

    Another green space project – and the best thing I saw in my trip to Dallas – is Klyde Warren Park, which is built on a freeway cap. About half the cost came from $50 million donations. I’ll be going into more detail on this in my next installment, but here’s a teaser photo:



    Klyde Warren Park. Source: Wikipedia

    The Calatrava bridge shows that Dallas has embraced the starchitect trend. This was also on display in the creation of the Dallas Arts District. Complementing the Dallas Museum of Art are a billion dollars worth of starchitect designed facilities including Renzo Piano’s Nasher Sculpture Center, IM Pei’s symphony center, Norman Foster’s Winspear Opera House, and OMA’s Wyly Theatre.



    Dee and Charles Wyly Theatre. Designed by OMA’s Joshua Prince-Ramus (partner in charge) and Rem Koolhaas

    This arts district – which naturally Dallas boasts is the world’s largest – along with the other major investments that were funded with significant private contributions show a major advantage Texas metros like DFW and Houston have: philanthropy. These are new money towns on their way up and local billionaires are willing to open their wallets bigtime in an attempt to realize world class ambitions, exactly the way Chicago’s did all those decades back.

    By contrast many northern tier cities are dependent on legacy philanthropy, such as foundations set up in an era when they were industrial power houses. This is a dwindling inheritance. What’s more, what wealthy residents they do have are as likely to be taking money out of their cities through cash for cronies projects than they are to be putting it in. Thus they can be a negative not positive influence.

    This shows the importance of wealth building in cities. Commercial endeavors can appear crass or greedy at times, and deservedly so. But without wealth, you can’t afford to do anything. There’s a reason Dallas could build America’s largest light rail system – it had the money to do so. Similarly with this performing arts district. To be a city of ambition requires that a place also be an engine of wealth generation.

    I’m sure that Dallas’ moneyed elite are well taken care of locally and exert outsized influence on decision making. I don’t want to make them out to be puristic altruists. But they’ve shown they are willing to open their wallets in a serious way, something that’s not true everywhere.

    This is a flavor of what Dallas has been up to. It’s too early to say whether the city will make the same transition Chicago did. Its greatest challenge also awaits some time in the future. When DFW’s hypergrowth phase ends and the city must, like New York and Chicago before it, reinvent itself for a new age, that’s when we will find out if DFW has what it takes to join the world’s elite, or whether it will fade like a flower as Detroit and so many other places did.

    Toyota did just announce it’s moving 3,500 jobs to north suburban Plano. But corporations have long seen Dallas a place for large white collar operations. Boeing was what I call an “executive headquarters” – a fairly small operation consisting of only the most senior people. I haven’t seen Dallas win any of these as of yet.

    The Dallas Morning News takes a somewhat mixed view on the city itself. They just did a special section called “Future Dallas: Making Strides, Facing Challenges,” the title of which sums it up. Dallas has put a lot of pieces on the board and made major progress on areas like crime, but it’s failed to make a dent in others, such as Booz Allen’s call to make the city more attractive to middle class families. Poverty is actually up since then, and the city is increasingly unequal in its income distribution. Dallas is not unique in that, but that’s cold comfort.

    Despite gigantic regional growth, the city’s population has been nearly flat. Despite the vaunted Texas and DFW jobs engine, Dallas County has lost about 100,000 jobs since 2000. The core is clearly continuing in relative decline, and the Dallas County job losses are particularly troubling. I’m no believer in this idea that everybody is going to abandon the suburbs and head back to the city. But as former Indianapolis Mayor Bill Hudnut put it, you can’t be a suburb of nowhere. If the core loses economic vitality, the entire DFW regional will take a hit to its growth.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

    Dallas photo by Bigstock.

  • Circling the Brain Drain

    It seems that Destination LI, “a nonprofit community building and educational organization dedicated to helping people create and sustain vibrant centers” on Long Island, has been quietly busy in recent months.

    Recently, the group released a survey, which, to nobody’s surprise, shows that millennials are not exactly thrilled with Long Island’s housing options.

    The solution? Those “vibrant” walkable communities that have been pitched so many times before. The survey also touched upon Long Island’s need for jobs that match millennial skillsets and salary expectations, two critical issues that policymakers must address.

    In a nutshell, “the survey, conducted on social media web forums between Feb. 27 and March 24, drew 413 respondents.” To solicit responses, the group used sites such as Facebook, Twitter, LinkedIn, Reddit and others. Seventy-five percent of those who participated said that they either “agree” or “strongly agree” that Long Island’s housing options limit their ability to stay, with 58.7 percent saying they currently live with parents or relatives.

    For perspective, consider this: According to U.S. Census data from 2010, there were 478,988 millennials in the Nassau-Suffolk region. Destination LI’s survey of 413 represents 0.08 percent of the sample size – far from a representative sample of that segment of population. Given the large gap between population and those surveyed online (which, by surveying standards, is a poor solicitation method), it’s important to take the results for what they are – anecdotal, but still an important commentary. Long Island clearly has issues with providing housing, but we’re going about it the wrong way.

    The survey brings to light significant questions concerning Long Island. Is regional housing availability holding millennials back, or is it Long Island’s stagnant economy? The survey infers that walkable apartments keep millennials here, but what about affordable single-family homes? Are apartments the only housing option for this age group? Is more development the answer to our regional woes? Are the survey’s findings legitimate given the methodology?
    Finally, the big question remains: Should developers be driving the regional conversation on housing needs?

    The answer to any of these questions is up for debate, but the last one should resonate. Have Long Islanders become so apathetic that they now are reliant upon stakeholders to conduct surveys that not only get ample press coverage, but are sure to influence policy decisions on the regional level? Shouldn’t planners be conducting these studies, with their recommendations being based off appropriate methodology and professionalism?

    Our policy solutions are only as good as the data that informs them. With land-use, the cost of failure is too expensive and repercussions too severe and far reaching to rely on stakeholder-driven solutions. We all are leaders in that we have the power to collectively shape our community. Let’s take back the reins and give our problems the thoughtful analysis they deserve.

  • The Long Term: Metro America Goes From 82% to 86% Suburban Since 1990

    The major metropolitan areas of the United States experienced virtually all of their overall growth in suburban and exurban areas between 2000 and 2010. This is the conclusion of an analysis of the functional Pre-Auto Urban Cores and functional suburban and exurban areas using the Demographia City Sector Model.

    The City Sector Model
    The City Sector Model classifies zip code areas in the major metropolitan areas based on urban form (Note 1). These include four classifications, one of which replicates the urban form and travel behavior typical of the pre-World War II urban cores. These areas were typically higher density and dependent on transit and walking. The City Sector Model has three other classifications, Pre-Auto Urban Core, Auto-Suburban: Earlier, Auto-Suburban: Later and Auto-Exurban.

    For simplicity the City Sector categories are referred to as urban core, earlier suburban, later suburban and exurban. The City Sector Model is described in a previous article, and illustrated in Figure 1, which is also posted to the internet.

    The model makes it possible to analyze metropolitan areas based on smaller area functional classifications, rather than on jurisdictional (historical core municipality) borders, which among other things, mask as core large areas of suburbanization.

    Suburbanized Core Municipality Examples: San Jose and Charlotte

    This suburbanization in the historical core municipalities is illustrated by examples like San Jose and Charlotte. The City Sector Model indicates that neither of these metropolitan areas has a pre-auto urban core. This is because neither metropolitan area has a large enough concentration of houses with a median construction date of 1945 or before or sufficient area of 7,500 population density per square mile (2,900 per square kilometer) with a transit, walking and cycling work trip market share of at least 20 percent. As a result, virtually all of both metropolitan areas is automobile oriented suburban, including virtually all of the core municipalities.

    This is true in Charlotte despite its development of one of the most impressive new central business districts in the nation, with high employment densities. Yet at the same time the  core city of Charlotte itself is very low density (2010), at 2,500 per square mile (950 per square kilometer), less than the suburban area average for large US urban areas (2,600 per square mile or 1,000 per square kilometer). Charlotte, however, could develop the equivalent of a pre-auto urban core if its central population density rises enough and enough commuters use transit, walking and cycling.

    The core city of San Jose is far more dense than Charlotte, at 5,800 per square mile (2,200 per square kilometer). However, it is less dense than the suburbs of Los Angeles (6,400 per square mile or 2,500 per square mile). Like Charlotte, the core city of San Jose is virtually all automobile oriented suburban and has a transit work trip market share a full third below the major metropolitan area average.

    Overall Population Trend: 2000-2010

    These phenomena reflect national trends, All major metropolitan area growth between 2000 and 2010 (100.9 percent) was in the functional suburbs and exurbs.

    Between 2000 and 2010, the percentage of major metropolitan area population in the urban cores declined from 16.1 percent to 14.4 percent. The urban cores lost approximately 140,000 residents (a loss of 0.6 percent), despite strong gains very close to the centers of the historical core municipalities. Consistent with these findings, Census Bureau analysis showed that the focused gains in the cores of the urban cores were more than negated by losses in surrounding urban core areas (described in: Flocking Elsewhere: The Downtown Growth Story).

    The earlier suburban areas gained only modestly, adding 280,000 new residents, for a 0.4 percent increase. These areas have median house construction dates between 1946 and 1979. The largest increase was in the later suburban areas, which added the most new residents, 11.4 million, for a gain of 33.4 percent. The later suburban areas have median house constructions of 1980 or later. Exurban areas added 5.0 million residents, for a gain of 21.3 percent. Exurban areas are located outside the principal urban areas (Figure 2).

    Overall, the later suburban and exurban areas gained 16.4 million residents, compared to the combined gain of 130,000 in the urban cores and earlier suburban areas. Thus, more than 99 percent of the population growth in the major metropolitan areas was in the later suburban and exurban areas (Figure 3).

    During the decade, the exurban areas overtook the urban cores in population, rising from 15.4 percent of the major metropolitan area population to 16.8 percent (Figure 4).

    Contrast with 1990-2000 Population Trend

    Despite all of the talk of an urban core renaissance, the 2000 to 2010 decade was less favorable for urban cores than the 1990 to 2000 decade. In the earlier decade, the urban cores (as defined in 2010) added 960,000 residents, for a growth rate of 4.0 percent. This compares to the 140,000 urban core loss between 2000 and 2010 (Note 2).

    Virtually all of the difference was attributable to urban core population trend reversals in New York, Boston and Chicago, which combined experienced a drop in growth of 1.1 million. Between 1990 and 2000, the urban core of New York added 779,000 residents, far more than the 190,000 added between 2000 and 2010. Boston’s 1990-2000 urban core growth was 296,000, but fell to 27,000 in the last decade. Chicago’s urban core dropped from a gain of 139,000 to a loss of 175,000.

    Over the past twenty years, the population of urban cores has diminished relative to that of major metropolitan areas. In 1990, the urban cores represented 18.1 percent of the population, but fell to 14.1 percent in 2010. Auto-oriented areas (suburban and exurban) have increased their combined share from 81.9 percent of the major metropolitan area population in 1990 to 85.6 percent in 2010 (Figure $$$).

    Summary of Individual Metropolitan areas

    In 30 of the 52 major metropolitan areas, all or more of the population growth was in suburban and exurban areas between 2000 and 2010. This includes the metropolitan areas that do not have Pre-Auto Urban Cores.

    Chicago had the largest share of suburban and exurban population growth, at 148 percent. This occurred because of the substantial urban core population losses. The suburbs and exurbs of Providence captured 131 percent of its growth, slightly more than the 126 percent suburban and exurban share in St. Louis. Baltimore, Rochester and Milwaukee had more than 110 percent of their growth in the suburbs and exurbs. Cincinnati, Indianapolis, Louisville, and Kansas City rounded out the largest suburban and exurban growth shares, all over 105 percent.

    Despite the substantial decline in its urban core growth in the last decade, New York had the lowest share of population growth in the suburbs and exurbs (meaning that it had the highest share of population growth in the urban core). The suburbs and exurbs of New York captured only 69 percent of the metropolitan area growth, well below second place, Virginia Beach – Norfolk (81 percent). Boston was next at 83 percent, followed by San Francisco – Oakland, at 88 percent. The bottom 10 in suburban and exurban growth share also included Seattle, Washington, Philadelphia, Richmond, Hartford and Portland. Even so, each of these six metropolitan areas had more than 90 percent of their growth in suburban and exurban areas (Figure 6).

    Jurisdictional Analyses: Suburbs Masquerading in Cities

    The functional analysis based on urban form and behavior reveals substantially different trends compared to the conventional jurisdictional analysis that compares historical core municipalities, principal cities or primary cities to the balance of metropolitan areas. For example a jurisdictional analysis shows that core municipalities added 1,290,000 residents between 2000 and 2010. In contrast, the urban cores, as indicated in the functional analysis, lost 140,000 residents. This indicates the extent of to which municipal boundaries can mislead in the analysis of urban form within metropolitan areas. The expansive city limits of most core cities masks the substantial automobile oriented suburbanization within their own borders.

    —-

    Note 1: The City Sector Model is generally similar to the groundbreaking research published by David L. A. Gordon and Mark Janzen at Queen’s University in Kingston Ontario (Suburban Nation: Estimating the Size of Canada’s Suburban Population) with regard to the metropolitan areas of Canada. Gordon and Janzen concluded that the metropolitan areas of Canada are largely suburban. Among the major metropolitan areas of Canada, the Auto Suburbs and Exurbs combined contain 76 percent of the population, somewhat less than the 86 percent found in the United States.

    Note 2: Changes in zip code definitions and boundaries could result in minor differences in comparability between the three censuses.

    —-

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photo:  Later Suburbs in New York Urban Area (Morris County, New Jersey), by author

  • What We Earn

    Discussions about housing affordability focus almost exclusively on the price of the real estate, movements in which are monitored by multiple organisations on a seemingly daily basis. There is comparatively little discussion about people’s incomes, which are equally as important as prices in determining what can and can’t be reasonably afforded. The income profile of what most Australian’s actually earn paints a sobering picture which could more often be taken into account in debates about housing and affordability.

    It’s becoming fashionable again for business lobbies to complain about Australia’s high wage structure. It explains, they’ll argue, why we lost Holden, Ford, Toyota, and (almost) Qantas, among other things. And yes, Australia’s wages are high by competitor standards – but so are our costs. One of the most fundamental of needs, along with food and clothing, is shelter. And it’s the cost of shelter relative to incomes which has been stretched to beyond reach for a large proportion of young Australians.

    Reducing minimum wages or reducing wage growth further, if at the same time allowing housing costs to further escalate, will only make this situation worse. Arguably, if we could substantially reduce the cost of supplying new housing, this would relieve upward pressure on wages and work towards improving our global competitiveness – along with repairing living standards for working and middle class families, rather than eroding them.

    First, here are some of the facts on the infrequently discussed income side of the equation. (I am again indebted to the team at Urban Economics for making these available. These are top line numbers only: if you want more detailed analysis, please contact Kerrianne Bonwick).

    Nearly two in three of all Australians earn less than $52,000 per annum. It doesn’t much matter whether it’s Brisbane, Sydney or Melbourne; the proportion is roughly the same.  It’s not much. Slightly more than another one in every eight earn from $52,000 to $78,000 per annum. Roughly eight in ten Australians earn less than $78,000 per annum.

    Personal Incomes

    Brisbane

    Sydney

    Melbourne

    < $52,000

    64.4%

    62.8%

    65.4%

    $52,000-$78,000

    15.0%

    13.8%

    14.1%

    $78,000 to $104,000

    7.0%

    7.2%

    6.4%

    > $104,000

    6.3%

    8.2%

    6.5%

    Not Stated

    7.2%

    8.1%

    7.7%

    Source: Urban Economics

    Problem? It is if you’re trying to buy into the housing market. Take a modest house of say $400,000 (very modest depending on location). A worker on $50,000 – and these represent nearly two thirds of all workers remember – is facing a price multiple which is 8 times their gross pre-tax income.  Basically, two thirds of us are stuffed in terms of affording even a modest $400,000 property if we weren’t already in the market. A more reasonable price multiple of say 5 times income would require an income of $80,000 per annum or more. But there are less than 15% of Australians who fit this category.

    But wait, shouldn’t we count household, as opposed to personal, incomes? A good point, particularly for younger families and young couples, where dual incomes are the norm due to necessity.

    But even based on combined household incomes, a third of all households earn less than $52,000 per annum. Another 14% to 15% earn between $52,000 and $78,000 and another 11% or 12% earn between $78,000 and $104,000. A reasonably healthy 30% of all households bring in a combined $104,000 per annum or more, but seven in ten bring in less than that.

    Taking our modest $400,000 home again, and  roughly half of all household incomes fall short of the $80,000 mark required for a price-to-income multiple of five. For one in three of every households, their combined income means a price to income multiple of eight times. They are pretty much stuffed, still.

    Household Incomes

    Brisbane

    Sydney

    Melbourne

    < $52,000

    32.8%

    32.2%

    34.3%

    $52,000-$78,000

    15.5%

    14.1%

    15.5%

    $78,000 to $104,000

    12.3%

    11.3%

    11.8%

    $104,000 – $156,000

    18.1%

    18.0%

    17.1%

    $156,000 – $208,000

    7.7%

    8.7%

    7.3%

    > $208,000

    3.6%

    5.5%

    3.8%

    Not Stated

    10.1%

    10.3%

    10.4%

    Source: Urban Economics

    Hang on, isn’t it more relevant to focus on the demographic that’s more likely to be trying to get into the property market, because older people and retirees, who already own or are paying off homes, may skew the figures? Absolutely: this is the key demographic, especially if you’re a developer of new detached housing product – which is what this cohort mainly wants to buy to raise a family in (as opposed to the apartment they might rent while pre-children).

    Personal income profiles of the 25-34 year old age group are pretty much in line with the Australia wide picture. More than half earn less than $52,000 and roughly eight in ten earn less than $78,000 per annum, which means eight in ten of this age group – who are at the peak of their family formation potential – would be faced with a price multiple of more than 5 times incomes on a $400,000 property, and more than half would be faced with a price multiple which is eight times their income, or more.

    Personal Incomes 25-34 year olds

    25-34year olds

    Brisbane

    Sydney

    Melbourne

    < $52,000

    55.2%

    52.9%

    56.2%

    $52,000-$78,000

    23.1%

    21.7%

    22.9%

    $78,000 to $104,000

    9.3%

    10.0%

    8.4%

    > $104,000

    5.6%

    7.4%

    5.4%

    Not Stated

    6.8%

    8.0%

    7.0%

    Source: Urban Economics

    None of this is great news. For developers trying to provide affordable new housing in new greenfield estates in urban fringe locations, the reality of these income profiles can’t be escaped. I had the privilege of visiting one such estate in south east Queensland recently and what I saw was absolutely first class product at very good entry level prices in a very well designed environment. No ‘McMansions’ here – just quality new detached three and four bedroom homes, on small lots, priced from around $350,000 – and in some cases less.

    But even at $350,000, only around 15% or so of the target 25 to 34 year old demographic could afford to get in with a price multiple of less than 5 times an individual’s income. That proportion would rise taking into account combined incomes for this age group, but it won’t rise beyond around a quarter or a third.  The reality is that more than half this age group would find an entry level $350,000 home would be six times their combined incomes or more. It would be tough going.

    Granted, interest rates are currently very low and some governments are offering stamp duty and other concessions to first time buyers. But these are having next to no impact on this market. Rates of first home buyer activity are at generational lows.  And interest rates won’t stay this low forever. A significant rise in variable home loan rates could tip a substantial number of families in this age group from the ‘just making it’ basket into the ‘we’re stuffed’ basket.

    Since the ‘do nothing’ policy approach doesn’t seem to be working, what could be done to turn the situation around? Basically, it’s a simple formula between incomes and prices. You either increase incomes or reduce prices. The first probably isn’t an option unless incomes can gradually creep up with inflation and with productivity gains over time.

    But what could also happen is the cost of supplying new housing (not referring to existing stock) could be reduced. New housing is heavily taxed and over regulated (the same cannot be said of existing stock). Something like a quarter to a third of the cost of the new home in an urban fringe location is due entirely to various taxes, charges and compliance costs (which do not apply to existing stock). It is also affected by the rapid escalation in land costs due to policy induced supply constraints in areas of ample available land (the same can’t be said of existing stock in mostly built-out inner or middle ring areas). Most of these additional costs of supply owe themselves to policy changes made since the early 2000s – precisely the time when the affordability gap began to widen.

    It does seem a compelling place to start.

    We should aspire to a more competitive Australia but this policy effort cannot just focus on labour costs because our incomes, while high by competitor standards, are now generally insufficient to cover one of the basic necessities of life: shelter. We have made this happen because policy makers have deliberately increased the cost of delivering new housing with new taxes, charges and compliance costs, all justified on esoteric planning or sustainability principles but impossible to justify on social equity or economic grounds.

    These policy changes were made to suit political agendas at the time: they were not needs-based or market-based policy changes. (It also has to be said the political agendas at the time were in the hands of Labor State governments, starting with Bob Carr in NSW but which spread rapidly to other jurisdictions. Why Labor Governments introduced policies which hurt people on working wages is as mystifying to me as to why Liberal Governments have continued to maintain the same policy positions, with minimal amendment).

    The gap between the cost of supplying even relatively basic housing on the urban fringe, and the incomes of the people who in past generations could afford it, will continue to widen unless regulators and policy makers begin to grasp the wider economic consequences of policy-inflated costs for new housing supply.

    Footnote: why a five times multiple? There is no strong reason. The authors of the global housing affordability report Demographia will argue that affordable housing should be around three times incomes. Moderately unaffordable they define as between 3 and 4, and between 4 and 5 is defined as ‘seriously unaffordable.’ The multiples of 7 or 8 times incomes, which we’re seeing in Australia, are off the scale. But for the purpose of argument, if even relatively high (by international standards) multiples of 5 times incomes seems like a utopian dream, it illustrates how far incomes need to rise or costs of new supply should fall before we get even close to the situation that prevailed for most of our history. It’s a big challenge.

    Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.

  • From Jurisdictional to Functional Analysis of Urban Cores & Suburbs

    The 52 major metropolitan areas of the United States are, in aggregate, approximately 86 percent suburban or exurban in function. This is the conclusion from our new City Sector Model, which divides all major metropolitan zip codes into four functional categories, based on urban form, population density and urban travel behavior. The categories are (1) Pre-Auto Urban Core, (2) Auto Suburban: Earlier, (3) Auto Suburban: Later and (4) Auto Exurban. It is recognized that automobile-oriented suburbanization was underway before World War II, but it was interrupted by the Great Depression during the 1930s and was small compared to the democratization of personal mobility and home ownership that has occurred since that time.

    For decades there has been considerable analysis of urban core versus suburban trends. However, for the most part, analysts have been jurisdictional, comparing historical core municipalities to the expanse that constitutes the rest of the metropolitan area. Most core municipalities are themselves substantially suburban, which can mask (and exaggerate) the size of urban cores.

    The Queen’s University Research

    The City Sector Model is generally similar to the groundbreaking research published by David L. A. Gordon and Mark Janzen at Queen’s University in Kingston Ontario (Suburban Nation: Estimating the Size of Canada’s Suburban Population) with regard to the metropolitan areas of Canada. Researchers used travel behavior (journey to work data from the 2006 census) and density for classifying metropolitan areas into four sectors, (1) Active Core, (2) Transit Suburbs, (3) Auto Suburbs, and (4) Exurbs. The active core was that portion of metropolitan areas with a high share of work trip travel by walking and cycling. I covered the research in a newgeography.com article last autumn.

    Gordon and Janzen concluded that the metropolitan areas of Canada are largely suburban. Among the major metropolitan areas of Canada, the Auto Suburbs and Exurbs combined contain 76 percent of the population, somewhat less than the 86 percent we found in the United States.

    The City Sector Model follows the same general approach as the Queens University research, although there are important differences. For example, the City Sector Model is principally aimed at identifying the Pre-Auto Urban Core component of the modern metropolitan area and does not identify an active core.

    All US Major Metropolitan Area Growth Has Been Suburban and Exurban

    Virtually all population growth in US metropolitan areas (as currently defined) has been suburban or exurban since before World War II (the 1940 census). The historical core municipalities that have not annexed materially and were largely developed by 1940 have lost population. As a result, approximately 110 percent of their metropolitan area growth has occurred in suburbs and exurbs. Further, among the other core municipalities, virtually all of the population growth that has occurred in annexed areas or greenfield areas that were undeveloped in 1940 (Figure 1).

    Identifying the Pre-Auto Urban Core

    The City Sector Model is not dependent upon municipal boundaries (the term "city" is generic, and refers to cities in their functional sense, metropolitan areas, or in their physical sense, urban areas). Not being constrained by municipal boundaries is important because core municipalities vary substantially. For example, the core municipality represents less than 10 percent of the population of Atlanta, while the core municipality represents more than 60 percent of the population of San Antonio. The City Sector Model applies data available from the US Census Bureau to estimate the population and distribution of Pre-Auto Urban Cores in a consistent manner.

    At the same time, the approach is materially different from the Office of Management and Budget (OMB) classification of "principal cities." It also differs from the Brookings Institution "primary cities," which is based on the OMB approach. The OMB-based classifications classify municipalities using employment data, without regard to urban form, density or other variables that are associated with the urban core. These classifications are useful and acknowledge that the monocentric nature of US metropolitan areas has evolved to polycentricity. However, non-urban-core principal cities and primary cities are themselves, with few exceptions, functionally suburban.

    The City Sector Model Criteria

    Due to media and academic interest in the Pre-Auto Urban Core, a number of data combinations were used to best fit the modeled population to that of the core municipalities that have virtually the same boundaries as in 1940 and that were virtually fully developed by that time (the Pre-War & Non-Suburban classification in historical core municipalities). A number of potential criteria were examined, and the following were accepted (Figure 2).

    The Auto Exurban category includes any area outside a principal urban area.

    The Pre-Auto Urban Core category includes any non-exurban with a median house construction date of 1945 or before and also included areas with a population density of 7,500 per square mile (2,900 per square kilometer) or more and with a transit, walk and cycling journey to work market share of 20 percent or more.

    The Auto Suburban Earlier category included the balance of areas with a median house construction date of 1979 or before.

    The Auto Suburban Later category later included the balance of areas with a median house construction date of 1980 or later.

    Additional details on the criteria are in Note 1

    Results: 2010 Census

    The combined Pre-Auto Urban Core areas represented 14.4 percent of the population of the major metropolitan areas in 2010 (2013 geographical definition). This compares to the 26.4 percent that the core municipalities themselves represented of the metropolitan areas, indicating nearly half of their population was essentially suburban.

    The Auto Suburban: Earlier areas accounted for 42.0 percent of the population, while the Auto Suburban: Later areas had 26.8 percent of the population. The Auto Exurban areas had 16.8 percent of the population (Figure 3).

    The substantial difference between US and Canadian urbanization is illustrated by applying an approximation of the Gordon-Janzen criteria, which yielded an 8.4 percent Pre-Auto Urban Core population. The corresponding figure for the six major metropolitan areas of Canada was 24.0 percent. This difference is not surprising, since major Canadian urban areas have generally higher densities and much more robust transit, walking and cycling market shares. Yet, the Gordon-Janzen research shows Canada still to be overwhelmingly suburban (Note 2).

    Population Density: As would be expected, the Pre-Auto Urban Core areas had the highest densities (Figure 4), at 11,000 per square mile (4,250 per square kilometer). The Auto Suburban: Earlier areas had a density of 2,500 per square mile (1,000 per square kilometer), while the Auto Suburban: Later had a population density of 1,300 per square mile (500 per square kilometer), while the Auto Exurban areas had a population density of 150 per square mile (60 per square kilometer)).

    Individual Metropolitan Areas (Cities)

    The metropolitan areas with the highest proportion of Pre-Auto Urban Core population are New York (more than 50 percent), and Boston (nearly 35 percent), followed by Buffalo, Chicago, San Francisco-Oakland, and Providence, all with more than 25 percent (Table).

    Table
    City Sectors: 2010
    Major Metropolitan Areas
    City (Metropolitan Area) Pre-Auto Urban Core Auto Suburban: Earlier Auto Suburban: Later Auto Exurban
    Atlanta, GA 0.5% 14.9% 70.7% 13.8%
    Austin, TX 1.8% 15.7% 62.5% 20.0%
    Baltimore, MD 16.2% 41.8% 19.9% 22.0%
    Birmingham, AL 0.0% 42.1% 24.6% 33.3%
    Boston, MA-NH 34.2% 49.7% 3.2% 12.9%
    Buffalo, NY 28.8% 51.6% 3.1% 16.5%
    Charlotte, NC-SC 0.0% 10.0% 38.4% 51.6%
    Chicago, IL-IN-WI 25.8% 45.0% 18.3% 10.9%
    Cincinnati, OH-KY-IN 10.1% 38.8% 24.3% 26.8%
    Cleveland, OH 22.2% 46.8% 10.5% 20.6%
    Columbus, OH 5.0% 28.7% 37.5% 28.9%
    Dallas-Fort Worth, TX 0.3% 34.4% 43.0% 22.4%
    Denver, CO 3.1% 42.9% 42.4% 11.6%
    Detroit,  MI 6.3% 60.6% 16.1% 16.9%
    Grand Rapids 3.8% 32.9% 15.3% 48.1%
    Hartford, CT 11.1% 58.6% 1.1% 29.2%
    Houston, TX 0.3% 34.2% 48.9% 16.6%
    Indianapolis. IN 4.6% 28.0% 41.8% 25.6%
    Jacksonville, FL 0.0% 26.4% 48.2% 25.4%
    Kansas City, MO-KS 5.4% 37.6% 26.3% 30.6%
    Las Vegas, NV 2.4% 17.5% 76.7% 3.5%
    Los Angeles, CA 10.4% 76.4% 5.2% 8.0%
    Louisville, KY-IN 8.1% 45.4% 25.6% 20.8%
    Memphis, TN-MS-AR 1.8% 40.6% 34.3% 23.3%
    Miami, FL 1.4% 51.4% 44.8% 2.4%
    Milwaukee,WI 22.1% 52.0% 10.4% 15.5%
    Minneapolis-St. Paul, MN-WI 12.7% 31.6% 33.8% 22.0%
    Nashville, TN 0.0% 25.0% 36.1% 38.9%
    New Orleans. LA 10.6% 49.9% 7.0% 32.4%
    New York, NY-NJ-PA 52.4% 35.3% 5.6% 6.7%
    Oklahoma City, OK 2.5% 35.1% 31.6% 30.8%
    Orlando, FL 0.0% 16.1% 50.5% 33.4%
    Philadelphia, PA-NJ-DE-MD 24.6% 51.1% 15.1% 9.2%
    Phoenix, AZ 0.0% 29.4% 51.7% 18.8%
    Pittsburgh, PA 15.7% 56.1% 4.8% 23.4%
    Portland, OR-WA 9.3% 36.7% 39.5% 14.6%
    Providence, RI-MA 25.5% 47.7% 2.8% 24.0%
    Raleigh, NC 0.0% 7.5% 54.4% 38.1%
    Richmond, VA 4.5% 38.8% 38.0% 18.8%
    Riverside-San Bernardino, CA 0.0% 29.1% 29.4% 41.4%
    Rochester, NY 11.1% 46.9% 7.7% 34.3%
    Sacramento, CA 1.6% 38.0% 40.2% 20.1%
    St. Louis,, MO-IL 11.7% 39.9% 25.7% 22.8%
    Salt Lake City, UT 4.6% 47.9% 38.4% 9.1%
    San Antonio, TX 0.1% 39.7% 42.6% 17.6%
    San Diego, CA 1.2% 61.6% 30.3% 6.9%
    San Francisco-Oakland, CA 25.7% 55.5% 7.6% 11.2%
    San Jose, CA 0.1% 77.7% 9.1% 13.1%
    Seattle, WA 7.8% 38.9% 40.2% 13.0%
    Tampa-St. Petersburg, FL 0.0% 44.8% 39.7% 15.5%
    Virginia Beach-Norfolk, VA-NC 1.5% 44.4% 37.7% 16.4%
    Washington, DC-VA-MD-WV 15.9% 29.2% 36.2% 18.7%
    Overall 14.4% 42.0% 26.8% 16.8%

     

    It may be surprising that many of the major metropolitan areas are shown with little or no Pre-Auto Urban Core population. For example, five metropolitan areas have virtually no Pre-Auto Urban Core population, including Phoenix, Riverside-San Bernardino, Tampa-St. Petersburg, Orlando, Jacksonville, and Birmingham. By the Census Bureau criteria of 1940, two of these areas were not yet metropolitan and only Birmingham (400,000) had more than 250,000 residents.  Many of the newer and fastest growing metropolitan areas were too small, too sparsely settled or insufficiently dense to have strong urban cores before the great automobile suburbanization that followed World War II. Further, many of the Pre-Auto Urban Cores have experienced significant population loss and some of their neighborhoods have become more suburban (automobile oriented). Virtually no urban cores have been developed since World War II meeting the criteria.

    Thus, no part of Phoenix, San Jose, Charlotte and a host of other newer metropolitan areas functionally resembles the Pre-Auto Urban Core areas of metropolitan areas like Chicago, Cincinnati, or Milwaukee. However, new or expanded urban cores are possible, if built at high enough population density and with high enough transit, walking, and cycling use. 

    Examples of three differing metropolitan areas are provided. Philadelphia (Figure 5) is a metropolitan area with a strong Pre-Auto Urban Core, which is indicative of an older metropolitan area that has been among the largest in the nation since its inception, Seattle (Figure 6) is a much newer metropolitan area, yet exhibits a larger Pre-Auto Urban Core than most. Phoenix (Figure 7) may be the best example of a post-War metropolitan area, with virtually no Pre-Auto Urban Core. In 1940, the Phoenix metropolitan area had only 120,000 residents and could be 40 times that large by 2020. Virtually all of Phoenix is automobile-oriented. Even three years after opening its light rail line, 88 percent of Phoenix commuters go to work by car and only two percent by transit, virtually the same as in 2000.

    Despite the comparatively small share of the modern metropolitan area represented by the Pre-Auto Urban Core in the City Core Model, the definition is broad and, if anything over-estimates the size of urban core city sectors. The population density of Pre-Auto Urban Core areas is below that of the historical core municipalities before the great auto oriented urbanization (11,000 compared to 12,100 in 1940) and well above their 2010 density (8,400), even when New York is excluded. The minimum density requirement of 7,500 per square mile (not applied to analysis zones with a median house construction data of 1945 or earlier) is slightly less than the density of Paris suburbs (7,800 per square mile or 3,000 per square kilometer) and only 20 percent more dense than the jurisdictional suburbs (suburbs outside the historical core municipality) of Los Angeles (6,400 per square mile or 2,500 per square kilometer). Some urban containment plans require higher minimum densities, not only in urban cores but also in the suburbs.

    In describing the Canadian results, Professor Gordon noted that there is a tendency to “overestimate the importance of the highly visible downtown cores and underestimate the vast growth happening in the suburban edges.” That is true to an even greater degree in the United States. 

    —–

    Note 1:

    The City Sector Model is applied to the 52 major metropolitan areas in the United States (over 1 million population). The metropolitan areas are broken into principal urban areas, with all other areas considered to be exurban. The principal urban areas also include the Concord urban area and the Mission Viejo urban area, which are adjacent to and included in the San Francisco and Los Angeles urban areas respectively. As a result, some smaller urban areas, such as Palm Springs (Riverside-San Bernardino metropolitan area), Lancaster (Los Angeles metropolitan area) and Poughkeepsie (New York metropolitan area) are considered exurban. Areas with less than 250 residents per square mile (100 per square kilometer) are also considered exurban, principally for classification of large areas on the urban fringe that have a substantial rural element.

    The Pre-Auto Urban Core includes all non-– exurban areas in which is the median house (single-family or multi-family) was built is 1945 or before. Three density levels were considered, 10,000, 7,500 and 5,000 per square mile (4,000, 2,900 and 2,000 per square kilometer). The lower 5,000 per square mile was examined to test the extent to which such a low density would increase the urban core population. This density, less than the entire urban area (urban core and suburban) of the Los Angeles, San Francisco, San Jose and New York urban areas would have, at the most raised the urban core population to 21.5 percent of the metropolitan population, even with a modest 10 percent transit, walking and cycling market share (Figure 8)

    The pre-auto urban core specification results in a 2010 population for the metropolitan areas with Pre-war and non-suburban historical core municipalities within one percentage point of the actual total, excluding the far higher density case of New York.

    The analysis showed that a lower transit, walking and cycling market share at a 7,500 per square mile floor (2,900 per square kilometer) would substantially increase the Pre-Auto Urban Core category population, while diluting its urban core nature. More than one-half of the increase would be in Los Angeles which has added literally millions of residents in high density suburban areas that are as automobile oriented as suburbs elsewhere.

    The analysis zones (zip codes) have an average population of 19,000, with from as many as 1,000 zones in New York to 50 in Raleigh.

    Note 2:

    An approximation based on the Gordon and Janzen approach would indicate an urban core population of only 8 percent in the major metropolitan areas of the United States. This approximation results in a modeled population for the metropolitan areas with pre-war and non-suburban historical core municipalities of less than one-half the actual 2010 population.

    This Queen’s University research comparison in Figure 8 is referred to as an approximation, since it applies an overall transit, walking, and cycling market share for the six major metropolitan areas, instead of a factor corresponding to each metropolitan area (the Gordon and Janzen approach).

    The differences in transit market share relative to the US are substantial. This may be best shown by considering Calgary, which with a population of 1.2 million in 2011 would have ranked as the 47th largest metropolitan area if it were in the United States. Yet, Calgary would rank second only to the New York metropolitan area in transit market share if it were in the United States. Even so, Calgary is found to be the most suburban of Canada’s major metropolitan areas in the Queen’s University research and Statistics Canada data from 2011 indicates strong domination of urban travel by the automobile.

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photo: Los Angeles