New Geography

Category: planning

  • Levittowns of the Future

    This essay is part of a new report from the Center for Opportunity Urbanism called "America’s Housing Crisis." The report contains several essays about the future of housing from various perspectives. Follow this link to download the full report (pdf).

    “…a social revolution was being made, not by storming barricades, but by leaping over them.”

    Seven decades ago, the great post- war American suburbanization began. The seminal development was Levittown, built on potato fields in Nassau County, outside New York City. This archetypical development, with its small houses and modest lots, helped launch a suburbanizing trend that has accounted for virtually all of the population growth in the nation’s largest metropolitan areas. Today’s new houses are at least three times the size of the early Levittown houses, but they reflect the continued preference for suburban communities over the last half century.

    This essay examines the great Post-War suburbanization, incubated in Levittown and its revolutionary impact on American civilization. At the same time, there is no doubt that racial exclusion was part of the formula, abetted not only by people, communities and developers, but worst of all by governments themselves, especially the federal government. These regrettable exclusionary policies at the time also characterized virtually every walk of American life.

    Yet, for the most part, millions— now including millions of minority households—are better off than they would have been without the great suburbanization. As Professional Builder magazine put it:

    At a time when few working people could afford a home, Levitt helped them realize their dream, starting with servicemen and women returning from the war.

    Levitt brought mass production techniques to home building, following in the mold of Henry Ford, who made automobiles inexpensive enough for middle-income households. The higher quality detached housing with yards could not have been built at low enough prices without such techniques, nor could it have been offered at such prices without the additional advantage of less expensive urban fringe land.

    As home ownership expanded, perhaps the most important result was class mobility. In this period the
    American middle class expanded as never before and home ownership skyrocketed.

    This might seem cause for celebration, but an influential group of planners and intellectuals damned it from the very start. These, whom this essay will refer to as the retro-urbanists, tend to idealize the pre- automobile city, which has largely been replaced not only in the United States but in virtually all high income countries. German academic Thomas Sieverts called these views “criticism rooted in an ideological concept of the city.”

    As retro-urbanists have sought to stop or even reverse suburbanization, people stubbornly have continued to choose the suburbs overwhelmingly,
    not materially moved by the nostalgia so often keenly evident among pundits and planners. So far these efforts have achieved only modest gains, mostly in a handful of states, where the retro-urbanists have had sway, but at great cost to the middle class. \

    In the meantime, however, the housing affordability represented by Levittown and most of the suburban development since World War II has  had its reward in a “property owning democracy,” which legendary urban planner Peter Hall of University College, London described as a principal objective of public policy.

    THE SITUATION IN 1946

    The America of 1946 was much different than today. The United States had just emerged from the world’s most destructive war, emerging as the dominant world power and producer (the latter principally because other competitors had experienced massive destruction). Yet, despite this position, Americans in 1946 experienced a far lower standard of living and greater level of poverty than today.

    World War II had made it possible, finally, for the nation to emerge from  the Great Depression, which had been characterized by unprecedented levels of unemployment and economic stagnation.

    Housing was overcrowded, especially in the cities and living standards were far below present standards.

    Michael J. Bennett describes the situation:

    “Home was usually a three or four story tenement or apartment house, a two, three or four-decker for as many families or a single-family shotgun house with tiny rooms off
    a single corridor, so-called because the shotgun could be fired down the corridor without hitting anyone. Only the better-off live in fairly spacious houses on the outskirts of town. Even those houses, however, had small tiny front lawns and were separated from each other by little more than a hedge between gravel or partially paved driveway.”

    Bennett goes on to indicate that only the very rich took showers in the morning, “because they were the only ones with showers” and that “Many families had to share toilets and sinks as well as tubs with people living on the same floor.”

    The nation’s returning soldiers, in unprecedented numbers, would experience a better America, with better lives. There was also a concern among policymakers that the failure to facilitate opportunities for returning soldiers could result in social upheaval or even revolution in the worst case. Some noted the social disruptions that occurred following World War I, in countries like Russia and Germany. There was great interest in trying to ensure that this did not happen in America.

    Just before the end of the war, Congress passed and President Roosevelt signed the Servicemen’s Readjustment Act of 1944, called the “GI Bill of Rights,” which provided assistance to veterans, especially improving access to housing and access to higher education. At the same time, the Federal Housing Administration was aiding home purchases for households not eligible for the “GI Bill.”

    LEVITTOWN AND THE GREAT POST-WAR SUBURBANIZATION

    America’s status as an urban nation was still relatively new as it headed into World War II. The US urban population had not exceeded that of rural areas until the 1920 census. By 1940, the urban population was approximately 57 percent, according to Census Bureau data, well below the 81 percent of 2010. In the following seven decades almost all of the nation’s population growth would occur in America’s urban areas.

    Following the legacy of the New Deal, it was expected that new housing would be largely provided by government. The home ownership rate had dropped to 44 percent from its peak of 48 percent in 1930.ix It was assumed that the new
    housing would be for renters rather than for homeowners. The reality turned out much different.

    One entrepreneur is widely heralded as having blazed the trail for the suburbanization that emerged following World War II, William Levitt, and his company Levitt and Sons. A home builder before the war, in 1947 he established the legendary Long Island, New York, community of Levittown. Levitt revolutionized homebuilding in the United States after having applied factory building techniques to the provision of wartime (defense) housing.

    Levitt began to build rental housing on the suburban fringe of New York City, but switched to owned housing as federal programs and his house production techniques together create auspicious conditions for selling single family houses.

    In 1947, Levitt marketed four different models. Eventually the seven square mile development would contain more than 17,000 new houses. The houses were small, at 750 square feet. There were
    four rooms, the kitchen, the living room and two bedrooms, all on a single floor. The houses, however could be expanded, which many households did. There were no garages. The houses were sold for approximately twice the average wage earner’s annual pay.

    Little more than a decade after the first house was occupied, Levittown achieved a population of 65,000 (1960 census). This was near the peak of Levittown’s population, since with virtually all of the land occupied and a future of declining household size, reductions in population were inevitable. By 2010, the population had dropped to 52,000. However Levittown remained a vibrant community from the beginning and remains so today.

    Levitt took the concept to other metropolitan areas as well. A Levittown featuring somewhat larger houses was developed in the Philadelphia suburbs of Willingboro township in Burlington County, New Jersey and in Pennsylvania’s Bucks County.

    In an essay entitled “Levittown: The Archetype for Suburban Development,” historian Joshua Ruff said that: “… Levittown was about more than just the houses,” adding that it was the “…largest and most influential housing development of its time..”

    Lakewood: Another important suburban community was Lakewood, located near Long Beach in the Los Angeles metropolitan area.xi The Lakewood development included 17,500 houses built between 1950 and 1953.
    The houses were between 825 square feet and 1,050 square feet.xii Lakewood, which claimed to be the largest planned housing development ever, included a regional shopping center.

    However, despite such important early developments, most of the new suburban housing around the nation was built by smaller home builders in the decades to come.

    THE CONSUMER RESPONSE

    The new suburban communities were exactly what returning soldiers and other Americans wanted. As historian Joshua Ruff put it:

    Patience had been killed by 15 years of economic depression, war and an epidemic housing shortage. People wanted the full package—the affordable house, the new appliances, the suburban lifestyle—and they wanted it right away.

    Kenneth Fox, of Yale University, wrote that: “The suburban development that began in the 1940s was revolutionary in two ways: it changed the type of community millions of Americans live in, and it transformed the national social class structure.”

    The American middle class was about to undergo an unprecedented expansion. Before, as author Studs Terkel put it:
    “The suburb, until [about 1946], had been the exclusive domain of the ‘upper class.’ It was where the rich lived. The rest of us were neighborhood folk. At war’s end, a new kind of suburb came into being.”

    According to Fox: “Eventually, suburban cultural changes and white- collar status aspirations fused and produced a shift in the basis of social class differentiation. Income and style of living supplanted occupation and economic status as the parameters defining the major social classes. A broad middle class emerged, encompassing more than one half the metropolitan population in the 1970s.”

    Indeed, according to Fox, middle- class became defined more as lifestyle,
    rather than origins: “Increasingly, and the family that chose to buy a home in a reputedly middle-class community, behave in a middle-class matter, and maintain all appearances of the middle class, could gain acceptance in the middle class, regardless of the parents occupations.”

    Levittown chronicler Barbara Kelly noted a connection between home ownership and upward mobility, indicating that it conveyed “defacto membership in middle class.” She added: “…during the years in which  the government was most active in promoting home ownership, there was a marked expansion of the American middle class, which consisted largely of the definition of its parameters.”

    Harvard historian Robert Fishman noted the rising affluence: “For the first time in any society, the single-family detached house was brought within  the economic grasp of the majority of households.” The US may have been first, but it is not alone in having democratized prosperity.

    Bennett characterized the advances, noting that “…a social revolution was being made, not by storming barricades, but by leaping over them.”

    And despite claims to the contrary, most of the new suburban residents came from migration to the large metropolitan areas, not from core cities. The new suburbanites were as likely to be from a small town or the countryside as a big city.

    HOUSING AFFORDABILITY: WHAT MADE IT POSSIBLE

    It was the affordability of such housing that made these improvements possible. Housing remained affordable across the nation in the decades to come, with some important exceptions.

    According to the US censuses of 1950 through 1970 median house values in the largest metropolitan areas were generally 3.0 or less times the median household income (the “median multiple”), with only two having a higher average (both 3.1).

    At the same time, there were differences in housing affordability. As would be expected, some parts of the country were more attractive than others. Therefore, it is not surprising that house prices in the coastal California metropolitan centers of Los Angeles, the San Francisco Bay Area and San Diego were less affordable, but still remained at or below the 3.0 median multiple standard, in part due to higher incomes.

    The housing bubble and bust were to come later, during which the losses in housing affordability were even greater.

    Home Ownership

    The government role here was crucial. By 1960, homeownership had reached 62 percent, well above the 44 percent  of 1940. In the following three and half decades, the home ownership rate varied up and down in a range of from 62 percent to 66 percent (Figure).

    Then, as mortgage eligibility was relaxed during the housing bubble, the home ownership rate rose to nearly
    69 percent. Following the housing bust, it had fallen to below 64 percent by 2015.

    Some retro-urbanists have characterized the comparatively recent experience of the housing bubble and bust as indicative of an overall failure of postwar US housing programs. Nothing could be further from the truth.

    In fact, US housing programs had been instrumental in producing a significant increase in homeownership and the creation of a much broader middle-class. The evidence remains “the 60 to 65 percent level of home ownership of the 35 years preceding 1995 was sustained. Meanwhile, even after the housing bust, home ownership remains a priority among American households,xxvi including younger people. Even after the Great Recession, the aspiration for home ownership remains strong. Polling by the Demand Institute (operated by The Conference Board and Nielson) found that 77% of respondents considered home ownership “an excellent investment” (Figure).

    THE RETRO-URBANIST RESPONSE

    It might be expected that there would be popular and widespread acclamation of this success. Surely, the results were consistent with the principal priorities of a progressive society, at least in the historic sense, to improve the standard of living and reduce poverty.

    Yet, this was not to be. Retro-urbanists, including many planners, architects and other thought leaders were nothing less than appalled. In reaction to this, the very first words in the preface of Herbert J. Gans’ The Levittowners: Ways of Life and Politics in a New Suburban Community, read: “This book is about a much-maligned part of America, suburbia…”xxix he continues to indicate that these observers of suburbia are similar to literary writing, “which often boils down to cataloguing … Shortcomings from the author’s perspective.”

    Kelly characterizes the criticisms as “…a form of pseudo-intellectual disdain for suburban life in general, with Levittown serving as its archetype.”

    For example, in 1964, architect Peter Blake declared in God’sOwn Junkyardthat the suburban pattern developing in the United States is “making life there only slightly less tolerable than on tenement streets.”

    He continued: “The results are palpable: children play in the street; parents spend most of their time maintaining a front garden they can’t use; the community has to maintain long roads and long utility lines to service its strung-out houses; and the suburbs go broke.” Blake also says that “America’s suburbia is now functionally, aesthetically and economically bankrupt.”

    Dr. Charles Winslow, professor of public health at Yale University said that the “inferior type of small house being provided by speculative builders to meet the veterans demands [were] dollhouses that out slum the slumming is of our prewar slums…” He also said that “families living in these houses might suffer serious mental and physical ills.” 

    Social commentator Paul Barker describes the intensity of the criticisms, noting that “suburban” is a “sneer- word” to architects and planners.xxxvi He also says: “Those who oppose suburbia usually have highly doctrinaire views about how other people should live.” While Sieverts refers to an ideological concept of cities, Barker characterizes it as theological: “Almost all architectural and planning commentaries, in the press or in government publications, still speak of the suburban as an evil that must somehow  be cast out.”

    These kinds of criticisms have often been supported in the press.

    Historian Joshua Ruff dismisses Lewis Mumford’s complaint that Levittown
    was a “uniform environment from which escape is impossible” as “ignoring the architectural sameness (block after
    block of overcrowded apartments) many new suburbanites were fleeing from in Manhattan, Brooklyn and Queens.”

    But, despite their influence and access to the press, the retro-urbanists have been consistently ignored by households making home purchase decisions. As Barker put it, “…such critics are outnumbered many, many times by the millions for whom suburbia is a land of pleasantness, friendship and hope.”xl Moreover, the retro-urbanists did not understand the desires of suburbanizing households. As Gans put it, they came “…for a house and not a social environment.”

    In the final analysis, as Journalist Edward Humes wrote: “But the veterans who snapped up these new houses were coming from a different outlook, a different place—from boarding houses and cramped apartments and lives that just a few years earlier had offered little hope of college or homeownership or lasting financial security.”

    Households continued to move to the suburbs and suburbanization continued to attract nearly all population growth in the major metropolitan areas.

    The Right and Wrong of Suburbanization

    Ruff provides a short summary of the positive and negative perceptions with respect to Levittown (which also apply
    to the great post-war suburbanization): “But Levittown was about more than just the houses. As the largest and
    most influential housing development  of its time, it became a postwar poster child for everything right (affordability, better standard of living) and wrong (architectural monotony, poor planning, racism) with suburbia.”

    As for the “right” that Ruff refers to, it is hard to imagine more important benefits than a dispersion of wealth, affordability and a better standard of living. These are fundamental domestic public policy objectives long held by much of the nation’s leadership, including liberals. A nation of homeowners, “President Franklin D. Roosevelt believed, “of people ho own a real share in their land, is unconquerable.”

    The case for the “wrong” is less clear. Architectural monotony does not negate the imperative to improve the standard of living and reduce poverty. Moreover, architectural monotony is in the eye of the beholder and clearly was of no more than secondary interest to the millions who overwhelmingly chose the suburbs. The very rowhouses that are now so widely celebrated by retro-urbanists were themselves originally stretches of identical structures with little differentiation. Planning that results in better affordability (and an improved standard of living) is good and effective, not “poor.” Finally, as noted above, the racism concern is valid, but is a more general indictment of the nation at the time and has now been moderated by a flood of minority residents to suburbia.

    According to Kelly: “For all the faults attributed to them by their critics, the houses of the postwar subdivisions had widespread appeal. They may have been small and repetitious to their observers, but to their owners they represented something more than basic shelter—they were an opportunity to build a better life, a first step on the road to success. It is at that level that the housing programs of the 1940s made their greatest achievement.”

    THE NEW CITY

    The postwar suburbs developed because they could. History had made it possible and thus virtually inevitable.

    Throughout history, people have routinely adopted new techniques and technologies that made their lives better. Nostalgia did not prevent people from abandoning outhouses for indoor plumbing or iceboxes for refrigerators. People prefer better lives and greater comfort and accept technological  advance as soon as it is affordable. It is  not surprising that people found better lives and comfort preferable to nostalgia and an “ideological concept of the city.”

    Indeed, the city was revolutionized.

    Levittown chronicler Barbara Kelly added that the postwar subdivision suburbs had “evolved into a new form  of city,” while Thomas Sieverts characterized the “strange urban—rural landscape as a new form of city.”

    The suburbs gradually became more independent of the core city, as employment was dispersed throughout the metropolitan area. They were no longer subordinate to the core cities, the legacy cites of the pre-war era. Jon
    C. Teaford of Purdue University wrote that the term: “…‘suburb’ had become a misnomer. Economically and socially periphery is no longer a subordinate dependent of the center and thus no longer a candidate for the prefix sub[emphasis in original]” Similarly, J. John Palen of Virginia Commonwealth University wrote: “Whatever everyone thinks about suburbs, it is now indisputable that they no longer sub [emphasis in original].”

    More than three decades ago, Robert Fishman of the University of Michigan suggested:

    “In my view, the most important feature of the postwar American development has been the almost simultaneous decentralization of housing, industry, specialized services and office jobs; the consequent breakaway of the urban periphery from the center it no longer needs; and the creation of the decentralized environment…”

    He went on to propose a new conception of the city (metropolitan area):

    “The true center of this new city is not some downtown business district
    but in each residential unit. From that central starting point, the members of the household create their own city from the multitude of destinations that are within suitable driving distance.”

    Even “suitable commuting distance” became less of a concern for many, as Alvin Tofler’s”electronic cottage” became a reality for many as working at home expanded, facilitated by improved telecommunications. Today, in the majority of American metropolitan areas, more people work at home than take transit.

    THE PLANNING RESPONSE

    Long before Levittown, there were strong criticisms of the suburbs reaching back into the 19th century and even to the 17th and 18th.

    However, it took the interwar building boom to marshal political  forces to implement planning restrictions intended to stop the growth of the suburbs. Under the Town and Country Planning Act of 1947, Britain’s liberal land-use policies were replaced by urban containment policies that have only become stronger over the years. Greenbelts (urban growth boundaries) were imposed around the cities of England, leaving little land for new residential development.

    The result has been a severe and on- going housing crisis, with house prices having doubled or tripled compared to their pre-urban containment relationship to incomes.lv This is to be expected, since prices tend to rise where the supply
    of a desired good or service (in this case land) is restricted, while demand continues unabated. Not even depressed metropolitan areas like Liverpool and Glasgow have escaped the cost escalation.

    There is broad agreement among economists and even planning advocates that higher land prices occur within urban containment boundaries. lvi Planners expected that construction of higher density housing would negate the higher land price impact on house prices. Moreover, urban containment planning regimes have routinely included periodic reviews to expand land supply housing affordability. As the discussion below indicates, these approaches have failed as losses
    in housing affordability have been pervasive in more restrictively regulated metropolitan areas.

    It took longer, but similar planning strategies have been adopted in many parts of the US. Their spread, however, has been slowed by America’s federal structure,lvii which did not lend itself to overnight imposition of urban containment policy. Even 70 years after World War II, the radical land use regulatory regime of the United Kingdom has been implemented in only parts of the United States.

    Nonetheless, there were important adoptions of Great Britain style urban containment policy. Things began to change, especially in California and Oregon in the 1970s.

    In California, restrictions were placed on the incorporation of new suburban municipalities that made it more difficult for development to extend from existing municipalities into unincorporated areas.lviii At the same time there were various environmental and land-use regulatory changes that made it more difficult to develop new housing. The net impact of this was fairly immediate house price increases relative to incomes. These housing affordability losses were recognized early some urban planning experts, such as David Dowell  at University of California, Berkeleylix and Bernard Friedan at MIT.lx California’s housing affordability, which had been similar to that of the rest of the nation, began to deteriorate markedly, and by 1980 had reached unprecedented severity.

    Urban containment policies were also enacted in states such as Washington, Florida, Tennessee, New Jersey and Maryland. Local initiatives significantly strengthened land use regulations, such as in the Virginia and Maryland counties of the Washington, DC-VA-MD-WV metropolitan area and the New York metropolitan area.

    By 2000, house prices in some markets had reached five times incomes, nearly double their 1970s ratios. This is consistent with the economic principle that restricting supply tends to result in higher prices, all else equal.

    The tragedy of the housing bust was to follow. Households were lured by
    mortgage products that back-loaded costs so that the greatly inflated prices could seem affordable. The more restrictive  land use regimes could not respond with sufficient supply to meet the increased demand. By the middle 2000’s the highest median multiples reached over 10 in the coastal California metropolitan areas, with some other metropolitan areas exceeding 5.0.

    These price factors led to mortgage defaults, corporate bankruptcies, and a recession so severed that it is called the Great Recesion. It was by far the worst economic reversal since the 1930s. Through the Great Recession, the
    US housing market sent ripples of economic disruption throughout the international economy.

    There were massive house price losses across the nation, with the largest losses where house prices had risen the most. Yet, the house price increases relative to incomes quickly resumed. By 2014, median multiples had reached 8.0 or above in the San Francisco, San Jose, San Diego and Los Angeles metropolitan areas. Housing was also severely unaffordable in the New York, Boston, Miami, Riverside-San Bernardino, and Seattle metropolitan areas and was approaching similar severity in the Denver and the Portland metropolitan areas (Figure).

    The housing distortion was so great that California’s cost adjusted poverty rate became the highest in the nation, 50 percent above that of Mississippi. Despite a California Legislative Analyst’s report documenting the association between regulation and housing affordability losses, the state has continued to strengthen regulation.

    Tomas Rivera Institute raised concerns about the impact of compact development on minority housing affordability:

    Whether the Latino homeownership gap can be closed, or projected demand for homeownership in 2020 be met, will depend not only on the growth of incomes and availability of mortgage money, but also on
    how decisively California moves to dismantle regulatory barriers that hinder the production of affordable housing. Far from helping, they are making it particularly difficult for Latino and African American households to own a home.

    At the same time, throughout most of the country the historic housing affordability was preserved. Even through the housing bubble many major markets remained at or below the 3.0 housing affordability standard. There were also significant house price increases in some liberally regulated markets, but most remained at or below a 3.0 median multiple (such as Atlanta and other Less Restrictive Markets in the Figure above “Middle-Income Housing Affordability”).

    Finally, even in metropolitan areas with strong policies discouraging suburban development and favoring urban core development, most growth continues the periphery. For example, in Portland more than 95 percent of that growth between 2000 and 2010 was in suburbs and exurbs. In San Francisco, 88 percent of the growth was in the suburbs and exurbs.

    TOWARD A MORE ELITIST AMERICA?

    The present preference in planning for urban containment policy threatens to reverse 70 years of social progress. As house prices rise relative to incomes — a phenomenon clearly associated with of urban containment policy — home ownership will be increasingly limited to the more affluent. Paul Barker asks why the strong land use regulations  have survived. Answering his own question, he says that: “The short answer is that it protects the haves against the have-nots.” Robert Bruegmann of the University of Illinois, Chicago provides similar commentary, in chronicling the conversion of suburbs to abodes of the middle class:

    “… Cities have sprawled from time immemorial and for a wide variety of reasons. As long as only a small number of the wealthiest and most powerful families occupied the most
    land in the most attractive locations, there was very little sustained organized protest. Whenever a newly affluent or empowered part of the population started to enjoy this privilege, there was a backlash.”

    Matthew Rognlie at the Mass- achusetts Institute of Technology has suggested that virtually all of the increased inequality identified by French economist Thomas Picketty has been in the housing sector. He suggests that:

    “… the literature studying markets with high housing costs finds that these costs are driven in large part by artificial scarcity through land use regulation …. A natural first step to combat the increasing role of housing wealth would be to re-examine these regulations and expand the housing supply.

    Jason Furman, Chairman of the White House Council of Economic Advisers called for regulatory relief in a recent address on housing affordability and the consequences of high prices on the economy.

    With high house prices and further hedges against property value depreciation in local regulations, some individuals are priced out of the market entirely, and homes in highly zoned areas also become even more attractive to wealthy buyers.
    Thus, in addition to constraining supply, zoning shifts demand outward, exerting further upward pressure on prices…

    Worse of all, these restrictions are largely unnecessary. Better policies can secure a future for the next generation every bit as promising as the generations since World War II came to expect. The words of Presidential candidate Adlai Stevenson in 1952 are as relevant today as then: “Who shall say that the American dream is ended?”

    LEVITTOWNS FOR THE FUTURE

    But there is a solution. Levitowns can still be built. For example, a review of four metropolitan areas shows that new, entry level detached housing can be purchased for from 2.0 to 2.5 times median household incomes in Atlanta, Columbus, Houston and Indianapolis. This is only slightly above the two times average earnings typical in Levittown, when few families had more than one wage earner. Moreover, today’s prices include a garage, and the houses are at least 50 percent larger. Implementation of recommendations in Section 9 could increase the number of new houses that replicate Levittown affordability today.

    A number of policy proposals could improve the potential for improving housing affordability, particularly in the starter home market following the “trail” blazed by Levittown and other early postwar suburbs. These could restore, in the short term, the promise of Levittown for today’s threatened middle-class.

    The first two relate to the stringency of metropolitan land use planning systems, since experience has demonstrated that the administration of urban containment policies not succeeded in maintaining housing affordability. Until these policies are reformed, new Levittowns are simply not likely to be built.

    Recommendation #1

    To retain housing affordability, liberally regulated metropolitan areas should not adopt restrictive housing
    regulations, such as urban containment.

    As is indicated above, urban containment policies have been virtually inextricably linked to the loss of housing affordability. The theory that the higher land prices inside an urban containment boundary will be offset by lower construction prices has proven to be entirely elusive in practice.

    Recommendation #2

    Wherever there is urban containment policy, it can be expected that housing affordability will further deteriorate. This approach needs to be reformed.

    A road map has been provided by the Productivity Commission of New Zealand. In seeking to address the
    severe housing affordability in Auckland, the Productivity Commission has recommended that greenfield land for development be opened up in greater volume once prices have become unduly distorted. As the Commission indicated: “”Where large discontinuities emerge between the price of land that can be developed for housing and land that cannot be developed, this is indicative of the inadequacy of development capacity being supplied…”

    The Productivity Commission’s recommendation for an “event- driven trigger” to open more land for development also could be adopted at the state or metropolitan area level in the United States. This would require establishment of annual housing affordability targets.

    Recommendation #3

    Metropolitan areas with urban containment policies should consider establishing “special housing areas” outside their urban containment boundaries in order to facilitate housing that is affordable to middle income households.

    These new developments could be authorized by governments to allow development of land and housing at prices similar to those, relative to incomes, that prevailed in the early suburban developments, such as Levittown. These districts should be within metropolitan areas (labor markets) and would provide advantages not only to aspiring families, but also to land owners whose land has been rendered worthless from a development perspective by urban containment policy. Limits on land prices should be set, with development proceeding only when land owners are willing to sell for prices within such limits. Generally similar proposals have been made by the New Zealand government (special housing areas), and by United Kingdom government housing researcher Kate Barker. This approach would also be similar in some respects to the successful municipal utility districts in Texas.

    Recommendation #4

    Governments, land developers and homebuilders should examine approaches for liberalizing regulation on starter homes, toward the end of implementing less costly delivery of housing.

    Cost increasing factors such as delays in permitting, more expensive materials requirements and designs (such as favored architectural styles, including “new urbanist” designs) and other requirements that increase costs for starter homes should be reviewed. This would be appropriate in all markets and should be conducted consistent with appropriate health and safety standards. Wherever feasible, reforms should be implemented.

    CONCLUSION

    The legitimate purpose of planning is not so much better cities, but better lives for their inhabitants. This requires housing that is affordable and maximizes discretionary incomes and a reduction in poverty.

    Planning can only be justified by the extent to which it improves people’s lives. Suburbanization, through entrepreneurship and liberal planning accomplished this, and created the Great American Middle Class after the Second World War.

    As Herbert Gans suggested a half century ago:

    “… whatever its imperfections, Levittown is a good place to live. Consequently, it is much less important to plan for new or improved suburban community and to make sure that more people are able to live in suburbs like those now being built. Specifically, the most urgent priority is to make the benefits of suburban living available to the poor and nonwhite families, now condemned to slum ghettos, who want to give their children
    and themselves a better life beyond the city limits."

    Gans further expressed concern that there needed to be a place in the suburbs for lower middle income households: lxxvi

    …The ideal solution is more, better and more variegated new towns in suburbs, but the first priority in the years to come is more communities for the less affluent.”

    Wendell Cox is Chair, Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), is a Senior Fellow of the Center for Opportunity Urbanism (US), a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California) and 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 served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

  • Intercity Buses: 2015 Was A Smooth Ride

    As a former airline pricing analyst who once viewed the intercity bus as an inconsequential player in major markets, I am perhaps an unlikely champion of this mode’s potential. But since Megabus made its US debut just blocks from my Chicago office in 2006, I have become intrigued with this increasingly popular mode of intercity transportation. I now collect data and write a year-in-review report that summarizes the notable happenings in the sector.

    Ever since I began this research, there have been remarkable developments. In 2015, the trend was for fast-growing brands such as BoltBus, Greyhound Express, and megabus.com to pivot from investing in new routes to investing in conveniences for quality-minded travelers, in a bid to woo them from cars and planes. Another major surprise has been the resurgence of Chinatown lines, some of which had been written off as dead after federal safety crackdowns several years ago.

    The intercity bus industry’s shift from added routes to investments that improve passenger experience stems from three factors.

    First, major lines need to allow consumer markets to catch up with previous expansion, which has pushed bus service to regions in which product awareness is relatively low (it often takes three to five years for new service to achieve financial self-sufficiency). The map below illustrates the expansion of hubs by Megabus since it began its US service in 2006 and continued with Florida additions in 2014.


    Development of hubs by Megabus with approximate geographic range of service. Chaddick Institute

    Secondly, as the map shows, many of the most lucrative markets have already been tapped, giving carriers little choice but to focus their efforts on broadening their appeal among the large segment of the public that has been reluctant to give bus travel a try.

    Third, plummeting fuel prices have greatly intensified competition from private vehicles. Average gasoline prices across the US fell from $3.68 a gallon in July 2014 to just over $2 last month, negating some advantages of fuel-efficient modes. Double-decker buses with heavy loads can easily achieve 200 passenger miles per gallon. On a 250 mile round-trip, these falling prices have reduced the relative cost of driving by about $25 per passenger. That’s a big change to overcome!

    Carriers retained momentum by working to make coach travel more appealing. Greyhound introduced OnTouch©, allowing passengers to surf for information about tourist attractions, theatrical events, and ridesharing services at their destination using the bus’ Wi-Fi system. The carrier also launched BusTracker, which provides updates every one to four minutes on a bus’s location and expected arrival time.

    Megabus created a reserved seating program that allows passengers to select particular seats — including table spots — when buying tickets, generally for $5 or less. As recently as a decade ago, almost all US bus passengers were denied even having a guaranteed seat, much less a particular seat, on a selected departure. This uncertainty compelled many to arrive at the station at least an hour ahead to stand in line. Now, passengers can arrive at the last moment with their preferred seat awaiting them.

    New business-class services, meanwhile, popped up, linking New York City to Ithaca (on both Chaddick Institute for Metropolitan Development and Professor of Public Service at DePaul University in Chicago.

    Flickr Photo by Richard Masoner / Cyclelicious

  • The Digitally Connected City

    We are witnessing an explosion in digital technology that is reshaping cities… and resulting in a fundamental shift in the way people move and interact within the built environment.

    New innovations have always had a profound impact on the evolution of cities, supporting commerce as well as addressing lifestyles. Making sense of the prevailing trajectory requires a new paradigm for city residents, visitors and those who govern.

    In recent times, computers and phones have become a must for navigating the vast ecosystem of urban options. New digital technologies support activities such as the ability to use forms of mobility other than cars. From digital apps such as RideScoutApp.com to local amenity rating services like Yelp.com, digital tools abound to guide both local residents and city visitors to where they want to go. These developments provide the backbone of sustainable economic development.

    Public and private initiatives are deploying tech solutions to interests and demands. The AT&T Smart Cities Initiative, which is being rolled out in urban centers like Chicago, Atlanta and Dallas, is just one example of a tool for citizens to stay abreast of developments locally and regionally. For example, consumers can receive live updates on their phones if a traffic signal isn’t working. And they can remotely access information on parking meters to reserve a space in advance. In addition, transportation updates in the form of digital signage allow commuters to be advised in real-time of arrival and departure schedules. These digital tools also allow them to rent electric bikes at stations populated throughout these host cities.

    The fuel for this movement? Rapid momentum in the deployment of high-speed Internet technology in cities and regions. This is the “juice” that fuels mobile technology adoption and the use of city-based apps, providing consumers with connectivity and the ability to have their data delivered fast. Leading the race in this push is Google Fiber, which is on board to offer warp speed Internet to a growing number of cities across the U.S., including Charlotte, Kansas City, Provo, Raleigh-Durham, Salt Lake City and San Antonio. While the full implications are still a ways off, it promises to serve as a lightening-rod of possibilities for igniting the new digital economy.

    Google’s catalytic spark has created a groundswell of public/private interest in boosting the gigabit landscape of cities and regions. A prime example of this is in Longmont, Colorado which has created an experimental laboratory of sorts around what they have coined the GigaBit City. Called NextLight, this venture is a plan to deliver warp-speed broadband to local residents and business. Seen as an economic development game-changer for this city of nearly 90,000, located about 45 minutes northwest of Denver, it is scheduled to be available by 2016. And the monthly price, which is reported to be around $49, is destined to raise some eyebrows among intrigued city planners. Viewed as a quasi-public utility, the ultimate goal of the city is to provide the fastest-speed at the most affordable price of any city in the nation.

    Greater access to reliable and fast Internet services allows city locals and visitors to efficiently navigate business and lifestyle options. It also helps citizens to engage more deeply with their communities and provide data-driven feedback on ways in which improvement can take place. Growing numbers of city governments are embracing the benefits as they bring more people online, which helps bridge the digital divide that often exists in their locales. While laws and compliance will always be the primary raison d’etre for public entities, there is a reason for optimism in their willingness to acknowledge and celebrate new technologies.

    The key drivers of citizen engagement are phones and other mobile tools. Anthony M Townsend expresses this theme eloquently in his book, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia. He writes:

    “We are witnessing the birth of a new civic movement, as the smartphone becomes a platform for reinventing cities from the bottom up. Every day, all across the globe, people are solving local problems by this increasingly cheap consumer technology… And smartphones are just the start – open government data, open-source hardware, cities of the future that are far smarter than any industry mainframe. And so, just as corporate engineers fan out to redesign the innards of the world’s great cities, they’re finding a grassroots transformation already at work. People are building smart cities much as we built the Web – one site, one app, and one click at a time.”

    The proliferation of phones and other mobile devices are the tipping point of a new digital normal for cities. Ridesharing tools like Uber and Lyft, community building sites like Meetup.com, dining apps like OpenTable.com, and even new digital currency apps like Airbitz.com open the door for civic engagement and local economic activity.

    And what about access to power sources for these mobile devices? We’ve all had times when our phone batteries have gone dead, leading us to a frantic search and rescue mission for an electrical outlet. This is the reason why ChargeIt (chargeitspot.com) stations are becoming available in growing numbers of cities.

    In the end, this mashup of tech infrastructure, consumer tools, and government engagement are fostering an exciting evolution in how we interact with our built environments. It signals the next wave of innovative solutions driving the connection between technology and the economic development of cities and regions.

    Michael Scott is a Denver-based journalist specializing in disruptive themes fueling today’s emerging digital economy. More on his work can be found on his blog site, BITDisrupt.

    Flickr photo by Adam Fagen: Texting Congress in support of medical research; Washington, D.C.

  • Best and Worst: 2015 International Housing Affordability

    Housing affordability and its impact on   middle income households around the world is emerging as a major concern throughout the developed world. The largest element in household budgets is housing, and house prices have skyrocketed relative to incomes in many metropolitan areas, especially those that have adopted strict land use regulation (particularly urban containment, as described below).

    The 12th Annual Demographia International Housing Affordability Survey reports that, as of the third quarter of 2015, Hong Kong has the least affordable housing among major markets in 9 nations, followed by Sydney, Vancouver, with Auckland, Melbourne, San Jose, San Francisco, London, Los Angeles and San Diego. In each of these markets, housing costs are now triple or more their  levels before restrictive land use regulation (house prices have tripled compared to incomes).

    Ranking Similarities: Demographia and the UBS Real Estate Bubble Index

    The Demographia list of least affordable metropolitan areas is largely echoed by UBS, the international financial services company headquartered in Switzerland. The UBS Global Real Estate Bubble Index ranks London, Hong Kong, Sydney and Vancouver as most vulnerable to risk from a real estate bubble. Demographia rates Hong Kong, Sydney and Vancouver as having the least affordable housing. London is ranked 8th in the Demographia Survey. Overall, the five cities rated by UBS as the most vulnerable are included among the eight least affordable in the Demographia Survey. The three other cities ranked in the least affordable eight by Demographia are not considered in the UBS report.

    Background on Middle-Income Housing Affordability

    In his introduction to the Survey, Senator Bob Day (Australian federal Senate) recalls that: “For more than 100 years the average Australian family was able to buy its first home on one wage. The median house price was around three times the median income allowing young home buyers easy entry into the housing market.”

    Senator Day’s description of the experience in Australia tracks with that of other nations. Following World War II and until the early 1970s, virtually all metropolitan areas in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States had median multiples around 3.0 or below.

    Since then far more restrictive land use policies have spread beyond the metropolitan areas to many others in other nations. This has often included urban containment policies (called “urban consolidation in Australia”), which severely limit or even prohibit new housing construction on or beyond the urban fringe. The result, as basic economics predicts, is higher land prices and skyrocketing housing costs, (despite expectations to the contrary by planners).

    Rating Housing Affordability

    The Demographia International Housing Affordability Survey uses the "median multiple" price-to-income ratio. The median multiple is calculated by dividing the median house price by the median household income.  Housing affordability ratings are indicated in Table 1.

    Virtually all of the severely unaffordable major markets in this year’s Survey exercise urban containment policy. Meanwhile, no market without strong land use regulation has ever been rated as severely unaffordable in the 12 years of the Survey.

    The Bottom 10: Least Affordable Major Metropolitan Markets

    The kinds of restrictions on development that Senator Day outlines are evident in the most unaffordable metropolitan areas.

    For the fifth straight year, Hong Kong had the least affordable housing.  Its median multiple was 19.0. Sydney became the second least affordable, at 12.2, leaping by 3.2 points, the largest annual increase ever recorded among major markets in the Survey. Sydney displaced Vancouver, which had the third least affordable housing among the major markets, with a median multiple of 10.8. This is up from 10.6 last year. Each of these is the highest median multiple recorded in these markets in the history of the Survey.

    Three metropolitan markets tied in fourth position with a median multiple of 9.7, San Jose, Melbourne and Auckland. San Francisco was the 7th least affordable market, with a median multiple of 9.4, followed by London (8.5). San Diego and Los Angeles, which both had a median multiple of 8.1 (Figure 1).

    Urban containment markets clearly and nearly perennially suffer declines in housing affordability. In 2013, the same ten metropolitan markets were the least affordable and had an average median multiple of 9.1. By 2015, their average median multiple had risen to 10.5. Housing affordability deteriorated in all 10 markets (house prices rose faster than incomes). This loss in housing affordability was at least 14 times the loss in the 10 most affordable markets (below).

    The Top 10: Most Affordable Major Metropolitan Markets

    Again, the United States, with its multiple regulatory variations accounted for all of the top 10 in housing affordability (actually the top 12, because of a four way tie for ninth position). Buffalo, Cincinnati, Cleveland and Rochester had the most affordable housing, with a median multiple of 2.6. Pittsburgh ranked 5th, at 2.7. Detroit, Grand Rapids and St. Louis tied for 6th, at 2.8. The tenth place tie was between Columbus, Indianapolis, Oklahoma City and Kansas City, with a median multiple of 2.9.

    By contrast, the top ten markets experienced relatively little deterioration in housing affordability over the past two years. In 2013, their median multiple averaged 2.6, and rose to 2.7 in 2015 (Figure 1). The housing affordability deterioration in the bottom 10 markets (all urban containment markets) was 14 times as high, as noted above.

    Among the five megacities (over 10 million population) in the Survey, Osaka-Kobe-Kyoto had the best housing affordability, with a moderately unaffordable median multiple of 3.4.

    All Markets

    Overall, the Survey included 368 markets. The most favorable housing affordability was in Ireland, with a median multiple among the markets of 2.8. This was the third year in a row that Ireland had the best housing affordability. In the nine prior years of the Survey, the most affordable housing had always been in either Canada or the United States (Figure 2).

    The United States was the second most affordable in 2015, with a median multiple of 3.5. Canada and Japan tied for third, with median multiples of 3.9. Four geographies with virtually universal urban containment policy were the least affordable, the United Kingdom (5.1), New Zealand (5.2), Australia (5.6) and Hong Kong (19.0).

    Singapore, though seriously unaffordable at 5.0, is far more affordable than its long-time rival,  Hong Kong (19.0). Each has virtually no suburban or rural hinterland and high population density. Yet there is a serious difference in housing policy. In contrast to Hong Kong, Singapore’s e Housing and Development Board, which accounts for approximately 90 percent of housing (which after sale is privately owned) has increased production and reduced new house prices which has led to a lowering of resale house prices as well.

    A Wholly Contrived Crisis

    Senator Day characterizes the housing affordability crisis “wholly contrived,” and “a matter of political choice… the product of restrictions imposed through planning regulation and zoning.” Senator Day calls the economic consequences of present land use policies “devastating.” He argues that governments and central banks have been too hasty to blame unprecedented housing affordability losses on demand factors, while missing the “real culprit,” which is the “refusal of … governments … to provide an adequate and affordable supply of land for new housing stock to meet demand (typically urban containment policy).

    Without reform, prospects for middle income households are grim in the metropolitan areas with urban containment policy. Housing affordability can be expected to deteriorate more, with dire economic and social consequences. According to London School of Economics and Political Science economists Paul C. Cheshire, Max Nathan and Henry G. Overman (see: People Rather than Places, Ends Rather than Means: LSE Economists on Urban Containment).

    "The problem is it is utterly unviable in the long term. With every passing decade the problems would get worse, the wider economic costs would become more penalising, the economy and monetary policy more unmanageable and the outcomes – the divide between the property haves and the property have-nots – more unacceptable."

    Wendell Cox is Chair, Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), is a Senior Fellow of the Center for Opportunity Urbanism (US), a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California) and 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 served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photo: Sign advertising new house and land packages starting in the $170,000s. Suburban St. Louis, third quarter 2015 (photo by author).

  • Land Regulation Making Us Poorer: Emerging Left-Right Consensus

    There is an emerging consensus about the destructiveness of excessive land use regulation, both with respect to its impact on housing affordability but also its overall impacts on economies. This is most evident in a recent New Zealand commentary.

    New Zealand

    Both the center-Left and center-Right have come together in agreement on the depth of New Zealand’s housing affordability and its principal cause, overly restrictive urban planning regulations. Labour Party housing spokesperson (shadow minister) Phil Twyford and Oliver Hartwich, executive director of the New Zealand Initiative, wrote in a co-authored New Zealand Herald commentary:“Our own research leaves no doubt that planning rules are a root cause of the housing crisis, particularly in Auckland…” (See: “Planning Rules the Cause of Housing Crisis.”).

    The Labour Party is the largest opposition party in Parliament, and has traded governing with the currently ruling National Party more than eight decades. The New Zealand Initiative is "an association of business leaders that is also a research institute."

    Planning and the New Zealand Housing Crisis

    New Zealand’s housing crisis has been building for more than two decades. New house construction has fallen dramatically. According to Twyford and Hartwich, house construction has declined nearly 40 percent from 1973. At the same time the demand for housing has increased. The authors note that New Zealand’s population has increased 50 percent since that time. The housing shortage is further exacerbated by the falling average size of households, which means more new dwellings are required than  indicated by the increase in population

    Across the Pacific nation, far more restrictive land use regulations have been adopted, including urban containment boundaries (urban growth boundaries), which have been associated with higher house prices relative to incomes. Before the imposition of strict land use regulation, houses typically cost three times or less that of household incomes. Since then, house prices have double or tripled relative to household incomes. Twyford and Hartich note that houses now cost a “severely unaffordable” 9 times household incomes in Auckland: They say that “A big part of the problem in Auckland is escalating land costs. Linked to this, too few houses are being built. The houses that are being built are too expensive.”

    Twyford and Hartwich indicated an even broader general agreement, endorsing comments by the ruling National Party government’s as indicated by Deputy Prime Minister Bill English: “It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply on responsive to demand” (also see: "Planning has Become the Externality")

    Broad Consequences

    Twyford and Hartwich starkly described the consequences of New Zealand’s urban planning regime.

    “Rising house prices are making us poorer as a nation. They force people to spend an ever larger proportion of their incomes on housing, and it ties up vast amounts of the nation’s wealth in housing instead of investing it in businesses that create jobs and exports.”

    Twyford and Hartwich also agreed that there is more than enough blame to go around for the mess that has arisen in New Zealand (a criticism that would be appropriate across Australia, the United Kingdom, some markets in the Unites States and the largest markets in Canada):

    "Because this is a national housing crisis that has grown over decades and under governments of different hues, playing political blame games is pointless. You cannot solve problems in retrospect. We need to face the facts and work together for real reform."

    The authors identified three issues for reform: “First, urban growth boundaries driving up section costs. Second, anti-density restrictions stopping affordable housing. Third, the expensive and inefficient way we fund infrastructure.” They also indicated a familiarity with the economics of development fees (also called impact fees”), often missed by planners in Australia, Canada, the United States and elsewhere. “Even though developers nominally pay for all these costs,” “they note, these costs “are immediately passed on to the new home-buyer.”

    Twyford and Hartwich propose what they refer to as "modest" reforms:

    “• Instead of using urban growth boundaries, empower communities to protect places that are of special character and value to them.

    • Free up density and height controls and rely more on high urban design standards including requirements for open and green space, to allow more affordable housing in the city. Let the market discover where and how people want to live.

    • Take developers out of the business of financing new infrastructure. Instead, spread the cost over the assets’ lifetime, either by issuing local government bonds or establishing Community Development Districts” (These could be similar to the Municipal Utility Districts of Texas).

    Importantly, in their second proposal, Twyford and Hartwich exhibit the appropriateness of consumer choice in housing. As in other goods and services, consumers should be free to make their own housing choices, rather than being limited to those permitted by urban planning  decrees. Yet, urban planning, in recent years, has attempted to reduce house sizes and force higher densities, attempting to drive many households into smaller houses and into condominiums who prefer larger detached houses. 

    The concluded that:

    "It is an issue of national importance and concerns all of us – all councils and political parties, developers and the wider business community – and of course the people of this country who would benefit the most from restored housing affordability.

    The time for reform is now."

    The Twyford-Hartwich commentary follows other significant developments in New Zealand.

    Indicating the depth of concern about the impact of planning policies on housing prices, the city of Auckland’s Chief Economist has proposed setting a target to nearly halve house prices relative to incomes over the next 15 years (to a price-to-income ratio of 5.0, compared to its now reported near 10). This represents an important turnaround in thinking in the city.

    Moreover, economic research produced recently for the  Productivity Commission of New Zealand indicated that the housing market distortion has become so bad that “After controlling for a range of other influences, the gradient in land prices (per hectare) from Auckland’s CBD to the rural land adjacent to the city undergoes a step change at the point of the MUL [metropolitan urban limit or urban containment boundary].” The differential was identified at approximately 10 times and the Commission noted that the land value gap has “increasingly binding as housing demand pressures have intensified” (Note 1).

    The Emerging International Consensus

    Consistent with the Productivity Commission recommendation, London School of Economics professors Paul Cheshire, Max Nathan and Henry Overman, in their recent book, Urban Economics and Urban Policy: Challenging Conventional Policy Wisdom, that (see: “People Rather than Places, Ends Rather than Means”):

    “…observed price discontinuities – the difference in market prices across boundaries categories – should become a ‘material consideration’ leading to a presumption in favour of any proposed development unless (a very important ‘unless’) it could be shown that the observed monetary value of the discontinuity reflected wider environmental, amenity or social values of the land in its current use.”

    Shortly after the Twyford-Hartwich article, George Mason University professor Ilya Somin wrote of an “emerging cross-ideological consensus” in his Washington Post column. Somin mentions economists perceived as representative of right of center and left of center positions, such as Harvard’s Edward Glaeser and Nobel Laureate and New York Times columnist Paul Krugman, as well as Jason Furman, Chair of the White House Council of Economic Advisors. He quotes Krugman: “this is an issue on which you don’t have to be a conservative to believe that we have too much regulation.”

    If there is any issue that the Left and Right should be able to unite around, it is policies that keep cities affordable (a prerequisite to livability) not only for both the threatened middle-class and for lower income citizens. More than 40 years ago, legendary urbanist Sir Peter Hall’s raised these as principal points in his critique of urban containment policy. Twyford, Krugman, Cheshire and Harwich are right. This is not an ideological issue but one about the human future in our cities.

    Wendell Cox is Chair, Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), is a Senior Fellow of the Center for Opportunity Urbanism (US), a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California) and 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 served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    —-

    Photograph: Phil Twyford, Labour Party housing spokesperson (shadow minister)

  • New Report: Building Cities for People

    This is the introduction to a new report: “Building Cities for People” published by the Center for Demographics and Policy. The report was authored by Joel Kotkin with help from Wendell Cox, Mark Schill, and Ali Modarres. Download the full report (pdf) here.

    Cities succeed by making life better for the vast majority of their citizens. This requires less of a focus on grand theories, architecture or being fashionable, and more on what occurs on the ground level. “Everyday life,” observed the French historian Fernand Braudel, “consists of the little things one hardly notices in time and space.” Braudel’s work focused on people who lived normal lives; they worried about feeding and housing their families, keeping warm, and making a livelihood.

    Adapting Braudel’s approach to the modern day, we concentrate on how families make the pragmatic decisions that determine where they choose to locate. To construct this new, family- centric model, we have employed various tools: historical reasoning, Census Bureau data, market data and economic statistics, as well as surveys of potential and actual home-buyers.

    This approach does not underestimate the critical role that the dense, traditional city plays in intellectual, cultural and economic life. Traditional cities will continue to attract many of our brightest and most capable citizens, particularly among the young and childless. But our evidence indicates strongly that, for the most part, families today are heading away from the most elite, more congested cities, and towards less expensive cities and the suburban periphery. (See report appendix “Best Cities for Families”)

    New York, San Francisco, and Los Angeles long have been among the cities that defined the American urban experience. But today, families with children seem to be settling instead in small, relatively inexpensive metropolitan areas, such as Fayetteville in Arkansas and Missouri; Cape Coral and Melbourne in Florida; Columbia, South Carolina; Colorado Springs; and Boise. They are also moving to less celebrated middle-sized metropolitan areas, such as Austin, Raleigh, San Antonio and Atlanta.

    Traditional cities will continue to attract many of our brightest and most capable citizens, particularly among the young and childless. But our evidence indicates strongly that, for the most part, families today are heading away from the most elite, celebrated cities, and towards less expensive cities and the suburban periphery.

    Download the full report (pdf).

  • San Francisco With 200,000 More People — Would we be Better Off?

    You want something truly scary? Take a look at these mockups of what San Francisco might look like if we build all the housing that the developers say we need.

    According to writer Greg Ferenstein,

    The city probably needs somewhere north of 150,000 more units: most high-rises would be concentrated in the Eastern, Downtown, and mid-market areas, while every block in the entire city would need at least one 7-story building. Essentially, San Francisco would be Manhattan downtown and Paris everywhere else.

    Set aside that I never want to live in Manhattan (at any price), and that the infrastructure to handle 200,000 more people would be horrendously expensive (and developers are already refusing to pay their fair share for far lower levels of need).

    It’s not just “how to we build that much housing.” It’s how do we build maybe $20 billion or more worth of transportation capacity to handle that density. Manhattan has a citywide underground transit system with high capacity and no surface traffic issues. SF doesn’t, and won’t, as long as we can’t raise property taxes and refuse to charge developers for the cost of that new system.

    Never mind, let’s take Ferenstein’s idea and play it out. Suppose we decided as a city that we are willing to accept a lot more density in exchange for affordability. (This is something the mayor is promoting). Let’s say that the city really needs to build highrises all over the eastern side of town (why only the east?) and put mid-rise buildings everywhere.

    Let’s say we decide that 47.5 square miles of space are enough for1 million people, and that we are willing to give up everything about San Francisco that we would lose in the process.

    Remember, the streets in the highrise districts in Manhattan are much broader than the streets in SF, able to handle more traffic, with big sidewalks that can handle more pedestrians – and still it’s often overwhelming.

    Right now in SF, for example, I am able to walk down the streets at 5pm without being jammed in a pack of stressed-out pushing people, which is life in parts of NYC. It’s possible to able to take your young kids and your dog for a walk in a place where there’s actually room to walk.

    Imagine Mission and Valencia, being packed with thousands more pedestrians. Don’t even think about the traffic.

    In fact, unless we took entire streets and banned cars, forget about the bicycle lanes – they are narrow and limited and can’t easily handle say 200 percent more traffic.

    But again, whatever. Let’s say that it’s elitist to try to keep the charm of a human-scale city in a world-class city like SF, which Ferenstein calls “quaint.” Let’s say that our only hope of avoiding being a city of just the rich is to build all the apartments and condos anyone could every want to build.

    Let’s say we have that debate and decide that the need for affordable housing trumps all, and we will just have to live with the implications.

    So what happens if we let the developers build 200,000 new units – and prices don’t come down?

    That’s actually a pretty likely scenario. It’s happened in other places (NYC, for example, where lots of new housing is being built and prices are not in any way coming down.)

    It’s happened in SF so far, where we have built more market-rate housing in the past four years than at any point since the 1960s, and prices continue to soar.

    Ferenstein talked to an econometrics expert at a credit agency. Okay. No idea if this person has ever studied housing or housing price trends in San Francisco, but he has a model. It assumes that we have to build housing faster than the population grows. Nice.

    Except that market-rate housing causes population growth as fast as it solves it – that is, if your model is the traditional capital-market model, you can’t keep up with population growth by building. You might as well try to decrease traffic by building freeways; never works, never has – not in San Francisco.

    And how come we never talk about why the population is growing so fast, and why so much of that growth comes from one industrial sector that hires one type of workers?

    I emailed Ferenstein with my questions, and here’s what he said:

    Well, prices don’t fall here because we don’t build enough. It’s been an issue for decades. And, if you build enough units, prices will fall. You just have to build more supply than people. The question is whether it is possible to do so. But, I’m actually not advocating for that. I’m advocating for *some* solution. If the city decides it doesn’t want to grow, then it should be responsible for finding some solution where people can live and work in the same city–somewhere. Maybe it’s San Francisco. Maybe it’s Oakland. Maybe it’s a new city. But there has to be a giant metropolis somewhere. And, San Franciscans must realize, if jobs relocate elsewhere, they will suffer massive inequality and terrible commutes.

    Interesting argument. Of course, we are not talking about a city where people live and work; San Francisco’s housing crisis in large part the result of people living here and commuting to Silicon Valley, on private buses. The Valley cities build no housing at all, and expect us to solve the problem.

    And I would argue that if some tech jobs went elsewhere, we would have less inequality and less terrible commutes – it’s the displacement from too many people moving here for jobs when housing doesn’t exist that has created the problem. Most of San Francisco does better when there is slower growth in bubbly tech industries.

    There’s a much more interesting question that we might want to address: Suppose we built may 20,000 new units, or 30,000, or 50,000, spread all over the city – and every one of them was social housing, that is, housing that was never in the private sector? Would that bring down prices? Would that provide the same level of affordability, or maybe much more, than the Manhattan West model?

    Would that be a better deal?

    At the very least, we would know that the new housing would be affordable, instead of taking a huge gamble that the (failed) free market, and the (failed) econometric projections of the past, would save us.

    Oh, and what if we said that SF no longer wants to be the bedroom community for Silicon Valley, and will stop entitling things like private buses that make that trend possible?

    That’s a bit of a different picture.

    This piece originally appeared at 48hills.org.

    Photo: A mockup by Alfred Two for a Medium story on what an “affordable” SF might look like

  • People Rather than Places, Ends Rather than Means: LSE Economists on Urban Containment

    “People rather than places” should be the focus of urban policy, according to Urban Economics and Urban Policy: Challenging Conventional Policy Wisdom. (paperback, Edward Elgar Publishing, 2015 $39.95). The book is among the most effective critiques of contemporary urban planning thought,  characterized by such approaches as urban containment, compact city, and densification. The authors are Paul C. Cheshire, Max and Nathan and Henry G. Overman, all economists at the London School of Economics and Political Science. Cheshire has a long list of publications analyzing urban planning policy. The authors characterize the central thesis of urban planning’s misdirected priorities stating that:

    "… that the ultimate objective of urban policy is to improve outcomes for people rather than places; for individuals and families rather than buildings."

    They argue that there is a place for urban planning, but that it must be in the appropriate context.

    "This is not to say that we should stop caring about what is happening in different cities and neighbourhoods but serves to remind us that improving places is a means to an end, rather than an end in itself." (emphasis added)

    This theme is applauded and characterized as “revolutionary” in the Foreword by Harvard University economist Edward Glaeser, who posits:

    "All policies need to be judged by the impact on people, not places."

    Basic Economics

    It has long been known that urban containment policy is fundamentally flawed, principally by its inconsistency with the fundamentals of economics, which leads to destructive housing affordability losses.

    Cheshire et al begin with the basics:

    “…there are some things on which nearly all mainstream economists would agree. Perhaps the nearest to unanimity one could find would be the proposition that if the supply of a good does not vary much as its price changes, and if the demand for that good rises proportionally more than incomes as incomes rise but is subject to cyclical fluctuations, then the price of that good will rise over the long run relative to other prices and its price will be volatile over the cycle.”

    They remind us that this is: “…one of the fundamental elements of economic analysis with a history of research and application going back at least 200 years.”

    The Problem

    This denial of economic realities, rooted in human nature itself, sets urban containment policy up to inflict major consequences, when evaluated based on outcomes for people.

    Urban containment’s forbidding or severely limiting house construction on the urban fringe has been associated with huge house price increases. This is particularly evident across the United Kingdom, which receives the principal attention from the authors. There house prices have doubled and even tripled compared to incomes. Obviously, being forced to spend more money on housing, people have less discretionary income to spend on other goods and services (and discretionary income virtually defines the standard of living and poverty).

    Rather than improving the standard of living and reducing poverty, which are fundamental domestic policy objectives, urban containment leaves in its wake “rising real house prices, falling affordability and increasing price volatility.” The authors note that price fluctuations are significantly greater where restrictions on development do not allow the supply of new housing to sufficiently respond to increases in consumer demand. To this they add concerns that all of this is leading to greater inequality.

    The problems with urban containment policy have long been known, not only to economists, but also to urban planners dispassionately examining the outcomes. On this score, the authors give well-deserved credit to a team of researchers led by the late Sir Peter Hall, one of history’s pre-eminent urban scholars. Hall led a team that was “…seriously sympathetic to the ideals of planning but who saw that the rigid policy of urban containment and the specific way in which the boundaries of the Greenbelts had been determined during the 1950s was perverting what they saw as the underlying purpose of town planning.” (See The Costs of Smart Growth Revisited: A 40 Year Perspective.)

    According to the authors, Hall et al had become convinced that “Far from providing people with greener environments and garden cities, the planning system had developed in a way which produced higher densities and made housing space more difficult to acquire.”

    Glaeser expands on this in the Foreword:

    “…we must never forget that any time we say ‘no’ to new building, whether in the city centre or on the edge, we are saying ‘no’ to families that want to experience the magic of urban life. We also ensure that every other family that lives in the city is paying more for their own homes.”

    Ignoring the Consequences

    The authors suggest that the planning objective of a compact city may “be a planner’s dream but for ordinary people it is more like a nightmare." They further imply that urban planning establishment has been “tone deaf” on the consequences of urban containment policy, noting that it is well and good to:

    “…argue that the costs imposed by the planning system are prices worth paying to ‘protect the countryside’ or achieve other policy objectives. However, it is not helpful for public debate to pretend that the costs we have documented do not exist; or even that they are negligible. Existing research shows that this is simply not the case; indeed research shows the costs are very substantial even if some are difficult to measure exactly."

    Cheshire et al express concern that the planning system is spreading beyond Great Britain. They continue: “…the British experience also provides some idea of what the future might hold for other countries as planning systems become increasingly restrictive.” Indeed that prediction is already being fulfilled with a vengeance.

    This can be seen across Australia and New Zealand, where the housing affordability losses have been at least as severe as in Britain. In the United States the predicament is highly regionalized. We can see its impacts in Portland, as well as huge losses in housing affordability in California, Seattle, Denver and elsewhere. And in Canada there is Vancouver, with the second worst housing affordability among the major markets in the 11th Annual Demographia International Housing Affordability Survey, and Toronto, where house prices have nearly doubled relative to incomes since 2000, under the Places to Grow Greenbelt initiative.

    They add a sobering assessment:

    "The problem is it is utterly unviable in the long term. With every passing decade the problems would get worse, the wider economic costs would become more penalising, the economy and monetary policy more unmanageable and the outcomes – the divide between the property haves and the property have-nots – more unacceptable."

    They add a perspective that should be appreciated by both students of history and politics:

    "In our judgment there is no doubt that if things go on as they are then at some point there will be a system breakdown and perhaps serious social unrest."

    Towards Resolution

    Cheshire and his colleagues suggest that: “any useful and rational debate should attempt to rigorously quantify the benefits conferred by the system rather than just assert them as ‘fact’.”

    More importantly, they offer workable solutions that can put urban policy back “on track” by seeking ends rather than means. Generally, they say that land use restrictions should be relaxed except where “there are amenity reasons not to do so.”

    This would start with an understanding that the large urban containment policy land price discontinuities be recognized for what they are — price signals that the demand for housing in an area is far greater than the supply.

    According to the authors,

    “…observed price discontinuities – the difference in market prices across boundaries of use categories – should become a ‘material consideration’ leading to a presumption in favour of any proposed development unless (a very important ‘unless’) it could be shown that the observed monetary value of the discontinuity reflected wider environmental, amenity or social values of the land in its current use.” (emphasis added)

    This would make sufficient land for development available to serve the economic well-being of households: “there is a very large amount of land where the ‘wider’ values are negligible.”

    A similar proposal was offered by the Productivity Commission of New Zealand in its recent report, which suggested setting a discontinuity maximum standard. When the standard is violated, land would be released.

    Getting Urban Policy Back on Track

    The authors say that “the economic and welfare – even environmental – damage done by Britain’s current planning system is overwhelming.” Moreover “the impact will get progressively more damaging over time.” The same damage can be expected beyond Britain, to the United States, Canada and wherever else urban containment policy is implemented, because of its fatal aversion to the realities of economics.

    Cheshire et al describe the dilemma that the policy detour urban containment has created.

    “The question is not will we reform it but when will we reform it and will that be before a catastrophic collapse? … The problem is that any radical reforms are politically unpalatable, but no alternative strategy will work.”

    Forty years ago, Hall and his colleagues lamented the disinterest of economists in urban planning. Cheshire et al similarly noted that economists have “contributed very little to the development and evaluation of real-world urban policy.” That needs to change and Urban Economics and Urban Policy: Challenging Conventional Policy Wisdom could be an important first step.

    Wendell Cox is Chair, Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), is a Senior Fellow of the Center for Opportunity Urbanism (US), a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California) and 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 served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

    Photograph: The Shard, London © User:Colin / Wikimedia Commons, via Wikimedia Commons

  • How Portland Is a Lot Like Texas

    One theme I always hammer is that you have to look at proposed policy solutions in the context of the area where you want to apply them.

    A great example of this is Portland’s Urban Growth Boundary (UGB). The UGB, a policy that limits suburban development outside of a line drawn around the Portland region, is widely admired and perhaps even seen a type of holy grail policy in terms of preventing sprawl.

    Obviously restricting development outside the UGB raised demand for land inside of it and thus housing prices. Portland’s median home price multiple – that is, the median home price divided by the median household income – is 4.8. The average household in Portland would need to spend 4.8 times its annual income to buy a house there.  This compares with 2.9 in Kansas City, 3.0 in Columbus, and 3.9 in Austin.

    So Portland is less affordable than many similar sized housing markets around the US.

    But despite this, Portland remains the most affordable major West Coast metro area.  That’s because housing prices in other major coastal cities are even higher, including Seattle (5.2), Los Angeles (8.0), San Diego (8.3), the Bay Area (9.2), and Vancouver (10.6).

    So even while its home prices have risen, Portland remains the cheapest major city to live apart from Sacramento (4.7).  That is, even with the UGB Portland has a big cost advantage over its regional competition. In short, it’s cheap.

    In this way, the attraction of Portland is a lot like Texas. Its draw is more a cost arbitrage play for people leaving San Francisco than an upgrade to superior urbanism from the interior. As it happens, California refugees make up the bulk of the net migrants into Portland.

    The Texas comparison is relevant on the tax front too. Portland is one of the rare places you have the potential for double border tax arbitrage. Washington state has no income tax and Oregon has no sales tax. While only a limited number of people can take advantage of both (you have to both live and work in Washington to avoid the income tax), being able to zero out one or more major tax categories is a win.

    This is not to say that Portland is a lousy place to live. It’s fantastic as near as I can tell. The point is that Portland was able to put in place policies to create good enough urbanism to lure a certain number of San Franciscans without compromising its competitive position because it was in a high cost neighborhood.

    The story would be very different for a place like Oklahoma City or Columbus. These cities are in low cost regions, and if they undertook policies that raised their housing prices, they’d rapidly find themselves the most expensive market in their area.

    Cloning Portland’s UGB is simply not a viable policy for most interior cities, even if they had the political alignment to make it happen.

    There are many policies that can be broadly implemented across cities. The general principle is to first understand why a policy worked in the original context, then ask whether it is applicable to the target context, and if so how to implement it most successfully.

    Aaron M. Renn is a senior fellow at the Manhattan Institute and a Contributing Editor at City Journal. He writes at The Urbanophile, where this piece originally appeared.

  • The Detached iHome of the Future

    Will new American housing growth continue to reflect old methods, or will the land development, home building, and consulting industry retool, re-educate, and collaborate to create a new era of more attractive, livable, efficient, and environmentally responsible growth at attainable prices?

    Here is why it would be so significant to make a change: The US Department of Housing has determined that 620,000 new single family homes were completed in 2014, averaging 2,453 square feet on an 8,689 square foot average lot. The average price was $345,800, with a national total of $214.4 billion.

    Those post-recession 620,000 homes have used up much of the existing empty suburban lots from the recession. Assume that 30 percent of a development is consumed by infrastructure, and that typical 8,689 square foot lot represents about 12,400 square foot of growth. That means we have newly-developed — or recently consumed — about 275 square miles of construction, using lot stock. In other words, now that the existing lots are consumed, future growth will annually consume more than 275 square miles of land.

    That development, at $214 billion dollars in home value, is the equivalent of a $650 iPhone 6s for every US resident. Unlike the iPhone that is assembled in a minute, though, a single family home is built by craftsmen over many months in a development that takes years to go through the approval and construction process.
    An iPhone is a marvel of technology, representing billions in research and development, and requiring close communication and collaboration between professionals in engineering, materials, software, and manufacturing.

    The design for the $345,800 home and its neighborhood progress at a snail’s pace. Both floor plans and site plans are rooted in the 1960s, with civil engineering standards from the 1950s handbook. The professionals involved in land development design and construction — surveyors, planners, civil engineers, and architects — are a most un-collaborative group, fostering this stagnation.

    Yet today, innovations in both technology and methods can empower the consulting industry to create neighborhoods and housing that matches the progress of other industries, like those that are creating mobile phones, cars, and medicines. Savvy developers and home builders are beginning to break free, setting new trends by merging planning, architecture, and engineering.

    Of those 620,000 homes, it’s likely that only a few custom built ones had a tight coordination between the room function, the wall and window locations, and the connection to the surrounding viewsheds.

    When land is ‘subdivided,’ the streets, and afterwards the lot lines, are all set to regulatory minimums. This method ‘stretches’ the public street to create the greatest volume of street and the smallest area available for lots. The compression of space forces cookie-cutter, mundane growth. Architectural design was traditionally an afterthought to the subdividing process.

    To develop alternative approaches, we used the ‘down-time’ during the recession to research and develop new geometric relationships between lot and home, as well as to develop better spatial analysis and design software to accomplish ‘Architectural Blending’ for the mass market single family home.

    We saw how advancements in land planning have been made possible by merging engineering and surveying geometry with organic site layout methods. This combination has proven to significantly reduce infrastructure (street-utility length), while increasing average lot area. Redistributed space allows for more flexible designs.

    The merging of interior and exterior spaces, ‘Architectural Blending,’ was first implemented in a design idea coined as ‘BayHomes.’ The term came from the bay-like shape of common open spaces that undulated between home fronts. In 1999, Professional Builder Magazine called BayHomes “New Urbanism with a View.”

    BayHomes are single family detached homes set within townhome zoning, thus, they are in association-maintained environments. They were first implemented in 1998 on The Greens of Hutchinson, Minnesota, offering production housing that coordinated living spaces within the home with adjacent spaces and views, and for the first time merged planning and architecture at attainable prices. Since The Greens, there have been thousands of BayHome designs that have refined the method.

    BayHomes are positioned to provide a panoramic view from the focal point, usually the kitchen, to common spaces adjacent to the home front. BayHomes hide the garages, which makes them ideal along arterial streets to create a ‘village-like’ appearance. By eliminating most of the public street right-of-ways, compared to traditional single family homes the BayHome can achieve duplex density with plenty of landscaped open space providing a lower density feel.

    BayHomes serve a specific consumer who would have otherwise bought a duplex or townhome. The large scale housing market has been and will remain single family homes.

    The next problem became: How to duplicate advantages of a BayHome in a single family home which must front a lot on a public street? The challenge to increase available space was solved through a design technique called coving. A rectangular lot is simple: You have few options — no side views and limited front and rear yards space — whereas ‘coving’ produces a larger, non-rectangular lot, yet still maintains the density of the rectangle.

    When we looked at some traditional designs that would fit on higher density narrow lots, we saw typical floor layouts where — for example — 8.1 percent of the home was consumed by the hallway. If the home cost $200,000, then $16,000 was the cost of the hall. By merging planning and architecture, new models are more efficient within higher density single family-home neighborhoods, reducing or eliminating these common forms of waste within and around the home.

    With a new era of design we can solve problems like these, as well as critical issues. The problem with increased density is the compaction of space, sacrificing livability, efficiency, curb appeal, views, and environment. Some may argue that the environment is not harmed by increased density, ignoring that while the lot and home size is reduced, streets, walks, garages, and other infrastructure elements remain the same size as larger lots. Thus, the ratio of housing footprint to paved areas serving the home increases, and ‘organic’ (landscaped) space is sacrificed.

    As the home buying public becomes aware that it’s possible to have a home of significantly higher value than the typical monotonous design rooted in the 1960s, and that it can be located in a neighborhood of greater character, they will demand change with their pocketbooks. They will be able to look at the streetscapes of nearby cookie cutter subdivisions, and see that neighborhoods of the same density can have a dramatic increase in function, curb appeal, views, safety, efficiency, connectivity, and perception of space. The differences will be as dramatic as comparing a dial phone of the 1960s to the iPhone of today.

    Rick Harrison is President of Rick Harrison Site Design Studio and Neighborhood Innovations, LLC. He is author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable and creator of Performance Planning System. His websites are rhsdplanning.com and performanceplanningsystem.com.

    Aerial view of Transoma, a community planned on the principles of coving, from the author.