New Geography

Category: Urban Issues

  • Health Care Development in Central Florida

    By Richard Reep

    In this still cooling economy, Florida seems to be continually buffeted by a perfect storm of unemployment, record foreclosures, and stagnant population growth. As the state continues to suffer, the health care industry has unfolded two planning efforts aimed at building some economic momentum.

    Florida Hospital’s Health Village, an urban revitalization of one of Orlando’s older core neighborhoods, is one planning effort to watch. The other, Lake Nona, is a classic suburban mixed-use campus planned around R&D facilities gilded with stellar names like Scripps and Nemours, occurring in the southeast periphery of Orlando. The vastly different values of their developers underscore the striking contrasts between the development strategies of Health Village and Lake Nona.

    Lake Nona, a small lake just east of Orlando’s airport, is a new development centered around six major research facilities, four of which are under construction. Financing came from a 2006 program, the Florida Capital Formation Act, that has contributed millions to start up biomedical research in the state. Florida’s state venture capital fund lured Scripps, Nemours, Burnham, and M. D. Anderson. Two state universities are also participating, as well as the Veterans Administration with a new facility. This taxpayer investment was supplemented by Tavistock, the master developer of Isleworth fame, and smaller contributions by city, county, and other private investors all creating the impetus to develop this campus.

    Lake Nona’s Robert Adams described his “model” as San Diego’s biomedical cluster, which combines commercial, clinical, research, and educational facilities forming. Employment, in the form of the research facilities, was preceded by a country club and an indistinct mix of Florida residential building types – estate homes, smaller single family homes, and multifamily clusters that are sprinkled amongst golf courses, pretty lakes, and remnant pockets of old Florida wilderness. It’s obvious upon visiting the campus that this is first and foremost a real estate development scheme. Like most developers, Tavistock programmed the uses and zones as if all the land, being flat, were relatively equal in nature except for the slightly more lucrative edges of lakes and the even more lucrative engineered waterways. Currently, the Town Center is an open, flat D-shaped parcel conveniently accessed from Orlando’s beltway, the 417. A comfortable, safe land development scheme with all the usual regulatory battles is underway, and eventually Orlando will find a new, attractive community themed around medical research competing with other new developments for market share.

    In contrast, Florida Hospital selected, among its multiple sites in the state, about 96 acres squeezed between two close, parallel roads (Orange Avenue and Interstate 4) in a dense part of the city where the Adventist Health System quietly bought up dozens of individual parcels of 1930s era Orlando. Like most neighborhoods still suffering in the shadow of Eisenhower’s grand interstate system, this one has languished, and Florida Hospital intends to convert this neighborhood into a Health Village campus anchored by its adjacent hospital campus in a slow, organically grown and financed process.

    Orange Avenue bisects this Health Village, with towering hospital facilities on one side and an aged, mostly 2-story commercial neighborhood on the other. Much of the older residential stock is past its useful life, and owners, grateful for a buyer to release them from the ragged edge of Interstate 4, quickly sold out and left. Inserting the Burnham Institute’s Clinical Research Institute for Diabetes will be the latest revitalization project, and the interior land is intended for residential development catering to hospital professionals and staff within walking distance.

    With 17 hospital locations in Florida alone (the Adventist Health System operates medical facilities throughout the South and Midwest), the choice to locate a health village in a congested urban site is an interesting one. The city deal-making involved in such a move is reminiscent of the negotiations for New York’s Lincoln Center near Columbus Circle in the 1960s, and is rare in Florida where land is cheap. At first glance, it seems like Florida Hospital willingly hamstrung itself with this strategy, as compared to the huge blank slate being developed by Tavistock in Lake Nona.

    Tavistock also has eyes firmly watching the global health care market, and hopes to compete with San Diego, Research Triangle, Dubai’s Medical City, Singapore’s Biopolis, and other stellar research clusters. Lake Nona’s growth potential is relatively large, assuming a smooth flow of funding and continuation of markets. The science-themed real estate development brochures for Lake Nona exude a breezy, hip confidence, putting biomedical research in the background and projecting an alluring lifestyle in the foreground.

    Instead of amping up its marketing campaign to overcome its vastly smaller size, Florida Hospital’s Health Village eschews marketing altogether, as if it is too busy developing it to talk about it. The Adventist Health System is not visibly interested in the temporal nature of global markets, and its stated position as a Christian health care institution quietly suggests that reviving a struggling neighborhood – an exercise most developers would shy away from – is worth the effort. Florida Hospital’s ultimate end appears to be planned on a much longer timescale.

    Both projects are refreshing pathways for Florida, as they represent an attempt to develop future jobs away from the dependence on tourism and second home development. Of the two, right now Lake
    Nona seems much more poised for growth. With a vision for 16,000 jobs at maturity, Lake Nona hopes to capture a substantial portion of the real estate growth attached to those jobs, which is the tried-and-true Old Florida model. Shopping areas, recreational activities, and lifestyle creation will add one more new neighborhood cluster to a multipolar, decentralized region at the expense of 7,000 acres of Florida’s natural environment.

    In contrast, Florida Hospital’s urban build out will benefit existing neighborhoods, certainly a new concept for Floridians. In this respect, Florida Hospital’s tiny contribution to growth (some 800 new residential units are proposed to replace the 150 existing homes) is more than offset by its larger contribution to Orlando’s development as a city. And it delivers this at no expense to Florida’s natural environment.

    Each model offers something to a revived Florida. Florida Hospital’s campus in congested Orlando is instructive as a model for economic activity in the urban future. Religious institutions may become a more important force in the community, given the lack of wealth creation by the standard players in Wall Street and real estate speculation.

    Tavistock could contribute as well, particularly as a move towards a new modality of wealth creation that transcends the traditional Florida focus on consumption activities: shopping malls, hotels, and theme parks. Placing the region on the world stage as a contender in health research can move Florida away from its failed model and towards a future shaped by important diversifications of its employment base.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

    Photo pf Lake Nona development by saikofish

  • Going Underground in Australia

    Just over a decade ago, governments in Australia were immune to calls for accelerated infrastructure investment in our major urban centres. Plans for strategic reinvestment were rare. Much has changed in that time, maybe too much. It seems that enthusiasm for major urban infrastructure now runs ahead of impartial assessment of the cost, versus the claimed benefits. A proposed $8.2 billion underground rail loop for Brisbane, along with a new underground station for its busy downtown, provides one example of an over exuberant propensity to spend.

    The idea of new underground heavy rail lines to connect with the commuter rail system of southeast Queensland isn’t new. I can recall some 15 years ago proposing just that in a policy paper for the Property Council. The paper identified new stations in the CBD as a critical element in making use of rail transit more user friendly. The existing downtown stations, we argued, were barely downtown anymore, because the modern downtown (of close to 2 million square metres of office space, major retail, and entertainment hubs) had shifted toward the river and away from the stations.

    This large concentration of office workers should prove prime candidates for public transit, since they typically work regular hours (which helps with service schedules) and are concentrated at the centre of a hub and spoke system. But the walk from their workplace to the nearest stations, in summer heat or rain, represents (among other things) a disincentive to rail transit. So logically a new underground station (or even two) which brings the convenience of commuter rail closer to the workplace should encourage more people to make use public transport. Clearly, if you owned office buildings anywhere along the river edge of the ‘Golden Triangle’, you’d welcome this initiative with open arms and beg the Government to fast track the proposal.

    So it could indeed be a great idea. But first there are few unanswered questions about the economics of heavy rail commuter transport. The latest State Government figures show that every trip, by each and every commuter on the City Train network, is now subsidized to the tune of $10. That’s per trip, so for every daily return trip, the taxpayer is forking over $20 per commuter. And that’s after commuters have paid their fare – remember it’s only the subsidy. Even worse, the numbers of patrons are falling, from 60.7 million to 57 million in a year. (Worth reading the article “Taxpayers’ share of rail fares increases, while CityTrain passengers continue to decline” in The Courier Mail, June 15, 2010).

    The concern here is that under this failed pricing model, more commuters may also mean more subsidies and a greater tax burden on the taxpayer. In short, there doesn’t seem to be an economy of scale: if more people caught the train under the present system, it could cost more in subsidies, not less.

    Ironically, an online poll taken in connection with the above story revealed that 79% of respondents (out of 824) claimed that train fares are already too high. This is especially ironic for two reasons: commuters with jobs in the CBD market are, on average, paid more than their suburban counterparts and commuters who use the rail service are increasingly drawn from more affluent inner city and middle ring suburbs. The proportion of public transport users who begin their journey in lower income, outer suburbs, is relatively small.

    The evidence for this is found in papers by people such as Dr Paul Rees, School of Global Studies, Social Science & Planning at RMIT, and others. Various studies increasingly point to a rising correlation between rail (and tram in the case of Melbourne) use and proximity to central city workplaces. Put crudely, big chunks of that $10 each way subsidy are being paid for by low and middle income taxpayers in the outer suburbs (far from convenient train stations) so higher paid central city workers can have access to a convenient form of transport from their inner city or middle ring home, to work.
    As for the mooted new underground rail network, according to the Queensland Premier Anna Bligh, the network will service “Toowong, West End, the city, Newstead, Bowen Hills, Bulimba and Hamilton North Shore.” In Brisbane’s case, these are inner city areas which enjoy some of the highest real estate prices in the region. In short, this is where the rich people live and will also be subsidized.

    A further question needs to be raised about the potential growth in commuter rail traffic, notwithstanding the convenience of a new CBD station. With the exception of the new line to Springfield, there are no new lines being laid and no new stations proposed. The catchment populations around the various train stations that form the City Train network are variously touted as ‘TOD’ (transit oriented development) zones but … there’s been precious little development activity to show for a decade of discussion.

    In the end, simply building more housing around train stations won’t mean more commuters to the CBD because most of the jobs are in the suburbs in the first place, and getting more so. I am unaware of any State Planning Policy which aims to concentrate more office and retail workers in the CBD (indeed the pressure is on to decentralize). And without more workers in the CBD, there are simply not going to be more commuters wanting to go there. So you can have more housing around train stations but this won’t mean more people working in the city – unless there’s also going to be more jobs in the city (or the mode share rises).

    An additional brake on increasing patronage of the heavy rail network is the inability to get to a suburban train station in order to easily catch the train. If you live more than a kilometre from a train station (the overwhelmingly majority of all residents), you would need to drive your car to a station to ride. But stations have precious little in the way of parking for these commuters, and nearby residents justifiably object to having their streets turned into kerbside carparks for daily rail commuters. This is one of many practical realities holding back increases in mode share of rail as a percentage of all commuter trips. That proportion has remained stubbornly fixed at under 10% of all trips for Brisbane (rail and bus and ferry combined) while for the CBD the mode share sits at some 45% of all commuter trips (bus, rail and ferry combined).

    So while the notion of a new underground rail line with a new CBD station sounds like a terrific idea, you’d hope that those who are responsible for spending our money will be running some hard numbers on the feasibility. This cross river rail project is mooted to cost something like $8.2 billion dollars in today’s terms. By the time they get around to building it, it will no doubt cost more.

    Even if the cross river rail and new station managed to achieve the result of 100,000 new rail commuters, that still works out to $82,000 per extra commuter. And if those commuters are to continue to be further subsidised to the tune of $10 per trip, each way, every day, this could be the sort of infrastructure initiative which ends up costing the community a great deal.

    You’d hope the numbers are being compiled rationally, dispassionately and independently, and the proper questions asked. Quality, strategic infrastructure investment in our urban areas is an economic necessity. But irrationally conceived projects of dubious economic merit are not the way forward.

    Ross Elliott is a 20 year veteran of property and real estate in Australia, and has held leading roles with national advocacy organizations. He was written and spoken extensively on housing and urban growth issues in Australia and maintains a blog devoted to public policy discussion: The Pulse.

    Photo by monkeyc.net

  • Driving and Transit in America: Myths from Down Under

    I nearly fell off my bicycle when I read that driving had declined 43% in the United States and transit use had increased 65%. Australia’s The Fifth Estate attributes these figures to Professor Peter Newman of Sydney’s Curtin University at an event at the Hassell architectural and urban planning firm offices in Sydney. In speaking about a declining driving trend in Australia, The Fifth Estate reports Professor Newman as saying that:*

    “… new research from the United States shows this is not a localised trend – car use in the US has plunged 43 percent and there has been a 65 percent leap in public transport use.”

    As anyone remotely familiar with US transport trends knows, the statement is erroneous. The driving claim is more than 20 times (2,000%) the reality, while transit has seen no ridership increase remotely approaching 65% since World War II, when gasoline (petrol) and tires were rationed.

    Professor Newman is one of the world’s leading advocates of compact city policies (urban consolidation or smart growth policies), and was co-author of Cities and Automobile Dependence (with Professor Jeffrey R. Kenworthy). This 1990 volume broke new ground in reporting international transport data (one can take issue with commentary in the book, but the data is solid as have been subsequent revisions under Professor Kenworthy’s leadership). Professor Newman has also served as Sustainability Commissioner for the state of New South Wales (Sydney is the capital) and serves on the federal government’s Infrastructure Advisory Council.

    In view of Professor Newman’s prominence, Australian colleagues asked me for clarification on the matter. I contacted Tina Perinotti, author of the story (by whom I had been interviewed while on a national speaking tour of Australia in 2006). She indicated concern said she would investigate it and make any necessary correction. The last I heard, she had been referred to a Brookings Institution publication. I responded that nothing would be found at Brookings to support the absurd notion that driving is down 43% and transit is up 65% (since we all rely on the same authoritative data sources). Approaching one month after publication (July 24), the error has neither been retracted nor clarified.

    The actual data shows the following:

    Driving Trends in the United States: According to the Federal Highway Administration of the United States Department of Transportation, driving is down from its 2007 historic peak. The price of gasoline rose 90% from early 2007 to middle 2008, which combined with the worst economic downturn since the Great Depression (See Note), resulted in a 1.9% decline from 2007 to 2008. By comparison, the largest previous post-war decline in driving was 1.4% during the 1973-1974 energy crisis. The first five months of 2010 indicate a 1.7% reduction in driving from 2007, however driving has been up each of the last three months. The decline in urban areas (where transit operates) is smaller, at 1.1%. Either figure is a far cry from 42%.

    Transit Trends in the United States: Transit ridership increased, especially as gasoline prices rose. While skyrocketing gasoline prices produced a modest decline in driving from 2007 to 2008, transit ridership increased more than 5%. In context, however, the ridership increases were inconsequential (Figure), because transit accounts for such a small share of urban travel (under 2%). During the gasoline price spike, only 10% of the loss in urban highway passenger miles was transferred to transit. It seems likely that people just traveled less or combined trips. More recently, transit ridership has begun declining. Data from the American Public Transportation Association indicates that transit ridership (first quarter annualized) has declined 6% from its 2008 peak. Over the same period, urban driving declined by less than one-tenth of the transit rate, at 0.4%.

    Trends in Australia: As in the United States, modest driving declines occurred in Australia. According to data from the Bureau of Infrastructure, Transport and Regional Economics, driving declined 0.04% in the five largest capital cities (Sydney, Melbourne, Brisbane, Perth and Adelaide), as gasoline prices increased (from the peak in 2007 to 2008). Over the same time period, transit ridership was up 6%. A more recent annual report by the New South Wales Department of Transport indicated that driving had dropped 1%. However, the three year period covered (July 2006 to June 2009) included the gasoline price spike, which was an important factor in reducing driving. The same report found that automobile ownership in Sydney had increased over the same period, which would seem to evidence the lack of any cultural shift (though cultural shifts are not indicated by miniscule numbers).

    It is not surprising that neither Australians nor Americans have seen their streets and highways freed from congested traffic. Indeed, in Sydney one way work trips take just as long as before (34 minutes) and longer than any US metropolitan area except New York.

    * Subsequently corrected by The Fifth Estate

    —–

    Note: For a description of the connection between compact city policies (smart growth), US housing bubble, and subsequent international financial crises, see Root Causes of the Financial Crisis: A Primer.

    —–

    Photograph: Freeway and transit in Perth, Western Australia (by the author)

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

  • The Decline and Revival of an American Suburb

    In 1952, a white Protestant couple from Pasadena, California along with their newly born first child, moved 22 miles east to a small town called Covina. There, among acres of open space and endless rows of orange, lemon, and avocado trees, the young family was able to purchase a plot of land and build a brand-new home with swimming pool for a total of $20,000.

    Not far away, in an unincorporated area of Los Angeles County straddled by the towns of La Puente, Baldwin Park and West Covina, a Mexican-American Catholic couple from central Los Angeles with two small daughters purchased a newly built 3-bedroom, 2-bath home with a large backyard for $15,000. The young husband had served in the Navy during World War II, allowing the couple to buy their home with the help of the G.I. Bill. The year was 1956.

    The two couples featured are my paternal and maternal grandparents. Both were young families of the prosperous post-war years claiming their stake on the middle class American Dream. My paternal grandfather worked as a sales representative for Drackett Products (the creators of Drano and Windex- now part of S.C. Johnson & Son) while my maternal grandfather worked as unionized welder at an aerospace plant in Burbank. Both grandmothers were career stay-at-home moms.

    The place they chose to call home is the San Gabriel Valley- a sprawling expanse east of Los Angeles comprised of 47 independent municipalities and unincorporated areas. Today, the region is a demographically diverse melting pot of more than 2 million residents. To a casual visitor heading east towards the Inland Empire on one of the Valley’s three main east-west arteries (the 210, 10 and 60 freeways), the separate municipalities-with names like Glendora, Rosemead, and Duarte-are virtually indistinguishable. Aside from Pasadena, the oldest city in the Valley and famous for its Rose Parade and accompanying Rose Bowl Game, most San Gabriel Valley cities are largely forgettable in terms of architecture or town planning.

    Such failings in the built environment were not a consideration back in the 50s and 60s. My father describes his childhood setting as ‘heaven on earth’ where he could ride his bike with friends for miles from his home exploring rolling hills, untouched rivers and endless citrus groves.

    My mother describes her childhood neighborhood as what Life magazine once dubbed ‘kidsville. She recalls the neighborhood kids playing a variety of games outside in the street after school. Most often, she would not even be allowed inside the house until 5 pm when dinner was promptly served. On special occasions, her parents would take her and her siblings, my aunt and uncle, to a new fast-food joint called In-N-Out Burger. The now iconic chain had their first location literally just around the corner from their home.

    By the mid 1970s, both of my parents had left the San Gabriel Valley for another valley in Northern California where they met and later got married. My younger sister and I were raised in the Bay Area’s Silicon Valley, but we would still make the drive down to Southern California at least once a year to visit relatives.

    This trip always prompted mixed feelings from my parents.

    My father later explained to me that over the course of 25 years the San Gabriel Valley had devolved from an idyllic bedroom community to a crowded and polluted assortment of endless strip-malls. The year he left, 1973, had one of the worst air-pollution levels on record. Most days it was impossible to even see the majestic San Gabriel Mountains towering over the Valley. Sometimes, my father tells me, his high school football practices had to be canceled due to the inability of the players to catch their breath.

    Today the air-quality is significantly improved (thanks in large part to the introduction of catalytic converters to automobiles).

    The demographic make-up is also drastically different. My mother’s childhood street, which was about 50-50 split between Mexican-Americans and white Americans is now predominately populated by Central American immigrants. Long gone are the children playing on the street and neighbors socializing with each other. Now, most homes have unkempt front lawns surrounded by chain-link fences and windows and doors with security bars on them. On commercial streets nearby, strip malls are dominated by small restaurants and grocery stores with signs in Spanish catering to the local Latino community.

    In the neighboring city of West Covina, the present demographics are markedly more mixed. About half of the population is of Hispanic origin while the remainder is split between white and Asian. The Asian influx to West Covina is a recent phenomenon, taking place over the past two decades. This is physically visible in several strip malls throughout the city catering to Chinese immigrants and Chinese Americans.

    The growing Asian population is part of a larger trend in the greater San Gabriel Valley region. Already, cities in the western part of the Valley, including Alhambra, Monterey Park, San Gabriel, and even the upscale enclave of San Marino, are majority Asian. Die-hard foodies of Southern California claim this area has the most authentic Chinese food in North America.

    I can’t blame my parents for wondering what happened to the suburban utopia of their youth. Many other Baby Boomers across the U.S. probably share similar sentiments about the communities where they grew up.

    Yet if the dream seems endangered, or even delusional, to many sophisticated Americans, many other people, particularly immigrants from outside of America’s borders, want a piece of it.

    Ultimately these newcomers may be the ones to save suburbs like those in the San Gabriel Valley. They are the ones now starting businesses, improving their houses, and building the new cultural institutions. This may not be the suburbia of my parent’s childhood but it is not the doomed dystopia imagined by many urbane observers.

    These newly energized suburbs will also not depend as much on the center city. More residents now work closer to home, and fewer commute to the core of Los Angeles, which has lost hundreds of thousands of jobs over the past decade.

    Instead these towns are reviving along the lines of ‘suburb as village’, building on now underutilized downtown areas with charming mid-century structures that once served as commercial hubs for their respective towns. A growing emphasis on locality, as well as a renewed interest in civic identity, may help these places find their individual character once again – even if the signs of revival may be in Mandarin or Spanish as well as English.

    Adam Nathaniel Mayer is a native of California. Raised in Silicon Valley, he developed a keen interest in the importance of place within the framework of a highly globalized economy. Adam attended the University of Southern California in Los Angeles where he earned a Bachelor of Architecture degree. He currently lives in China where he works in the architecture profession. His blog can be read at http://adamnathanielmayer.blogspot.com/

    Photo by BurlyInTheBay

  • We Trust Family First

    Americans, with good reason, increasingly distrust the big, impersonal forces that loom over their lives: Wall Street, federal bureaucracy, Congress and big corporations. But the one thing they still trust is that most basic expression of our mammalian essence: the family.

    Family ties dominate our economic life far more than commonly believed. Despite the power of public companies, family businesses control roughly 50% of the country’s gross domestic product, according to the research firm Gaebler.com. Some 35% of the Fortune 500 are family businesses, but so too are the vast majority of smaller firms. Family companies represent 60% of the nation’s employment and almost 80% of all new jobs.

    And despite the glowering about impersonal corporate agriculture and the overall decline in the number of farms since the 1950s, almost 96% of the 2.2 million remaining farms are family-owned. Even among the largest 2% of farms, 84% are family-owned. The recent surge in smaller, specialized farming may actually increase this percentage in the future.

    Family life also often determines the economic success of individuals–something widely understood since the controversial 1965 Moynihan Report linked poverty among African-Americans to the decline of intact family units. Today more than half of black children live in households with a single mother, a number that has doubled since the 1960s, and they are much more likely to live in poverty than non-blacks. When you consider intact African-American families the so-called “racial gap” diminishes markedly.

    The confluence between upward mobility and strong family networks remains extraordinary not only among African-Americans but among all groups. Only 6% of married-couple families live in poverty, and most of them, like previous generations of newcomers, are likely to climb out of that state. “Families,” suggests Nobel Prize-winning economist James Heckman, “are the major source of inequality in American social and economic life.”

    The critical importance of family runs against the mindset of pundits, corporate marketers and planners. Starting with Vance Packard’s 1972 bestseller A Nation of Strangers, Americans have been sold the notion of a more atomized, highly individualized future. Similar alarms have been issued both on the left, from the late Jane Jacobs, and by conservative observers, like Francis Fukuyama and William Bennett.

    Yet despite these predictions, our mammalian instinct to trust family first has remained very strong. Some 90% of Americans, notes social historian Stephanie Coontz, consider their parental relations close.

    This back-to-family trend has been building for at least a decade. For example, over the past 30 years the percentage of households with more than one generation of adults has grown and now stands at the highest levels since the mid-1950s. Meanwhile the once irrepressible growth of single-family households has begun to slow down, and has even dropped among those over 65. Meanwhile the numbers of adults aged 25 to 39 living with their parents jumped 32% between 2000 and 2008, before the full impact of the recession; the increase in single-centric Manhattan, notes The New York Times’ Sam Roberts, was nearly 40%.

    Unlike the typically “nuclear” families of the mid-20th century, the current crop, much like earlier generations of American families, tend to be more “blended.” In its contemporary form this includes same-sex partners, uncles, aunts, grandparents and stepparents.

    Today childrearing extends beyond the biological parents and is often shared by divorced parents, their new spouses and other family members. Grandparents and other relatives help provide care for roughly half of all preschoolers, something that has not changed significantly over time and is unlikely to do so in the future. This is even true in the Obama White House, where Marian Robinson, the First Lady’s mother, has moved in to help raise the couple’s two children.

    Of course, some still celebrate the purported demise of the family unit to support various feminist, green or dense urbanist agendas. They point out with enthusiasm that barely one in five households consists of a married couple with children living at home, even though these households account for more than one-third of the total population ,according to the Census. Yet they miss one critical point: Parents usually continue to care for and be deeply involved with their offspring even after they leave the nest.

    When people move somewhere, for instance, they tend not to do so because it is closer to their favorite jazz club or a Starbucks or even because they would get a better job–instead, their main motivation for moving is to be closer to kin. Family, as one Pew researcher notes, “trumps money when people make decisions about where to live.”

    These nesting patterns are being further buttressed by hard times. People who might have struck out on their own are staying close to home–if not at home.

    Last year Pew reported that some 10% of people under 35 moved back in with their parents. Pressed by the bad economy, the number of adults 18 to 29 who lived alone dropped from nearly 8% in 2007 to 7.3%. People are less likely to form new households in tough times.

    Similarly if people are looking to start a business, they are more likely to do so within the family. In a time of constricted credit from banks, Pew also reports a growing dependence on family members for loan. In bad times, who else can you trust besides your kin?

    Of course, the very affluent can afford to have it all–easy credit, a country house and ease of travel between their “places.” But for the middle and working classes, family ties often trump all other considerations. Real estate agent Judy Markowitz, once explained to me that being close to parents remained the primary motivation for young people staying in neighborhoods like Bayside or Middle Village in Queens, N.Y. “In Manhattan they have nannies,” she explained. “In Queens we have grandparents.”

    These basic trends are not likely to be reversed once the economy recovers. For one thing, our increasingly non-white populations remain very committed to inter-generational living; over 20% of African-Americans, Asians and Latino households–compared with 13% of whites–live in such households. Many minorities, particularly immigrants, also often tend to own small family businesses, which rely on credit and labor from extended family networks.

    And then we have to consider the new generation. The millennials, note researchers Morley Winograd and Michael Hais, are very family-oriented. Indeed three-quarters of 13-to-24-year-olds, according to one 2007 survey, consider time spent with family the greatest source of their own happiness, rating it even higher than time spent with friends or a significant other. More than 80% think getting married will make them happy, and some 77% say they definitely or probably will want children.

    Anyone looking into the future of the country’s economy cannot do so without considering the continued importance of the family. Americans’ most important decisions–where to move, what to buy, whether to have children–will continue to revolve largely around the one institution most can still trust: the family.

    This article originally appeared in Forbes.com.

    Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

    Photo: driki

  • Distilling China’s Development

    The economic rise of China has created two growth industries pulling in opposite directions. There’s either the school of blind praise of ‘The China Miracle’ or its opposite, apocalyptic predictions about the country’s impending implosion.

    On the surface, it appears as if the fundamentals of China’s modernization are similar to what the Western nations went through in the past, that is, a mass migration of farmers from the countryside to the urban centers to work in factories and construction sites. Taking into account the enormous scale at which this migration is happening, the country seems to be moving toward what some observers are dubbing the ‘Chinese Century’.

    Similarities aside, however, China’s development is uniquely Chinese. Whereas the U.S. was built upon the backs of immigrants from outside of its borders, China’s development owes its current success to its own huge population. China will never become a nation of external immigrants and will remain a homogenous behemoth long into the future.

    China’s current condition and its immediate future remain shrouded in a state of unsettling mystery. Having lived and worked as an architectural designer in China for nearly a year now, my own fervent curiosity has hardly been assuaged. There are a few things I’ve learned though that should be clarified regarding China’s development. Following, I will attempt to belie some common misconceptions.

    Misconception: As China continues develop, it will become more open to outside influence and the government system will reform itself to become more democratic and free.

    To the naive Western observer, China’s continued economic evolution means that the country must allow more democratic freedoms in order to remain competitive in the future. This assumption is extraordinarily dubious. China’s model is top-down, centralized planning and it has proven to be successful. To argue that it will not continue to work for China is a biased Western-projected fantasy.

    A pre-existing culture of collectivism constitutes one reason why state-driven development continues to blaze forward totally unhinged. When it comes to sensitive issues like media censorship or human rights, most Chinese citizens passively shrug their shoulders knowing full well that protesting will ultimately prove futile and self-defeating. Furthermore, most citizens are too busy hustling to make money and pull themselves up the socioeconomic ladder to be concerned with such matters.

    Perhaps the past two centuries of Chinese history will offer some clues into why the status-quo is so apathetically accepted. China’s experience of 19th and 20th Centuries consisted largely of a series of hardships: the Opium Wars to the fall of the Qing Dynasty, the subsequent Japanese Invasions and Chinese Civil War, and concluding with Mao’s Cultural Revolution. It is obvious that China is much better off now than it has been for the past 200 years.

    This might explain why China’s populace is now seizing the unique opportunity of “reform and opening” to make the best out of the current situation. It might also explain why people are reluctant to disrupt the established order. Thought about in this way, China’s current system of rule is not so much a ‘big-brother’ entity as it is an unspoken collective social contract to keep peace.

    Misconception: China’s rise to global prominence is over estimated. The looming real estate bubble in China means that economic collapse is imminent.

    Doomsday predictions about China’s collapse have become something of a growth industry. Commentators like Gordon Chang and hedge fund manager James Chanos are placing their bets on China’s demise. Many of these criticisms stem from what is speculated to be a coming crash in the real estate market.

    To the central government, constructing new buildings is much more than just providing new and modern accommodations for the populace; it stands for social stability. It doesn’t take an economist to acknowledge that city-building is an important part of economic growth. But what is often overlooked is how city-building is a key part of the modernization process, employing rural migrants and giving them opportunity to earn substantially more than they could as farmers.

    In China, real estate development is only one part of economic growth equation. Chinese leaders are well aware that the mad pace of constructing new buildings cannot last forever and already there seems to be an overabundance of supply in the residential and commercial sectors in first-tier cities like Shanghai and Beijing. Yet China is not anywhere near finished with its construction boom as 2nd, 3rd and 4th tier cities race ahead to catch up with their 1st tier counterparts.

    Looking into the future, China’s leaders are preparing to shift the economic growth to more information-based sectors. The city I live in, Chengdu, the capital of Sichuan province, has already recruited American heavy-hitters such as Cisco and Intel. Chengdu has been successful in doing this by investing in new infrastructure and developing a series of high-tech industrial zones that give foreign companies the option of lower operational costs than found in the increasingly pricey coastal cities.

    Misconception: Revaluing China’s currency will help bring manufacturing jobs back to the U.S.

    China’s economy would not be the success it is today without the foreign investment that flooded through the gates since they first opened in 1978. The number of foreign enterprises directly benefitting from the low cost of labor in China has expanded greatly since that time. China’s maintaining a low valuation of its currency, the Renminbi (RMB), has been a key factor in attracting and keeping investment from overseas businesses.

    Yet the talking heads in Washington have taken to pressuring China to revalue the RMB in order to help ‘rebalance the global economy’. Just ahead of the G20 last month, Treasury Secretary Timothy Geithner told Congress that China’s RMB peg to the U.S. dollar is an ‘impediment to sustainable global growth.’ Responding to the pressure, China announced that it would in fact let the RMB appreciate against the dollar.

    Following China’s announcement, the RMB rose a whopping .4% in value leading to what Economist Paul Krugman called the ‘Renminbi Runaround’. Krugman is correct to call out China on its currency manipulation- but it should be no surprise that what China is doing is simply looking out for its own national interests. A rapid rise in RMB value would cause some serious damage to the Chinese economy.

    American politicians know this but will continue to pressure China to raise the RMB value to score brownie points with their constituents. The reality is that both China’s economy and foreign companies using Chinese labor benefit from the low value of the RMB. For instance, companies such as Apple would not be able to sell their much coveted iPads at reasonable prices if it were not for cheap Chinese labor.

    Pressuring China too much could result in a trade war which would in fact not only hurt Chinese exporters but the American consumer as well. Politicians are also deluded into thinking that manufacturing jobs will come back to the U.S. if China’s RMB goes up. On the contrary, companies will move manufacturing operations to some other place where regulations and labor costs remain substantially lower.

    Conclusion: China’s accomplishments over the past two decades are unprecedented and fascinating. The scale at which change is happening means that complexity and uncertainty are unavoidable facts of life. Many challenges lie ahead, both for China’s domestic issues and its relationship with the rest of the world. As far as China has come, there still is a long way to go as millions still aspire to a better life.

    Adam Nathaniel Mayer is a native of California. Raised in Silicon Valley, he developed a keen interest in the importance of place within the framework of a highly globalized economy. Adam attended the University of Southern California in Los Angeles where he earned a Bachelor of Architecture degree. He currently lives in China where he works in the architecture profession. His blog can be read at http://adamnathanielmayer.blogspot.com/

    Photo by DavidM06

  • How Texas Avoided the Great Recession

    Lately, Texas has been noted frequently for its superior economic performance. The most recent example is the CNBC ratings, which designated the Lone Star state as the top state for business in the nation. Moreover, Texas performed far better than its principal competitor states during the Great Recession as is indicated in our How Texas Averted the Great Recession report, authored for Houstonians for Responsible Growth.

    Introduction: How Texas averted the Great Recession:

    One reason that Texas did so well is that it fully escaped the “housing bubble” that did so much damage in California, Florida, Arizona, Nevada and other states. One key factor was the state’s liberal, market oriented land use policies. This served to help keep the price of land low while profligate lending increased demand. More importantly, still sufficient new housing was built, and affordably. By contrast, places with highly restrictive land use policies (California, Florida and other places, saw prices rise to unprecedented heights), making it impossible for builders to supply sufficient new housing at affordable prices (overall, median house prices have been 3.0 times or less median household incomes where there are liberal land use policies).

    The Great Recession: The world-wide Great Recession was the deepest economic decline since the Great Depression: This downturn hit average households very hard. According to Federal Reserve Board “flow of funds” data, gross housing values declined 9 quarters in a row through the first quarter of 2009. The previous modern record is a single quarter. From the peak to the trough, household net worth was reduced a quarter, which is more than 1.5 times the previous record decline.

    Texas Largely Avoided the Great Recession. Texas has largely escaped the economic distress experienced around the nation, and especially that of its principal competitors, California and Florida. By virtually all measures, Texas has performed better in growth of gross domestic product, employment, unemployment, personal income, state tax collections, and consumer spending This is in part due to much less mortgage distress in Texas. At the bottom of the economic trough, the Brookings Institution Metropolitan Monitor ranked the performance of the 6 largest Texas metropolitan areas among the top 10 in the nation. The latest Metropolitan Monitor ranked each of the 6 metropolitan areas in the highest performance category.

    Throughout the past decade, Texas has experienced far smaller house price increases than in California, Florida and many other states. During the bubble, California house prices increased at a rate 16 times those of Texas, while Florida house prices increased 7 times those of Texas. As a result, after the bubble burst, subsequent house price declines were far less severe or even non-existent in Texas. Texas had experienced its own housing bubble in the 1980s, however even then overall prices did not exceed the Median Multiple of 3.0 (The Median Multiple is the median house price divided by the median household income).

    Unlike Texas, all of the markets with steep house price escalation had more restrictive land use regulations. This association between more restrictive use regulation and higher house prices has been noted by a wide range economists, from left-leaning Nobel Laureate Paul Krugman to the conservative Hoover Institution’s Thomas Sowell. It is even conceded in The Costs of Sprawl —2000, the leading academic advocacy piece on more restrictive land use controls, which indicates the potential for higher house or land prices in 7 of its 10 recommended strategies.

    Comparing Texas and California: Unlike California, housing remained affordable in Texas. California’s housing affordability – in relation to income – largely tracked that of Texas (and the nation) until the early 1970s (Figure). After more restrictive land use regulations were adopted prices started to escalate. This relationship has been well demonstrated by William Fischel of Dartmouth University. Other factors have had little impact. Construction cost increases have been near the national average in California. Other factors, like underlying demand as measured by domestic migration, have been lower in California than in Texas..

    Comparing Texas and Florida: The contrast with Florida is similar. Housing affordability in Florida was comparable to that of Texas as late as the 1990s. However, with strict planning control of land for development in Florida, land prices rose substantially when profligate lending increased demand.

    Comparing Texas and Portland: Further, the Texas housing market avoided the huge price increases that have occurred in Portland (Oregon), which relies on extensive restrictive land use regulation. In 1990, Portland house prices relative to incomes were similar to those of the large Texas metropolitan areas. At the recent peak, the median Portland house price soared to approximately 80% above Texas prices. Portland did not experience the price collapses of California, but due to the greater price volatility associated with smart growth price declines in relation to incomes that were five times those of Texas.

    How the Speculators Missed Texas: Speculation is often blamed as having contributed to the higher house prices that developed in California and Florida. This is correct. Moreover, with some of the strongest demand in the United States, Texas would seem to have been a candidate for rampant speculation. After all, it happened back in the 1970s when a huge oversupply of housing, industrial, retail and office space collapsed in the face of falling energy prices.

    But it did not happen this time, despite solid population growth. During the housing bubble, Dallas-Fort Worth and Houston ranked second and third to Atlanta in population increases among metropolitan areas with more than 5 million population. Austin is the nation’s second fastest growing metropolitan area with more than 1 million population. Each of these metropolitan areas had strong underlying demand, as indicated by domestic migration data.

    Yet the speculators were not drawn to the metropolitan areas of Texas. This is because speculators or “flippers” are not drawn by plenty, but by perceived scarcity. In housing, a sure road to scarcity is to limit the supply of buildable land by outlawing development on much that might otherwise be available.

    However, the speculators did not miss California and Florida. Nor did they miss Las Vegas or Phoenix, where the price of land for new housing rose between five and 10 times as the housing bubble developed. Despite their near limitless expanse of land, much of it was off limits to building, and the exorbitant price increases were thus to be expected.

    The Threat: Yet, despite the success of the less restrictive land use policies in Texas, there are strong efforts there to impose more smart growth policies. The impact could be devastating, especially from strategies that ration land that would raise land and house prices, as has occurred in California and Florida. In 2009, Governor Perry vetoed a bill that would have required the state to promote smart growth. Federal initiatives, under proposed climate change and transportation acts could do much to destroy not only the affordability of Texas metropolitan markets, but could also make Texas less competitive in the decades ahead.

    Photograph: Suburban San Antonio (by the author)

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

  • Civic Choices: The Quality vs. Quantity Dilemma

    Advocates on opposite sides of urban debates often spend a great deal of time talking past each other. That’s because there’s a certain Mars-Venus split in how they see the world. In effect, there are two very different and competing visions of what an American city should be in the 21st century, the “high quality” model and the “high quantity” model One side has focused on growing vertically, the other horizontally. One group wants to be Neimans or a trendy boutique and ignores the mass market. The other focuses more on the middle class, like a Costco and Target. It should come as no surprise that there’s seldom agreement between the two.

    America’s “High Quality” cities are the traditional large tier-one metro areas, but also include smaller cities like Seattle and Portland. They stress high wage activities such as finance, high tech, and luxury consumption. In this model, traditional growth in areas like population, jobs, or the size of the urban footprint are less important and even seen as a negative. Understandably so. It’s difficult to see, for example, how another million people living in the Bay Area would improve the fortunes of companies like Google or Facebook, or another million Angelenos helping Hollywood.

    Indeed many residents would oppose such growth due to increased traffic, infrastructure spending, and other of the challenges associated with it. In effect, the anti-growth agenda that dominates the culture of many of these places is not based simply on environmental concern, but the economic interests of their dominant regional elites. These places have already achieved the size to support their urban amenities.

    Another reason not to press the growth button: on measures of urban quality such as economic output and income, most are clearly doing very well. Most of these places generate GDP per capita far above the US metro average of $41,737. With the exception of Chicago, they are also growing at a pace that beats the US average. These cities also boast incomes – although often a cost of living – generally well above average, though have been mixed in performance on that metric over the last decade.

    “High Quality” Cities
      Quality Indicators Quantity Indicators
    MSA 2008 Real GDP per Capita Percent Change in GDP per Capita, 2001-2008 2008 Per Capita Income as Pct of US Average PCI Change vs. US Average 2009 Pop. Pop. Pct. Change 2000-2009 2009 Jobs Percent Change in Jobs 2000-2009
    Boston 57916 11.50% 137 -1 4589 4.20% 2408.1 -5.10%
    Chicago 45463 5.50% 113 -4 9581 5.10% 4291 -6.10%
    Los Angeles 47214 16.90% 111 6 12875 3.80% 5200.9 -4.80%
    Miami 40447 15.60% 107 2 5547 10.40% 2201.9 2.10%
    New York 57097 17.60% 137 6 19070 3.90% 8304.5 -1.10%
    Portland 47811 22.40% 99 -9 2242 15.80% 972.4 -0.10%
    San Francisco 60873 10.50% 156 -8 4318 4.40% 1908.8 -10.20%
    San Jose 82880 20.90% 146 -35 1840 5.80% 855.6 -18.10%
    Seattle 55982 11.30% 126 -1 3408 11.60% 1668.7 1.30%
    Washington 61834 15.20% 141 5 5476 13.60% 2950.2 10.10%

    But if these areas are doing well, for those who can afford to live them at least, they tend to do poorly on quantity measures. Many of them have anemic population growth, albeit from a large base. And virtually all of them actually destroyed jobs in the last decade. The ravenous maw of Washington, DC of course, being the great exception.

    This mixed performance isn’t surprising. High end activities are by definition exclusive. The specialized environments they require, and the high value and wealth they create, create expensive places to do business. Unless you have to be in one of these places, such as to take advantage of industry clusters or specialized labor markets, it doesn’t make sense to pay the price to do so. Clearly, mass employers have voted with their feet.

    Four data points from Silicon Valley sum it up. Between 2001 and 2008, the San Jose MSA’s: a) real GDP per capita increased by 20.8% b) total real GDP increased by 25.9%, c) real GDP per job increased by 39.6%, BUT d) total employment declined by 9.4%. That’s the high quality city dynamic in a nutshell.

    America’s “High Quantity” cities follow the opposite pattern. They might have their occasional claims to fame, but few feature the high end business or glamorous lifestyles of America’s premier metros – even though some have spent big bucks on vanity projects to polish their reputations. Rather, what these cities do well is provide quality workaday environments for the middle class. And create jobs – lots of jobs, the Great Recession notwithstanding.

    This is again backed up by the numbers. These cities fare well on quantity measures such as population growth, where they crush the US average of 8.8%, and job growth, where several of them actually managed to post double-digit gains during the generally anemic 2000s.

    “High Quantity” Cities
      Quality Indicators Quantity Indicators
    MSA 2008 Real GDP per Capita Percent Change in GDP per Capita, 2001-2008 2008 Per Capita Income as Pct of US Average PCI Change vs. US Average 2009 Pop. 2009 Jobs Percent Change in Jobs 2000-2009
    Pop. Pct.
      Change
      2000-2009
    Atlanta 43020 -6.00% 95 -16 5475 27.90% 2290.3 0.50%
    Austin 43819 8.50% 93 -16 1705 34.70% 758.2 12.70%
    Charlotte 59191 0.70% 99 -11 1746 30.20% 810.2 5.70%
    Dallas 50067 5.10% 104 -9 6448 24.10% 2864.3 3.70%
    Houston 49182 3.60% 114 1 5867 23.80% 2539 12.60%
    Nashville 43891 9.90% 99 -5 1582 20.10% 723.7 3.30%
    Orlando 42353 13.30% 89 -3 2082 25.70% 1009.5 10.60%
    Phoenix 38009 2.80% 90 -5 4364 33.10% 1719.6 8.90%
    Raleigh 41681 -3.70% 99 -16 1126 40.00% 499.7 14.10%
    Salt Lake City 46453 9.30% 95 0 1130 16.20% 610.8 8.00%

    But all is not well with these cities just because they are adding jobs and people. Their GDP per capita is generally above average, but is growing slowly. Their per capita income may be lower than some, but their cost of living is rock bottom, enabling a high quality of life. But worryingly, those incomes are often not keeping pace with the US average.

    These two dynamics reflect what has happened throughout America, from retail to media, where there has been a great “hour glassing” effect in the marketplace. A small but significant high end is thriving, almost everywhere but particularly in the quality oriented cities. The low end is also doing well, particularly in the quantity oriented cities. Neimans and Wal-Mart, indeed.

    In the future, both models face big challenges. The high quality cities continue to become more exclusive. The problem with getting high end on a smaller base is that your market is asymptotically zero. And as high quality talent gets squeezed out – by being not quite elite enough, for lifestyle, affordability or other reasons – the quantity cities start to poach great people and start stealing even more market share. It’s always easier to climb up the value chain than go down it. At some point, these cities could run out of room to shimmy up the flag pole.

    Some high quantity cities may face even greater risks. America’s great elite metropolises have proven they can stand the test of time. New York, Boston, Chicago, San Francisco – all have made it through many economic cycles, fundamental transformations, and even great physical disasters. Few of the high growth cities have proven they’ve got staying power after exhausting their first great growth phase. Detroit, Cleveland, and other Rust Belt burgs were yesterday’s Sun Belt boomtowns. They serve as a cautionary tale about the risks of not having a quality calling card to fall back on when your allure as a growth story fades

    Partisans of these two models need to learn how to learn from each other. The high quality cities need to learn again the lessons of their youth about the importance of growth. And the high quantity cities need to create environments that will sustain them after they’ve lost greenfield advantages. An hourglass America is not one most of us want to live in for the long term. Maintaining a stable commonwealth for the long term means striving again to restore some new 21st century version of our lost middle ground.

    Data Sources:
    Real GDP per Capita (in 2001 chained dollars) is from the US Bureau of Economic Analysis
    Per Capita Personal Income as a percentage of the US average is from the US Bureau of Economic Analysis.
    Population is the from the annual mid-year estimates from the US Bureau of the Census.
    Total jobs from the US Bureau of Labor Statistics Current Employment Statistics program.
    Data changes are calculated.

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile.

    Photo by Werner Kunz (werkunz1)

  • Locals Flee from New South Wales

    A newspaper headline “Fleeing locals ease population pressure on New South Wales” highlights a trend over the last few years. Since 2002 the Australian state of New South Wales, the country’s most populous with over seven million residents, has been losing its residents to other states at some 20,000 per year.

    During the year ended December 2009, 0.2 per cent of the New South Wales population moved to other Australian states. By contrast the State of Queensland, gained 0.3 per cent. Total population growth (consisting of net immigration, natural increase and net interstate movement) in the states of Victoria, Queensland and Western Australia was 2.13, 2.44 and 2.65 per cent respectively. By contrast New South Wales grew a desultory 1.64 per cent.

    The main reason ascribed to the exodus from New South Wales is the cost of housing in Sydney. The 6th Annual Demographia Housing Affordability Survey shows that its capital city Sydney has the second highest housing costs of the cities in the six countries surveyed, behind only Vancouver, Canada. For many people, 9.1 years of median family income required to purchase a median family home Sydney is becoming too expensive to live in.

    The Demographia Survey indicates that a price/income ratio of 3.0 can be considered affordable and 9.1 severely unaffordable. As a result many people, especially the young, will never be able to aspire to the Great Australian Dream of owning their own home. For those who can afford a home, the average wait time to save for the required deposit is 6.2 years. The newly appointed Federal Sustainable Population Minister recently is quoted as saying “people have said all I can see for my kids is they’re never going to be able to afford to live in this suburb because of what’s happening with housing prices”.

    The high cost of housing has significant social impacts. The Demographia Survey estimates that in Sydney 57% of median gross family income would be required to make mortgage repayments for a current median priced house. This may be compared with the 20 per cent figure applicable in Atlanta or Dallas-Fort Worth. There are already some 11,000 homeless persons in New South Wales and some 4,000 sleeping rough.

    Why is the cost of housing in Sydney so high? The Demographia Survey portrays a widespread relationship among the cities studied between high housing cost and overly restrictive planning regimes. New South Wales is among the most restrictive. In order to implement a high-density policy it has restricted the release of greenfield housing sites from an historic average of 10,000 lots per year to an average over the last five years of only 2,250. This is in the face of a annual state population increase of some 115,000. It is staggering to consider this constraint in a continent-sized country of which only some 0.3 per cent is urbanised.

    The scarcity resulting from the miserable allocation of greenfield lots has been most notable in land price, whose share of housing costs has increased from 30 per cent to 70 per cent of the total cost. The result has been an increase of overall prices some three times what it was ten years ago.
    Only seven per cent of people, wish to live in apartments. However, in order to implement its high-density policy the State Government intends to force this lifestyle on reluctant consumers. It plans 460,000 extra dwellings within the existing footprint of Sydney by 2031. In practice the production rate of these high density units has fallen well short of that planned.

    These high-density planning policies result in a dwelling scarcity which enables developers to make large profits on apartments. Developers now comprise by far the largest group (29.5 percent) among Australia’s 200 richest people. They have the resources to make sizable donations to both major political parties. Donations help fund election campaigns and in the past have helped keep the politicians who promote these policies in power. Numerous cases have been documented that show a large donation being made to a governing party shortly before permission was granted for a particular development.

    The shortage of land also impacts commerce and industry. Higher housing costs result in higher rentals or mortgage costs. Workers have to make ends meet and so businesses have to pay higher wages. Additionally employers must shell out for higher commercial rentals. The cost of industrial land in Sydney is roughly 70 per cent greater than in the other Australian large cities. Recently there have been a number of well publicised instances of industries closing their factories in Sydney and moving to Victoria, the state located to the south.

    Communities in Sydney are now paying the price for misguided state planning policies. Concrete, bitumen and tiles dominate vast areas where streetscapes of flowers and foliage once reigned supreme. There is a rising consciousness of disasters resulting from the government’s high-density planning policies. as Along with the topic of unaffordable housing, traffic gridlock, disintegrating public transport, frequent power blackouts and a city running out of water hit the headlines with increasing frequency. Dissatisfaction is escalating.

    The latest Newspoll puts the primary vote for New South Wale’s ruling Labor Party at 25 per cent, the lowest ever recorded. It faces a devastating defeat in the forthcoming March 2011 election. There can be little doubt that ill-advised planning policies are a major factor underlying this pending electoral calamity. But will politicians ever learn?

    (Dr) Tony Recsei has a background in chemistry and is an environmental consultant. Since retiring he has taken an interest in community affairs and is president of the Save Our Suburbs community group which opposes over-development forced onto communities by the New South Wales State Government.

    Photo by Nelson Minar

  • More Clouds Over Sky-High Metro Housing

    Can housing costs get so high that they repel new migrants, and stunt a metropolitan area’s economic growth?

    For potential migrants looking for a job, metropolitan areas—and in particular large metropolitan areas—are the places to be. People move in because that’s where the jobs are. More than 93% of non-farm jobs in the U.S. are in the 100 largest metropolitan areas. The biggest 15 metro areas account for 34% of the nation’s jobs. Big places also have the benefits of cultural amenities, educational institutions, and impressive retail and restaurant environments.

    The combination of population growth, a constrained supply of land, and local land use policies, however, work together to put upward pressure on housing costs. Wages in big cities are typically higher than in other places. In theory, this compensates for higher housing costs. But is this notion a thing of the past?

    One measure of housing affordability in metropolitan areas is the Housing Opportunity Index (HOI), produced quarterly by the National Association of Home Builders, and defined as the share of homes sold in a metropolitan area affordable to a household earning the local area median income, using standard mortgage underwriting criteria. The nation’s largest metropolitan areas—the so-called Mega metropolitan areas—are the least affordable places to live as measured by the HOI. They also experienced the biggest drop in affordability over the 2000-2007 period: The average HOI for the Mega metropolitan areas dipped from 54.3 to 34.5 between 2000 and 2007 (Table 1). In other words, 54.3% of homes in the nation’s largest metropolitan areas were affordable to the median income household in 2000, but only 34.5% were in 2007.

    Metropolitan Area Hierarchy
    Population
    Mega metro greater than 2.5 million
    Major metro 1 to 2.5 million
    AAA metro 500,000 to 999,999
    AA metro 250,000 to 499,999
    A metro less than 250,000
    Source: D. A. Plane, C. J. Henrie, and M. J. Perry.  2005. Migration up and down the urban hierarchy and across the life course. PNAS 102(43).

    Given the run-up in home prices, household migration to the Mega metropolitan areas should have slowed between 2000 and 2007, while migration to smaller, more affordable places should have been relatively higher.

    Table 1. Housing Opportunity Index by  Metropolitan Area Type: 2000 and 2007
    Percent of Homes Affordable to Median Income Household
    Metropolitan Area Type 2000 2007 Pct. Change
    Mega metropolitan 54.3 34.5 -19.8
    Major metropolitan 68.3 57.5 -10.9
    AAA metropolitan 70.7 53.2 -17.5
    AA metropolitan 66.4 56.2 -10.3
    A metropolitan 70.3 62.5 -7.8
    All metropolitan areas 68.7 58.3 -10.4
    Source: National Association of Home Builders and author’s calculations

    In-migration rates (Table 2) fell between 2000 and 2007 for all sizes of metropolitan areas, with somewhat larger drops in the Mega metros.

    Table 2. Household In-Migration Rates (per 10,000 housing units) by Metropolitan Area Type: 2000 and 2007
    Metropolitan Area 2000 2007 Pct. Change
    Mega metropolitan 401 367 -8.8
    Major metropolitan 449 423 -5.8
    AAA metropolitan 467 440 -5.8
    AA metropolitan 544 501 -7.9
    A metropolitan 560 526 -6.1
    All metropolitan areas 527 492 -6.6
    Source: IRS County-to-county migration files and author’s calculations

    Is there a statistical relationship between a metropolitan area’s housing affordability and household in-migration rates in a given year? The short answer is no. A simple correlation between metropolitan area HOI and in-migration rate for both 2000 and 2007 show a weak negative relationship between housing affordability and household in-migration rates.

    What does seem to matter is the change in housing affordability over time. There is a positive and large correlation between the change in HOI between 2000 and 2007 and in-migration rates in 2007. That is, places where affordability dropped between 2000 and 2007 generally had lower rates of household in-migration in 2007. Places that became more affordable between 2000 and 2007 had higher in-migration rates in 2007.

    Why would the change in housing affordability be related to in-migration when a metro area’s current affordability is not? It may be that changes in housing affordability are actually signals for a multitude of economic changes. Generally, we think of home prices as being influenced by changes in the local economy. When a region loses jobs, as some metro areas in the mid-West have, home prices fall and the region becomes more affordable.

    But it is also possible that the relationship can work differently. Can home prices influence job growth, particularly when prices rise quickly and wages cannot keep up? Perhaps the phenomenon is a result of employers not being able to expand their businesses and add jobs because they could not find workers that could afford to re-locate. Perhaps new firms did not locate in places with rapidly escalating housing costs because the wage premium got too high. Perhaps the disadvantages of large metropolitan areas started to outweigh the advantages, at least on the margins.

    Job data from the Bureau of Labor Statistics provides some preliminary indications on the economic effects of housing unaffordability in large metro areas. In metropolitan Miami, for example, the HOI dropped 49 points, from 58.8 in 2000 to 10.0 in 2007. The job growth rate in Miami slowed considerably in 2007. The number of jobs in the Miami metro area grew by about 3% annually in 2004, 2005 and 2006; however, in 2007, jobs grew by only 0.6%. In the Washington DC metro area, where the HOI dropped 39 points between 2000 and 2007, job growth proceeded at a stable 2.0 to 2.5% annual growth rate in 2004, 2005 and 2006. In 2007, however, job growth was at 0.8%.

    In many places where housing affordability improved—or at least did not decline too much—job growth held steady or increased in 2007. Many of these were Major metro areas (with populations between one and 2.5 million). For example, the HOI for Denver increased six points, from 58.5 in 2000 to 64.5 in 2007. The job growth rate in Denver in 2007 was 2.2%, up from 2.1% in 2006, 2.0% in 2005 and 0.8% in 2004. In Pittsburgh, the HOI was up 8.6 points and annual job growth rates were steady between 2004 and 2007. In Rochester, NY, the HOI was up five points and job growth in 2007 was stronger than in 2006.

    So—big drops in housing affordability may be a problem for a metropolitan area’s economic health. High housing costs make it more difficult to attract labor. The wage premium needed to offset the high housing costs becomes untenable at some point. As a result, new firms stop locating in high cost areas and existing firms are unable to add jobs.

    Eventually, of course, job losses would put downward pressure on housing costs and the metropolitan area’s economy would stabilize. Large metropolitan areas will end up with a smaller share of the nation’s jobs after this stabilization process. If large places are good for economic activity because of the agglomeration benefits they provide, the dispersion of economic activity may not be a good thing for them.

    How can the biggest cities best prosper? Large, high cost metropolitan areas can stem economic slowdowns through policy changes that increase the supply of housing, thereby reducing housing costs. These policy initiatives would include changes to local land use and building regulations to encourage the construction of more housing. A regional approach to increasing the housing supply would focus on promoting housing near transit and employment centers.

    In the last two years, home prices have declined across many high cost metropolitan areas; however, job growth has already slowed disproportionately in many of these regions. This trend will likely continue in the near future. If the nation’s largest places are to be the dominate location for job growth in the future, regional and local policymakers need to develop comprehensive housing strategies that treat housing as an integral part of a regional economic development policy.

    Photo by limonada (Emilie Eagan), Late Afternoon and Almost Stormy

    Lisa Sturtevant is an Assistant Research Professor at George Mason University School of Public Policy, Center for Regional Analysis.