Quick Note: How to Incentivize Transit-Oriented Development

The Biden administration recently put out a statement saying that it would work to increase national housing production. It talks about the need to close the housing shortfall, estimated at 1.5 million dwellings, and proposes to use the Bipartisan Infrastructure Law (BIL) to dole out transport funding based on housing production. This is a welcome development, and I’d like to offer some guidelines for how this can be done most effectively.

Incentives mean mistrust

You do not need to give incentives to trustworthy people. The notion of incentives already assumes that the people who are so governed would behave poorly by themselves, and that the governing body, in this case the federal government, surveils them loosely so as to judge them by visible metrics set in advance. Once this fundamental fact is accepted – the use of BIL funding to encourage housing production implies mistrust of all local government to build housing – every other detail should be set up in support of it.

Demand conflict with community

Federal funding should, in all cases, require state and local governments to discipline community groups that fight housing and extract surplus from infrastructure. Regions that cannot or do not do so should receive less funding; the feds should communicate this in advance, stating both the principle and the rules by which it will be judged. For example, a history of surrender to local NIMBYs to avoid lawsuits, or else an unwillingness to fight said lawsuits, should make a region less favored for funds, since it’s showing that they will be wasted. In contrast, a history of steamrolling community should be rewarded, showing that the government is in control and prioritizes explicit promises to the feds and the voters over implicit promises to the local notables who form the base of NIMBYism.

Spend money in growth regions

In cities without much housing demand, like Detroit and Cleveland, the problem of housing affordability is one of poverty; infrastructure spending wouldn’t fix anything. This means that the housing grant should prioritize places with growth demand, where current prices greatly exceed construction costs. These include constrained expensive cities like New York and San Francisco, but increasingly also other wealthy cities like Denver and Nashville, whose economic booms translate to population increase as well as income growth, but unfortunately housing growth lags demand. Even poorer interior cities are seeing rent increases as people flee the high prices of richer places, and encouraging housing growth in their centers is welcome (but not in their suburbs, where housing is abundant and not as desirable).

Look at residential, not commercial development

In the United States, YIMBY groups have focused exclusively on residential development. This is partly for political reasons: it’s easier to portray housing as more moral, benefiting residents who need affordable housing even if the building in question is market-rate, than to portray an office building as needing political support. In some cases it’s due to perceived economic reasons – the two cities driving the American YIMBY discourse, New York and San Francisco, have unusually low levels of job sprawl for the United States, and in both cities YIMBY groups are based near city center, where jobs look especially plentiful. At the local and state level, this indifference to commercial YIMBY is bad, because it’s necessary to build taller in city center and commercialize near-center neighborhoods like the West Village to fight off job sprawl.

However, at the federal level, a focus on residential development is good. This is a consequence of the inherent mistrust assumed in the incentive system. While economically, American cities need city centers to grow beyond the few downtown blocks they currently occupy, politically it’s too easy for local actors to bundle a city center expansion with an outrageously expensive urban renewal infrastructure plan. In New York, this is Penn Station redevelopment, including some office towers in the area that are pretty useful and yet have no reason to be attached to the ill-advised Penn Station South project digging up an entire block to build new tracks. Residential development is done at smaller scale and is harder to bundle with such unnecessary signature projects; the sort of projects that are bundled with it are extensions of urban rail to new neighborhoods to be redeveloped, and those are easier to judge on the usual transport metrics.


  1. Patrick Jensen

    Uh… no, I don’t think you want to reward conflict with the community. What you want is a system that disenfranchises NIMBYs but does ensure funded schemes aren’t full-on Robert Moses style urban renewal/slum clearance. This is most easily achieved by doing what Japan and France have done – formalizing public review criteria, rather than leaving them up to the coin toss that is the court system.

    This is also much easier to sell than “Washington telling locals to get stuffed.” On one hand it’s “fighting discriminatory housing policies,” on the other it’s “strengthening property owner’s rights.”

    • Eric2

      Robert Moses was a government figure who extensively used eminent domain. I don’t think YIMBYism needs any eminent domain, it just needs to let individual owners choose to make money by adding density.

    • Alon Levy

      The essence of Robert Moses was avoiding conflict with the white middle class; he failed in the Village because he misread the neighborhood as a slum rather than the rapidly gentrifying area it was by the 1950s. And Japan and France are very much systems where the state tells locals to get stuffed.

      • Patrick Jensen

        What makes you think this conflict-happy system won’t take the path of least resistance like every other planning system before it? It sounds to me like you’re suggesting an autocratic scheme when a rules-based planning scheme would be a much better replacement for current discretion-based ones.

        “Broadly speaking, three types of planning systems exist across the rich world: discretion-based; autocratic; and rules-based. The first type is commonly found in Commonwealth countries. Local residents have plenty of power to stop development plans, and they frequently do.

        Autocratic planning systems do a better job of boosting housing supply. Russia has raised its annual rate of housebuilding from 400,000 a year in the early 2000s to over 1m. Singaporeans who protest against development are routinely ignored, says one with a house located near Tengah forest, some of which will soon be razed to make way for apartment blocks.

        The third group—rules-based planning systems—are commonly found in European countries such as France and Germany. If developers tick all the boxes then construction is permitted, even if local residents object. These systems have generally done a better job of delivering housing. Since the 1950s Germany has built twice the number of houses as Britain, despite having only a slightly higher population.”


  2. Matthew Hutton

    Got a Liberal Democrat leaflet the other day. It says yes to development but no to steamrolling.

  3. Eric2

    “You do not need to give incentives to trustworthy people.”

    Huh? You give incentives to anyone who has different goals than you, whom you would like to align with your goals at least partially.

    “The notion of incentives already assumes that the people who are so governed would behave poorly by themselves,”

    If your definition of “poorly” includes “based on different values”, then yes. Of course, if they already had our values we wouldn’t need to make federal policy to begin with.

    “and that the governing body, in this case the federal government, surveils them loosely so as to judge them by visible metrics set in advance.”

    That’s what a federal system means. States and local governments make policy and the federal government has limited ability to direct them.

    • Alon Levy

      That’s what a federal system means. States and local governments make policy and the federal government has limited ability to direct them.

      No? We have a federal system here too, and DB does things rather than just nudging others.

      • Eric2

        Germany has a different constitution to the US. In the US, any power not specifically given to the federal government is forbidden to the federal government (10th amendment). This makes a lot of “federal government doing things” illegal, or at least questionably legal depending on the whims of the Supreme Court.

  4. Henry Miller

    He could go a long way just be reforming HUD rules. Loans should incentive places where up to 5 floors are allowed by right (5 floors is about the most cheap conventional construction can support), and as many units as fit on the lot space. Subsidies loans should require the owner to live in one unit, but owning an apartment is a great way for some types of people to get out of poverty (there are lots of negatives to this as well, I don’t know how to keep someone from renting to those who will trash the place cooking meth as one extreme example) As such small apartments should be encouraged.

    In no case should federal subsidies apply to anyplace where building is not by right. The following should not be allowed anyplace that federal support is wanted: Minimum building sizes. Maximum building sizes less than 5 floor (unless the FAA imposes the restriction). Any parking requirements. Cannot build up to lot lines if the space isn’t used for sidewalks/utilities/drainage (this implies fire code rules to stop fire spread between buildings). Maximum units per lots of less than 5.

    Historical designation should also be reformed. There are a lot of buildings that can’t be touched just because they are more than 70 years old. Historical should require something on national significance happened there.

    Biden probably cannot pull off all of the above. He may need to pick and choose a few that he can push and pass.

    • Matthew Hutton

      Most of this stuff is only bad in America because you take it too far.

      There’s nothing wrong with housing space minimums of 50sqm or so as they stop developers building rabbit hutches – but a 150sqm minimum is obviously absurd.

      Same with parking minimums – in Britain shopping parking minimums mean you have enough parking so there are couple of spare spaces somewhere in the car park on market day and on a typical lunchtime 70% of the spaces are taken. In America there have to be plenty of parking spaces on the day before thanksgiving and on a typical lunchtime 10% of the spaces are taken.

      Even domestically in the suburbs probably a minimum of 1-2 cars is OK but 6 cars or whatever the minimum is in America is probably ridiculous.

      • Alon Levy

        There’s nothing wrong with housing space minimums of 50sqm or so

        What? There’s everything wrong with that; San Francisco’s minimum is 40, and as a result there are no small apartment for single people and couples. This is why there’s such a culture of living with housemates in American cities and in other places with many large and few small apartments, like Israel. In contrast, in Scandinavia there are lots of units in the 20-25 m^2 area and people live alone.

        • Matthew Hutton

          It’s difficult to build stuff much smalller than 50sqm that is big enough to allow a wheelchair through and has space to have a few friends round and has sufficient wardrobe space for a couple. I mean a disabled accessible bathroom is ~7sqm alone.

          Plus when the walls are going to be 35cm or more in thickness so they are properly insulated to get energy usage down making the rooms a bit bigger doesn’t add to the footprint.

          • Eric2

            Internal walls between units don’t need quality thermal insulation (though they need noise insulation, I’m not sure how thick that needs to be)

          • Tom M

            Ok, but why dictate that? Why not let buyers and sellers determine what they’d like? Enforcing minimum sizes, or other development restrictions drives up building costs, housing prices, and reduces supply. No one is forcing anyone into a rabbit hutch. Scandinavia, Hong Kong etc. easily make do with small sizes. How has Scandinavia solved the disability accessibility issue?

          • Ernest Tufft

            Developers will build cheap shit housing sold at high prices to unsuspecting low income buyers, then neighborhood falls into decline as maintenance and such put buyer into foreclosure.

          • Tiercelet

            @Tom M
            Because without significant intervention, all that happens is you recreate 19th-century tenements. This isn’t a market that will clear naturally–markets only clear when either side can reasonably walk away (when the power of the seller and buyer is roughly equal) and when supply can actually rise to meet demand. The former doesn’t hold when you’re talking about a life necessity. And the latter doesn’t hold in cities, as the level of expertise, reputation, access to finance, and political connections required to do major development in a city rapidly leads to cartelization. Why would the cartel provide anything but the bare minimum if restricting the housing supply leads to greater profits?

            Buyers/renters have to live somewhere, and as the population grows (both organically and because of job geography–even though job concentration is a Very Good Thing in general) owners of the existing housing stock can charge more and more for the same (or worse) units. Existing owners see no reason to allow the creation of more (perforce denser, and in particular taller) housing, since that would “change the neighborhood character” and decrease the rent they can extract from their ownership; and the developer cartel–especially in world cities with their bottomless markets for prestige luxury pieds-a-terre–focuses what little building can be done on the ultra-high-end segment. Even outside major cities, if the population grows, housing stock will have inherently deflationary dynamics. It’s much more profitable to pack people in like sardines than to put in the money to create a decent standard of living.

            In short, an unregulated housing market is the darling of the slumlord.

          • Matthew Hutton

            Also construction is full of one way bets where there’s a small up front cost that saves a pile of cash down the line. For example if you use waterboard around your bath rather than standard plasterboard then if there’s a small water leak at the shower say then rather than having to replace all the tiles in the whole bathroom and probably the bath as well you’ll get a small leak through the ceiling. But it costs an extra $10/sheet so builders won’t use it unless it’s demanded by the client or legally required.

          • Eric2

            “Ok, but why dictate that? Why not let buyers and sellers determine what they’d like?”

            I agree – when the quality is transparent and easy to verify, for example lot size and floor area. However insulation, specifically, is hard to quantify and verify, so people move in just hoping the insulation will be good and get annoyed when it isn’t. Since they already move in and if they leave someone else will replace them, there’s little incentive for the builder to put in good insulation. So there is good reason for insulation codes, or at least standardized published measurements.

          • Matthew Hutton

            Yeah but even with lot size and floor area if you don’t mandate a reasonable standard the poor land up living in very small homes. And life is especially tough for the disabled poor if homes aren’t forced to be suitable for them.

          • Eric2

            Mandating large homes does not mean that the poor get to live in large homes. It means that no housing exists at the lower price point corresponding to a small home. So some poor end up paying through the nose for a large home (a perpetual poverty trap) while others end up homeless.

          • adirondacker12800

            If you want full sized kitchen appliances and a full sized bathtub, a closet, someplace to put a small table and a few chairs, some place to sit other than the bed and a bed it’s 400 square feet/40 square meters.

          • Alon Levy

            Yes, that’s what I had in Paris (but there was also a couch that could double up as a bed, with separation between the living room and the bedroom). In Stockholm I never had a full-size bathtub.

          • Matthew Hutton

            Disabled bathrooms in hotels might not be 7m2 but they are definitely significantly larger than non disabled bathrooms. And I doubt they’d make them bigger than necessary for fun.

          • Matthew Hutton

            The big issue with too large size minimums (e.g 100m2) is that no-one builds 1-2 bedroom homes because you could build a 3-4 bed house with that floor area and make more money selling that which means people who want a 1-2 bed place can’t get anything suitable.

            And Britain certainly had size minimums for public housing in the 1970s when housing was reasonable value and there was lots of public housing.

          • adirondacker12800

            This stuff comes in standard sizes. It’s available in non standard sizes but if you get the non standard size stuff it costs more to buy, more to install and more to maintain. A standard North American bathtub is 30 inches wide and 60 inches long. A standard shower stall is 30 by 30. You don’t save a whole lot of space by swapping the tub for a shower. Kitchen appliances come in standard sizes. So do beds and dining tables… It comes out to 400 square feet.

          • Jason

            Then the problem is that America’s standards are too big and the solution is to loosen up the rules so that the market is allowed to import new smaller standards and build smaller and cheaper homes. All these things are way smaller in Japanese standards and you can easily have a functional 1 bedroom apartment in 200 sqft. My 400 sqft studio apartment in silicon valley is not twice as comfortable or functional as my 200 sqft 1 bed in Tokyo. The Tokyo apartment had in-suite washer and dryer!

  5. adirondacker12800

    commercialize near-center neighborhoods like the West Village to fight off job sprawl.

    It’s too expensive to redevelop things in the Village. And it’s a Historic District, you can’t tear things down. The Port Authority has been trying for years to add exits to the Christopher Street and Ninth Street PATH stations. The neighbors object to any plan. Nothing gets done.

    In New York, this is Penn Station redevelopment,

    If they tear down the block south of the existing Penn Station putting some office space over it would be replacing whatever they tore down. Or more.

    As far as I know the tearing down the Hotel Pennsylvania doesn’t have anything to do with Amtrak. They are tearing down half a block to do that.


    I hope the MTA and the city were able to wedge reopening the passageway to Herald Square into it. It would be nice if they reopened the subway concourse, outside of fare control, from Herald Square to 42nd Street.

    • Alon Levy

      Historic district designations can be revoked, and neighborhoods can be disempowered.

      The Penn Station plans include overbuilding Block 780, yes, but at higher costs as it is much more expensive to build over railyards than over firma. They also include doing some eminent domain for private development on nearby blocks, I believe?

      • adirondacker12800

        Historic districts can be revoked. Greenwich Village isn’t one.
        They’ve been grumbling about needing more capacity at Penn Station for 40 years. I don’t keep track of each spasm of fantasy someone proposes. ARC should be open by now. That would have given them enough capacity through 2040 or so. At the rate they are going they might have broken ground for something by 2040.

          • Eric2

            Let’s be realistic, no historic district will ever get revoked in any foreseeable political future.

          • Tom M

            Sure, completely agree that it is politically unlikely this side the heat death of the universe. My question is trying to understand what is supposedly different about the Greenwich Village one which makes it un-revokable?

          • adirondacker12800

            Because a lot of history happened there. And it’s filled with townhouses that have 8 figure prices?

          • Tom M

            You can say the same about many of the other historic districts in Manhattan, Brooklyn etc.

  6. SB

    Isn’t a major flaw with rewarding transit funding with new housing is new housing in the sprawly low density region?
    Then transit funding would go to regions with low transit ridership and be very inefficient.

    • Henry Miller

      Most low density areas are still dense enough support good transit. It can’t support bad transit (where there is no traffic you will drive unless the bus is frequent and fast).

      The problem with low density areas isn’t the density it is that there are not enough roads that are useful for a bus. Winding roads with many cul-de-sacs like most suburbs have makes the bus slow, and the walk to a straight road where a bus could work is unreasonably long. If you happen to live near the larger road surrounding your suburbs the bus could work great, but this is near as the person walks, most roads that a bus could work on have have a fence and so while in theory it is in your backyard, you cannot in practice get there out your backdoor.

      Frequent is often written about here, but fast is important. In low density areas it is farther to places people are going so you need to go faster to get them there. Nothing that is unreasonable to reach, but you have to watch this as little things that are meaningless to denser cities matter a lot.

      If we fixed that about suburbs (which still allows for cul-de-sacs, they just can’t be as long) transit could work.

  7. Ernest Tufft

    The issue of housing in America has meant stick built junk single family dwelling or high rise concrete poverty only apartments. Neither of these is good idea. Better plan is try to restore and convert into mixed business and apartment housing of various pricing the existing historic buildings in danger of becoming fire traps. To reduce “project housing”, low income apartments must be mixed with middle and even luxury apartments, and ground floor given over to retail. The suburban model of single family stick construction is not sustainable—construction method deforests, and layout destroys farm land and wildlife habitat, and the lower density footprint makes everything from public transit and fiber optic, to water/sewer and garbage collection more expensive to build and maintain and more energy intensive.

    • Henry Miller

      stick built junk

      People keep saying that, but stick built is not junk. It is well engineered to be good. Sure in the past we put in much thicker beams in places because we didn’t know how much was needed, but that doesn’t make the historic stuff better, just overbuilt there. In the mean time nobody notices the beam isn’t supported very well and so will fall in some only slightly unlikely cases.

      Yes we need more density, but don’t go throwing out all the good from the suburbs just because there are some problems with them.

      • Tiercelet

        I think you’re being very generous to tract developers–I don’t think you have to dig very deep to find major homebuilders cutting corners in all kinds of ways.

        But okay, let’s assume we completely redeem the idea of timber framing and market-based construction standards. That doesn’t touch the bigger issue: sprawl consumes farmland and wilderness at too high a rate, requires vastly greater infrastructure expenditure (needlessly extended water/sewer/gas/electric/telecom/cable/road/whatever-else-they-invent networks saddle communities with both high up-front costs and an ongoing maintenance burden), and initiates a self-reinforcing cycle of car dependency that makes good transit service a hopeless cause.

        About the only theoretical good sides I can see about the suburbs are being more separated from your neighbors and having access to green space. But everybody I know who lives in the suburbs *still* hates all their neighbors & talks endlessly about their conflicts; and denser communities would allow reserving space for allotments, community gardens, parks, etc. instead of endless HOA-mandated lawns…

      • Ernest Tufft

        I agree that for Japan and California residential homes are often better built by stick for seismic reasons, but otherwise to compare stick with stone is silly. Stone even built like Romans and Greeks built, and there are better mortars and methods today, will easily outlast stick by several centuries. If a flood comes, might as well bulldoze stick given the post flood mold and effort to restore. With stone, just mop up and you are ready to go. IMHO cities shouldn’t permit stick built apartment buildings at all, given low quality of life and fire risk with these structures. Apartments built properly with steel and concrete are much more habitable. If first floor of building is dedicated to commercial retail, should flood occur, the hardship is barely noticeable. Retailers can get inventory replaced quickly.

  8. Charlie

    Is there a way for the federal government to incentivize housing development within huge abandoned sections of Detroit and stop building housing on the fringes of the metro area?

    • Alon Levy

      Not really? Detroit isn’t exactly choice real estate – there aren’t a lot of jobs there, and the metro area’s entire economy collapsed in the 2000s and hasn’t really recovered.

      • Charlie

        The regional economy and population are stagnant but I wouldn’t say collapsed. It’s Detroit that experienced the worst deprivation but is starting to see new downtown growth again.

    • Eric2

      They could pay people to live in the city. But that’s a political nonstarter. It’s also super inefficient, better to pay people to live in NYC which is denser and more transit-oriented than Detroit will ever be.

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