Category: Politics and Society
Why Avoiding Stereotypes is Important (Hoisted from Comments)
In the transit-related forums I participate in, people know that the US builds subways at higher costs than all other countries, because I talk about it often. This feeds into various stereotypes Americans have of government effectiveness; Americans of many political stripes understand that there are serious problems with US governance, and compare the US negatively with certain countries that are famous for getting things done. Thomas Friedman periodically raves about China’s massive infrastructure investment; when he was secretary of transportation, Ray LaHood made the same praise, and connected this to Chinese authoritarianism, while saying that American democracy was still overall a better system. More recently, there’s been praise for Germany, or more generally Northern Europe, as a place with effective infrastructure investment (even as the actual state of German infrastructure is in decline). I was reminded of these stereotypes in the discussion of New York’s shrug-worthy reinvention report at Second Avenue Sagas: once again, the commenters praised the usual-suspect countries, and sometimes connected low construction costs with authoritarianism.
Several more examples from this month have made me notice that people overstate certain cultural differences, especially ones that are in line with stereotypes, such as Western individualism versus Asian collectivism or Northern European efficiency versus Southern European corruption. Cultures are far too diverse to be reduced to these oppositions, and this is especially true on the level of political subcultures, such as transit investment.
The reality is that the places with the lowest construction costs do not really match the stereotypes. Peruse my various posts about subway construction costs again: the main three, but also some of the side ones. Authoritarian countries like China and Egypt do not have unusually low construction costs. Countries with reputations for efficiency run the gamut: Scandinavia and Switzerland are relatively cheap, but Germany and the Netherlands are expensive, with some German projects needlessly expensive because of political influence over alignment choices. Labor costs seem to have a weak if any effect on construction costs: India, by far the poorest country on my lists, is fairly expensive to build in, and within the first world, low-income Naples has cheap construction but so do high-income Swiss cities and middle-to-high-income Milan. Culture in the sense of Samuel Huntington’s civilizations has a weak if any effect, again: there are multiple examples of subway lines built in the Western world, the Islamic world, and East Asia, and the cost differences within each bloc are far greater than the cost differences between the blocs.
I try to avoid giving explanations for these patterns of construction costs. If I knew for certain what caused them, I would not be blogging; I would be forming a consultancy and teaching New York and other high-cost cities how to build subways for less than $100 million per kilometer. I have seen two explanations by professionals. Manuel Melis Maynar, the former CEO of Madrid Metro, explained briefly how Madrid has the world’s lowest construction costs, in terms of design compromises, avoidance of outside consultants, and structuring bids based primarily on technical merit and not cost. And Paul Barter’s thesis explains Japan’s relative lack of urban freeways as a result of high land costs and a costly eminent domain process; this also explains the pattern of Japan’s high urban subway construction costs compared with relatively cheap Shinkansen tunneling (the 50% underground Shin-Aomori extension was only about $55 million per km).
The key here is that neither of these two particular explanations has anything to do with cultural stereotypes of the nations in question. When people think of Hispanic culture, many stereotypes come to mind, but none of them involves having hyper-competent local agencies designing subway systems with small in-house staffs. On the contrary, given the stereotype of Southern European corruption, an American or Northern European who was informed that Madrid Metro awarded contracts based on a combination of technical merit, speed, and cost, and did not use outside consultants, might conclude that it has a bloated in-house staff and that it uses the discretion of technical merit to favor the politically connected. Likewise, although Japan is notorious for the expense of its urban land, it does not have a reputation for strong property rights protections; Anglophone and Western supremacists take it for granted that the West has stronger property rights protections than East Asia, even if in reality English common law makes takings easier than Japanese law.
In addition to the thread on Second Avenue Sagas, in which I felt compelled to constantly defend Southern Europe’s record on building rail infrastructure efficiently, I was recently exposed to another set of stereotypes, in a four-week-old blog post by Andrew McAfee on Financial Times repeating all the usual American exceptionalist tropes of innovation. According to McAfee, the rise of the tech sector of Silicon Valley underscores how the US is going to keep winning the new global economy, giving Tesla as the prime example.
I have a simple bullshit detector for articles about innovation, especially in the tech sector: if they praise Israel’s entrepreneurial cultures, I know with a high degree of certainty that they’re familiar with too small a slice of the nation to be informed. The real Israel, even the upper middle-class slice that I grew up in, is a country at the bottom end of the first world, with Southern Italian average salaries (average household income per capita is about $14,000 a year in PPP terms, about half as high as in the US), with people who move to the US and are floored by the plenty they see at American supermarkets. It has a lot of tech workers, who function as a back office to Silicon Valley, and a handful of inventors who make exit and become rich; neither group is large enough to raise average salaries to proper first-world levels.
But McAfee’s wrongness goes well beyond the line about Israel. In a global economy with specialized regions, people tend to overvalue the sort of production that accords with their sense of identity, and this leads to either regional pride or nationalism. For a certain class of Anglo-American boosters, this is finance; New York and London are global financial centers, and this makes them worthier in this view than cities with different economic roles, such as Paris. McAfee belongs to the class that views the tech sector as the most important, and sees Silicon Valley’s wealth as superior. This is simply the modern equivalent of the 19th-century Manchester boosters’ denigration of Birmingham as a city that didn’t have Manchester’s culture of mass production of cotton, as described in The Economy of Cities; back then the boosters viewed the world as a giant factory, and today they view it as a giant smartphone app. The epitome of this is the overrating of Tesla, which is special only in that it’s made by someone with a background in online companies and not in the auto industry. Who needs the Tokyo rail system when there are luxury electric cars exciting the tech boosters?
As it happens, Europe has a lot of innovation in new fields – it’s not just Siemens making incremental industrial progress; it’s also the Human Brain Project. So do Japan and South Korea: McAfee brushes aside patent statistics, perhaps because Japan and South Korea have by far the highest numbers of patents per capita.
Now, to clarify, it’s possible to relate the US strength in online companies like Facebook to its business culture of superstars, which relates to individualism. In traditional manufacturing sectors, big businesses are built slowly, and require immense amounts of capital; in the tech sector, Mark Zuckerberg could start with a relatively low amount of capital, supplied by an angel investor like Peter Thiel on the strength of an already successful demonstration, and obtain a very large market share via network effects. However, this explanation still requires mediation via business culture. Quoting Marc Andreessen, McAfee lists four explanations, two of which do indeed involve business culture, but two of which play well into the European stereotype of American ignorance: great research universities, and rule of law and respect for contracts and property. Paris has some amazing research universities, judging by the intellectual achievements of their faculty, and as noted above, in some respects the Anglosphere actually has weaker property rights than Japan. But American tech boosters have learned that great universities lead to software and tech businesses, so if the Grandes Ecoles don’t have that then they can’t be that great, right? The national stereotype is stronger than the reality, just as with the insistence of many people in the transit infrastructure debate to talk about China and Northern Europe.
I’m reminded by a point that I made three months ago, in response to a proposal to move Silicon Valley to a growth-friendlier metro area like Houston. Facebook, Uber, and other hot Silicon Valley firms have a culture that works for their industry and that has led to useful inventions. This does not mean that the entire world has to operate like a Silicon Valley firm, nor does this mean that everything in the US operates like one. The same is true of other national stereotypes. The Spanish economy is weak, but happens to have a small segment, corresponding to infrastructure engineering and management, that works very well; other countries would be wise to copy this culture in the realm of infrastructure, and in nothing else, until it can be verified that the same principles work in other settings.
This sort of imitation, focusing on specific aspects of business culture in a particular industry, is harder than general handwaving about how to think like a German or Japanese business manager (a common trope in the 1980s and early 90s) or how to think like a Silicon Valley manager. It requires much more detailed knowledge of several different countries to make comparisons, and this is uncommon, since usually the sort of knowledge that leads to comparative analysis is broader and less specific. I certainly don’t have it – I only know the construction cost output, not the inputs that go into it. Even small mistakes are hazardous: it’s likely that the best performers’ cultures have many distinct features, of which some are crucial to their success but others are irrelevant, and it requires specialized knowledge to sort out which is which.
To add to my previous post about the MTA reinvention report, this is why I’m so disappointed in official efforts to improve American transit governance. The MTA and similar bodies have enough institutional clout and money to hire people who do understand the intricacies of various success stories abroad, and could make specific recommendations, which could appear small but could also be revolutionary. Commentators have to default to first-order information about costs, or to national stereotypes, but the MTA could have detailed knowledge about what’s needed. Instead, the MTA did nothing of the sort, and left the sweeping changes to mongers of stereotypes.
Height Limits: Still a Bad Idea
In a pair of recent articles on Strong Towns, Charles Marohn, best known in the urbanist community for introducing the term stroad (street+road) for a pedestrian-hostile arterial street, argues for height limits as a positive force for urbanism. He does not make the usual aesthetic argument that tall buildings are inherently unpleasant (“out of scale”), or the usual urbanist one that tall buildings lead to neighborhood decline; instead, he makes an economic argument that allowing tall buildings greatly raises land costs, and makes redevelopment of vacant lots less likely. He uses the following example:
Let’s say the local code allows [a] vacant lot to be developed as a one story strip mall, but nothing higher. If the strip mall is worth $500,000, then the vacant lot is going to be somewhere around $75,000.
Okay, but what if the development code allows that vacant lot to be developed as a sixteen story tower? If the tower is worth $20,000,000, then that vacant lot is going to fetch a much higher price, maybe as much $2.5 million.
You own that vacant lot. I come to you with an offer to buy it for $75,000. What are the odds you are going to sell it at that price when you look to the other side and see the same piece of property going for millions? Not very good.
In most cities, as Charles notes, there is not enough demand to redevelop every vacant lot as a high-rise, and therefore, if high-rises are permitted, a few vacant lots will be redeveloped as high-rises, while the rest remain vacant. This is not the case in large cities, which Charles specifically exempts in his article (see also Daniel Kay Hertz’s response), but part of the problem with the argument, as we will see, is that the boundary between large cities and small ones is fuzzy.
Let me now explain why this argument fails, like all the other arguments for zoning restrictions: it makes implicit assumptions on future uncertainty. The reason the vacant lot owners are not willing to sell for $75,000 is that they hope to get $2.5 million. In a stable market, with low enough population that most lots cannot fetch such a high price, the lot owners know that holding off on $75,000 offers is a gamble and that they are unlikely to ever get a higher offer. People have optimism bias and might overrate the probability that they’ll get the $2.5 million offer, but also have risk aversion; in most cases in economics, risk aversion dominates, so that safer assets cost more and have lower returns.
So when do we see holdouts? Risk aversion predicts that the probability of obtaining a $2.5 million offer should be higher than the total demand for new towers divided by the number of vacant lots. If we explicitly assume that the cost figures in Charles’ example, including land costs, are unchangeable, then this means vacant lot owners expect there to be more high-rise towers in the future, which comes out of growth regions. Charles’ example is based on Sarasota, which like most of Florida has high population growth.
The other possibility is regulatory uncertainty. In a competitive market, land costs are already as low as they can be while letting lot owners cash out on past investments. Developer profits are also as low as possible, and represent the developer’s wage for managerial work. However, zoning restrictions will greatly raise both figures, and a lot owner who expects future developments to brush up against the present zoning code can hold out until prices rise.
This is the danger of a system that is based on arbitrary rules (Charles proposes up to two floors or 1.5 times the average present height, whichever is higher), and arbitrary distinctions between small cities in which height restrictions are desirable and large cities in which they are not: these introduce political discretion in the details, which introduces additional uncertainty among lot owners. True windfalls usually involve the boundary between regulatory regimes, and this creates political incentive to game the system in order to be one of the few owners whose lots can be developed as high-rises. In contrast, once a ground rule is established that there is no zoning, such as in Houston, introducing zoning is difficult, even when there are rules that are zoning in all but name, such as parking minimums.
Once we get into the realm of cities with a large proportion of their lots developed, as Charles proposes, future development can only replace old development, and this introduces a key difference between new development and redevelopment: redevelopment requires buying out the preexisting property. If a two-floor building is replaced by a three-floor building, then the developer has to not only pay construction costs for three floors, but also buy out two floors, effectively paying for five floors. But the revenue is still only that of a three-floor building, which bids up effective costs by a factor of five thirds. The formula is that if it’s possible to multiply the total built-up area by a factor of 
This effect is why, in major cities, we usually see buildings replaced by much larger buildings: for example, a three- or four-floor Manhattan building may be replaced by a fifteen- or twenty-story tower on a base. Charles laments that this is not small-scale or incremental, but even his example of good incremental development is similar: in Houston, single-family houses are replaced by low-rise apartment buildings, generating similarly high ratios of the floor areas of redevelopments with the buildings they replaced. Incrementalism in these cases consists of replacing small buildings by much larger ones, gradually, until a few decades later the entire neighborhood is tall.
One way around redevelopment’s need to buy out preexisting buildings is to mandate that future buildings be built to allow adding floors on top of them. Chicago’s Blue Cross Blue Shield Tower is an example. This is a regulation that increases the average cost of construction but reduces the marginal cost and thus the price. It’s also a regulation that only really matters in situations when it is difficult to have a high ratio of new to old floor area, such as in areas that are already high-rise, especially major city CBDs. (It is easy to quintuple floor area ratio when the preexisting buildings have three floors, but not so much when they have twelve.) The current styles of construction of most small buildings, for example sloping roofs common in American and European urban and suburban houses, tend to make adding floors impossible. Of course, the implication that such a regulation should only apply for buildings above a certain height introduces political discretion and hence uncertainty, but at least this is uncertainty that would apply equally to all buildings in an area, which is not always the case for zoning.
What Charles proposes, to develop all vacant lots first and only then start going taller, is then a recipe for high marginal costs, because of the buyout factor. In a small city uniformly developed up to one or two floors, it is difficult to spread the new development across many buildings up to three floors, precisely because there is no way to build single-family houses that are recognizable as such to Americans or Europeans from countries I’ve been to (It’s different in Canada, but this is considered a feature of the low quality of Vancouver’s housing) and that can have floors added to them. In such an environment, building tall is the only way to avoid high housing costs.
The NITBY Problem
Usually, the barrier to new development in a neighborhood is NIMBYism: connected local community members do not want the project, saying “not in my backyard.” There’s a wealth of literature about NIMBYs’ role in restrictions on development; William Fischel’s work is a good start, and the short version is that opposition to development is local, based on fear of the risk of decline in property values. Urbanists take it for granted that decisions made with regard to regional rather than local concerns will be more pro-development: Let’s Go LA has examples from Los Angeles, and Stephen Smith explains Toronto and Tokyo’s lax rules on new development based on their high-level decisionmaking (at the provincial level in Ontario and national level in Japan). In this post, I would like to discuss the opposite problem, which I call NITBYism – “not in their backyard.”
In certain circumstances, opposition comes from people living in other areas, who are aghast that an area they don’t live in is getting so much investment. This is more likely to happen when there’s heavy public involvement in development, but, since upzoning an area is a public decision (as opposed to unthinkable across-the-board zoning abolition), opposition can sprout anytime. One common thread to NITBY opposition campaigns is that NITBYs view housing as a good thing, and want it redirected to their areas. Another is that they self-perceived as ignored by the urban elites; this is common to both right-wing populists and left-wing ones. Since the process is heavily public by assumption, the price signal telling developers to build in the center of the major city is irrelevant, and this encourages the government to build more low-value peripheral projects.
The first example of this is when the process actually is public: subsidized affordable housing. As discussed by Daniel Kay Hertz, in Chicago, affordable housing regulations require developers to pay a fee to a dedicated affordable housing fund, which then uses the money to develop or buy housing and rent it out at subsidized rates for moderate-income residents. To minimize the cost per affordable unit, the fund builds the units in the cheapest neighborhoods, i.e. the poorest ones, exacerbating housing segregation. As Payton Chung explains, the low-income housing community networks in Chicago support this arrangement, because they are based in the neighborhoods where this affordable housing is built. This is not as self-serving as the examples I will include below, since the community groups want to see the most number of housing units built at a given cost; but a common feature of NITBYism, namely that the NITBYs view housing as a good rather than as a burden imposed by outsiders, is present here.
In Israel, NITBYism does not have the cost defense that it does in Chicago. Zoning in Israel is prepared by municipalities but must get approved by the state. This means that it is geared not only toward providing services to Israelis (such as cheap and orderly housing) but also toward national goals of Judaization. The worst NITBYism is not affecting Tel Aviv, but Arab cities, where the state refuses to approve zoning plans; since independence, not a single new Arab city has been built, except to house Bedouins who the state expelled from their villages after independence, and plans to build the first new Arab city are controversial on segregation grounds. This is while the state has built many new Jewish cities from scratch, often in peripheral areas in order to ensure a Jewish majority.
However, NITBYism afflicts housing in Tel Aviv, too. Although the state could if it wanted declare a housing emergency and force upzoning in Tel Aviv, it does not. There are few permits for new apartments in the Tel Aviv District (though more new housing sales): only 5% of the national total (including settlements), as per the pie chart on page 17 of the Ministry of Construction and Housing’s report and the more complete (in English) data on page 49, compared with a national population share of 16%; the Center District, consisting of Tel Aviv suburbs (though not the richest and most expensive, such as Ramat HaSharon, which are in the Tel Aviv District), has 22% of national permits, about the same as its share of the national population. This is not just NIMBYism in Tel Aviv, although that exists in abundance. Local politicians from peripheral towns demand local construction, and view Tel Aviv construction as something useful only to outsiders, such as foreign speculators or the urban elite. During the housing protests of 2011, there was widespread debate on the left about what solutions to offer, and people representing the ethnic and geographic periphery were adamant that the state build and preserve public housing in peripheral towns and not concentrate on Tel Aviv, which they identified with the secular Ashkenazi elite. A common thread in housing and infrastructure debates to both working-class Jews from the periphery and Arabs is the demand for a policy that would create jobs and housing in their hometowns, rather than build infrastructure that would put them in the Tel Aviv orbit.
Of the above examples, in Chicago the NITBYs self-identify as leftists, and in Israel, the NITBYs who want local housing rather than Tel Aviv housing either identify as leftists or identify as economic leftists and support the right on security and ethnic identity issues. However, the populist right is not immune from this. Right-wing supporters of suburbs who oppose cities for what they represent (diversity, usually left-wing politics of the kind they associate with the liberal elite) may also oppose urban upzoning. The best example of this kind is Joel Kotkin’s opposition to upzoning in Hollywood, which sounds like a criticism of government projects until one realizes that upzoning simply means developers are permitted to build more densely if they’d like. Now, Kotkin is pro-immigration, setting him apart from the main of right-wing populism, but in all other aspects, his paranoid fear of urban liberal elites imposing behavioral controls on ordinary people would be right at home at the UK Independence Party and its mainland European equivalents. Kotkin is also just one person, but his views mirror those of Tea Party activists who equate dense urbanism with an Agenda 21 conspiracy, to the point of conflating a phrase that means building new suburbs with a plan to forcibly relocate suburbanites to central cities.
I do not know Japan’s regional patterns of politics well, but I know Ontario’s. In Ontario, there is not much us-and-them politics regarding Toronto. There is such politics regarding the inner parts of Toronto – Rob Ford was elected on the heels of an outer-urban populist backlash to David Miller’s urbanism, including the perception that Miller was fighting a war on cars. But there’s none of the hatred of the central city and all that it represents that typifies politics in both Israel and the US. Hatred of the city in the US is right-wing (though within the city, hatred of the gentrified core is often tied to left-wing anti-gentrification activism), and hatred of Tel Aviv in Israel is generically populist, but in both cases, the us-and-them aspect encourages NITBYism.
In the most expensive American cities, this is not a major problem. Anti-urban populism does not have enough votes to win in New York and California, so state control of zoning in those states would not produce these problems. The Tea Party disruption of zoning meeting I brought up above happened in San Francisco suburbs, but did not have an effect on planning; I brought this example up to show that this political force exists, even if in that specific locality it is powerlessly weak. In those areas, local NIMBYism is a much bigger problem: many New York neighborhoods were actually downzoned in the Bloomberg era by local request. The primary problems that would plague state-level decisionmaking are corruption and power brokering, in which politicians hold even straightforward rule revisions hostage to their local pet projects. The us-and-them politics of Upstate and Downstate New York contributes heavily to power brokering, but Downstate’s demographic dominance precludes ideological choking of development.
Within the US, the risks of NITBYism are different. First, in the cost tier just below that of New York and California there are city regions in more moderate states, for examples Philadelphia and the Virginia suburbs of Washington, or possibly Miami (where the county-made rules have allowed aggressive new construction, mostly urban, which Stephen Smith credits to the political power of Cuban immigrants). And second, zooming in on different neighborhoods within each expensive city, the Chicago example suggests that if New York and other expensive cities begin a major program of public housing construction, the community organizations and the populists will demand to spread construction across many neighborhoods, especially poor ones, and not in the neighborhoods where there is the most demand.
As I noted two posts ago, there is a political economy problem, coming from the fact that the politically palatable amounts of construction are not transformative enough to let the working class live in market-rate city-center apartments, not in high-income major cities. Israel could semi-plausibly double the Tel Aviv housing stock; even that requires housing forms that Israelis associate with poverty, such as buildings that touch, without side setbacks. This would allow many more people to live in Tel Aviv, but they’d be drawn from the middle class, which is being priced out to middle-class suburbs or to working-class suburbs that it gentrifies. The working class in the periphery would be able to move into these closer-in suburbs, but this cascading process is not obvious. Worse, from the point of view of community leaders, it disrupts the community: it involves a churn of people moving, which means they end up in a different municipal fief, one with leadership the current suburb’s leaders may be hostile to.
For essentially the same reasons, subsidized housing in the center produces the same problems. If Israel builds a massive number of subsidized or rent-regulated apartments in Tel Aviv, there will be immense nationwide demand for them. Few would serve the residents of a given peripheral suburb, and there is no guarantee anyone would get them. On the contrary, in such a plan, priority is likely to go to downwardly-mobile children of established residents. At the 2011 protests, the people who were most supportive of plans to lower rents in Tel Aviv specifically were people from Tel Aviv or high-income suburbs who wanted to be able to keep living in the area. The community disruption effect of offering people the ability to live where they’d want would still be there. Thus, all the incentives line up behind periphery community leader support for building public housing in the periphery, where there is little demand for it, and not in the center. Even when housing is universally seen as a benefit and there’s no NIMBYism, politics dictates that housing is built in rough proportion to current population (since that’s where political power comes from) and not future demand.
Abolishing zoning is one way to cut this Gordian knot; it is also completely unpalatable to nearly everyone who is enfranchised in a given area. Allowing more private construction is the more acceptable alternative, but leads to the same problems, only on a smaller scale. It really is easier for community leaders to twist arms to demand veto rights and local resident priority than to push for sufficient citywide upzoning to alleviate the price pressure. But in an environment with weak NIMBYs and few NITBYs, fast growth in urban housing is possible.
Dispersing Expensive Centers: Edge City Version
This is somewhat of an addendum to my post before about dispersal of urban networks toward cheaper cities. I addressed the question of dispersal from rich, expensive metro areas, especially San Francisco, to cheaper ones, as a way of dealing with high housing prices. But more common is dispersal within metro areas: gentrification spilling from a rebounding neighborhood to adjacent neighborhoods that remain cheaper, and office space spilling from the primary CBD to the edge cities. I am going to address the latter issue in this post.
CBDs are expensive. They have intense demand for office space, as well as high-end retail and hotels. In many cities, there’s demand for office space even at the construction costs of supertall skyscrapers, going up to about $5,000-6,000 per square meter in privately-built New York towers. Zoning regimes resist the height required to accommodate everyone, and this is worse in Europe than in North America and high-income East Asia. Paris proper has many towers just above the 100 meter mark, but only three above 120. On a list of the tallest buildings in Sweden, not a single one above 100 meters is in central Stockholm, and the tallest within the zone are not in the CBD but in Södermalm; compare this with Vancouver, a metro area of similar size. But in the US, too, expanding CBDs is difficult in the face of neighborhood opposition, even in Manhattan.
The solution many cities have adopted is to put the skyscrapers in edge cities. Paris famously built La Defense, which has far more skyscrapers than the city proper does; Stockholm is building skyscrapers in Kista; London built Canary Wharf; Washington, the major US city with the tightest CBD height limits, sprouted skyscraper clusters in several suburbs in Maryland and Virginia. Ryan Avent proposed this as one solution to NIMBYism: in new-build areas, there are few residents who could oppose the new development. In contrast, near zoning-constrained CBDs, not only are there many residents, but also the land is so desirable that they are typically high-income, which means they have the most political power to oppose new development.
The problem with this solution is that those secondary CBDs are not public transit hubs. In Paris, this has created an east-west disparity, in which people from (typically wealthy) western suburbs can easily reach La Defense, whereas people from poorer ones need to take long RER trips and often make multiple transfers. In every transit city, the CBD is unique in that it can be reached from anywhere. To give similar accessibility to a secondary center, massive investment is required; Paris is spending tens of billions of euros on circumferential regional rail lines to improve suburb-to-suburb connectivity, expand access in the eastern suburbs, and ameliorate the east-west imbalance (see for example isochrones on PDF-pp. 20-21 of the links here). Those lines are going to be well-patronized: the estimate is 2 million daily passengers. And yet, the east-west imbalance, if nothing else, would be a lesser problem if instead of building La Defense, Paris had built up Les Halles.
The situation in other cities is similar. Kista is on one branch of one subway line, two stops away from its outer terminus. Living in Central Stockholm, my coworkers and I can get to KTH on foot or by bike, but a coworker who teaches at KTH’s satellite campus in Kista has a long commute involving circumferential buses (taking the subway and changing at T-Central would be even longer because of the detour). While many individual sub-neighborhoods of Central Stockholm are quite dense, the overall density in the center is not particularly high, certainly not by the standards of Paris or New York. A similar problem happens in Washington, where the biggest edge city cluster, Tysons Corner, is traditionally auto-oriented and was only just connected to Metro, on a branch. This always affects poorer people the worst, as they can’t afford to live in the CBD, where there is easy access to all secondary destination, and often are pushed to suburbs with long commutes.
There is a political economy problem here, as is usually the case with zoning. (Although in the largest cities skyscraper heights are pushing beyond the point of constant marginal costs, purchase prices at least in New York are much higher than construction costs.) The people living near CBDs, as noted before, are usually rich. The displacement of office space to the suburbs affects them the least, for three reasons. First, if they desire work within walking distance or short subway distance, they can have it, since their firms typically make enough money to afford CBD office rents. Second, since they live in the transit hub, they can access suburban jobs in any direction. And third, if the transit options are lacking, they can afford cars, although of course traffic and parking remain problematic. Against their lack of incentive to support CBD office space, they have reasons to support the status quo: the high rents keep it exclusive and push poor people away, and often the traditional mid-rise buildings are genuinely more aesthetic than skyscrapers, especially ones built in modernist style.
These concerns are somewhat muted in the US, where rich people decamped for the suburbs throughout the 20th century, and have supported zoning that mandates single-family housing in the suburbs, instead of staying in the city and supporting zoning that keeps the city mid-rise. This may have a lot to do with the formation of high-rise downtowns in American cities of such size that in Europe they’d be essentially skyscraper-free.
However, what’s worse in the US is the possibility of short car-free commutes to the edge cities. Where La Defense is flanked by suburbs with high residential density, and Kista’s office blocks are adjacent to medium-density housing projects for working- and middle-class people, American edge cities are usually surrounded by low-density sprawl, where they are easily accessible by car but not by any other mode of transportation. This is because the American edge cities were usually not planned to be this way, but instead arose from intersections of freeways, and developed only after the residential suburbs did. As those edge cities are usually in rich areas, the residents again successfully resist new development; this is the point made in Edgeless Cities, which notes that, in major US metro areas, growth has been less in recognizable edge cities and more in lower-density edgeless cities.
As with the possibility of dispersing innovation clusters from rich, expensive metro areas to poorer and cheaper ones, the already-occurring dispersal from city centers to edge and subsequently edgeless cities has negative effects. It lengthens transit commutes. Although in Tokyo, long commutes first arose as a problem of a monocentric CBD, and the city developed secondary CBDs as a solution, the situation in European cities an order of magnitude smaller is very different. It worsens housing segregation: the development of an edge city tends to be in the direction of the favored quarter, since that’s where the senior managers live, and conversely, higher-income workers can choose to move nearby for the short commute. Although nearly all metro areas have favored quarters, decentralization of jobs thus tends to lengthen the commutes of poor people more than those of rich people.
This is not quite the same as what happens when entire metro areas are forced to disperse due to housing cost. The agglomerations generally stay intact, since an entire industry can move in the same direction: smaller cities have just one major favored quarter with edge cities, and larger ones still only have a few, so that industries can specialize, for example in New York, biotech and health care cluster in the Edison-Woodbridge-New Brunswick edge city. Moreover, the specialized workers are usually high-income enough that they can stay in the central city or migrate to the favored quarter. San Francisco’s programmers are not forced to move individually to faraway poor neighborhoods; they move in larger numbers to ones near already gentrifying ones, spurring a new wave of gentrification in the process; were they to move alone, they’d lose the access to the tech shuttles. The negative effects are predominantly not on richer people, but on poorer people.
The problem is that even among the poor, there is little short-term benefit from supporting upzoning. If Paris, London, and Stockholm liberalize housing and office construction, the first towers built of both kinds will be luxury, because of the large backlogs of people who would like to move in and are willing to pay far in excess of construction costs. I am going to develop this point further in two posts, on what is best called NITBYism – Not In Their Backyard – but this means that the incentive for poor and peripheral populations is not to care too much about development in rich centers. The marginal additional building in a rich city center is going to go to the upper middle class; sufficient construction would trickle to the middle class; only extensive construction would serve the working class, and then not all of it.
In the US, the marginal additional building may actually displace poor people, if no new construction is allowed, simply by removing low-income apartments. It may even create local demand for high-income housing, for example by signaling that the neighborhood has improved. In San Francisco, this is compounded by the tech shuttles, as a critical mass of Silicon Valley-bound residents can justify running shuttles, creating demand for more high-income housing.
The amount of construction required to benefit the bottom half of the national income distribution is likely to be massive. This is especially true in France and the UK, which have sharp income differences between the capital and the rest of the country; their backlogs of people who would like to move to the capital are likely in the millions, possibly the high millions. Such massive construction is beyond the pale of political reality: the current high-income resident population is simply not going to allow it – when forced to share a building with the working class, it pushes for poor doors, so why would it want zoning that would reduce the market-rate rent to what the working class would afford? The only political possibility in the short run is partial plans, but these are not going to be of partial use to the working class, but of no use to it, benefiting the middle class instead. As a result, there is no push by the working class and its social democratic political organs to liberalize construction, nor by the small-is-beautiful green movement.
Ultimately, the attempt to bypass restrictions on urban CBD formation by building edge cities, like every other kludge, is doomed to failure. The fundamental problem of rich people making it illegal to build housing nearby is not solved, and is often made even worse. The commutes get worse, and the inequality in commutes between the rich and the poor grows. Office space gets built, where otherwise it would spread along a larger share of the medium-rise CBD, but for most workers, this is not an improvement, and the environmental effects of more driving have negative consequences globally. And once city center is abandoned to the rich, there is no significant political force that can rectify the situation. What seems like a workaround and an acceptable compromise only makes the situation worse.
Dispersal of Urban Networks is Bad
The debate over upzoning has reached Paul Krugman, who is a strong supporter of liberalization (and an opponent of rent control), on the grounds that rich cities like New York and San Francisco are hotbeds of productivity and people should be allowed to move to them in greater numbers. Per Krugman, zoning rules in rich cities force people out, so instead they live in environments where they are less productive and thus earn lower wages, such as the Southern US. Dietrich Vollrath, an economist studying economic growth, makes a different suggestion:
Of course, there is an equivalent solution – move everyone in San Francisco to Houston or Atlanta. The reason SF is the most productive city is not because of some fixed, inherent quality of the location at 37.78 degrees North, 122.41 degrees West. It’s certainly not because of it’s fantastic summer climate. San Fran is the most productive city because it so happened that a unique collection of nerds coalesced there starting in the 1960’s. More nerds were attracted to the bright, shiny things that the original nerds were making, and now I have an iPhone. But here’s the thing about nerds – they are easy to move. You can easily strap one to a dolly and wheel them anywhere you want.
This is the economic equivalent of proposals for population dispersal used in discussions of poverty: urban renewal tends to involve such dispersal, with negative effects on community life, social support networks, and crime. (See for example what I wrote of proposals on the Israel left to disperse black refugees away from South Tel Aviv; while I fingered just one political party, the others seem to believe the same today.) Of course, the people Dietrich characterizes as nerds are not oppressed and are not going to turn to crime because of lack of opportunity, but they will not be as productive in Houston as they are in San Francisco, for similar reasons.
The key to the Bay Area’s success in the tech sector is not that it has people who came from all over the world, who could equally congregate elsewhere. On the contrary, as per a Wired infographic, tech giants tend to hire locally: the top universities feeding Silicon Valley firms are in the Bay Area (including San Jose State, and not just Stanford and Berkeley), and the top university feeding Microsoft is the University of Washington. The Bay Area, and to a lesser extent Boston and Seattle, has a culture that propels people with interests in science and engineering toward programming. New York’s culture is different, and propels them to finance. In addition to different regional cultures, there are also university cultures: Harvard may be in Cambridge, but is far less important as a tech feeder than MIT, with fewer than half as many grads per capita going to Silicon Valley.
Dispersing people away from the Bay Area means dispersing them toward regions in which the business and social networks do not favor the same activities, and do not reward them as much. Houston has a core of nerds working for NASA, who may be interested in working for private tech firms that find themselves priced out of Boston and San Francisco. But those nerds are used to what is presumably a totally different business culture. If these private tech firms are started by local Houstonians, then they will have a business culture familiar to Houstonians, and alien to any San Franciscan they hire.
People in the software sector have specific ideas about how to do things, reinforced by what works in their industry; as a result, their ideas regarding public transit, a mature industry in which immense capital requirements and routinized tasks make the modern startup model inapplicable, are often painful and wrong, as I’ve ranted here, here, and here, and as Jarrett Walker has ranted here, here, here, and here. This also goes in the other direction – a corporate culture built around mature technology is unlikely to create innovative smartphone apps. If Uber were a Washington firm, it would be better at lobbying for regulations that would retroactively legalize it and give it favorable insurance requirements, but then it wouldn’t have invented a new way of hailing cabs in the first place. This is historically related to the growth of the Bay Area as a tech hub in the first place, as explained in Regional Advantage: Boston got there first, but its traditional corporate hierarchies couldn’t innovate at the same rate as the flatter networks of the Bay Area. One of the candidate US Sunbelt cities for poaching the tech cluster in Dietrich’s proposal, Dallas, is the home of Texas Instruments, where the integrated circuit was invented, but it is today a tertiary tech cluster because of this problem of corporate culture.
But all this assumes the tech cluster would even exist in whichever low-cost city it moved to. There is no real reason for it to do so. If high prices lead to an exodus of tech firms from the Bay Area, the community will dissipate rather than relocate. The richest members of it – Google, Apple, Facebook, the major venture capital firms – have the money to stay in the Bay Area, and to pay employees extra to cover rent in San Francisco. It’s the weaker members, typically startups, who are in danger of being priced out, and they are probably going to move to many different cities, depending on personal ties.
Once away from the Bay Area, they’d have to not only contend with a new urban culture, but also deal with it as a small minority. The same factors that cause unassimilated minorities to stay in their ethnic enclaves, even when discrimination is not a factor (ultra-Orthodox Jews own much of the housing in Brooklyn even outside their enclaves), favor clustering of industries. A hundred thousand Bay Area nerds could possibly remake parts of Houston in a way that’s favorable for their economic production; ten thousand could not. They’d have to rely on local venture capital firms, which are almost certainly looking for different business models. They’d have to recruit new workers from universities with student populations with different interests, expectations, and summer internships. In analogy with forced assimilation of ethnic whites in early- and mid-20th century America, they’d assimilate, to a nationwide economy with much lower per capita income than is normal in their sector.
The second assumption is that, if Houston became the next San Francisco, it would eventually accommodate a larger pool of tech workers. This is not necessarily true: Houston has a liberal process for permitting new construction, including of apartments, but only subject to onerous parking minimums and setbacks, which it doesn’t call zoning but which appear on the zoning codes of cities that do have zoning. It makes it easy to build new sprawl, but not so much new density, and eventually, the sprawl is going to lead to long commutes, producing the same rising prices in the deed-restricted and de facto zoned center that are seen in San Francisco and other coastal US cities. Fast-growing exurbs exist at the edge of metro areas everywhere in the US; the reason there’s not much growth in the expensive metro areas is that these exurbs are so far from the center that the commutes are too long for people to bother.
This is worse outside the US. The exact same problems of high costs coming from high rents exist in most other developed countries, only they don’t have fast-growing cities as large as Dallas, Atlanta, or Houston. Stockholm is rent-controlled and, judging by the almost complete absence of high-rises, tightly zoned; there are likely many people who’d move here if market-rate rents were in line with construction costs, but instead they have to live in Norrland, Malmö, and other peripheral areas. Houston’s metro area is not much smaller than the Bay Area’s, but in Europe, the cheaper cities are far smaller than their respective countries’ more expensive cities (often the capitals). The business networks formed in those cities would have to be smaller and less specialized. This is similar to the situation in the US involving New York’s great size, except that smaller Boston, San Francisco, and Washington achieve equivalent or higher incomes, so Houston should not be penalized for not being a hypercity.
The only problem is that Europe has no Houston. Its cheap larger cities, such as Naples and Berlin, have high unemployment and low incomes. Browse per capita income net of rent (see definitions here) by regions of European countries here, and per capita income by US metro area or county here. Houston and Dallas are both richer than the US average, and Atlanta is about 10% poorer. Berlin is 20% poorer than the German average, and 40% poorer than Munich’s region, Upper Bavaria, part of a general pattern of East-West inequality, driving a flight from the former East Germany to the West. In Italy, with its north-south divide, the southern regions, including Naples’ Campania, are about half as rich as Milan’s Lombardy, leading to a similar pattern of more immigration to the north. To tell people to move there and start their own social networks is, in American terms, like to tell people to move to Mississippi. In the smaller European countries we do not see such large income gaps, but we also do not see large metro areas with affordable housing.
Now, those rich capital cities (or non-capital ones, in the case of Milan) usually have rent control, which is how they achieve such high levels of per capita income even after subtracting rents. The people from the provinces who might have moved to them if they were cheaper do not benefit from this rent control, and have to either wait years for an apartment to open up or pay exorbitant rents. This reduces interregional mobility, and is a predictable side effect of a system in which housing is allocated to people based on how long they’ve lived in the city.
The idea of making do with tight zoning restrictions in some cities by bypassing them and developing alternative networks around the Houstons of the world is attractive, but fatally flawed. San Francisco – and Munich, and Stockholm, and Paris, and the major cities of Switzerland – is productive for reasons that go beyond individual denizens, who can be moved elsewhere freely. This, ironically, goes against the grain of San Francisco’s tech culture, which uses technology to overcome regulatory failures: NextBus and similar apps try to overcome byzantine bus schedules, Uber and Lyft try to avoid taxi medallion restrictions, AirBnB tries to overcome hotel regulations. The tech sector’s thinking is often that bad regulations should be subverted rather than reformed. It works in some cases and fails in others; in the case of zoning, it’s doomed to failure, on every level, from trying to shrink dwelling sizes to fit more people in, to recreating business clusters in cities with less awful zoning rules, as Dietrich proposes. Like Dietrich, I am pessimistic about the ability of the US and most European countries to reform their zoning rules to allow more intense urban development (or about Japan’s ability to allow more immigration), but on the other hand I also don’t think there’s any workaround avoiding a massive political fight about it.
Zoning and Market Pricing of Housing
The question of the effects of the supply restrictions in zoning on housing prices has erupted among leftist urbanist bloggers again. On the side saying that US urban housing prices are rising because of zoning, see anything by Daniel Kay Hertz, but most recently his article in the Washington Post on the subject. On the side saying that zoning doesn’t matter and the problem is demand (and by implication demand needs to be curbed), see the article Daniel is responding to in Gawker, and anything recent by Jim Russell of Burgh Diaspora, e.g. this link set and his Pacific Standard article on the subject.
This is not a post about why rising prices really are a matter of supply. I will briefly explain why they are, but the bulk of this post is about why, given that this is the case, cities need to apportion the bulk of their housing via market pricing and not rent controls, as a matter of good political economy. Few do, which is also explainable in terms of political economy.
But first, let us look at the anti-supply articles. Gawker claims that San Francisco prices are rising despite a building boom. We’ll come back to this point later, but let me note that in reality, growth in housing supply has been sluggish: Gawker links to a SPUR article about San Francisco’s housing growth, which shows there was high growth in 2012, but anemic growth in previous years. The Census put the city’s annual housing unit growth last decade at 0.8%. In New York, annual growth was 0.5%, as per a London study comparing London, Paris, New York, and Tokyo. In contrast, Tokyo, where zoning is relatively lax, growth was 2%, and rents have sharply fallen. The myth that there is a building boom in cities with very low housing unit growth is an important aspect of the non-market-priced system.
Jim’s arguments are more interesting. He quotes a Fed study showing that housing vacancies in the most expensive US cities have not fallen, as we’d expect if price hikes came from lack of supply. (In San Francisco, vacancies went up last decade, at least if you believe that the Census did not miss anyone.) This is too not completely right, because in Los Angeles County, as noted on PDF-page 18 here, vacancies did recently fall. But broadly, it’s correct that e.g. New York’s vacancy rate has been 3% since the late 1990s, as per its housing surveys. But I do not think it’s devastating to the supply position at all. The best way to think about it is in analogy with natural rates of unemployment.
Briefly: it’s understood in both Keynesian and neo-classical macroeconomics that an economy with zero employment will have high and rising inflation, because to get new workers, employers have to hire them away from existing jobs by offering higher wages. There is a minimum rate of unemployment consistent with stable inflation, below which even stable unemployment will trigger accelerating inflation. In the US, this is to my understanding about 4%; whether the recession caused structural changes that raised it is of course a critical question for macroeconomic policy. A similar concept can be borrowed into the more microeconomic concept of the housing market.
There’s also the issue of friction, again borrowed from unemployment. There’s a minimum frictional vacancy, in which all vacant apartments are briefly between tenants, and if people move between apartments more, it rises. For what it’s worth, the breakdown of 2011 New York vacancies on pages 3-4 by borough and type of apartment suggests friction is at play. First, the lowest vacancy by borough is 2.61%, in Brooklyn, not far below city average. Second, the only type of apartment with much lower vacancy than the city average is the public housing sector, with 1.4% vacancy, where presumably people stay for decades so that friction is very low; rent-stabilized units have lower vacancy than market-rate units, 2.6% vs. 4.4%, which accords with what I would guess about how often people move.
So if high rents are the result of supply restrictions, and it appears that they are, the way to reduce them should be to relax zoning restrictions. If this is done, then this allows living even in currently expensive areas without spending much on rent. Urban construction costs are lower than people think: New York’s condo average is $2,300 per square meter, and London’s is not much higher, entirely eaten by PPP conversions; Payton Chung notes the much higher cost of high-rises than that of low-rises, but the cost of high-rise apartment buildings is still only about $2,650/m^2 in Washington, and (using the same tool) about $3,100 in New York, and at least based on the same tool, mid-rises are barely any cheaper. For US-wide single-family houses, construction costs are 61.7% of sale prices, but the $3,100 figure already includes overheads and profit. Excluding land costs, which are someone else’s profit, construction, profit, and overheads are 92.5%; so let’s take our $3,100/m^2 New York high-rise and add the rest to get about $3,300, which is already more than most non-supertall office skyscrapers I have found data for in other major cities. The metro area appears to have a price-to-rent ratio of about 25, and with the caveat that this may go down slightly if the city gets more affordable, this corresponds to a monthly rent of $11 per square meter, at which point, a 100-m^2 apartment, sized for a middle-class family of four, becomes affordable, without subsidies, to families making about $44,000 a year and up, about twice the poverty line and well below the median for a family of that size. If we allow some compromises on construction costs – perhaps slightly smaller apartments, perhaps somewhat lower-end construction – we could cover most of the gap between this and the poverty line.
But given that demand for housing at prices that match construction costs, there has to be a way of allocating apartments. Under market pricing, they’re allocated to the highest bidder. If there is a perfectly rigid supply of 2 million housing units and a demand for 4 million at construction costs, the top 2 million bidders get housing, at the rent that the 2 millionth bidder is willing to pay.
I do not know of any expensive city with low home ownership that uses market pricing: too many existing residents would lose their homes. High home ownership has the opposite effect, of course – Tel Aviv may have rising rents, and high price-to-income ratios, but since home ownership is high, the local middle class is profiting rather than being squeezed, or at least its older and slightly richer members are.
Instead, cities give preference to people who have lived in them for the longest time. Rent control, which limits the increase in annual rent, is one way to do this. City-states, i.e. Singapore and Monaco, have citizenship preference for public housing to keep rents down for their citizens. Other cities use regulations, including rent control but also assorted protections for tenants from eviction, to establish this preference. Instead of market pricing allocation, there is allocation based on a social hierarchy, depending on political connections and how long one has lived in the city. People who moved to San Francisco eight years ago, at age 23, organize to make it harder for other people to move to the city at this age today.
Going to market pricing, which means weakening rent controls over the next few years until they’re dead letter, is the only way to also ensure there is upzoning. Although rent control and upzoning both seem to be different policies aimed at affordability, they’re diametrically opposed to each other: one makes it easy for people to move in, one makes it hard. As I mentioned years ago, rent-controlled cities tend to have parallel markets: one is protected for long-timers, and for the rest there is a market that’s unregulated and, because so much of the city’s housing supply is taken off it, very expensive. In exchange-rate dollars, I pay $1,000 for a studio of 30 square meters, of which maybe 20 are usable, the rest having low sloped ceilings. In PPP dollars it’s $730, still very high for the size of the unit. If I put my name on a waiting list, I could get a similar apartment for a fraction of the price; to nearly all residents, rents are far lower than what I pay, because of tight rent controls. Stockholm at least has a relatively short waiting list for rent-controlled apartments, 1.5 years, for international visitors at my university; American cities (or perhaps American universities) never do foreigners such favors.
The problem here is entirely political. Cities have the power to zone. Thus, supply depends entirely on whether local community leaders accept more housing. This housing, almost invariably, goes to outsiders, who would dilute the community’s politics, forming alternative social networks and possibly caring about different political issues. It’s somewhat telling that ultra-Orthodox Jews in the New York areas support aggressive upzoning, since the new residents are their children and not outsiders; Stephen Smith has written before about the Brooklyn Satmars’ support for upzoning, and the resulting relatively low prices. In the vast majority of the first world, with its at- or below-replacement birth rates, this is not the case, and communities tend to oppose making it easier to build more housing.
There is a certain privilege to being organized here. We see the pattern when we compare how US minorities vote on zoning to what minority community leaders say. In San Francisco specifically, activists who oppose additional development have made appeals to white gentrification in nonwhite neighborhoods, primarily the Mission District. Actual votes on the subject reveal the exact opposite: see the discussion on PDF-pp. 13-15 of this history of Houston land use controls, which notes that low-income blacks voted against zoning by an overwhelming margin because of scare tactics employed by the zoning opponents. (Middle-income blacks voted for zoning, by a fairly large margin.) Polling can provide us with additional data, less dependent on voter turnout and mobilization, and in Santa Monica, Hispanics again favor new hotel development more than whites. In areas where being low-income or nonwhite means one is not organized, low-income minorities are not going to support restrictions that benefit community leaders.
The result is that organized communities are going to instead favor zoning, because it gives them more power, as long as they are insulated from the effect of rising prices. In suburbs with high home ownership, they actually want higher prices: my rents are their property values. In cities with low home ownership, rent controls provide the crucial insulation, ensuring that established factions do not have to pay higher rents. Zoning also ensures that, since the developers who do get variances can make great profits, community groups can extort them into providing amenities. This is of course the worst in high-income areas: every abuse of power is worse when committed by people who are already powerful. But the poor can learn to do it just the same, and this is what happens in San Francisco; TechCrunch has a comprehensive article about various abuses, by San Franciscans of all social classes, culminating in the violent protests against the Google shuttles, and in many cases, the key to the abuse was the community’s ability to veto private developments.
The risk, of course, is displacement. As the gap between the regulated and market rent grows, landlords have a greater incentive to harass regulated tenants into leaving. This is routine in New York and San Francisco. Community groups respond by attacking such harassment individually, which amounts to supporting additional tenant protections. In California, this is the debate over the Ellis Act. The present housing shortages are such that supporting measures that would lower the market rent has no visible short-term benefits, and may even backfire, if a small rent-controlled building is replaced by a large unregulated building.
So with rent controls, community groups have every incentive to support restrictive zoning, and none to support additional development. With market pricing, the opposite is the case. What of low-income city residents’ access to housing, then? Daniel mentions housing subsidies as a necessity for the poor. To be honest, I don’t see the purpose, outside land-constrained cities like Hong Kong and Singapore. If it is possible through supply saturation to cut rents to levels that are affordable to families making not much more than the poverty line, say 133% of the US poverty line, the Medicaid threshold, then direct cash benefits are better. In the ongoing debate over a guaranteed minimum income, the minimum should be slightly higher than the US poverty line, which is lower as a proportion of GDP per capita than most other developed countries’ poverty lines, as seen in the government programs with slightly higher limits, led by Medicaid.
Leftists have spent decades arguing for state involvement in health care and education – not just cash benefits, but either state provision, or state subsidies combined with some measure of cost control. There are many arguments, but the way I understand them, none applies to housing:
1. Positive externalities: Ed Glaeser has noted that if some people in a metro area get more education then there is higher income growth even for other people in the area. In health care, there are issues like herd immunity.
2. Very long-term benefits: if college is as expensive as it is in the US today, it takes many years for graduates’ extra incomes to be worth the debt. With health care, the equivalent is preventive care. When benefits take so much time to accrue, first some people face poverty traps and don’t have the disposable income today to invest in their own health and education, and second, the assumptions of rational behavior in classical economics are less true.
3. Natural monopolies outside large cities: hospitals, schools, and universities have high fixed capital costs, so there can only be sufficient competition in very large cities. The same is of course true of rail transit.
4. Asymmetric information: students and parents can’t know easily whether a school is effective, and patients face the same problem with doctors; short-term satisfaction surveys, such as student evaluations, may miss long-term benefits, and are as a result very unpopular in academia.
With housing, we instead have competitive builder markets everywhere, no appreciable benefits to having your neighbor get a bigger or better apartment, and properties that can be evaluated by viewing them.
The only question is what to do in the transition from the present situation to market pricing. This is where a limited amount of protection can be useful. For example, rent controls could be relaxed into a steady annual gain in the maximum allowed real rent. While market-rate housing remains expensive, public housing is a stopgap solution, and although it should be awarded primarily based on need rather than how long one has lived in the city, a small proportion should be set aside to people in rent-controlled small buildings that were replaced by new towers. None of this should be a long-term solution, but in the short run, this may guarantee the most vulnerable tenants a soft landing.
What this is not, however, is a workable compromise. Community organizations are not going to accept any zoning reform that lets in people who are members of out-groups. They have no real reason to negotiate in good faith; they can negotiate in bad faith as a delaying tactic, which has much the same effect as present zoning regimes. What they want is not just specific amenities, but also the power to demand more in the future; it’s precisely this power that ensures the neighborhoods that are desirable to outsiders are unaffordable to them. What they want is a system in which their political connections and social networks are real resources. A city that welcomes newcomers is the exact opposite. Expensive housing is ultimately not a market failure; it’s a political failure.
California HSR Should Not Have Been Funded This Way
Last month, California made a budget deal for the formula that would be used to distribute its cap-and-trade revenues. The state’s cap-and-trade bill does not deed the money to the general budget but to a separate account, to be distributed based on a variety of goals including subsidies to programs that reduce greenhouse gas emissions. The recent deal is to give most of the money to transportation (including transit-oriented development): this year the budget gives $600 out of $850 million to transportation (see PDF-p. 6 here), of which $250 million will go to high-speed rail, and according to an informational hearing the long-term deal gives 80% of revenues to transportation, including 15% to high-speed rail. Transit bloggers who are not in the process of moving across oceans covered the issue last month as the deal was made: Streetsblog wrote about the plan, Robert Cruickshank wrote multiple times in support of the decision, and Bruce McFarling explained how HSR’s projected emissions reductions should entitle it to a share of the cap-and-trade proceeds.
In reality, although it’s a good thing that California HSR is getting funded, it’s a bad way of funding it, betraying both environmental incompetence and political mistrust. The basic problem is that the HSR project is not going to reduce emissions enough to justify 15% of the pot, nor is transportation such a big share of California’s emissions inventory to deserve 80%: it accounts for only 37% of statewide emissions. Electricity, and related sources of emissions such as building heating and industrial emissions, get far less than their share of emissions.
Bruce’s post runs the numbers on HSR, notes that the projections are currently $250-400 in construction costs per ton of CO2 reduction, and proposes that if cap-and-trade results in a carbon cost of $75 per ton then this justifies using the revenues for 20-35% of the cost of HSR. The projected revenue from cap-and-trade is a range whose top end is $5 billion statewide, corresponding to about $11 per metric ton; at this level, assuming HSR saves $250/t-CO2 means it should get 4.4% of its funding from emissions reduction, or (at the current cost of $53 billion in constant dollars) about $2.3 billion over the lifetime of the program. If the revenue is indeed $5 billion a year, this spending level is projected to be reached in 3 years.
For some evidence of what the state is really doing, consider how the deal comments on each share of the funding. The informational hearing details the investment strategy as follows:
25% for a permanent source of funding for transit operations, distributed based on greenhouse gas criteria.
20% for affordable housing and miscellaneous urban planning goals (including TOD), of which at least half must be for affordable housing (including TOD, again); the money is to be distributed based on “competitive GHG performance.”
15% low-carbon transportation, based on both long-term clean air and GHG goals.
13% energy, including electricity and building efficiency.
7% natural resources, waste diversion, and water projects.
15% HSR.
5% “new or existing” intercity rail, based on GHG criteria.
Note that internally to four categories, comprising 65% of the total funds, the hearing mentions greenhouse gas criteria. In three out of the four, comprising half of the funds, the hearing implies that the decision of how to distribute the funds will be based on competitive grants according to which project reduces emissions the most.
The key point here is that the state has effectively said what the best way is to ensure the spending side of cap-and-trade will reduce emissions optimally: projects will compete for scarce funding based on greenhouse gas criteria. Once it has made the political decision to distribute funds by a formula that disproportionately goes to transportation, it has no objection to using greenhouse gas criteria internally to each category. The problem is that the transportation projects in general and HSR in particular would never make it out of a grant process based on such criteria if they were not shielded from competition with non-transportation priorities.
There are two legitimate ways to distribute funds coming out of an externality tax, which is what cap-and-trade really is. One is to let the tax side do the work of reducing impact, and put the money into the general budget. This is common practice for most developed countries’ fuel taxes (though not the US’s). In this approach, HSR would compete with all of the state’s other budget priorities. If the state wanted to reduce other taxes against the cap-and-trade funds rather than raise spending, it could. If it wanted to spend the money on unrelated things, such as education, it could as well. There already is a more or less open and democratic budget process for this.
The other way is to reduce all political discretion, and distribute the funds based entirely on greenhouse gas criteria, without breaking the money into categories. The state seems to prefer this way, judging by its use of this process within each category. With other externality taxes there is another option, of giving the money directly to victims of the externality, e.g. spending cigarette taxes on lung cancer treatment; however, the bulk of damage caused by climate change is to developing countries, and spending cap-and-trade revenues on targeted aid to vulnerable developing countries is politically unacceptable.
The state’s hybrid approach is effectively a slush fund. High-level politicians, including Governor Jerry Brown, want to build a visible legacy, and HSR is far more visible than making household appliances consume less electricity. Emissions reductions are secondary to this concern. They’ll be happy to make their legacy a project that reduces greenhouse gas emissions, but they have no quantitative preference for projects that reduce emissions more than others. On the contrary, when they pull strings, they might even make decisions that make these projects less environmentally beneficial: the decision to connect Los Angeles to Bakersfield via Palmdale rather than directly has no technical merit, and judging by LA County’s support appears to be motivated by concerns for development in the Palmdale area. As the incremental cost of going through Palmdale is about $5 billion, nearly 10% of the HSR cost, the result is that the state is going to spend a substantial amount of cap-and-trade money on spurring more development in the High Desert exurbs.
Needless to say, when the cap-and-trade bill was passed, it did not state or even imply that the state could use the money to spur more development in the exurbs. The bill did not adopt a GHG-only approach, but listed several additional goals, none of which included transportation. Chapter 1, Part 2, paragraph h states,
It is the intent of the Legislature that the State Air Resources Board design emissions reduction measures to meet the state wide emissions limits for greenhouse gases established pursuant to this division in a manner that minimizes costs and maximizes benefits for California’s economy, improves and modernizes California’s energy infrastructure and maintains electric system reliability, maximizes additional environmental and economic co-benefits for California, and complements the state’s efforts to improve air quality.
There is an explicit mention of air quality, and explicit mentions of energy and electricity, which are only getting 13% of the funding despite accounting for 54% of emissions. Elsewhere the list of legislative intents includes vague terms such as technological leadership, but the only explicit mention of transportation in the bill is in paragraph c, which says that historically California provided leadership on several environmental issues, including emissions limits on cars as well as energy efficiency and renewable energy.
However, the cap-and-trade bill is older than the current administration, and the political priorities have changed. Since a regular budget process giving HSR the money it needs would run into opposition from competing priorities, it’s best to raid a new source of revenue, one without legislative inertia or established supporters directing the money to more useful purposes.
Hence, a slush fund.
What Elites Do Instead of Providing Services
I realized last year that even when they face a problem that is evidently about city services, city governments prefer to go for monuments that glorify their leadership. The most blatant example then was Cornell NYC Tech, the city-backed university whose campus construction alone is several times as expensive as the CUNY system per student. Since then I’ve tried to collect examples of power brokers proposing similar schemes, of which the worst is Larry Summers’ proposal to solve US inequality by spending public money on airport improvements. These are, to be frank, analogs of what American transit activists have to deal with routinely, with agencies preferring expensive iconic stations to ordinary capital and operating improvements in service.
The argument for Cornell NYC Tech is that New York needs tech entrepreneurs of the kind that Silicon Valley has, and that for that it needs its own Stanford. Instead of investing in STEM education across the CUNY system, or in its dedicated technological campus at the New York City College of Technology, it decided to start a private university from scratch, inviting other universities to bid on it. The city wanted Stanford to win the bid, but instead the winning bid was a joint effort by Cornell and the Technion, Israel’s technological university. The Technion was never run this way; it was started as a German-style technical university and is now a public university, funded and run on the same terms as the other Israeli public universities.
For Cornell NYC Tech, the city has lined up $2 billion in public and private funds for campus construction, expecting 2,000 students in 2037, which at 4% interest is $40,000 per student-year; annual capital and operating spending together, from all sources including tuition, is $16,000 per full-time equivalent student at the CUNY senior colleges and $11,000 at the CUNY community colleges (see PDF-page 65 of the budget request). This is the educational equivalent of airport connectors, which cities routinely spend several times per rider on as they would on ordinary subway extensions.
Summers’ proposal for airport improvements is in a way more frustrating, and more telling. He did not propose it as part of an independent infrastructure plan, but as a way to build public works to reduce US inequality, on the grounds that JFK is “an embarrassment as an entry point” and “the wealthiest, by flying privately, largely escape its depredations.” The proportion of people who fly privately is tiny; an income level at the bottom of the US top 1%, $400,000 per year, will buy you a lot of intercontinental business-class travel or some first-class travel, while affording a late-model Learjet requires an annual income of many tens of millions of dollars. Since poor people don’t fly as much as rich people, the users of JFK skew richer than the general city public.
My frustration comes from the fact that Summers is not trying to derail the conversation: he previously wrote about inequality as a problem and proposed standard center-left solutions, including raising taxes on capital gains and inheritances, supporting unionization, and (by implication) investment in public education. He clearly cares about the problem. He just seems to think that airport investment benefits the poor more than the rich. Most likely, this comes out of years of insider schmoozing with people so rich that they do own private jets, and generalizing to the considerably broader class of rich people.
In both cases, even on its stated merits, the proposal misses key facts about the situation. Silicon Valley began around Stanford, but once the initial tech cluster formed, it became independent of the university, so that even companies formed by people with no affiliation with Stanford or the Bay Area, such as Facebook, relocated to the area. New York is not going to grow its tech industry to the proportion of Silicon Valley’s by building an enterprise university any more than the Bay Area can become a world financial center by building affiliate universities for Columbia and NYU, from which many finance workers are recruited. As for JFK, like many of its users, when I arrive my first experience is the immigration line, a humiliating experience that involves fingerprinting and standing in line possibly for hours, depending on what terminal I use and what time I arrive. Public works will not solve that.
The problem with making even the merit-based argument is that public monuments are never truly merit-based projects. The decision-making process goes in the other direction: first the city elites (or, in case Summers’ proposal makes it into a national jobs bill, national elites) decide on something they want to see built, usually with the adjective world-class thrown in: a world-class university, a world-class airport, a world-class train station, a world-class office tower. The image of a world-class monument is more important than whether it works at its stated goal, such as improving education or transportation or fulfilling a need for class A office space.
Witness all the problems involving World Trade Center, which is being built entirely for prestige value, at enormous cost. The associated PATH station is $4 billion, almost as much as Second Avenue Subway, and about the same as 20 kilometers of subway in an average first-world city. One World Trade Center cost about $12,000 per square meter. I am not aware of any office tower in the world that is this expensive outside the WTC area and Hudson Yards; the tallest recent tower built in New York excluding 1 WTC, Bank of America Tower, cost about $5,500 per square meter in 2012 dollars, while the range I have seen for office towers in the 200+ meter range is about $2,500-6,000. Meanwhile, the WTC site struggles to find tenants: 1 WTC is almost half empty.
The sentiments after 9/11 ensured WTC would be rebuilt taller, regardless of actual demand in Lower Manhattan. Viewed through this lens, 1 WTC is not really about office space, but about proving a point about the power of US and New York to come back and not surrender to terrorism. This is why the transit spending went mainly to the PATH station and not to bringing the LIRR to Lower Manhattan, as proposed by the Regional Plan Association and studied officially in subsequent years: the LIRR project would’ve been about Lower Manhattan in general, without enhancing the specific prestige of WTC, while the billions poured into the WTC site and its PATH stations are all about the prestige.
Those other projects – various overrated transit schemes such as airport connectors, but also Cornell NYC Tech and Summers’ JFK proposals – are the same. They are not about what people living in, working in, or visiting the city need. They are not even about what they want. Whereas there was a citywide impulse to rebuild WTC taller after 9/11, there is no equivalent impulse to build an exclusive technical university, except among the power brokers. They are entirely about being able to say, “we have our own ___” and “I got that built.” It looks like development, but at best provides a fraction of the advertised value, and at worst provides nothing.
Whenever an urban project is proposed, the most important question to be asked is “what problem is this solving?”. Often, the problem is real, but there are much cheaper and less glamorous solutions. At other times, the project is a solution in search of a problem, and this is often detectable when proponents tout many unrelated benefits, almost as if the project can solve every major problem.
Compare this with solid public transit projects. Consider the lines I think North American cities should be focusing on, and the lines proposed in comments, especially as the Vermont subway in Los Angeles. In every single case, there are strong arguments for why the ridership of those lines would be high relative to the cost, and why existing subway lines (if any) and surface transit options are inadequate. The problem being solved is underserved neighborhoods with high transit demand, or in the case of the crosstown lines underserved origin-destination pairs in high demand. For other lines, not listed, there might be a separate argument regarding transit-oriented development: American cities tend to oversell TOD, as the problems with Hudson Yards show, but there do exist cases in which extending a subway line can allow dense development, or the construction of a new business district. But this involves figuring out where the development comes from – for example, the housing market may be very expensive, signaling high demand, or there may be projections of high future metropolitan population growth.
Usually, support for prestige projects to the exclusion of providing public services is the hallmark of moderates, along a broad arc from the center-left to the center-right. In the last few years, Republicans too far right to be called center-right have prioritized cutting taxes and spending and weakening the unions; signature projects conflict with their opposition to government spending. Conversely, urban leftist activists tend to oppose these prestige projects, on such grounds as gentrification, displacement, and private-sector involvement in public services.
The people in between those two ends are the ones most guilty of this kind of thinking. They are usually neo-liberal enough that they believe the government should champion market solutions and oppose industrial policy, and yet what they do is in many cases exactly industrial policy: Cornell NYC Tech is an attempt to curry favor with the technology industry. They are not so conservative as to believe government is always the problem, but the role they envision for government is to partner with the private sector to build public projects, which they tend to choose on grounds of what looks good rather than what provides the best public service. They know the buzzwords of urban politics well: for example, they’ll happily argue climate change to push a desired agenda that is usually only partly related to the problem, but lack the urgency of actual environmentalist activists and often also build roads and other dirty projects.
As with most bad things in politics, it’s a result of weak democratic institutions on the local level. American mayors tend to be elected dictators, and the opposition to them tends to be based on personality rather than ideology. In this non-ideological framework, the role of government is not to balance market and state solutions based on the voters’ preferences, but to aggrandize the leaders. Signature initiatives must appeal to the broad spectrum of non-ideological voters, so they can’t involve merely increasing spending on a chosen priority like education or transportation. Doing nothing is not an option – something has to be passed to remind people that the government still exists and has a purpose. The political incentives are against any incremental improvements that lead to tangible results, and for white elephants.
State Boundaries and the Northeast (Hoisted from Comments)
Aaron Renn’s repost on US states mattering more than some people imagine made me think about the difference in attitudes toward state lines in different US regions. Aaron’s examples of state lines mattering come from the Midwest, specifically Indianapolis and Columbus. My usual examples of state lines not mattering come from the Northeast. And those two regions treat states very differently.
Imagine a thought experiment in which Congress allows states to redraw their own boundaries – to split, merge, or change borders on their own accord. Let’s ignore the Senate – perhaps it still uses the old boundaries. Let’s also assume that this is not a completely de novo redrawing, akin to the creation of the French departments, in which states are drawn to be of specific size or population.
In such a case, in most of the US, there would be small changes only. Indiana would lose the suburbs of Chicago, Cincinnati, and Louisville, but otherwise remain intact. Virginia would lose the DC suburbs and gain the North Carolina suburbs of Hampton Roads. Tennessee would gain the Memphis suburbs, and maybe possibly lose Chattanooga. Oregon and Washington would merge. California, Texas, and Florida could either survive more or less intact or split based on metro area spheres of influence. I do not know Florida well enough, but my understanding is that Texas and California have strong enough state identity that in a referendum, their major regions would vote against a split. Ohio might have cleaved if it had had only Cleveland and Cincinnati, but I believe the presence of Columbus would make it survive more or less intact. The only Midwestern state that would be completely dismembered is Missouri, which has no equivalent of Columbus between St. Louis and Kansas City.
The opposite is true of the Northeast. From talking to people from both Upstate and Downstate New York, I believe a referendum would result in both sides voting for a split. New Jersey exists as a coherent entity only in jokes about the state made by people from other states. Pennsylvania has at least three regions that do not identify with one another. But at the same time, a coherent Northeast region exists: there are strong migration ties, not only among the four main coastal metro areas but also to and from Pittsburgh and the Upstate metro areas, which have stronger migration ties to New York and Philadelphia than to Cleveland and Chicago. Along the coast, there is also suburb-sharing, which has led to the formation of just four combined statistical areas; there’s even a chain of suburb sharing connecting New York, Allentown (now in the New York CSA), and Philadelphia, and there may soon be direct sharing between New York and Philadelphia.
Unlike in the Midwest or Texas or California, the Northeast does not have the same university-enforced state boundaries, which are probably a major reason why Columbus specifically has migration ties with the entire state but not much with areas just outside the state. In much of the Northeast, a huge number of students go to private universities. In Massachusetts as far as I can tell there are more students at private universities than at public four-year colleges. New York has a very large public university system, but the SUNY/CUNY distinction reinforces the state’s internal divisions rather than erasing them the way Ohio State does.
In terms of a national rail plan, the Northeast practically is a single state (as is the Pacific Northwest, but that’s just two states), from Portland to Quantico. In California, Texas, and Florida, and even Ohio and South Carolina, there are potentially strong in-state intercity rail routes. New York and Pennsylvania have those as well, but both have even stronger routes that cross many states. The Midwest is full of routes that cross states, but usually those connect one or two states to Chicago; the main exception, Chicago-Detroit via Toledo, is indeed not pursued, in favor of the inferior I-94 route that mainly serves Michigan.
Regional rail is similar. It is possible to come up with a plan that’s at least theoretically coherent for regional rail in most parts of the US, to be run by a state agency (or in borderline cases a bi-state agency), or by a local agency with powers delegated by the state. In the Northeast, it’s completely impossible. It’s not even possible to cleanly cleave the region into separate states for the four primary coastal metro areas, because commuter rail services on the Northeast Corridor need to share track with intercity trains at least part of the way, and building infrastructure to avoid such track-sharing is needlessly expensive.
I do not know of a transport association that crosses so many boundaries of subnational entities in Europe. French services are run by the regions; they sometimes cross boundaries, but only in the Midwestern sense of a region bordering Ile-de-France running some of its regional trains to Paris. In Germany, Berlin and Brandenburg have the same transport association, and for all intents and purposes are a single state when it comes to rail network planning. Swiss services cross cantonal borders, but at least the Zurich regional rail network is again French or Midwestern, in that there’s a core of services funded by the ZVV, and services in bordering cantons that run through. In the Northeast, there are good reasons to have commuter services run through from Philadelphia to New York along the Northeast Corridor and maybe also the West Trenton Line; even metro area boundaries are not hard, let alone state boundaries.
Stepping back from the thought experiment, let’s think of how to organize transportation planning in the US. In the Midwest and the South, states are coherent entities. In the West, the areas where states really do not mean much are deep in the Interior West, where there’s no point in building additional ground transportation infrastructure in the first place. But in the Northeast, there may have to be a special exemption treating all of it, including Northern Virginia, as a single state for planning purposes. It can’t be run as tightly as a single state because of its size and its natural division into several metro areas, but some joint service between its various divisions is unavoidable.
More in general, the Ohio example showcases how coherent state identities can be manufactured by the presence of state institutions. On maps that center Cleveland and Cincinnati, such as maps of which baseball and football teams people support, Ohio looks completely dismembered. And yet, the presence of Columbus and Ohio State changes everything when it comes to economic ties such as migration: suddenly, the otherwise-artificial state border means something in terms of social services.
This is not something Northeastern states can really do, nor should they. Pennsylvania has Penn State at State College, but it’s in a small, faraway town, and people who can instead go to Penn or Carnegie Mellon will. New York can expand CUNY and SUNY, but there are too many campuses to provide the same social function of Ohio State. Of course states should expand public higher education, in terms of both opening new campuses where needed and subsidizing tuition, but there’s no room to create a new Columbus; such expansion would provide a necessary service to state residents, but not change economic geography the way it did in Ohio.
Transit Observations from Philadelphia
I was in Philadelphia last summer for about five days. I have few observations as a pedestrian: I stayed in West Philadelphia, in the gentrifying zone radiating out of University City, and traveled to Center City, and both neighborhoods seemed intimately familiar to me as a (former) New Yorker. The street widths and setbacks looked very much like those of New York; West Philadelphia could easily be an area of Brooklyn. The difference to me was in the public transit rather than the pedestrian experience.
In New York, the subway is for everyone. The same is true of Singapore and Vancouver. In Philadelphia, it is not the case. The city is about 40% white and 40% black. On the trains I took, the Market Street subway and the Subway-Surface Trolleys, nearly everyone was black. A friend who lived in Philadelphia for ten years has observed the same on the buses, and adds that white people on buses tend to be college students.
But there’s more to the story. I think it’s a commonplace that in American cities other than New York, blacks ride public transit more than whites. What I think is more important is that whites tend to ride transit at rush hour. When I rode the trains in Philadelphia at rush hour, there was still a clear black majority on the streetcar or the subway car, but there were a fair number of whites. In the off-peak, I was at times the only white person on a streetcar that was filled to its seated capacity. The aforementioned friend says she thinks she saw the same, but as she rarely rode at rush hour, she is not sure.
It is not hard to come up with explanations for the difference. In Philadelphia, as in the typical Rust Belt city, the white population is quite suburbanized, much more so than the black population. It is also substantially richer. Both contribute to car ownership, and to driving in whenever traffic allows; since traffic is worst at rush hour, that’s when we see the most white people on public transit. The people who ride the trains and the buses outside rush hour tend to be urban residents who do not own a car, and in a city with the income distribution and racial dynamics of Philadelphia, they are predominantly black.
This injects a racial element into a lot of transit planning, especially for commuter rail. North American commuter rail is designed exclusively for suburban residents, who in Philadelphia and similar cities are usually white and at least middle-class. This is why it gets away with such poor off-peak service: hourly on most SEPTA Regional Rail lines, hourly or even every two hours on the MBTA, hourly on most branches of the New York commuter rail network. Although New York itself doesn’t have the typical Rust Belt city demographics, its suburbs have typical Rust Belt suburb demographics, so the situation is the same. The same is true of Boston, when one remembers that a huge fraction of its urban white population is in Cambridge and Somerville. Philadelphia is only where this racial division is the most obvious even on the subway.
Everything about North American commuter rail screams “you’re better than the hoi polloi who ride the subway”: the seating arrangement maximizing seating rather than standing space, the park-and-rides, the fares, the lack of fare integration with local transit, the schedules. Since peak-only suburban transit serves precisely the niche that the traditional white suburban middle class is comfortable riding transit in, it is necessarily segregated. Its riders even fight to keep it that way: witness for example the opposition in Stamford to developing the Metro-North station and moving the parking 400 meters away. This article complaining about parking lot waits is typical of the species; these complaints persist despite very high spending on commuter rail parking lots, for example in Hicksville.
The same transit agencies that fudge or make up numbers to avoid serving minority neighborhoods also ignore the possibility of improving off-peak service. Although off-peak service is cheaper to provide than peak service – it requires no new vehicles or infrastructure and fewer split-shift crews – the plans for service expansion typically focus on more peak capacity, despite often high crowding levels on off-peak trains. This is worst on commuter rail, but also affects subway and bus systems. In New York, the MTA’s crowding guidelines call for setting off-peak frequency such that the average train on each line will have 25% more riders than seats at the most crowded point of its journey. As anyone who’s ridden trains in Manhattan in the evening knows, trains are quite often much more crowded than this average. The MTA needs to keep its losses to a reasonable minimum, and on the core lines the off-peak frequency is not bad; but why keep claiming that trains only have 25% more riders than cars? The MTA is by comparison more honest about its capacity problems on the Lexington express trains, for example in the Second Avenue Subway environmental impact statement.
Many of the problems of American transit systems are directly traceable to the fact that the managers don’t often ride the trains, and their peer group is not the same as the average transit user. This is why we see little concern for off-peak service, and practically none with off-peak service on the whitest and more suburban form of transit, commuter rail. None of these managers of course intends to be racist or classist, but they unwittingly are.
Pedestrian Observations 