Joel Kotkin cannot find evidence of a "Back to the City" movement

He puts together a table of suburban and core urban growth based on 2000 and 2010 census data.

MSA                   Core Growth                         Suburban Growth                             Total Growth

Austin	20.4%	56.1%	37.3%
Baltimore	-4.6%	9.9%	6.2%
Chicago	-6.9%	9.0%	3.9%
Dallas-Fort Worth	0.8%	30.2%	23.4%
Houston	7.5%	39.3%	26.1%
Indianapolis	5.0%	28.3%	15.2%
San Antonio	16.0%	43.7%	25.2%
Washington	5.2%	16.8%	15.4%
Total	3.2%	21.7%	15.7%

These are places for which the Census had released data by mid-February. Some of the places for which data has been released since then--St. Louis, Las Vegas and Birmingham--have the same pattern: in all cases suburban growth has outpaced central city growth. St. Louis' population has dropped to its lowest level since 1870.

The results seem particularly surprising for Chicago and Washington, which have had successful redevelopment in their urban cores. But redevelopment can actually reduce density. Gentrification often means that wealthy households rehabilitate mult-family properties into single family homes. This can lead to an increase in wealth in cities, but does not necessary translate into a relative increase in population.

I have long rooted for cities (although I confess that I myself live in an "urban" suburb). But facts are facts, and the facts from the 2010 census at this point do not support the idea of a reversal from suburbanization to urbanization.

From my daughter's blog: Hannah in Paris: Politics or nostalgia? » North by Northwestern

Hannah in Paris: Politics or nostalgia? » North by Northwestern

Property rights and time

When I moved to LA a bit more than two years ago, I bought a dryer.  Last week, the heating element went out.  The good news is that the dryer is still under warranty.  The bad news is that when the repair guy came to my house, he didn't have the part to fix it.  As I result, someone needs to be home a second time for the machine to get repaired.

The store from which I bought the dryer will only tell you what day they will come to do repairs--they won't give you a window of time for the day until the night before.  Consequently, to get a dryer that is under warranty repaired, one might well be required to give up two days. 

Because professors have a lot of flexibility in their jobs, this is not a huge deal for me.  For my wife, however, who is a phycician, this would be a big deal.  It would also be a big deal for any production or service worker who has little to no control over hours worked. 

The appliance store that sold and will repair the dryer has essetially asserted a property right to its customers' time--it is imposing costs that it is not forced to bear.  I am not sure whether it is true that this is happening over larger and larger swaths of the economy, but it sure seems so.  For instance, sometimes when I want to change a plane ticket, I am not allowed to do so on the web.  When I call the airline's number, I am sometimes required to wait on hold for a long time before I can talk to someone.  Now it is possible that the time saved on the web when I use it and the lower cost of airfare makes up for the cost of the dreadful phone service, but I am not sure.

Ryan Avent on Density and Skyscrapers

He writes:

This comparison encourages a lot of people (not necessarily Richard Green) to decide that we don’t need skyscrapers. Defenders of the Washington height limit often fall into this category. But there are two points worth making in response to this. One is that it would be harder to build Paris in America than it would be to build Manhattan. Paris’ tiny streets are more hostile to the automobile than anything in the US, including Manhattan. And Paris has relatively tall buildings over a vast area; it’s easier for me to imagine Washingtonians tolerating 30-story buildings downtown than 10-story buildings in a central neighborhood like Brookland. If you need 10-story buildings in every little Brookland-like neighborhood to generate the same density you achieve with 30-story buildings in a central business district, then you can basically forget about generating high densities in American cities. The NIMBYs are just too strong.


The second point is that Glaeser isn’t directing people to go out and build skyscrapers. He’s not a planner. He’s merely saying that, yes, allowing developers to meet demand with supply will often yield tall buildings, and that’s a good thing. It will increase densities relative to the alternative, supply-limited case, and it will improve affordability relative to the alternative, supply-limited case. People who read Glaeser lauding density and who go on to tout the advantages of Paris get his argument precisely backwards. Because density is good, it’s costly — in terms of the metropolitan economy and affordability — to adopt Parisian limits on growth. Unless your city is one of the architectural jewels of the modern world, and if you live in America it isn’t, you should work very hard to avoid such constraints.

I think the comment about Brookland is very much on point.  At the same time, I can't help but wonder if Washington would be a more attractive and affordable city if it allowed a bunch of six floor buildings almost anywhere, instead of skyscrapers in certain districts.  BTW, I think Washington is close to being one of the architectural jewels of the modern world--its vistas are among its best features.

But now let us consider Los Angeles, another expensive city that has relatively few skyscrapers. Because of regulations arising from seismic concerns, it is very expensive to build steel-framed glass-curtainwall buildings here.   At the same time, while land is expensive in LA, it is nowhere near as expensive as Manhattan.  The combination of high construction costs and (lower) land costs leaves me skeptical about whether high-rise buildings could be economically feasible here.

On the other hand, we should use our land more densely and efficiently here.  Lots of four-to-six story buildings would help.  Maybe narrowing some minor street would help--particularly in the San Fernando Valley and Orange County.

As I said in my original post, high rises are almost certainly the right hammer for very large cities, such as Mumbai, Cairo, Mexico City and Sao [Paulo].  Singapore and Hong Kong have proved that cities that rely on the skyscraper can be beautiful and livable (although affordable is actually still an issue in those places).  But not every city is a nail.

Are Skyscrapers Necessary for Density?

I just read Ed Glaeser's Atlantic piece on skyscrapers (which is excerpted from his new book on cities that I need to read).  I agree with nearly everything he says, particularly about the need for tall buildings in Mumbai, but I also think it is worth mentioning that one can get a lot of density without a lot of skyscrapers.  The municipality of Paris has a residential density of about 54,000 people per square mile; Manhattan has a residential densisity of about 71,000 people per square mile.  Paris has about 1.7 million workers, while Manhattan has about 2.1 million workers.  Yet as Ed notes, Manhattan has lots of skyscrapers, and Paris has few, and almost none outside of Le Defense.  How is this possible?

Let's look at a Google Earth image of Paris from 50,000 feet up:

Now lets's look at Manhattan from the same height:

Notice how at this scale you can see the minor streets of Manhattan pretty clearly, but not the minor streets of Paris?  Paris actually uses its land very efficiently--it does not waste space on streets or setbacks.  As a consequence, while it can be livable (if not affordable) with 3/4 of the denisity of Manhattan and a small fraction of the number of tall buildings of Manhattan.

There is no question that Ed is correct that mega-cities such as Mumbai, Cairo, Mexico City and Sao [Paulo] require skyscrapers to house people adequately and affordably.  But as he also notes, building skyscrapers is a lot more expensive than low-rise buildings.  For many cities, more efficient land-use could go a long way toward making cities more livable, more walkable, and less expensive.

Mark Zandi and Christian DiRitis on the Moral Hazard of a Hybrid Mortgage System

I think they get it right:

One potential weakness of a hybrid system involves moral hazard: If private investors believe the government will bail them out if things go badly, they will take inappropriate risks. Such concerns were illustrated by the recent experience with the two government-sponsored mortgage finance agencies, Fannie Mae and Freddie Mac. These institutions took on too much risk, holding too little capital for the kinds of investments they held in mortgage securities. While their private shareholders were effectively wiped out, bondholders were made whole when the federal government put Fannie and Freddie into conservatorship.

Moral hazard cannot be eliminated in a hybrid model, but it can be significantly mitigated. The system we support would require enough private capital to withstand losses associated with a 25% decline in house prices. Before the crisis, Fannie's and Freddie's capital levels were designed to withstand only a 10% decline. The hybrid system's catastrophic insurance would not kick in until losses reached levels consistent with a 25% price drop, providing significant financial incentive for private investors to make sound lending decisions. 

It is also important to recognize that moral hazard exists even in a fully privatized system. Investors in such a system are likely to assume that in extreme circumstances, the government would still step in, congressional pledges to the contrary notwithstanding. Recent experience has only reinforced this belief, as the government stepped in during the financial crisis to bail out the system. In the hybrid system plan, the government's backstop is explicit and paid for by private investors. 

Mark Thoma on Social Insurance

Mark's postings are reliably good, but today's is especially good:

...There is a need for social insurance. I had hoped this recession would show people that it can happen to anyone, that high moral character is not enough to protect you from the vagaries of the market system. One day a job can be gone, morals or not, savings can evaporate as a result, and all those years of doing the right thing -- putting a little away each month for the future -- provides little protection against financial ruin when there are no jobs to be found.




Don't get me wrong. I think it's good to make people aware of the amount of government services they consume, and that such awareness could help some in getting support for social insurance and other programs. So I'm not saying that making people aware of their own use of these services has no value. But I really do think the key to more widespread support is to make people aware of the need for social insurance, and the fact that insurance -- by it's very nature -- means that those people unlucky enough to need it will often consume more than they put in (just as would be the case under fire insurance if your house burns down), while others will consume less. That's how insurance works and we shouldn't resent those unlucky enough to need it.



The key here is to overcome the belief that the majority of people using these services are "gaming" the system to get handouts they don't deserve. If we are going to successfully defend the social insurance system, it is this belief that must be countered. Of course such behavior goes on, there will always be people who try to take advantage of any system that is put in place (in the public or private sector), but this is not the predominant feature of these programs. The share of "deadbeats" is not large, it is relatively small given all the good such programs do, and that's the message that needs to be delivered. The social benefits clearly exceed the costs of providing these services, but it will be tough to make this case convincingly -- the opposition can always find isolated cases where people take advantage of the system and surround them with negative publicity. This has been a successful strategy, and it will take a concerted effort to counter overcome such efforts.

Four quick points about Fannie-Freddie Reform

(1) Why have an explicit guarantee?  If TARP should have taught us anything, it is that there are implicit guarantees everywhere; it is better to be up-front about the fact that the government does provide backstops in times of crisis.

(2) How to price the guarantee?  Mark Zandi has a good explanation.  The hard part is going to be to keep fees up in times of low defaults.  In the early part of the last decade, Fannie and Freddie were criticized for earning excess profits on their guarantee fees, for the simple reason that defaults on prime mortgages essentially didn't exist in the 1998-2005 period.  Complaining about Fannie-Freddie's g-fees at that time would be akin to complaining the State Farm enjoys excess profits when Florida goes a year without a hurricane.

(3) In the absence of government intervention in the market, the long-term fixed-rate prepayable mortgage will likely go away.  These mortgages are expensive to households, but they also provide a level of certainty that helps households manage risk.  Households are already facing more risk than before (defined benefit pensions, anyone?), so I am not sure it is a good idea to add even more.

(4) I worry about high downpayment requirements.  It is clear that households need to put some of their own money into a house for a mortgage to be safe (gifts and grants don't count).  But while the overall homeownership rate for the US is fine, the substantial gap between whites and minorities, more than 20 percentage points, is not.  Minorities have far less wealth than whites, and across the generations, have had wealth systematically expropriated; minorities have also been discriminated against by the government in credit markets.  Massey and Denton:

In rating the home, the FHA established minimum standards for lot size, setbacks and separation from existing structures that essentially eliminated many inner-city dwellings....in the late 1940s, the FHA recommended the use of application of racially restrictive covenants...per capita mortgage spending was 6.3 times greater [in St. Louis County relative to the city of St. Louis].

I suppose in light of history, direct payments to the heirs of those who have had wealth systematically stripped away makes more sense than trying to close the homeownership gap.  But the latter seems more politically doable than the former.

SIngapore Envy

Tom Friedman rhapsodizes too much about Singapore.  While it is hardly the least free society in the world, the People's Action Party for all intents and purposes has a political monopoly.  Singapore's GINI coefficient is higher than the United States for income, as is its ratio 90th percentile to 10th percentile income.

Nevertheless, every time I pass through the city-state (I just did for the third time), I am awed by its transportation infrastructure: beautifully landscaped expressways, congestion pricing for automobiles, and well-operated bus and trail transit.  Transit is very clean, fast and efficient, and runs frequently.  The trains are often crowded but somehow not too crowded.  Changi airport is a public works project of the sort that once filled American's with pride--it is to airports what Hoover Dam is to, well, dams.  Changi is also profitable.

So when I come home to Los Angeles, I find LAX to be a little embarrassing.  When I use transit from the airport, the Flyaway Bus, I find it to be unreliable and less than spotless.  The process of buying a ticket (at the end of the journey) is cumbersome.  It would be one thing if LA were unusually bad about such things for US cities, but it is not.  The fact that New York is having a hard time getting a second rail tunnel built under the Hudson also reflects America's seeming inability to provide necessary public works.