Reason Foundation - Policy Areas > Housing, Land Use, Urban Growth

TIF for Tat: The Folly of Tax Increment Financing

sam.staley@reason.org (Samuel Staley) — Wed, 30 Sep 2009 15:17:00 EDT

Tax increment financing, or TIF, has become an increasingly common and acceptable form of "innovative financing" for state and local governments. The idea is simple: public investments should improve the economic viability of cities and neighborhoods, increasing property values. The property taxes generated from the increase in the property values (the tax increment) can be used to finance government investments in neighborhoods. In theory, TIF has the potential to increase transparency and reduce general tax burdens by incorporating a user pays principle into government financing for targeted investments.

In practice, TIF has been used to finance boondoggles and subsidize businesses. The potential pitfalls of adopting TIFs are becoming legend, and Reason magazine had an article recently by Daniel McGraw that highlighted some of these excesses. Most recently, the Heartland Institute published a nice short piece highlighting the failiure of TIF to fund $200 million in subsidies extended to Sears to move their corporate headquarters to suburban Chicago.

Still, TIF may have a role in financing a limited number of public investments if they are designed properly. That's the rub. Most TIF programs are designed as elaborate schemes to funnel subsidies to private firms and organizations, or to promote various social welfare objectives such as affordable housing. The result is that cities that use TIF are no more likely to grow than those that don't use them, when other factors that contribute to growth are considered.

A good overview of the potential impact of TIF programs on economic development can be found in an article by economists Richard Dye and David Merriman for the Lincoln Institute of Land Policy. After analyzing hundreds of TIF programs in different cities and counties, they conclude:

"Tax increment financing is an alluring tool. TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable. The issues we have studied are (1) whether the targeting causes the growth or merely signals that growth is coming; and (2) whether the growth in the targeted area comes at the expense of other parts of the same municipality. We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

"Policy makers should use TIF with caution. It is, after all, merely a way of financing economic development and does not change the opportunities for development or the skills of those doing the development planning. Moreover, policy makers should pay careful attention to land use when TIF is being considered. Our evidence shows that commercial TIF districts reduce commercial property value growth in the non-TIF part of the same municipality. This is not terribly surprising, given that much of commercial property is retailing and most retail trade needs to be located close to its customer base. That is, if you subsidize a store in one location there will be less demand to have a store in a nearby location. Industrial land use, in theory, is different. Industrial goods are mostly exported and sold outside the local area, so a local offset would not be expected. Our evidence is generally consistent with this prediction of no offset in industrial property growth in non-TIF areas of the same municipality."

The point is not that TIF can never be a useful approach to financing a public investment. Rather, its value is limited, and the broader implications need to be considered. A TIF working on its own will not revitaize a city or neighborhood. The "preconditions" for growth still need to be in place. In addition, for commercial TIFs, the likely impact is to reshuffle growth. In short, a TIF does not necessarily (and is unlikely to) finance truly new development.

Where would a TIF make sense? In my view, TIF should only be considered to fund a long-term public investment, such as roads or other transportation infrastructure that improves access in a local area. These investments must have tangible, measurable, and localized benefits. The TIF would serve as an alternative to financing from general taxes and avoid the current practice of subsidizing improvements in one area at the expense of another. When designed properly, TIF can be a form of a user fee where the beneficiaries (land owners and businesses benefiting from the investment) pay for the infrastructure without burdening the rest of the community.

Singing the Motown Blues

shikha.dalmia@reason.org (Shikha Dalmia) — Mon, 21 Sep 2009 22:39:00 EDT

Kathleen Bushnel Owsley, director of something called One-D, a collaborative initiative seeking to transform regional Detroit, launched a full-scale attack on my previous column examining the claim that Detroit was on the cusp of a major renaissance as artists attracted by cheap real estate move back to the city.

Owsley disputes my claims. She says that she's:

"encouraged by a multitude of recent initiatives that support the city, including a plan to increase the density of creative economy businesses, a strategy to get 15,000 more young college-educated people living in greater downtown Detroit by 2015 and a thriving, innovative association that supports the vitality of arts and culture institutions in metro Detroit--which are peppered throughout our community and are not, as Dalmia claims, limited to one block in east Detroit."

But after reading her column, I formed the impression that she doesn't live in a different city from me, she lives on a different planet. She claims that the Motor City is bouncing back. It would be nice, but facts are an inconvenient thing, and they don't support her happy little fairy tale. The fact of the matter, as I note in my comment on her column, is that:

"Detroit is facing a $300 million deficit and many fear that it might well have to declare bankruptcy before the end of the fiscal year -- an unprecedented step for a city its size. Its schools are a mess and facing a deficit as big as the city itself. They graduate 25% of their students and were recently handed over to an emergency financial manager. Detroit's unemployment is touching Depression-era rates of 30%. It has the dubious distinction of being the murder capital of the country. Seven kids were attacked by armed gunmen two months ago as they waited for a school bus outside their school. The city is so unsafe that ice cream trucks cruising through neighborhoods sport iron bars on their windows and backside to prevent attacks on poor drivers. Illiteracy rate is about 50% and illegitimacy rate is even higher. It's population is expected to drop to less than 800,000 by 2015 -- down from 2 million at its peak.

Yes, there are Campus Martius and Riverfront Walk -- efforts of misguided city leaders who think that the way to revive the city is not to do the hard work of providing basic services -- safety, schools, and clean streets -- but pouring subsidies into feel-good projects that people like Ms. Boswell can preen about.

I am used to Pollyannaish talk about the city's comeback. But at no time does this talk appear more quixotic than now when the city is in so much trouble and nearly every responsible adult is worried that it might have reached the point of no return. Detroit might overcome its challenges and reclaim its former glory, but it won't be because of dreamers like Ms. Boswell who refuse to confront the facts."

Housing and Land Use Links

sam.staley@reason.org (Samuel Staley) — Sat, 19 Sep 2009 09:07:00 EDT

The American Dream Communicator, an on-line publication of the American Dream Coalition, provides regular links to news on housing, land use, transportation, and growth management. Here are a few of the most recent land use and housing links from the September 11th edition:

Housing & Land Use
Will Obama's "Livability" Program Bring Britain's "Hobbit Homes" to America? – Ron Utt, Heritage Foundation
What A City Needs – Edward Glaeser, The New Republic
Oregon's land-use system: a barrier to economic recovery - Bill Moshofsky, Oregon Live
Higher Density Housing To Do Little To Cut Fossil Fuels – FuturePundit.com
Florida Drifts Into the Morass – Richard Reep, New Geography
Texas Tops U.S. in Housing Affordability – Buyers House Realty
State leaders clash over growth plans – Naples News, Florida
People and Metro Prosperity – The New Republic
Sex and the City of the Future – Forbes.com
Council OKs using eminent domain to create rail quiet zone – Kansas City Star
Williamsburg businesses fear eminent domain for Broadway Triangle – New York Daily News
School board seeks to condemn property – Statesman Journal, Oregon
Cedar Falls TIF district would let mall keep some option tax funds – WCF Courier, Iowa
Development Stifled By 10-Year-Old Comprehensive Plan – Daily Commercial, Florida
What We’ve Learned: Ugly Truths About Housing – New York Times

Links to Trasportation, Land Use, Smart Growth in the News

sam.staley@reason.org (Samuel Staley) — Thu, 17 Sep 2009 07:40:00 EDT

The American Dream Coalition, an organization focused on educating and informing citizens on land use, transportation, and growth management issues from a private property rights and free market perspective, has a weekly newsletter of news links well worth the free subscription.

As the coalition describes "The American Dream Communicator's" purpose:

The American Dream Communicator is a weekly round-up of news and opinion about public policy in America’s cities and metropolitan areas. Issues affecting mobility and transportation, land use and housing affordability and related matters of economic development, property rights and grassroots activism in the cause of freedom often get overlooked in the national news. Yet by pulling together news reports and commentary from different parts of the country, common themes and patterns begin to emerge.

Here's a sampling from the September 11th edition on Moblity and Transportation:

Mobility & Transportation
The Costs of Climate Change Strategies, Who Will Tell People? – Wendel Cox, New Geography
Senator muscles U.S. for Vancouver light rail money – The Oregonian
NYSDOT: $19.9 Million in Stimulus Money to Fund Transit – Read Media, New York
Phoenix to sell 7 properties it bought for light-rail facilities – AZCentral
Light-rail settlement to cost $36.7 million – Ottawa Citizen
Honolulu residents paying $4,000 per person for light rail – Honolulu Advertiser
Missouri S.C. won’t hear appeal regarding light-rail plan – Kansas City Business Journal
D.C. Metro Predicts Shortfall, Talks Fare Hike – Washington Post
VTA proposes bus, light rail cuts – San Jose Business Journal
Tenants Evicted by Metro Transit Authority to make way for subway – New York Times
Sacramento light-rail factory is hiring – Sacramento Bee
Cyclist dies after collision with Toronto streetcar – National Post, Canada
Metro employee struck by train, seriously injured – Washington Examiner
Light rail train derailed in Phoenix crash, 7 hurt – ABC-15, Arizona
Pedestrian Hit By Light-Rail Train in Minneapolis – KSTP-TV, Minneapolis
Traffic circles stir more controversy in Ahwatukee – AZCentral
Big traffic calming schemes increase emissions - Environmental Data Interactive
PODCARS - A Personal Rapid Transit primer – Miami Examiner
America's Ten Best Transportation Projects Unveiled – Thomas.net

This is a great new resource for those following these issues on the state and local level and who want to be kept up to date with events around the nation.

National Academy of Sciences on Sprawl and Carbon Emissions

sam.staley@reason.org (Samuel Staley) — Wed, 09 Sep 2009 13:41:00 EDT

The National Academy of Sciences Transportation Research Board released "Driving and the Built Environment," a study of the potential impacts of increasing density on carbon dioxide levels. (A very useful summary can be found here.) The results, as I told USA Today in an article reporting on the study's release, are underwhelming, to say the least.

According to the analysis in the report, if we funnel 75 percent of future land use into higher density settings--effectively doubling current regional population densities--we might reduce carbon emissions by 11 percent. But, the chances of that happening are so remote they almost aren't even worth considering. Anthony Downs, one of the study's coauthors, said as much and is quoted in a report on the study's release by Technology Review.

One of the study's authors doubts whether major increases in housing density are even possible. "I think the 75 percent figures are completely unrealistic," says Anthony Downs of the Brookings Institution. "Twenty-five percent is much closer to realistic and that may even be high. Nationally we've had no increase in housing density in the last 30 years; I don't see that reversing."

A more moderate scenario that assumes about 25 percent of replacement housing is built in high density settings suggest CO2 emissions will fall by about 1 percent. That's probably more plausible. But even this estimate may be high short of planning policies that dramatically restrict suburban development using acreage of one quarter of an acre or more for new housing.

But this assumes these studies are reliable. The TRB report points out that most of the studies examining the relationship between land use and transportation are weak and lack methodological consistency.

While many proponents of Smart Growth, including draconian policies such as urban growth boundaries that explicitly limit land available for development to force higher densities, believe the study vindicates their position, it doesn't. While the research shows that higher densities in the right place and with the right uses can reduce vehicle miles traveled (VMT), this is a very blunt industry if the goal is to influence carbon emissions (and climate change).

It's not land use per se that produces carbon emissions; it's the fuel for the technology we use to get from place to place, heat our homes, and run the conveniences of life. The most direct and efficient way to reduce carbon emissions is to replace the fuel technology, not limit housing or transportation choices, or force people into "second best" alternatives.

Let Free Markets Guide Fire Protection Services

adam.summers@reason.org (Adam Summers) — Fri, 04 Sep 2009 22:48:00 EDT

In the third and final part of our three-day series of point-counterpoint articles on the politics and policies of wildfire protection for the L.A. Times Web site, UC Berkely forestry specialist William Stewart and I tackled the issue of whether the government should restrict building in high-risk, fore-prone areas. Dr. Stewart claimed that building codes and zoning regulations help to reduce fire damage. I argued that free markets and private arrangements do a better job of assessing risk, determining and allocating costs, and helping people to decide where they want to live while leaving them free to choose the risk levels and lifestyles that are right for them. We both agreed that the subsidization of fire insurance in California has warped incentives and encouraged building in areas that would be considered too high-risk in a true free market.

See my commentary and Dr. Stewart's response here.

See here to access the "Dust-Up" exchanges from all three days, including Wednesday's columns about whether the state has enough resources to fight fires and whether the private sector should have a larger role in wildfire prevention and protection and Thursday's discussion about what the government does right about preventing and fighting wildfires, and--mostly--what it does wrong.

Below is an excerpt of my column from today.

In your Thursday post, Bill, you voiced your approval of certain building codes passed recently, but I disagree that such government mandates are the way to go. While some building requirements may be advisable, people own their private property and should be free to determine how to build their homes (or which kind of home they want to buy) and what risks they are willing to take in this regard. Furthermore, when building specifications are subject to the political process, they become open to manipulation by lobbying and special interests that would benefit from the new regulations. What if the regulators do not adopt the proper standards? And who is to say what the right standards are? Specifications adopted for some homes and in some locations may not be appropriate for other homes in other locations. These decisions are all determined and tailored to meet specific needs in the free market by builders, insurers and home-buyers.

Zoning regulations should similarly be eliminated and avoided. Growth boundaries and other zoning laws that would prohibit people from living in certain high-risk or "protected" areas are often advocated by environmentalists and anti-growth activists who see people as a scourge of the environment rather than a part of it. Their true agenda is to inhibit development in order to concentrate populations in city centers. But in a free country, people should have the freedom to live where they choose -- including less dense areas closer to nature -- and not to be forced to live in high-density urban centers that might not suit their budgets or their preferred lifestyles.

Simply put, restrictive building codes and zoning laws violate property rights. Free markets and private arrangements do a better job of assessing risk, determining and allocating costs, satisfying consumers' demands and preserving individual liberties than centralized land-use planning. The less property rights are eroded by various governmental edicts and mechanisms, the more free and prosperous we are as individuals and as a nation.

Finally, the private sector should also be instrumental in providing wildfire prevention and protection services. To this end, volunteer firefighters, who make up nearly three out of every four firefighters in the nation, and private firefighters can help to provide protection against wildfire damage. As Orange County Register senior editorial writer and columnist Steven Greenhut argued in an article about the 2003 California fires, "Far better if we had private land and private firefighters, with the costs of firefighting borne privately by those who choose to live in the canyons. But when we choose to live near lands controlled by the government, and the government does a bad job managing them, why are we supposed to feel guilty when our houses burn down?"

Government Policies Exacerbate Fire Damage

adam.summers@reason.org (Adam Summers) — Thu, 03 Sep 2009 17:49:00 EDT

In the second installment of our three-day "Dust-Up," point-counterpoint articles for the L.A. Times Web site on wildfires and government responses to them, UC Berkeley forestry specialist William Stewart and I write about what government does right in fighting and preventing fires, and what it does wrong. Not surprisingly, we both had much more to say about what it does wrong. Dr. Stewart argues that individuals and communities should take more responsibility for protecting themselves and I point out how bad government policies lead to more severe fire damage.

See Dr. Stewart's commentary and my response here.

Below is an excerpt of my column.

I agree with you about the incentives of governments to focus more on fighting wildfires after they crop up than addressing the problem through preventive measures. Focusing more on action -- or, more accurately, reaction -- than prevention is a typical bureaucratic response. The goal seems to be "fighting fires," when it should be managing government-owned land to prevent or minimize wildfire damage. Unfortunately, fighting fires is politically a sexier aspect of the job -- it is more tangible to voters, who can see the news stories of brave firefighters battling the flames to save homes, and politicians can say, "See what we're doing with your tax dollars!"

Simply put, the . . . government manages its lands poorly. It neglects to build firebreaks and conduct controlled burns before wildfires break out and allows underbrush and other tinder to build up -- in some cases, for 40 to 60 years -- which makes the fires all the more severe when they hit. For example, a Los Angeles city inspector in Tujunga related how the federal government failed to respond to requests to clean out brush on open lands. The federal agency claimed that it needed to conduct a study and prepare an environmental impact report before taking any action. Environmental policies and regulations that encourage leaving forests, canyons and woodlands in their "natural" state and prevent the clearing of trees and brush that serve as fuel for the fires only make matters worse. This red tape and bureaucratic nonsense leads to more destruction of property and lives.

Another disastrous government policy is the subsidization of fire insurance. In 1968, California created the Fair Access to Insurance Requirements (FAIR) Plan to be a fire insurance plan of last resort and required all insurers doing business in the state to participate in the insurance pool. This encourages the construction of homes in overly risky, fire-prone areas and is unfair to those who buy insurance in non-fire-prone areas, who must pay higher premiums to subsidize FAIR Plan participants, as well as to taxpayers across the state who have to pay for efforts to save these homes when fires do take place. A true free market in fire insurance would allow insurers to set premiums based on the true value of the fire risk involved and would allow homebuyers to make their purchase decisions accordingly. Some may be priced out by the high cost of insurance in extremely risky areas, and some areas may be uninsurable entirely, but those costs are high for a reason, and they should not be ignored.

Public officials seem to spend an awful lot of time holding news conferences in front of television cameras to offer each other congratulations on the efforts they all are making and too little time providing accurate, real-time information to the public to help them make decisions about how to react to the fires. With resources such as the Internet, satellite pictures and other technology at its disposal, government should be able to provide residents with up-to-date information about exactly where the fire is, and where it is headed at the moment, to help them make better preparations to flee or defend their homes. Yet communication is still lacking, and there always seems to be problems with government emergency notification systems. For example, "The county's new mass emergency notification system failed to inform residents about the status of the fire or evacuation orders," L.A. County Supervisor Mike Antonovich wrote in a resolution. "It was reported to my office that an erroneous evacuation order was announced by the mass emergency notification broadcast system to the community of La Crescenta."

On a related note, as you allude to in your discussion of Australia's approach to wildfires, government should dispose of mandatory evacuation orders. This is particularly important in more suburban areas where the threat is not so much a raging inferno running through the neighborhood as it is falling embers, which can be combated fairly easily to keep homes from going up in flames. Indeed, many homeowners that defied evacuation orders in recent fires were able to save their homes -- and even neighbors' homes -- without suffering harm or necessitating the diversion of firefighting resources to rescue them. In any case, America was founded on the principle that one has the rights to defend his life, liberty and property, and these rights should not be infringed.

In tomorrow's third and final exchange, we will be debating whether the government should do more to discourage building in wildfire-prone areas, or if there are better means of protecting homes in such areas.

Use Private Firefighters to Improve Wildfire Protection

adam.summers@reason.org (Adam Summers) — Wed, 02 Sep 2009 16:47:00 EDT

Today, tomorrow, and Friday I am participating in a three-part, point-counterpoint discussion of wildfire protection services in California on the L.A. Times Web site. My counterpart is William Stewart, a forestry specialist at UC Berkeley.

Today's topic: Experts forecast that climate change will increase the frequency of deadly wildfires. Do state and local governments have enough resources to prevent and fight fires (in other words, will taxes have to be raised to pay for more services), or should the private sector play a bigger role disaster response?

In my commentary, I argue that the problem is not that there are not enough resources to fight fires--in fact, the California Department of Forestry and Fire Protection (Cal Fire) budget has continued to increase despite the recession--and that if any additional resources are deemed necessary, the answer is not more taxes, but rather an adjustment of state priorities and the diversion of funding from wasteful spending and lower-priority or poorly-performing programs to productive programs and functions that will protect lives and property. In addition, California should tap the resources of the rapidly-growing private-sector wildfire protection industry, which, like numerous other private-sector alternatives, typically offers equal or better services at lower costs. Dr. Stewart points out that property owners must accept some responsibility for living in fire-prone areas, and agrees that there is a role for private contractors in providing fire protection services.

See my commentary and Dr. Stewart's response here.

Below is an excerpt from my article.

State and local governments can better provide fire protection services by tapping military resources (which were severely underutilized during the 2006 wildfires in the San Diego area, for example) and private-sector resources. The private sector has a long and distinguished history of providing high-quality services for such things as paramedic services, security services and, yes, even firefighting services at lower costs. The private firefighting industry is growing quickly and is now estimated to be worth billions of dollars.

The National Wildfire Suppression Assn. (NWSA), for example, is a trade group founded in 2000 that now represents more than 150 private companies and 12,000 private wildland firefighters. NWSA reports that about 40% of the resources devoted to fighting wildland fires across the United States are provided by private fire services.

Companies such as Firebreak Spray Systems Co. and insurance company AIG saved homes during the 2007 California wildfires. Private firefighting contractor Rural/Metro provides fire protection services to more than 25 communities, and responds to more than 60,000 calls annually, according to the company's website. The rapid growth of this industry is evidence that, despite the substantial public resources devoted to fire protection, the government is not adequately doing its job and a need remains unfulfilled.

Governments -- including the federal government -- are increasingly contracting out firefighting services, sometimes replacing public fire departments entirely. As is the case in numerous other outsourced services, private fire protection contractors oftentimes provide equal or better services at significantly lower costs. Given the condition of state and local government budgets, this should offer an even greater incentive to utilize private-sector resources to provide fire protection services.

Tomorrow we will be discussing what government does right about preventing and fighting wildfires, and what it does wrong. Stay tuned!

Market Urbanism

sam.staley@reason.org (Samuel Staley) — Wed, 02 Sep 2009 12:53:00 EDT

I just ran across the Market Urbanism web site, and it has a lot of really good analysis and resources available for anyone following urban policy issues. The sub-title of the web site is "Urbanism for Capitalists/Capitalism for Urbanists". The blog includes lots of references to F.A. Hayek, free markets, and even takes the Cato Institute to task for advocating "socialism for roads."

As the website's author describes his purpose:

In this blog I intend to introduce free-market thought to urbanists, and introduce urbanism to market advocates. I also hope to incorporate some ideas relating to environmentalism in the built environment. I like to refer to the connections between free-market economic thought, urbanism, and environmentalism as “Market Urbanism.”

This site is well organized and designed. I think it's a great addition to the debate and discussion, and its refreshing to see a new voice enter into the fray.

Free market approaches to urban policy are not new to Reason Foundation, of course. We helped frame the debate on market-oriented planning when we started the urban policy program more than 10 years ago now. A current project in Houston should really take market-oriented planning to a new, contemporary level.

I look forward to reporting more from this site in the near future.

Free Market Housing Book Released

sam.staley@reason.org (Samuel Staley) — Wed, 02 Sep 2009 08:32:00 EDT

The Independent Institute in Oakland, California has teamed up with Transaction Publishers to release Housing America: Building Out of a Crisis, a comprehensive free-market approach to the current housing crisis as well as land use, planning, affordability, and finance issues.

This volume should be on any urbanist's bookshelf and includes many academic and policy heavy weights, including Randall G. Holcombe (Florida State), Bejamin Powell (Suffolk University), Robert Nelson (University of Maryland), Lawrence White (New York University), Randal O'Toole (Cato Institute), Ed Stringham (Trinity College), and, of course, yours truly (writing on growth controls and housing affordability).

All the chapters are highly relevant to current times and many directly address the mortgage meltdown and what we need to do get out of the housing depression.

Here is the table of contents:

Table of Contents

Introduction: Is there a Housing Crisis?
Randall G. Holcombe and Benjamin Powell
Urban Planning, Housing Affordability, and Land Use
Samuel R. Staley
The Benefits of Nonzoning
Bernard H. Siegan
Building Codes, Housing Prices, and the Poor
William Tucker
Smart Growth and Housing
Randal O’Toole
Inclusionary Zoning
Benjamin Powell and Edward Stringham
A Brief Survey of Rent Control in America: Past Mistakes and Future Directions
Matthew Brown
The Economics of Government Housing Assistance for the Poor
Joshua C. Hall and Matt Ryan
Eminent Domain
Randall G. Holcombe
Arresting Development: Impact Fees in Theory and Practice
Jack Estill, Benjamin Powell, and Edward Stringham
The Economics of Housing Bubbles
Mark Thornton
Fannie Mae, Freddie Mac, and Housing: Good Intentions Gone Awry
Lawrence J. White
Anatomy of a Train Wreck: Causes of the Mortgage Meltdown
Stan J. Liebowitz
Urban Planning: The Government or the Market
Fred E. Foldvary
Private Neighborhood Governance: Trends and New Options in Collective Housing Ownership
Robert H. Nelson

New Home Sales Increase 10 percent in July As Inventory Falls

sam.staley@reason.org (Samuel Staley) — Wed, 26 Aug 2009 18:55:00 EDT

The U.S. Commerce Departmente reported that new home sales increased by 9.6 percent in July, a strong enough showing that more economists believe that the housing market may have bottomed out. Home sales are still down 13.6 percent from a year earlier. Indeed, there is still substantial weakness in the housing sector:

The inventory of homes for sale fell to a seasonally adjusted 271,000, which would take seven and a half months to sell at the current pace. That is a higher supply of homes than normal, but it is down sharply from a 12 months’ supply earlier this year.

And inventories are falling in part because construction companies are simply not building houses like they were during real estate’s boom years. Credit for builders is still tight, and builders are being undercut in many markets by distressed properties like foreclosures and short sales by homeowners who need to sell.

While this isn't a strong sign of recovery, the key is the trend. In this respect, we can be cautiously optimistic that housing has bottomed out.

Get Ready for the Next Housing Bubble

sam.staley@reason.org (Samuel Staley) — Thu, 13 Aug 2009 15:41:00 EDT

Wendell Cox covers the recent global bursting of the housing bubble from an international perspective, and warns we may be setting ourselves up for another one. It's worth a read over a the New Geography web site.

Among those that noticed [dangers in the housing market] were the Bank of International Settlements (the central bank of central banks) in Basle, which raised the potential of an international financial crisis to be set off by a bursting of the US housing bubble. Others, like Alan Greenspan, noticed, telling a Congressional Committee that “there was some froth” in local markets. Others, across the political spectrum, like Nobel Laureate Paul Krugman, Thomas Sowell and former Reserve Bank of New Zealand Governor Donald Brash both noticed and understood.

Missing the Housing Market Fundamentals: The housing market fundamentals were clear. With more liberal credit, the demand for owned housing increased markedly, virtually everywhere. In all markets of the United Kingdom and Australia, house prices rose so much that the historic relationship with household incomes was shattered. The same was true in some US markets, but not others (Figure 2).

On average, major housing markets in the United Kingdom experienced median house prices that increased the equivalent of three years of median household income in just 10 years (to 2007). The increases were pervasive; no major market experienced increases less than 2.5 years of income, while in the London area, prices rose by 4 years of household income. In Australia, house prices increased the equivalent of 3.3 years of income. Like the UK, the increases were pervasive. All major markets had increases more than double household incomes.

Based upon national averages, the inflating bubble appears to have been similar, though a bit more muted in the United States, with an average house price increase equal to 1.5 years of household income. But the United States was a two-speed market, one-half of which experienced significant house price increases and the other half which did not. In the price escalating half, house prices increased an average of 2.4 times incomes. The largest increases occurred in Los Angeles, San Francisco and San Diego, where house prices rose the equivalent of 5 years income. In the other half of the market, house prices remained within or near historic norms relative to incomes. A similar contrast is evident in Canadian markets. In some, house prices reached stratospheric and unprecedented highs, while in others, historic norms were maintained.

Wendell also does a nice job of highlighting the role of land use regulations played in artificially boosting housing prices by reducing supply. He notes:

These regulations, such as urban growth boundaries, building moratoria and other measures that ration land and raise its price collaborated to make it impossible for such markets to accommodate the increased demand without experiencing huge price increases (these strategies are often referred to as “smart growth”). In the other markets, less restrictive land use regulations allowed building new housing on competitively priced land and kept house prices under control. The resulting price distortions leads to greater speculation, as has been shown by economists Edward Glaeser and Joseph Gyourko.

In short, it's the supply and demand side of the housing market that we need to consider, not just the demand side.

Smart Growth Contributing to Local Fiscal Woes in California

leonard.gilroy@reason.org (Leonard Gilroy) — Mon, 10 Aug 2009 13:37:00 EDT

In recent years, California passed two greenhouse gas emission "control" bills—AB 32 and SB 375 (see Sam Staley's op-ed here)—that aim to force local governments and regional planning authorities to reduce GHG emissions through a set of onerous smart growth and transportation planning mandates that in the end will likely have very little effect on emissions but a significant and dampening effect on local and regional economies.

Unfortunately, the costs of these unfunded state planning mandates appear to be contributing to widespread local fiscal woes. As Louis Dettorre at PublicCEO.com writes today:

California environmental bills Assembly Bill 32 and Senate Bill 375 are putting pressure on local governments, especially in these hard economic times.

AB 32, also known as the Global Warming Solutions Act of 2006, sets a goal of lowering California's greenhouse gas emissions by 2020 to levels seen in the year 1990. Measures have followed this bill that reduce emissions from landfills, semi-trucks and things requiring an EPA approval.

Director of Land Use Services in San Bernardino County, Julie Rynerson Rock, said that the Attorney General hit the county with a lawsuit nearly a year-and-a-half ago. The City of Stockton was also hit with the same lawsuit. Attorney General Edmund Brown claimed San Bernardino's and Stockton's plans did not account for greenhouse emissions. [...]

AB 32 does not include specifications for city and county planning departments in regards to emission standards. This has become the dilemma, as planning departments now must utilize their land in ways that will reduce gas emissions. [...]

Rynerson Rock said of the process to mandate these new regulations, "It is an involved process, and very expensive." Burt Southard, Media Relations Coordinator in San Bernardino County, said, "We continue to have our reservations on the cost implications to counties."

SB 375 states that the metropolitan planning organizations must put Sustainable Communities Strategies (SCS) in their regional transportation plans. For the purpose of reducing greenhouse gas emissions, cities and counties must align plans for transportation and housing, and create specified incentives for the implementation of the strategies. [...]

"The governor is continuing to put on unfunded mandates, and is taking away money," said Rynerson Rock. Niblock said that the Stockton is feeling the same budget squeeze, and is aggressively pursuing outside funding. [...]

Rynerson Rock expressed that there is a real concern for good planning, air quality and doing the right thing environmentally, but the real question is how to fund this during this economic time.

Costly state lawsuits and planning mandates are forcing deficit-ridden local governments to divert resources away from safety and other core government priorities at a time when local officials need full discretion on how to best prioritize and trim their budgets. Cities and counties would probably drop this planning like a hot potato if the legislature were to say, amend these laws to delay implementation for a few years to give local governments time to ride out the fiscal crises.

Making things worse, state leaders are raiding local government funds to pay for its unsustainable spending addiction, effectively drawing down local coffers at the same time that the state is requiring them to spend more money to "fight" GHGs.

Something's seriously wrong with this picture. It's bad policy to force all sorts of costly and dubious planning and research on local governments ill-equipped to handle it at a time when deficits are growing, long-term pension and health obligations are spiraling, and fiscal responsibility should be paramount.

Urban Sprawl Causing Snakebite Spike?

leonard.gilroy@reason.org (Leonard Gilroy) — Thu, 30 Jul 2009 18:31:00 EDT

Over the years, we've heard urban sprawl blamed for everything from pollution to obesity to global warming to social isolation. In my mind, it's hard to blame a nebulous "know it when you see it" phenomenon for such ills, but that doesn't stop utopian do-gooders from trying. Anyway, an article in today's USA Today comes up with a new one that's a gem, suggesting that urban sprawl is to blame for a spike in snakebites—that's right, snakebites:

The American Association of Poison Control Centers receives around 2,000 reports of snakebites each year. Bite reports increased 8% from 2006 to 2007, the most recent national data available, said executive director Jim Hirt. Cities in central Texas and southern California have seen an increase in snakebites in recent months.

Douglas Borys of the Central Texas Poison Center says in the month of June, reported cases in the region were up 35% from 2008. All of Texas saw a 6% increase.

Hospitals in southern California have seen a surge in seriously ill snakebite patients this summer, says Sean Bush, an expert on snakebites at Loma Linda University Medical Center in southern California. Bush, whose son was recently bitten by a rattlesnake in the family's backyard, says he has treated a much larger number of severe cases this summer.

Urban sprawl could be the culprit, says Richard Clark, director of toxicology at UC-San Diego Medical Center.

"We have seen more interactions between people and snakes because of the way we build. I mean, we build schools right on canyons inhabited by rattlesnakes," Clark says.

Riggghhht—the horrible urban sprawl menace has been lying in wait to emerge with its latest onslaught against society, which it was able to manage in just one year with an 8 percent national spike in snakebites (never mind that the housing market was already slowing down at the time of the spike, seriously calling into question the notion that rampant urbanization is the root of the problem).

Luckily, another academic stepped up at the end of the piece with a needed dose of common sense:

The drought and hot weather in central Texas may be coaxing more snakes to cool, shady places around residences, says Lee Fitzgerald, a herpetologist at Texas A&M University. He cautions against oversimplifying: "Everything's complicated in nature, there can be lots of reasons."

Unfortunately, when academics say the same thing about global warming—which would be a very, very accurate statement—then they'd be branded a climate change "denier" or corporate stooge, because of course if the answer isn't "it's man's fault," then it's not useful to the eco-doom-n-gloom types. Substitute "sprawl" as a proxy for "man," and you have a very similar phenomenon in the public discourse over urban land policies.

» Reason Foundation's Land Use and Urban Policy Research and Commentary

San Diego County Planning to Triple Size of Jail Facility in Downtown Santee, Should Consider Cheaper & Better Alternatives

adam.summers@reason.org (Adam Summers) — Fri, 10 Jul 2009 18:42:00 EDT

The City of Santee, California, and San Diego County are currently embroiled in a big fight over the expansion and renovation of a women's detention facility located in Santee. The problem is that when the facility was originally built several decades ago, it was a small, out-of-the way rural community, but now it is a thriving city of 57,000 residents and the jail facility sits right in the downtown area. Santee is a lot different now than it was when the Las Colinas Detention Facility was initially constructed, and residents and business owners in the area are justifiably concerned about plans to triple the size of the jail, from its current 15 acres to 45 acres--complete with guard towers and barbed wire fencing around the perimeter--in the city’s urban core. The expanded facility would comprise roughly 20% of the entire downtown area.

The County owns hundreds of other parcels of land, many of which would be much more suitable for a jail facility and could be built on less valuable land outside a city center, but has so far refused to seriously consider alternative sites.

The Las Colinas land is adjacent to the RiverView office and technology mixed-use campus, which is part of the 700-acre Santee Town Center and transit center. The facility is also surrounded by homes, a church and a day-care center, and senior mobile home parks.

A study of the land for the proposed expanded jail site by The London Group Realty Advisors concluded that the land has a market value of $89 million. In addition, the study estimated that the expansion of the jail would reduce the value of surrounding properties by $75 million. This reduction in land value and the foregone revenue the County could receive from selling the land for more productive and appropriate uses would result in a total economic loss of approximately $165 million.

The consultants’ report also suggested several other potential sites for the jail among the hundreds of parcels of land that the County owns. One promising site at or adjacent to the East Otay Mesa Detention Facility would allow the County to save on costs for food, warehouse services, and transportation of goods by sharing or consolidating services and infrastructure with the existing facility there. Even if the East Otay Mesa site is deemed unsuitable for some reason, there are many other sites of County-owned land that should be considered. In consideration of this, it would be prudent for the County undertake a comprehensive evaluation of its real estate portfolio to identify other sites for an expanded detention facility that would be better alternatives.

Given the value of the land Las Colinas sits on in the downtown Santee area, and the loss in property values and development opportunities that would result from its expansion at the current site, it makes financial sense for the County to sell the land and use the proceeds to develop an upgraded facility elsewhere. The incompatibility of an expanded detention facility with the City of Santee’s current and future makeup and growth, and the resulting public opposition to the proposal, only reinforce this notion.

In deciding on the proper way and place to renovate and expand the Las Colinas Detention Facility, San Diego County supervisors should consider the impact of the jail expansion on taxpayers across the county, as well as the residents of Santee who are rightly concerned about the effects of the County's decision on their community and quality of life. Unfortunately, County supervisors recently voted 4-1 to support the current expansion proposal at the present Santee location. The lone dissenting vote was that of Chairwoman Dianne Jacob, whose district includes Santee. The City of Santee has vowed to fight the County vigorously in the courts.

Is the Honeymoon Over for Richard Florida?

sam.staley@reason.org (Samuel Staley) — Sat, 04 Jul 2009 09:48:00 EDT

Richard Florida is about as close as you get to a rock star in urban policy circles. He parlayed books on cities into best sellers, created a lucrative cosulting business, and recently was lured to Toronto to head a think tank created just for him (with a salary exceeding $350k in Canadian dollars).

Florida's rise to rock star status rests on his argument that a city's future depends on its ability to attract, retain, and grow a "creative class" of professionals, artists, hip software engineers, technology experts, and others. His consulting firm has been retained by dozens of cities to craft plans for attracting and nurturing the so-called creative class.

If all this sounds a bit elitist, it is, and Florida doesn't hide it. Affable and open in person (I've debaetd him before), Florida says he is simply pointing out what he thinks are observations about the way cities actually function and grow. The ideas seem a little too simplistic (and they are), so the real question may be how long they last in the policy debate.

Now, as the Toronto Star reports, the party may be over. A legion of critics is arguing that his work is little more than salemanship. What makes this report particularly interesting is the explicitly Marxist orientation of most of the critiques.

According to one neighborhood activist leading the charge against Florida,

"Richard Florida's exotic city, his creative city, depends on ghost people, working behind the scenes. Immigrants, people of colour. You want to know what his version of creative is? He's the relocation agent for the global bourgeoisie. And the rest of us don't matter."

Honeymoons, typically, are short. For Florida, who arrived in Toronto just over two years ago to head the Martin Prosperity Institute, a University of Toronto think-tank created just for him, it's officially over.

Shakir, a community advocate, was speaking at a public forum organized recently by the art magazine Fuse, and the group, Creative Class Struggle. Its website leaves little to the imagination: "We are a Toronto-based collective who are organizing a campaign challenging the presence of Richard Florida and the Martin Prosperity Institute at the University of Toronto, as well as the wider policies and practices they represent."

The forum was its coming-out party – the beginning, they say, of a wider campaign, as the site explains, "to reclaim our institutions, our city, and our elected governments" from Florida's best-known pitch: That future economic health for cities relies on broad-brushstroke boosterism of creative professionals, bohemianism, cosmopolitanism and diversity, and the warning that cities that don't embrace it will be left in a death-spiral of post-industrial decay.

I've generally felt that Florida's insights were useful, but oversold on their merits. You can't build a city only on professionals, artists, and other elites. Too many people were looking for the next silver bullet to revitalize their city, and Florida's ideas seemed to provide it. The problem is that Florida's ideas apply most directly to downtowns, and downtowns simply aren't that important (economically and culturally) anymore. So, an urban development strategy based on downtown development will do little to keep an urban economy growing.

The backlash in Toronto is probably inevitable as the practical weaknesses of the new sliver bullet become evident.

Florida is best known for his books the Rise of the Creative Class, the Flight of the Creative Class and most recently Who's Your City?

One of the most substantive critics of Florida is Joel Kotkin and a popular early critique of Florida's work can be found here. Several articles critical of Florida's ideas can be found at newgeography.com as well.

Does Breaking Down Policy Silos Mean the End of Federalism?

sam.staley@reason.org (Samuel Staley) — Thu, 25 Jun 2009 19:55:00 EDT

Neal Peirce weighs in on the Obama Administration's ambitious efforts to break down "silos" of policy implementation, but he takes it a step further with dramatic implications for the future of Federalism.

Urban analysts, particularly those with a progressive bent and a non-pluralist ideology of what cities should look like and how they should function, have long lamented the tendancy to think of housing, environment, and transportation as separate policy issues. I am sympathetic to that argument because, in the real world, we live in an integrated system that does not respect particular areas of expertise. But, I'm not ready to scrap the basic structure of the U.S. Constitution and undermine the checks and balances of Federalism to do it.

Others are not so concerned. As Peirce writes:

This spring the new president’s Transportation and Housing Secretaries–Ray LaHood and Shaun Donovan–made a public pledge to collaborate in joint field work of their departments. On June 16 the new Environmental Protection Agency chief, Lisa Jackson, joined in under the banner of advancing more “livable,” sustainable American communities. In the near future, it’s like Energy Secretary Steven Chu will also align his department with the alliance.

The principles the group is enumerating are amazingly broad. Transportation choices are to go far beyond roadways, with a likely focus on transit to reduce foreign oil dependence, improve air quality and cut back greenhouse gas emissions. Government-assisted housing will be located near workplaces and/or transit to increase economic competitiveness and let hard-pressed families reduce high combined shelter and commuting costs. In lieu of sprawl subsidies, government assistance will be targeted toward support of existing neighborhoods and communities.

Setting aside for a moment the problematic proposition that there is an "optimal" urban form (so-called Smart Growth that is high density, walkable, and transit oriented), the real problem with this proposal has to do with the conscious subversion of state and local governance. At the begining of Peirce's article, for example, he states:

"The silos loom highest at the federal level, where massive departments from Transportation to Commerce to Labor rarely speak and almost never work together.

"Borders proliferate closer to home, dividing our metro areas into hundreds of economically linked but separately governed cities and suburbs. And borders, as state lines, plunge straight through such massive citistate regions as New York, Philadelphia, Chicago and St. Louis."

In short, one of the biggest barriers to progressive government approaches to solving these problems is not just the silos but the Federalist structure of government. Federalism essentially splits responsibilities for governing between the national governent (Federal Government) and the states. Cities (and by extention urban regions) are creatures of state government, not the federal government.

So, to really break down silos and implement an integrated approach to regulating city growth, we need regions with independent identies and authorities. In principle, we could create a new tier of Federalism, but this would require a Constitutional convention which would likely be very messy. (The last time we ended up throwing out the Articles of Confederation and writing an entirely new Constitution.)

In reality, the Federal government will continue to undermine state authority and responsibility by leveraging funding to build up the independent power of cities and extending federal regulation over states. Moreover, policymakers in large urban areas will probably welcome this circumvention because it allows them to completely sidestep state governments which are not necessarily aligned with their priorities. The Obama Administration, on the other hand, is aligned with their priorities and sympathetic to their policy agenda--more transit, more subsidized housing, greater federal funding of a slew of urban programs that can't be financed from their dwindling tax base.

Again, Peirce's observations are worth highlighting:

"But it’s [Obama's White House Office of Urban Affairs] known to be mulling one lead idea: challenging governments and civic leaders across regions to come up with their own ideas for joined-up metro-wide transportation, energy, housing and environmental projects. Federal departments could then negotiate the details and help fund proposals with the most impact for sustainability and livable communities.

"Metro regions, says Seattle Mayor Greg Nickels, new president of the U.S. Conference of Mayors, are such critical linchpins of the national economy that they need direct relationships with the federal government to bolster their livability and global competitiveness.

"Nickels and Tom Cochran, the Mayors Conference’s veteran executive director, favor going outside center city boundaries to create political alliances with executives of the large suburban counties. It’s time, says Cochran, “to form a political operation to demand” more effective federal response to entire metros’ needs.

Once again, we see momentum building for a European style progressiveism fundamentally based on a redistributionist view of government and growth that diminishes local governance while centralizing authority in the national government. We're looking more like Europe every day.

Other recent posts on Federalism can be found here and here.

Free Market Views on Transportation, Land Use Available

sam.staley@reason.org (Samuel Staley) — Thu, 25 Jun 2009 06:03:00 EDT

The American Dream Coalition hosts an annual conference spotlighting free-market and property-rights based approaches to transportation, housing, land use, and local government reform. The conference brings together the leading analysts and thinkers from the U.S. and around the world.

The last conference was in Bellevue, Washingotn, and DVDs and powerpoints can now be downloaded from their web site.

Speakers included Alan Pisarski, Wendell Cox, Ron Utt, Tom Rubin, Michael Ennnis, Peter Gordon, Sam Staley, and many others.

Where the Growth Is: Outside of Urban Areas

adrian.moore@reason.org (Adrian Moore) — Wed, 24 Jun 2009 19:29:00 EDT

A new report from the Census Bureau shows that as much as the busybodies of the nation want everyone to live in an apartment above a store in some city, where people are moving to is the countryside. According to the report, "U.S. outlying counties grew faster than central counties, 13 percent compared with 7.8 percent."

Hat tip to Wendell Cox for pointing out this report. He also points out that:

The report goes on to compare detailed results for the 12 metropolitan areas with more than 2,500,000 population that have outlying counties. In every case, the outlying counties grew faster than the central counties. On average, the outlying counties grew at 2.3 times the rate of the central counties (Figure 3).

In San Francisco, the outlying county growth was 25 times that of the central counties.
In New York, the outlying county growth was 10 times that of the central counties.
In Boston and Minneapolis-St. Paul, the outlying country growth was between four and five times the growth in the central counties.
In Baltimore, the outlying country growth was 3.5 times the growth in the central counties.
In St. Louis, Washington (DC) and Chicago, the country growth was between two and three times the growth in the central counties.

Reducing Greenhouse Gas Emissions Without Reducing Mobility

bob.poole@reason.org (Robert Poole) — Tue, 09 Jun 2009 16:36:00 EDT

Public Works Financing

This year’s six-year reauthorization of the federal surface transportation program is likely to have far greater impact on our transportation future than anything since the launch of the Interstate highway program in 1956. Many organizations are calling for fundamental changes in the federal role, and while there is certainly much that is dysfunctional about the current federal program, some of the proposed changes could make things worse, not better.

An example is the proposal released on May 15 by Sens. Jay Rockefeller (D-WV) and Frank Lautenberg (D-NJ) of the Senate Commerce Committee. The first item on their list of “Major Goals of the Federal Surface Transportation Policy and Planning Act of 2009” was this: “Reduce national per capita motor vehicle miles traveled [VMT] on an annual basis.” Many of their other goals were either laudable or innocuous, but this one is definitely harmful, as I will explain.

Before getting into the details, however, just imagine a world in which any proposed new toll road (or toll lanes) project would have to demonstrate conformity with a state’s VMT reduction plan, in order to get a federal record of decision allowing it to be built. In other words, you’d have to prove that your new toll road would lead to less driving.

You may think that is highly unlikely to be legislated, but if you think that, you haven’t been paying attention to debates on transportation policy, energy policy, and global warming over the last few years. Reducing vehicle miles traveled is on the wish-list of just about every leading environmental organization. It is part of the agenda set forth in the 2008 Brookings paper, “A Bridge to Somewhere.” And it’s a top priority of a group called America 2050, with backing from the Rockefeller Foundation and several other nonprofits such as the Regional Plan Association and the Lincoln Institute of Land Policy.

Not only that, but VMT reduction is now the law in California, thanks to SB 375, enacted last year. In the name of greenhouse gas (GHG) reduction, this law sets GHG reduction targets for each of the state’s 17 metro areas and requires them to draft smart growth-oriented land use and transportation plans aimed at reducing VMT. Those that produce the “best” plans to do this will get priority in the allocation of about $20 billion per year in federal and state transportation funding.

The logic chain that underlies such efforts goes something like this. Transportation is a major source of GHGs, and the more people drive, the more GHGs they emit. If their jobs, schools, and shopping are close to where they live, they won’t drive as much. Therefore, government should promote compact, high-density development so as to reduce driving and therefore to reduce GHGs.

When working through this logic chain with data and numbers, it starts falling apart. First, all of transportation (including trucking, airlines, barges, etc.) contributes 27.9 percent of U.S. greenhouse gas emissions, according to the Environmental Protection Agency. Personal vehicles (cars and light trucks) are 61 percent of that; hence, personal vehicles are the source of 17 percent of GHGs, not one-third, as you will often hear.

Second, greenhouse gas emissions from vehicles are a function of speed. Stop-and-go driving (as in congestion) produces much greater GHG emissions than steady-speed driving between 30 and 60 miles per hour; above about 60 mph, GHGs increase fairly rapidly.

Third, there is no hard data showing that people who live in higher densities drive significantly less than those who live in typical suburbia.

Fourth, there is excellent data from the Australian Conservation Foundation showing that among housing types, townhouses have the lowest carbon footprint, single-family suburban houses the second-lowest, and high-rise condo-type dwellings the highest. This logic chain also ignores considerable evidence that traffic congestion increases with urban density—which of course increases GHG emissions.

If the attempts to reduce VMT in these ways succeed, the result will be even greater reductions in mobility than Americans already suffer through from today’s traffic congestion. There is a small but growing academic literature that finds direct correlations between reduced travel times and regional economic productivity. One key example: if you can go twice as far in a 30-minute commute, your potential-jobs area is four times as large (since the area of a circle around your house is proportional to the radius squared). Some of this research is summarized in the 2008 book Mobility First, by my Reason colleagues Sam Staley and Adrian Moore.

There’s already a lot of momentum for including reduced VMT as one key performance measure in the reauthorization bill, so it’s likely to take a serious effort to keep it out. Besides debunking the logic chain on which it’s based, let’s consider some positive talking points that can help make the case.

First, Americans should demand that proposed transportation-related greenhouse gas reduction measures meet a reasonable cost-effectiveness standard. Both the Intergovernmental Panel on Climate Change and the well-respected McKinsey & Company study, “Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost?” recommend $50 per ton as a good benchmark, below which there are ample opportunities for large-scale but low-cost GHG reduction measures. (In the vehicular area, one of the most cost-effective is miles-per-gallon standards, like the tougher ones President Obama announced in May.) VMT reduction, especially via smart growth land use changes, will surely flunk that test.

Second, instead of setting goals for reduced VMT, we should aim to reduce VHT—vehicle hours of travel. High-occupancy toll (HOT) lanes and new urban toll roads using congestion pricing are excellent at reducing vehicle hours of travel, since reliable time savings are their main rationale. And since congestion pricing can maintain free-flow, uncongested travel, these managed roadways also reduce GHG emissions.

Finally, if we need a slogan, perhaps it could be this: Reduce CO2, not mobility. If we can re-frame the debate in this manner, we might well prevent the enactment of very harmful federal restrictions on driving.

Robert Poole is director of transportation at Reason Foundation.

Transit-Oriented Development Not Immune to Downturn

sam.staley@reason.org (Samuel Staley) — Sat, 06 Jun 2009 09:27:00 EDT

I saw this interesting tidbit in the news yesterday: Rockville Town Center in Maryland, a marquee project for proponents of transit-oriented development, is not holding up so well in the economic recession. Retailers and restaurants are folding up despite the concentration of housing built into the mixed-use project according to a report at WTOP.com

"But some businesses have cleared out of the mix of retail, restaurant and residential buildings.

One merchant, who didn't want to be recorded, rattled off a number that have left or are leaving.

"Bedheaders, Love Your Eyes, Mo's Southwestern Grill, Stonefish Grill," and more. On Gibbs Street, the tanning salon was shuttered. A handwritten sign urged would-be customers to call a corporate number to find other locations.

One shop worker looked out his front window and declared, "In two years, this will be nail salons and dollar stores."

This may be a bit harsh, but it makes an important point. Investment in and of itself doesn't guarantee success. Also, projects need to be evaluated over the long run, not the short-term swings of the economy. Nevertheless, Rockville Town Center was touted as a project designed to meet untapped demand, and it has the advantage of a major Washington, D.C. metro stop.

Replacements [for departed restaurants] are on the way. A wing restaurant will replace the Greystone Grill.

Fenestra apartments - the apartment building on site - reports that it has a 92 percent occupancy rate, but a Web site dedicated to rating apartments includes comments - and complaints - about the number of students being directed there by area universities and the subsequent noise and parties that result. Shop owners say when the residential spaces didn't sell with professionals and families, the pitch went out to universities to fill the building.

Another complaint in the area is that there is no grocery store in the development. Super Fresh is paying rent on a space, but has yet to open its doors. The chain failed to obtain a license to sell liquor.

Transportation-Housing Trade Offs of Suburban, Urban, and Rural Living

sam.staley@reason.org (Samuel Staley) — Wed, 27 May 2009 09:36:00 EDT

Transportation analyst Alan Pisarski, author of the definitive research and analysis on U.S. commuting patterns, has written an important and penetrating "white paper" for the Heritage Foundation on housing/transportation tradeoffs. It's a "must read" for anyone who wants to be conversant in this issue.

Housing-transportation tradeoffs will loom large in the current transportation reauthorization debate. An important and driving justification for increased transit funding, at the expense of both mobility and highway spending, will be the supposed benefits from households locating closer to transit. They can, essence, offload the costs of transportation onto the general public by reducing their out of pocket costs from getting rid of their car and its expenses and using highly discounted transit services.

Alan's analysis is much to detailed and rich to summarize here, but let's simply say the data are pretty compelling that our nation's wealth and mobility are inextricably intertwined. Rising expenditures on transportation are not an inherently bad thing if we are getting a higher quality of life from that spending.

Do Polluting Plants Locate Near Poor Neighborhoods?

sam.staley@reason.org (Samuel Staley) — Sun, 24 May 2009 08:47:00 EDT

The Berkeley Electronic Journal of Economic Analysis and Policy recently published intriguing academic research on environmental justice--the question of whether poor and minority neighborhoods suffer more than higher-income neighborhoods because polluting firms locate nearby. Ann Wolverton, a staffer at the U.S. Environmental Protection Agency, ran the numbers to figure out how much truth this claim might have.

Her results didn't fit the conventional wisdom. Once location decisions were analyzed based on the the original conditions of the neighborhood, race was not a factor. Poverty levels were significant, but higher poverty rates seemed to discourage plant location. In fact, her analysis confirms much of the traditional plant location literature--labor force, access to transportation, and clustering of similar plants are important.

Here's the abstract to Wolverton's article "Effects of Socio-Economic and Input-Related Factors on Polluting Plants' Location Decisions":

Abstract

Many environmental justice studies argue that firms choose to locate waste sites or polluting plants disproportionately in minority or poor communities. However, it is not uncommon for these studies to match site or plant location to contemporaneous socioeconomic characteristics instead of to characteristics at the time of siting. While this may provide important information on disproportionate impacts currently faced by these communities, it does not describe the relationship at the time of siting. Also, variables that are important to a plant's location decision – i.e., production and transportation costs – are often not included. Without controlling for such variables, it is difficult to evaluate the relative importance of socioeconomic characteristics in a firm's initial location decision. This paper examines the role of community socioeconomic characteristics at the time of siting in the location decisions of manufacturing plants while controlling for other location-relevant factors such as input costs.

When plant location is matched to current socioeconomic characteristics, results are consistent with what the environmental justice literature predicts: race is significant and positively related to plant location, while income is significant and negatively related to plant location. When plant location is matched to socioeconomic characteristics at the time of siting, empirical results suggest that race is no longer significant, though income is still significant and negatively related to plant location. Poverty rates are sometimes significant but act as a deterrent to plant location. Variables traditionally considered in the firm location literature – such as land and labor costs, the quality of labor, and distance to rail – are significant. The presence of pre-existing TRI plants in a neighborhood and average plant size are also significant.

Submitted: August 14, 2008 · Accepted: February 18, 2009 · Published: March 27, 2009

Recommended Citation

Wolverton, Ann (2009) "Effects of Socio-Economic and Input-Related Factors on Polluting Plants' Location Decisions," The B.E. Journal of Economic Analysis & Policy: Vol. 9 : Iss. 1 (Advances), Article 14.
DOI: 10.2202/1935-1682.2083
Available at: http://www.bepress.com/bejeap/vol9/iss1/art14

Rural Towns Drive Suburban Population Growth

sam.staley@reason.org (Samuel Staley) — Fri, 22 May 2009 09:25:00 EDT

Much of the received wisdom in planning circles is that migration out of the urban core is a primary driver of suburban population growth. In fact, most suburbs owe their growth to migration from rural areas and small towns, not central city residents escaping the urban core.

Wendell Cox makes this point in a recent article for NewGeography.com. Writes Wendell:

"There are, of course, significant individual exceptions. Virtually all of the first world core cities that have achieved a population of more than 400,000 – if they have not expanded their boundaries and did not have substantial empty land for development – experienced losses to 2000. Yet even in most of these cases, the majority of suburban growth was from outside the metropolitan areas, rather than from the core cities. For example:

St. Louis is a champion among the ranks of population losers, having lost the greatest percentage of its population of any large municipality in the world, (dropping from nearly 860,000 in 1950 to 350,000 in 2000). Indeed, it may be fair to say that St. Louis has lost more of its population than any city since the Romans sacked Carthage. Yet, even in St. Louis, 60 percent of suburban growth was from outside the metropolitan area, rather than from the city.

Few core cities have lost the nearly 1,000,000 residents that have fled Detroit since 1950. Yet, even in Detroit, 65 percent of suburban growth was from outside the metropolitan area, rather than from the city.

The city of Chicago lost 725,000 residents between 1950 and 2000, yet 82 percent of the suburban growth was from outside the metropolitan area.

Wendell discusses a number of world cities as well, including Paris and Tokyo, to make his piont.

The implications are important for understanding travel, as Adrian Moore and I discuss in our book Mobility First. As jobs decentralize to non-central city core areas, the idea of the hub and spoke approach to organizing the road network (with a central city as a hub). The new jobs are really growing up in new kinds of urban places with links and destinations separate from the urban core.

With this type of growth pattern, point-to-point trips are more numerous and more reflecting of complext metropolitan area travel patterns. In short, we need to think of a spiderweb, not a wagon wheel (Chapter 3 in our book).

The Struggling Housing Market

anthony.randazzo@reason.org (Anthony Randazzo) — Tue, 19 May 2009 10:29:00 EDT

The first quarter of 2009 was a tough one for the housing sector--no surprise there. The housing market has been in decline for nearly four years now, having hit a price peak in July 2006. The low earnings report from Lowe's today emphasized that, even though they posted better than expected revenues. Earlier this month Plute Homes President Richard Dugas, Jr., said:

"The operating environment for housing remained very difficult during the first quarter of 2009. The housing market continues to face rising unemployment, tight mortgage availability, increased foreclosure activity and declining home prices, all putting negative pressure on buyer demand."

And that was echoed by Centex CEO Tim Eller (who does catch one glimmer of hope):

"Housing markets remained challenged throughout the quarter, with the positives of historic affordability and low interest rates offset by rising foreclosures and high resale inventories."

Of course the "historic affordability" glimmer of hope means prices are rock bottom, which is killing homeowners who now owe more on their mortgages than their home is worth. One study suggests 20% of homeowners are "underwater." Another study estimates that "...of 78.2 million owner-occupied single-family homes, 14.8 million borrowers, or 19%, owed more than their homes were worth at the end of the first quarter, up from 13.6 million at the end of last year."

However, the fact that new home inventory is in decline might actually remedy the situation. A decrease of houses on the market should help aid a resurgence in prices, given decreased supply. Hopefully this will help some of those underwater, but the fact is that many of those who owe more than their house is worth bought it at an inflated value. Just because a house is underwater doesn't necessarily mean its value needs to go back up if it had been priced too high in the first place. Maybe a home purchased for $800K in May 06 is worth more like $600K. Such is the danger with taking out a loan (mortgage) on anything that has fluctuating value.

All, and all, though the housing market doesn't look pretty, it's not as grim as it was before. Prices may continue to decline, but they are reflective of what the market will pay.

(HT: Calculated Risk)