My latest Manhattan Institute report is now available. It’s called “Scaling Up: How Superstar Cities Can Grow to New Heights” and it examines the well-known problem of housing costs in coastal superstar cities.
I argue that some of these cities simply forgot how to grow during the decades during which they suffered from external constraints (the Depression, World War II), followed by decades of decline. (Even the city of San Francisco lost population for three straight decades).
I also explain why the average resident of these cities does not perceive much benefit from growth, and even can perceive negative effects from it.
While I’m generally a believer in local control, some of these places have made it extremely difficult to build anything. Hence I come down on the side of some level of targeted state preemption. (I do believe many of the proposed efforts out there are too broad). If San Francisco wants to make it impossible to redevelop a one story laundromat, then they have to expect state government will eventually act.
But I also point out that urban containment policies are a big factor in these price rises and say they must be addressed as well. People who want to forcibly upzone cities while making urban expansion nearly impossible aren’t concerned about housing prices, they have another agenda they are using high housing prices as an excuse to pursue.
Here’s the executive summary:
For decades, urban policy has focused on troubled cities—those losing population and commercial activity. But in many cities, the era of decline is over; today, we are seeing the emergence of prosperous, economically dynamic cities, often located on America’s coasts. These “superstar cities”—New York, Los Angeles, the San Francisco Bay Area, Boston, Washington, and Seattle—are among America’s largest, most productive urban regions. They have well-above-average per-capita GDP and incomes and serve as the home bases of high-value sectors like finance (New York) and high tech (San Francisco).
Despite their high incomes, these cities are growing slowly—or even, in the case of New York, shrinking—because of extremely high housing prices and overburdened infrastructure. In short, the superstars are suffering the problems of success, not failure.
There are a number of reasons that these cities are unable to expand their housing supply and infrastructure:
- Regulatory accretion and changes in social attitudes
- A loss of civic capacity to grow in the wake of an extended era of shrinkage—after decades of stagnation or decline, these cities are no longer organized to support growth
- A belief, on the part of ordinary current residents, that there are few significant marginal benefits to growth, or that the negative effects of growth, such as rising congestion, outweigh any benefits.
America’s superstar cities need to think like high-growth cities again, or the national economy will lose access to high-productivity locations. Avoiding this outcome will require significant liberalization of land-use regimes to permit more and denser housing development near transit lines and areas with the most jobs, as well as expansion of the urban footprint on the suburban edge.
Because local resident perceptions militate against growth, states should consider preempting local land-use control in a targeted way that balances growth with other community goods. Even with preemption, local leaders need to clearly articulate and sell to their existing residents the benefits of becoming a larger city.
In addition, these regions need to develop credible plans to expand their infrastructure, particularly transit and airports, to support the significant new levels of growth that a liberalized land-regulation regime would enable.
Click through to read the whole thing.
Aaron’s point holds true in some of the least successful cities in America, too. The City That Shall Not be Named has among the cheapest land and housing prices and lowest household incomes of any metro over 2 million in America…lower than Detroit! Still it also struggles to get even ordinary new projects going. It’s because the local elite see no point in permitting development that they don’t have a political or economic piece of. If the mayor doesn’t get his cut, he’ll shut down any attempt at a major new development. I can understand how that’s possible in SF or NY as Aaron describes, but how its done in a metro where large areas have ceased to have a functioning real estate market at all, is beyond me.
I think that its not just growth. It’s Density. Virtually all of America’s social and economic problems. Our current system subsidizes sprawl and penalized density. Density requires higher levels of public services but creates efficiencies that cannot be achieved otherwise. Learning to pull off density is the key. We have to stop letting the renter class block development on the most accessible land in a metro because it threatens their other interests elsewhere in that metro.
Most people dislike change regardless if their city is declining or ascending, but I suspect that it’s high population growth in and of itself that leads to a growth mindset. All places have the local cranks who resist development altogether, but newcomers, who lack nostalgia for the old customs and the way things used to be, can override them with enough numbers. Whereas cities with declining and stagnant populations don’t suffer the same pressure to alter the status quo, and tend to be dominated by people determined to preserve it. And it’s not just physical development; the real resistance is sparked by the changes in local culture and politics that newcomers would bring.
Without high population turnover, I suspect it’s only outside political pressure, long slow generational turnover or rarely a sudden existential crisis that can alter a city’s mindset.
You just described the City That Shall Not Be Named beautifully. It’s most committed ‘supporters’ aggressively work to keep outsiders out of its politics and culture and then loudly wonder why the world hasn’t “discovered” it. They usually then decide among themselves that the outside world is somehow decadent and corrupt and therefore CAN’T therefore appreciate its morally superior condition. Assured of its superiority, they have another beer and say something to the effect of ‘whatcha gonna do….” Catholic fatalism only reinforces this. Culture really is at the heart of economic development. We really all do create our own realities……
I’m not sure this is entirely right. The stereotypical Austinite is someone who says “Austin was perfect when I moved here two years ago, but all the people that have come since are ruining it!”
Cincinnati and Austin are opposites. There is very little in-migration to Cincinnati, while Austin gets more than 30,000 new arrivals every year. The stereotypical Cincinnatian is someone who says “Cincinnati was perfect in 1855 when my great great grandparents moved here, but all my ancestors and other disloyal Cincinnatians, who have left since then ruined it!”
Chris Barnett says
Some of the anti growth sentiment probably traces to the balkanized nature of large US metros, and the lack of available development sites within a particular municipality.
In this case, population growth (or regrowth) requires densification in any particular spot (probably also including acquisition and demolition) and it’s going to be resisted by some or even most neighbors (increased traffic, difficulty parking, removal of neighborhood “institutions”, and more generally, perceived negative changes in the neighborhood fabric).**
Alongside this, if redevelopment projects are proposed in “less-advantaged” (poor or minority) neighborhoods, the g-word enters the discussion.
**Too little remarked upon is that to fit even the same number of people in historic core cities as lived there in the pre-auto-suburban/post-WW2 peak, both more and larger housing units are required. More because there are fewer people per household today, and larger because the average American abode size has expanded tremendously in the same time.
Hence, neighborhoods can be faced with megaprojects consisting of 250-300 1100sf apartment or condo stacks on a podium in a superblock that might once have held 30-50 600sf dwelling units over storefronts with 10-20 single-family homes on the backside. People tend to fight that.
“America’s superstar cities need to think like high-growth cities again, or the national economy will lose access to high-productivity locations.”
I’m surprised how Aaron doesn’t even touch on the fact that these superstar cities are rarely rewarded by state and federal policies for being centers of economic activity. Why seek to be a center of high-growth when the rewards are largely intangibles that don’t translate into revenue to support that growth? Likewise, we’ve seen federal tax policy changed to punish these regions of the county and accelerate the subsidization of “red state” regions of the country at the expense of these cities.
As a resident of a “superstar” metro, i’s pretty clear to me how existing residents of “superstar” cities benefit from housing growth. More housing growth provides more choices, and reduces housing prices–or more likely slows down the increase in housing prices.
The benefit of employment growth is not so clear. Yes there are more job choices, but job choices in the region are pretty good, especially in the dominant fields. More jobs draw more inmigrants–domestic and foreign. Good for them, presumably. But for the existing residents, more residents means more pressure on the housing market and higher housing prices.
Essentially the article says that the superstar cities are resources for the whole national economy. That makes sense. But if these cities are going to act as a national resource, they have to be helped with the infrastructure investments that the author describes. The New York airports, for example, are serving people far beyond metro New York. Even new transit investments–which are required to maintain mobility in any of these regions–can really be understood as serving a broader purpose. But the nation hardly seems to be in a mood to invest in “wealthy” San Francisco.
So local control is the problem and increased influence from the states and national governments are the solution. Large improvements in transportation and housing can’t be achieved by local governments alone.
P Burgos says
China seems to take the view that its cities are important national resources to achieve economic growth and improvements in living standards, and acts accordingly, investing massively in intracity transit, and also by trying to increase school capacity in urban areas, which is still quite an issue, with compulsory education only provided through 9th grade, and some cities only having enough slots at high schools to only offer a publicly funded high school education to 50 percent of students.
Authoritarians do ‘get things done.’ Hitler did get the autobahns built and the Chinese Communist Party had crushed all that stands in the way of their plans, too.
P Burgos says
I don’t think it is merely the authoritarianism. There are lots of countries with an authoritarian elite that cannot achieve all that much. I suspect that there is a combination of culture and government structure that contributes to the power of the Chinese state to build infrastructure and develop cities.
As you noted previously, cities that are full of newcomers tend not to be as resistant to change, and all of China’s cities are basically full of people who are either directly from the countryside or are at most one generation removed from subsistence level farming. They are not very nostalgic about the past.
Also, change has been constant, and so people are more comfortable with it. Additionally, people see the change as part of the development of the country. It is a sign that the country is progressing, and is something in which they tend to have a little bit of pride.
As for the government part, what China really lacks are millions of veto points over developing property and building public infrastructure. While that definitely is a result of a political system in which the CCP is the only legitimate political organization, it is also a result of the way in which the CCP is organized. Accountability and power in the CCP tends to be hierarchical and not overly dependent on patronage, which is say in sharp contrast to what you read about Putin’s Russia, where it seems as if Putin answers to the petty provincial and local powers as much as they answer to him.
The point being that it isn’t difficult to imagine a liberal democracy copying some aspects of China’s governance to improve accountability, and the way to do that would be to eliminate elections at the local level and only have elections for, say, state or provincial legislatures, who then appoint a prime minister who hires all the important public officials for the province, including mayors.
I was mocking the CCP’s competency and moral legitimacy. It’s not an answer to any question. The epidemic is showing that. The answer to america’s challenges is reinvigorated democracy at all levels, not the abandonment of local democracy. I’m honestly shocked that you took my bait so readily.
One thing that is completely ignored here: So many of the Superstar cities are in geologically and climate challenged areas. SHOULD more people be crammed into skyscrapers sitting just a few miles (if not on top of) the San Andreas Fault in a State potentially facing major water supply issues?
What about pushing more people into the Puget Sound region? Also Seismically active….some geologists warn that everything west of I-5 could be washed away if the Cascadia Subduction Fault goes.
New York City? More hurricanes and ocean-based flooding is predicted. It may be valuable enough to spend the billions protecting the city, but….
Atlanta-climate change will not treat the humid subtropical south well. And, the State is facing serious water supply issues despite the (increasingly unreliable) regional rainfall.
Internationally, the situation can be worse. Australia may be unsustainable over the long term. Jakarta is literally sinking into the mud. Major economic centers in South Africa are facing severe drought. Sao Paulo saw its major reservoirs go dry-and even fancy condo towers saw their water supplies shut off.
George Mattei says
Much here to consider. I think you need good comprehensive planning in today’s environment, or you get Atlanta. Of the superstar cities, Boston probably has the most room to grow. But the development outside of the core Route 128 area feels like Atlanta-very low-density sprawl that worsens congestion, chews up land and ends up costing tons to maintain. No wonder no one wants more.
The alternative is denser development, but density has a bad name. People move to Sprawlville to be away from the City, not to mention the racial and socioeconomic implications that come with today’s zoning regimes. They don’t want it following them to their new place.
Planing itself has a bad name-either you think Oregon’s growth boundary-type planning, or you think Robert Moses-like bulldozer and public housing planning. But really good planning would be comprehensive-laying out a framework for how and where to grow, and how and where NOT to grow. It would include estimates for growth needs, infrastructure estimates to accommodate those needs, and regulatory reform to allow the growth to occur.
Aaron, you noted that there are ulterior motives for growth boundaries. I think one of the main ones is environmental advocates. Part of the issue is that we need to learn how to grow with a lighter footprint. Look at the Chernobyl Exclusion Zone. Wildlife is thriving there in the absence of humans. So for nature, ironically, having human habitation was more deadly than having a nuclear meltdown in your backyard. Now there’s always going to be some cost of growth, but in the long run it can’t be the cost that it has been in the recent past-it chews up too many resources.
So there’s a lot to consider. There needs to be a step back to rethink how things are done in a very basic manner, including matching housing development to the market demand, but also much more. Unfortunately today we’re living in a calcified sociopolitical regime that probably will need to collapse upon itself-as it seems to be doing quite well right now- before real change can be had.
what if the market demand is unsustainable and ultimately harmful? I may DEMAND a 7000 pound Stupid Useless Vulgarity to drive to the mall, but meeting the demand has some SERIOUS costs. I may demand a 5,000 square foot house 45 miles from my job, but how far must we go to meet that demand?
Roads and drivers are massively subsidized in America. The aren’t created by markets.
I think it is a bit more complicated than that (and more complicated than my original plaint). But I agree with your comment on subsidies, of course. It’s a self-reinforcing system. Private players and governments work together as much as in opposition. Suburbia was originally very, very profitable. Developers certainly worked in cahoots with local and state governments to open up land for development. Plus, there was the ideological (and racial) underpinnings of the great suburban migration.
Markets are not some pure economic reality, though. They are deeply affected by propaganda (advertising) which trains us to NEED 5,000 square foot houses and 7,000 pound trucks. Which are further supported by government taxation and subsidies. It’s a vicious circle! Chuck Marohn likes to focus on these issues,.
How do we know that “Suburbia was originally very, very profitable?” It was subsidized from the start. Do you merely mean that road and house builders made individual profits for their companies? We were only trained to need large houses when it became possible to access enough land to build large numbers of them. The massive subsidizations of the suburban industrial complex made that possible.
Matt: I merely mean exactly that (profitability for their companies). As Marohn and others have pointed out, suburbia is extremely COSTLY over the long term for society and arguably its residents.
The rest of what you state echoes my second paragraph, so of course I agree!