Freeman

RULES OVER RULERS

Smart Growth?: U Cities vs. Galaxy Cities

Progressive urban policies hurt the poor, pamper the rich, and drive off the middle class

AUGUST 13, 2014 by MAX BORDERS


 

I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can’t afford to live here anymore. I’ll protest my appraisal notice, but that’s not enough. Someone needs to step in and address the big picture.

– Gretchen Gardner, Austin, TX 

San Francisco, Seattle, and Portland are generally considered progressive cities. Well in advance of other cities, they implemented “smart growth” policies. Now, there is a lot to recommend about these cities, but if you’re not rich, you’ll probably just want to visit.

Some people think cool cities are just expensive. And advocates of smart growth think the cool draws people and the growth has to be “managed.” Those who live there are happy to tolerate the planners for all sorts of reasons, but signaling one’s ideological bona fides is surely high among them. There is also the (generally unstated) desire to curb the growth—that is, to keep out the newbies before they ruin everything. Your favorite dive bar could become a chain restaurant, god forbid. And many well-heeled urbanites will go without cars and cram themselves into all manner of tiny dwellings to indulge environmental self-congratulation.

Smart growth thus becomes a catch-all: a cluster concept for socially engineering your way to bourgeois bohemia and treating everything in town as the property of an enlightened elite (which every self-respecting progressive goes along with lest she be considered unenlightened, or worse, not a member of said elite).

If they’re being honest with themselves, however, denizens of such places have to admit there is not only a growing gap between rich and poor in these towns, but a disappearing middle class. Much of this gap in San Francisco, for example, comes from the fact that some of the largest companies in the world are headquartered there, even among folks who self-identify as progressives. That’s a lot of rich people. And of course, progressives say they don’t like inequality. But they also don’t like sprawl (building out) or high-rises (building up). And in an effort to remedy both inequality and sprawl, progressive town fathers end up making both worse. They’re creating “U cities.” 


U cities 

I shamelessly borrow the term “U city” from entrepreneur Gary Hoover, who is used to doing business in developing countries where a lot of the major cities are U cities. Here’s the idea: When you have a strong middle class, the population—when mapped on a curve—looks more or less like an inverted U (X is the number of people, Y is the level of income.) But the inverted U can get flipped to a regular U when, for example, the middle class starts to leave, the rich come and stay, and the poor are trapped by incentives. U cities predominate in the third world, primarily due to rampant cronyism—which limits possibilities for a middle class to emerge. In the United States cronyism is a factor, too. But so also are urban planning and growth management policies. 


Smart growth

To understand how wealth disparities worsen in cities like these, we have to look at clusters of policies that go under the name "smart growth." They aren’t the only policies that create U cities, but these three areas drive the U city pattern, so they’re a good place to start the conversation:


  • strict zoning regulations and building codes
  • rent control and low-income housing subsidies
  • rail investments preferred over roads

These three points alone suffice to set any city on the path to being a U city. (Austin, where I live, is trending that way.)

Let’s take it as a given that people like living in cool cities such as San Francisco and Portland. These bourgie meccas are just the sorts of places likely to attract people from tech and other high-net-worth sectors—particularly because smart, forward-thinking people like to be around other smart, forward-thinking people. This creates all sorts of virtuous feedback loops. It also means these cities attract wealthier people. As we alluded to above, some of these innovation clusters tend to have their own gravity and network effects, which are going to raise the cost of living. 


Code red

Now, let’s add in strict zoning regulations and building codes. In a relatively free housing market, the cost of creating new housing supply is generally far lower. So, for example, city planners don’t have to approve a townhome or building for mixed use, declare it residential only, or whatever—if it can be built at all. Not so in areas with byzantine building codes and zoning. In these areas the stock of housing is limited and restricted to certain areas of the city. Of course, this makes housing far more expensive. Now, that’s okay for wealthier people. Indeed, they’re content with paying more. Once they’re there, they really like the idea that not so many more people are moving into the area. If you’re a middle-class earner, this makes life considerably more difficult as housing is far less affordable. The wealthier folks snap up the dwellings in limited supply. Middle-class folks look for housing outside the city, if they can stay in the area at all. The poor, however, stay. They are subsidized to do so. 


Poor house

By now the progressive town fathers have likely picked up on the fact that this is happening. So they expand or maintain policies like rent control and subsidized housing for the poor. Poor people who’ve been there for a while cling to their rent-controlled or subsidized housing—as is reasonable to do given the incentives (but which sadly represents another “poverty trap” for the poor.) Of course, basic economics tells us that rent control exacerbates the problems of a limited housing supply, as developers have far fewer incentives to build properties and tenants have great incentives to stay put. The rental market is therefore less dynamic and the price controls distort the housing market even more—further limiting the availability of affordable housing. Non-rental properties may get built. But as we say, their supply is artificially limited, too, so these are reserved for tech execs.

To give you an idea: As of this writing, the average rental in San Francisco costs $3,437 per month; the mean home value is $910,000. Again, some of this high cost is due to the sort of talent the city attracts. And, of course, some cities (like Frisco) are bounded by water on three sides. But that can’t be the whole story. 


Expensive tastes

Of course, rich people have expensive tastes. Whatever one thinks about the purported environmental benefits of rail travel—dubious at best (especially relative to other considerations, such as cost)—rich people are not going to want to ride a bus. For conscientious social signalers in progressive cities, the only thing that’s going to pull them out of their Priuses is rail transit. The trouble is, light rail is really, really (really) expensive. In fact, on average, rail transit is four times more expensive than driving per passenger mile, according to Cato transportation analyst Randall O’Toole.

Not only is light rail profoundly wasteful in cost-efficiency terms, it means resources that could have gone to increasing road capacity or building bus networks are lost (not that buses benefit town cronies). People who idealize walkable cities are simply kidding themselves, as most people drive their cars anyway and grumble about the awful commuting times—which new rail line thruways end up making worse.

Now, let’s not forget that rail is an expensive proposition. To give you an example of just how expensive it is, consider that the average U.S. light rail rider only pays in his/her fare about 10 percent of the total cost of the ride. Boosters rarely bring up costs, and cost overruns always plague such projects once voters take the bait. The people who do use rail don’t see or feel the budgetary nightmares their (in most cases, mostly empty) train cars create.

That’s because a lot of the costs get shifted onto people who will never see or take light rail in their lives—people who live in cities without rail, or people who live in rural areas. So much of the tax burden for these rolling pyramids falls disproportionately on the poor and middle class. After all, funding for such projects—even if they benefit rich, urban progressives—comes from sales and property taxes (which are not progressive taxes). If the price of housing does not suffice to drive off the middle class, the increasing tax burden will. And it’s starting to drive off the middle class. And the contradictions can turn any self-respecting progressive against herself.

But not at first. You might get responses like those from this Austin woman

“I’m at the breaking point,” said Gretchen Gardner, an Austin artist who bought a 1930s bungalow in the Bouldin neighborhood just south of downtown in 1991 and has watched her property tax bill soar to $8,500 this year.

“It’s not because I don’t like paying taxes,” said Gardner, who attended both meetings. “I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can’t afford to live here anymore. I’ll protest my appraisal notice, but that’s not enough. Someone needs to step in and address the big picture.” 

Perverse effects and strange bedfellows 

Hopefully you can now see how smart growth policies hurt the poor, pamper the rich, and drive off the middle class. It’s strange that cities with so many people who claim to care about inequality would let these trends continue. It’s stranger still that cities with so many conscientious progressives would allow so many policies to make the poor worse off. Of course, a dependent supplicant class keeps in power only those willing to feed their dependency. And yet this dependency class creates a striking contrast in U cities: Poor, superrich and little in between. The contrast is such that voters continue to double down on contradictory policies. And ultra-progressives in U cities can’t figure out why the one percent makes such great bedfellows with those who spurn them. In any case, U cities demonstrate that progressives must choose: Either improve the lot of the poor and middle class, or implement smart growth. Attempts to “balance” such contradictory values will continue to exacerbate the perverse patterns of U cities and create an endless series of policy epicycles that will require an endless succession of “fixes.”

Urban progressives who fret about the disappearance of the middle class in America should take heart: The middle class is still here. They’ve just moved out of your town.


U cities v. galaxy cities

Now what about inverted-U cities? We could call these “fried-egg” cities, but that’s not terribly sexy. I prefer “galaxy cities” for obvious reasons. The idea behind galaxy cities is that, all things equal, you’ll not only get a fat bell of a middle class on the graph, but you’ll also get a galactic distribution of housing options if you look from above. Some call this sprawl, because more affordable housing extends outward from a denser core, phasing out at the periphery after the suburbs and exurbs. Not-so-obvious reasons for the galaxy metaphor include dynamics that have been unpacked in the work of the Santa Fe Institute (SFI), a group that studies all sorts of phenomena in complex systems.

"It’s an entirely new kind of complex system that we humans have created," says Luis Bettencourt of SFI, quoted in Science. "We have intuitively invented the best way to create vast social networks embedded in space and time, and keep them growing and evolving without having to stop. When that is possible, a social species can sustain ways of being incredibly inventive and productive." 

Jane Jacobs would have liked galaxy cities, too. “There is a quality even meaner than outright ugliness or disorder,” she wrote in The Death and Life of Great American Cities, “and this meaner quality is the dishonest mask of pretended order, achieved by ignoring or suppressing the real order that is struggling to exist and to be served.” Galaxy cities are participatory cities. That is to say, their people participate far more in their evolution than do town planners. They are emergent cities. 


Future cities

Galaxy cities of the future will be far smarter than any city that adopts smart growth, as galaxy cities will do the following: 

Eliminate unreasonable zoning restrictions and costly building codes. Some believe that cities without zoning laws and building codes will have collapsing structures and factories moving in next to residential housing. It would take us too far afield to explain why free prices and a robust system of common law would help settle conflicts that might arise from the absence of zoning and municipal codes. Suffice it to say that with prices undistorted, property rights well established, and municipal courts using tort principles to settle disputes, cities will continue to find equilibria that will make galaxy cities far more hospitable to people across the income spectrum (especially the middle class). And if, god forbid, poor or middle-class people have to live in the same zone as a warehouse, at least they’ll be able to afford it.

Get rid of rent control and, instead, voucherize housing for the poor. Assuming full privatization of housing is not politically viable, then cities should simply get rid of government housing projects and rent control. Instead, the municipal government can offer housing vouchers for the poor based on an income scale specific to that city’s cost of living.

Think of any given citizen as needing to go to any given point in the city. Instead of going from point A to point G—with only points B, C, D, E, F in between—galaxy cities will build travel networks that assume people want to get from point A to point n (read: “any point among millions”) as quickly, efficiently, and safely as possible. To accommodate galaxy-city travelers, they will create distributed networks and vascular systems. And until there are flying cars, these systems will be built around cars. There are a number of great ways to build car-centric systems: 


  • Remove regulations against ride-sharing technologies, such as Uber and Lyft;
  • Prepare for the coming age of driverless cars (We have the technology!);
  • Convert as many intersections as possible to traffic circles;
  • Optimize traffic lights using computer modeling;
  • Use congestion pricing and hot lanes, where possible;
  • Liberalize and privatize all bus and van services;
  • End municipal transport and taxi cartels;
  • Let resources follow cars rather than hoping cars (or people) follow resources;
  • Respect the urban ecosystem as it is rather than as you would hope for it to be.

The extent to which planning for transportation is a market-based phenomenon is the extent to which cities will become more convenient, cost-effective, and dynamic for everyone.

In the connected age, we sometimes forget that most of us move about in urban ecosystems. But most people do. That’s why it’s more important than ever to consider the economic and policy implications of urban planning fancies that end up making people worse off—or simply drive them away in their cars. 

 

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October 2014

ABOUT

MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also cofounder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

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