Monthly Archives: February 2013

Repeat argument: Washington D.C. is the real second city in the United States

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Aaron Renn argues that Washington D.C., and not Los Angeles or Chicago, is the real “second city” in the United States:

During the first decade of the twenty-first century, the Washington metropolitan area overachieved on a variety of measurements versus its peer metro areas—that is, the rest of the ten largest metros in the country, plus the San Francisco Bay Area (which federal classifications divide into two, neither of which would make the Top Ten on its own). Among these regions, Washington ranked fourth in population growth from 2000 to 2010, trailing only the three Sunbelt boomtowns of Atlanta, Dallas, and Houston (see “The Texas Growth Machine”). Washington is currently the seventh most populous metropolitan area in America.The region has performed even more impressively on the jobs front. Since 2001, Washington has enjoyed the lowest unemployment rate of its peer group. Over the course of the entire decade, it ranked second in job growth, trailing only Houston. That wasn’t just because of the federal agencies and gigantic contractors of Washington stereotype. The region has also been a hotbed of entrepreneurship—much of it, to be sure, dependent on federal dollars. During the 2000s, it had 385 firms named to the Inc. 500 lists of fastest-growing companies in America, according to Kauffman Foundation research—by far the most of any metro area. From 2000 through 2011, according to rankings developed by Praxis Strategy Group, Washington’s low-profile but powerful tech sector had the country’s second-highest job growth, after Seattle’s. The region is also one of America’s top life-sciences centers.

Then there’s economic output. During the 2000s, per-capita GDP grew faster in Washington than in any of its peer regions except the Bay Area. Today, Washington’s per-capita GDP is the country’s second-highest—again, after the Bay Area. Unlike Washington, however, the Bay Area hemorrhaged jobs over the course of the decade. Related to Washington’s impressive output is its astonishing median household income, the highest of any metro area with more than 1 million people. A remarkable seven of the ten highest-income counties in America are in metro Washington. And during the 2000s, per-capita income rose in Washington faster than in any of its peer metros.

Finally, Washington’s population is the best-educated in America. Almost half of all adults in the Washington region have college degrees, the highest proportion of any metro area with more than 1 million people. The same is true of graduate degrees: almost 23 percent of Washingtonians hold them…

But what solidifies Washington’s emerging status as America’s new Second City isn’t its economic performance or its emerging global-city profile. Both of those are secondary effects of the real change in Washington: the increasingly intrusive control of the federal government over American life.

Washington has changed in recent decades and Renn highlights some of these shifts. Three things strike me about his analysis:

1. Washington still lags compared to Los Angeles and Chicago in being a world city. According to the 2012 A.T. Kearney Global Cities Index, New York is #1, Los Angeles #6, Chicago #7, Washington #10, and Boston is the next American city at #15.

GlobalCitiesIndex2012ATKearney

This may not be a huge gap but L.A. and Chicago particularly have edges in business activity, human capital, and cultural experience while Washington has the clear edge in political engagement.

2. The choice to build a new capital in the United States back in the late 1700s is still having far-reaching implications today. Imagine New York City as both #1 global city and center of US government. While Renn argues the federal government in Washington is helping propel it up the rankings of cities, I wonder how government centers will fare in the future versus business and trade centers like New York, L.A., and Chicago (which aren’t even the state capitals). We might then benefit from a cross-national comparison with other countries that have similar set-ups.

3. Renn has made this argument before. I wrote a post titled “Washington D.C., not Chicago or LA, the real “second city” of the United States?” back on April 7, 2012 based on Renn’s piece on newgeography.com titled “The Great Reordering of the Urban Hierarchy.” So Renn is making this argument…is anyone else?

h/t Instapundit

You can get a no-money-down mortgage – if you are really wealthy and put your investments up as collateral

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No-money-down mortgages have been blamed for helping bring about the recent economic crisis but they can still be obtained – if you have the assets to obtain one.

It’s 100% financing—the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They’re almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral—the house and a portion of the client’s investment portfolio in lieu of a traditional cash down payment.

In most cases, borrowers end up with one loan and one monthly payment. Depending on the lender and the borrower, roughly 60% to 80% of the loan can be pegged to the home’s value while the remaining 20% to 40% can be secured by investments. On a $2 million primary residence, for instance, the borrower could get a $2 million loan, which would require a pledge of assets in an investment portfolio to cover what could have been, say, a $500,000 down payment. The pledged assets can remain fully invested, earning returns as normal, without disrupting the client’s investment goals.

While these affluent clients may be flush with cash, this strategy allows them to get into a home without tying up funds or making withdrawals from interest-earning accounts. And given the market’s gains combined with low borrowing rates in recent years, some banks say clients are pursuing 100% financing as an arbitrage play—where the return on their investments is bigger than the rate they pay on the loan, which can be as low as 2.5%. Some institutions offer only adjustable rates with these loans, which could become more expensive if rates rise. In most cases, the investment account must be held by the same institution that’s providing the loan.

These loans also provide tax benefits. Since borrowers don’t have to liquidate their investment portfolios to get financing, they can avoid the capital-gains tax. And in some cases, they can still tap into the mortgage-interest deduction. (Borrowers can usually deduct interest payments on up to $1 million of mortgage debt.)

Theoretically, this is how no-money-down mortgages could work since only signing up wealthier clients helps limit the losses a bank might incur if they default on the mortgage. Yet, it also sounds like another financial option that is only available to the wealthy who might even be able to make money by taking out a non-money-down mortgage. In other words, is this something that only helps the rich get richer (and possibly bigger houses)?

When banks say these loans are safer, how much safer? I suspect part of the safety of these mortgages is that there are relatively few new ones being offered to wealthy Americans. It would be interesting to hear about some cases where this has worked out well or not worked out as planned.

Data suggests cities, suburbs, and rural areas divided about Obama

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Recent data continues to suggest President Obama has quite different levels of support across cities, suburbs, and exurbs:

But the most important Obama divide to keep your eye on this year is the one between urban, suburban and rural places.

Urban America is still strongly in Mr. Obama’s corner, 66% say they are optimistic or satisfied. That’s down from 2009’s 74%, but not sharply. The suburbs have grown more skeptical with only 48% saying they are in the optimistic/satisfied camp. In 2009, 63% of the people in suburbs were feeling positive about Mr. Obama’s first term. And rural America is particularly gloomy about the next four years, with only 35% saying they are optimistic or satisfied. In 2009, 58% in rural America thought Mr. Obama would do a good job in the White House.

This is not a new split; Joel Kotkin, for example, has argued for years that the suburbs are the current battleground for voters as city dwellers tend to lean Democratic and people in rural areas tend to lean Republican. But the persistence of this divide goes beyond a red state, blue state divide that has been at the center of American political discourse for over a decade. It is not just about states, which matter particularly for Congress and electoral votes. Rather there are large divides even within states that lead to all sorts of more local issues about how resources should be allocated and who should be able to make decisions. President Obama is known for calling for a purple America bringing together red and blue states but perhaps he needs to call for an America that bridges the big divides between cities, suburbs, and rural areas.

A growing interest in science cafes in America?

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Reuters reports on a supposedly growing trend: science cafes.

Science cafes have sprouted in almost every state including a tapas restaurant near downtown Orlando where Sean Walsh, 27, a graphic designer, describes himself and his friends as some of the laymen in the crowd…

But the typical participant brings at least some college-level education or at least a lively curiosity, said Edward Haddad, executive director of the Florida Academy of Sciences, which helped start up Orlando’s original cafe and organizes the events…

Haddad said the current national push to increase the number of U.S. graduates in science, technology, engineering and math, or the STEM fields, is driving up the number of science cafes…

The U.S. science cafe movement grew out of Cafe Scientifique in the United Kingdom. The first Cafe Scientifique popped up in Leeds in 1998 as a regularly scheduled event where all interested parties could participate in informal forums about the latest in science and technology.

I’m dubious that this is that big of a movement just because “almost every state” now has a science cafe. This is similar to journalists claiming that something is popular because there is a Facebook group devoted to it.

But, this sounds like a fascinating example of a “third place” where Americans can gather between home and work, learn, and interact with others interested in similar topics. In fact, it sounds more like a Parisian salon of the 1800s. However, the article also mentions these cafes are probably more attractive to the NPR crowd and I imagine many Americans would not want to go discuss science in a cafe.

I wonder if the news coverage would be different if Americans were gathering in cafes to talk about other topics. How about The Bachelor? The tea party? Religion? The tone of the article is that it is more unusual for Americans to want to hear about and discuss science when they are not being forced to.

h/t Instapundit

Choose teardown “mansionization” over sprawl in suburbs

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Anthony Flint argues that communities should see the positive aspects of teardown McMansions:

Yes, some embodied energy is wasted in a teardown. But the new homes are universally more energy-efficient, and can be made with recycled materials and other green construction methods. What families want is a little bit more room. A recent survey by the National Association of Homebuilders found that most homeowners want something in the area of 2,500 square feet – close to the average size for single-family homes, which has been creeping up steadily over the decades.Sometimes the extra space is for multigenerational housing, a certain trend in the years ahead. The homebuilder Lennar recently touted homes with granny flats and in-law apartments – the kind of flexible housing New urbanism has been advocating for 20 years or so.

There is surely another trend of “right-sizing” and smaller homes and even micro apartments, for empty nesters and singles. But that’s the thing about the housing markets – one size doesn’t fit all. If some homeowners want more size, they’ll find a way to get it. They key factor in the teardown phenomenon is location.

The same NAHB survey found that while a bigger house was desirable, families didn’t want that house to be isolated out in the far-flung exurbs, miles from anywhere. They want to be able to walk to school or to a park, maybe even to a store to get a half-gallon of milk, or at least not spend quite so much time driving all around to disparate destinations.

And so we come back to teardowns and mansionization. Another way to describe the phenomenon is “infill redevelopment.” Builders are essentially re-using an established parcel in an already developed neighborhood. That’s a far greener step than building a true McMansion out in the cornfields. It’s the essence of smart growth – build in the places already built up, and leave the greenfields of the periphery alone.

One argument for teardowns is the rights of individual property owners to take advantage of a market that will pay them more money. However, this argument tends to pit the interests of the neighborhood or community versus those of the individual. In contrast, this argument is much more community oriented. Flint argues that the alternative is not between an individual and their neighbors but rather between suburban sprawl or infill development. These new large homes may not be ideal and communities could provide guidelines for how big they should be and/or how they should match existing homes and styles yet they are better than new subdivisions.

Flint is hinting at another issue that many suburban communities will face in the coming decades: just how dense should desirable suburban areas become? While teardown arguments seem to mostly be about neighborhoods and retaining a certain kind of character, the bigger issue is whether suburbs should be packing in more houses or even building up. This will be a problem for two kinds of suburbs: those who have little or no open land remaining (and this ranges from inner-ring suburbs to ones 20-30 miles out from big cities who have run out of space in more recent years) and those that could attract lots of new residents. Naperville is a good example as it has a downtown and amenities that would likely attract people and it has reached its limits on the south and west after several decades of rapid growth. Indeed, Naperville has received proposals in the past for high-rise condominiums (and turned them down) and the latest Water Street development proposal suggests expanding the denser downtown.

In the end, these suburbs will have to decide if they want denser development. If they hope to grow in population or develop more mixed-use areas (for example, through transit oriented development around transportation nodes), this might require teardowns and denser development.

Celebrating “a cathedral for commuters”

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Grand Central Terminal is 100 years old and NPR provides part of its story:

Seven is one of the 750,000 people who walk through Grand Central every day. To put it into perspective, that’s more people than the entire population of the state of Alaska — a handy fact you can learn from Daniel Brucker, an enthusiastic New Yorker who’s managed Grand Central Tours for the past 25 years…

Fortunately, the Vanderbilt family, who owned the New York Central Railroad, had the money. And what they built was a 49-acre rail complex with more tracks and platforms than any other in the world. The buildings on Park Avenue, to the north, are built over it. And it’s an almost unfathomably busy place — during the morning rush hour, a Metro-North commuter train arrives every 58 seconds.

“It’s like a cathedral that’s built for the people,” Brucker says. “We’re not going through somebody else’s mansion, through somebody else’s monument. It’s ours. It’s meant for the everyday commuter, and it’s a celebration of it.”…

“It is the largest interior … public space in New York,” Monasterio says. The windows on the east and the west side, those windows used to open, they used to draw air from the east side, through the terminal, over and out the west side.”

Having been there a few times myself, it is a remarkable building. Public spaces that are so crowded, functional, and well-designed are rare.

It would be interesting to hear more about how Grand Central fits into the fabric of New York City. On one hand, it seems like quintessential New York: classical exterior, busy space, busy yet functional. At the same time, it doesn’t exactly fit with Midtown Manhattan and the modern skyline. It is a relic of the past, a building that had to be saved through the first federal conservancy act from the 1960s.

Debate over priming effect illustrates need for replication

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A review of the literature regarding the priming effect highlights the need in science for replication:

At the same time, psychology has been beset with scandal and doubt. Formerly high-flying researchers like Diederik Stapel, Marc Hauser, and Dirk Smeesters saw their careers implode after allegations that they had cooked their results and managed to slip them past the supposedly watchful eyes of peer reviewers. Psychology isn’t the only field with fakers, but it has its share. Plus there’s the so-called file-drawer problem, that is, the tendency for researchers to publish their singular successes and ignore their multiple failures, making a fluke look like a breakthrough. Fairly or not, social psychologists are perceived to be less rigorous in their methods, generally not replicating their own or one another’s work, instead pressing on toward the next headline-making outcome.

Much of the criticism has been directed at priming. The definitions get dicey here because the term can refer to a range of phenomena, some of which are grounded in decades of solid evidence—like the “anchoring effect,” which happens, for instance, when a store lists a competitor’s inflated price next to its own to make you think you’re getting a bargain. That works. The studies that raise eyebrows are mostly in an area known as behavioral or goal priming, research that demonstrates how subliminal prompts can make you do all manner of crazy things. A warm mug makes you friendlier. The American flag makes you vote Republican. Fast-food logos make you impatient. A small group of skeptical psychologists—let’s call them the Replicators—have been trying to reproduce some of the most popular priming effects in their own labs.

What have they found? Mostly that they can’t get those results. The studies don’t check out. Something is wrong. And because he is undoubtedly the biggest name in the field, the Replicators have paid special attention to John Bargh and the study that started it all.

While some may find this discouraging, it sounds like the scientific process is being followed. A researcher, Bargh, finds something interesting. Others follow up to see if Bargh was right and to try to extend the idea. Debate ensues once a number of studies have been done. Perhaps there is one stage left to finish off in this process: the research community has to look at the accumulated evidence at some point and decide whether the priming effect exists or not. What does the overall weight of the evidence suggest?

For the replication process to work well, a few things need to happen. Researchers need to be willing to repeat the studies of others as well as their own studies. They need to be willing to report both positive and negative findings, regardless of which side of the debate they are on. Journals need to provide space for positive and negative findings. This incremental process will take time and may not lead to big headlines but its steady approach should pay off in the end.

Argument: boost America’s foreign policy by promoting walkable communities at home

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Patrick Doherty argues that promoting and developing walkable urbanism at home can boost American foreign policy abroad:

This is the lesson, Doherty says, we should take from that era: “The real key to American strategic success in the 20th century – both during World War II and the Cold War – was not the military stuff. The key was that we understood how to let our economic engine do the heavy lifting.”

It’s clear today, though, that suburbia can no longer do this for us. The children of baby boomers are less interested in living their parents’ lifestyle. And baby boomers themselves are increasingly rejecting it, wary of a choice between isolated houses and nursing homes. If anything, the development model of suburbia now seems to be weakening our economy instead of propping it up. Without eternal new development, the infrastructure costs of existing subdivisions are becoming clearer. And as demand shifts back toward urban centers, we’re left with a dramatic oversupply of another era’s housing (which we continued to build long after the Cold War ended).

So what replaces suburbia as the engine of our economy?

“There’s no good growth story,” Doherty says. Or, at least, that’s how many investors and CFOs feel. But he believes an answer does exist among findings we’ve covered before from real estate theorist Christopher Leinberger: it’s in the rising demand for walkable urbanism.

The connection between foreign policy and suburban development is a fascinating one: economic strength, driven in the past by suburban growth and possibly in the future by walkable development, leads to a stronger foreign policy posture. But, this summary doesn’t connect the dots enough for me. Is there enough demand to make a big switch from suburbs to walkable urbanism? Where will the money come from – as the article notes, the suburbs were subsidized with federal dollars so will walkable urbanism receive similar funding? Given the demand and the money, would all of this be enough to drive the American economy in a new direction? It sounds like Doherty would argue walkable urbanism provides some bonuses compared to other kinds of development (can reduce dependence on oil, it is greener, etc.) but wouldn’t any big trend in development help the American economy and foreign policy?

I’m thinking this could also be an updated critique of the American suburbs: not only are they bad for residents but they hurt American foreign policy. Going further, if we continue with suburban development, America will decline relative to other countries.

Hispanics will be largest group in California by 2020

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New demographic projections for California suggest Hispanics will pass whites to be the largest group by 2020:

Population projections released Thursday by the state Department of Finance show that Hispanics will become the dominant ethnic group in California for the first time.

By 2020, demographers say Hispanics will be about 41 percent of California’s population, with whites less than 37 percent.

The white population will fall to about 30 percent by 2060 from the current 39 percent, affecting politics and public policy in the nation’s most populous state. Whites currently lack a majority in only Hawaii and New Mexico.

It will be worth watching to see what changes this brings to California’s society, economy, and politics. Another issue to consider is whether the trend in California will extend to other states or whether California is uniquely positioned to experience this sort of demographic change. While we have been reading about these projected demographic changes in California for years, I don’t recall seeing similar projections for states like Texas. This, of course, could suggest demographic change is taking place more slowly in other states.