Monthly Archives: November 2017

Do “real-life millionaires” buy McMansions?

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The spending habits of millionaires tends to be a popular topic but few people discuss exactly what kind of house they live in:

A millionaire is a person with a net worth of $1 million or more. Net worth is the value of everything a person owns, minus all debts…

Such an individual could have a negative net worth, yet they drive a Range Rover and live in a McMansion. Meanwhile, the millionaire next door lives in a three-bedroom house and drives a Hyundai…

Although it’s a common misconception that millionaires spend their money on luxury vacations, clothing, houses, and cars, what I’ve learned in growing my own net worth — and speaking with other millionaires — is that after a certain point, money stops mattering as much as it once did.

This seems to line up with the accepted wisdom that many American millionaires are relatively frugal and made their way to that wealth through saving and hard work.

But, if millionaires are not buying all those McMansions, who is? The flip argument expressed above that there are plenty of people living a millionaire lifestyle or above their means does not apply in all cases either.

Part of the trick here might be disconnecting income from wealth. Having $1 million plus in wealth does not necessarily mean you have the kind of assets to put down a sizable down payment or make sizable payments on a large house. (Think of the people who have paid off their mortgages and have a lot in retirement and savings accounts – this is not always easy to access.) Some people might be willing to buy homes based on whether they can afford the monthly payments – does it roughly fall within 30-35% of my monthly take-home pay – while others would be unwilling to splurge on a McMansion.

To be honest, I have not seen a convincing article or set of data regarding McMansion owners. I would guess a good number are in the top 20% of earners in the United States but probably a good portion are also living paycheck to paycheck.

Eight (unlikely and unpopular) policy options for addressing housing issues

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After a recent conversation with colleagues prompted by reading together the sociological work Evicted as well as my own thinking about residential segregation, I wanted to put together a blog post summarizing possible policy solutions to housing issues. I am not optimistic but here are the possible options I see at multiple levels:

  1. Provide incentives for developers and builders. This is a common strategy across different government levels: builders and developers are given access to choice properties or are able to build higher-end housing if they build cheaper housing or provide monies that could be used for cheaper housing. A number of major cities, including Chicago, have such incentives. However, it does not seem to have made a major dent in the amount of affordable housing that is needed. I have heard that argument that governments have simply not offered big enough incentives – there is a tipping point where this could really push builders and developers to construct cheaper housing. I don’t think I buy this argument. Even though there is clearly a market right now for cheaper housing, why would builders and developers not try to build the priciest stuff they can to bring in more profit?
  2. Other market-driven solutions beyond incentives. I’m on the record here as skeptical that free markets can address issues of residential segregation and housing. Vouchers have their supporters since they theoretically would allow poorer residents to access areas of the housing market they otherwise could not. At the same time, introducing vouchers leads to other issues such as inflated prices/rents and negative reactions to those with the vouchers.
  3. Local government action. Municipal officials have a good amount of control over what can be built within their boundaries. However, they are constrained by (1) local residents who want to protect their community (examples of NIMBY in action here and here) and (2) limited budgets and revenues so they are typically trying to maximize property and sales taxes while minimizing use of social services. The biggest tool municipalities have are local zoning guidelines that often constrict what can be built (see recent suburban non-housing examples here and here). One way that wealthier areas exclude those who are not so wealthy is to not allow multi-family housing or set guidelines requiring larger lot sizes.
  4. Metropolitan action. Housing is really an issue that spans municipalities as the majority of people live in one place and commute to another for work (plus drive elsewhere for other amenities). Yet, metropolitan governance does not exist on a large-scale in the United States. Outside of a few regions, this is not a viable option: people in different communities do not have ways to collaborate nor would they necessarily want to. This is particularly true of wealthier communities. Residents would argue that this is the purpose of local government: local residents should get to make decisions about their own communities rather than handing off money and/or control to an outside body that wishes to damage their quality of life. See examples of how this can play out regarding affordable housing in one region and another involving transportation across a whole region.
  5. State governments. States could decide to impose regulations and guidelines but then they would have to overrule municipalities. This is difficult. For example, Illinois in 2004 an affordable housing guideline where every community was supposed to have a certain percentage of their housing stock within affordable limits. The guidelines could have been useful but they had no teeth and what counted as affordable was loosely defined. As this 2015 Chicago Tribune article suggests, wealthier communities did not submit to the guidelines and “Lee acknowledged that the agency has no authority to enforce the mandate if municipalities do not submit affordable housing plans.” Nothing really changed – and I’m guessing this was intentional.
  6. Federal government. Even though the United States has public housing, it was difficult to get off the ground and is not viewed favorably by many. That whole single-family homes fights communism thing plus the American ideal is everyone owning a home. Even if public housing had some successes, on the whole federal efforts have promoted white suburbs mortgages for single-family homes are subsidized. Results for federal initiatives involving vouchers, such as Moving to Opportunity, are mixed as many of the residents end up in similar poor neighborhoods and it is not clear if certain long-term outcomes such as education and employment are positively affected. Federal efforts consistently draw negative responses from conservatives. Operators in the housing industry – the National Association of Home Builders, the National Association of Realtors, lenders, and others – mobilize to protect the mortgage interest deduction and single-family homes. American Apartheid suggested we lack the political will to enforce the 1968 Housing Act and thus we still have discrimination in housing (from mortgages to real estate agents to landlords and more).
  7. The court system. Given the relative lack of action by local and state officials, housing and zoning cases do occasionally make it to state and federal courts. I argued a few years back that I could envision the Supreme Court approving inclusionary zoning (I’m not sure I still think this given the current makeup of the court). They can indeed take action and compel other governmental bodies to address issues. Some famous cases include the Gatreaux case in Chicago where a court ordered scattered-site housing and the Mount Laurel cases in New Jersey combating exclusionary zoning. The problem with these is that they require taking legal action in the first place, they can take a long time to litigate, and while the results may be compelling, they are still often viewed unfavorably and putting the changes into action are not easy.
  8. Non-profits and religious groups. Either sets of groups have limited resources – housing is a very expensive proposition on a large scale – or are more interested in other concerns. Groups like Habitat for Humanity may do good things but they can only build so many houses and not all communities or neighborhoods are welcoming to their projects. Churches, particularly big ones, could access a good amount of resources but housing is more of a structural issue that many conservative Christians may not want to get into.

All of these options are difficult to implement. On the whole, many wealthier suburbanites and urban residents do not want any kind of cheaper or subsidized housing in their neighborhoods or community.

If I had to pick two levels that provide the best opportunities, I might go with local government and the courts. Zoning guidelines are often developed by average citizens sitting on local committees. Get named to such committees and you can influence this process. The courts are a way to get around the unpopularity of introducing cheaper housing as such measure are unlikely to find broad support. At the same time, as noted above, the court route has its own challenges.

Perhaps the most daunting option in my mind is trying to influence the federal level. Does any political party talk seriously about housing? After all, one journalist captured this quote:

The former governor of the Bank of England, Mervyn King, told me this: “Most countries have socialized health care and a free market for mortgages. You in the United States do exactly the opposite.”

It will be hard to alter an entire system based on providing socialized mortgages for the middle-class and above.

Are TV portrayals of NYC housing realistic? An (incomplete) analysis

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Earlier this year, the Washington Post ran an interesting analysis of how realistically the housing for numerous New York City characters was portrayed:

TVhousinginNYCWashingtonPostApr17

The article has a detailed breakdown of the housing in Girls and then has summaries for everything else.

Although this does not include every major television show depicted in New York City (I could think of a number off the top of my head), there are two noticeable patterns in the shows discussed in this particular article:

  1. Three popular and influential shows from the 1990s, all ones that supposedly made the city attractive to new generations, showed unrealistically large apartments. The city may look like a fun place to be when everyone has plenty of space and cool stuff.
  2. The number of working class shows here is limited. Television does not do a great job in general portraying the working class – see the documentary Class Dismissed – and this article deals mostly with shows with higher class aspirations.

Additionally, it seems like it would be important to also discuss the field of housing prices within New York City over the last sixty years. Manhattan is one of the most expensive places in the world now but was it always this bad? Additionally, the fates of the boroughs have changed over time.

 

Emergencies due to homelessness in major cities on the West Coast

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The rising real estate prices on the West Coast have not helped those on the economic edges find places to live:

—Official counts taken earlier this year in California, Oregon and Washington show 168,000 homeless people in the three states, according to an AP tally of every jurisdiction in those states that reports homeless numbers to the U.S. Department of Housing and Urban Development. That is 19,000 more than were counted in 2015, although the numbers may not be directly comparable because of factors ranging from the weather to new counting methods.

—During the same period, the number of unsheltered people in the three states climbed 18 percent to 105,000.

—Rising rents are the main culprit. The median one-bedroom apartment in the San Francisco Bay Area is more expensive than it is in the New York City metro area, for instance.

—Since 2015, at least 10 cities or municipal regions in California, Oregon and Washington have declared emergencies due to the rise of homelessness, a designation usually reserved for natural disasters.

This is not an easy social problem to address in places that are already expensive. Still, what would it take to mobilize a good portion of the population in these cities and regions to do something about providing affordable housing? The article mentions a recent vote in Los Angeles to provide money for 10,000 affordable housing units but it will be interesting to see how long it takes to build these, where they will be located, and what the long-term effects of such housing will be.

Ongoing fights over zoning for religious buildings

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The Religious Land Use and Institutionalized Persons Act (RLUIPA) was passed in 2000 and still there are numerous local battles between local governments and religious groups who want to use or build a structure for religious purposes:

By the time they take on a zoning challenge, many religious groups are already struggling to find and retain members, and to get by on shoestring budgets. Without an adequate place to gather, they miss opportunities to assemble in study, service, and prayer. The stakes are high for towns, too. Churches, synagogues, and mosques influence life well outside their walls: People who belong to religious institutions are more civically engaged than their secular neighbors. They are more likely to serve on school boards, volunteer at charities, and join clubs. In the absence of these institutions, communities can become fractured and isolated. Neighborly infrastructure decays…

Many of the groups that wind up at the center of RLUIPA cases have it worse than North Jersey Vineyard. Cases can stretch on for decades, and the majority of religious organizations end up losing: According to Dalton, who wrote a book on RLUIPA, roughly 80 percent of RLUIPA claims filed in federal court fail. “This is a very hard statute to follow,” he said. “For the inexperienced, it is easy to lose.” An untold number of religious groups never make it to court at all, either because congregations don’t realize they have special protections under the law, don’t know how to file a claim, or don’t have the resources to pursue a case. Many simply walk away from purchasing a property when they discover that it is not zoned for religious use.

North Jersey Vineyard was also spared the ugly bigotry underlying many zoning disputes. Other than a few awkward comments confusing Catholic and Protestant styles of worship, officials in South Hackensack didn’t seem to oppose North Jersey Vineyard’s purchase based on the congregants’ faith. Often, though, zoning books are wielded by intolerant or ignorant officials; about half of RLUIPA disputes involve religious or ethnic minorities, according to Dalton. As a participant in a Department of Justice listening session recently told government officials, “People don’t come into hearings now and say, ‘I hate Muslims.’ They say, ‘The traffic is going to be terrible on [Fridays,]’” when Muslims gather for Jumah prayer…
This is where the practicalities of land-use law shade into something more philosophical: Where is the line between preserving a community’s character and preventing its evolution? While it’s easy to sympathize with a church that can’t find a space in which to pray, it’s also easy to imagine aggrieved residents sitting in Sunday-morning traffic or searching in vain for parking near their house.

My own take on this is similar: it is not as simple as saying that most communities dislike certain religious groups (though some requests certainly gain more attention – I’ve seen more cases in the last ten years or so involving Muslims and orthodox Jews) as many times the concerns raised by local residents and governments are similar to those raised for any development project. The difference is here that religious groups have certain legal options open to them that are not available to non-religious development projects.

Almost all suburban residents’ concerns about redevelopment expressed in one meeting

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Naperville is pursuing a redevelopment project just south of the downtown train station and a recent public input meeting provided almost all the typical suburban concerns about redevelopment:

Land use and traffic are emerging as top concerns about redevelopment plans for 5th Avenue near the Naperville Metra station.

But close behind are issues of stormwater, green space, pedestrian access, the commuter experience and parking…

Promises to take time understanding and synthesizing resident wants and concerns seemed to only somewhat satisfy residents at Ryan Companies’ fourth group input session Friday afternoon. Some who attended said they want very little to be built on the land, which they see as a solution to flooding, traffic congestion and a lack of nearby park space.

“I don’t want high density,” neighbor Dana Aldrich said. “Our schools are already crowded.”

These are all common concerns. Too much traffic. Water issues. Parking. A desire for more green space. The city or developer not taking the concerns of residents seriously. Not increasing the burden on local services (and presumably property taxes), particularly schools. The only thing missing? The suggestion that property taxes will be negatively affected. Given this particular location and wealthy community, it is unlikely the proposed project would reduce property values – but realities do not always stop suburban residents from raising this specter.

It is also interesting to consider how suburban governments can proceed if residents tend to raise the same concerns almost regardless of the project. Something is likely to be done with this land since a good argument could be made that it is not serving the community as well as it might. (Redevelopment can incur new costs but it can also generate new tax revenues.) Development can be tweaked to try to assuage concerns. However, at some point, community leaders may just decide to override residents’ concerns. Perhaps the concerns are limited to a small number of vocal residents. Perhaps they would argue that as leaders they have the greater good of the community in mind.

Holding a World Series parade in a sprawling big city

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The Houston Astros won the World Series and held a victory parade Friday in downtown Houston. Downtown Houston exists but it seems odd to hold a parade in the central part of a city that has a reputation for sprawl and a lack of zoning. Some quotes about sprawling Houston starting with a list of “The American Cities With the Worst Sprawl.”

Texas and bigness again. Houston takes up 627 square miles, making it more than twice as large as Singapore with about 40% as many residents. Houston is sprawl defined, and that lack of density is the reason it makes our list. Dubbed “The Blob That Ate East Texas,” Houston is one of those quintessentially American cities not limited by any natural geographic barriers like mountains or bodies of water. Sprawl was a business decision for developers, as there’s a lot less risk building horizontally than vertically.

But Houston is discovering that sprawl isn’t a permanent blight, and the city has seen significant private and public investment in its urban core. Over the past eight years, Houston has completely reimagined its transit network by opening two new light rail lines and expanding another. Two additional lines are in the works with one slated to be completed by 2019. Houston also grew its bike sharing network from just 18 bikes in 2012 to more than 300 now. (Administrators are aiming for 1,000 by the end of 2017.)

The economy of Houston according to The Economist in March 2015:

FOR a view of Houston’s economy, get in a car. At the intersection of the Loop and Freeway 225, two motorways in the south-east of the city, you drive over a high, tangled overpass. To the east, where the port of Houston sits on Buffalo Bayou, the skyline is an endless mass of refineries, warehouses and factories: Houston is an oil town. To the west, glistening skyscrapers and cranes puncture greenery. In between, the landscape is a sprawl of signs advertising motels and car dealerships.

Houston is not pretty, but it thrives.

From a April 2000 guide to Houston in the New York Times.

Famous as a city without zoning, Houston is a sprawling metropolis, laced with highways as serpentine as ant tunnels, a place so vast that popular myth holds that a motorist can drive for an hour at 55 miles an hour and never get from one end of the city to the other.

Is it true? Probably not. But the city’s sprawl tends to obscure just how much is actually going on there.

Did all that sprawl contribute to a different kind of victory parade compared to one in a city with a more traditional urban core? Did the sprawl change how many people attended? (A reminder: Houston is the fourth largest city in the country and may someday soon pass Chicago for third place.)

A deep American social problem: residential segregation

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This post is about a crucial American social problem. It is not about uncivil discourse, increased immigration, political polarization, a decline in social trust, consumerism, or other regularly-discussed options. Rather, underlying many other American issues is residential segregation which occurs by race and class. Here are just some of the social spheres it affects:

  1. Schools. While Americans tend to see more education as a silver bullet to all social problems, the fate of schools is closely tied to their neighborhoods and communities. This is not mainly about funding. It is more about mixing kids of different socioeconomic backgrounds together. Read about the Coleman Report from 1966.
  2. Social networks. Even in a digitally connected, who you live near affects who you and/or your kids see on a regular basis. Live near people like you and you will interact with people like that more.
  3. Quality of life in the community and availability of social services. Factors like crime, public parks, health care, local amenities (libraries, park districts, civic organizations), and local programs (through local governments as well as non-profits and other civic organizations) are connected to the wealth and resources of a community.
  4. Access to jobs. Spatial mismatch describes situations where jobs available to lower-skilled workers are far in distance from lower-skilled workers. Live in a wealthier community and you are likely closer to better jobs.
  5. Access to good housing. Affordable and quality housing is difficult to find in many places in the United States but those with more resources and whose race and ethnicity are viewed more favorably have more housing opportunities.
  6. Building wealth. Since wealth creation is tied to homeownership and good jobs, those who have harder times accessing these two things have a harder time developing and passing along wealth. The disparities between the wealth of whites and blacks as well as Latinos are huge.
  7. Concentrated poverty. As wealthier communities are able to keep poorer residents out through a variety of methods (even as poverty increases in the suburbs), poorer residents can be limited to certain neighborhoods and communities which can exacerbate problems.

It is difficult to truly address a number of American social problems if this problem of residential segregation is not addressed. Read more about how this residential segregation came to be in an earlier post about the development of American suburbs.

Of course, residential segregation cannot be said to be the deepest American problem since beneath residential segregation is the uglier issue of the “American dilemma” or “America’s original sin“: racism.

 

Linking great trick-or-treat neighborhoods to traditional neighborhood design

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Maybe a good trick-or-treat location should be defined less by the available candy and more regarding its design:

Great neighbourhoods for trick-or-treating also tend to be great neighborhoods for families everyday:

  • Tree-lined streets designed for walkers more than speeding cars.
  • Enough density and community completeness, to activate what I call “the power of nearness” – everything you need, nearby.
  • Good visual surveillance through doors and stoops, windows (and I don’t mean windows in garages), porches and “eyes on the street.”
  • Connected, legible streets that let you “read” the neighbourhood easily -grids tend to be good for this, but other patterns work too…

If kids ARE being driven in, that can mean it’s a great neighbourhood from a design perspective (or perhaps just that it’s a more affluent community, with “better candy”) — but having too few local kids can show that there isn’t enough housing diversity, new infill, and family-friendly “infrastructure” to keep kids in the neighbourhood. In fact, in many beautiful, tree-lined neighbourhoods popular on Halloween, the number of local kids may be actually dropping, with resulting pressures on local schools to close. This as household sizes decrease, and new density and “gentle infill” that could stabilize the population and keep kids in the neighbourhood, is often locally resisted.

From this point of view, good neighborhoods promote walkability and ultimately sociability. There are few times of years where this matters as much as Halloween as many Americans do not regularly walk down their streets to visit a number of neighbors at once.

More broadly, the practice of trick-or-treating is closely tied to social trust. Even with no documented cases of poisoned candy, parents want to know that their kids are safe. And with declining social trust in the United States, again, there are limited numbers of opportunities where Americans ritually interact with physical neighbors as opposed to seeking out people they whom they share an identity or interests.

It sounds like there is an empirical question to be answered here: do neighborhoods with (1) more traditional design and (2) higher levels of social trust (which may or more not be related to the neighborhood design experience more satisfying trick-or-treat experiences (measured by numbers of children trick-or-treating, percent of households providing candy, and perceptions of whether the neighborhood is a good place for this)?

Finding more room for people in streets with autonomous vehicles

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A new urban planning guide considers how driverless vehicles could transform streets:

To that end, on Monday, the National Association of City Transportation Officials, an international, 60-city organization of very serious transportation planners and engineers, published its own vision of the Promised Land, a 50-page blueprint outlining how to account for our autonomous future and build in flexible options that could result in less traffic for everyone, not just those riding on four wheels. “We don’t just need new software running on our streets—we need to update the hardware of the streets themselves,” says Janette Sadik-Khan, a former transportation head in New York City during the Bloomberg administration who now serves on the board for NACTO. “That’s why we need a new roadmap that puts humans first.”…

So what does transit heaven look like? In the future, the transportation planners suggest, vehicle lanes can be a lot thinner. Machines, after all, should be better at driving straight—and less distracted by Snapchat—than their human counterparts. That means more room in major boulevards for walking, biking, even loitering. Tiny parks might exist where parking meters once lived—no need to park self-driving taxis owned by companies, not individual drivers. In fact, vehicles might not even have their own dedicated spaces at all. “Flex zones” could be turned over to different services and vehicles for different times of day. During rush hour, there could be more lanes open to vehicles. During heavy delivery hours, there could be curb space dedicated to Amazon delivery vans (or landing delivery drones). At night, street space next to bars could be dedicated to picking up and dropping off carousers from driverless taxicabs…

“The blueprint is for building the safer future streets that cities need, where speeding is no longer an option, where cars are designed to yield and stop for pedestrians and bicyclists by default, and where people are free to cross the streets where it makes sense, rather than trek a mile to the nearest stoplight,” says Mollie Pelon, who oversees NACTO’s technology and city transportation program. Ignore the naysayers, these optimistic planners say. Autonomous vehicles don’t have to destroy the American city—they’re a shiny opportunity to rebuild it for the better.

I could imagine a number of interesting tweaks to free up more space for pedestrians, particularly since traffic can be more predictable (or at least known). At the same time, I wonder if autonomous vehicles could lead to dramatic changes in roads and cities. Imagine a community where main streets were dedicated to pedestrians and bicycles while vehicles were relegated to side streets or alleys.