Tag Archives: development

Richard Florida: homeownership not related to economic growth and development

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Richard Florida looks at some data and argues that homeownership is not related to several dimensions of economic growth and development:

The economic growth and development of cities and regions is generally thought to be driven by three key factors: innovation, human capital, and productivity. Homeownership, it turns out, is not related to any of them.

Take innovation and high-tech industry. Homeownership bears little relation to either, being weakly negatively associated with the concentration of high-tech industry (-.20) and not associated at all with innovation (measured as the rate of patenting).

Or consider the percentage of college graduates or share of highly-skilled knowledge/creative jobs. Again, nothing. The arrow in fact points in the wrong direction. Homeownership is weakly negatively correlated with both the share of college grads (-.27), and with the creative class share of the labor force (-.30).

What about productivity? Once again, no connection to homeownership. Homeownership is weakly negatively associated with economic output per capita (-.19)…

It used to be that homeownership signaled and led to economic growth. But that relationship was tied to the industrial era, when building and buying more homes primed the pump of America’s great assembly-lines, increasing demand for cars, appliances, televisions, and all manner of consumer durables. Those days are gone. The United States is a now knowledge and service economy; less than ten percent of Americans work in some form of manufacturing and just 6.5 percent are engaged in actually producing things. The stuff Americans buy is largely made offshore.

I wonder how this relates to the recent campaign from the National Association of Realtors regarding how building homes would lead to more jobs. While having more construction might lead to some good short-term outcomes, Florida is arguing here that homeownership doesn’t have a large influence on the economy.

Going beyond the economic impact of homeownership and building homes, these statistics don’t quite capture the cultural influence of homeownership in American culture. At the same time, the numbers might suggest that policymakers shouldn’t go all in for promoting homeownership for its economic benefits. Selling homeownership can be done by linking it to values of individualism or the American Dream but the larger economic angle doesn’t hold up.

I wonder what the story would be utilizing data that allow analysis beyond correlations…

Naperville cites traffic concerns and proximity to a residential area in rejecting McDonald’s near downtown

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Naperville’s City Council voted Tuesday against a proposal from McDonald’s to build a restaurant just south of downtown. The cited reasons: traffic and proximity to a residential area.

The City Council unanimously turned down the proposed fast-food restaurant at the southeast corner of Washington Street and Hillside Road citing concerns about traffic at an already busy intersection and locating a 24-hour business close to homes…

The proposal was backed by both city staff and the plan commission. However, in a discussion that lasted more than an hour, councilmen focused on the potential for traffic tie-ups…Addressing the myriad of traffic concerns, William Grieve, a traffic engineer hired by McDonald’s, said a traffic study showed travel time through the intersection would only increase by about a second and double drive-through lanes would prevent backups.  Stillwell said the company would be diligent about addressing any problems if they arise…

But traffic wasn’t the only concern. Neighbors said they feared there would be increased noise and lights coming from the restaurant if it was allowed to stay open 24 hours as proposed.

Both Judy Brodhead and Joe McElroywere among the councilmen who agreed and said having a restaurant open 24 hours so close to homes was a deal-breaker regardless of the traffic issues.

I’m not surprised by this result: not too many residents would willingly choose to have a McDonald’s nearby and few people want more traffic. However, this seems a bit strange for a few reasons:

1. Washington is already a fairly busy road.

2. This intersection is near homes but there are already strip mall type establishments at this corner. In fact, I’m not sure there any homes that back up directly to this site as the DuPage River is to the east and all of the corners at the intersection are already occupied. The McDonald’s would replace a Citgo gas station, not exactly a paragon of civic architecture. Across the street is a Brown’s Chicken establishment. The other two corners include a cemetery and another strip mall type establishment.

3. The traffic study from McDonald’s seems to suggest there wouldn’t be any issues.

4. I wondered if this had anything to do with protecting the downtown but it is three blocks south of the downtown so it shouldn’t contribute to congestion problems there.

I wonder if there isn’t more to this story. Indeed, here are a few more details from the Daily Herald:

Council members admitted they were initially thrilled that McDonald’s wanted to open a downtown store on the southeast corner of Hillside and Washington streets. But when it came down to a plan that included five zoning variances, three landscape variances and a sign variance, they just weren’t lovin’ it.

So the McDonald’s required too many deviations from Naperville’s guidelines? While the restaurant might have needed 9 variances, the city could have made it happen if they really wanted to. Just how much did the pressure from the neighborhood matter?

Study: home values increase several percent very near a Walmart

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A new study suggests that the value of a home increases a few percent if it is located within a half-mile of a Walmart:

It turns out, according to their recently published research, that values increase an average of 2 to 3 percent for homes within half a mile of a Wal-Mart store and 1 to 2 percent when the home is a half mile to 1 mile from a store…

The duo studied more than 1 million home sales between January 1998 and January 2008 near 159 Wal-Marts that were built between July 2000 and January 2006. They compared the prices of homes within four miles of a store that sold up to 21/2 years before an opening or 21/2 years afterward. The long time frame was picked on purpose, after the researchers discovered that the median number of days between when Wal-Mart announced a new store and when it opened was 516 days.

The study also noted that Wal-Mart’s entry into a market often acts as a beacon, generating other economic development nearby…

“On average, the benefits to quick and easy access to the lower retail prices offered by Wal-Mart and shopping at these other stores appear to matter more to households than any increase in crime, traffic and congestion, noise and light pollution or other negative externalities that would be capitalized into housing prices,” the professors wrote.

One interpretation of these findings: people are willing to pay a little more to be located near some commercial development. They may not want to live right next to it evidenced by the fact that most municipalities have some strong guidelines about how commercial areas to demarcate the space between development and residential areas, often with some combination of a berm, a fence, and trees/bushes. But, being a few moments away from a place where you can quickly buy groceries (and Walmart is the country’s biggest grocery store) and other goods is a plus.

One thing that is likely ironic about this data is that while homes close to the Walmart are a little higher, it is unlikely that residents walk to Walmart even though they could. You could interpret this data as evidence people want to live closer to some denser commercial development but having a Walmart nearby is probably not about walkability.

I wonder if these researchers could also tell how much development Walmarts tend to attract. Do they tend to act as anchors for one corner of a busy intersection? Is it enough for development on multiple corners? How many square feet of retail space, on average, can be successfully operated once a Walmart moves in?

I’m now going to look for real estate ads that mention the proximity of a Walmart…I’m not holding my breath.

The Thomas Kincaide housing development in Vallejo, California

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With the recent passing of Thomas Kincaide, one columnist takes a look at a development in Vallejo, California built with Kincaide’s name on it:

Named the Village, a Thomas Kinkade Community, it promised residents a “vision of simpler times” with “cottage style homes that are filled with warmth and personality.” Its slogan: “Calm, not chaos. Peace, not pressure.”…

The homes in the Village look a lot like other tract homes in Hiddenbrooke, but with Kinkadean touches such as steeply gabled roofs covered in faux-slate tile, gingerbread trim, front porches and stone facades.

Residents see their homes and neighborhood as unique and distinctive.

Teri Booth, an original owner, says she bought her home because “it didn’t look like every other McMansion.”

Homes here average 2,400 square feet. The four models were named after Kinkade’s daughters – Merritt, Chandler, Winsor and Everett. The styles might be described as pseudo Victorian, pseudo French provincial, pseudo New England cottage and pseudo arts and crafts.

The streetlights (electric) look like Kinkade’s gaslight logo and the walkways (stamped concrete) resemble cobblestones.

This reminds me of the Disney-built Celebration, Florida and Martha Stewart homes. Some homebuyers are looking for a distinctive house, a world of not “every other McMansion” but rather a Thomas Kincaide McMansion! (Interestingly, this article suggests that the Kincaide homes are a pastiche of styles, a common complaint about McMansions. These homebuyers also seem to like being tied to a famous person or company. Perhaps this is reassuring or perhaps it means that there might be a bigger market for the homes as they are distinctive. (Alas, as the article suggests, home prices in a Kincaide neighborhood can fall as well.) The Village also seems to promote nostalgia and traditional neighborhood life, as do many other developments and builders.

Why have just a painting when you can buy a Thomas Kincaide house?

Slowdown in exurban growth

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New estimates from the US Census suggest that growth in the exurbs has slowed in recent years:

The annual rate of growth in American cities and surrounding urban areas has now surpassed that of exurbs for the first time in at least 20 years, spanning the most recent era of sprawling suburban development…

“The heyday of exurbs may well be behind us,” Yale University economist Robert J. Shiller said. Shiller, co-creator of a Standard & Poor’s housing index, is perhaps best known for identifying the risks of a U.S. housing bubble before it actually burst in 2006-2007. Examining the current market, he believes America is now at a turning point, shifting away from faraway suburbs to cities amid persistently high gasoline prices…

About 10.6 million Americans reside in the nation’s exurbs, just 5 percent of the number in large metropolitan areas. That number for exurbs represents annual growth of just 0.4 percent from 2010 to 2011, smaller than the 0.8 percent rate for cities and their surrounding urban areas. Still, it also represents the largest one-year growth drop for exurbs in at least 20 years…

In all, 99 of the 100 fastest-growing exurbs and outer suburbs saw slower or no growth in 2011 compared with the mid-decade housing peak – the exception being Spotsylvania County, Va., located south of the Washington, D.C., metropolitan area, which has boomed even in the downturn. Nearly three-fourths of the top 100 outer suburban areas also saw slower growth compared with 2010, hurt by $3-a-gallon gasoline last year that has since climbed higher.

Translation: growth on the metropolitan fringes slowed in 2010. This doesn’t mean that suburban growth overall slowed but growth on the edges has slowed. I don’t think we should be too surprised by this: the housing market is in bad shape, gas prices are up, and the number of both residential and commercial projects in the suburbs has dropped. If the economy was good, the exurbs would be where growth tends to happen as there is available land (cheaper to build here than to redevelop existing suburban properties or tackle some small infill projects) and people would have money for transportation to job centers (whether these are edge cities or big cities).

I think the real question is whether the exurban growth picks up when the economy improves or at least if gas becomes cheaper. Even if exurban growth essentially stops today, many metropolitan regions could tolerate some more dense land use in their suburbs.

High rents and the lack of politics

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Forbes recently published a two part interview with law professor David Schleicher discussing his recent paper City Unplanning.  Schleicher discusses the perversity of zoning restrictions and begins by noting that, in many cases, rents and rental units available have nothing to do with each other:

In a number of big cities, new housing starts seem uncorrelated or only weakly correlated with housing prices and the result of increasing demand while holding supply steady is that price went up fast. The average cost of a Manhattan apartment is now over $1.4 million and the average monthly rent is over $3,300.

The only explanation is that zoning rules stop supply from increasing in the face of rising demand.

Effectively, Schleicher argues that new developments in big cities are subject to a form of NIMBYism which is effective to the extent it is apolitical:

Local legislators may prefer more development than we have now to less, but have stronger preferences for stopping development in their districts because these projects would hurt homeowners in their neighborhoods—either directly through things like increased traffic or indirectly through increasing the supply of housing, harming the value of existing houses.

This is a prisoner’s dilemma and absent a political party to organize the vote in local legislatures, one-by-one votes on projects will result in “defect” results, or situations where every legislator builds coalitions to block projects in their own district and nothing gets built [emphasis added].

I couldn’t quite understand Schleicher’s point from the interview, but it is much better explained in the full paper:

Importantly, most cities do not have competitive party politics – they either have formally nonpartisan elections and/or are entirely dominated by one party that rarely takes local-issue specific stances. Absent partisan competition, there is little debate over citywide issues in local legislative races and there is no party leadership to organize the legislature, making the procedural rules governing the manner in which the legislature considers land use issues far more important. The content of the land use procedure generates what one might call “localist” policy-making: seriatim [i.e., one-off] decisions about individual developments or rezonings in which the preferences of the most affected local residents are privileged against more weakly-held citywide preferences about housing.

It’s an intriguing thesis positively, but I’m not sure what I think of Schleicher’s point normatively.  Local voters generally do seem to prefer NIMBY outcomes in order to avoid threats (e.g., increased traffic, lowered property values) to their existing assets (i.e., homes and businesses).  But if local voters achieve this result through the mechanics of “weak” local politics, isn’t that an example of the political system “working”?

Put another way, high rents may be undesirable, but they are largely an outsider problem.  Current residents (insiders who can vote) first and foremost want to protect themselves from the problematic vicissitudes of new development (which will, if it is built, be populated with outsiders who obviously cannot vote unless it is built and they take up residence).  If current residents/voters achieve this goal through voting for “apolitical” council members, (1) isn’t this actually a highly political choice, and (2) isn’t this precisely how voting and elections are designed to work?

NASA on Vegas and sprawl

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NASA recently posted a video on Flikr showing 28 years of development in Las Vegas as seen from space:

When Landsat 5 launched on March 1, 1972, Las Vegas was a smaller city. This image series, done in honor of the satellite’s 28th birthday, shows the desert city’s massive growth spurt since 1972. The outward expansion of the city is shown in a false-color [i.e., red = green space like parks and golf courses] time lapse of data from all the Landsat satellites.

Pedestrians in a world of driverless cars

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Many bloggers are starting to tease out the social and infrastructure implications of driverless cars, including David Alpert over at the Atlantic:

[Driverless cars] will bring many changes, but when it comes to the car’s role in the city, they may just intensify current tensions.

David suggests that new technology will simply exacerbate current trends by “trigger[ing] a whole new round of pressure to further redesign intersections for the throughput of vehicles above all else”:

If autonomous cars travel much faster than today’s cars and operate closer to other vehicles and obstacles, as we see in the [University of] Texas team’s simulation , then they may well kill more pedestrians. Or, perhaps the computers controlling them will respond so quickly that they can avoid hitting any pedestrian, even one who steps out in front of a car.

In that case, we might see a small number of people taking advantage of that to cross through traffic, knowing the cars can’t kill him. That will slow the cars down, and their drivers will start lobbying for even greater restrictions on pedestrians, like fences preventing midblock crossings.

Our metropolitan areas could then look, more and more, like zoos for humans interlaced with pathways for the dominant species, the robot car.

Personally, I think one of these scenarios (i.e., “travel much faster…[and] kill more pedestrians”) is unlikely.  Initially, driverless cars will almost certainly be much more expensive than equivalent conventional vehicles.  A car that is both (1) more expensive and (2) more dangerous seems unlikely to sell well, to say nothing of the likelihood that such lawsuit-magnets would be sued utterly out of existence.  To catch on with a mass market, driverless cars will at least need to uphold safety’s current status quo.

As far as David’s second fear (“metropolitan areas [that] look, more and more, like zoos for humans”), I’m unclear how much that differs from current development patterns.  While there are plenty of examples of “walkable” cities, much of contemporary American infrastructure is extremely unfriendly to pedestrians, cyclists, and other non-car users.  To the extent that cars dominate today’s roads, a move to driverless cars seems only to continue, rather than augment, that trend.

In defense of Portland

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Mark Hemingway takes aim at Portland, Oregon in a long cover story in the Weekly Standard:

Unlike the New York Times, I write not to praise the place but to note the litany of things that plainly have gone wrong. Also to alert anyone else who’s listening: Right now, America’s civil and social engineers are beavering away trying to turn your city or town into the next Portlandia.

Mark’s piece is a rambling barrage that roughly summarizes as follows:

  1. Portland gets a lot of attention from the media, particularly the New York Times and via the TV show Portlandia (paragraphs 1-14).
  2. Portland is crazy-town (“quietly closing in on San Francisco as the American city that has most conspicuously taken leave of its senses”) (paragraphs 15-20)…
    1. …because of its development policies, particularly light rail (paragraphs 21-37);
    2. …because of its “generally hostile business climate” (paragraphs 38-53); and
    3. …because of its lax sexual mores (paragraphs 54-84).

A few thoughts re: development policies.  Mark suggests “[t]hings began to unravel in 1973, when the Oregon legislature required cities in the state to set development boundaries with the goal of preserving farmland.”  Portland responded by “cancel[ing] a major interstate freeway project” in order to start a light rail system.  Mark objects to this decision because (a) the light rail has low ridership (“It’s called ‘light’ rail not because the trains are less heavy, but because it’s more lightly used by the public than, say, New York’s subway or Washington, D.C.’s Metro”) and (b) it allowed “Oregon’s integrated land use and transportation planning system [to be] manipulated to award [a former-politician-turned-consultant’s] clients hundreds of millions in state and city contracts relating to light rail expansion and the accompanying high-density developments.”

While I’m certainly no expert on either Portland or light rail ridership statistics, a cursory web search turned up this Wikipedia article suggesting that Portland’s system ranks 4th in ridership among similar U.S. systems and ahead of (much larger) cities such as San Diego (5th), Philadelphia (6th), and Dallas (7th).  And as far as the revolving door between local politics, consultancies, and developers goes, it strikes me that this is a problem that has little to do with light rail as such.  The placement of new roads and highways is similarly susceptible to backroom-dealing that favors the wealthy and well-connected.  Mark makes no effort to explain why corruption (whether of the “small-c” or “big-C” variety) poses a bigger or more inherent problem with publicly funded mass transit projects (e.g., light rail) than with publicly funded car-based projects (e.g., highways), and I fail to see an argument so obvious that it needn’t be even implied (let alone spelled out).

A few thoughts re: Portland’s “generally hostile business climate.”  Mark begins by quoting extensively from a 2010 op-ed written by the chairman of Nike, a company started and headquartered in Portland, which opposed an increase being considered in the state income tax.  Whatever the merits or demerits of the tax increase or this two-year-old op-ed, it is hard to understand why Mark cites this as his leading example of Portland’s hostile business climate in particular rather than Oregon’s in general.

Worse, this op-ed is the closest Mark comes to criticizing Portland directly.  In the subsequent paragraphs, he (a) tells the story of his own grandparents as an example of the “upwardly mobile, working-class life now seems out of reach for much of the city,” (b) notes that income is unevenly distributed in Portland (“Don’t tell Portland’s scabies-infested Occupy camp, but between 1980 and 2007, the share of wealth earned by Portland’s middle quintile declined by about 20 percent, while the top 1 percent’s share doubled”), and (c) rises to defend “the traditional working class” from “the new hipsters.”

  • (A), the fact that the WWII generation could be both “upwardly mobile” and “working-class” is well documented, as is the fact that similar opportunities are vanishingly scarce for younger America today.  While I am certainly happy for Mark’s grandparents, it’s hard to imagine that today’s public school teacher and bus driver will, in 35 years, “retire to a farm…[and] rais[e] quarter horses.”  And it’s not likely that choosing to live in Peoria rather than Portland will make any difference.
  • (B), the fact that income is unevenly distributed in Portland only proves that Portland is normal relative to the rest of the U.S., not that it is a statistical outlier.  Moreover, without further explanation, it is unclear why Mark thinks uneven wealth distribution contributes to a “generally hostile business climate.”
  • (C), as his sole example of hipster-on-working-class attacks, Mark cites a five-year-old Willamette Week article which makes reference to “drunken red-neck[s].”  Apparently, Mark did not read the prologue to the article, which clarified that it was a humorous “series of bitter, petty, pessimistic rants that generally s**t on everything—and hopefully poke holes in the Portland hype” in order to “persuade prospective Portlanders not to crowd out our way of life for a little longer.”  Whatever one thinks of this brand of humor, it’s as surprising as it is clear that Mark missed this context and tone.

One final note.  Mark does begrudge respect to Portland’s small businesses, though he apparently can’t resist a few barbs:

While it’s hard not to root for entrepreneurial initiative wherever you find it, in Portland it carries a whiff of desperation. I submit that the real reason Portland has a thriving artisanal economy is that the regular economy is in the dumps. Portland’s hipsters are starting craft businesses in their garages and opening restaurants not merely because they “reject passive consumption” but because they can’t find jobs, the kind that offer upward mobility.

Perhaps Mark should re-read that 2010 op-ed he cited.  Before Phil Knight was a multi-billionaire and the chairman of a Fortune 500 corporation, he was just another small business owner with “a whiff of desperation” about him:

Forty-six years ago [as of 2010], when Mark Hatfield was governor, I started a small business in Oregon. In our first year, sales totaled $8,000. I am proud that [Nike] eventually became a major employer in the state.

It has been my hope that other entrepreneurs would similarly pursue their dreams in Oregon.

Today, across the U.S. and not just in Portland, “the regular economy is in the dumps” and people “can’t find jobs, the kind that offer upward mobility.”  If “a small city like Portland” has enough entrepreneurs to open “671 food trucks”, I say we should encourage them.  The last thing we need is for the supposedly conservative Weekly Standard to ape the Willamette Week in its quest to publish “series of bitter, petty, pessimistic rants that generally s**t on everything.”

Disney building luxury community of Golden Oak

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The Disney community of Celebration is well known (see earlier posts here and here) but the company is developing a more luxurious community called Golden Oak three miles from the theme parks.

At prices ranging from $1.5 million to upwards of $8 million, the developer promises a house and neighborhood with the hallmarks it has carefully cultivated for decades: meticulous attention to detail; extensive personal service; and, if you’re so inclined, a daily dose of Mickey, Minnie and the crew…

Although Florida abounds in upscale communities that promote a “lifestyle” of one kind or another, Golden Oak’s planners think the Disney brand is the not-so-secret weapon that sets it apart: Buy here, goes part of the sales pitch, and get years of virtually unlimited access to Disney properties in the surrounding area.

“We’ve never done this for anybody else,” explained Stacey Thomson, public relations manager for Golden Oak, who said that buyers in the current sales phase will get three years’ worth of unlimited VIP-access passes to the parks for the homeowner and four guests, in addition to such services as door-to-park van service, access to special events, and numerous other Disney-esque benefits that don’t accrue to the typical visitor…

Where Celebration was conceived as a full-fledged town with a large contingent of full-time residents and a share of units at a much lower price point, Golden Oak is a sprawling, 980-acre subdivision that will function more as a gilt-edged resort…

This is a great example of branding. If your company can be associated with ideas like quality, fun, vacation, and magic, consumers will go to great lengths to be a part of this. The reach of Disney is so broad that they can build communities and people are drawn to them because of the Disney name even though they could find comparable homes or amenities elsewhere.

While we know there are enough buyers to make this work, it would be helpful to hear more from Disney in what they are trying to do with Golden Oak. Here is “the story of Golden Oak“:

The story of Golden Oak begins in true once-upon-a time fashion. As a youth in Missouri, Walt Disney would lie beneath the spreading branches of his “dreaming tree” and let his imagination run free. It was here that Walt’s talents for storytelling and fantasy began to take shape into some of the world’s most beloved characters.

Years later, a scenic ranch in California’s Placerita Canyon proved an equally inspiring location for filming segments of The Mickey Mouse Club TV show. Walt Disney Productions purchased portions of the property in 1959 and, over the years, acquired more than 900 acres to reserve its quiet vistas for TV and movie productions and protect its harmony with nature. In fact, Walt and his family spent time relaxing and playing on the ranch.

The name of this ranch? Golden Oak, in honor of a storied tree there, under which some say gold nuggets had been found in 1842. From these illustrious origins, the legacy continues with Golden Oak at Walt Disney World® Resort.

The website for Golden Oak emphasizes a blend of neighborhood plus resort living. Will there really be a neighborhood here or is this more of a resort that can be called a “neighborhood” because it consists of single-family homes? Or does Disney think that without calling it a neighborhood, the development won’t be as attractive? If only you have the money necessary, you too can purchase this unique Disney blend.

I wonder if we can read anything into this development in terms of how it relates to Celebration. This wealthier development could be a marker of several things:

1. Disney has gone as far as it wants to go with Celebration type developments which are more geared toward “average” suburbanites. Disney now wants to take advantage of wealthier people who are willing to buy larger and more expensive homes these days.

1a. Does Disney consider Celebration a success or would they do a lot differently if they were starting a new community?

2. Disney finds these housing projects to be profitable and will pursue more of these in the future as conditions allow. It would be interesting to know how profitable the developments are.