Linking Microsoft giving $500 million for Seattle area housing to tech companies and declining gov’t support for housing

Microsoft is pledging a substantial amount to address the important issue of housing in Seattle:

Microsoft plans to lend $225 million at subsidized rates to preserve and build middle-income housing in six cities near its Redmond headquarters. It will put an additional $250 million into low-income housing across the region. Some of those loans may be made through the federal programs that provide tax breaks for low-income housing.

The company plans to invest the money within three years, and expects most of it to go to Seattle’s suburbs.

The loans could go to private or nonprofit developers, or to governmental groups like the King County Housing Authority. As the loans are repaid, Mr. Smith said, Microsoft plans to lend the money out again to support additional projects.

This article frames the giving as part of the housing issues wrought by the actions of tech companies:

Microsoft’s money represents the most ambitious effort by a tech company to directly address the inequality that has spread in areas where the industry is concentrated, particularly on the West Coast. It will fund construction for homes affordable not only to the company’s own non-tech workers, but also for teachers, firefighters and other middle- and low-income residents.

From this point of view, the health of a region matters for companies. If workers, whether ones employed by a particular company or organization or others, cannot find affordable housing, it will be harder for the region to find and hold on to workers. Whereas businesses often focus on a good business climate (low taxes, tax breaks, business-friendly governments, etc.), housing is a big factor in finding a strong work force. Additionally, Microsoft can help show through these actions that they care about local conditions in ways that tech companies are often said to ignore because of their global status. Would Microsoft be the same if it were not in the Seattle region?

Another way to view this is that private companies are now taking on what the federal government should address:

The government spent about three times as much on housing programs in the 1970s as it does today, according to the National Low Income Housing Coalition. In the years since, the government has gotten out of the business of building public housing. And capital funds to repair the remaining public housing stock have been cut in half over the last 15 years.

Over this time, federal resources have increasingly shifted away from subsidizing the construction of affordable housing to subsidizing renters who find housing in the private market. And now most new below-market-rate housing is built not by public agencies, but by nonprofit developers leveraging tax credits. The value of those credits has declined recently as well, as a result of changes in the tax bill passed in 2017.

In a sense, Microsoft’s proposal is an extension of this story, as private actors continue to step in where the government once stood.

Ed Goetz, a professor at the University of Minnesota who has studied the history of public housing in America, said: “I don’t want to diminish the magnitude of what they’re doing. I think it’s important, and it will help. But it won’t solve Seattle’s problem.”

This argument suggests that private actors can only do so much to address housing issues. Because so much money is involved and the issue is so widespread, even $500 million may not do much in a single metropolitan region with high land and housing costs. Of course, the government is involved in the housing industry: the federal government for decades has supported single-family homes, primarily in the suburbs. At the same time, the government and the American people have always been more ambivalent about public housing. It is not as if  the housing market is a free market: the United States subsidizes mortgages.

At the least, this will be an interesting experiment: can Microsoft make even a small dent in the housing needs of the Seattle area? Will this help strengthen the metropolitan region or primarily serve as good publicity for the company?

Towns that restrict road access to app users only address the symptoms and not the bigger issue

The decision in a New Jersey suburb to fight back against drivers directed to their streets by apps raises all sorts of questions:

In mid-January, the borough’s police force will close 60 streets to all drivers aside from residents and people employed in the borough during the morning and afternoon rush periods, effectively taking most of the town out of circulation for the popular traffic apps — and for everyone else, for that matter…

But Leonia is not alone. From Medford, Mass. to Fremont, Calif., communities are grappling with the local gridlock caused by well-intentioned traffic apps like Waze, which was purchased by Google in 2013 for $1.15 billion.

Since Waze uses crowd sourcing to update its information, some people — frustrated at the influx of outside traffic — have taken to fabricating reports of traffic accidents in their communities to try to deter the app from sending motorists their way. One suburb of Tel Aviv has even sued Waze, which was developed by an Israeli company….

“It’s a slippery slope,” said Samuel I. Schwartz, the former traffic engineer for New York City known as Gridlock Sam, and the author of the early 1990s book “Shadow Traffic’s New York Shortcuts and Traffic Tips.” “Waze and other services are upsetting the apple cart in a lot of communities. But these are public streets, so where do you draw the line?”

See an earlier post about a Los Angeles neighborhood that raised similar objections.

I can see the reasoning by small communities: the roads are partly or mostly paid for through local tax dollars and thus they should primarily be reserved for the use of locals. These sorts of situations can become big deals in suburbs where residents are often resentful of ways that their local tax monies serve others.

At the same time, this hints at a larger issue: efforts like this by single communities could end up having deleterious effects on the region as a whole. What if every suburb or community employed such tactics? Traffic would only be worse. This then suggests a metropolitan approach is needed to tackle these congestion issues. This might be difficult to do considering how local residents like to hold onto their own monies but drivers across the region might be too mad at that point to care if there are no alternative routes. The best way to tackle this issue may be to lobby for more mass transit and decreased reliance on cars in the New Jersey suburbs.

Suburbs to respond to companies returning to cities

Another new issue facing suburbs – in addition to homelessness – is how to respond when companies move their headquarters back to cities:

In Chicago, McDonald’s will join a slew of other companies — among them food giant Kraft Heinz, farming supplier ADM and telecommunications firm Motorola Solutions — all looking to appeal to and be near young professionals versed in the world of e-commerce, software analytics, digital engineering, marketing and finance…

Aetna recently announced that it will relocate from Hartford, Conn., to Manhattan; General Electric is leaving Connecticut to build a global headquarters in Boston; and Marriott International is moving from an emptying Maryland office park into the center of Bethesda, Md…

The migration to urban centers threatens the prosperity outlying suburbs have long enjoyed, bringing a dose of pain felt by rural communities and exacerbating stark gaps in earnings and wealth that Donald Trump capitalized on in winning the presidency…

Long term, the corporate moves threaten an orbit of smaller enterprises that fed on their proximity to the big companies, from restaurants and janitorial operations to subcontractors who located nearby.

It is difficult for any community – whether big city or suburb – to adjust to the move of a large firm out of the community. A number of things are lost: prestige, jobs, philanthropic contributions, and tax revenue. Arguably, suburbs lose more compared to big cities that have broader and more diverse economies: the headquarters in the suburb might be a sizable community anchor.

This may be similar to when suburbs with once-thriving shopping malls try to figure out what to do with that space. It can be difficult to fill the property all at once so suburbs might have to take their time and move one small step at a time.

I’ve argued before that this whole city-suburb competition for headquarters could harm both in the long run as it takes the focus away from a metropolitan effort to encourage business growth. On the whole, it matters less if a company moves from the Chicago suburbs to downtown than if the company decides to leave the entire region for another location. If more businesses move back to major cities, could suburbs find some way to work together to prevent moves? Or, or is the sometimes cutthroat competition between suburbs impossible to stop?

Can a suburb enact a higher minimum wage if others nearby do not?

Suburbs in Cook County have the ability to opt out of a county ordinance raising the minimum wage but they have to weigh how their decision compares to communities near them:

Home-rule municipalities can opt out of the ordinance that boosts the minimum wage from $8.25 to $10 an hour starting July 1, and dozens of them have done just that since the Cook County Board passed the ordinance in October. That has left neighboring towns in a precarious state, worrying that their businesses will suffer under higher payrolls.

Evanston appeared ready to address those concerns at an emergency meeting Friday morning, after nearby Wilmette decided to opt out of the minimum wage increase…

Skokie Chamber of Commerce Executive Director Howard Meyer said the group at first had no issue with the measure. Because Skokie borders Chicago, where a heightened minimum wage is already in effect, the chamber believed its members wouldn’t be at a competitive disadvantage.

But after more municipalities opted out and Skokie businesses expressed worries about the impact, the chamber spoke out against the minimum wage plan, as well as another county ordinance to mandate paid sick leave.

Suburbs often face this pressure: if we enact a new measure, will residents and businesses respond by leaving for other suburbs? This happens with tax breaks for businesses (I’ve argued this leads to a race to the bottom) as well as tax rates, city services, and other quality of life factors. Economists and others would suggest that residents and businesses vote with their feet: if this doesn’t happen immediately, the long-term effect could be bad for a suburb if the inflow stops.

The best solution to all of this is not to allow suburbs to have separate policies on something like this. Based on the article, it sounds like numerous suburbs are fearful. But, if they all had no choice, they wouldn’t have to compete with each other (though they then would have to compete with communities in other counties). I’m guessing the ability to opt out was important to getting this passed at the county level but it could be highly negative in the long run.

Perhaps then it would be best to enact a region-wide initiative where every community is affected. Of course, this goes against many of the principles of local control and government – we should be able to decide fiscal policies within our borders – and there is not a binding governmental body that oversees the hundreds of local governments in the Chicago region. This could only happen at the state level but then there are other actors beyond the Chicago region.

In the mean time, it will be difficult to put into practice a higher minimum wage within the region if each community can opt out and act upon their fears.

60+ Chicago suburbs lose population in recent years

Population loss may not just be limited to Chicago; dozens of Chicago area suburbs have lost population in the last few years.

From 2010 to 2014, Chicago and 73 of the suburbs saw their populations increase.

But the trend reversed from 2014 to 2016. In that time, Chicago and 61 suburbs saw their populations shrink…

Decreases were sharpest in the Cook County suburbs closest to the Chicago. Towns including Rosemont, Des Plaines, Elk Grove Village, Mount Prospect and even Hoffman Estates experienced declines of a full percent or more during the past two years…

But now, both the city and its suburbs are losing population, which is troubling to researchers. “That’s not really typical for us,” said Elizabeth Schuh, principal policy analyst at the Chicago Metropolitan Agency for Planning. “Many regions often tend to lose from the central city as residents migrate to the suburbs. When you’re losing from both is when you see regional decline.”

From the maps, it is not as simple as closer suburbs are losing population and further suburbs are gaining residents. Instead, there seem to be pockets of suburban growth: the far west suburbs, two southwest corridors (though not Joliet), and some communities in eastern DuPage County and southern Lake County. Are these just communities that have had new development or are there particular features of these growing suburbs that are attracting residents (like access to trains or a high quality of life or a mix of housing options)?

The suggestion from the article that this is a regional issue could lead to some fruitful discussions: how does the third largest region in the country work together to attract more residents and businesses? It is easy to cast this as a problem with just Chicago but the city and suburbs are intertwined. A regional approach where multiple parties can win – and not just fight over businesses or residents moving from the suburbs to the city or vice versa – could be the better way to go.

Indianapolis’ Univgov only worked because schools were not included

The Univgov created in Indianapolis in 1970 may have only gone forward because it didn’t unite all local governments; it intentionally left out school districts.

The celebrated unified government, or “Unigov,” law brought together about a dozen communities in Marion County into a single large city in 1970. The idea was to put a bigger, more powerful Indianapolis onto the national map, simplify city services, and grow the city’s tax base. Indianapolis was not the only city in the country to merge with its surrounding county at that time—but it was the only one to explicitly leave schools out of the deal…

The judge who ordered the busing, Samuel Dillin, stated bluntly that a merged city that left 11 separate school districts was racially motivated. At the time, a majority of the region’s African American and minority students lived in the city center while the surrounding school districts primarily enrolled white students.

“Unigov was not a perfect consolidation,” then-Mayor Richard Lugar said. He went on to be one of Indiana’s most legendary political leaders as a six-term U.S. Senator. “A good number of people really wanted to keep at least their particular school segregated.” Lugar said he knew the 162-page Unigov bill would die in the Indiana General Assembly if schools were included. But he still thinks the merger was worth it, despite the effects it has had on schools…

Unigov’s legacy for Indiana education is mixed at best, but neither Lugar nor Cierzniak think a future Marion County school district merger—one way some scholars say segregation can be reduced—is likely. Township districts have grown considerably, and the state legislature has heard district consolidation plans over the years that have repeatedly failed.

Uniting metropolitan governments is a difficult task, primarily for reasons like this: wealthier, whiter, often suburban residents do not often want to share their resources – particularly schools – with those who are not as wealthy and white. When the middle-class and above look for places to live, they often prioritize the school district and if it has a record of higher performance, will fight to keep others out. These wealthier residents want their tax dollars, especially those based on their better housing values, to go to their children and community. And the white-black divide is often the most difficult line to cross in such situations.

As another recent example, see the case of when Ferguson, Missouri students were given the chance to leave their unaccredited school district. Some parents in the new school district do not react well.

Balkanized suburbs and declining local revenues

A story about several suburbs outside Philadelphia highlights a problem facing many suburban communities: how can they counter declining revenues when residents and businesses move away?

Pennsylvania’s Delaware County is a crazy quilt of municipalities. Just to the west of Philadelphia, it is home to some of the oldest suburban communities in America. It is dense, with more than half a million people packed into townships and boroughs as small as a half square mile. Such tight confines can make governance difficult under any but the best conditions.

If a neighborhood starts to change in a way its middle-class residents don’t like, they can move a few miles to a newer house, a better school district, and lower property taxes. The communities they leave behind are faced with the impossible math of declining revenues, rising taxes, and an increasingly needy population…

But Hepkins’ most attainable plan is his ongoing effort to lash Yeadon together more tightly with its neighboring municipalities. He dreams of creating a non-profit 311 call center that could cover the six eastern Delaware County municipalities served by the William Penn School District. This centralized office could connect residents with immigration, veteran, and senior services…

The mayors of Lansdowne and East Lansdowne have been receptive to Hepkins’ advances, but his other three counterparts are hesitant. Even if the local politicians do overcome their own parochial interests, it’s an open question how much resource-sharing between six struggling municipalities would accomplish. A system incorporating the region’s more prosperous communities would be far more advantageous, akin to the revenue-sharing policies utilized in the Twin Cities metro region. But nothing like that is being seriously discussed in the Philadelphia area.

Several thoughts come to mind:

  1. This is a reminder that suburbia is much more diverse than the standard image of white and wealthy communities. Suburbs have increasing numbers of non-white and poor residents and there are various types of suburban communities ranging from bedroom suburbs to industrial centers.
  2. Local governments are often very reliant on property taxes. And Pennsylvania has a lot of local taxing bodies though it trails Illinois. Thus, suburban communities are very interested in wealthier residents as well as businesses that can bring in money through property taxes and sales tax revenue. This creates a kind of competition that is difficult for everyone to win.
  3. A number of metropolitan regions and urban communities in the United States have considered ways to band together to tackle common economic and social issues. This can be hard to do because one of the features people like about the suburbs is having more local control. Moving local revenues to another community – even if it is needed or might benefit the region as a whole – can be a hard sell, particularly in better off suburban communities.

I suspect we’ll see more and more stories like this in the years to come.

Hoping to retire the myth of widening roads to reduce traffic

Eric Jaffe provides a reminder that traffic is not lessened if there were just wider roads:

“Wider Roads = Less Traffic”—The most enduring popular traffic myth holds that building more roads always leads to less congestion. This belief is a perfectly logical one: if there are 100 cars packed into one highway lane, then building a second should mean there’s 50 cars in each. The problem, as transportation researchers have found again and again, is that when this new lane gets added the number of cars doesn’t stay the same. On the contrary, people who stopped driving out of frustration with traffic now attack the road with an enthusiasm unknown to mankind.

While residents of heavily congested metro areas have a suite of four-letter words to describe this effect, experts call it “induced demand.” What this means, simply put, is that building more road eventually (if not always immediately) leads to more traffic, not less. Fortunately, local leaders are starting to distinguish reality from myth when it comes to induced demand. Unfortunately, the best way to address it—congestion pricing—remains all-but politically impossible in the U.S. That pretty much leaves one thing to do: deal with it.

A congestion tax is one way to deal with the issue: make people think twice about driving into heavily trafficked areas. At the same time, broader solutions could be employed: planning communities and regions that don’t rely so much on solo driver trips (such as through denser development); increasing funding to mass transit and providing more regular service and/or more options; and finding other ways to cut incentives on driving such as increasing gasoline taxes or paying per mile for driving. Of course, these broader approaches may be asking too much as Americans still like the option of driving. But, it may take some bold politicians and municipalities to try congestion pricing and show that it can work before it is widely adopted.

In other words, you may be able to show studies that demonstrate how this myth isn’t true but perhaps Americans dislike the truth – and the solutions that go with – even more.

A Chicago congestion tax reveals regional issues in addressing traffic

Looking for revenue and to reduce traffic, a congestion tax may be on the table in Chicago:

According to Michael Sneed in the Chicago Sun-Times, Chicago Alderman Ed Burke recently persuaded Mayor Rahm Emanuel “to study the feasibility and logistics of collecting a congestion fee from suburbanites who drive into the city.” The move could raise millions for the city and keep cars off city streets, easing congestion.

A panel has since been tasked with determining how such a fee would be collected, where it could be collected, and the costs of operating such a program…

In the Sun-Times, Burke was quoted as saying a congestion tax has been “extremely successful” in European cities such as London. There, drivers pay a charge for being able to enter certain zones from 7 a.m. to 6 p.m. on weekdays. Cameras monitor the zones and drivers who don’t pay are fined.

About 194,000 vehicles drive to Chicago’s main business district each day from elsewhere in the city and the suburbs, according to a Chicago Metropolitan Agency for Planning study conducted before Feb. 2010.

Traffic is a major problem in the Chicago region; see a recent report as to how many hours are lost each year. A congestion tax could be part of a comprehensive answer to this. However, it would be silly to expect this tax on its own to solve all the problems. Having effective mass transit across the region would help. If you want people to drive less, they need to have viable train and bus options. Having denser development near job centers throughout the region would help. Promoting Chicago’s core may be good but it also means concentrating more people from throughout the region on a single place. Promoting more bicycling and walking would help. Simply adding more lanes and roads does not necessarily help.

The other interesting part of this story from the Daily Herald are the predictable negative reactions from suburban leaders. They don’t want suburbanites to be penalized for going into Chicago. Yet, solutions to these issues have to be at the regional level. If suburban leaders don’t want a congestion tax, what are they willing to give to improve transit throughout the region? Can everyone contribute some money to help all residents of the region? The efforts of individual communities – even Chicago if it is just acting alone – won’t be enough.

Can IL, WI, and IN work together to promote the region?

Efforts to cross state lines to promote the Chicago region have not produced much:

With Illinois Gov. Bruce Rauner threatening to “rip the economic guts out of Indiana” and Indiana Gov. Mike Pence admitting to “a playful penchant to poach business from Illinois,” efforts to forge alliances within the tri-state metro area have been consigned to scholarly conferences and countless committee meetings, with scant tangible results…

In the global competition to attract business and talent, regions that collaborate to establish a brand, develop industry hubs, streamline transportation, foster a cultural scene and revitalize neighborhoods have a competitive edge, experts say…

Formalized regional collaboration is paying off for a number of major metropolitan regions, helping to stoke their economies and lure new residents. Denver-area taxpayers have anted up repeatedly for cultural and transit projects that have revitalized the city. Portland and its suburbs worked together to rev up exports. Metro Minneapolis’ tax-sharing strategy has helped reduce the gap between rich and poor communities. The communities lining the southern coast of Lake Michigan comprise the nation’s third largest economy. They are home to a rich assortment of businesses, an educated workforce, respected universities and a massive, if overloaded, transportation system.

But greater Chicago’s tepid growth rate is outpaced by a number of metropolitan areas with cohesive regional strategies. Denver, for instance, ranked No. 6 in economic performance among the nation’s 100 largest metros since its pre-recession peak, while Chicago was No. 77, according to Brookings Institution data.

This is a good example of how relatively arbitrary political boundaries limit the ability to operate within day-to-day social boundaries. The Chicago region exists as an interdependent whole and it cross state lines into Wisconsin and Indiana as well as includes hundreds of Illinois municipalities. Yet, politicians are elected to represent their particular geographic area and don’t get much credit if nearby areas also do well. Voters don’t have broad views of regions – efforts to support metropolitan institutions and bodies are often voted down across the United States – and prefer to exercise local control. Thus, politicians hunker down and do what they can to boost their particular chances even if what they can do is affected by what these nearby leaders do. For example, see Indiana’s ongoing effort to attract Illinois businesses. In contrast, see what a 2012 OECD report said could be done across the Chicago region.

Given the issues facing the region (from mass transit to stormwater management to poverty to affordable housing to jobs to population decreases and more), one would hope that the various leaders and governmental bodies will start working together before it might be too late to do anything productive.