March Madness

Transit agencies are now demanding that Congress give them at least $25 billion so they can continue infecting people with COVID-19. Restaurants, bars, shopping malls, amusement parks, and barber shops are all supposed to shut down, but let’s keep transit running even though one study has found that “mass transportation systems offer an effective way of accelerating the spread of infectious diseases within communities.”

At least one transit agency, Portland’s TriMet, is now admitting that it’s too dangerous for people to ride transit and that they should stay at home (or drive) instead. But it is still running its buses and trains. Why? For “medical staff, first responders and other essential workers.” So we’re encouraging health care and other “essential” people to use the form of transportation whose riders are nearly six times more likely to suffer from upper respiratory infections. That’s smart!

Speaking of smart (as in smart growth), the New York Times is blaming the high incidence of coronavirus in New York City on the city’s dense population. The newspaper-of-record noted that the nation’s largest and densest major city has 26 times as many cases and 18 times as many fatalities as the nation’s second-largest city, Los Angeles. Continue reading

Seattle About to Implode

As the Antiplanner noted last week, Seattle is the only major city whose transit ridership grew in 2017 because the city has concentrated nearly 300,000 jobs in its downtown area. Yet, as noted earlier this week, Seattle transit ridership is starting to decline. That decline may may rapidly accelerate if the city council approves a proposed so-called “head tax” on all businesses that earn more than $20 million a year, which basically means Amazon and a few other companies.

The proposed tax would charge employers 26 cents per hour that each employee works in the city, or about $500 per full-time employee per year. For Amazon, which has something like 40,000 jobs in Seattle, the tax would amount to around $20 million a year — more than a quarter of total head-tax revenues — for the first couple of years, then go up to $30 million a year. The revenues from the tax would be used to provide affordable housing for homeless people.

Amazon was so perturbed by this that it halted construction on a new office tower it was building in downtown Seattle and threatened to pull all of its employees out of another existing building. When Seattle city councillor Kshama Sawant held an outdoor press conference, laid-off construction workers disrupted the meeting with shouts of “no head tax.” Despite this, members of the city council insist they will approve the tax. Continue reading

Turning Portland into San Francisco

A couple of decades ago, the planning mantra in Oregon was “don’t turn Portland into Los Angeles,” meaning don’t make it more congested. So planners were a bit chagrinned to discover that their plans actually aimed to turn Portland into Los Angeles (see p. 7), meaning a dense urban area (L.A. is the densest in the nation) with a low number of freeway miles per capita (L.A. has the lowest of the nation’s fifty largest urban areas). Since then, Portland-area congestion (measured in hours of delay per commuter) has reached the Los Angeles’ 1985 level.

Today, the mantra is “don’t turn Portland into San Francisco,” meaning an extremely unaffordable housing market. So it should be no surprise that Portland planners are following exactly the policies that will turn Portland into San Francisco.

“We have a crisis of housing affordability in this city,” says Portland Mayor Hales. But expanding the urban-growth boundary is not the answer, he claims. “It’s not true that new housing at the edge is affordable,” he argues. “Maybe it once was when there was cheap land, cheap money and cheap transportation. That’s not true anymore.” Yes, but the reason it isn’t true is the urban-growth boundary. Get rid of the boundary and associated planning restrictions, and vacant land becomes cheap, and new homes built on the urban fringe will cost a lot less. In turn, that will force prices down throughout the city and region.

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California Judge Shoots Down Smart-Growth Plan

A Los Angeles judge has ruled that a densification plan for Hollywood is “fatally flawed because the city failed to adequately assess the environmental impacts and alternatives. The plan called for lifting height restrictions so developers could construct higher-density housing.

In an all-too familiar refrain, planners argued that the plan would transform the community into a “vibrant center of jobs, residential towers and public transportation.” But neighborhood groups opposed the plan, saying it would “push out longtime stakeholders, harm neighborhoods, overtax our infrastructure, and overburden our already gridlocked streets and freeways.” The judge’s 41-page decision concluded that the environmental impact report contained “errors of fact and of law.”

California environmentalists persuaded the legislature to pass so many environmental laws that it is practically impossible to comply with them all, and then used those laws to beat down proposals for new roads and suburban development. Now those laws are coming back to bite them as they try to impose their high-density visions on various communities.
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Ending the Mortgage Interest Deduction

Realtors and home builders strongly defend the mortgage interest deduction as a way of increasing homeownership, which is supposed to be a good thing. But does it really work that well?

Edward Glaeser doesn’t think so. While he agrees that there are social benefits to increasing homeownership, he notes that the mortgage-interest deduction mainly benefits the wealthy, who are almost always homeowners anyway. He also finds that, while the subsidy has changed significantly over the years, those changes have not been reflected by changes in homeownership.

Charging taxes on interest is double taxation because the people who earn the interest also have to pay taxes on it. So, as Wikipedia notes, when Congress created the income tax in 1913, it allowed people to deduct the interest from all personal loans, not just mortgages. But in 1986, Congress (no longer worried about double taxation) repealed that deduction for all loans other than home loans. The stated reason for leaving that deduction was to promote homeownership.

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Mixed Messages from Fortune Magazine

On March 29, Colin Barr, a Fortune magazine financial writer, argues in a blog post that “housing prices will keep falling.” Just two weeks later, the cover story of the April 11 Fortune proclaims the “return of real estate” and says “it’s time to buy again.”

They can’t both be right: either Fortune magazine is wrong or Fortune magazine is wrong. As a matter of fact, they are both wrong.

Barr bases his argument on a graph comparing housing prices with the consumer price index. Before 1997, the two lines parallel one another. Then housing shoots upward until 2006. Though housing prices have fallen since then, they haven’t reached the line that would have been parallel to the CPI. Prices will continue falling, Barr argues, until they return to that line.

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Another Smart-Growth Plot?

“Under Obama’s proposal, fewer to own homes,” reported the Antiplanner’s local paper. The paper was reprinting an article from the New York Times, whose original headline was the slightly less inflammatory, “Administration calls for cutting aid to homebuyers.”

Is this another smart-growth plot to restrict homeownership only to the wealthy? Or is it a rational response to the recent financial crisis? The article is based on a report from the Department of Housing and Urban Development on reforming the home finance market.

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Regulating to Prevent the Last Crisis

In addition to mentioning high-speed rail a couple of times, President Obama’s state of the union speech mentioned the need to regulate the finance industry to prevent the kind of global crisis that took place in 2008. This received one of the loudest applauses of the evening as it has become conventional wisdom that the crisis was due to banker greed and the lack of regulation. “The main cause of the crisis was the behavior of the banks–largely a result of misguided incentives unrestrained by good regulation,” says Nobel-prize winning economist Joseph Stiglitz.

An alternate view is provided by Jeffrey Friedman: the crisis was actually caused by too much regulation, most of which had been written precisely to prevent such crises. But instead of preventing financial panics, successive waves of regulation each laid the groundwork for the next crash. Friedman presents his view in a new book, What Caused the Financial Crisis, which also includes the paper by Stiglitz that contains the above quote.

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Housing and Economic Growth

Nations with well-functioning housing markets that are responsive to changes in demand will be more likely to grow faster than nations with strict land-use regulation, says a new report from the Organization for Economic Co-operation and Development (OECD). The report is a part of a series of studies known as Going for Growth that are promoting economic development.

The report (which is also summarized in this presentation) compared housing markets in more than 20 leading nations and showed that those with less regulation tended to have more affordable housing whose prices were less volatile. Some of the data in the report, however, were overly simplistic: the United States and Canada, for example, were each considered as single housing markets, when in fact housing policies and market conditions vary tremendously from state to state, province to province, and metro area to metro area.

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Are We at the Bottom Yet?

According to economists at Moody’s, the housing market will bottom out in 2011–which means now may be the time to hunt for cheap homes and be ready to flip them when prices start going up. Unfortunately, the Antiplanner can’t afford the $250 required to listen to Moody’s webconference, so let’s look at some other data to see how likely it is that prices will start to recover.

First, we can go to the Federal Housing Finance Agency (FHFA), which publishes home price indices beginning in 1975 for states, metropolitan areas, and the nation as a whole. Many news reports rely on the Case-Schiller index, but that index only covers a selection of metro areas and misses many states. The FHFA uses the Case-Schiller methodology but has a much larger database.

The Antiplanner has made a user-friendly Excel chart from FHFA’s state data. Simply enter the two-letter acronyms of up to six states in cells BK150 to BP150, and the chart should update with those states. Nationally, housing prices peaked in the first quarter of 2007, declined through the second quarter of 2010, and recovered slightly in the third quarter of 2010. But, as averages of the country as a whole, national data do not provide very useful indicators of what is really happening in housing markets.

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