BN: housing
Showing posts with label housing. Show all posts
Showing posts with label housing. Show all posts

18 Aug 2020

Zoning common sense - Barokong

Kate Kershaw Downing has posted a worthy letter of resignation from the Palo Alto Housing commission, that seems to be going viral.

Palo Alto is absurdly expensive. People who want to come here for jobs can't afford to live anywhere nearby.  What to do about it?

I have repeatedly made recommendations to the Council to expand the housing supply in Palo Alto so that together with our neighboring cities who are already adding housing, we can start to make a dent in the jobs-housing imbalance that causes housing prices throughout the Bay Area to spiral out of control. Small steps like allowing 2 floors of housing instead of 1 in mixed use developments, enforcing minimum density requirements so that developers build apartments instead of penthouses, legalizing duplexes, easing restrictions on granny units, leveraging the residential parking permit program to experiment with housing for people who don’t want or need two cars, and allowing single-use areas like the Stanford shopping center to add housing on top of shops (or offices), would go a long way in adding desperately needed housing units while maintaining the character of our neighborhoods and preserving historic structures throughout.

She also warns

If things keep going as they are, yes, Palo Alto’s streets will look just as they did decades ago, but its inhabitants, spirit, and sense of community will be unrecognizable. A once thriving city will turn into a hollowed out museum.
I found Ms. Downing's letter noteworthy in that it did not include the usual Bay Area nostrums -- the government must build "affordable housing," freeze rents, ban new construction (yes, this is proposed) or otherwise take counterproductive actions. Those steps can preserve some existing low-income people at high cost -- creating a different kind of museum, really -- but make matters even worse for people who want to move here to work. Few local voices appreciate that expanding supply can do a lot to lower prices, and enhance age and economic diversity.

As the post notes, the coverage and comments in the local newspaper are worth reading as well.  These are local issues, handled by local governments, responsive to the wishes of their local residents. A lot of residents like things just as they are and as they are going, or have quite different views of cause and effect of housing policies.

I'm sorry Ms. Downing is leaving. Good local government depends on hard work by people like her, not crabby bloggers. We all spend too much time focused on Washington and Presidents rather than these kinds of important issues.

Update: Alex Tabarrok at Marginal Revolution on the same letter. Alex points out just how much we have all lost property rights.

17 Aug 2020

Furman on zoning - Barokong

On this day (Clinton vs. Trump debate) of likely partisan political bloviation, I am delighted to highlight a very nice editorial by Jason Furman, President Obama's CEA chair, on the effects of housing restrictions. A longer speech here. The editorial is in the San Francisco Chronicle, ground zero for housing restriction induced astronomical prices. Furman:

When certain government policies — like minimum lot sizes, off-street parking requirements, height limits, prohibitions on multifamily housing, or unnecessarily lengthy permitting processes — restrict the supply of housing, fewer units are available and the price rises. On the other hand, more efficient policies can promote availability and affordability of housing, regional economic development, transportation options and socioeconomic diversity...
...barriers to housing development can allow a small number of individuals to enjoy the benefits of living in a community while excluding many others, limiting diversity and economic mobility.
This upward pressure on house prices may also undermine the market forces that typically determine patterns of housing construction, leading to mismatches between household needs and available housing.
What's even more praiseworthy is what Furman does not say: "Affordable" housing constructed by taxpayers, or by forcing developers to provide it; rent controls; housing subsidies; bans on the construction of market-rate housing (yes, SF does that); bans on new businesses (yes, Palo Alto does that), and the rest of the standard bay-area responses to our housing problems.  The first few may allow a few lucky low-income people to stay where they are, as long as they remain low-income, but does not allow new people to come chase opportunities. Subsidies that raise demand without raising supply just raise prices more. As in child care or medicine.

When President Obama's CEA chair writes an oped, most of which could easily have come from Hoover or CATO, it's a hopeful day, no matter what happens tonight.

Moreover, Furman recognizes that a thousand-point federal program imposed on states and local governments by regulation is not the answer:

While most land use policies are appropriately made at the state and local level, the federal government can also play a role in encouraging smart land use regulations
We have found the enemy, as Pogo said, and it is us.

The real political economy is tough, of course. Current residents vote for restrictions, and not just out of misunderstanding.  Current residents (people like me), who buy expensive houses in this beautiful area, vote to keep things just as they are. Restrictions mean they can't sell houses for $10 million to a developer who wants to put up a 100 story office building and turn it in to Manhattan. But restrictions mean they can sell for $2 million and retire comfortably to Mendocino.  Or stay  right where they are, paying property taxes based on the 1965 value of their house (another big impediment to housing mobility and affordability) and making sure the neighbors don't sell and ruin their view. Renters vote for rent control, affordable housing mandates, and so on that applies to current residents but not to newcomers.  This behavior has a  negative externality on low-income ("low" means out of top 0.5%in SF!)  people who want to move here. But a Trumpian mini-wall of regulation keeps them out. The most local government is not always the best. The most liberal government often acts with effects that are surprisingly conservative.

10 Aug 2020

EconTalk - Barokong

As in other recent projects (growth essay,testimony) I'm trying to synthesize, and also to find policies and ways to talk about them that avoid the stale left-right debate, where people just shout base-pleasing spin ever louder. "You're a tax and spend socialist" "You just want tax cuts for your rich buddies" is getting about as far as "You always leave your socks on the floor" "Well, you spend the whole day on the phone to your mother."

We did this as an interview before a live audience, at a Chicago Booth alumni event held at Hoover, so it's a bit lighter than the usual EconTalk. This kind of thought helps the synthesis process a lot for me.  Russ' pointed questions make me think, as did the audience in follow up Q&A (not recorded). Plus, it was fun.

I always leave any interview full of regrets about things I could have said better or differently. The top of the regret pile here was leaving a short joke in response to Russ' question about what the government should spend more on. Russ was kindly teeing up the section of thegrowth essay "there is good spending" and perhaps "spend more to spend less" ideas in several other recent writings. It would have been a good idea to go there and spend a lot more time on the question.

From the growth essay, I think the government could profitably spend a lot more money on the justice system. That so many of our fellow citizens rot in jail awaiting trials, that the vast majority never receive a trial anyway but a hasty plea-bargain, that their legal representation is so thin, is a disgrace -- and causing huge problems. If a wrongly accused young man spends two years in jail before charges are dropped, the consequences for him and his family are awful. Business relies on a speedy and efficient justice system to adjudicate commercial disputes, and that seems to be falling apart too, partly for lack of resources.  The cost here is peanuts compared to, say, peanut subsidies.

Our public infrastructure doesn't just consist of steel and asphalt. The public software needs investment as well, or more.

Public health is one of the most essential public goods. Of all the civilization-ending scenarios you can think of, nuclear war and a pandemics top my list. Many past pandemics followed a surge in globalization -- the plague of the 1350s, that wiped out half or more of the population; the smallpox that wiped out native America in the 1500s, the 1918 flu. (Larry Summers has a good article on this point.) We are ripe for antibiotics to stop working and new diseases to spread catastrophically, if not among humans among the plants and animals on which we depend. Don't count on the UN and the WHO.

The government can profitably fund basic research. "Yes, 95% of funded research is silly. Yes, the government allocates money inefficiently. Yes, research should also attract private donations. But the 5% that is not silly is often vital, and can produce big breakthroughs." (Basic research is not the same thing as subsidies for commercializing research.)

Yes, Martha, I should have said, there are public goods here and there.

Of course, more spending on things like these does not imply more spending overall. They're all remarkably cheap, and could easily be funded by spending a little less on some of the colossal waste. (Example: We spend $6 billion on the FBI and $13 billion on border control.) Of course, one must also spend wisely and use the results wisely. And one could add a lot to the list. But repeating a fun joke about spending is not the right answer.

6 Aug 2020

How to raise house prices and inequality - Barokong

From Chris Kirkham in today's Wall Street Journal, department of you can't make this stuff up:

Nearly two-thirds of Los Angeles voters last week approved a citywide affordable-housing requirement....
The rule requires that up to 25% of units in rental properties and up to 40% in for-sale projects meet affordability guidelines. Alternatively, developers can pay a fee to the city.

New York City and Seattle passed similar requirements earlier this year.

The Los Angeles initiative goes a step further, however. It also sets wage standards for the projects.
Developers must pay construction wages on par with those required for public-works projects, hire 30% of the workforce from within city limits, set aside 10% of jobs for certain disadvantaged workers living within 5 miles of the project and ensure 60% of workers have experience on par with graduates of a union apprenticeship program.
The mandates could double the hourly wage for some construction trades compared with state median wages. The pay for a carpenter, for example, could rise to $55.77 an hour from $26.16, according to an economic analysis sponsored by opponents of the initiative.
I wonder what that will do to the cost of housing? Notice also that by restricting who can do construction jobs and forcing up wages, there will be lots of new unemployment among lower-skilled or new entrants to construction, often a first step up the ladder for less educated people.

... some developers will be less affected by the change. Those who build primarily affordable housing, using government subsidies, already must pay higher wages. Developers of large high-rise projects, meantime, often use union work crews.
The measure was backed in part by the Los Angeles County Federation of Labor, a union group,
A union group delighted to eliminate low-wage competition. Let them eat tacos?

“There’s a huge shortage of housing in L.A., and a huge shortage of low-income housing,” he [Shawn Evenhaim, chief executive of Los Angeles developer California Home Builders] said. “They took that problem and made it worse.”
Left out of the article, and a big question I have if anyone knows the answer: who gets "affordable" or "below market rate" housing. Rather obviously more people want subsidized housing than can get it. So who wins the lottery?

"Affordable" housing is parceled out by income limits. So what happens if you get a better job? Are you kicked out of your house? That sounds like a great recipe for perpetuating income inequality. What happens if you get a job offer somewhere far away? Can you trade one "affordable" house for another? I bet not. One more nail in the coffin of advancement.

More deeply, if these things work the way I suspect, there is a long waiting list and a lottery. Once in, you're in so long as you don't get more income. Thus, they entrench and benefit people who have been in one place a long time. And the people really hurt by "affordable" housing -- which restricts supply and raises costs of all other housing -- are newcomers, especially low-income newcomers who would like to come for better jobs. And new businesses who would like to hire ambitious low-income newcomers and give them better incomes.

So the effects are not just to raise house prices -- they are to increase inequality, reduce opportunity, especially for low skill and low income people, and reduce the economic vitality of the region.

19 Jul 2020

YIMBY papers - Barokong

Two new papers on housing restrictions are noteworthy, Housing Constraints and Spatial Misallocation by Chang-Tai Hsieh and Enrico Moretti, andThe Economic Implications of Housing Supply by Ed Glaeser and Joe Gyourko.

Readers of this blog will not be surprised at the idea that zoning and other restrictions drive up the cost of housing, and that this has many bad consequences on economic growth and inequality. The papers are especially noteworthy for much deeper implications.

Hsieh and Moretti:

...high productivity cities like New York and the San Francisco Bay Area have adopted stringent re- strictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009.
1) The costs of regulation. The biggest problem in economics right now (yes, I mean that) is, How do we measure the growth consequences of regulation? Looking at the Western world's sclerotically slow growth rate, and listening to many anecdotes, it seems at least plausible that productive innovation is being strangled by byzantine bureacracy, captured by rent-seeking and anti-competitive forces. (Your other choices are, we just ran out of ideas, or some sort of endless "lack of demand.")

But how do we move past anecdote? How to we come up with "regulation is costing the economy x percentage points of growth?" Our statistical measurement system, GDP, unemployment, inflation, and so on, was beautifully designed in the 1940s to measure very Keynesian demand concepts. It isn't designed to answer the question of our time, how much growth is regulation costing us? We are flying in the dark. And Europe, perpetually in an Augustinian moment -- Lord,  grant me structural reform, just not yet--is also.

Well, Hsieh and Moretti are doing it, and by doing so showing one path to answering the larger question.

Half of all US growth for a half century is an astounding amount. 1964: $3,734 trillion;   2009: $14,419 Trillion. Growth = 3.05% per year. At 6.1% per year, $3734 x (1.061)^(2009-1964)=$53.6 trillion dollars!

OK, maybe that's too huge. Well, read the paper and see how they came up with the number. If you don't like their assumptions make different ones. More important than this number is how they are coming up with answers to this, the most important question of economics.

2) Models and micro vs. macro

So how do they make the calculation? Roughly, they measure productivity in cities. They assume that people get higher wages in San Francisco because there are some very high productivity activities that have to be done here. They assume that business could expand and form here, and workers could move here and join in those high productivity activities, both earning higher wages and making more and better stuff for the rest of us. But those workers can't move, and businesses can't expand and form, because housing supply is restricted.

You can see grounds for objection.

Housing costs are high in places like Carmel (I think) because retired rich people like to live there, together with restricted supply -- the amenity theory of housing cost. Workers moving there would not earn a lot more. Maybe people live in tiny apartments in San Francisco because they prefer it, so restricted housing supply is not restricting productive activity. Well come up with your own model, and check it out in the micro data as Hsieh and Moretti do. Every model has assumptions. To calculate a counterfactual -- how much would people earn and businesses make if they could move to San Francisco -- you have to do that. It takes a better model to beat a model.

But there is a deep lesson in their style of modeling: Heterogeneity. Misallocation. Dispersion. Inequality. The key lesson is not that "regulation is killing US firms on average." The US as a whole is doing badly because firms are in the wrong place -- misallocation. Each individual firm may feel it's doing fine. It might consider moving to San Francisco, but say "well, we might be more productive there, but wages are much higher because you have to pay people enough to buy a house, so we wouldn't make any more money if we were there." More to the point, a new business that would embody the higher productivity, get workers to move, and put the old unproductive business out of business can't start.

Macroeconomics and our numbers are designed around the "representative firm" and the "representative worker." But you are seeing here the macroeconomic effects of microeconomic distortion, and only visible in the amazingly large, widening and persistent differences in productivities, wages, and incomes across areas and companies.

(Random additional examples: The Allocation of Talent and U.S. Economic Growth, Chang-Tai Hsieh Chad Jones Erik Hurst and Pete  Klenow; "About one-quarter of growth in aggregate output per person [from 1960 to 2010] can be explained by the improved allocation of talent," talented african-americans and women moving in to occupations from which they had been excluded. See above eye popping numbers.; Chang Tai Shieh and Pete Klenow, Misallocation and Manufacturing in China and India, or keep browsing all these authors' websites.)

3) Regulation again. There is a deeper lesson in this story for my call to measure the cost of regulations. The usual measures -- hours spent filling out forms, costs of activities required by regulators, wages of compliance employees and lawyers -- are completely meaningless. Suppose that getting a building permit in the Bay Area took 5 minutes. (It doesn't. It's an amazingly wasteful and time consuming process. But suppose it did.) But they just say no. Well, the cost of regulation measured that way would be zero. Businesses would answer surveys, "Regulations? They aren't a problem. It's just too darn expensive here." Economics is always about the unseen.

The cost of regulation is in the higher prices it imposes, the businesses that don't get started, the people who can't move here to earn the high wages that high productivity brings, the higher tax rates we all must pay to bail out social security medicare and pensions because the tax base is half as large as it should be, the personal social and government costs of the islands of poverty we have created away from the productive cities, and so on.

Glaeser and Gyourko is a great readable summary of broader issues in housing economics. This is going on a bit, so I'll give you one quote and save the rest for another day

In some parts of America, there has been a revolution in the regulation of home building over the past 50 years (Glaeser, Gyourko and Saks, 2005). For most of U.S. history, local economic booms were met with local building booms, so labor could follow shocks to local productivity. However, between the 1960s and the 1990s, it became far more difficult to build in the nation’s most desirable locations, especially those along the coasts. Higher economic productivity in San Francisco now leads to higher prices, not more homes and more workers (Ganong and Shoag, 2013). This change has both led to a transfer of wealth to a few lucky homeowners and to a distorted labor market where people move to regions such as the Sunbelt that make it particularly easy to build (Glaeser and Tobio, 2008).
(YIMBY stands for yes in my backyard, a new movement that even here in the Bay area recognizes that letting people build houses and apartments might lower housing costs.)

Update: See also "Tarnishing the Golden State: Regulations and the US Slowdown" by Kyle  Herkenho , Lee  Ohanian and Ed Prescott. From the abstract, the finding,

Deregulating existing urban land from 2014 restriction levels back to 2000 restriction levels would increase US GDP growth by nearly .5% per annum from 2000 to 2014, bringing output and TFP growth roughly in line with their historical trends. The most significant expanding regions from these hypothetical deregulations are California, New York, and the Mid-Atlantic.
A half percentage point of growth is still huge. What's the logic? As in Hsieh and Moratti, counterfactuals must come from a model

We use a variety of state-level data sources, including the USDA, the Census and the BEA to develop a general equilibrium spatial model of the US states
... general equilibrium congestion forces in the market for housing and land offset some of the gains from deregulation
I get an inkling here that there is a production function with decreasing returns to scale, so not everyone can move tomorrow to SF (if they had a place to live) and earn currently high salaries. Just how many more people could benefit from whatever is the local magic is of course the key question.

Thanks to a correspondent for the link.

22 Jun 2020

Rent Control Poem - Barokong

"kevinsch" posts an remarkable essay on rent control on a  Seattle city council blog (HT Marginal Revolution).

I’m not an economist, not a landlord, nor a renter. But since we’re having this debate, I went to the UW Library and pulled the literature on rent control so I could understand the issues, the studies, and what the experts conclude.  Here’s what I found.
1. Within the community of economists there is broad consensus that rent control is a bad idea. The consensus is on par with the scientific community on climate change, and the medical community on the safety of vaccinations.
Given the widespread move to introduce rent controls on the left coast, savor that.

2. There are two documented benefits of rent control: it decreases economic displacement for people living in rent-controlled housing, and it can reduce the volatility of rental pricing in cities where there is sufficient stock of rental housing.
3.  There is a very long list of documented harms that rent control causes. It provides a strong disincentive to build more rental housing. It drives landlords to reduce spending on maintaining their units until the quality of the housing has drawn down to the point where it matches the allowed rent. And thus by reducing property values, it reduces property tax revenues. It reduces mobility for renters, causing them to stay in their rent-controlled housing rather than move when a better job or the needs of their family require it. It misallocates the total housing stock by encouraging people to stay in housing that doesn’t match their needs.  It encourages rental property owners to convert apartments to condominiums, thereby reducing the rental housing stock. It inevitably leads to a “cluster” of regulations piled on top to try to legislate away all of rent control’s problems. And it doesn’t help the people with the greatest need, but rather the people most capable of gaming the system.
It's remarkable that someone who is not an economist could so quickly find all these subtle effects. Yes, most people quickly get that landlords will not keep up apartments, and builders won't build them. But most people don't quickly get the disincentives for renters not to "move when a better job or the needs of their housing require it." Or that it leads not to nirvana for the low income renter, but helps "the people most capable of gaming the system." I would only add that it really hurts the young ambitious person of limited means who wants to move to town to get that upward-mobility job.

4.  In many cities with rent control, tenants see annual rent increases at the maximum amount allowed, because landlords understand that if they skip a year they will never catch up.
5.  Rent control’s harms can be mitigated in part through an aggressive public/social housing program that creates a large quantity of units using public funds. However, in those places it’s unclear that rent control itself is adding much value beyond the significant value that the public housing program alone delivers.
OK, Kevinsch is not an economist so I'll let this pass. The history of aggressive public/social housing programs in US cities are an absolute disaster.

More deeply, he missed the underlying cause of the problem -- building, zoning, and land-use restrictions. Supply meets demand. If builders were allowed to build cheap apartments for modest renters, they would do so. If builders were allowed to build expensive apartments for high-income renters, who then would move out of buildings suitable for low rent apartments, they would do so.

6.  As this paper says, rent control “confers its benefits early, and extracts its costs late.” That’s one of the reasons it’s such an attractive policy idea.
Well, it confers benefits to renters early. The loss of property value to landlords is instant, but apparently nobody cares about them. The "one time" capital tax is always tempting.

7.  As this article puts so well, among rent control advocates there are no rent control failures; there are only bad implementations.
Ditto, say, Socialism and Venezuela.

8. And finally, as this research paper suggests, economists have been thorough at convincing themselves that rent control is a bad idea, and inept at convincing anyone else.

This is a gem. And so true. Like, say, tariffs. I wish I knew just how to fix that despite the immense effort and millions of dollars going in to better dissemination of economic ideas.

The essay goes on, and it's worth reading the whole thing.

There is a lesson here. Why do our governments, and especially local governments, so often wander into terrible economic policies? The "education" theory says they just don't know basic economics, and don't have any competent policy advice. If they and their staff could just be "educated" things would get better. (And if we could break through all the competing parties who also want to "educate" politicians.) The "interest" theory, more typical among public choice economists, views political outcomes as the result of power, not ideas. Rent control wins when incumbent renters who want to stay put win the political battle over landlords, mobile renters, and potential newcomers, and invoke whatever ideas butter the toast of their cause.

That the city council of Seattle has available such amazingly good policy advice speaks to the latter, sad to say for those of us in the "education" business.

The third view is that ideas still matter at the larger level.  A bad idea like rent control requires the asset of the general voter. Yes, incumbent renters who know how to work the system may win the political battle over landlords, property owners, people who want to move to the city and rent, and mobile renters or those not good at working the system, who will lose.  But the larger mass of homeowners, condo owners, and non-controlled renters must go along. They don't have a personal interest, other than a general desire to feel good by helping those who face higher rents, so they don't have much reason to study the issue. If the general electorate understood how bad rent control is for their city, and most of the people they want to help, perhaps economic policy would be better. There is hope for ideas.

21 Jun 2020

Almost sane housing supply - Barokong

California, despite being a one-party state, is actively debating SB50 that would over-ride local zoning laws and allow construction of apartment buildings, especially near transit areas.

This is almost a remarkable outbreak of sanity. In a divided government, one can keep touting slogans. But when one party takes over, apparently permanently, they do have to actually govern, and eventually some reality must sink in.

Housing in California is ridiculously expensive. After California tried everything else -- "affordable housing" mandates on developers, subsidies, rent controls, public housing, and so forth -- it is finally facing the fact -- we need to just let people build. Given that California will not allow more land to be devoted to housing -- wisely, in my view -- and given that the first generation housing stock was built cheaply, using a lot of land for little house, the natural place to allow people to build is up: replace small single family houses on large lots with apartments, townhouses, or even single family houses on smaller lots.

The problem here is local zoning laws, building laws and various impeding regulations, which are more or less designed to preserve enormously expensive museums of 1950s suburbia. So SB50 overrides local laws.

The end result, though is saddled by a trip through the progressive sausage factory. I recommend Joe DiStephano's analysis with beautiful maps.

The first stop was rather clever: wrap it in green. "You can build" was never going to fly in California. So the original effort, SB25, restricted the effort to areas near transit. Who can object to allowing apartments near transit, so people can get out of their cars? Moreover, with this twist, SB25 put the kibosh on one standard local trick for restricting construction, requirements for lots of onsite parking.

The transit clause extends to "high quality bus corridors." Now in one sense that's great. Other than nostalgia and cuteness, and outside places like New York City, buses are much better transit options.  But one of the main reasons buses are great is that it is much easier to move a bus line than to move a rail line. You can be on a "high quality bus corridor" tomorrow.

"Jobs rich areas" are now included. Allowing people to live nearer where they work is better than any "transit" idea. That too is a little strange though. If people were allowed to build housing, jobs would locate there quickly. Housing first redevelopment is not too hard an idea.

Alas, the bus and jobs exemption only waive density and parking, and allow cities to keep height limits and other zoning restrictions. Which they will do.

Then it descends into madness, and an invitation to endless litigation.

"Sensitive communities" are exempt. That means (still quoting Joe), "‘High Segregation & Poverty’ or ‘Low Resource’ in TCAC Opportunity Maps," "Other local areas determined by each regional government through a collaborative process," and "Tenant-Occupied and Rent Controlled parcels."

California will write a law allowing the construction of apartment buildings, and conversion of houses to multifamily units, yet will specifically exempt the areas most obviously in need of redevelopment. Once upon a time governments granted subsidies and tax breaks for redeveloping such places. Minorities and poor people will instead be condemned to live in rotten housing and rotten neighborhoods. Heaven forbid a few apartments get built near transit stops, some yuppies move in, grocery stores and coffee shops grow to serve them, and the rest of the neighborhood.

Joe's maps tell the story. Where in LA will California allow apartments? Not in the places that need redevelopment! Perhaps if people could build apartments, these might become "jobs rich areas!"

As its local governments are devoted to maintaining museums of suburbia, the state government is devoted to preserving museums of poverty, racial segregation, and lack of businesses and services.

(To be fair, the state law only over rides local zoning laws. There is nothing that stops the city of LA from allowing development with or without SB50.)

As a classic example of how we got in to this mess, consider the instant reaction on the Menlo Park nextdoor.com

Now, if we do a little Bayesian Improved Surname Geocoding -- not perfect, but good enough for the Justice Department to sue auto dealers -- we can conclude that the author is white, wealthy, lives in a house worth at least $3 million dollars, and a reliable progressive Democrat, bleeding hearts over climate change and inequality. Yet this post is worthy of the darkest anti-immigrant keep-the-poor-out    climate-denying right-winger. All the people who rehab the $3 million single family houses to $6 million single-family houses in Menlo Park drive in from 50 miles away, as do those who mow the lawns, wait the tables and so on. The young bright kid from Fresno who might get his break working here has little hope of finding a place to live. I guess there is a lot of hypocrisy going around these days, but this is pretty glaring.

Also echoing the local zeitgeist and how-did-we-get-in-to-this-mess thoughts is the ongoing saga of the Flintstone House. NYT here, and a good article at the Guardian If you've ever driven down 280, you've seen this cool house. It was recently sold, and the new owner took up the Flintstones theme:

Before:

After:

More great pictures at SF Curbed. How utterly cool, you undoubtedly think. What did the city do, make it a historic landmark to preserve it? No, the city is suing Ms. Fang, the owner, for landscaping without permits and "community input."

From the Guardian

... the tastemakers of Hillsborough have not extended their favor to the experimental stylings of William Nicholson, the architect...It was in response to the Nicholson’s construction of the Flintstone house in 1976 that the town first established its Architecture and Design Review Board (ADRB), ... established “so there would never be another home like that built in Hillsborough”.
...Mrs Fang claims that she attempted to work with town of Hillsborough to obtain the proper permits for her landscaping work, ..she says she feels like the town is playing with her like a cat with a mouse – “play, play, play, bite, until I die” – and claims she has interacted with the town 44 times while attempting to comply. At one point, the town lawyer pressured her to paint all the mushrooms a single color, she says. “Every time I complied with their request, they moved the goalpost,” she says.
"Design review," which produces Disneyland replicas of craftsman houses and bland identical French farmhouses, allows its executors to stymie permits with endless arbitrary whimsical requests for esthetic changes.

Bottom line, any residual meaning of "private property" is vanishing in California.

(I received a few comments from fellow libertarians last time I wrote about these issues. Shouldn't communities have the right to pass whatever restrictions they want? If they want to preserve a $5 million per house replica of 1950s suburbia, and wall out the unwashed masses, hypocrisy aside, why should the state stop them? I counter, this is not libertarianism, the defense of private rights, this is untrammeled majoritarianism, by which your neighbors via the city strip you of your right to sell your house to the highest bidder, do what you want with it, and strip the ambitious kid from Fresno who wants to move here of his right to be supplied by a competitive marketplace. It's also a monstrous inefficiency. A neighbor who is hurt by $500 from his dislike of looking at your property can destroy millions of value to you. Anyway, it's a longer discussion which I acknowledge here without getting in to it. )

The rent is too damn high - Barokong

NPR covered the Democratic candidates' plans to address housing issues:

[Julian] Castro would provide housing vouchers to all families who need help. Right now, only 1 in 4 families eligible for housing assistance gets it. He would also increase government spending on new affordable housing by tens of billions of dollars a year and provide a refundable tax credit to the millions of low- and moderate-income renters who have to spend more than 30% of their incomes on housing.
I'm actually surprised it's as much as a fourth. Most government programs outside medicare and social security attract tiny fractions of the eligible people. Watch out budget if people catch on.

Massachusetts Sen. Elizabeth Warren calls for a $500 billion federal investment over the next 10 years in new affordable housing....
[New Jersey Sen. Cory Booker] would also provide a renters' tax credit, legal assistance for tenants facing eviction and protect against housing discrimination...

Sen. Kamala Harris has also introduced a plan for a renters' tax credit of up to $6,000 for families making $100,000 or less.
New York Sen. Kirsten Gillibrand has signed on to both the Harris and Warren plans, which have been introduced as legislation.
In sum, they're piling on to pay your rent or mortgage.

The economic foolishness of all this is painful. Housing is not a single good. It's location, location, location, and also size and condition. This isn't about homelessness. Everyone lives somewhere, so the point is to subsidize larger, better, or more conveniently placed housing. Or, to free up money for people to spend on other things.

Economics is about incentives. If the government pays for all your rent past 30% of your income, that's a big incentive to rent a huge apartment and not to earn any extra income. =

"Affordable housing," doesn't mean affordable housing, in the same way affordable hamburgers mean affordable hamburgers. It's a catchword for "below-market rate" housing, usually mandated by zoning boards, but now I guess to be paid for by the government. But when you give away something for, by definition, less than the market rate, that means people line up for it. Like scarce rent-controlled apartments, is one more impediment to people moving for better opportunities.

Econ 101: What happens if you subsidize demand, but do not unleash supply?

Prices go up. Period. It ends up entirely in the pockets of current property owners. There is a good case this happened already. To earn a gazillion dollars in tech, you need to move to the Bay Area. There are only so many houses, so the great gains in productivity end up in the pockets of existing landowners.

Aha, you will answer, but they have a fix for that: rent control, now sweeping the nation. We know where that leads.

They also answer, as above,the Federal government will start building houses and apartments.

I guess millenials are too young, and nobody reads any history any more, but, we and especially Europe have tried this one over and over, to catastrophic failure. Go visit the sites of housing projects, now thankfully torn down, in Chicago. They look like Chernobyl. Go visit the cruddy outskirts of European cities, with government built cement apartment blocks. This is our vision for the "middle class?"

In sum, the candidates promise to repeat for housing the immense success of subsidies and supply management and provision that the the government has just accomplished for health care, insurance, and education.

It's usually a good idea to figure out what's broken before we start fixing things. That idea never seems to occur to anyone in politics when talking about economic policies. Where is the market failure in home and apartment building? Why is the private sector not building more housing? The answer is pretty obvious -- zoning, building codes, insane permitting processes and so forth.

So, the government restricts supply, and prices go up. Then it subsidizes demand, and prices go up some more. Then it puts in price controls. So the plan seems to be to bring the government's huge success with health care and health insurance to the housing market.

One tiny ray of light:

New Jersey Sen. Cory Booker would provide financial incentives to encourage local governments to get rid of zoning laws that limit the construction of affordable housing.
Zoning laws largely keep poor people away from rich people and enforce a lot of racial segregation.

But again, "affordable housing" means "housing allocated by politics," and "housing you'd better not leave once you get it, and better not earn too much either." I wish the article just said "limit the construction of housing, which makes it unaffordable!"

The usual coexistence of subsidy and restriction plays out almost comically in the "gentrification" issue, politicians wanting to be all things to all people:

"It is not acceptable that, in communities throughout the country, wealthy developers are gentrifying neighborhoods and forcing working families out of the homes and apartments where they have lived their entire lives," [said] Vermont Sen. Bernie Sanders,..
Warren would also give grants to first-time homebuyers who live in areas where black families were once excluded from getting home loans. "Everybody who lives or lived in a formerly red-lined district can get some housing assistance now to be able to buy a home," Warren told attendees at the She the People Presidential Forum in Houston this spring.
Technically, "Everybody" includes white millennials. I wonder how she will stop that.

Calfornia's SB50 proposal to force  local zoning to allow development near transit had a similar feature. Yes, we allow development everywhere -- except in poorer neighborhoods most in need of development, which are protected from the evils of new Starbucks and Whole Foods popping up.

***

These are tough times to be an economist. As a matter of technocratic policy, this is not hard stuff. Physicists don't have to write blog posts because the candidates want to enshrine the phlogistic theory of heat. Doctors don't have to rail about HHS policy on four humor management. Somehow we are left railing against fallacies understood since the 1700s.

It is, of course, no better on the right. The benefits of free trade and migration have also been known since the 1700s. It is just, sadly, that there is no debate on the right at the moment.

This is a real weakness of the American  political equilibrium, that in a reelection year all the new ideas and analysis come out of the party in opposition. It would be a great time for the Republican Party to try to come to terms with what Trumpism means, how it relates to traditional conservatism, and to hash out ideas like this. Alas, that will not happen.

One is tempted to dismiss all this as rhetoric that will settle down in the general election. But I don't think one should take too much comfort. Trump ended up doing a lot of exactly what he said he would do. Politicians often do.

On this, I found fascinating a tidbit fromDan Henninger in WSJ, covering a poll of Democrats conducted by Fox News.

Fox asked these Democratic voters whether they wanted “steady, reliable leadership” or a “bold, new agenda.” Steady and reliable crushed bold and new by 72% to 25%.
Anyone consuming the media every day the past year would have concluded that the Democratic left’s “bold, new agenda” had taken over the Democratic Party lock, stock and barrel. Most of their presidential candidates obviously thought so.
How else to explain why Sens. Warren, Harris and Cory Booker instantly saluted Bernie Sanders’s socialized medicine or, even more incredibly, the antic Alexandria Ocasio-Cortez’s multitrillion-dollar Green New Deal? Recall how Nancy Pelosi, whose 70-something sense of political smell is still more acute than her juniors’, called it “the green dream, or whatever.”
In fact, when Fox asked these Democrats what they most wanted from their candidate, 74% chose “unite Americans” against just 23% who want to “fight against extreme right-wing beliefs.” Looks like there’s a silent majority inside the Democratic Party, unmoved by the propaganda of social media.
These are the parts of the Fox poll, surfacing a nostalgia for steadiness and unity, that should upset the Trump campaign, not Mr. Biden’s 10-point lead 16 months before the election.
Mr. Henninger did not add that Mr. Biden is the one who should be listening hardest. He is currently drifting fast to the left.  The poll tells us that this time, my friends, the answer is not blowin' in the wind. I hope more people listen.

20 Jun 2020

Refreshing YIMBY at NYT - Barokong

Farhad Manjoo writes an excellent YIMBY (yes in my back yard) essay in the New York Times, remarkably placing the blame squarely where it belongs -- progressive politics.

Across my home state [California], traffic and transportation is a developing-world nightmare. Child care and education seem impossible for all but the wealthiest. The problems of affordable housing and homelessness have surpassed all superlatives — what was a crisis is now an emergency that feels like a dystopian showcase of American inequality.
Just look at San Francisco, Nancy Pelosi’s city. One of every 11,600 residents is a billionaire, and the annual household income necessary to buy a median-priced home now tops $320,000. Yet the streets there are a plague of garbage and needles and feces, and every morning brings fresh horror stories from a “Black Mirror” hellscape: Homeless veterans are surviving on an economy of trash from billionaires’ mansions. Wealthy homeowners are crowdfunding a legal effort arguing that a proposed homeless shelter is an environmental hazard. A public-school teacher suffering from cancer is forced to pay for her own substitute.
At every level of government, our representatives, nearly all of them Democrats, prove inadequate and unresponsive to the challenges at hand. Witness last week’s embarrassment, when California lawmakers used a sketchy parliamentary maneuver to knife Senate Bill 50, an ambitious effort to undo restrictive local zoning rules and increase the supply of housing.
He notices the same hypocrisy that struck me walking past the "all are welcome here" signs in Palo Alto:

Then there is the refusal on the part of wealthy progressives to live by the values they profess to support at the national level. Creating dense, economically and socially diverse urban environments ought to be a paramount goal of progressivism... Urban areas are the most environmentally friendly way we know of housing lots of people. We can’t solve the climate crisis without vastly improving public transportation and increasing urban density. ...
Yet where progressives argue for openness and inclusion as a cudgel against President Trump, they abandon it on Nob Hill and in Beverly Hills. This explains the opposition to SB 50, which aimed to address the housing shortage in a very straightforward way: by building more housing. ...
Reading opposition to SB 50 and other efforts at increasing density, I’m struck by an unsettling thought: What Republicans want to do with I.C.E. and border walls, wealthy progressive Democrats are doing with zoning and Nimbyism. Preserving “local character,” maintaining “local control,” keeping housing scarce and inaccessible — the goals of both sides are really the same: to keep people out.
“We’re saying we welcome immigration, we welcome refugees, we welcome outsiders — but you’ve got to have a $2 million entrance fee to live here, otherwise you can use this part of a sidewalk for a tent,” said Brian Hanlon, president of the pro-density group California Yimby.
It's an obvious point. But it's great to hear this point in the New York Times. An internal reflection on hypocrisy is much more effective than an outside charge.

I don't agree with everything. He starts with a good point,

One continuing tragedy is the decimation of local media and the rise of nationalized politics in its place.
Yes, everyone here in California is so consumed with Trump Apolexy that they don't even notice what the city council is doing. But Manjoo chalks the fundamental problem up to larger representation for rural states in the Senate. Hmm. If the same people who vote for San Francisco zoning have more power to push their agenda on the whole country, I don't see how that makes it better.

Still I see hope. California is a one party state, and the one party is slowly waking up to the fact that it must govern too. Slogans about the great progressive future are fine in opposition, but once you've been in total charge for a while, you do start to own it.  After trying everything else, California is slowly waking up to the fact that we have found the problem and it is us. Subsidies, vouchers, "affordable housing" mandates will never make a dent. Just Let Them Build some housing. It took Nixon to go to China. I was very happy to see the Obama administration recognize the havoc caused by occupational licensing restrictions. The YIMBY self-reflection is not over yet.

1 Jun 2020

Politically allocated (aka "affordable") housing - Barokong

I've long been curious about politically allocated housing. (It's called "affordable," and "below market rate," but why should we let the left make up all the buzzwords?) A free market economist smells a rat of inefficient subsidies, and huge inequality-increasing implicit tax rates.

If it's "below market rate" then ipso facto more people want it than can have it, so it has to be allocated by standing in line, lotteries, and/or extensive qualifications. That means it's going to go to people who have been around a long time, not to newcomers who want to get jobs. Once you get an "affordable" unit, I would figure, getting a better job or a raise is going to cost you rent, or getting kicked out of your apartment. Moving across town to get a better job is out of the question -- there is a long line for those apartments. The "affordable" deals all seem to be worked out on a case by case basis, making it very hard for an economist (or voter) to figure out what's going on.

But that's all suspicion. I have been looking for a comprehensive study of these programs, but haven't found one. (Hint: doing such a study looks like a great idea for our free market think tanks!)

Enter a great anecdote: "How Do You Measure The "Success" Of Affordable Housing?" by  Francis Menton, the "Manhattan Contrarian"

Here in Manhattan, it is an article of unshakable religious faith that conjuring “affordable housing” into existence, through some magic recipe of taxpayer subsidies and coercion, is a fundamental responsibility of government.
In the Bay Area too.

I called government-coerced “affordable housing” the “most expensive possible way to help the smallest number of people.”
A good theme, but he too misses the possibility that it may be the most expensive possible way to hurt  a larger  number of people, by tying them to a specific income level and apartment.

Menton scathingly reviews a West View News article, "to guarantee the future you have to buy it," which is actually true taken completely out of context. (Buying an apartment is a great hedge against rent increases,.) He covers the story of the Penn South Houses,

This complex of 2,820 units is located between 8th and 9th Avenues, from 23rd to 29th Streets.  At its closest point, it is just two blocks, 0.1 mile, from Penn Station, the busiest train station in the country.

I need to go by on a tourist visit to boondoggles someday.

This complex is what we here in New York call a “limited equity co-op.”  Back in the 60s when it was built, the sponsor (a labor union) sold the apartments for deeply subsidized prices of about $7500 - $15,000 per unit, depending on the size of the unit.  The deal was that when you sold, you had to sell back to the co-op for the exact amount you had bought for — no profiting by selling on the free market.  The project also got a deeply-subsidized mortgage (financed by a tax-exempt bond sale by the State), and a total property tax exemption for 40 years....
Today, a benchmark price for a good-size two-bedroom apartment in this neighborhood would be about $2 million.  According to the WestView News piece, a recent price for a two-bedroom apartment at this complex was about $150,000, subject to the same deal that when you leave you must sell it back for exactly what you paid.  To get one of these apartments, you must go through a waiting list of about 20 - 30 years.
20-30 years. Well, so much for the young family who wants to move to NY to get a better job.

Menton adds up the subsidies:

But let’s take a more critical view of what the cost of this Penn South thing really is:

The property tax exemption for this complex is worth at least $10,000 per year per apartment, and up to $20,000 per year for larger apartments.  This annual non-cash handout goes entirely to people who by definition are not poor. [Menton added up the costs to live there. You have to be decidedly "middle class"]

Other people who must pay the additional $10,000 or $20,000 tax per year for comparable apartment also must earn cash income to pay that, and then pay tax on the cash income before they pay the property tax.  That’s another subsidy of about $4000 - $8000 per year per apartment.
People who sell apartments in the private market must pay capital gains tax on the sale at a rate of about 20% federal and 11% New York State and City.  Whatever you might think of the altruism of these people in agreeing to resell without personal profit, they also avoid paying these taxes, that are used to provide government services.
The article linked above reporting on the federally guaranteed mortgage loan estimates the savings to the complex at $3 million per year.  That’s another $1000 per year per apartment handout that others don’t get.
Add it all up, and a fair estimate of the cost to taxpayers of this project is around $20,000 per household per year.  And what exactly is the superior moral claim to the annual $20K of these people over, say, you?  If every “middle-income” household (of which there are around 100 million) in the country is entitled to the $20K, we would be talking about an annual $2 trillion +/-.
This is really good -- not all subsidies are on budget!

Menton gets a very important inefficiency. By subsidizing long-time residents to stay put, we subsidize a very inefficient match of apartment to location.

And even that $20,000 per year per household is on the assumption that in an unsubsidized world this site would remain with the same buildings and the same number of apartments.  If instead the complex was auctioned to the highest bidder and then put to it’s highest and best use — which probably would be some mix of office buildings, hotels, and high-end condos — the resulting property taxes alone would probably come to at least $50,000 per Penn South apartment, and maybe up to $100,000.
Coase rolls over in his grave at many of these deals. How many of these residents would move out in a minute in return for $100,000 per year?

And finally, did I mention that this project is in close walking distance to Penn Station, the busiest train station in the country?  The government spends additional billions to run hundreds of trains a day in and out of there, only to find a high percentage of the nearby blocks occupied by buildings that almost no one traveling into the City is going to.  So those people need to get off and take the subway, when there could be hotels and office buildings right nearby.  Subsidized housing is about the worst possible land use in the immediate proximity of a major transit hub.

31 May 2020

Supply and demand in local economics - Barokong

Act 1: If housing is too expensive, allow the supply curve to operate.

In a surprising bit of excellent economics,Conor Dougherty  writes "Build Build Build Build..."in Sunday's New York Times.

The story starts with the usual way of doing business (meaning, not doing business) in California:

A developer had proposed putting 315 apartments on a choice parcel along Deer Hill Road — close to a Bay Area Rapid Transit station, and smack in the view of a bunch of high-dollar properties. ... Zoning rules allowed it, but neighbors seemed to feel that if their opposition was vehement enough, it could keep the Terraces unbuilt....
Mr. Falk could see where this was going. There would be years of hearings and design reviews and historical assessments and environmental reports. Voters would protest, the council would deny the project, the developer would sue. ...
Spoiler: Where did this all end up?

Today, after eight years of struggle, his career with the city is over, the Deer Hill Road site is still just a mass of dirt and shrubs, and Mr. Falk has become an outspoken proponent of taking local control away from cities like the one he used to lead.
Mr. Dougherty comes to a most un-Times like view of the problem.

America has a housing crisis. ...One need only look out an airplane window to see that this has nothing to do with a lack of space. It’s the concentration of opportunity and the rising cost of being near it.... There is, simply put, a dire shortage of housing in places where people and companies want to live — and reactionary local politics that fight every effort to add more homes.
Nearly all of the biggest challenges in America are, at some level, a housing problem. Rising home costs are a major driver of segregation, inequality, and racial and generational wealth gaps. You can’t talk about education or the shrinking middle class without talking about how much it costs to live near good schools and high-paying jobs. Transportation accounts for about a third of the nation’s carbon dioxide emissions, so there’s no serious plan for climate change that doesn’t begin with a conversation about how to alter the urban landscape so that people can live closer to work.

We tend to look to laws, edicts, regulations and other top-down solutions to problems. Mr. Dougherty notices we are a democracy, and one that at a local level is quite responsive to the desires of people who show up at town meetings. If this is to change, the attitude of the people in the room has to change.

the real solution will have to be sociological. People have to realize that homelessness is connected to housing prices. They have to accept it’s hypocritical to say that you don’t like density but are worried about climate change. They have to internalize the lesson that if they want their children to have a stable financial future, they have to make space. They are going to have to change.
Along the way, we meet Sonja Trauss, heroine of the YIMBY (yes in my back yard) movement who  "thought the Deer Hill Road project was too small."

Ms. Trauss...made her public debut a couple of years earlier, at a planning meeting at San Francisco City Hall. When it was time for public comment, she stepped to the microphone and addressed the commissioners, speaking in favor of a housing development. She returned to praise another one. And another. And another.
In backing every single project in the development pipeline that day, Ms. Trauss laid out a platform that would make her a celebrity of Bay Area politics:how expensive new housing today would become affordable old housing tomorrow, how San Francisco was blowing its chance to harness the energy of an economic boom to mass-build homes that generations of residents could enjoy. She didn’t care if a proposal was for apartments or condos or how much money its future residents had. It was a universal platform of more. Ms. Trauss was for anything and everything, so long as it was built tall and fast and had people living in it.
My italics. Ponder how astonishing it is that anyone living in San Francisco or writing in the New York Times could say something like this.

Sonja also understands that ideas have to change.

her goal wasn’t to enact any particular housing policy, but to alter social mores such that neighbors who fought development ceased being regarded as stewards of good taste and instead came to be viewed as selfish hoarders.

Selfish, and intensely hypocritical. My Palo Alto neighbors fight development here, forcing all the people who build our houses, wait on our tables, and staff the businesses who pay our taxes, to drive 50 miles from Gilroy or Tracy. They are also parodies of bleeding heart inequality and climate warriors.

Ms Trauss and Mr. Dougherty understand not only the mechanics of supply curves, vintage economics of real estate, the responsiveness of local governments to their constituents, but they get deep theorems about political economy:

Ms. Trauss... argued that the entire notion of public comment on new construction was inherently flawed, because the beneficiaries — the people who would eventually live in the buildings — couldn’t argue their side.
“An ordinary political process like a sales tax — both sides have an opportunity to show up and say whether they’re for or against it,” she said. “But when you have a new project like this, where are the 700-plus people who would initially move in, much less the tens of thousands of people who would live in it over the lifetime of the project? Those people don’t know who they are yet. Some of them are not even born.”

This is a deep issue for land control regulation. "Affordable housing" whether directly by government  or by forcing developers to provide it (i.e. an implicit tax on new housing) is directed to long-time residents who are already here. The crying need is for housing for people who want to move here, to take the great jobs this area has to offer. That is what reduces inequality, enhances opportunity, and reduces carbon. The Bay Area has enacted quite a few museums of poverty to allow long-time residents with little or no income to stay, and to stay that way.

Mr. Falk took a step that allowed the 300 unit plan to proceed, which he paid for with his job. He didn't dare read aloud the last half of his resignation letter.

“All cities — even small ones — have a responsibility to address the most significant challenges of our time: climate change, income inequality, and housing affordability,” Mr. Falk had written. “I believe that adding multifamily housing at the BART station is the best way for Lafayette to do its part, and it has therefore become increasingly difficult for me to support, advocate for, or implement policies that would thwart transit density. My conscience won’t allow it.”
Lafayette in general has not yet had the change of ideas.

That California is a one-party state may actually help. If this were partisan, it would be easy to tar pro-development forces as evil Republicans who want to line to pockets of real estate developers. Instead, note how this argument hits all the progressive goals -- inequality, climate, affordability, homelessness, and nobody is talking about economic growth.  Well, it does help both. If an argument can be made inside a party, perhaps common sense has a better chance to emerge. Sensible climate policy disappeared from public debate when climate became a partisan cleavage issue.

Some of my libertarian friends have pushed back, saying that local communities have a right to build walls and drawbridges if they like. But if they want views, they can buy the property and keep it pristine.

***********

Act 2: Uber congestion.

On Saturday, Eliot Brown atWall Street Journal covered Uber and Traffic

Five years ago, Travis Kalanick was so confident that Uber ...rides would prompt people to leave their cars at home that he told a tech conference: “If every car in San Francisco was Ubered there would be no traffic.”
Today, a mounting collection of studies shows the opposite: Far from easing traffic, Uber and its main rival Lyft..are adding to congestion in numerous U.S. downtowns.
...Multiple studies show that Uber and Lyft have pulled people away from buses, subways and walking, and that the apps add to the overall amount of driving in the U.S.
Surprise, surprise, if a method of transportation becomes cheaper and better, people use more of it. They substitute out of owner driven cars, yes. But Ubering substitutes away from a parked car, not a driven car!  People  also out of public transit, walking, bicycling and so forth. And they take more trips.

As usual, cities are full of complex regulatory schemes to allocate an underpriced resource -- caps and special fees on Uber and Lyft, for example.

Officials in San Francisco, Chicago and New York have cited congestion as the main rationale for new fees they recently enacted on Lyft and Uber rides in each of the cities.
As usual, the point of regulation here as it is in real estate, is to privilege access to free resources to status quo users -- to existing homeowners who like free views, to drivers of their own cars, to taxicab companies, to money-losing public transit. And a mess results.

Uber and Lyft now emphasize the ways they steer riders toward alternatives to their ride-hail cars, such as by incorporating public-transit options into their apps.
Hmm. Clutter up the apps with more things people don't want? That's not likely to work.

They have both launched shared scooters and bikes..
With their own set of problems

The answer is hiding in plain sight, though not celebrated in this article:

[Uber and Lyft] and have lobbied heavily for congestion pricing in cities including New York, so that all cars on the road—not just theirs—share the penalties for added traffic.
Uber is “determined to continue our work to improve access to shared and active transportation modes, while also doubling down in our efforts to advocate for road pricing,” a spokesman said.

Aha! If the streets are congested with cars, charge all cars for using the streets. Real time electronic tolling is now easy to do. How the car is owed and operated is irrelevant. Every car causes the same congestion.

How much should the toll cost?

drivers in major cities cruise for fares without passengers an estimated 40% of the time.
The biggest factor by far is the large amount of time Uber and Lyft drivers spend without any passengers, hunting for fares. A December report by the California Air Resources Board found ride-hailing cars are driving with no passengers 39% of the time; New York City estimates such cruising at 41%.
Well, it surely should cost more to drive than to park.That Uber drivers are cruising around on free city streets, that move at speeds indistinguishable from parking, while awaiting rides is an obvious misuse of a free resource.

It's a win - win. Either we get unclogged streets, or we get a windfall of revenue for bankrupt cities. Or both.

30 May 2020

The Elephant's family - Barokong

David Brooks essayin the Atlantic "The nuclear family was a mistake" has a lot of interesting ideas. We used to (1800s) largely live with extended family. In the mid 20th century we moved to mom, dad and kids, the nuclear family that David thinks is a mistake. Now we increasingly live the widely parodied Life of Julia (Taranto scathing review at WSJ, guide to parodies at Atlantic), individuals whose main relationship in life is to the federal government.

One aspect, tangential to the main theme, struck me. In all our economic discussions about inequality, when we stop shouting at each other, we come down to a commonsense middle ground: There are lots of obstacles in the way of economic, personal, and social advancement for Americans who start on the lower end of the economic ladder. Free marketers tend to point to government obstacles -- horrible schools in the thrall of teacher unions, land use policies that make it impossible to live near better jobs, social programs whose disincentives to work or move to work make that an impossible choice, and so on. Government-run-things advocates ask for more programs, a 58th job training program, UBI, government jobs, government provided housing, more money to the teachers unions, government-run pre-k and day care, gushers of money, and so on. Still, we get to a comfortable point that we agree on a problem, and we're talking about various ways to fix it.

Into this comfortable discussion, Brooks' essay points to the elephant in the middle of the room.  People on the lower economic end in this country start their lives in chaotic families.

In 1970, the family structures of the rich and poor did not differ that greatly. Now there is a chasm between them. As of 2005, 85 percent of children born to upper-middle-class families were living with both biological parents when the mom was 40. Among working-class families, only 30 percent were. According to a 2012 report from the National Center for Health Statistics, college-educated women ages 22 to 44 have a 78 percent chance of having their first marriage last at least 20 years. Women in the same age range with a high-school degree or less have only about a 40 percent chance. Among Americans ages 18 to 55, only 26 percent of the poor and 39 percent of the working class are currently married.
In 1960, roughly 5 percent of children were born to unmarried women. Now about 40 percent are. The Pew Research Center reported that 11 percent of children lived apart from their father in 1960. In 2010, 27 percent did. Now, if you are born into poverty and raised by your married parents, you have an 80 percent chance of climbing out of it. If you are born into poverty and raised by an unmarried mother, you have a 50 percent chance of remaining stuck.
Nothing, nothing, in our pleasant dirigiste anti-inequality debate adds up to these kinds of numbers. A year of government run pre-K while not even talking about these facts is like handing out bandaids to cancer patients.

Brooks goes on to a later stage in life, the difficult transition to adulthood.

Extended families provided men with the fortifying influences of male bonding and female companionship. Today many American males spend the first 20 years of their life without a father and the next 15 without a spouse. Kay Hymowitz of the Manhattan Institute has spent a good chunk of her career examining the wreckage caused by the decline of the American family, and cites evidence showing that, in the absence of the connection and meaning that family provides, unmarried men are less healthy—alcohol and drug abuse are common—earn less, and die sooner than married men.
This is not a new insight, really. It's just the great unmentionable. When in any inequality discussion did anyone point to the fact that hordes of children are growing up in chaotic family lives as the central problem, and the central thing that has gotten worse in the last decades? When in any job training discussion do we point out that young men growing up alone learn from their gang? Even elephants need families to grow up, and young elephants raised alone are ill-behaved and unmoored.

It is the great unmentionable:

Highly educated progressives may talk a tolerant game on family structure when speaking about society at large, but they have extremely strict expectations for their own families. When Wilcox asked his University of Virginia students if they thought having a child out of wedlock was wrong, 62 percent said it was not wrong. When he asked the students how their own parents would feel if they themselves had a child out of wedlock, 97 percent said their parents would “freak out.”
But if we do not mention it, we're wasting our time.

A central question for all of us is the disincentives that government programs have had for families. As I see it, the life-of-Julia experiment has this disincentive. It's not a new or partisan view -- Daniel Patrick Moynihan started in the 1960s pointing out that giving welfare conditioned on no men being present was a huge mistake.

Brooks goes quickly to culture.  But culture also responds to incentives.

We are indeed not homo economicus, either individuals facing a market or individuals facing the array of government programs. Especially as we grow and mature, we are a social animal, homo of the family, of the extended family, of the village. Now absent.

****

Response to Jeremy:

This is an excellent point, other than the snarky tone ("convenient"). I did not claim an exclusive list, just a starting point. The war on drugs, and the disastrous effects of the criminal justice system on many lives is surely a contributor. Here's a place I'm for a lot more government spending. Efficient law and courts are infrastructure too. In order to catch criminals, we do not need to ruin this many lives of innocent people. And we could do a darn better job of catching criminals too -- crime rates in low-income neighborhoods are shocking, destroying business, opportunities, incentives and lives.

English

Anies Baswedan

Tekno