Urban density and innovation

CC image from Seth Waite

One more round on density – this time focusing on affordability via the tangentially related prospect of innovative and creative economies.

Richard Florida chimed in at The Atlantic Cities, asking this:

Stop and think for a moment: What kind of environments spur new innovation, start-ups and high-tech industries? Can you name one instance, one, of this sort of creative destruction occurring in high-rise office or residential towers, in skyscraper districts? The answer is no. High-rise districts typically house either corporate office functions or residences. During the post-war era, while they were building these towers for their corporate functions, large U.S. companies housed their research scientists in green, low-rise R&D campuses, where the scientists could interact more freely.

The backlash on Twitter was swift and merciless – with plenty of anecdotes of innovative, creative destruction going on in high rise office towers.  Timothy Lee at Forbes noted that Florida is probably a bit sloppy with his terminology here, equating a high rise with an expensive building.  Citing Jane Jacobs, he writes:

While Jacobs framed this principle as being about old buildings, it was really about cheap buildings. Young innovators need to keep their expenses down to maximize the time they can spend on their project and minimize time spent waiting tables. And when they start companies, they need to minimize their rent to maximize their chances of reaching profitability before they run out of money.

So Florida is right that innovators almost never start their careers in gleaming office towers. But it’s a mistake to conclude from that that an excess of skyscrapers makes a city bad for innovation. The innovators themselves won’t move into the skyscrapers, but the construction of more housing units places general downward pressure on rents. That allows innovators to move into the less swanky, more affordable, homes and offices that were abandoned by the people who do move into the skyscrapers.

That is, those older high rises will filter down to lower rents and therefore be attractive to startups and other innovative uses (see the case of Silicon Alley in New York – Florida mentions it as a ‘low rise’ example, but equating that to a Sunnyvale office park is quite a leap).  The actual form of the building doesn’t play nearly as much of a role as Florida would imply.  The jury is out on the role of the city form and urban design (though I have my guesses).

As mentioned above, Florida was a bit sloppy in what he considered a high rise, later commenting that 14-20 stories is fine, but taller heights might not work. Perhaps it’s my time in DC that’s shifted my perspective on tall buildings, but I would argue that 14-20 stories is plenty tall enough to be considered a high rise.  Regardless of my definition of a high rise, the question is then – what is tall enough, dense enough?  David Schleicher and Ryan Avent make the case that you can’t know that in advance.

Some more back and forth shifted the discussion to the tradeoffs inherent to density, but in DC that discussion of density can’t be considered in isolation of other constraints on development – the kind that see low rent buildings redeveloped rather than letting them filter down where innovation might take hold (given several other key ingredients).  The gleaming new corporate office tower reduce rent pressure on the older high rise office buildings, as well as smaller and shorter legacy structures.

It’s somewhat curious to see a discussion about the power of markets to foster innovation when talking about the massive constraints on real estate. The creative destruction of capitalism at its best in the idealized start-up office park Florida described, yet that physical outcome is anything but a free market outcome.  Timothy Lee makes the case that if the real estate markets were more free to operate, the Bay Area would have 4 million more people living there today. The Bay Area’s natural geography limits sprawl and favors density, as well – if given the chance to grow.

That, of course, is a big if. Matt Yglesias takes note of some dense residential construction proposed for Downtown San Jose – precisely the kind of place that you would expect to grow more densely if allowed:

The San Jose and San Francisco metropolitan areas are ground zero for the phenomenon of regulations that provide for an insufficient quantity of construction in America’s high-value areas, so I was somewhat surprised to read an article about the municipality of San Jose implementing an incentive program to encourage more residential investment in the city. Why are incentives needed? The incentives, however, all turn out to be nothing more than temporary relaxation of anti-development rules:

The incentive package includes a 50 percent break in construction taxes; a 50 percent reduction in fees that downtown residential developers must set aside for a park as a portion of their project costs; expedited reviews by the planning department staff and eliminating a city requirement for an expensive air container system for firefighters in high-rise buildings.

What you have here are an explicit tax on construction, a de facto tax on construction, a regulatory barrier to construction, and a second regulatory barrier to construction. The “incentives” are relief from those barriers if your projects breaks ground by 2013.

From Wired (cited in Timothy Lee’s piece above):

As an investor Hartz points to the usual signs of too much money-chasing deals. The billboards on highway 101 between San Francisco and Silicon Valley touting startups no one has heard of. The bus stop signs in tech-heavy locales like Mountain View and Palo Alto advertising scads of engineering jobs.

“Everyone is competing for the same people, going after the same real estate, the same support services,” Hartz says. “The natural resources of the startup world are getting scarcer and scarcer, and the cost is getting higher and higher. It’s all an outgrowth of an abundance of capital.”

Lee’s point (same as Yglesias’s) is that the constraints on some of those resources aren’t as natural as you might think.

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