Tag Archives: filtering

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.

Links: The new American Dream

House for rent. CC image from Sean Dreilinger

Foreclosed sprawl – the next frontier of renting?  The New York Times looks at the practice of firms buying up foreclosed, cookie cutter sprawl housing at relatively low prices with the idea of renting these houses out to tenants.

As an inspector for the Waypoint Real Estate Group, Mr. Hladik takes about 20 minutes to walk through each home, noting worn kitchen cabinets or missing roof tiles. The blistering pace is necessary to keep up with Waypoint’s appetite: the company, which has bought about 1,200 homes since 2008 — and is now buying five to seven a day — is an early entrant in a business that some deep-pocketed investors are betting is poised to explode.

With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants. Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes.

Cities usually have more rentals, and for good reason.  Apartments have common structural elements and provide for economies of scale in managing multiple units.  Applying this to large-scale single family detached homes is a different and challenging model, but a seemingly inevitable result of the decline in home prices in these areas once built on speculation.

It’s also an example of housing market filtering in action.

This isn’t quite what the concept of filtering is about… Cap’n Transit disputes the concept of filtering, noting that such shifts are not permanent.  However, I don’t think anyone was asserting they were.  Filtering is a process, a description of the market responding to shifting demand.  It is not a description of an end state.

It’s true that most of those buildings were not well-maintained, but the causation is more likely the other way around: the landlords didn’t put a lot of money into them because they didn’t bring in much rent. So why were the rents so cheap? I’m guessing that there were several related factors: racism, city services, crime, noise, fads and the suburban ponzi scheme.

I don’t think any of those really disproves the filtering concept.  Filtering doesn’t really describe causation, just the correlation – as demand drops (and therefore the potential rent income), so to does maintenance, and the units on the margins will filter down to more “affordable” prices. Each of those factors listed at the end could be construed, one way or another, as an influence on demand.

The rest of the Cap’ns post on the politics and emotions of gentrification and filtering up are spot on, however.

The fiscal benefits of density: While renting out old McMansions might be a challenge due to diseconomies of scale, Emily Badger looks at Asheville, NC and makes the fiscal case for density and urban infill development.

The whole idea is pretty simple. But it’s sort of baffling that we haven’t been looking at our land this way for years. Cities, Minicozzi laments, are woefully ignorant about exactly which types of neighborhoods and development put the most financial strain on public coffers and which kick in the most money. This is why Minicozzi has been deploying every metaphor he can think of – cash crops, gas tanks, french fries! – to beat home the math.

Fundamentally, this is the same concept as the Geoffrey West observation of urban agglomeration and the inherent efficiency it offers.

How to make use of the reverse commute: Perhaps someone should inform various secondary job centers along transit lines of their fiscal potential.  Alon Levy looks at what’s required to make for successful secondary CBDs along rail transit lines, and what’s wrong with our current land use around suburban stations:

But really, the kind of development that’s missing around suburban train stations in the US is twofold. First, the local development near the stations is not transit-oriented, in the sense that big job and retail centers may be inconvenient to walk to for the pedestrian. And second, the regional development does not follow the train lines, but rather arterial roads, or, in cities with rapid transit, rapid transit lines…

In both cases, what’s missing is transportation-development symbiosis. Whoever runs the trains has the most to gain from locating major office and retail development, without excessive parking, near the train stations. And whoever owns the buildings has the most to gain from running trains to them, to prop up property values. This leads to the private railroad conglomerates in Tokyo, and to the Hong Kong MTR.

Commenter Jim notes how the DC region has a decent track record in this regard with Metro, but not with commuter rail:

The experience in Washington has been that when a Metrorail station (either an extension or infill) is proposed, the planners tear up their existing plans and write new ones for the area immediately surrounding the new station. Metrorail-catalysed TOD is a well understood and appreciated phenomenon. But no-one cares about commuter rail. Planners don’t assume that commuter rail stations will change anything, so don’t change their existing plans to accommodate them.

That’s the disconnect you have to fix.

Indeed – creating that symbiosis requires solving a bit of a chicken-egg problem.  Still, some opportunities exist in the DC region.  New Carrollton jumps to mind, both for Metro access for DC reverse commutes, as well as its mid-line location on the MARC Penn line.  However, the challenge there is on the development side, not the transit service side.

Parking requirements matter: Downtown LA’s revival based on adaptive re-use might not have been possible without changes to LA’s minimum parking requirements.  Making a place built pre-requirement conform is unnecessary, and shows how influential and destructive the requirements can be.  It also speaks to the ability of changing regulations to make doing the right thing the path of least resistance:

Passed by the L.A. City Council in — yes — 1999 and at first applied only to Downtown, ARO gave the go-ahead for the conversion of historic and other older — and often under-used, under-appreciated or even abandoned — office buildings into residences. ARO was expanded in 2003 into various other parts of the city.

“[The Ordinance] provides for an expedited approval process and ensures that older and historic building are not subjected to the same zoning and code requirements that apply to new construction,” reads text on the city’s Office of Historic Resources site.

Fitting in with the econourbanist theory about reduced land use regulation allowing for the market to better address issues of supply, the response was impressive:

During an almost thirty-year period beginning in 1970, Downtown Los Angeles gained a grand total of 4,300 units in housing stock.

Then, between 1999 and 2008, Downtown gained at least 7,300 housing units just from long-term vacant buildings.

That said, it’s not like LA completely abandoned these regulations:

Shoup’s article notes that pre-ARO, developers were required per each housing unit to provide two or more parking spaces. Those spaces, Shoup emphasizes in his piece, were required to be on-site.

Post-ARO, Shoup’s piece says that the average number of on-site parking spaces fell to 0.9 in those converted, previously vacant buildings. Including off-site parking, the number was still 1.3 spaces per unit. That’s a 65% drop in required parking spaces in an area where many residents already self-select to reside in for reasons unrelated to having a multi-car garage.

Nearly one space per unit is still a lot of parking.  Granted, this is LA that we’re talking about.  The flexibility to meet that requirement off-site (flexibility likely required to make the adaptive reuse of historic buildings possible) speaks to the benefits of allowing such changes as a matter of right.

The point about residents self-selecting to live in such conditions is key, contrary to common NIMBY complaints – no one is forcing Angelenos to move in at gunpoint.

Different thoughts on transit service metrics: Jarrett Walker looks at San Francisco’s transit speed (same as it was 100 years ago, or slower) and offers thoughts on various metrics and the need to think about the reliability of the network as a whole.

My own work in this area has always advocated a stronger, more transit-specific approach that begins not with the single delayed line, but rather with the functioning of an entire network.  Don’t just ask “how fast should this line be?” which tends to degenerate into “What can we do to make those forlorn buses move a little faster without upsetting anyone?”  Instead, ask “What travel time outcomes do we need across this network?”  Or turn it around: How much of the city needs to be within 30 minutes of most people?  — a question that leads to those compelling Walkscore travel time maps, which are literally maps of individual freedom.