LSE researchers: beware of the “build baby build” approach

high-rise-3155455_960_720.jpg

“Upzoning is far from the progressive policy tool it has been sold to be. It mainly leads to building high-end housing in desirable locations.”

As this blog has long argued, the challenges of affordability, equity and sustainability are complex, and require a comprehensive approach, including economic tools, “polycentric” regional planning, and other strategic interventions.  These challenges are not likely to be addressed with simplistic “silver bullets.”  Case in point: the idea that just building more supply (especially in the cores) will automatically result in lower prices, more opportunities for formerly excluded populations, or more sustainable urban types.  (What some have called a “build baby build” approach.)

In recent research discussed on the CityLab blog, economic geographers Andrés Rodríguez-Pose and Michael Storper of the London School of Economics found that “Upzoning expensive cities is no match for the deep divides within—and especially between—cities, and is wholly insufficient to remedy them.”

The research by LSE is hardly the first to point out this problem with “build baby build”.  As the CityLab article points out, “Economist Tyler Cowen agrees that the ultimate beneficiaries from zoning and building deregulation are landlords and developers. As he puts it, “the gains from removing taxes/restrictions on building largely will be captured by landowners … More stuff will be built, urban output will expand, land still will be the scarce factor, and by the end of the process rents still will be high.”And a recent study by Yonah Freemark found that upzoning in Chicago led to higher, not lower, housing prices, while having no discernible impact on local housing supply.”

The author of the CityLab article, Richard Florida, expressed dismay at the barrage of derogatory criticism that he and the LSE economists received from defenders of the “build baby build” approach.  “That makes little sense,” said Florida. “The paper is an important cautionary tale. The authors are not saying that we should not build more housing. They are simply saying that doing so won’t magically solve economic and spatial inequality, because both are deeply rooted in the very nature of the geographically clustered and concentrated knowledge economy.”

But perhaps the effects of financial and other self-interests are far more seductive than the calm and reasoned approaches that are called for.  Perhaps the lesson here is the one famously offered by Upton Sinclair: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”

Excerpts from the CityLab article are below, and the entire article can be read here.

new paper by two leading economic geographers suggests this argument is simply too good to be true. Titled “Housing, Urban Growth and Inequalities” and forthcoming in the journal Urban Studies, it’s written by Andrés Rodríguez-Pose of the London School of Economics (LSE) and Michael Storper, who divides his time among the LSE, UCLA, and Sciences Po in Paris. According to Storper and Rodríguez-Pose, the notion that an insufficient supply of housing is a main cause of urban economic problems is based on a number of faulty premises. They say the effect of supply has been blown far out of proportion.

They agree that housing is part of the problem: “Housing market failures can imperil local economic growth and generate problems such as segregation, long commute times, deteriorating quality of life, homelessness, and barriers to social mobility for certain populations,” they write. But housing policy, and zoning restrictions in particular, are certainly not the be-all and end-all of urban problems. Upzoning expensive cities is no match for the deep divides within—and especially between—cities, and is wholly insufficient to remedy them.

“Housing is an area where the law of unintended consequences is most powerful,” Storper recently told Planning Report. “The idea that upzoning will cause housing affordability to trickle down within our metropolis, while also setting up Los Angeles and San Francisco as the new golden land for people in less prosperous regions, is just a lot to promise—and it’s based on a narrative of housing as opportunity that is deeply flawed.” And as Rodríguez-Pose told me via email: “Upzoning is far from the progressive policy tool it has been sold to be. It mainly leads to building high-end housing in desirable locations.”

Rodríguez-Pose and Storper question several pieces of evidence that stand at the heart of this market-urbanist view, a perspective they dub “housing as opportunity.” Whereas some urban economists suggest a close relationship between housing supply and prices (with places that add supply having lower prices), Rodríguez-Pose and Storper find the relationship to be weak.

Likewise, some market urbanists point to an association between city population size and/or density and economic growth. But Rodríguez-Pose and Storper argue that this too falls away under close scrutiny—the link between city population in 2000 and subsequent economic growth from 2000 to 2016 is weak to “non-existent,” on their analysis.For Storper and Rodríguez-Pose, the rising spatial inequality between cities and metro areas stems from different kinds of economies that distinguish different kinds of cities, not from differences in housing costs. Or as they put it, “the basic motors of all these features of the economy are the current geography of employment, wages and skills.”  

The economies and talent bases of cities have diverged over time. Expensive cities have much larger clusters of leading-edge tech and knowledge industries and of highly educated, skilled talent. It’s this, rather than differences in housing prices, that is behind growing spatial inequality.

“The affordability crisis within major urban areas is real,” they write, “but it is due less to over-regulation of housing markets than to the underlying wage and income inequalities, and a sharp increase in the value of central locations within metro areas, as employment and amenities concentrate in these places.”

A key factor here is the growing divide between highly-paid techies and knowledge workers and much lower-paid people who work in routine service jobs. These service workers end up getting the short end of the stick, spending much more of their income on housing in expensive cities. “Under these circumstances moving to big cities provides no immediate benefits for workers without college education,” Rodríguez-Pose and Storper write.

Upzoning does little to change this fundamental imbalance. Because land in superstar cities and tech hubs is so expensive to begin with, upzoning tends to create even more expensive condominium towers. “While building more affordable housing in core agglomerations would accommodate more people,” the authors note, “the collapse of the urban wage premium for less-educated workers means that the extra housing would mostly attract additional skilled workers.”

Opportunities for improved wages in core areas have stagnated, and the “ladder has shrunk.” Therefore, the decline in interregional migration can be attributed to many factors, including the new geography of skills and wages. But housing restrictions in prosperous areas wouldn’t top the list. And upzoning ends up fueling, not relieving, economic and spatial inequality. As Rodríguez-Pose told me: “Income inequality is greater within our cities than across our regions. Upzoning will only exacerbate this.”

“Planning deregulation and housing costs are neither going to solve the problem of areas lagging behind, nor are they likely to have an impact on the economic development of dynamic cities,” Rodríguez-Pose and Storper write. Worse, they caution, “an excessive focus on these issues at the expense of serious and sustainable development strategies, can fuel economic, social and political distress and anger in declining and lagging areas that can threaten the very foundations on which economic activity, both in less developed and more prosperous areas, has been erected in recent decades.”

 

This last point deserves attention.  By focusing on a kind of “voodoo urbanism” approach — by concentrating too much on the urban cores, including new building there, and hoping the benefits will “trickle down” to everyone else — we are not only not improving the affordability and equity issues, we are actually fueling a spiraling dynamic of “left-behind places.” These  include the suburbs, and also, importantly, the smaller towns and rural areas where much of the so-called “populist revolt” is occurring (in both the US and other countries).  Rodríguez-Pose in particular has argued for a more evenly distributed, “polycentric” approach to economic and human development, within city regions as well as national regions. 
 To us this suggests a more even-tempered and polycentric approach to development across urban and national regions —  creating a network of walkable, compact, transit-served places at a range of scales, densities, and (importantly) costs.  As we have written before, this approach might be thought of as a kind of “Goldilocks urbanism”.  Yes, cities do generate economic and cultural benefits from concentrations of talent, but also from “spreading it around.” Getting the balance “just right” (neither too hot nor too cold) is not just about fairness; it turns out to be better for everyone’s bottom line too.  

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s