Janis Magnuson asks: What do you think a similar analysis would find in Canada/Vancouver?
By Richard Florida, from CityLab.
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The Urban Housing Crunch Costs the U.S. Economy About $1.6 Trillion a Year
For the first time, economists have put a price tag on restrictive urban land use policies.
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While we know that cities and metro areas contribute massively to economic growth—the nation’s 380 plus metro areas generated $14.6 trillion in GDP in 2012, about 90 percent of the total—we know a great deal less about which factors limit the growth of cities and metros. …
The dearth of affordable housing options in superstar cities like New York, San Francisco and San Jose (home of Silicon Valley) costs the U.S. economy about $1.6 trillion a year in lost wages and productivity, according to a new analysis from economists Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California at Berkeley.
… the economists’ research examines the geographic allocation of workers across the United States, and tests the following proposition: What might happen if workers were free to move to the cities and metros with the most robust economies, where they could be most productive, thus fueling even greater productivity and growth for the U.S. economy as a whole? To get at this, Hsieh and Moretti develop a number of alternative scenarios based on the ability of workers to move to and settle in these highly productive metros. The exercise leads to several intriguing findings.
… they find that roughly 75 percent of the nation’s economic growth between 1964 and 2009 came from a relatively small group of Southern metros and 19 other large metros. Even though superstar metros like New York, San Francisco, and San Jose created great wealth in sectors like finance and high-tech, nearly all of those gains were eaten up by the wages used to pay for higher housing costs. … As the authors point out, “the main effect of the fast productivity growth in New York, San Francisco, and San Jose was an increase in local housing prices and local wages, not in employment.” …
The crux of the economists’ analysis is their models, which create an “alternate universe” where workers can move freely to where they can contribute the most to the U.S. economy. They note the substantial wage differentials between the superstar cities of New York, San Francisco and San Jose and others over the past half-century. To correct for this, their models essentially reallocate workers in today’s economy according to the prevailing wage back in 1964. Based on this, they find that employment in New York would increase by nearly 800 percent, while it would grow by more than 500 percent in San Jose and San Francisco. …
How to begin to fix the problem? Here the authors offer a welcome corrective to the naïve notion promoted by too many urban economists that simply loosening housing restrictions and overcoming urban NIMBYism will magically solve the problems of America’s superstar cities.
Moretti and Hseih rightly point out that a big part of the solution lies in transit. As I have long argued, transit is a key part of the great reset required for our current era of knowledge-based capitalism.
Transit can work on two levels. Within metros, it can more seamlessly connect suburban areas to the more clustered urban core, enabling workers to commute from greater distances while also spurring denser clustering and development along transit corridors. And it can help stretch labor and housing markets across metros, creating more economically functional mega-regions. …
Moretti and Hsieh’s study reminds us of the enormous costs of trying to run the powerful, highly clustered new economy on the platform of our outmoded suburban, industrial model. Unleashing the productive power of this new age requires a spatial fix based on transit-based infrastructure and a more flexible housing system. Without that, as Moretti and Hsieh so pointedly remind us, we will continue to squander this country’s productive potential, its economic performance and, critically, our overall well-being.
Yes.
@ Gordon; “For the first time, economists have put a price tag on restrictive urban land use policies.”
Is it time to discuss substantial changes to the large chunks of the ALR in the Vancouver region?
Would parts of Surrey and Langley be so ‘North American Suburban’ typical if the ALR had not restricted residences being built in south Vancouver, east Richmond and areas of Delta?
Choosing ALR reform as a priority seems misguided for a few reasons:
1) A glance at real estate prices by neighbourhood/city shows that the most desirable areas are usually much more centrally located than ALR land.
2) Simply allowing apartments in existing single-family neighbourhoods would create a lot more housing.
3) Zoning for residential is arguably a one way process – changing it back to agricultural if needed would be nearly politically impossible.
Also, Florida’s lede is incorrect – plenty of economists have taken a stab at addressing the costs of zoning. Edward Glaeser and Joseph Gyourko come to mind, their papers “The Impact of Zoning on Housing Affordability” and “Why is Manhattan Housing So Expensive?” are both excellent.
My mistake. The quote is from Richard Florida.
Nevertheless, if transit (rapid) is desired as a better mode than highways for vehicles, then distances become critical because of costs. The farming of eastern Richmond and the other areas I mentioned is charming. For those that live close it provides sweet and fragrant air. Distances for transit is vastly greater to reach the residential areas beyond the ALR regions, therefore very expensive. The most glaring example is south. Extending the Canada Line along the bus route to the residential areas of Ladner, South and North Delta, South Surrey and White Rock would undoubtedly reduce the volume of vehicles running into Vancouver but imagine the cost of a system more than four times longer that it is now.
The massive developments over the recent ten years, all along the north/south streets in Surrey and Langley and the huge development in the Morgan Crossing area of Surrey and many parts of Coquitlam are providing what we hear that young new buyers want but cannot find in Vancouver; townhouses and mini single-family residences.
Without serious substantial zoning changes within Vancouver and no change to the ALR there will inevitably be more vehicular traffic everywhere.
Many people are quite happy to live in multi-unit condos, yet, there is a substantial constituency that would prefer and want a single family residence. If they don’t find it in Vancouver they are and will find it in a ‘burb and they will almost all buy a vehicle, or two, to get around.
“How to begin to fix the problem? Here the authors offer a welcome corrective to the naïve notion promoted by too many urban economists that simply loosening housing restrictions and overcoming urban NIMBYism will magically solve the problems of America’s superstar cities.”
My immediate thought when I read this is that you had better have some very convincing data if you want to make the claim that keeping something lots of people want in relatively short supply doesn’t lead to increased prices. When I took a quick look through the actual report though it seems like this statement is a skewed reading of what is actually said, which is much more inline with the “naive” notions of other urban economists:
“Constraints to housing supply reflect both land availability and deliberate land use regulations. We estimate that holding constant land availability, but lowering regulatory constraints in New York, San Francisco, and San Jose cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%. Our results thus suggest that local land use regulations that restrict housing supply in dynamic labor markets have important externalities on the rest of the country. Incumbent homeowners in high wage cities have a private incentive to restrict housing supply. By doing so, these voters de facto limit the number of US workers who have access to the most productive of American cities.”
In deed transit is critical for cities’ vitality .. as in RAPID transit .. not more wobbly slow-moving buses stuck in traffic while car use remains cheap as proposed by this band-aid MetroVan Transit proposal.
Indeed much land for residential living could be created in the ALR (say 10-20% of it) or the mudflats off UBC, Richmond, Delta or Surrey.
How about this: a brand new city in Boundary bay, south of Surrey, connected via rapid transit to Surrey and Vancouver. A BC version of Venice: almost no cars, walkable, dense living, shopping, open plazas, beaches, bike paths, views, and 2-3 transit stops for fast access to airport, ferries and employment centers.
Foster City, just off San Mateo (south of San Francisco Airport) in the SF Bay Area essentially did that, starting with planning in the 1960’s. Today 30,000 people live there. Lovely to walk around. Close to airport. Still too car oriented but s.th. similar could be created here if we really wanted to build more housing connected via transit.
A good summary of this city and its vision from the 1960’s is here: http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCQQFjAB&url=http%3A%2F%2Fdigitalcommons.calpoly.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D1113%26context%3Dfocus&ei=z4deVe-NNI_boAS3oIC4BQ&usg=AFQjCNFcwD2gH_7EBhRNI9iC5PvP3vtVzg&bvm=bv.93990622,d.cGU
Where is this vision in MetroVan ?
There are so many reasons why developing dense housing in the ALR is a bad idea. Much of the ALR is flood plain so it has higher flood risk. Typically soils are fine textured alluvial soils so they are more at risk in an earthquake. Much of the ALR is not well situated to accommodate growth simply because of its location, the amount of new infrastructure needed would be incredible. This is without going into the benefits of the ALR…
Plenty of ALR immediately next to 6-10 story buildings in Richmond, for example. I am not suggesting a complete hollowing out of ALR just an intelligent debate about land use and sensible creation of new land in mud flats that exist by the 1000’s of acres off Richmond, UBC, Delta and Surrey.
Huge Parking lots already exist near shopping malls in Richmond and Surrey that could be prime land ready for high density residential Apartments. Convert all those before we touch the ALR. Some of these parking lots are next to Skytrain.
The commentaries this week on radio, TV and in the press about first-time buyers of homes being unable to find what they want in Vancouver repeatedly refers to single-family residences, not apartment or condo buildings.
If Vancouver wants to retain the ALR as is this is just another feature that makes the city very expensive. Green, sustainable and expensive. Nothing wrong in that but let’s be honest and say it. There cannot be any expectation of cheap homes in this general environment. Bob Rennie is right. Forget the dream and don’t fan any flames of racism about foreign buyers bumping up the general prices, Vancouver has evolved and has been noticed by more than just a few retirees from back east.
There are 10 square kilometres of land locked up just in the front yard setbacks of every 135,000+ Vancouver standard lots. That increases to 25+ km2 when you include side setbacks and back yards. The majority of the high values attributed to Vancouver’s real estate (excluding luxury homes) are found in the land, not the structures. About 70% of Vancouver’s private land base is zoned as standard lots. Most of the expensive cities Vancouver have been compared to on this issue have learned long ago to consume less land per home.
We do not have to abandon our ability to grow food locally and stick with increasingly tenuous and insecure 2,500 km food supply chains from drought-stricken California just because someone thinks abolishing the ALR and building plastic subdivisions set in asphalt would be a permanent solution to housing affordability. That is a false economy at its best.
An agronomist who recently studied the Class 1-3 soils destined to be flooded by the Site C dam concluded that less than 2,000 hectares of prime farm land could feed a million people a year and generate ~$10 billion in economic activity every decade when food crops are grown intensely instead of pasture and hay. You can’t eat vinyl siding or stucco, and when it is suggested that these elements cover our very scarce food producing lands, the eyes do tend to roll.
The authors seem to be discussing loosening land use regulations while holding land availability constant. So a similar analysis of Metro Vancouver whould include preserving the ALR.
“For example, Silicon Valley—the area between San Francisco and San Jose—has some of the most productive labor in the globe. But, as Glaeser (2014) puts it, “by global urban standards, the area is remarkably low density” due to land use restrictions. In a region with some of the most expensive real estate in the world, surface parking lots, 1-story buildings and underutilized pieces of land are still remarkably common due to land use restrictions. While the region’s natural amenities—its hills, beaches and parks—are part of the attractiveness of the area, there is enough underutilized land within its urban core that housing units could be greatly expanded without any reduction in natural amenities. Our findings indicate that in general equilibrium, this would raise income and welfare of all US workers.”
I think it also holds that using the existing land base more efficiently is the best endeavour.
BTW, Glaeser’s book “The Triumph of the City” is very good.
Agreed on both counts