Thursday, January 7, 2010

Urban Growth Regulation in the US

Paul Krugman points to another be-mapped Brookings report, this one on the growth typologies of the 50 largest US metro areas. Here's the map Krugman posts - it shows typology of land use regulation by metro area:

city growth regulation type map

They found that cities followed a few different patterns of growth regulation regimes, which they classify into four orders:

Traditional. This covers 34 metros and 75 million people. In these areas, "planning and zoning remains mostly voluntary, few local governments engage in innovative land-use regulation, and state review of local plans is mostly absent. These are also highly 'fragmented' metropolitan areas with large numbers of local governments, each of which regulates land use based mainly on its own calculus." Densities are falling faster in these areas than elsewhere, and they tend to offer fewer housing opportunities for low-income residents.

Exclusion. These areas regulate against the construction of low-density apartment complexes, and "share a comparatively low use of tools to require that development 'pay its own way'.” Housing prices tend to be relatively high in these areas.

Wild Wild Texas. The Lone Star State is sui generis, its cities less restricted than any others in the country, partly because zoning and comprehensive growth plans are both disallowed for Texas counties. These cities have some of the lowest housing prices, but note that this report was from 2006, the height of the housing bubble.

Reform. These metros use a broad range of tools to regulate and manage development. Central cities in these areas tend to be more prosperous, with more college graduates and homeowners, than in the Exclusion and Traditional areas. (This goes for Texas as well.) The growth control group within this family has thte highest housing prioes in the country.

One thing worth noting is that, though the essentially deregulated environment in Texas is characterized by affordable housing and (in 2010) one of the least bad state economies (not saying much), this is largely due to the existence of uncharacteristically progressive regulations in the mortgage market which kept the housing bubble at bay in Texas' biggest cities. And, of course, the affordability of these cities has lots of external costs in the form of environmental impacts, particularly the worsening of global warming engendered by all that new sprawl. Meanwhile, the report says that reform cities generally offer the best opportunities for minorities (again, ca. 2006; but these areas are generally getting hammered economically right now); and that they succeed when they are oriented towards growth management rather than growth control, the latter of which suppresses development in already built areas.

Krugman makes a further point:
Oh, and someone will surely raise the claim that this shows that you mustn’t have “smart growth” policies because they cause housing bubbles. Can I say that this is deeply stupid? On one side, we’re supposed to believe that markets are efficient and wonderful; on the other, we’re supposed to believe that anything which constrains buildable land — which, you know, sometimes happens for entirely natural reasons — will send markets into wild irrational swings. Those poor, fragile, omnipotent markets, able to handle anything except mild government intervention …
I more or less agree with this sentiment, though I wouldn't necessarily call the opposing view "deeply stupid." I think that on the one hand, a truly deregulated growth environment is sort of like what Ghandi said about Western democracy: it would be a nice idea and we whould try it some time. Even cities like Houston have lots of regulations about how cities can be built, for instance, employing minimum parking space requirements that exacerbate sprawl. (I actually don't know if a truly unregulated city growth pattern would be a 'nice idea,' but it would be interesting to have one such American city as a test case.) But on the other hand, I think what you get from a radically free market in urban development is what you usually get from radically free markets: a tremendous ability to satisfy consumer demand in the short-term, plus horrendous externalized costs (environmental degradation, including global warming, and so forth) and other terrible consequences that tend to mount over the long term, and which private individuals have little incentive to account for.


Andrew B said...

Almost all the cities marked as Traditional except High Density NYC are super cheap to live, have plenty of housing available in all ranges, and tons of low-income housing thanks to the existence of large inner cities. Those places plus Texas are affordable for everyone, from poor to rich. Everywhere else is ridiculously overpriced. I very much disagree with the idea that: "they tend to offer fewer housing opportunities for low-income residents". Inner city houses in many of these areas can be had for $50K or less.

Dohsan said...

You know, for a smart guy, Krugman isn't very able to see opposing views (though I enjoy his rants; mostly because he's an entertaining writer). In any case, you can take the view (as I do) that markets are not efficient all the time, thus more regulation can cause wilder gyrations in housing prices, but (just like democracy in politics), lightly-regulated markets (even though an inherently unstable system) are the best of all the imperfect economic systems out there.

You don't have to believe in market efficiency to be an economic libertarian. Krugman makes the basic mistake of conflating 2 different types of economic conservatives yet has the chutzpah to call other people stupid....

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You know, for a smart guy, Krugman isn't very able to see opposing views (though I enjoy his rants; Inner city houses in many of these areas can be had for $50K or less.

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