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There are “Left-behind” in the Blue States Too

Fri, 11/11/2016 - 11:21

The 2016 presidential election revealed a strongly divided nation. Donald Trump’s victory has been characterized as a “landslide” by some, noting the surprisingly high electoral vote tally. Others note the likelihood that Hillary Clinton will win the popular vote. In any event, the result is far different than many expected. In its last pre—election prediction of the electoral vote, the Los Angeles Times gave Hillary Clinton one-half more electoral votes (352) than she will apparently receive (232). Her apparent popular vote victory (approximately 300,000 at this point) is so concentrated that without California she would have lost the popular vote by more than 3,000,000 (based on trends at this writing).

Just about everyone agrees that the pollsters got this election very wrong. It appears that Trump voters, especially rural voters were significantly under sampled in polling. Generally, it is agreed, that the secret to the success of the Trump campaign was the mobilization of voters who believed that they had been “left-behind” by the “system.” This was the key to the strong Republican performance in the Rust Belt and especially in “coal country.”

In these areas, working households who had depended on manufacturing or mining employment have seen jobs disappear and incomes drop in the last two decades. It was, overall, an election pitting the more fortunate “elite,” especially the West Coast and in Northeastern metropolitan areas against middle and lower middle income households that have not done well. These are households that feel they have been “left-behind” in a national economy that has yet to restore inflation-adjusted 1999 median incomes.

Yet the “left-behind” were evident in voting patterns even in the more prosperous Blue State metropolitan regions (combined statistical areas), especially in outer suburban counties, which often have smaller populations.

New York

The New York metropolitan region, with its high nominal household income, has a number of counties in which Donald Trump polled well.

The four most highly urban boroughs of the city delivered overwhelming mandates to Clinton, with as much as 89 percent of the vote in Manhattan and the Bronx, 80 percent in Brooklyn and 75 percent in Queens. She also received strong support from inner suburban counties, 65 percent in Westchester, 74 percent in Hudson (Jersey City), 77 percent and Essex (Newark) and 66 percent in Mercer (Trenton) and Union (Elizabeth).

However, some of the outer counties showed strong support for Donald Trump. For example, he received 66 percent of the vote in New Jersey’s Ocean County, and more than 60 percent of the vote in Sussex County, New Jersey and won other suburban New Jersey counties such as Monmouth, Hunterdon, Morris. Trump also took Suffolk County in eastern Long Island, and the Hudson Valley counties of Putnam, Orange and Dutchess, where the FDR Library is located.

Even farther out, Trump managed above 60 percent majorities in Pennsylvania’s Pike and Carbon counties and also won Northampton County (Bethlehem).

Washington-Baltimore

There was strong support for Trump in Washington – Baltimore metropolitan region, with its lucrative government jobs machine. Northernmost Franklin County, Pennsylvania provided a 71 percent majority to Trump, while Maryland’s Washington County, just across the border, provided 64 percent. Closer to Baltimore, Carroll and Harford provided Trump 65 percent and 60 percent majorities. Across the Chesapeake Bay Bridge from an Annapolis, Queen Anne’s County voted 66 percent for Trump. Southeast of Washington, St. Mary’s County voted 60 percent for Trump.

West Virginia’s Hampshire County provided the largest majority in the metropolitan region to Trump at 78 percent, while Berkeley County provided a 60 percent vote. Amazingly, every county in the state of West Virginia voted for Trump, despite its decades of Democratic Party domination, providing Trump a 62 to 27 percent landslide.

The situation was similar in outer counties across the Potomac River in Virginia. Warren County voted 66 percent and Frederick County 65 percent for Trump. Facquier  and Culpepper counties supported Trump at 60 percent.

The “Left” Coast

There were even pockets of strong Trump support in some metropolitan regions of the so-called “Left Coast.”

For example, in the Portland metropolitan region, Linn County voted 60 percent for Trump. Among the 11 suburban Portland counties, six supported Trump. Perhaps most surprisingly, Marion County, home of Oregon’s capital (Salem) supported Trump. Marion County was one of only two Clinton supporting states in which the capital county supported Trump (the other being Storey County in Nevada).

California was not to be left out. In the Sacramento metropolitan region, five of the seven suburban counties supported Donald Trump.

Minneapolis-St. Paul

Trump managed to command surprisingly strong support in the suburbs of high-income Minneapolis-St. Paul. Beyond Clinton’s predictably strong support in core Ramsey (St. Paul) and Hennepin counties (Minneapolis), all but two of the 19 suburban counties supported Trump. Support was strongest in the outer suburban counties. The entire northeastern corner of the metropolitan region provided strong support to Donald Trump. In Stearns County (St. Cloud), Trump received 60 percent of the vote and an even higher 65 percent in adjacent Benton and Shelburne counties.

Wright County, which is adjacent to central Hennepin County, voted 63 percent for Trump. There was a wall of strong support across the remainder of the metropolitan region’s northern tier, with a 65 percent majority in Isanti County, 64 percent in Mille Lacs County and 61 percent in Chisago County. The southeastern corner of the metropolitan region also supported Trump strongly, with Le Sueur County providing 62 percent and Sibley County providing the largest Minneapolis – St. Paul area majority for Trump at 67 percent.

Denver

Denver, with its information technology industry and its high nominal household income supported Hillary Clinton strongly. Yet, four suburban counties supported Trump, Douglas, Weld, Park and Elbert.

What is Behind the Trump Support in Blue States?

While the metropolitan regions discussed above have not endured the huge manufacturing and resource industry losses of the Rust Belt metropolitan regions, some households have faced serious economic challenges. Here the culprit is a high cost of living, most evident in especially high house prices. Many middle income residents are “driving until qualified” to find the housing they desire at a price they can afford.

Like those in the less economically favored parts of the nation, they are having difficulty sustaining their standard of living. With the prospect of mortgage interest increases and price increases from strengthening regulation, the ranks of the “left-behind” could grow, and with it the Trump coalition. Or, a Democratic Party returning to its roots could seize the opportunity, though that seems less likely.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Electoral map by Ali Zifan (This file was derived from:  USA Counties.svg) [CC BY-SA 4.0], via Wikimedia Commons

Trumping the Elites

Wed, 11/09/2016 - 21:38

She had it all—the pliant media, the tech oligarchs, Wall Street, the property moguls, the academics, and the all-around “smart people.” What Hillary Clinton didn’t have was flyover country, the economic “leftovers,” the small towns, the unhipstered suburbs, and other unfashionable places. As Thomas Frank has noted, Democrats have gone “from being the party of Decatur to the party of Martha’s Vineyard.” No surprise, then, that working- and middle-class voters went for Donald Trump and helped him break through in states—Michigan, Wisconsin, Iowa—that have usually gone blue in recent presidential elections.

Trump seized on the widespread sense that American life was destined to get worse from generation to generation. Americans wanted opportunity for the next generation, not a managed decline. Democrats—and I was one for over 40 years—once offered this to the working and middle classes that have now deserted the party.

More than anything, the Trump vote says “no” to oligarchies and ruling classes that not only hoard their wealth but also are convinced that they are morally superior. Trump may be as ostentatious as anyone in flaunting his own wealth, but compared with his garishness, the hypocrisy of the elites is infinitely worse. It’s one thing to be told that decline and future stagnation are your lot by, say, selfless monks wearing hair shirts or tough party cadres who live, like the pre-revolutionary Bolsheviks, with the common people. It’s quite another, when the message comes from trustafarians writing for the New York Times or people who fly their own planes and own numerous homes.

Concern about climate change galvanized the elites—Wall Street, Hollywood, Silicon Valley—but left Main Street cold. Wall Street placed its bets on Trump and, like many blocs within the new “progressive” constituency, reacted with shock that the American people hadn’t bought in to their investment.

The map tells all. Clinton won by large margins in the Northeast and on the West Coast, and in states—Colorado, New Mexico, and Nevada—where Trump’s intemperate comments roused Latino voters. But outside of Illinois, a whole swath of the country, from the hills of Appalachia to the fringes of the Rockies, went solidly for Trump.

Why would that be? Start with basic economics. The economy in the nation’s interior relies on producing things—an endeavor that the coasts have largely abandoned. Energy, manufacturing, and agriculture still define these economies, and employ many white-collar as well as blue-collar workers. If you live in Texas and Oklahoma, “decarbonization” is a much less attractive concept than it might seem in Manhattan or San Francisco. Trump swept the areas that keep the lights on and the motors turning—Ohio, Oklahoma, Louisiana, Texas, Wyoming, Idaho, Louisiana, and especially West Virginia, where he won by a remarkable 68 to 27 margin. 

Among other things, the media missed the fact that the middle of the country and the South continue to gain population. The “blue” model, for the most part, expels people, while, in contrast, the “red” one appeals, particularly to middle- and working-class families. Texas and Florida are now our second and third most-populous states. Once the pacesetter, New York is a mere shadow of itself as a determiner of elections, and California, no longer growing quicker than the rest of the country, has perched itself on the Left fringe, with obvious bad ramifications—high housing and energy bills, depressed blue-collar sectors—for middle-aged, middle-class families.

In contrast, Trump’s America presents an alternative model, which honors small enterprise, allows housing to meet demand, and does not see the United States as part of a global system to be managed. That there are xenophobic, and even racist, elements in the Trumpian ranks is undeniable—but for most Americans, the true “deplorables” have been the self-appointed regulators and financial masters who seem determined to halt their upward progress, and that of their children. If our governing elites want to know how Trump happened, they need only look in the mirror.

This piece first appeared at The City Journal.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo: "US Secretary of State Hillary Rodham Clinton Meets Japanese Foreign Minister Seiji Maehara in Hawaii 101027-F-LX971-088" by Master Sgt. Cohen Young - https://www.dvidshub.net/image/1317097. Licensed under Public Domain via Wikimedia Commons.

The Improbable Demographics Behind Donald Trump's Shocking Presidential Victory

Wed, 11/09/2016 - 05:49

n an election so ugly and so close, one is reluctant to proclaim winners. But it’s clear that there’s a loser — the very notion of the United States of America.

Instead we have populations and geographies that barely seem to belong in the same country, if not on the same planet. The electorate is so divided that many states went for either Donald Trump or Hillary Clinton by lopsided margins. The Northeast was solidly Democratic, with Clinton winning New York, Massachusetts and Vermont with three-fifths of the vote or more. Washington, D.C., heavily black and the seat of the bureaucracy and pundit class, delivered an almost Soviet-style 93% to 4% margin.

On the other side were a series of states where Trump won just as easily, including Tennessee and Kentucky, with three-fifths of the vote, and West Virginia, by a margin of two-to-one  – higher than those attained by 2012 GOP presidential candidate Mitt Romney.

Much of the rest of the map has followed the usual patterns: Democratic domination of Illinois and the West Coast, while Republicans held the South. Where the election was decided was in previous battleground states: Florida, North Carolina and Ohio.

The Revolt of Middle America

America is a nation of many economies, but those that produce real, tangible things — food, fiber, energy and manufactured goods — went overwhelmingly for Trump. He won virtually every state from Appalachia to the Rockies, with the exceptions of heavily Hispanic Colorado, Nevada and New Mexico, and President Obama’s home base of Illinois.

Some of his biggest margins were in energy states — Texas, Oklahoma, West Virginia, Wyoming, North Dakota — where the fracking revolution created a burst of prosperity. Generally speaking, the more carbon-intensive the economy, the better the Republicans did. Many of his biggest wins took place across the energy-producing regions of the country, including Ohio, Texas, Louisiana, Wyoming, Idaho, and especially West Virginia, where he won by a remarkable margin of 68% to 27%. The energy industry could well be the biggest financial winner in the election.

The Green Trap

Clinton’s support for climate change legislation, a lower priority among the electorate than other concerns, was seen as necessary to shore up support from greens threatening to attack her from the left. Yet the issue never caught on the heartland, which tends to see climate change mitigation as injurious to them.

This may have proven a major miscalculation, as the energy economy is also tied closely to manufacturing. Besides climate change, the heartland had many reasons to fear a continuation of Obama policies, particularly related to regulation and global trade, which seems to have been a big factor in Trump’s upset win in normally moderate to liberal Wisconsin.

Trump either won, or closely contested all the traditional manufacturing states — Ohio, Wisconsin, Indiana, Iowa and even Michigan, where union voters did not support Clinton as they had Obama and where trade was also a big issue. Trump did consistently better than Romney in all these states, even though Romney was a native of Michigan. Perhaps the most significant turnaround was in Ohio, which Obama won with barely 51%  of the vote in 2012. This year Trump reversed this loss and won by over seven points.

Agricultural states, reeling from the decline of commodity prices, not surprisingly, also went for the New Yorker.

Premature Epitaphs For The White Voter

Race, as is often the case, played a major role in the election. For much of the election, commentators, particularly in the dominant Eastern media, seemed to be openly celebrating what CNN heralded as “the decline of the white voter.” The “new America,” they suggested, would be a coalition of minorities, educated workers and millennials.

To be sure, the minority share of the electorate is only going to grow — from less than 30% today to over 40% in 2032 — as more white Americans continue to die than be born. Just between 2012 and 2016, the Latino and Asian electorate grew 17% and 16%, respectively; the white electorate expanded barely 2%.

In Colorado the new minority math was seen, with a strong showing among Latinos, the educated suburbs around Denver and millennials.

That may be the future, but now is now. Exit polling nationwide showed Trump won two-to-one among people without a college degree, matched Clinton among college graduates, losing only those with graduate degrees, a group that has voted for the Democrats since 1988.

But there’s simply more high school graduates then those with graduate degrees. And for now there are a lot more whites than minorities. As we look into the future, these groups will fade somewhat but right now they can still determine elections. Nowhere is this clearer than in Trump’s decisive win in Florida, a state that is home to many white retirees, including from the old industrial states.

Latinos may be the one group in the “new America” that made a difference for Clinton, not only in Colorado, but also in Nevada. Republicans paid a price for Trump’s intemperate comments on immigration and about Mexico.

They also made states like Texas and North Carolina closer, and may have helped secure Clinton’s win in Virginia. In contrast, neither African-Americans or millennials seem to have turned out as heavily, both in numbers and percentage terms, as they did for President Obama. Trump appears to have made some modest gains with both groups, contrary to the conventional wisdom.

Class Warrior

Class has been a bigger factor in this election than in any election since the New Deal era. Trump’s insurgency rode largely on middle- and working-class fears about globalization, immigration and the cultural arrogance of the “progressive” cultural elite. This is something Bill Clinton understandsbetter than his wife.

Trump owes his election to what one writer has called “the leftover people.” These may be “deplorables” to the pundits but their grievances are real – their incomes and their lifespans have been decreasing. They have noticed, as Thomas Frank has written, that the Democrats have gone “from being the party of Decatur to the party of Martha’s Vineyard.”

Many of these voters were once Democrats, and feel they have been betrayed. And they include a large swath of the middle class, whose fury explains much of what happened tonight. Trump has connected better with these voters than Romney, who won those making between $50,000 and $90,000 by a narrow 52 percent margin. Early analysis of this year’s election shows Trump doing better among these kind of voters.

At the same time, however, affluent voters — those making $100,000 and above — seem to have tilted over to the Democrats this year. This is the first time the “rich” have gone against the GOP since the 1964 Goldwater debacle. Obama did better among the wealthy, winning eight of the 10 richest counties in 2012. In virtually all these counties, Clinton did even better.

What does this mean for America’s traditional middle class, whose numbers have been fading for a generation? Long the majority, notes Pew, they are no longer, outnumbered by the lower and upper classes combined. Yet like the Anglo population, in this election what’s left of America’s middle class has shown itself not ready to face the sunset.

Now What?

Given the unpredictable nature of Trump, it’s hard to see what he will do. Although himself a businessman, he was opposed overwhelmingly by his own class. Clinton won more support from big business and the business elite. If you had a billionaire primary, Clinton would have won by as much as 20 to 1.

Initially many of those business interests closest to both Obama and Clinton — Wall Street, Silicon Valley, Hollywood — will be on the outside looking in. Their advantages from tax avoidance could be lessened. Merger-mania, yet another form of asset inflation, will continue unabated, particularly in the tech and media space.

The clear challenge for (I can’t believe I am writing these words) President Trump will not be so much to punish these enemies, but to embrace those people — largely middle class, suburban, small town and white — who are not part of his world, but made him President. If he embraces his role as a radical reformer, he could do much good, for example with a flatter tax system, restoring federalism, seizing the advantage of the energy revolution and reviving military preparedness.

The question is whether he will, or is capable, of doing these things. A Hillary Clinton administration would have been safer, and predictable, but it would not have addressed the very things that made Americans turn to this bizarre political poseur. Now it’s up to Trump to live up to his promise to restore the country’s self-confidence, and, for the rest of us, to make sure he does it in accordance with the Constitution and basic decency.

This piece first appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

Economic Participation Matters Most

Tue, 11/08/2016 - 05:20

This piece first appeared at Real Clear Policy.

POLICIES FOR THE NEXT ADMINISTRATION. PART 10: ECONOMIC INEQUALITY

This is the tenth in a series on the major policy ideas — from Left and Right — that should guide the next presidential administration's agenda. (For the opposing view, see David Madland, "A Path Forward for the Middle Class and the Country.")

Do we want to live in a society in which people profit when they have new ideas, products, and abilities that others are willing to pay for? If so, then we will also have economic inequality. 

To most economists and ordinary Americans, inequality is the price we pay for an economy that rewards innovation, risk, and hard work. The topic has been a recurrent theme in our recent political discourse, however, because of two things: the outsized income of the nation’s top earners and the stagnation, or tepid growth, of middle-class incomes. The question is whether we think these two trends say something bad about America, and if so, what public policy can do about them.

On the first issue, the rising incomes of the rich, politicians and advocates who want to reduce inequality typically rely on one of three rationales. 

First, there is the “piece of the pie” rationale. This view regards the economy as a kind of zero-sum game in which larger slices of the economic pie for the rich mean less for everyone else. But the evidence for this view is dubious at best. Even Paul Krugman has claimed to be a skeptic of the idea that inequality affects economic performance.

The second rationale is a kind of moral objection: It is simply wrong, or unfair, for the rich to earn so much. Behind the veil of ignorance, as the political philosopher John Rawls taught us to think, no one would choose to live in a society where 1 percent of the population earns more than $430,000 while everyone else averages one-eighth that amount. But, the fact is, we live in a non-Rawlsian reality in which many would roll the dice and say, “I’ll take those odds!” 

Besides, as polls suggest, everyday Americans just don’t care about inequality as much as they care about upward mobility. They may dislike faceless “bankers” and “CEOs of insurance companies,” but they admire Steve Jobs and Mark Zuckerberg, whose earnings make most bankers and insurance executives look middle class.

The third rationale blames cronyism, the “rigged game,” for making people rich. It is unlikely that cronyism is the main driver of the top 1 percent’s income. Still, as research from Boston University’s Jim Bessen shows, there is a positive relationship between growing corporate profits and lobbying. And Sutirtha Bagchi and Jan Svenjar have found that inequality is greater in countries whose richest citizens earn their wealth through cronyism rather than free enterprise. We live in an era in which the CEO of Goldman Sachs praises Dodd-Frank for making things better for Goldman. Clearly, we have policy work to do to fix this.

But the energy policymakers and pundits spend worrying about the super-rich might be better spent focusing on the second initial question: What do we do about lower and middle-class incomes that are not rising as they should? 

If we get this question right, maybe the first one becomes less important. This seems to be what Adam Smith’s mentor and friend David Hume had in mind back in 18th-century Scotland. Hume observed merchants, who were not welcome in elite society, earning “great profits” by importing and exporting novel and innovative products. Their success made them “rivals in wealth to the ancient nobility.” Commercial exchange had narrowed the gap between the birthright rich and an enterprising class of hardscrabble commoners. 

Not only merchants saw their lot improve. The growing taste for newer and better products prompted ordinary people to become innovators and to get in on the action, producing “every home commodity to the utmost perfection of which it is susceptible…[S]teel and iron, in such laborious hands, [had] become equal to the gold and rubies of the Indies.”

What Hume called “luxury” — goods from overseas and improved products through innovation at home — was no longer the domain of kings and aristocrats alone. The iPhone 4 replaced the flip phone, and the iPhone 6 surpassed the iPhone 4 — not just for the king, but for you. Not only did luxury make life better, it opened up new opportunities to earn a living for those making the products. 

Detouring through 18th-century Scotland reminds us that upward mobility comes not primarily from redistributing money from the nobility to the poor but through economic participation — that is, encouraging work in those sectors of the economy where innovation and growth are robust.

The problem in America today is that some people are participating in the growing, opportunity-rich parts of the economy and others are not. It is the inequality among the 99 percent, not the 1 percent, that matters most in America. MIT’s David Autor has calculated that growth in income between the top and bottom of the 99 percent between 1979 and 2012 was four times greater than the redistribution of income from the entire 99 percent to the top 1 percent.

The so-called “hollowing out” of the middle class can be understood in these terms. As Pew has reported, of the 11 percent decrease in middle-class households between 1971 and 2015, 7 percentage points are the result of families moving up and out of the middle class. Of the remaining 4 percent that moved down, a large share can be explained by the growth in immigrants working in low-wage jobs. 

The best way up for people is — and always has been — the capacity to participate in the economy as an employee, entrepreneur, or owner. No amount of redistributive policy can achieve the same result. The safety net, as the name implies, is to prevent downward mobility; it has never been a very good trampoline. 

Given the gap between the top and bottom of the 99 percent, we need to focus with revolutionary zeal on increasing economic participation among marginalized workers. To do this, our approach to workforce development should emphasize the following:

1. High school certification paths in high-demand skills. Career and technical education needs to move from a sideshow to a central part of high school curricula. The programs should be flexible, using online learning platforms and easily convertible physical space so schools can quickly offer new programs as market demand changes. Also, in place of textbook economics, students should learn about the role of investors and owners in the economy, how firms are formed, what innovation is, and which companies are successful and why.

2. Apprenticeships for the American economy. Current workforce-development funding should shift to support on-the-job training more than classroom vocational training. Given the flexibility of the U.S. labor market, employers should bear minimal cost in the event that the apprentice leaves for another company.

3. Increased rate of new business creation. This may sound more pro-entrepreneur than pro-worker, but the reality is that new companies: create most of the new jobs each year; employ a disproportionate number of young people; and pay on par with more established firms. Sophisticated startups with patents and Delaware registrations are doing well. The rest, not so much. Local clubs, entrepreneur networks, school partnerships, and other ways of connecting would-be entrepreneurs to real entrepreneurs as well as to investors and lenders are needed now more than ever.

We need a policy environment that connects people to the growing, highly productive sectors of our economy. This will do more to “make work pay” than conventional ideas such as setting wage floors, making marginally effective community colleges “free,” and strengthening unions. The only way to increase mobility and deal with inequality is to increase the earning power and vocational prospects of people who are currently on the outside looking in.

This piece first appeared at Real Clear Policy.

Ryan Streeter is the Executive Director of the Center for Politics and Government at the University of Texas at Austin.

Can Working Class, Elite Form Alliance?

Sun, 11/06/2016 - 21:38

Can the party of oligarchy also be the party of the people? Besides fending off the never-ending taint of corruption, which could weaken the extent of her “mandate,” this may prove the central challenge of a Hillary Clinton regime.

No candidate in recent memory — at least, not since Lyndon B. Johnson in 1964 — has enjoyed more universal support from the rich, powerful and well-connected. They have provided her with “a towering cash advantage,” as a recent Bloomberg column described it, over her opponent. By one estimate, she is getting funds from 20 times as many billionaires as Trump.

Yet, at the same time, Clinton faces a challenge from strident, and often anti-business, populists who now control much of the party base. The presidency may soon belong to Hillary, but its heart belongs to Vermont Sen. Bernie Sanders and Massachusetts Sen. Elizabeth Warren.

These trends will pose a difficult, but not necessarily insurmountable, challenge. The Peronist Kirschners, Nestor and Christina, ruinously dominated Argentina’s politics for 12 years by providing lavish favors for business supporters while they expanded the country’s welfare state.

Perhaps a more uplifting model could be gleaned from late 19th-century Britain, where “Tory Democracy” sought to forge an alliance between the struggling working class and the traditional landed gentry. This strategy was largely designed by Benjamin Disraeli, who served two terms as prime minister.

This piece first appeared at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore from Peoria, AZ, United States of America - Hillary ClintonCC BY-SA 2.0

Cat and Mouse in Frogtown

Fri, 11/04/2016 - 21:38

A friend recently expressed an interest in how some cities are reforming their land use regulations. “I mean, there are places like LA that say they’ve thrown out the code books and are rewriting their zoning.” My short response was… No. The reality is that the city plays an expensive and byzantine game of cat and mouse with each individual neighborhood.



There’s a little sliver of brassiere shaped land wedged between the Los Angeles River and the Golden State Freeway that sums up a lot of what constitutes the land use regulation process in LA. When poor Mexicans were forcibly removed in order to build Dodger Stadium in the late 1950’s they resettled in this inexpensive semi-industrial zone called the Elysian Valley, which is also commonly known as Frogtown.

It's been a solid working class neighborhood for decades. Families have long managed to own modest homes and live in respectable obscurity among the auto body shops, plumbing supply warehouses, and municipal maintenance facilities.

In recent years the adjacent neighborhoods of downtown Los Angeles, Echo Park, Silver Lake, Atwater Village, and Glassell Park (all previously ignored and undervalued) have become newly fashionable and prohibitively expensive. Pent up market demand acts like a balloon – if you squeeze the middle the ends bulge. In this case home buyers, renters, and businesses have scoured the area looking for alternatives. Frogtown is a centrally located and relatively affordable compromise.

Design firms, architects, photographers, tech incubators, high end specialty fabricators, and other such enterprises have moved in to the nondescript buildings of Frogtown. If you’re willing to celebrate concrete block walls and corrugated steel as honest industrial materials you can create the trendy Dwell look with paint and landscaping on the cheap. Compare this process with the expense of restoring a more exotic historic property in a tony neighborhood.

Art Yanez is a Los Angeles native and the son of immigrants. He’s also the principal of FSY Architects. He purchased three contiguous parcels in Frogtown and created a campus for his firm.

The space incorporates pre-existing industrial warehouses as well as new construction with shops and offices that are now rented for supplemental income. The architecture firm’s own offices are currently oversized to accommodate anticipated expansion as business continues to ramp up. But construction is a cyclical industry, so the space can be subdivided and rented during future downturns.

The new building achieves the legally required off street parking standard as well as the fire marshal’s demand that a full size fire engine be able to drive around the entire structure in an emergency. The parking is convenient (this is Los Angeles after all), but the outdoor space does double duty as a plaza for human activities on occasion. Strings of cafe lights, movable furniture, potted plants, and people transform the place quickly and easily.

Part of FSY’s strategy was to create a place that would activate the entire community, not just a building containing offices. The initial concept involved repurposing shipping containers and pressing them into service as small shops. The building code wouldn’t permit that so a stick built version mimics the container look and scale. Actual containers are parked in back and are used for low cost storage. Local artists were invited to install distinctive motifs for the exterior of the corner cafe. All of this was as-of-right construction within the established city code.

For the last century the Los Angeles River has been a concrete industrial drainage canal sealed off by barbed wire fences and cinder block walls. Most people in LA have no particular relationship to the “riverfront.” But that’s changing as city officials have announced a billion dollar program to transform the river into a ribbon of green and blue public amenities lead by none other than starchitect Frank Gehry.

The success of small infill developments in Frogtown along with the city’s plans to transform the river have attracted large scale production developers. Previously ignored sites began to sprout upscale apartment buildings and condo complexes on dead end streets at the river’s edge.

This process was viewed with scorn by existing property owners and community organizers who haven’t forgotten how their families were bulldozed to make way for Dodgers Stadium. So they lobbied for new regulations to make it harder to build anything new and to work around the perception that political figures are corrupt and on the take for developer’s money. The new regulations now make projects like Art Yanez’s building non-conforming and subject to special review processes for height, bulk, and so on.

The result is that now only very small projects can be built as-of-right, and only very large and expensive projects can overcome the newly implemented regulatory hurdles. All the incremental in-between projects that might have been built are now much less viable and far more expensive to push through. This is what land use policy actually looks like on the ground.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He's a member of the Congress for New Urbanism, films videos for faircompanies.com, and is a regular contributor to Strongtowns.org. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

Top photo: John Sanphillippo

Were Urban Freeways a Good Idea?

Thu, 11/03/2016 - 21:38

It’s almost a truism in urbanist circles that construction of urban freeways was a bad idea.

Indianapolis Monthly magazine takes a somewhat more charitable view in its retrospective on the 40th anniversary of the completion of the downtown “inner loop” freeway.

"But even before its grand opening, the inner loop—31 miles of interstate within I-465, built at a cost of nearly $300 million—had begun paying downtown dividends. Real estate values around the superhighway increased in the early 1970s, reversing a 35-year decline, and Mayor Hudnut also credited the road with stimulating such projects as the Hilton Hotel, the Indiana National Bank building, and the $150 million expansion of Eli Lilly & Co.

Hudnut predicted the new freeway would spur 20,000 new jobs, and state legislators embraced the spirit: In 1973, when a federal reimbursement slowdown threatened to add 10 years to its completion date, they fronted the money for the last leg of I-65/I-70."

The conventional wisdom is that downtown freeways were unmitigated disasters. It says they destroyed vast tracts of urban neighborhoods, with a racist targeting of black ones, then remained as huge barriers to redevelopment.

The Indy Monthly article acknowledges the downsides of the construction:

"But little relief awaited the neighborhoods that were carved up for the inner loop. The project displaced a total of 17,000 residents, including 6,000 from Fountain Square (one-fourth of the population).

Linda Osborne, owner of Arthur’s Music Store, remembers Fountain Square as a vibrant full-service community during the 1950s and early ’60s. “There were theaters, grocery stores, shoe stores—all the things you have in a small town,” says Osborne, whose family business opened in 1952. Interstate construction, however, dug a wide channel that isolated Fountain Square from downtown. Then as now, a Virginia Avenue bridge carried traffic over the chasm, but the commercial district soon tanked, Osborne says."

I previously posted an article documenting the destruction in Fountain Square. It features pictures from Historic Indianapolis, including this one showing the scale of the destruction.

I don’t have Fountain Square’s demographics at the time, but what evidence I do have suggests it was a largely white community, which it remains to this day. So in this case the place with the most destruction wasn’t a minority area.

Indy Monthly also points out the example of downtown Ft. Wayne. That city decided to go with a bypass option rather than a downtown alignment. The result was that they did indeed prevent neighborhoods from being destroyed, but those neighborhoods and the city’s downtown severely declined anyway. While there are some interesting things going on downtown Ft. Wayne to be sure, it’s unarguable that Indy’s downtown is on a completely different plane of development, though to be sure Indy is a much larger city.

In fact, this is the pattern we see. Urban decline happened pretty much everywhere, urban freeway or no. When there’s a downtown freeway to blame, people do that. Where there’s not, people blame the bypass. Hence most attributing of blame for decline to urban freeways is simply incorrect.

Indy Monthly argues that the freeway system provided for convenient access to downtown. Without that access. businesses would have fled, it would be impossible to host large events, etc.

There is something to this, I think. If there were no freeway access to downtown Indianapolis, it seems likely it would be a much diminished urban center. Keep in mind, there was limited transit access and no real prospect of creating it.

But we should separate two things, the freeways that provide access to downtown and the ones that run through it. It’s certainly possible that freeway spurs could have been built into the center of the city without building them as through-routes. This is the idea behind much of the boulevarding advocacy movement.

Twice within the last decade, the state implemented multi-month closures of the Indianapolis inner loop to through traffic. This was a good real world test of whether it was needed at all.

I wasn’t living there at the time but did do some driving around rush hour during one of the closures. The best alternate route for through traffic is to use I-465 to the south. This did get heavily congested, suggesting that this road would need to be widened prior to removing the inner loop. Some folks did say some surface routes near downtown were more congested during rush hour. But there didn’t seem to be any show-stoppers to permanent closure.

In my view, removal of the inner loop is feasible, though highly unlikely to ever occur. But it goes to show that the benefits of freeway access to downtown could have been implemented in ways that were less invasive, using freeway spurs and boulevard distributors. In this scenario, the inner loop itself would no longer be a barrier, and the demolition associated with its construction could have been largely avoided. The freeway spurs could have been build with lower capacity, since no through traffic need be designed for. Some interchange complexes would have been eliminated.

Removing or never building the inner loop would indeed likely add to peak of the peak congestion. The extent to which this dominates local thinking is hard to overstate. It’s revealing that the biggest source Indy Monthly used for quotes was Bill Benner, a sports columnist, and sports and events loom large.

"To fully appreciate Indy’s middle-aged expressway, imagine 65,000-plus NFL fans spilling out of Lucas Oil Stadium and heading home on the stoplight-laden likes of Meridian Street, Washington Street, Kentucky Avenue, and other prime thoroughfares of yesteryear. Or don’t imagine it—because without this key piece of infrastructure, there might never have been a Lucas Oil Stadium.

“It was a series of dominoes,” Benner recalls. “Without the interstate, it would have really held back downtown development. So maybe you don’t have the Hoosier Dome, or the Indianapolis Colts, or the Super Bowl. And maybe you don’t have Circle Centre or Victory Field.”

Designing a transport system around sports event peaks, particularly low-frequency ones like NFL home games, illustrates the Faustian bargain Indianapolis made to revive its downtown.

Indianapolis made its downtown America’s most friendly to major events. So you can get people to and from the Super Bowl the one time the city hosts it. (I would suspect getting people to and from the Indianapolis Motor Speedway for so many decades powerfully shaped this mode of thinking).

But the design of the transport system is very hostile to almost everything else, whether that be residential uses or pedestrian access. This has changed somewhat with the Cultural Trail, Georgia St. and others. But to truly change the game would require a major change in psychological orientation to be able to care less about peak of the peak congestion after Colts games and more about the average ordinary experience of the city. I suspect a similar dynamic is at play in many other places.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Photo: By reddit user MikeSanborn. Cf. https://www.reddit.com/r/indianapolis/comments/3jx7n5/my_favorite_view_o... (https://imgur.com/oJLlvTS) [CC BY 4.0], via Wikimedia Commons

Canada’s Middle-Income Housing Affordability Crisis

Wed, 11/02/2016 - 21:38

The Canadian Mortgage and Housing Corporation (CMHC) has issued a “red warning” for the entire housing market in Canada.” According to CMHC the red warnings are due to “strong evidence of problematic conditions for Canada overall. Home prices have risen ahead of economic fundamentals such as personal disposable income and population growth. This has resulted in overvaluation in many Canadian housing markets.”

This pattern has been present  in Canada for at least a decade. This was the subject of a policy report authored by Ailin He, a PhD candidate in economics at McGill University (Montréal) and me (Canada’s Middle-Income Housing Affordability Crisis), which was published by the Frontier Centre for Public Policy in Winnipeg. The report covered all census 33 metropolitan areas and two smaller census agglomerations.

The Executive Summary (adapted) and selected charts from Canada’s Middle-Income Housing Affordability Crisis are reproduced below.

Canada has a serious middle-income housing affordability crisis. Canada’s house prices have grown nearly three times that of household income since 2000. This contrasts with the stability between growth in house prices and household income during the previous three decades. These house-price increases have raised serious concerns at the Bank of Canada and at international financial organizations such as the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF).

This public policy report examines overall housing affordability in 35 housing markets, including all 33 CMAs and two census agglomerations (Section 1).

Higher house prices reduce the standard of living and constrain economic growth. Housing affordability is analyzed using indicators with comparisons between housing markets and within individual housing markets over time. Price-to-income multiples are used. Higher house prices mean less home buyer discretionary income (the amount left over after paying for necessities such as housing, food, clothing and transportation). Households have less income available for purchasing other goods and services, which can constrain economic growth and job creation. Moreover, less discretionary income translates into lower standards of living (Sections 1.1 and 1.2).

There was serious deterioration in middle-income housing between 2000 and 2015. This analysis shows that house prices rose faster than income in each of the 35 markets. The largest losses in housing affordability occurred in the six markets with a population of more than one million (Calgary, Edmonton, Montréal, Ottawa-Gatineau, Toronto and Vancouver), where house prices rose on average 3.3 times that of household income. More alarmingly, house prices rose more than four times household income in Vancouver and Toronto. In the five metropolitan areas with between 500,000 and one million residents (Hamilton, Kitchener-Waterloo, London, Québec and Winnipeg), house prices rose 3.2 times that of household income. Even in the smaller markets, house prices rose on average by at least double that of household income (Section 2).

Substantial mortgage affordability losses could occur with the expected interest increases. Should mortgage interest rates rise by 2020 as projected by The Conference Board of Canada, approximately 800,000 fewer households will be able to qualify for a mortgage on an average-priced house, all else being equal. This could have an impact sooner than expected, since many Canadian mortgages require renewing every five years (Section 3).

Higher house prices have made it more difficult for middle-income households to afford the housing that Canadians have preferred for decades. Higher house prices appear to have been a principal factor in a trend toward smaller houses and condominiums across Canada between 2001 and 2011. This shift is most evident in Vancouver and Toronto, where housing markets also have the most-restrictive land-use regulation (Section 4).

Restrictive land-use policy is associated with housing affordability losses. International economic literature associates more-restrictive land-use regulation with diminished housing affordability. The largest housing affordability losses have occurred in metropolitan areas (markets) that have adopted urban containment land-use strategies, which severely limit the land that can be used for building houses on and beyond the urban fringe. Consistent with basic economics, this reduction of land supply is associated with rising land prices, which lead to higher house prices. Without the substantial reform of restrictive land-use policies, housing affordability is likely to continue deteriorating (Section 5).

Higher house prices impose adverse social and economic consequences. Higher house prices are associated with increased rates of internal migration out of higher-cost markets, increased inequality, overcrowding, the greater public expenditure that is required to support low-income housing and losses to the economy (Section 6).

Solving the middle-income housing affordability crisis will require policy reforms. There is considerable evidence that restrictive land-use policies are associated with significant losses in housing affordability in Canada as is the case elsewhere. Metropolitan areas with restrictive land-use policy should undertake reforms aimed at improving housing affordability. There should be a moratorium on the adoption of urban containment policy where it is not yet in place. Concerns have been expressed about the potential for high house prices and high household debt to complicate the ability of central banks (such as the Bank of Canada) to perform their monetary policy responsibilities.  Conclusion:  that middle-income housing affordability in Canada is a profound social and economic crisis that warrants serious and concentrated public policy attention (Section 7).

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Photograph: Calgary (by author)

The Cities Where Your Salary Will Stretch The Furthest 2016

Tue, 11/01/2016 - 21:38

When Americans consider a move to another part of the country, they sometimes are forced to make a tough choice: should they go to a city with the best job opportunities, or a less economically vital area that offers a better standard of living, particularly more affordable housing? However,  there are still plenty of metropolitan areas in the U.S. where you can get the best of both worlds.

Center for Opportunity Urbanism senior fellow Wendell Cox has developed a set of rankings that identify metropolitan areas where salaries are relatively high relative to costs, and you get more for your paycheck. Our list is geographically and demographically diverse, both in terms of the top 20 and the places closest to the bottom.

The COU Standard of Living Index takes the 2015 mean pay per job in the 106 metropolitan statistical areas with more than 500,000 population and adjusts it by cost of living. Metro areas that have a large proportion of high-wage jobs tend to do best, such as San Jose, Calif., and Houston. The biggest differences in terms of cost of living generally have to do with housing; costs for goods varied by 23 percent and for services by 35 percent in 2014 across the metropolitan data, but for rents the differential between the most and least expensive metro areas is 194 percent and, for housing purchased in 2014, a remarkable 775 percent. The composite cost of living index underlying the COU Standard of Living Index is developed from a blend of annual rent as well as home ownership costs for prospective home buyers.

I have divided the top and bottom rankings into four basic groups: expensive but worth it; moderately priced but still high income; expensive but so costly as to  be economically barely worth it; and, finally, areas that are cheap, but not for the right reasons.

Expensive, But Worth It

There are several high-cost areas that do very well in this ranking, largely because they offer high incomes to match. The metro area with the highest annual wage when adjusted for cost of living is San Jose, the center of Silicon Valley. The cost of living there is 63 percent higher than the national average, the highest in the nation, but with the highest nominal pay per job at $112,300 ($27,000 above the next best), the metro area still ends up with the highest adjusted paycheck of $68,850.

Four other high-cost areas also make our top 10. Two are in Connecticut: No. 4 Bridgeport-Stamford, where the cost of living is 45 percent above the national average, and No. 5 Hartford, where costs are 15 percent above the national average. But higher wages — $85,400 for Bridgeport and $62,600 for Hartford — give residents the buying power to absorb those costs, and places these metros areas high on the list.The other two are No. 6 Boston and 10th-ranked Seattle.

One common thread that helps these metro areas overcome high costs is a high concentration of jobs in better paying fields such as technology and business and professional services.

Opportunity Cities: Less Expensive And Economically Vital

The other five top cities in our Standard of Living index fit a very different mold. These are what may be seen “opportunity cities,” where there are relatively high wages and somewhat low costs. If the successful blue cities can be seen as something of “gated communities” for well-educated, largely white and Asian residents, these cities offer a higher standard for a broader and often more diverse population.

The epitome of opportunity cities, Houston, takes second place. Like San Jose, Houston has a strong concentration of engineering talent and STEM jobs, many of them related to the energy industry. The average annual paycheck in America’s Energy Capital is $65,000, well above the national average, and with a cost of living barely 5 percent above the usual, it’s only eroded slightly to an adjusted worth of $62,300.

The other cities in our top 10 tend to feature high growth in STEM employment but moderate to low costs. They include No. 3 Durham, N.C., located in the tech-rich Research Triangle area, No. 7 Atlanta and No. 8 Detroit. In all these areas the cost of living is around the national average, but salaries are higher. You may be surprised by Detroit, but this ranking looks at the total metro area, which is in much better shape than the core city. With good-paying jobs, many connected to the revived auto industry, the Detroit metro area is in far better shape than is commonly suggested.

Of course, the Motor City may lack the glamour and stratospheric wages of Silicon Valley, but its far lower costs offer a surprising high standard of living. Nor is it the only Rust Belt city that ranks highly. Consider No. 13 Cincinnati, No. 15 Pittsburgh, No. 16 Cleveland and No. 19 St. Louis. In the future it may make sense for more individuals and companies to take a second look at these areas.

Expensive, And Not Producing Enough Good Jobs To Make Up For It

Not all expensive cities are worth the cost, particularly if you are considering a move. Take 89thplace San Diego and 97th place Los Angeles, two California cities with idyllic climates and dynamic histories, but that now have become too expensive to offer a high standard of living for anyone not making far more than the local average salary.

The tragedy for these Southern California metro areas is that, while they have seen a rapid escalation in housing prices and rents, they have not been able to take a meaningful part in the tech boom that has driven up wages in San Jose and the Bay Area. San Diego’s mean wage of $58,000 might seem more than respectable, but with a cost of living 36 percent above the national average, it reduces the real pay in this attractive coastal city to a more modest $42,700.

Most critical, however, is the clear downshift in the standard of living in my adopted home region, greater Los Angeles. Once L.A. was full of high-wage jobs, many of them tied to aerospace and manufacturing, as well as high-end business services. Those industries have been eroding for well over a decade, replaced, in large part, by lower-wage positions in hospitality, retail and health. Now it is one of the poorest big cities in America, yet one with extraordinarily high costs, particularly for housing. The cost of living in LA is 46 percent above the national average, driving real wage from a respectable nominal average $59,000 to a dismal adjusted $40,400.

Left Behind

Most of the metro areas at the bottom half of our list are smaller, with barely a million people or less. Many of these are in high-cost regions, notably our last-place finisher, Honolulu. In the Hawaiian capital, the average paycheck is $48,800 but when you factor in our cost of living modifier, the real income falls to $33,900. That’s partly due to a lack of developable land that drives up property prices and also due to the high proportion of necessities that are imported, including food and oil.

This pattern is repeated by many areas in our bottom 10, including the California cites Stockton (94th), Fresno (98th), Riverside-San Bernardino (102nd) and Santa Rosa (105th). In all these cases, incomes tend to be  modest, but costs, particularly for housing, are higher than their economies would logically warrant. Much of the “credit” here may well belong to California’s restrictive land use and housing policies, and generally poor climate for manufacturing, agriculture and other blue-collar businesses.

What does this tell us? Metro areas that want  to improve in these rankings need to focus not just on developing their economies, but also policies that keep costs competitive with other regions.



Center for Opportunity Urbanism Standard of Living Index: 2015 Rank (of 106) Metropolitan Area Annual Pay Per Job, Adjusted by COU CoL Index 1 San Jose, CA $68,855 2 Houston, TX $62,305 3 Durham, NC $59,526 4 Bridgeport-Stamford, CT $58,704 5 Hartford, CT $57,050 6 Boston, MA-NH $56,979 7 Atlanta, GA $56,647 8 Detroit,  MI $56,421 9 Dallas-Fort Worth, TX $55,529 10 Seattle, WA $55,123 11 Charlotte, NC-SC $55,122 12 Washington, DC-VA-MD-WV $54,525 13 Cincinnati, OH-KY-IN $54,265 14 Birmingham, AL $54,256 15 Pittsburgh, PA $54,168 16 Cleveland, OH $54,059 17 Minneapolis-St. Paul, MN-WI $53,668 18 Denver, CO $53,526 19 St. Louis,, MO-IL $53,519 20 Nashville, TN $53,144 21 Des Moines, IA $53,115 22 Kansas City, MO-KS $53,009 23 Austin, TX $53,002 24 Memphis, TN-MS-AR $52,911 25 Columbus, OH $52,319 26 Philadelphia, PA-NJ-DE-MD $51,912 27 Fayetteville (Bentonville), AR-M $51,876 28 San Francisco, CA $51,723 29 Baton Rouge, LA $51,492 30 Chicago, IL-IN-WI $51,425 31 Raleigh, NC $50,980 32 Tulsa, OK $50,798 33 Indianapolis. IN $50,781 34 Akron, OH $50,578 35 Harrisburg, PA $50,483 36 Louisville, KY-IN $50,390 37 Richmond, VA $50,053 38 Oklahoma City, OK $50,018 39 New York, NY-NJ-PA $49,760 40 New Orleans. LA $49,739 41 Albany, NY $49,578 42 Phoenix, AZ $49,403 43 Sacramento, CA $49,323 44 Portland, OR-WA $49,262 45 Dayton, OH $49,203 46 Winston-Salem, NC $49,079 47 Knoxville, TN $49,060 48 Milwaukee,WI $49,022 49 Baltimore, MD $48,771 50 Toledo, OH $48,705 51 Wichita, KS $48,608 52 Melbourne (Palm Bay), FL $48,230 53 Augusta, GA-SC $48,065 54 Omaha, NE-IA $47,956 55 San Antonio, TX $47,910 56 Little Rock, AR $47,900 57 Chattanooga, TN-GA $47,877 58 Jacksonville, FL $47,810 59 Madison, WI $47,510 60 Rochester, NY $47,486 61 Grand Rapids, MI $47,459 62 Salt Lake City, UT $47,368 63 Syracuse, NY $47,239 64 Greensboro, NC $47,013 65 Greenville, SC $46,762 66 Buffalo, NY $46,500 67 Columbia, SC $46,437 68 Tampa-St. Petersburg, FL $46,410 69 Allentown, PA-NJ $46,141 70 Springfield, MA $45,585 71 Providence, RI-MA $45,323 72 Worcester, MA-CT $45,236 73 Jackson, MS $45,196 74 Colorado Springs, CO $45,017 75 New Haven CT $44,848 76 Charleston, SC $44,613 77 Miami, FL $44,589 78 Orlando, FL $44,527 79 Virginia Beach-Norfolk, VA-NC $44,290 80 Las Vegas, NV $44,265 81 Spokane, WA $43,770 82 Albuquerque, NM $43,486 83 Tucson, AZ $43,484 84 Bakersfield, CA $43,464 85 Boise, ID $43,103 86 Scranton, PA $43,082 87 Lakeland, FL $42,907 88 Youngstown, OH-PA $42,766 89 San Diego, CA $42,716 90 Lancaster, PA $42,227 91 Modesto, CA $42,034 92 Portland, ME $41,902 93 Cape Coral-Fort Myers, FL $41,547 94 Stockton, CA $40,512 95 Provo, UT $40,473 96 Sarasota (North Port), FL $40,434 97 Los Angeles, CA $40,432 98 Fresno, CA $40,226 99 El Paso, TX $40,074 100 Oxnard, CA $40,049 101 Ogden, UT $39,966 102 Riverside-San Bernardino, CA $38,598 103 Daytona Beach (Deltona), FL $38,242 104 McAllen, TX $38,182 105 Santa Rosa, CA $35,370 106 Honolulu, HI $33,903

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by w:Flickr user Bill Jacobus [CC-BY-2.0], via Wikimedia Commons

Job Creation Under the Next President

Mon, 10/31/2016 - 21:38

Retraining the employed and the unemployed for higher value-added skills is now more important than simply adding to the number of jobs.

Coal and steel magnate Wilbur Ross, a senior policy advisor to the Trump campaign, has just made in the pages of the Wall Street Journal an economic prediction that looks mathematically unattainable.

Writing with Professor Navarro of UC – Irvine, Mr. Ross forecast that policies enacted by a President Trump would lead to the creation of 25 million new jobs, ostensibly over an eight year period:

Donald Trump will cut taxes, reduce regulation, unleash our abundant energy and eliminate our trade deficit through muscular trade negotiations that increase exports, reduce imports and eliminate cheating. These policies will double our economic growth rate, create 25 million new jobs, boost labor and capital incomes, generate trillions of additional tax revenues and reduce debt as a percentage of GDP.

To evaluate the 25 million figure, remember that new job creation during the booming Ronald Reagan and Bill Clinton two-term presidencies amounted to 16.1 million and 22.5 million, respectively. Given the growth of the population, you could say that a 25 million target compares reasonably to these figures. It is optimistic but, on the face of it, not outlandish.

That is, until you scrutinize the underlying demographics. A new job requires not only an open paid position but also a person to occupy this position. In order to have 25 million new jobs, we need 25 million people to fill these jobs. So does the US even have 25 million people who would be available in the next eight years? It doesn’t seem like we do.

Now as at any time, there are three main sources of new workers:

Increase in working-age population: During the 1980s decade (which includes the two Reagan terms), the population aged 20 to 64 grew by 18.5 million. During the 1990s (including the two Clinton terms), it grew by 19.1 million. In the coming decade ending in 2025 by contrast, it will only grow by a much smaller 2.6 million.

What explains this decline in growth for this segment? Simply put, there were many more new babies in the 1960s than in the 1910s, resulting in strong growth in the 1980s. But there were only a few more babies in the 2000s than in the 1950s, resulting in lower growth in the 2016-25 decade. Put another way, a rising number of boomers are turning 65 every year and exiting the 20-64 age bracket. This means that, unlike in the 1980s and 1990s, a large percentage of people going into these 25 million jobs will have to come from other sources.

Immigration: Assuming an annual influx of one million immigrants (green card holders), we estimate another 7 new million workers for the decade, and a prorated 5.6 million over eight years.

The idle and unemployed: The current official unemployment rate is hovering around 5%. However, the U6 measure of unemployment now stands at 9.7%, not far from its historical average. If we assume generously that U6 will drop by 3% towards its low of October 2000, there would be an additional 4.8 million people available for work.

Adding all these figures (and making adjustments from 10 to 8 years where needed), we see that there is still a shortfall of 12.5 million people, or half the 25 million needed to meet the new supply of jobs.

Keeping an open mind, we could speculate that an additional 12 or 13 million people, counting for example a large number of women and elderly, could decide to join or remain in the labor force. But this seems unlikely within the big economic boom described by Mr. Ross and Professor Navarro. If the economy will be doing that well, fewer spouses may choose to work and more people will retire early.

Finally, the next President could increase the number of immigrants to address the labor force shortfall. This decision would require doubling or tripling the number of visas and green cards awarded annually, a policy that runs against the grain of Trump campaign pledges.

To sum up, an optimistic level of job creation under the next President, whether Trump or Clinton, would be 12 to 15 million. But even this lower target will prove to be too ambitious if, as is widely anticipated, automation and the internet of things take over more job functions.

Further, because the marginal demand for jobs will be less than in the past, an effort to boost the supply looks not only ill-fated but also misdirected, like that of a general preparing to fight the last war. At this juncture of changing demographics and increased automation, it will be more important to upgrade jobs to higher value-added functions than to simply count the number of net new jobs. Bringing the old jobs back would in theory provide much needed relief to households that are struggling, but retraining these same workers for better jobs will ultimately lead to more favorable outcomes.

In this vein, investments in education and retraining seem more critical now than in the past. Rather than merely adding jobs, a more promising employment strategy for the next President would be to facilitate retraining programs for people who have not kept up with the economy because of outsourcing or other factors.

All this will probably be unconvincing to Mr. Ross and Professor Navarro who downplay the role of demographics in the economy and who believe that a sufficient amount of can-do spirit will overcome the facts of a hard-nosed analysis:

Some falsely assert that the U.S. and other developed countries have settled into a “new normal” of slower economic growth due to greater competition from developing countries and demographic changes beyond our control.

But to quote Mr. Trump’s running mate, Gov. Mike Pence, “People in Scranton know different. People in Fort Wayne know different.”

We shall see.

One clear fact remains however: the golden decades ending in 2005 were in part powered by a fast-growing population and a declining dependency ratio, two conditions that are now fading.

Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master's in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

Photo: neetalparekh

Real Estate Doesn’t Make an Economy

Sun, 10/30/2016 - 21:38

From Southern California to Shanghai and London, inflated real estate prices have evolved into a simulacrum for broader prosperity. In an era of limited income gains, growing inequality, political dysfunction and fading productivity, the conjunction of low interest rates and essentially free money for the rich and well-placed has sparked the construction of often expensive, high-density residential housing.

This heady period of rapid real estate asset inflation could soon be coming to an end, followed by a potentially nasty correction in high-density, high-cost, more urban core locations. Since the 2008 crash, centered in overpriced single-family housing, density has been the new mantra, a trend largely echoed in the media, academia and among the planning professions.

The notion that dense, expensive urban real estate would dominate the future rested on two assumptions. First, it was widely explained to developers that millennials would prefer to rent small apartments for the foreseeable future, padding the profits of the investor class. Second, it was assumed that money would continue to pour into elite Western cities from the newly rich of China, Russia, Latin America and the Middle East.

Today, both trends are diminishing. Millennials are getting older, and by 2018 more will be in their 30s — when most people seek out single-family homes — than in their 20s. We are already reaching “peak urban millennials,” as University of Southern California demographer Dowell Myers suggests, while the replacement generation, known as the “Z” or “plurals,” will be somewhat less numerous.

At the same time, high-end residential investors from the once booming BRICS countries — Brazil, Russia, India, China and South Africa — are, with the exception of India, now experiencing slower or negative growth. They are likely to be a far less reliable source of funds for high-end luxury housing.

Read the entire piece at the Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Mark Lyon -- Full Floor For Rent.

A Tour of The Bund in Shanghai

Fri, 10/28/2016 - 21:38

One of the great pleasures of China is a walk along the Bund promenade.

Shanghai’s Bund is one of China’s great tourist and historic sites. Its history lessons are from two distinctively different periods. All of this can be witnessed from the raised promenade along the west bank of the Huang Pu River, which separates the old Puxi (west of the river) commercial core of Shanghai from the new, iconic business district that has grown up in Pudong (east of the river). It is clear that the promenade at the Bund is a very popular local tourist attraction as well.

The Bund became a center of British commerce in the mid-19th century and remained a part of the Shanghai International Settlement (through a 1860s merger of the British and American concessions) until the beginning of World War II. Most of the buildings were built in the first quarter of the 20th century.

This article will provide a quick tour of the western style buildings in Puxi, behind the promenade and a few views of Pudong (the Lujiazui business district) across the river. The tour starts at the south end of the Bund and continues approximately 1.2 kilometers (0.75 miles) to Suzhou Creek, just beyond the north end of the Bund. The western buildings are located along Zhongshan East #1 Road, facing the Huang Pu. The promenade is between the buildings and the Huang Pu, across from which is the Lujiazui business district of Pudong. Generally, the names used for the buildings are the original or pre-World War II, though the there can be conflicting names. I would be pleased to be advised of any corrections.

Image 1 shows a broad sweep of the central Bund from the south to north. It includes the four most iconic buildings.

The Hong Kong and Shanghai Banking Corporation (HSBC) Building is the large domed building near the left of the picture. It was constructed in 1923 and served as the local branch of this UK bank until 1955, six years after the establishment of the People’s Republic of China. When the bank left, it ceded title to the Shanghai People’s Government, which used the building as its headquarters for some years. It is now the Shanghai Pudong Development Bank Building.

The Customs House is just to the north of the Shanghai Pudong Development Bank Building, with the tall clock tower was opened in 1927.

The Peace Hotel is farther north, with the green peaked tower. It was originally the Sassoon Hotel and was the north building of the hotel complex. It is now the Fairmont Peace Hotel. Across the street, is the south building of the Peace Hotel, now called the Swatch Art Peace Hotel.

The Bank of China Building is just to the north of the Peace Hotel. Construction began on the building in the mid-1930s and it was opened after the start of World War II, in 1942.

The illustrations start at the south end of the Bund, just north of the Pudong Ferry Terminal

Image 2: Asia Building

Image 3: Shanghai Club

Image 4: Union & Nish in Navigation Buildings

Image 5: Nishin Navigation & China Merchants Bank Buildings

Image 6: Great Northern Telegraph to HSBC Building

Image 7: Great Northern Telegraph & Bund #6

Between Bund #6 and the Hong Kong & Shanghai Bank Buildings, Fuzhou Road reaches Zhongshan Road. Fuzhou Road has been known for its bookstores, though there have been fewer in recent years.

Image 8: Original Hong Kong & Shanghai Bank (HSBC) Building, now Shanghai Pudong Development Bank.

Image 9: HSBC Bank & Customs House Buildings

Image 10: Customs House and buildings to the south

Image 11: Customs House

Image 12: Bank of Shanghai & Russo-Chinese Bank

Image 13: Russo-Chinese Bank, Bank of Taiwan (original name, Taiwan was occupied by Japan when built) and the North China Daily News buildings. The North China Daily News was the leading English newspaper of China until it closed at the beginning of World War II.

Image 14: Bank of Taiwan, North China Daily News & Chartered Bank

Image 15: North China Daily News Peace Hotel South Building, Peace Hotel (North) and Bank of China buildings

The Peace Hotel north and south buildings are across Nanjing Road opposite one another. Nanjing Road is an important shopping street, and a few more blocks inland becomes a pedestrian mall. It is also famous for offers from local students to join them in tea drinking ceremonies or at art exhibitions at which they claim to have work on display. This can be a costly experience and is not recommended.

Image 16: Peace Hotel (North) and Bank of China

Image 17: Peace Hotel (North) and Bank of China

Image 18: South from Peace Hotel (North) to North China Daily News

Image 19: Yokohama Specie Bank and Yangtze Insurance buildings

Image 20: Jardine Matheson, Yangtze Insurance, Yokohama Specie Bank and Peace Hotel (north and south buildings). Jardine Matheson was an early trading company that got its start in Guanghou (Canton) and Hong Kong.

Image 21: Glen Steamship Lines and Bank of Indochina

Image 22: North end of the historic bund buildings on Zhongshan Road (Glen Steamship Lines and Bank of Indochina).

Image 23: Waibaidu Bridge over Suzhou Creek, Broadway Mansions and Russian Consulate

Image 24: Central Bund, including HSBC, Customs House and North China Daily News buildings from the World Finance Centre. The Shanghai World Finance Center has an opening at the top and locals refer to it as the “bottle opener” for its resemblance (Image 33).

Image 25: Northern Bund, including North China Daily News, Peace Hotel, Bank of China and Jardine Matheson Buildings from the Shanghai World Financial Tower.

Images 26 to 28: Promenade views

Image 29: View of Pudong’s Lujiazui business district from the Bund promenade (across the Huang Pu). The Pearl of the Orient Tower is to the left. The tallest building, on the right, is the Shanghai Tower, second tallest building in the world (127 stories).

Image 30: Northern tip of Lujiazui business district from the promenade

There are a number of additional Western-style buildings that were a part of the International Settlement in Puxi. Many are on the East – West streets leading from Zhongshan Road as well as on some North – South streets, such as Sichuan Middle Road. Some buildings of the same era are located on Nanjing Road. The Park Hotel, located across the street from People’s Park was the tallest building in Asia when it was built in 1934 (Image 31), and may be the best known local hotel, along with the Peace Hotel, on the Bund.

The Bund is close to other interesting tourist areas. The Yu Garden dates to the 16th century and is the very architectural conception of China for some tourists. As Chinese as is its appearance, not much of Chinese cities looks like this. Yu Garden now hosts extensive shopping, as well as the Huxinting Teahouse (Image 32, at night).

The Bund sightseeing tunnel provides a short rail service from East Beijing Road (across the street from the Bank of China) under the Huang Pu to Lujiazui, near the Pearl of the Orient Tower. From there overhead walkways provide access to Lujiazui skyscrapers, include the three tallest (Image 33), which are virtually across the street from one another. These include the Shanghai Tower (second tallest in the world), the Shanghai World Financial Center and the shortest, the Jin Miao Tower, which is taller than the Empire State Building in New York and nearly as tall as the Willis Tower (former Sears Tower), in Chicago, the tallest in the world for a quarter of a century.

From here, it is a short walk to the ferry terminal for a short right to the south end of the Bund (Image 34), completing the circle tour that began with Image 2.

Finally, the Bund promenade is also a very well designed urban space that has become one of Shanghai’s most important public meeting spaces. It is well appointed with places to sit, relax or read a book. Like Le Jardine du Luxembourg in Paris and New York’s Central Park, there are few places to better spend a Saturday afternoon.

Photograph at Top: Central Bund (Hong Kong & Shanghai Bank and Customs House), by author

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

Erasing Anglo cultural heritage risks what makes our republic diverse

Thu, 10/27/2016 - 21:38

It’s increasingly unfashionable to celebrate those who made this republic and established its core values. On college campuses, the media and, increasingly, in corporate circles, the embrace of “diversity” extends to demeaning the founding designers who arose from a white population that was 80 percent British.

In this American version of Mao’s “Cultural Revolution,” which tried to eviscerate traces of China’s past, venerable buildings are being renamed, athletes refuse to stand for the national anthem and, on some campuses, waving the American flag is now considered a “microaggression,” while English students at Yale want to avoid reading the likes of Milton, Shakespeare and Chaucer.

Of course, some changes are justified. Asking anyone, particularly African Americans, to revere the Confederate flag or attend schools named after the founder of the Ku Klux Klan is, indeed, offensive. But in our zeal to address old wrongs, we may also be sacrificing the very things that have made this republic so attractive to millions from distinctly different backgrounds for the last two centuries.

Why we come here

Just to clear the air, I have not a single drop of British blood in me. The closest ties I have to what I consider my cultural and political home country come from my great uncle Simon, who served in Gen. Allenby’s Jewish brigade in World War I, and that my wife, born in Montreal, came into the world a subject of Her Majesty, Queen Elizabeth. Career wise, I did work for a think tank in London for several years.

But what ties most Americans to the founders is not race, but our embrace of a political and legal culture based on distinctly Anglo-Saxon ideas about due process, representative government, property rights and free speech. These proved infinitely superior to the divine right of czars, kaisers, emperors and other hereditary autocrats for generations of non-Anglo-Americans.

This system, always capable of amendment, has allowed waves of traditional outsider groups — African Americans, Latinos, women, Mormons, Jews and Muslims — to join the economic, political and cultural mainstream. In some cases, as in the case of President Obama, they have also secured the highest reaches in the national firmament.

Read the entire piece at the Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo: William Robert Shepherd [Public domain], via Wikimedia Commons

Suburban. Comma. Transit.

Wed, 10/26/2016 - 21:38

I explored the Orange Line Bus Rapid Transit (BRT) system that runs for eighteen miles across the San Fernando Valley in Los Angeles. The Valley is a profoundly suburban city-within-a-city and home to 1.8 million people spread out over 260 square miles. Attempts to upgrade public transit by the central authorities in LA proper have been fought tooth and nail by folks in the Valley and illustrate why transit just doesn’t work when the local culture doesn’t want it. I’m not sure why LA keeps pushing on this particular string.

Transit works best when one compact highly productive walkable neighborhood is connected to another compact highly productive walkable neighborhood. Manhattan or Hong Kong isn’t required. A plain vanilla Main Street with two and three story buildings works just fine.

Suburbia is the exact opposite. Everything is spread out and oriented around private space, leisure, and consumption. Public space is an afterthought and any hint of density is anathema. Transit is believed to attract “the wrong element.” If this is the kind of world these folks want to inhabit… I say walk away and let them all enjoy the Jiffy Lubes and drive-thru burger joints without transit.

This is the standard suburban environment with its sad begrudging crumbs of half assed bus service. It’s a monumental waste of scarce public funds to attempt to operate public transit here. The land use pattern and culture are in direct conflict with efficient cost-effective transit. And it’s punishing for the people who have no choice but to walk or take the bus: the young, the elderly, the infirm, and the poor.

Here’s how suburban communities typically deal with transit. To the extent that it’s tolerated at all the transit station is hidden away behind a row of self storage facilities and plumbing supply warehouses. The entrance is treated as if it were an office park. There’s an enormous amount of surface parking. The assumption is that people will drive to the bus or train station since transit is a bridge between the comforts of the private automobile and the necessary evil of commuting to a more congested urban destination.

The Park and Ride model of transit like this Metro stop in Chatsworth (the terminus of the Orange Line) is moderately acceptable to middle class suburbanites so long as the station is properly landscaped. Absolutely nothing can be built anywhere near the station. Loitering must be prevented at all costs. Theoretically it’s possible to walk to and from the station, but the location and design of the place ensure it isn’t a common practice.

I followed the entire route of the Orange Line and found the stations themselves are well designed, convenient, and efficient. The fully segregated busway disguised in a tunnel of greenery mean buses are never stuck in the same traffic that afflicts cars and trucks. The buses come frequently and predictably and travel is comfortable and fast. BRT simulates the benefits of a light rail system, but at a tenth the cost.

But each station was built in a spot that makes it unlikely that transit will live up to its full potential. This is the De Soto stop. The buses do a great job of getting passengers from one isolated station to another. This isn’t an accident. It’s the only set of arrangements the locals would tolerate – and the locals have a lot of lawyers. Transit is associated with the lower class and home owners here want no part of it. So they litigated for years until the proposed rail line was beaten back to a bus route and some decorative shrubbery that didn’t go anywhere too offensive.

Here’s the Balboa station. Abundant surface parking, plenty of landscaped strips, and a location that doesn’t infringe on nearby private property lets people drive to the bus. Unfortunately the effectiveness of good transit is negated by the barren surroundings. If you had access to a car and could drive to the bus… you wouldn’t really need the bus.

Here’s the Sepulveda station. Notice how the pattern repeats. In the Valley it’s now possible to take a highly effective bus trip from the Costco parking lot in Van Nuys to a strip mall a dozen miles away in Canoga Park. That’s progress of a sort since the BRT is so much better than traditional suburban bus service. But the public investment in infrastructure isn’t being complimented by the required private investment near any of the stations. That’s because the culture rejects the kind of infill development that would make the stations economically meaningful.

Bicycle and pedestrian paths parallel the BRT busway along many miles of the system. This allows people to get from Point A to Point B in a way that doesn’t rile up the locals quite as much as the proposed light rail did. Fenced in landscaped bike paths follow the suburban “Sunday in the park” model of leisure that’s at least borderline socially acceptable in the Valley. The fact that low income people also use the paths to peddle to work is an unfortunate and much lamented side effect. I noticed more than a few Spandexed guys on $4,000 bikes yelling at slow moving folks to get out of the way.

The eighteen miles of Bus Rapid Transit in the Valley cost $324 million dollars to construct. That’s $18 million per mile. Compare that to the recent $1.1 billion road improvement project on a ten mile stretch of freeway in the Valley. The freeway was already ten lanes wide so adding slightly better on and off ramps and tweaking the car pool lanes did exactly nothing to relieve traffic congestion. That’s $110 million dollars per mile. The same people who lament the waste of taxpayer money on transit think the city should be spending more to upgrade the roads.

Over the years community groups and their elected representatives in the Valley have created legislation that forbids the construction of light rail or the use of sales tax revenue to fund a subway. Other local groups created rules that mandated a fully underground subway system because they objected to surface or elevated rail lines in their neighborhoods. And the ubiquitous anti-infill and anti-density brigades continue as always.

Personally, I don’t see the point of fighting locals who don’t value transit. I say give this part of the city no transit at all. But also require the locals to fund their own road projects from their own immediate tax base as well. Actually, I would love to see things taken a step farther. Cut the Valley loose from the City of Los Angeles altogether as so many folks in the Valley have attempted to do for decades. Let the Valley keep its own tax revenue and pay for its own services and infrastructure as an independent city. And let Los Angeles be free to focus on projects that actually make sense in the coastal communities that actively want transit and more intensive development. If that means the region is less integrated as a result… I don’t see how things could be worse.

John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He's a member of the Congress for New Urbanism, films videos for faircompanies.com, and is a regular contributor to Strongtowns.org. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.

Corporate Mustard Showroom Helps Explain New York’s Retail Rent Crisis

Tue, 10/25/2016 - 21:38

The story of skyrocketing rents has two components: residential and commercial.

My New York neighborhood, the Upper West Side, features fairly stable residential rents, but commercial rents seem to have been soaring. This has caused the familiar angst over the loss of neighborhood businesses to the ubiquitous bank branches and drug stores.

But today even chains are getting priced out. The quintessential marker of gentrification, Starbucks, was recently forced to relocate in my neighborhood. They vacated their stores at 67th and Columbus when the landlord raised their rent to $140,550/month.

You’ve got to sell a lot of grande’s to cover that kind of rent check. How many businesses can realistically survive at this location? (Maybe none – it’s still vacant).

A block up the street, another store helps illustrate the forces sending retail rents through the roof. It’s the Maille “mustard boutique” at 68th and Columbus pictured above.

Maille is a supermarket brand of dijon mustard. It’s a product of Unilever, the Anglo-Dutch food and consumer products giant. You may not know Unilever, but you know their brands, including Hellman’s, Dove, Lipton, and even Ben and Jerry’s.

This particular location provides mustard tastings, and sells dijon in a variety of flavors not typically available. I believe they also have some vinegars. I was once needed some dijon and purchased a jar of their regular flavor for $7 – which is $3 more it sells for at the grocery store a few blocks away.  They apparently charge as much as $99 for a jar of black truffle mustard.

I don’t know what their monthly rent is. It’s a smaller, mid-block store than the former Starbucks location. Based on square footage equivalents, the rent would be somewhere around $30,000 a month.

Can you really sell enough mustard to cover that kind of rent (to say nothing of the “mustard sommelier” and other employees they have on staff and all the other costs of operations)? I see people in the store, but it’s never crowded. And it’s rare to see someone walking out with a shopping bag.

It strikes me as dubious that this store could even break even, much less turn a profit that would earn the required return on invested capital.

But ultimately it doesn’t matter if this store makes money or not. The rent isn’t even a rounding error to Unilever and can easily be justified as a marketing expense.

If there’s one thing it’s not hard to find in this world, it’s gourmet mustard. This neighborhood needs a corporate mustard showroom like it needs a hole in the head.

But we have one anyway. And there’s actually a second location in the Flatiron. These are the only Maille stores in the US, save for what appears to be a popup going into a Connecticut mall.

You can tell a lot of amazing “only in New York” stories. But this is an example of a bad one. These showrooms may be exclusive to the city, but they put upward pressure on retail rents and make it harder for actual neighborhood serving businesses to make it. (This location was closed over the summer for a sidewalk replacement project and I was hopeful it wouldn’t reopen – alas, it was to be denied).

Multiply two Maille mustard showrooms by all the other major corporations who use NYC as a branding platform, and it’s easy to get a sense as to why retail rents are so high in Manhattan.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Photo: Maille mustard “boutique” on Columbus Ave at 68th St.

Can California Transition to Next Tech Wave?

Tue, 10/25/2016 - 07:47

The consumer technology boom, largely responsible for a resurgence in California’s economy after the tech wreck of 2001, seems to be coming to an end. The signs are widespread: slowing employment, layoffs from bell-weather social media companies, the almost embarrassing difficulty of finding buyers for Twitter, the absorption of Yahoo by Verizon and the acquisition by Microsoft of LinkedIn.

This is not to minimize the great things which have been accomplished over 15 years of massive investment in these technologies. Mark Zuckerberg founded Facebook in 2004, and is now worth some $55 billion, up $15 billion from last year. In 2015, more than 1 billion people globally used Facebook applications every single day. The “app economy” created by Steve Jobs and Apple is equally impressive. What would we have done with our free time if it were not for Farmville, Angry Birds and Pokemon Go?

The tech boom has changed the face of wealth in America. Tech oligarchs, mostly clustered in the Bay Area, which dominates some 40 percent of employment in search and web publishing, now account for one quarter of the wealth of the Forbes 400 richest Americans. This tilting of wealth is not going away, and may shape the business world for a generation.

Concentration and contraction

Overall though, the economic impact of these technologies has been limited. Google’s Alphabet Inc. and Facebook Inc. together employ fewer than 75,000 people, one-third fewer than Microsoft, worth only a fraction its value. Snapchat, the star of Silicon Beach, employs several hundred people, hardly enough to reverse a long-term decline in Southern California tech employment.

More troubling still are changes in the Bay Area tech culture. In its 1980s heyday, Silicon Valley was a Wild West of start-ups, new companies and ideas, and lots of jobs. Today, it resembles increasingly the cozy and fundamentally uncompetitive world of Detroit’s Big Three — Ford, Chrysler and General Motors. The Valley is increasingly dominated by a handful of companies — Google, Facebook and Apple — while conditions for startups, even well-funded ones, have deteriorated markedly.

Read the entire piece at The Orange County Register.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Marshall Toplansky is Senior Advisor to Chapman University in the area of Data & Analytics, as well as adjunct faculty member at the Argyros School of Business and Economics. Formerly Managing Director of KPMG’s national center of excellence in Data & Analytics, Marshall co-founded big data company Wise Window, a pioneer in analyzing social media, blogs and news stories to track and predict business and political trends. Marshall is Chairman of the Cicero Institute, a strategy and research institution in Salt Lake City, Utah. He is past Managing Director of the Harvard Business School Association of Orange County, and was elected to the Computing Industry Hall of Fame for his role in creating the industry’s largest technical service certification program, A+, which has certified more than 3 million computer technicians worldwide.

Trump Will Go Away, but the Anger He’s Stirred Up Is Just Getting Started

Sun, 10/23/2016 - 21:38

For progressives, the gloating is about to begin. The Washington Monthly proclaims that we are on the cusp of a “second progressive era,” where the technocratic “new class” overcomes a Republican Party reduced to “know-nothing madness.”

To be sure, Trump himself proved a mean-spirited and ultimately ineffective political vessel. But the forces that he aroused will outlive him and could get stronger in the future. In this respect Trump may reprise the role played another intemperate figure, the late Senator Barry Goldwater. Like Trump, Goldwater openly spurned political consensus, opposing everything from civil rights and Medicare to détente. His defeat led to huge losses at the congressional level, as could indeed occur this year as well.

Goldwater might have failed in 1964, but his defeat did not augur a second New Deal, as some, including President Lyndon Johnson, may have hoped. Instead, his campaign set the stage for something of a right-wing resurgence that defined American politics until the election of President Obama. Pushing the deep South into the GOP, Goldwater created the “Southern strategy” that in 1968 helped elect Richard Nixon; this was followed in 1980 by the victory of Goldwater acolyte Ronald Reagan.

History could repeat itself after this fall’s disaster. People who wrote off the GOP in 1964 soon became victims of their own hubris, believing they could extend the welfare state and the federal government without limits and, as it turned out, without broad popular support. In this notion they were sustained by the even then liberally oriented media and a wide section of the “respectable” business community.

Three decades later a similar constellation of forces —- Hollywood, Silicon Valley, Wall Street—have locked in behind Hillary Clinton. But it is the transformation of the media itself both more ideologically uniform and concentrated more than ever on the true-blue coasts, that threatens to exacerbate Progressive Triumphalism. In this election, notes Carl Cannon, no Trump fan himself, coverage has become so utterly partisan that “the 2016 election will be remembered as one in which much of the mainstream media all but admitted aligning itself with the Democratic Party.”

 Progressive Triumphalism may lead the Clintonites to believe her election represented not just a rejection of the unique horribleness of Trump, but proof of wide support for their favored progressive agenda. Yet in reality, modern progressivism faces significant cultural, geographic, economic and demographic headwinds that will not ease once the New York poseur dispatched.

Successful modern Democratic candidates, including President Obama and former President Clinton, generally avoid openly embracing an ever bigger federal government. Obama, of course, proved a centralizer par excellence, but he did it stealthily and, for the most part, without the approval of Congress. This allowed him to take some bold actions, but limited the ability to “transform” the country into some variant of European welfare, crony capitalist state.

Hillary Clinton lacks both Obama’s rhetorical skills and her erstwhile husband’s political ones. Her entire approach in the campaign has been based on creating an ever more intrusive and ever larger federal government. Even during Bill Clinton’s reign, she was known to be the most enthusiastic supporter of governmental regulation, and it’s unlikely that, approaching 70, she will change her approach. It seems almost certain, for example, that she will push HUD and the EPA to reshape local communities in ways pleasing to the bureaucracy.

Yet most Americans do not seem to want a bigger state to interfere with their daily life. A solid majority—some 54 percent—recently told Gallup they favor a less intrusive federal government, compared to only 41 percent who want a more activist Washington. The federal government is now regarded by half of all Americans, according to another poll by Gallup, as “an immediate threat to the rights and freedoms of ordinary citizens.” In 2003 only 30 percent of Americans felt that way.

Nor is this trend likely to fade with time. Millennials may be liberal on issues like immigration and gay marriage, but are not generally fans of centralization, fewer than one-third favor federal solutions over locally based ones. 

Due largely to Trump’s awful persona, Hillary likely will get some wins in “flyover country,” the vast territory that stretches from the Appalachians to the coastal ranges. In certain areas with strong sense of traditional morality, such as in Germanic Wisconsin and parts of Michigan, notes Mike Barone, Trump’s lewdness and celebrity-mania proved in the primaries incompatible with even conservative small town and rural sensibilities, more so in fact than in the cosmopolitan cores, where sexual obsessions are more celebrated than denounced.

Yet Trump’s strongest states, with some exceptions, remain in the country’s mid-section; he still clings to leads in most of the Intermountain West, Texas, the mid-south and the Great Plains. He is still killing it in West Virginia. This edge extends beyond a preponderance of “deplorables” and what Bubba himself has referred to as “your standard redneck.”

Exacerbating this cultural and class discussion is the growing division between the coastal and interior economies. Essentially, as I have argued elsewhere, the country is split fundamentally by how regions makes money. The heartland regions generally thrive by producing and transporting “stuff”—food, energy, manufactured goods —while the Democrats do best where the economy revolves around images, media, financial engineering and tourism.

Energy is the issue that most separates the heartland from the coasts. The increasingly radical calls for “decarbonization” by leading Democrats spell the loss of jobs throughout the heartland, either directly by attacking fossil fuels or by boosting energy costs. Since 2010, the energy boom has helped create hundreds of thousands of jobs throughout the heartland, many of them in manufacturing. At the same time, most big city Democratic strongholds continued to deindustrialize and shed factory employment. No surprise then that the increasingly anti-carbon Democrats control just one legislature, Illinois, outside the Northeast and the West Coast.

Trump’s romp through the primaries, like that of Bernie Sanders, rode on the perceived relative decline of the country’s middle and working classes. For all her well-calculated programmatic appeals, Hillary Clinton emerged as the willing candidate of the ruling economic oligarchy, something made more painfully obvious from the recent WikiLeaks tapes. Her likely approach to the economy, more of the same, is no doubt attractive to the Wall Street investment banks, Silicon Valley venture capitalists, renewable energy providers and inner city real estate speculators who have thrived under Obama.

Yet more of the same seems unlikely to reverse income stagnation, as exemplified by the huge reserve army of unemployed, many of them middle aged men, outside the labor force. The fact remains that Obama’s vaunted “era of hope and change,” as liberal journalist Thomas Frank has noted, has not brought much positive improvement for the middle class or historically disadvantaged minorities.

The notion that free trade and illegal immigration have harmed the prospects for millions of Americans will continue to gain adherents with many middle and working class voters—particularly in the heartland. We are likely to hear this appeal again in the future. If the GOP could find a better, less divisive face for their policies, a Reagan rather than a Goldwater, this working-class base could be expanded enough to overcome the progressive tide as early as 2018.

The one place where the progressives seem to have won most handily is on issues of culture. Virtually the entire entertainment, fashion, and food establishments now openly allied with the left; the culture of luxury, expressed in the page of The New York Times, has found its political voice by identifying with such issues as gay rights, transgender bathrooms , abortion and, to some extent, Black Lives Matter. In contrast, the Republicans cultural constituency has devolved to a bunch of country music crooners, open cultural reactionaries and, yes, a revolting collection of racist and misogynist “deplorables.”

Yet perhaps nowhere is the danger of Progressive Triumphalism more acute. Despite the cultural progressive embrace of the notion that more diversity is always good, the reality is that our racial divide remains stark and is arguably getting worse. As for immigration, polls say that more people want to decrease not just the undocumented but even legal immigration than increase it.

And then there’s the mountain rebellion against political correctness. Relative few Americans have much patience with such things as “micro-aggressions,” “safe spaces,” the generally anti-American tone of history instruction whose adherents are largely concentrated in the media and college campuses. Fewer still would endorse the anti-police agitation now sweeping progressive circles. For some, voting for Trump represents the opportunity to extend a “middle finger” to the ruling elites of both parties.

Yet Trump’s appeal also represented something of a poke in the eye for the old-school religious right; Trump has actually helped the GOP by embracing openly gay figures like Peter Thiel. He may have caused many bad things, but the New Yorker succeeded, as no Republican in a generation, in making the holy rollers largely irrelevant.

The dangers for the Democrats lie in going too far in their secularism. As recent emails hacked by WikiLeaks have demonstrated, there is widespread contempt in left circles for most organized religion, most importantly for the moral teachings of the Roman Catholic Church, even under a more progressive Pope. Some Democrats may argue that irreligiosity will remain “in” among millennials. Yet this was also said about boomers and turned out to be wrong. Few sociologists in the 1970s would have expected a religious revival that arose in the next decade.

Simply put, millennials’ economic and cultural views could shift, as they become somewhat less “idealistic” and more concerned with buying homes and raising children. They could shift more the center and right, much as Baby Boomers have done.

No matter what happens this year, the battle for America’s political soul is not remotely over. Trump may fade into deserved ignominy and hopefully obscurity, but his nationalist and populist message will not fade with him as long as concerns over jobs, America’s role in the world, and disdain for political correctness remain. If Hillary and her supporters over-shoot their nonexistent mandate and try to impose their whole agenda before achieving a supportable consensus, American politics could well end up going in directions that the progressives, and their media claque, might either not anticipate or much like.

This piece first appeared in The Daily Beast.

Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class ConflictThe City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

Unsustainable solutions in the name of sustainability

Fri, 10/21/2016 - 21:38

The other day when I was riding my bike in Minneapolis crossing I-94 near Riverside I encountered a small townhome project built during the first (failed) green era under the Carter administration. It was built to showcase the future. One thing I've learned over the years building my own green homes is to not listen blindly to the experts who parrot others' ideas without thinking of the ramifications.

The world's first solar and earth-berm grass-roof townhome projects look like this today:

The original townhomes were built with earth covered roofs, with south facing solar panels for heating, and stored the heat collected over a long period of time in a room full of boulders. In 1983, I also owned an earth-berm solar heated home overlooking a lake in another part of town. Back then we thought, as the world freezes over (no global warming at that time), we would be nice and toasty in our 'energy-independent' homes powered by the sun itself. I went even further with a 10kW Bergey Wind Generator on a 100' tall tower. Heated by the sun and powered by the wind.

As you see in the above pictures, this experiment, which had the University of Minnesota involved (from what I remember), did not age well, nor did it work - at all! Gone are the solar panels that used to collect the heat positioned along the bare brown steel roof panels, and gone is grass roof that leaked. Banished is the room full of boulders to store the heat, which got so hot often windows needed to be opened to let in cold winter air, a problem my own solar home had also.

In 1983, my 4,000 square foot lake front solar home cost $120,000 and after tax credits, my Wind Generator cost $12,000. These smaller townhome units cost $80,000 at the time. One of the original residents who stayed over the decades experienced failed systems and lawsuits. They eventually sold their home – for $80,000! Quite the investment these fancy schmancy trendy homes. A Nigerian investment scheme via an E-Mail might have been less risky. You would think the first home owners would have been the architects and professors who were behind this project – but they themselves didn’t buy in, so there’s an indication that maybe the idea was not so terrific. This is the lesson I’ve learned, never take advice from anyone who is not willing to personally invest and take the same risk as they suggest to others in a new concept.

The Carter era was a troubled one, with energy widely predicted to be running out, and home mortgage rates as high as 18%. It’s hard to imagine there was any new housing being built, but some were. The initial residents of these townhomes (including myself) believed we were the smart ones, preparing for the energy costs skyrocketing and never having to worry. Hell could freeze over – but we wouldn’t.

That was then, but how does this apply to now, especially with an election just days away?

Hillary Clinton was promising half a billion solar panels on rooftops. OK, now picture the above bare rooftops – that’s how the roofs will look when the lifespan of those half billion heavily subsidized solar panels reach the end of their usefulness - in two decades. Where do you think most solar panels are made today? If you answered China, you deserve a star! And if a roof needs repair or replacement prior to the end of the panels’ lifespan, will the government subsidize the extra cost of repairs? Who will pay for cutting down the mature trees along the streets so that the sun can reach these panels? Oh, wait, you are supposed to keep those mature, beautiful, and value increasing shade trees? My bad. You think Obama Care was a terrible idea… just wait for the Hillary program, and the social engineering sure to follow, and sure to fail.

Trump? I imagine he’d be politically incorrect of course, calling those solar townhomes: ugly, hideously, awful useless, fat, blemished, blight… only unlike comments about women, he’d have a lot who would agree. I don’t know what a Trump administration would look like, but I’m pretty confident that it would not involve social engineering, nor have subsidies go to China or Mexico. I hope that if he had a wind or solar agenda, the panels would be produced here with a fair and proper competition to award the vendors with the best price/performance ratio and make them bond a 20 or 30-year fund if the mechanisms wear prematurely.

I hope that Trump or Clinton look into creating new programs that encourage private new developments or large scale redevelopment to have their own ground based solar gardens instead of the current wave of public investments of solar farms which have federal tax advantages but seem, at least to me, a questionable investment at best. They are even promoting these solar investments at the Best Buy store in Minnetonka, Minnesota with the promise of a consistent energy cost, but they require a 20-year commitment, even though the average home sells once every 6 years.

These are heavily subsidized by you, the tax payers. Some of these solar fields are supposed to supply the power companies themselves, for example Ivanpah in the California desert which was to supply power for PG&E. Ivanpah was a solar system using mirrors heating up over 170,000 panels to create steam, but failed to deliver the power the ‘experts’ promised. Besides killing thousands of birds, the 1.5 billion dollars of your tax money was pretty much a really bad investment – oopsie! A more viable alternative is to create a more localized system as part of new developments or large scale redevelopments.

Having a solar garden in a subdivision eliminates the problem with roof-top application, cleaning ice and snow off the panels, and streets could still have those shade trees. Each resident in the subdivision would have their share of the power and as technology improves, every resident would benefit from the latest technologies – be it solar, wind, or both. Such a Federal program does not exist – but should.

Top photo by https://pixabay.com/en/users/Kenueone-2397379/ [CC0], via Wikimedia Commons

Rick Harrison is President of Rick Harrison Site Design Studio and Neighborhood Innovations, LLC. He is author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable and creator of LandMentor. His websites are rhsdplanning.com and LandMentor.com

The House Prices are Too Damned High

Thu, 10/20/2016 - 21:38

In recent years, the plight of renters in a stagnant economy has been covered extensively. A book title incorporated the phrase “the rent is too damn high” (by Matthew Iglesias). The “Rent is Too Damn High Party” ran candidates in both city and state of New York elections. However, as bad as rent increases have been, more serious has been the escalation of house prices in the major metropolitan areas of the United States.

The Expected Nexus

Generally, a closely aligned relationship between trends in owner occupied and rented housing costs would be expected . This was certainly true until 1970 (Note 1).  In 1949 there was a 135 percent difference between the lowest median household value and the highest in the major metropolitan areas (Note 2). There was a similar 114 percent difference between the lowest gross rent and the highest (Figure 1). The house value variation was 18 percent higher than the rent variation.

By 1969 median house values varied a maximum of 134 percent from the lowest figure to the highest, a slight reduction from the 135 percent difference across the United States in 1949. Median gross rents varied a maximum of 107 percent among the same metropolitan areas, down modestly from 1949’s 114 percent (Figure 2). The house value variation was 25 percent higher than the rent variation.

The close relationship between the variations in house value and rent   was substantially broken in more recent decades. The 2015 American Community Survey shows that the variation among the major metropolitan areas in median house values is now a staggering 509 percent. The range between the least expensive and most expensive rental markets is a much smaller 158 percent (Figure 3). The difference in the variations between house value and rents across the nation rose to 222 percent, nearly nine times the 1969 figure.

Among the 10 metropolitan areas with the largest house price increases between 1969 and 2015, house values increases averaged 226 percent, nearly 350 percent more than the 65 increase in median rents, both figures inflation adjusted (Figure 4).

Of course, the hideously expensive California metropolitan areas are well represented, such as San Jose, San Francisco, Los Angeles and San Diego, among the most impacted. Even inland Sacramento, with significant housing affordability problems often over-shadowed by the Bay Area, is included. However, the huge differences extend to metropolitan areas outside California, such as Denver, Baltimore, Portland, Seattle and Boston.

The broken relationship between rent and house value could imply severe distortion in either the rental market or the owned housing market.

If the Rent is Too Damn Low

Distortions in the market could have prevented rents to retain their relationship with rising house values.

The implications are ominous. If the increase in rents had kept up with the increase in house values, the median gross rent in the San Francisco metropolitan area would have been approximately $3,700 per month, compared to the actual $1,600 per month in 2015. This would suggest that rents in 2015 were $2,100 below market in San Francisco. If this is true, then the rent is too damn low in San Francisco. The situation would be even worse down the road in San Jose where to keep up with house prices rents need to be $4,700 per month, $2,800 per month higher than market.

If the rental market is distorted, then rents are far too low in other metropolitan areas. In Los Angeles, San Diego, Baltimore, Sacramento and Portland rents are between $1,000 and $1,400 too low. Rents would be at least $800 below market in Boston, Seattle and Denver (Figure 5).

If House Prices are Too Damn High

If the owned housing market became distorted relative to the rental market between 1969 and 2015, then it is the rents that are too damn high.  If house values had risen at the same rate as rents, none of the 53 markets would have exceeded a price to income ratio of 5.0, which denotes is denoted as “severely unaffordable” in the Demographia International Housing Affordability Survey. This would be a substantial improvement, given that 11 major markets actually were severely unaffordable in 2015.

The 10 major metropolitan areas with the largest house value increases would have had hugely lower house prices. In San Jose, the median house value would have been equal to 3.2 years of median household income in 2015. This is considerably better than the actual 8.1 years, representing a 55 percent improvement. In San Francisco the median house value would have been equal to 3.5 years of median household income. This would be a 60 percent improvement on the actual 8.1 ratio in 2015 (Note 3). 

In Los Angeles, Portland, Sacramento and San Diego, house values would have been about 50 percent less if they had risen at the same rate as rents. In Boston, Denver and Seattle, house prices would have been between 40 percent and 45 percent less (Figure 6).

It’s the House Prices that are Too Damned High

Rents have risen faster than incomes, but nothing compared to the increase in house prices. Clearly, house prices are too damn high. The huge increase between 1969 and 2015 in house prices is an anomaly that has become extreme in recent decades. The ranges in rents (1949, 1969 and 2015) and the ranges in house values in 1949 and 1969 were far more similar and reflected a reality more in line with the stability that would be expected in non-distorted markets (Figure 7). Indeed, the large increase in the 1969-2015 rent range could well have been influenced upward by the virulent house price increase (reflected in land prices).

It seems likely that rents across the country are much more reflective of an efficiently operating market, while there are serious distortions in the owned housing market.

Finally, owner-occupied housing, especially detached housing, has been under assault by restrictive urban planning regulations since 1970. House prices are most out of alignment in markets where this has occurred, especially in California, Oregon, Washington, and the Denver, Baltimore and Washington, DC metropolitan areas. More often than not, these regulations have evolved into urban containment policy (Note 4), which draws arbitrary lines around cities beyond which detached housing tracts are not permitted (See: Urban Containment, Endangered Working Families and Beleaguered Minorities). Obviously, as in goods and services generally, this regulatory over-reach makes housing less affordable (See: People Rather than Places, Ends Rather than Means: LSE Economists on Urban Containment).

There has been no such assault on multi-family building, which represents the bulk of rentals. This is not to suggest that rental regulation is perfect, only that the market distortions have been far more severe in reference to the owned housing market in some metropolitan areas, such as those identified above.

All of this has serious consequences for the nation and its threatened middle income households. With median household incomes below nearly two decades ago (perhaps for the first time in US history), economic stagnation and younger people burdened by rising college debt, lower house prices are a necessity in the over-regulated metropolitan areas. Yet there seems little desire on the part of most governments, particularly in the most severely impacted markets, to do much about it.

Note 1: These censuses collected house value and rent data for the previous year, 1949 and 1969 respectively. The rent and house value data referenced in this article was first available in the 1950 census.

Note 2: The 53 metropolitan areas with more than 1,000,000 population in 2015 (in 1950, only 51 of these had achieved metropolitan area status). The rent ranges cited in this article are calculated by dividing the highest major metropolitan area rent by the lowest major metropolitan area rent in the particular year. The house value ranges cited in this article are calculated by dividing the highest major metropolitan area house value by the lowest major metropolitan area house value in the particular year.

Note 3: Some analysts cite topographic barriers for creating the scarcity of land that has driven house price up so much in the San Francisco Bay Area (which includes both the San Francisco and San Jose metropolitan areas). As indicated in a previous article, there is far more land available for greenfield residential development in the Bay Area than would be required by even the strongest population growth.

Note 4: With respect to urban containment policy, Boston is an exception, which is the only seriously unaffordable major metropolitan area in the Demographia International Housing Affordability Survey that does not have urban containment policy. Boston has large lot zoning so expansive that it has created a severe shortage of land for development, with urban containment-like effects on house prices. Boston’s urbanization covers more land area than all urban areas in the world except New York and Tokyo, despite having only a fraction of their populations (See: The Evolving Urban Form: Sprawling Boston).

Photo: Sacramento: An inland California unaffordable housing market (by author)

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

The US Census Digs Deeper: Where Were Your Ancestors From?

Wed, 10/19/2016 - 21:38

Over 45 million Americans identify their dominant ancestry as German and 22,000 identify theirs as Marshallese, from the Marshall Islands in the Pacific. But in the US Census proposed new form for 2020, both of these groups get their own box to check for the first time. In the previous 2010 form (shown below), German-Americans would simply check ‘White’ and Marshallese-Americans would check ‘Other Pacific Islander’.

In the 2020 form therefore, the US Census is seeking more disclosure and more granularity in the population data. This desire for more detail is not evenly spread however. The Marshallese, 0.01% of the US population, get as much real estate on the form as do German-Americans, 14% of the population. Germany being a country of many regions and Bundesländer, there would surely be more fragmentation in that 14% if anyone cared enough to know the percentage who claim for example Bavarian vs. Hessian ancestry.

This extra layer of detail would make sense if the US Census was agnostically gathering data about ancestry. The Census would then determine a certain hurdle, say 1% or 2% of population, beyond which a group would get its own check box. But as we will see below, the Census has specific policy-related reasons for gathering this data.


Fifty Shades

The proposed new form (shown below with annotations by Pew Research) has nearly tripled in size from 2010 and now includes a new section for Americans of ‘Middle Eastern or North African’ (MENA) ancestry who had been until now categorized as ‘White’. Notwithstanding this new privilege, the six national origins listed in the MENA section (Lebanese, Syrian, Iranian, Moroccan, Egyptian and Algerian) altogether add up to well below 1% of the population.

Of course, this is the percentage of people who ‘self-identify’ as Middle Eastern or North African. Their actual number is likely to be higher if you account for the fact that some still prefer to self-identify as white. Even with this adjustment however, the MENA groups probably don’t exceed 2% of the population.

A similarly sized section is reserved for ‘Native Hawaiian and Other Pacific Islander’ (including the Marshallese) but here again, the entire section and its six choices represent a small percentage that is less in total than 0.25% of the population. Here then are six choices to cover fewer than 0.25% of Americans, same as the six choices under the ‘White’ heading to cover 60%+ of Americans who are of European descent.

Because each major heading only includes six ethnic or national identifiers, many large groups of Europeans are not represented by the available choices. For example, Scottish and Norwegian are 5.5 million and 4.4 million, or 1.7% and 1.4% of the population, but are not on the form.

Even within a section, the inclusion of some countries and exclusion of others are not straightforward. For example, in the new ‘Hispanic, Latino or Spanish’ category, Guatemalan with a population of 1.38 million is left out to make room for Colombian with 1.08 million. This may come from a desire to have at least one South American country listed among the six in this category. By contrast in the 2010 census, most Americans of Hispanic, Latino and Spanish ancestry would check the ‘White’ box.

In its effort to obtain a comprehensive picture, the Census has to grapple with the complication of data that is is part race, part ethnicity and part national origin.

One solution is to do away with the headline categories (White, Hispanic, Black, Asian etc.) and to simply list the 40-odd subcategories. Yet this would still overweigh some and underweigh others.

Another solution then is to simply list all the countries of the world. But this in turn would not provide enough information on race. Is an American of South African ancestry black or white? To be thorough, an adjacent question could request this information. But then is an Argentinian of German ancestry ‘White’ or ‘Hispanic, Latino or Spanish’? Is the Paris-born son of Moroccan immigrants ‘French’ or a descendant of MENA ancestors?

The point here is that there is little racial or ethnic homogeneity in many countries, even if most Americans associate their own ancestry with one or two specific nationalities. The key phrase in this data collection is ‘self-identify’, meaning the way each American chooses to identify him or herself. The offered choices are in many cases convenient shortcuts rather than objective identifiers.

Data for Policy

A third solution in theory would be to opt for simplicity and to do away with this type of data collection altogether. Not all nations request this information in their censuses. Censuses in Italy, the Netherlands, Norway and other countries make no mention of race or ethnicity. France passed a law in 1978 that makes it illegal for the census to collect data on race or ethnicity. A Brookings Institution article explains:

Unlike many other West European countries, and very much unlike English-speaking immigrant societies such as the United States, Canada or Australia, France has intentionally avoided implementing “race-conscious” policies. There are no public policies in France that target benefits or confer recognition on groups defined as races. For many Frenchmen, the very term race sends a shiver running down their spines, since it tends to recall the atrocities of Nazi Germany and the complicity of France’s Vichy regime in deporting Jews to concentration camps. Race is such a taboo term that a 1978 law specifically banned the collection and computerized storage of race-based data without the express consent of the interviewees or a waiver by a state committee. France therefore collects no census or other data on the race (or ethnicity) of its citizens.

The article goes on to discuss some policies and laws that were adopted to fight racism and to improve conditions in economically depressed parts of the country.

The US however is different in many ways. It has several large groups of different ethnicities and a longer history of often difficult race relations. The US Census addresses the question of race data collection on its website:

Why does the Census Bureau collect information on race?

Information on race is required for many Federal programs and is critical in making policy decisions, particularly for civil rights. States use these data to meet legislative redistricting principles. Race data also are used to promote equal employment opportunities and to assess racial disparities in health and environmental risks.

Looking at each in turn,

Federal programs: It makes sense for the Census to identify the location of communities that receive some kind of government attention or assistance. Yet, when you consider the new form, it is not entirely clear why some programs should be tailor made for say Egyptian-Americans (represented on the new form, though only 0.08% of the population) but none for the numerous Scots-Irish (not represented, though 1% of the population) some of whom, according to this new book, have long endured a weak economy in Appalachia and would certainly welcome some assistance.

One explanation is that the Census is counting the groups that are more likely to experience discrimination rather than any group that happens to be suffering economic distress. But if this is the case, why then have the choices of German, Irish, English etc. instead of just White?

Redistricting:As often discussed elsewhere, redistricting that takes race or ethnicity in consideration can easily lead to gerrymandering, an undesirable way to define district boundaries.

Employment, Health, Environment:Here again as with Federal Programs, it is not immediately obvious why the Census needs more granularity than it already had in 2010.

Outside of the provision of government programs to specific groups, there seems to be no compelling reason for the Census to collect and distribute data on race, ethnicity or national ancestry. Of course, corporations also find this data useful in their effort to market their products to people of various cultural affinities. But private demographers could easily fill the gap if the Census did not collect the data with sufficient detail.

The big question is whether the Census should be asking this question in the first place. Could government programs be effective by targeting poorer parts of the country without any data on race or ethnicity? It may be a good idea to analyze the experience of France in this regard.

Politicians may like the fragmented information that helps them tailor their message specifically to the audience in every locality they visit. But on any given issue, a national politician should offer a consistent message whether he is speaking to a crowd in Minneapolis, San Diego or New York. And a local politician would already have a close knowledge of his district’s or state’s demographics.

This piece first appeared at Populyst.net.

Sami Karam is the founder and editor of populyst.net and the creator of the populyst index™. populyst is about innovation, demography and society. Before populyst, he was the founder and manager of the Seven Global funds and a fund manager at leading asset managers in Boston and New York. In addition to a finance MBA from the Wharton School, he holds a Master's in Civil Engineering from Cornell and a Bachelor of Architecture from UT Austin.

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