Mark Hogan on San Francisco’s housing shortage: “Living in a Fool’s Paradise”

“… the current state of permitting regulations for building and the glacial pace of infrastructure projects in San Francisco benefit very few people and risk turning it into a caricature of its former self for tourists and residents rich enough to live in a fantasy, not a living city. If there was ever a time when San Francisco needed to embrace a dynamic, expansive policy for building housing, offices and transportation, it is now.”

San Francisco architect Mark Hogan wrote a very smart and well-informed essay Living in a Fool’s Paradise for the Summer 2014 issue of Boom A Journal of California. In this essay Mark tackled the very prickly issue of how San Francisco became “the most-expensive large city in the United States”.

If you have seen any of the media reporting on San Francisco housing prices you have probably been reading about how city residents want to evict the “rich Google and Apple techies” who are thought to be responsible for making their neighborhood unaffordable. That favored media meme converts the real supply/demand economics into a human-interest story about evicted single mothers and Google-bus protests.

The true story is more complex. Mark moved to San Francisco in 2003, when it was feasible for a young architect to rent an apartment in Lower Nob Hill. Specializing in urban housing, Mark has experienced the inevitable price impacts of extremely restricted housing supply. In this essay he recounts the story of anti-growth Bay Area housing policies and some pragmatic solutions.

San Francisco has had a very strong tendency to try to stave off change through regulation and legislation. Limiting growth artificially usually has many unintended effects, however, as there is no way to prevent people from moving in, and we probably wouldn’t want to if we could. For individuals who want to live in walkable neighborhoods with reliable access to public transportation, there are not that many places in the Bay Area that are as attractive as San Francisco. The city is at or near the top of this list regionally, nationally, and even globally. The demand for such beautiful city living is not going away. It’s only going to increase.

Mark’s analysis reminds us of Ed Glaeser’s Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. Harvard’s Glaeser has made a deep study of urbanization including supply/demand for space of all types. Mark Hogan offers his first-hand perspective – informed in part by his current position as Chair of the Housing Committee at the AIA San Francisco. You can follow Mark’s thinking at and on Twitter @markasaurus.

Image credit


From subsistence farming to prosperity?

Nairobi 2009

[Image Nairobi 2009 ©Corbis, Nigel Pavitt]

For several years I’ve been writing about the development challenge — what policies are the most effective to help Paul Collier’s “Bottom Billion” escape from poverty to our world of prosperity? There are a number of central ideas which I think of in an interdependent relationship: (Industrial agriculture, urbanization, cities) => (Ideas, innovation, economic growth) => (Women control their own fertility, women’s education, population growth stabilizes). This virtuous pyramid rests on a foundation of affordable, low-carbon energy.

The purpose of this post is to offer recommendations for print, audio and video resources on these topics.

A good place to begin is with iconic ecologist Stewart Brand:  Environmental Heresies at MIT Technology Review “The founder of The Whole Earth Catalog believes the environmental movement will soon reverse its position on four core issues.” Rethinking Green (video, SALT lecture). And his 2010 book Whole Earth Discipline.

For a current and informed view of development challenges and progress, see the 2014 Gates Letter “3 Myths That Block Progress For The Poor”.

Are you concerned that population growth is out of control? Then read the recent essay by Stanford professor Martin Lewis “Population Bomb? So Wrong”. Marian Swain at the Breakthrough Institute looks at the current situation for population growth rates, carbon free energy, food supplies and development in Four Surprising Facts About Population: Why Humans Are Not Fated to Ecological Disaster. I’m reasonably confident that you will have fewer population nightmares after watching Hans Rosling in the BBC documentary “DON’T PANIC — The Facts About Population“.

My current favorite introduction to both climate change and energy policy  is Stanford University nuclear physicist and Nobel laureate Burton Richter’s 2010 book: Beyond Smoke and Mirrors: Climate Change and Energy in the 21st Century. It is very accessible to the non-technical reader, and balanced in the presentation of energy policy options. Dr. Richter calls energy-policy winners and losers as he sees them.

For an overview of agricultural reform try Pamela Ronald and Raoul Adamchak’s “Organically Grown and Genetically Engineered: The Food of the Future” [video of their SALT talk], [the book at Amazon]. On agriculture and urbanization, try Why big dams and big ag are good for the poor (transcript of interview with Harvard’s John Briscoe).

Regarding urbanization: ideas come from places where people congregate – in particular cities. Innovation comes from banging ideas against each other. And the central engine of economic growth is innovation – both in the form of new technologies and new institutions (or rules). This is one of the insights that made Paul Romer one of today’s most influential economists. Romer’s “endogenous growth theory” or “new growth theory” is sure to win him a much-deserved Nobel Prize. From Dr. Romer’s Stanford biography:

(…) The contrast between the economics of objects and the economics of ideas is the thread that runs through my work. In graduate school, I wondered why growth rates had been increasing over time. Fresh from cosmology, I was not motivated by policy concerns. It just seemed like an important puzzle. Existing theory suggested that scarcity combined with population growth should be making things worse, but they kept getting better at ever faster rates. New ideas, in the form of new technologies, had to be the answer. Everyone “knew” that. But why do new technologies keep arriving at faster rates? One key insight is that because ideas are nonrival or sharable, interacting with more people turns out to make us all better off. In this sense, ideas are the exact opposite of scarce objects. (See my recent paper with Chad Jones for more.)

For an introduction to Romer’s growth theory I recommend Paul’s chapter “Economic Growth” inThe Concise Encyclopedia of Economics, and the Econtalk interview “Romer on Growth” (if you prefer to read, see the full transcript).

Paul Romer’s current project is Charter Cities, a pragmatic scheme to overcome the development bottleneck of bad rules (for examples of bad rule systems think of Haiti, Zimbabwe, North Korea). I am persuaded that the Charter Cities concept has a chance to evolve into an effective development tool, and continue to find every Romer presentation fascinating. There are two TED Talks so far: Paul Romer’s radical idea: Charter cities (2009) and Paul Romer: The world’s first charter city? (2011 regarding Honduras).

For a 2011 look at cities as idea- and hence prosperity-generators, Harvard’s Ed Glaeser is getting a lot of favorable comment on his 2011 book Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. Glaeser is the subject of an excellent Freakonomics Radio podcast [MP3], and the London School of Economics lecture of the same title. See also the LSE review of Triumph of the City.

More on cities, ideas and growth: why do cities seem to be able to keep growing while most corporations die? Geoffrey West and colleagues at the Santa Fe Institute have been searching for a common theory which might answer that question. Geoffrey recently gave a thoughtful lecture at the Long Now Foundation (SALT).

Lastly, on the same theme, Steven Johnson’s 2010 book Where Good Ideas Come From: The Natural History of Innovation is summarized in his TED Talk: Where good ideas come from, and in his recent RSA Animate lecture of the same title. Enjoy!  

The importance of being urban

Don't miss the latest from Ryan Avent at the Economist Free Exchange:

WHILE Europe's austerity-minded governments and inflation-averse central bank must take much of the credit for the euro area's current economic problems, the crisis has been fanned by failures of regulatory reform and integration that have made adjustment much harder than it needs to be. Those failures also operated prior to the crisis, contributing to growth in imbalances, and without much more in the way of structural reform they will continue to be an economic albatross when the crisis is finally put to rest.

This week's Free exchange column looks at an underappreciated way in which regulatory burdens and incomplete integration have prevented the euro area from taking full advantage of the size of its market and growing richer: by constraining the growth of its cities:

Although America and the euro zone have similar total populations, America’s 50 largest metropolitan areas are home to 164m people, compared with just 102m in the euro area. This striking disparity has big consequences.

Differences in metropolitan populations may help explain gaps in productivity and incomes. Western Europe’s per-person GDP is 72% of America’s, on a purchasing-power-parity basis. A recent study by the McKinsey Global Institute, the consultancy’s research arm, reckons that some three-quarters of this gap can be chalked up to Europe’s relatively diminutive cities. More Americans than Europeans live in big cities: there is a particular divergence in the size each region’s “middleweight” cities, those that teem just a little less than the likes of New York and Paris (see chart). And the premium earned by Americans in large cities relative to those in the countryside is larger than that earned by urban Europeans.

In highly skilled societies, bigger cities are associated with higher levels of productivity and income, the column explains. This seems to be due to the ways in which cities facilitate innovation in an age of rapidly increasing economic and technological complexity. Prosperity now requires lots of skilled individuals in reasonably close proximity to each other, to learn from and occasionally partner with as part of the process of coming up with and spreading new ideas. America appears to be better able than Europe to accomplish this across a wide range of places.

But why? The piece explains:

Regulatory barriers to growth may be to blame. Tight zoning rules limit housing supply and raise prices by driving a wedge between construction costs and market prices. This “regulatory tax” amounts to over 300% in the office markets in Frankfurt, Paris and Milan, according to a 2008 study by Paul Cheshire and Christian Hilber of the London School of Economics, but is just 50% in Manhattan and, in effect, zero in fast-growing places like Houston. Taxes that add to transaction costs also help explain low European mobility.

(… Snip…)