NGVideo: East St. Louis (Part III)

Part III in the video series on East St. Louis explores ideas put forward for (re)development of the city, including cultural tourism based on the city's African American heritage and use of vacant land for farming to create a local food source for the St. Louis metropolitan area.

Part II gives views of downtown today, shows how its history can be seen in the city, and explains why the city could still be a good place for new development.

Part I discusses the origins and development of East St. Louis as an industrial city.

Michael R. Allen is an architectural historian currently serving as director of the Preservation Research Office, a technical assistance and preservation consulting firm. Allen also serves on the boards of the St. Louis Building Arts Foundation and Preservation Action.

Alex Lotz is a graduate of the Film Production program of Chapman University's Dodge College of Film and Media Arts.

The Fed and Asset Bubbles: Beyond Superficiality

There is considerable discussion about tasking the Federal Reserve Board with monitoring and even taking actions to prevent asset bubbles. Before they move too far, the Fed needs to understand what happened in the housing bubble to which they responded after the world economy was decimated.

Any initiative on the part of the Fed to seriously understand, much less do anything about asset bubbles requires that their causes be comprehended at more than a superficial level. To this day, the Fed appears to presume that the housing bubble was simply the result of financial factors, such as loose money and loose lending. In fact, however, the housing bubble was far more complex than that.

The averages on which the Fed and much of the business press have based their analysis hide the dynamics that were at the heart of the price explosion. The housing bubble inflated with a vengeance in only one-half of the major US metropolitan markets, and inflated very little in the others.

There is no doubt that the bubble would not have occurred without the loose monetary policies. However, where the bubble inflated the most, it was in a metropolitan environment of excessively strong land use controls or artificially constricted land supply (called compact development or smart growth). In these markets (such as in California, Florida, Phoenix, Las Vegas, Portland and Seattle), regulation is so strong that when the loose credit induced expansion of demand occurred, the housing market was not permitted to respond with a supply of new affordable housing, and there was a rush to purchase existing stock, which drove prices up.

On the other hand, in the traditionally regulated markets, including fast growing metropolitan areas like Atlanta, Dallas-Fort Worth and Houston, there was comparatively little escalation in house prices. In short, one-half of the country had a housing bubble, the other half did not. In the more highly regulated markets, the Median Multiple (median house price divided by median household income) increased to from 4.5 times to more than 11 (compared to the historic ratio of 3.0). In the traditionally regulated markets, the 3.0 standard was generally not exceeded. Thus, as Nobel Laureate Paul Krugman of Princeton University and The New York Times noted more than three years before the crash, the United States was really two nations with respect to house price escalation, and the difference was land use regulation.

We have estimated that the house value losses were overly concentrated in the compact development markets, accounting for 85% of the peak to trough declines. Without these artificial losses, which were the result of unwise policy intervention, the international Great Recession might not have been set off or it certainly would have been less severe. All of this is described in the last two editions of our “Demographia International Housing Affordability Survey” and related items (the 6th Annual Demographia Housing Affordability Survey will be available early in 2010).

The purpose of compact development and smart growth is to stop the expansion (the ideological term is “sprawl”) of urban areas. Clearly, given the distress that has occurred in the US housing market and the wave of additional losses in both the domestic and international economy that followed, the price of stopping urban expansion (or attempting to) has proven to be immensely larger than any gains.

At least in housing, until the Fed understands what happened, it will be powerless to effectively apply whatever new powers it employs to control future housing bubbles.

A Threat To Home Owners Associations

In the 1990s, just about the only site amenity that most suburban developments offered was a fancy entrance monument. Usually, there were no other additions beyond ordinance minimums and even those weren’t generally elaborate. Some of these monuments did cost millions, but once past the gilded gates, the seduction ended, and residents were greeted by familiar monotonous cookie cutter subdivisions.

As neighborhood planners, we educate our developer clients regarding the virtues of building site amenities that improve Quality of Life (trails, gazebos, decorative ponds and fountains, etc). You would think these amenities were an easy sell to the cities approving the developments. After all, great developments create a great city, right? It’s not that simple, because all of these amenities require maintenance, and that places a burden on tax payers. No city wants to create a tax burden for all, when the likely benefit accrues to the few within the development.

The solution to that problem was simple: The Home Owners Association. We are not talking about the type of Stepford-like association where lifestyles and flower plantings are strictly dictated, but the more limited type that adds a small monthly fee to service the common outdoor site amenities. In other words, only those extra amenities are cared for. Private yards still remain the financial burden of the individual homeowners. In the North, with snow removal, these neighborhood association fees are likely to be higher if the trails and walks are cleared. Since these Associations do not have to maintain private yards or address maintenance of buildings typical of townhome projects, the monthly fees are minimal. Some associations were formed in the North that did give options for snow removal on private driveways, at a very reasonable cost (after all, why not clear a few extra driveways while you are out clearing the trails?).

The developer could now offer a much higher living standard and create more valuable lots that would be easier to sell. The majority of the neighborhoods we designed in the late 1990s through 2006 (the recession) offered the advantages that these minimal cost Associations could provide. We encouraged developers to spend less on elaborate entrance monuments and instead spread real value through the development where people lived.

How HOAs May Be At Risk The recession has not just brought about massive foreclosures and reduced home prices. It has escalated real-estate taxes (the home value may be 40% less but the tax remains at pre-recession rates) and put the very idea of a Home Owners Association at risk. With failed development, there are often also failed Associations. With little or no maintenance of a development that was once cared for by private funding, cities may have to take over the burden until the economy recovers, and in some areas, if it recovers. Comprehensive associations that maintain all of the grounds (where there are no privately maintained yards),including the building exteriors and rooftops, as well as the streets, are at the greatest risk. The limited Associations that were typical of the neighborhoods we designed are not as much of a problem, but could easily be lumped into “all Associations are bad news” category in the minds of those approving future developments, after the economy returns.

This affects all types of residential development.

Developments that exceed minimum standards typically offer site amenities to make the development more enticing. Someone must maintain these extras. Fear of HOA failures will certainly be more on the minds of cities after the recession, but without HOAs, who will maintain the amenities? A two million dollar entrance monument does not make a neighborhood sustainable. Spreading value through the neighborhood with features that enhance quality of life, is a better investment. The Homeowners Association must not fall victim to the recession.

Dubai Debt Debacle

When a bunch of American bankers woke up last Thursday, I hope they found more to be thankful for than just a traditional turkey dinner. It’s thought that the American banks will have less exposure to Dubai World than most European or Asian banks – although the American banking industry is known to hide a thing or two up their sleeves. Dubai World is asking creditors for a “standstill” – meaning they want the interest to stop accumulating on their debt. It’s a polite way of saying they can’t afford the interest payments anymore.

Dubai is one of the seven states that make up the United Arab Emirates (UAE). Dubai borrowed heavily to finance a building boom supported by high oil prices. They now lay claim to the world's tallest building and an island in the shape of a palm tree – at least General Motors went broke building cars. The capital of the UAE is Abu Dhabi. It’s unlikely that Abu Dhabi can come to the rescue. Just last February Abu Dhabi injected $4.5 billion into five banks that were coming under financial pressure when the real estate market shifted. Bailing out banks seemed to stop the U.S. government from bailing out General Motors.

Dubai World is said to be in debt for $60 billion, although some reports put the figure much higher at about $90 billion. Even at the low end, that figure is equal to all the foreign direct investment in the UAE. (Foreign direct investment is all the money that foreigners invested in UAE.) By comparison, the direct investment of all UAE residents in other countries is less than one half that amount (about $29 billion at the end of December 2008). But don’t think that means that Dubai World’s investments are of little consequence outside the Gulf region. Recent projects include ports in London and Vancouver. DP World was at the center of a controversy in February 2006 when they announced the purchase of a firm that oversees operations at six U.S. ports – DP World subsequently sold them off.

Dubai World is the UAE government’s investment conglomerate. That makes this a crisis in sovereign (public) debt – possibly only the first shoe to drop in the coming crisis I warned about back in July. Hope you don’t get tired of hearing me say “told ya’ so” – I suspect it will happen with increasing frequency during the next twelve months. The real problem with defaulting sovereigns is that there is no Chapter 11 bankruptcy process for them, like there was for General Motors. When a country defaults on their debt, they just stop paying – “governments can change the rules on a whim.”

Bill Gates is Right On – We Can Feed a Growing, Hungry World

The world’s richest man recently sent a shockwave through the world food community by calling for another green revolution built upon n sustainability paired with genetic modification. Gates, one of the preeminent global philanthropists, made the case for empowering Africa’s small landholder farmers to be more productive in drought-ridden and other harsh environments.

"Poor farmers are not a problem to be solved; they are the solution—the best answer for a world that is fighting hunger and poverty, and trying to feed a growing population," Gates said.

Next week in Ghana the first National Farm and Agriculture Show (FAGRO) will be held to take steps that will add value to agriculture and move it from it peasant stage to a commercial stage. According to the Coordinator of FAGRO '09, Ms. Alberta Nana Akyaa Akosa , “agriculture is a highly ignored discipline and this is not good for the growth of the economy. A lot of corporate institutions do not place high priority on Agriculture and we at FAGRO aim to bring a new revolution in the Agriculture sector. This revolution will increase Private Partnership Approach; where Agriculture will not be politically but privately driven; a revolution where most of our young ones will come out of school and yearn to go into Agriculture” she noted. “It is the only way we can free ourselves from the high import rate of all consumables”, she added.

During this Thanksgiving holiday we should be mindful that meeting the food needs of a growing, global population – estimated to be around 9 billion by 2050 – will require harnessing the tremendous productive power of North American agriculture, as well as in producing countries in Oceania and Europe, as well as improving the ability of small farmers around the world to produce more for indigenous and export markets alike.

Precision agriculture can be used to scale up sustainable agricultural practices, reducing energy usage and other environmental ill effects often associated with large-scale production agriculture. Providing small farmers with access to agricultural technologies adaptable to local circumstances and market access should be given highest priority.

Bill Gates knows this. So do developing world visionaries like Alberta Nana Akyaa Akosa.

The Essence and Future of Texas vs. California

I know there have been a lot of articles and references to Texas vs. California recently in this blog, but, well, there's a new one with some genuinely new contributions to the argument ("America's Future: California vs. Texas", Trends magazine, hat tip to Jeff). And it says some nice things about Houston too, so how can I pass on it? The beginning of the article is here - including an overview of both states' situations - but here are some key additional excerpts:

...Both the Brookings Institution and Forbes Magazine studied America’s cities and rated them for how well they create new jobs. All of America’s top five job-creating cities were in Texas. It's more than purely economics and regulation can explain, though. Texas – and Houston in particular – has a broad mix of Hispanics, whites, Asians, and blacks with virtually no racial problems. Texas welcomes new people and exemplifies genuine tolerance. When Hurricane Katrina hit, Houston took in 100,000 people. Not surprisingly, Houston has more foreign consulates than any American city other than New York and Los Angeles.
But, how did this happen? What’s wrong with California, and what’s right with Texas? It really comes down to four fundamental differences in the value systems embodied in these states:

First, Texans on average believe in laissez-faire markets with an emphasis on individual responsibility. Since the '80s, California’s policy-makers have favored central planning solutions and a reliance on a government social safety net. This unrelenting commitment to big government has led to a huge tax burden and triggered a mass exodus of jobs. The Trends Editors examined the resulting migration in “Voting with Our Feet,” in the April 2008 issue of Trends.

Second, Californians have largely treated environmentalism as a “religious sacrament” rather than as one component among many in maximizing people's quality of life. As we explained in “The Road Ahead for Housing,” in the June 2009 issue of Trends, environmentally-based land-use restriction centered in California played a huge role in inflating the recent housing bubble. Similarly, an unwillingness to manage ecology proactively for man’s benefit has been behind the recent epidemic of wildfires.

Third, California has placed “ethnic diversity” above “assimilation,” while Texas has done the opposite. “Identity politics” has created psychological ghettos that have prevented many of California’s diverse ethnic groups and subcultures from integrating fully into the mainstream. Texas, on the other hand, has proactively encouraged all the state’s residents to join the mainstream.

Fourth, beyond taxes, diversity, and the environment, Texas has focused on streamlining the regulatory and litigation burden on its residents. Meanwhile, California’s government has attempted to use regulation and litigation to transfer wealth from its creators to various special-interest constituencies.

They go on to make six forecasts:

  1. ...expect to see California’s loss of jobs to Nevada accelerate...
  2. ...expect to see a backlash in California and across the country against regulations, especially green initiatives that can’t clearly demonstrate a positive ROI...
  3. Watch for the smart money, including venture capital, to begin migrating to Texas for start-ups in many areas, including energy, info-tech, manufacturing, and biotech. Just as Delaware’s tax laws once encouraged numerous businesses to incorporate there, even when they had no connection to the state, Texas will become a magnet for new businesses by offering cheap land, a favorable regulatory environment, a business-friendly culture, and a large supply of skilled labor. Unless California revamps dramatically, expect to see its economy languish, even as the recovery takes off.
  4. To make its business climate even more business-friendly, Texas will invest heavily in secondary education and work hard to attract the best talent to its research universities (note the recent Tier 1 proposition and funding). Keep an eye especially on the University of Texas, which already has a first-rate campus and faculty. Within 10 years, UT, as the locals call it, may well rival Stanford or Berkeley.
  5. Other states will adopt tort reform measures pioneered in Texas. Unlike California and most other states, Texas has been aggressive in minimizing the enormous burden of frivolous lawsuits...
  6. Look to Texas to become a cutting-edge cultural mecca. Houston has always offered a vibrant cultural scene, ever since the Alley theater company was founded there in 1947 by Nina Eloise Whittington Vance. In the 1950s, John and Dominique de Menil moved to Houston with one of the most significant private collections of art in the world and began donating art and money to the Houston Museum of Fine Arts. Both institutions have grown to world-class status since then. In the coming years, this trend will spread to the major cities of Texas (take that, Dallas!), attracting the best talent and money and shifting the cultural balance of the nation away from New York and San Francisco.

I can personally vouch for #5. I was just visiting my brother out in CA, and a friend of his with a small store was being hit with a large disability discrimination lawsuit for a minor oversight (handicapped parking was marked on the ground and had the requisite walkways and ramps, but lacked a pole sign). Evidently this has become a cottage industry in California, where lawyers guide the disabled through stores looking for very minor violations of a vague law (things like high shelves or tables), then sue (expecting a quick settlement, of course). Under CA law, discrimination guilt is assumed if there's anything in the store the disabled can't do that a normal customer can do, regardless of the availability of employees to provide assistance. His friend was clearly exasperated with the unwinnable situation. Just plain nuts.

As Jim Goode says, "You might give some serious thought to thanking your lucky stars you're in Texas."

A Republican Resurgence in George H.W. Bush States?

George W. Bush unveiled plans this week for his presidential library at Southern Methodist University in Dallas, and according to architects’ renditions, it will have a front yard that is designed to look like a prairie.  Judging by the imagery surrounding W., one would think that his forefathers fought at the Alamo.

But as most astute political observes know, Bush’s family tree is really rooted in Kennebunkport and Prescott Bush.  It was from this legacy that his Dad built a coalition in 1988 that delivered wins in mainstream states like New Jersey, Connecticut, Delaware, and Illinois. These could be called George H. W. Bush states.

Of course, in the 1990s and early 2000s, these states turned blue, and the younger Bush lost them all, mostly by wide margins, even though New Jersey was closer than expected in 2004 when memories of 9/11 were still fresh.  These days, however, it could be possible that Republicans are seeing a resurgence in these H. W. states.

Chris Christie knocked off machine-powered Gov. Jon Corzine in New Jersey.  Moderate Reps. Mike Castle and Mark Kirk are promising to make open-seat Senate races in Delaware and Illinois competitive.  And former Rep. Rob Simmons is neck-and-neck with Sen. Chris Dodd in Connecticut.

What do these Republican candidates have in common?  Three things: First, they’re all Wall Street Journal Republican – pro-business and socially tolerant – in states that are pro-business and socially tolerant.  Most Republicans in these states agreed with Peggy Noonan’s observation that picking Sarah Palin for vice president was “political bullshit,” “gimmicky,” and signaled that the race was “over.”

Second, they’re running against runaway government spending, which was a winning message for in the 1980s and early ‘90s.  “Unemployed, white-collar voters don’t think they’ll get their jobs back at the same pay, and this is a huge group that is politically unaffiliated,” says Connecticut GOP chairman Chris Healey.  “They want action, not bailouts to those who don’t deserve it and not the Detroit model.”

Third, these candidates are running against (or ran against, in Christie’s case) either Democratic candidates traditionally fueled by political machines (Dodd, Corzine, Alexi Giannoulis) or political brand names whose shelf-life may have expired (Dodd, Corzine, Beau Biden).  In this sense, Republicans are simply picking the right year to run.

Another H.W. state where Republicans are optimistic is New Hampshire, although demographics here may have shifted so far that it’s gone for good for Republicans.  The same is true in California, where even the most successful Republican will have a tough time winning on the Left Coast. In Pennsylvania, Republicans seem to have completely lost the suburban bloc of their coalition.

Could the Republican resurgence be sustainable in New Jersey, Connecticut, Delaware, and Illinois?  Probably not on the presidential level.  But if Republicans keep nominating candidates that fit the district, and if they can discredit the tea party, Club-for-Shrinkage crusaders, they may be able to reclaim a beachhead.

Contrived Sustainability

The draft reauthorization of the federal surface transportation program (highway and transit) in the House of Representatives is filled with initiatives to reduce greenhouse gas emissions, often by seeking to encourage compact development (smart growth) policies. Dr. Ronald D. Utt of the Heritage Foundation discovered an interesting definition in the draft: “sustainable modes of transportation” means public transit, walking, and bicycling” (Section 333(P)7, page 219, accessed November 18, 2009).

This definition would mean that a Toyota Prius that emits one-half as many grams of greenhouse gases per passenger mile as a transit system (not an unusual occurrence) is not sustainable transportation, while the transit system is. There will be more cases like this as time goes on, as vehicle fuel economy improves and the impact of alternative fuel technology is expanded. This is irrational and the worst kind of ideology.

It is possible, of course, that this is simply sloppy legislative drafting. But given the persistence of the compact development lobby and its contribution to pending legislation in Washington in the face of respected research demonstrating its scant potential, something else may be operating. The wording may betray an agenda more concerned with forcing people to accept the favored (and anti-suburban) lifestyles that an urban elite has long sought to impose on others than it is to reduce greenhouse gases. Sustainability in greenhouse gas emissions is not about the hobby horses of one group of advocates or another, it is rather about reducing greenhouse gas emissions as efficiently as possible. The Transportation and Infrastructure Committee and the rest of Washington needs to focus on ends, not means.

Provisions that pick particular strategies, without regard to their effectiveness, have no place in a crusade so much of the scientific community has characterized in apocalyptic terms. Moreover, such disingenuousness, in the longer run, could whittle away the already apparently declining support for reducing greenhouse gas emissions.

Long Beach Freeway Saga

The Los Angeles Times reports progress toward completion of the Long Beach Freeway (I-710) gap between Valley Boulevard in East Los Angeles and Pasadena, with a geologic study finding a tunnel alignment to be feasible. Real progress is overdue. My great aunt and great uncle were forced out of their house in the early 1960s in South Pasadena by the California Highway Department, in anticipation of building the freeway. I suspect the house is still there.

For nearly one-half century, South Pasadena residents have opposed building the “Meridian” route that would have dissected the city. They were not against the freeway per se, but rather preferred the “Westerly” route, which would have skirted the city. The state had selected the Meridian route. In the middle 1980s, while a member of the Los Angeles County Transportation Commission, I served on a special route selection committee chaired by former county supervisor Peter F. Schabarum. Under our legislative authority, we also selected the Meridian route. Nothing came of it.

It is to be hoped that serious efforts to close the gap will be underway soon.

China’s Love Affair with Mobility

China Daily reports that car (light vehicle) sales reached 10.9 million units in the first 10 months of 2009, surpassing sales in the United States by 2.2 million. This was a 38% increase over the same period last year. Part of the increase is attributed to government programs to stimulate automobile sales.

China’s leading manufacturer is General Motors (GM), which experienced a 60% increase in sales compared to last year. By contrast, GM’s sales in the United States fell 33% in the first 10 months of the year on an annual basis. GM sold nearly 1.5 million cars in China, somewhat less than its 1.7 million sales over the same period in the United States.