Policy

The New Deal at 75: An Inspiration, Not a Blueprint

Joel Kotkin — Mon, 11 Aug 2008 01:57:40 -0400

Whatever your political perspective, Americans need to admire the New Deal for, if nothing else, its ambitious agenda. In a way unparalleled in the 20th Century, the New Deal left us a legacy of achievement – one that we can still see in big cities like San Francisco and small towns like Wishek, North Dakota.

The great genius of the New Deal lay not in ideology but in its pragmatism and practicality. People were out of work so it created jobs. The country’s infrastructure, particularly in the rural areas, was primitive, so it took on the task of modernization.

In some ways, this paralleled what was also being done under the Communists in the Soviet Union as well as under Fascists in Italy and under the National Socialists in Germany. This has led some conservatives, such as “Liberal Fascism” author Jonah Goldberg, to conflate the New Deal legacy with fascism. But this assertion is belied by the fact that we still live under a democratic and liberal political structure, one that by the 1980s had turned to oppose much of that legacy.

Yet I believe that even Ronald Reagan – himself once an avid New Dealer – would admit that the New Deal did much to expand America’s middle class. It did so not by promoting redistribution and welfarism or by moral cajoling – characteristics Mike Lind identifies with the more elite Progressives – but by practical actions that gave people the tools with which to build their own individual prosperity.

Economically speaking, it is also true that the New Deal failed to recreate prosperity (at least until the onset of the Second World War). But it cannot be denied that it literally brought light to large parts of the country – particularly the Southeast and the rural Great Plains – into the 20th Century. Among the New Deal’s great accomplishments, as Andy Sywak discusses, are its public works.A partial list of these accomplishments include:

• 22,428 road projects
• 7488 educational buildings
• Over 7000 sewer, water and other public buildings
• Employed over 3,000,000 workers earning who helped support 10,000,000 dependents
• Employed 125,000 engineers, social workers, accountants, superintendents, foremen and timekeepers scattered in every state and community

Ultimately, notes scholar Jason Scott Smith, the New Deal touched intimately the lives of more than fifty million out of a total U.S. population in 1933 of 125 million. Yet its legacy went well beyond the Roosevelt years, extending from Roosevelt and Truman all the way to Eisenhower, Kennedy, Johnson and, even to some extent, Richard Nixon.

As Sherle Schwenninger points out, The New Deal created the basis for the great, and widely shared, national prosperity of the post-war period. Through infrastructure spending, housing programs, the GI Bill and government-funded scientific research, the New Deal directly and indirectly helped make the United States the premier power on the world scene and by far its strongest economy.

America remains the preeminent country in the world, but there is a great, widely held belief that this status is slipping as other countries – China, Russia, Brazil, India – enact what amounts to their own New Deals. Our once vibrant middle class is under siege, our infrastructure is aging and even “progressives” seem more interested in promoting avant garde cultural values than in economic growth, upward mobility or maintaining technological excellence. Even in the field of conservation, a core value of the New Deal and progressive traditions, the focus is increasing less about preserving resources and open space for people, and more about how to preserve and insulate nature from the ill-effects of human carbon-based life forms.

Yet if we can be inspired by the New Deal, we can not simply repeat it. For one thing, our crisis today is less palpable and immediate, making it all but impossible to mobilize resources in the same way. At the same time, the public sector, small at the onset of New Deal, has already swollen to gargantuan size. The power of organized public employees, largely a non-factor in the 1930s and 1940s, threatens any government initiative by siphoning off too many local and federal resources due to their often extravagant demands in everything from salaries and work rules to pensions.

This can be seen in the morphing of the New Deal legacy in large cities including the greatest of all, New York. Under Mayor Fiorella La Guardia, a maverick Republican of the Theodore Roosevelt stripe, the city built new parks, playgrounds, swimming pools, roads, and sanitation systems with an almost messianic fervor. At one time, New York City was receiving one-seventh of all funds dispersed by the Works Progress Administration (WPA).

Yet La Guardia’s expanded city government, notes Cooper Union historian Fred Siegel, still operated under an efficiency-oriented progressive administration. La Guardia and his parks commissioner, Robert Moses fired political appointees and dismissed incumbents, leading some public employees to identify him with the Italian dictator Mussolini. Rejecting narrow ideology, La Guardia famously claimed: “There is no Republican or Democratic way to clean streets.”

La Guardia’s successors, in New York and elsewhere, did not stick to this moral and administrative rigor. The share government workers in New York’s workforce expanded from 10 percent in 1950 to over 17 percent in 1970s but with increasingly little accountability. If a new New Deal means a large expansion of the unionized public workforce, in New York or elsewhere, it will be largely doomed.

So as we admire the achievements of the New Deal, we also need to keep in mind the shortcomings that grew out of its success. That we need a new powerful commitment to infrastructure and economic growth is undoubted, but in pursuing this we need to make sure it does not serve primarily the public employee lobbies and the well-organized rent-seeking private interests.

New solutions, such as tapping abundant capital resources from both here and abroad, need to be tried out. And given the overconcentration of power already in Washington, and the spread of technical expertise to states and regions, a greater emphasis on locally based initiatives may work better this time around.

Yet in the end, American still requires some form of broad initiative to overcome its current doldrums. This requires the same kind of bold, innovative and pragmatic spirit characteristic of the New Deal that three quarters of a century later remains its most useful legacy.

Joel Kotkin is the Executive Editor of www.newgeography.com.

Other New Geography New Deal articles:

The New Deal & the Legacy of Public Works
New Deal Investments Created Enduring, Livable Communities
Progressives, New Dealers, and the Politics of Landscape
Public Investment, Decentralization and Other Economic Lessons from the New Deal
Emerald City Emergence: Seattle and the New Deal
Excavating The Buried Civilization of Roosevelt’s New Deall

Other New Deal sites:

New Deal Network (sponsored by the Franklin and Eleanor Roosevelt Institute)
New Deal Cultural Programs
California’s Living New Deal Project

Time to Rethink This Experiment? Delusion Down Under

Ross Elliott — Fri, 10 Feb 2012 00:38:10 -0500

The famous physicist, Albert Einstein, was noted for his powers of observation and rigorous observance of the scientific method. It was insanity, he once wrote, to repeat the same experiment over and over again, and to expect a different outcome. With that in mind, I wonder what Einstein would make of the last decade and a bit of experimentation in Queensland’s urban planning and development assessment?

Fortunately, we don’t need Einstein’s help on this one because even the most casual of observers would conclude that after more than a decade of ‘reform’ and ‘innovation’ in the fields of town planning and the regulatory assessment of development, it now costs a great deal more and takes a great deal longer to do the same thing for no measureable benefit. As experiments go, this is one we might think about abandoning or at the very least trying something different.

First, let’s quickly review the last decade or so of change in urban planning and development assessment. Up until the late 1990s, development assessment was relatively more straightforward under the Local Government (Planning and Environment) Act of 1990. Land already zoned for industrial use required only building consent to develop an industrial building. Land zoned for housing likewise required compliance with building approvals for housing. These were usually granted within a matter of weeks or (at the outset) months.

There were small head works charges, which essentially related to connection costs of services to the particular development. Town planning departments in local and state governments were fairly small in size and focussed mainly on strategic planning and land use zoning. It was the building departments that did most of the approving. Land not zoned for its intended use was subject to a process of development application (for rezoning), but here again the approach was much less convoluted that today. NIMBY’s and hard left greenies were around back then, but they weren’t in charge. Things happened, and they happened far more quickly, at lower cost to the community, than now.

In the intervening decade and a bit, we’ve seen the delivery and implementation of an avalanche of regulatory and legislative intervention. It started with the Integrated Planning Act (1997), which sought to integrate disparate approval agencies into one ‘fast track’ simplified system. It immediately slowed everything down. It promised greater freedom under an alleged ‘performance based’ assessment system, but in reality provoked local councils to invoke the ‘precautionary principle’ by submitting virtually everything to detailed development assessment. The Integrated Planning Act was followed, with much fanfare, by the Sustainable Planning Act (2009). Cynics, including some in the government at the time, dryly noted that a key performance measure of the Sustainable Planning Act was that it used the word ‘sustainable’ on almost every page.

Overlaying these regulations have been a constant flow of land use regulations in the form of regional plans, environmental plans, acid sulphate soil plans, global warming, sky-is-falling, seas-are-rising plans – plans for just about everything which also affect what can and can’t be done with individual pieces of private property.
But it wasn’t just the steady withdrawal of private property rights as state and local government agencies gradually assumed more control over permissible development on other people’s land. There was also a philosophical change on two essential fronts.

First, there was the notion that we were rapidly running out of land and desperately needed to avoid becoming a 200 kilometre wide city. Fear mongers warned of ‘LA type sprawl’ and argued the need for densification, based largely on innocuous sounding planning notions like ‘Smart Growth’ imported from places like California (population 36 million, more than 1.5 times all of Australia, and Los Angeles, population 10 million, roughly three times the population of south east Queensland). The first ‘South east Queensland Regional Plan 2005-2026’ was born with these philosophical changes in mind, setting an urban growth boundary around the region and mandating a change to higher density living (despite broad community disinterest in density). It was revisited by the South East Queensland Regional Plan 2009-2031 which formally announced that 50% of all new dwellings should be delivered via infill and density models (without much thought, clearly, for how this was to be achieved and whether anyone particularly wanted it). Then there was the South East Queensland Regional Infrastructure Plan 2010-2031 which promised $134 billion in infrastructure spending to make this all possible (without much thought to where the money might come from) and a host of state planning policies to fill in any gaps which particular interest groups or social engineers may have identified as needing to be filled.

The significant philosophical change, enforced by the regional plan, was that land for growth instantly became scarcer because planning permission would be denied in areas outside the artificially imposed land boundary. Scarcity of any product, particularly during a time of rising demand (as it was back then, when south east Queensland had a strong economy to speak of) results in rising prices. That is just what happened to any land capable of gaining development permission within the land boundary: raw land rose in price, much faster than house construction costs or wages.

The other significant philosophical change that took root was the notion of ‘user pays’ – which became a byword for buck passing the infrastructure challenge from the community at large, to new entrants, via developer levies. Local governments state-wide took to the notion of ‘developer levies’ with unseemly greed and haste. ‘Greedy developers’ could afford to pay (they argued) plus the notion of ‘user pays’ gave them some (albeit shaky) grounds for ideological justification. Soon, developers weren’t just being levied for the immediate cost of infrastructure associated with their particular development, but were being charged with the costs of community-wide infrastructure upgrades well beyond the impact of their proposal or its occupants.

Levies rose faster than Poseidon shares in the ‘70s. Soon enough, upfront per lot levies went past the $50,000 per lot mark and although recent moves to cap these per lot levies to $28,000 per dwelling have been introduced, many observers seem to think that councils are now so addicted that they’ll find alternate ways to get around the caps.

So the triple whammy of ‘reform’ in just over a decade was that regulations and complexity exploded, supply became artificially constrained to meet some deterministic view of how and where us mere citizens might be permitted to live, and costs and charges levied on new housing (and new development generally) exploded.

At no point during this period, and this has to be emphasised, can anyone honestly claim that this has achieved anything positive. It has made housing prohibitively expensive, and less responsive to market signals. Simply put, it takes longer, costs more, and is vastly more complicated than it was before, for no measureable gain.

An indication of this was given to me recently in the form of the Sunshine Coast Council’s budget for its development assessment ‘directorate.’ (How apropos is that term? It would be just as much at home in a Soviet planning bureau). Their budget (the documents had to be FOI’d) for 2009-10 financial year included a total employee costs budget of $17.4 million. For the sake of argument, let’s assume the average directorate comrade was paid $80,000 per annum. That would mean something like more than 200 staff in total. Now they might all be very busy, but it surely says something about how complexity and costs have poisoned our assessment system if the Sunshine Coast Council needs to spend over $17 million of its ratepayer’s money just to employ people to assess development applications in a down market.

If there had been any meaningful measures attached to these changes in approach over the last decade, we’d be better placed to assess how they’ve performed. But there weren’t, so let’s instead retrospectively apply some:

Is there now more certainty? No. Ask anyone. Developers are confused. The community is confused. Even regulators are confused and frequently resort to planning lawyers, which often leads to more confusion. The simple question of ‘what can be done on this piece of land’ is now much harder to answer.

Is there more efficiency? No. Any process which now takes so much longer and costs so much more cannot be argued to be efficient.

Is the system more market responsive? No. Indeed the opposite could be argued – that the system is less responsive to market signals or consumer preference. Urban planning and market preference have become gradually divorced to the point that some planners actively view the market preferences of homebuyers with contempt.

Are we getting better quality product? Many developers will argue that even on this criteria, the system has dumbed down innovation such that aesthetic, environmental or design initiatives have to fight so much harder to get through that they’re simply not worth doing.

Is infrastructure delivery more closely aligned with demand? One of the great promises of a decade of ‘reform’ was that infrastructure deficits would be addressed if urban expansion and infrastructure delivery were aligned. Well it’s been done in theory via countless reports and press releases but it’s hardly been delivered in execution. And when the volumes of infrastructure levies collected by various agencies has been examined, it’s often been found that the money’s been hoarded and not even being spent on the very things it was collected for.

Is the community better served? Maybe elements of the green movement would say so, but for young families trying to enter the housing market, the answer is an emphatic (and expensive) no. How can prohibitively expensive new housing costs be good for the community? For communities in established urban areas, there is more confusion about the impact of density planning, which has made NIMBY’s even more hostile than before.

Has it been good for the economy? South east Queensland’s economy was once driven by strong population growth – the very reason all this extra planning was considered necessary. But growth has stalled, arguably due to the very regulatory systems and pricing regimes that were designed around it. We now have some of the slowest rates of population growth in recent history and our interstate competitiveness – in terms of land prices and the costs of development – is at an all time low. That’s hardly what you’d call a positive outcome.

Is the environment better served? If you believe that the only way the environment can be better served is by choking off growth under the weight of regulation and taxation, you might say yes. But then again, studies repeatedly show that the density models proposed under current planning philosophies promote less environmentally efficient forms of housing, and can cause more congestion, than the alternate. So even if the heroic assumptions for the scale of infill and high density development contained in regional plans was actually by some miracle achieved, the environment might be worse off, not better, for it.

All up, it’s a pretty damming assessment of what’s been achieved in just over a decade. Of course the proponents of the current approach might warn that – without all this complexity, cost and frustration – Queensland would be subject to ‘runaway growth’ and a ‘return to the policies of sprawl.’ The answer to that, surely, is that everything prior to the late 1990s was delivered – successfully – without all this baggage. Life was affordable, the economy strong, growth was a positive and things were getting done. Queensland, and south east Queensland in particular, was regarded as a place with a strong future and a magnet for talent and capital. Now, that’s been lost.

Einstein would tell us to stop this experiment and try something else if we aren’t happy with the results. To persist with the current frameworks and philosophies can only mean the advocates of the status quo consider these outcomes to be acceptable. Is anyone prepared to put up their hand and say that they are?

Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.

Photo by Flickr user Mansionwb

New Urbanism vs. Dispersionism

Richard Reep — Tue, 07 Feb 2012 00:38:14 -0500

The Florida real estate developer, unburdened of state regulatory agencies, may now focus his efforts on pleasing the investment community and the local market. I recently played the role of real estate developer interviewing two consultant teams vying to help me create a new fictional community. Fortified with readings in both the New Urbanist camp and the Dispersionist camp, each team of students pitched their method of community building to me.

The actual debate was very lively, with many rebuttals and some serious emotional engagement. The premise: I have a multi-acre greenfield property. I have shortlisted my planning candidates down to two: a New Urbanist team, and a Dispersionist team. Each team must pitch their philosophy, and I will select one team to design it.

Question 1: Since I am only able to afford Phase 1, future phases will be left to future developers. In your approach, can future generations be trusted to keep focus on high-quality development? How would you guarantee that the property rises in value? I asked the New Urbanists to go first.

The New Urbanist team was ready: As Master Planners, they will create the entire form-based vision for the property and design it around a smart code so that the future developers will obey a plan to keep property values rising. No future developer will get to ‘cheap out’. For this team, the Master Plan will guarantee a quality of life for all residents.

The Dispersionists will plan Phase 1, not as a rigid image of a town, but rather as a response to the natural landscape. This team said the community would grow organically, from its functional needs, guaranteeing the freedom of future generations to plan their own destiny. They scoffed at a Master Plan that determined the urban form. What good is a guarantee of a quality of life, they asked, if future generations want something different than the Master Planner intended?

This round, in my mind, went to the Dispersionists. Their argument that future generations should have the freedom to plan based on their functional needs outweighed the seductive beauty of a Master Plan. Too many Master Plans are implemented poorly, or abandoned due to their disutility based on changing needs and markets.

Question 2: How does your viewpoint deal with the car? How will residents and visitors get around your community? I asked the Dispersionists to go first this time.

“Well,” replied the Dispersionists, “Americans love their cars, and we love the car too. We’ll plan for sidewalks and bikes, but we know that the car is a necessity. We know that a 5-minute walk isn’t so realistic in Florida’s hot, humid climate.” The Dispersionists have a hearty regard for cars, and they spoke of long, sweeping curves and scenic drives. They pointed out that most residents will need to drive to other parts of the city as well.

The New Urbanists shuddered. “We will plan for car-free living,” they stated. With very clever planning, they intended to keep driving to a minimum, and will design walking trails. One New Urbanist ventured 4-story parking garages, crowing that their proposal would not be littered with gas stations. The New Urbanists pointed out the ugly commercial strips dominating our current city, and how little they want that to intrude into the new development.

I liked this, and challenged the Dispersionists. Isn’t it better health, and less use of oil, to reduce vehicle dependency? The Dispersionists asked me why, in this ten-acre community, I thought I could attract residents with 4-story parking garages? Good point, I thought.

Both sides had good answers, and the question did not fully go to one side or the other. Cars do tend to generate a lot of aesthetic horror. On the other hand, they are not going away anytime soon, so learning how to deal with them seems like an important task for a developer looking to the future.

Question 3: How would you distribute density in your development? One center, multiple centers, and centered around what? This time the New Urbanists went first.

The core, they stated, will be in the center of town, and could go to 8-10 stories, leaving the perimeter a green zone. In the center will be the government and institutional buildings, carefully matched with proper style. The point, they said, is predictability. They pledged to learn from the failures of the past, and their Master Plan will account for the full scope of development.

The Dispersionists suggested multiple centers. “Phase 1 will be our first density cluster,” they said, “and we’ll see how it goes.” Unlike the New Urbanists, they didn’t want to introduce all their product at once, in case the market changes. “We believe in New England-style green space,” they said, and wanted to evolve the community around these. They saw the vitality of the community coming from diversity.

I asked the New Urbanists what they would do if the market changes . When pressed, they insisted their Master Plan had plenty of contingency plans in case the original plan wasn’t workable, but it sounded like they were winging it.

This is what the Dispersionists saw as their own strong suit. “We don’t have all the answers,” they said. Their first phase would gently nudge the community in a certain direction, but it would leave future developers the choice whether to reinforce the first phase, or strike out and build another phase better suited to a unique need.

I felt that this round went to the Dispersionists.

Question 4: Do you think your development scheme can promote or discourage social values? Why or why not? This time the Dispersionists went first.

The Dispersionists believed that one cannot engineer social values through urban design. However, they can be influenced. Conservation, for example, is a value that they would promote in their plan to conserve open space and not overtake the land with development. A sense of community, they said, was another, giving people a loyalty to their community out of good design. These, they felt, led to a sustainable plan.

The New Urbanists guaranteed that conservation land would always be there, and pointed out the Dispersionists’ flexibility as a negative . The New Urbanists insisted that their sense of place would be stronger, because it would be designed. People want predictability. New Urbanists would engage people by walking and having front porches.

The Dispersionists speculated that neighbors will get to know one another in a cul-de-sac just as well as they would if they all had front porches. They also felt that the shared experiences of a community would transcend the particular style or form that community took.

Although I gave this one to the New Urbanists, I was skeptical about the New Urbanists’ implication that well-behaved buildings produce well-behaved people. The Dispersionists’ view that a cul-de-sac breeds any neighborly closeness also seemed a bit disingenuous. It was near the end of class.

Question 5: Give me your arguments why your strategy is sustainable. I let the New Urbanists go first.

For one thing, they said, they will have more efficient transportation. Vertical buildings save land, they argued, and people who choose this community will value open space more highly and be willing to live densely. They believed that they will have less gridlock by de-emphasizing the car and will be more stable and socially cohesive. All this will come from a well-designed Master Plan.

The Dispersionists said their community would start small and then grow. Failures won’t cause dead zones, they claimed, because they are not sentimental about form and want a community that works. So if a building in their development begets a failed business, the building will need to be reinvented to make it successful.

“Yes, but,” countered the New Urbanists, “for every successful community like yours, there are 10 that have failed and ultimately decline in value. What guarantee do you give that you will be the one out of ten?” They went on to cite their successes – Seaside, Celebration, and so on.

The Dispersionists noted that Seaside was a resort town and Celebration was heavily subsidized by a local employer, so those weren’t exactly good models. In any case, they said, their community will appeal to a much broader segment of the population than the New Urbanists, and therefore more likely to sustain growth in the future.

With that, the debate was concluded. What lingers, however, are some truths that show both sides need to do some more work.

The New Urbanists, fresh on the scene, seem overly evangelical in their approach, and demand a great deal of faith in the Master (Planner). The slow, organically grown towns of which they are so fond were largely planned before the car. While many of these towns, like Charleston, South Carolina, are sentimental favorites, their practical replication in today’s transportation-intensive, constantly changing real estate market is questionable.

The Dispersionists, on the other hand, have been around for quite a long time, and are the modus operandi for much of the earth’s population. They seem uninvolved in the aesthetics of the built environment, preferring to leave this up to individual taste, and the result is a rather shabby, cluttered contemporary American scene. Some cleaning up is certainly in order.

While the New Urbanists have a hopeful approach in this regard, they are overreacting to the vast consumer-oriented real estate development world that operated up until 2007, and are missing the fundamentals of how a real community works. None are built around employers or economic producers in any significant way. None admit the lowest socioeconomic groups. Content, perhaps, to dabble with shopping districts and farmer’s markets, New Urbanists have yet to offer what contemporary employers need – space, flexibility, and room to grow. They therefore seem doomed to create peripheral urban designs rather than communities integrated with 21st century employers.

Dispersionists would do well to pay a bit more attention to the natural environment, for the general public is quite aware of the toll that this strategy has taken. Developers, having overbuilt in so many markets recently, will face tough opposition to bulldozing another woodland, given the empty real estate that exists in our cities today.

It seems inevitable that dispersionist strategies will continue; they largely dominate our real estate development world and will continue to do so. They make the most economic sense, they leave the future choices to the future generations, and they respond to people’s natural density tendencies. One hopes that the New Urbanists will nudge the market a bit more towards aesthetic continuity and environmental stewardship as the next wave of growth inevitably begins again, and that the debate remains healthy, productive, and positive as citizens get re-engaged about the future of their cities.

Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

Photo courtesy of BigStockPhoto.com.

The Three Laws of Future Employment

Daniel Jelski — Mon, 06 Feb 2012 00:38:55 -0500

As a college educator I am tasked with preparing today’s students for their future careers.

Implicit is that I should know more about the future than most people. I do not - at least not in the sense of specific predictions. But I can suggest some boundaries on the path forward.

Let’s start with the three Laws of Future Employment. Law #1: People will get jobs doing things that computers can’t do. Law #2: A global market place will result in lower pay and fewer opportunities for many careers. (But also in cheaper and better products and a higher standard of living for American consumers.) Law #3: Professional people will more likely be freelancers and less likely to have a steady job.

Usually taken for granted is that future jobs depend on STEM disciplines (science, technology, engineering, and math). This view is eloquently expounded by Thomas Friedman, who argues that the US is falling behind China and India in educating for STEM careers.

Alex Tabarrok makes a case for STEM in his excellent little e-book, Launching the Innovation Renaissance. He points out that “the US graduated just 5,036 chemical engineers in 2009, no more than we did 25 years ago. In electrical engineering there were only 11,619 graduates in 2009, about half the number of 25 years ago.” Similarly, the numbers of US computer science grads is flat over the past quarter century. Thus Tabarrok believes the US is falling behind in innovation and related technologies.

But Tabarrok and much of the conventional wisdom are wrong. The job that electrical engineers did 25 years ago has almost nothing to do with the job they do today. Computers now do much of the work that people used to do - computers design circuits, do all the drafting, plan the manufacturing, etc. It used to be that an electrical engineer designed the electronics in your car. To some extent they still do, but today even the smallest components come with operating systems - in other words, your car is programmed rather than designed. Electrical engineering is a career that follows Law #1: much of it has been (and will continue to be) computerized out of existence.

Computer science careers illustrate Law #2. Computer science services are among the most tradable in the world. It is literally a global job market. Thus the number of computer scientists graduating from American colleges is an irrelevant number. Further, computer science jobs are themselves being computerized. The job description for today’s computer scientist is only tenuously related to what they did 25 years ago.

Laws #1 & 2 predict that there will likely be fewer STEM jobs in the future – they are both easily computerized and tradable. People will always be employed in STEM disciplines, many of them highly paid, but they’ll be paid for smarts rather than education. The disciplines will be much more competitive, with older and less talented workers left on the sidelines. Tom Friedman and Alex Tabarrok, reflecting conventional wisdom, are mistaken in maintaining that increasing STEM education is a key to future economic competitiveness.

So if computerized, tradable skills won’t create much new employment, if any, what will? Clearly, it will be non-tradable skills that can’t be computerized. At their most valuable these jobs depend on human-human interaction - empathy. Counseling (of any sort: psychiatric, financial, weight loss, etc.), sales, customer service, management, and personal services all rely on empathy, as does waitressing. While much teaching can be computerized, what remains will depend more on empathy than anything else. “They don’t care what you know, but they will know if you care,” is a maxim future teachers should take to heart.

According to Ronald Coase it is generally cheaper to engage freelance labor than to hire employees, unless the market transaction costs are too high. The internet lowers transaction costs and makes smaller firms (fewer employees) more economical. Thus we arrive at the Third Law of Future Employment: professional people will more likely be freelancers and less likely to have jobs. This already happens in computer science: projects are put out to bid on websites for global competition. Much journalism today is freelance, as is graphic design, engineering, or any number of other skills. The third law predicts this trend will grow.

The bottom line is that today’s young people need to develop an individually unique set of marketable skills for tomorrow’s job market. A marketable skill is more than an education (which is not a skill), and also more than just job training (a skill, but no larger expertise). The useful benchmark is it takes 10,000 hours to become expert in something.

I recently had a student – an English major – in my chemistry class. He had no good reason for being there; he could have fulfilled requirements with much less effort. So I asked him why?

“It fit into my schedule and I felt like doing it. I like it.”

“What are you going to do with an English degree?” I asked.

“I’m writing a novel. It’s about cowboys.”

Now conventional wisdom says this guy is all wet. Alex Tabarrok would have him drop the English degree in favor of chemistry (or chemical engineering). His English professors will say that his chances of publishing a novel (much less earning a living off one) are next to zero. SUNY Chancellor Nancy Zimpher has Six Big Ideas for SUNY - and my student doesn’t fit into any of them.

But think about the skill set needed to write a novel, of which writing may be the least of it. He has to have something to write about, which means nurturing a general curiosity about the world – not just cowboys, but apparently also chemistry. He learns to be a keen observer of people: their appearance, what they wear, their character, mannerisms, and language. He develops the self-discipline and self-confidence to finish a project because it is intrinsically important, not because people say “Wow, that’s wonderful. You’re writing a novel!” Because of his novel my student becomes expert in many skills that can translate into a wonderful career.

How is that different from mere education? The typical English major writes papers comparing Proust with Balzac. Not that there’s anything wrong with that, but it isn’t building the 10,000 hours. It simply amounts to following directions carefully, and eventually collecting a credential. True expertise, by contrast, is something self-generated, following your own passion and talents. This isn’t to say education is always a waste of time, but it will no longer be sufficient to build a career.

So here is my career advice to today’s students:

If you passionately like something and are good at it, then do that. STEM, for example, will always have a place for smart, hardworking people. Likewise, good writing can’t be computerized, but you need both talent and passion to be successful.
Start work on the 10,000 hours. Your education may help, but very little you do in school contributes to the total. Be it car detailing, truck driving, computer programming, drawing, writing – acquire an expert skill in something. Write a novel.
Empathize if you can. Computers can’t do that. Jobs that involve empathy (along with other skills) will always be in demand.
If you got it, flaunt it. That’s something else computers can’t do. Beauty has value, especially for women but also for men. This is wonderfully described in Catherine Hakim’s book, Erotic Capital. Even if you don’t got it, take advantage of youth. Acquire a fashion sense, take care of yourself, look as good as you can.

Work hard. Have fun. Get rich.

Daniel Jelski is a professor of chemistry at New Paltz, and previously served as dean of New Paltz’s School of Science & Engineering.

Indianapolis: From Naptown to Super City

Aaron M. Renn — Sat, 04 Feb 2012 00:38:49 -0500

I have long touted the sports strategy that Indianapolis used to revitalize its downtown as a model for cities to follow in terms of strategy led economic and community development. I really think it sets the benchmark in terms of how to do it, and it has been very successful.

Indy is hosting the Super Bowl on Sunday, something that is locally seen as a sort of crowning achievement of the 40 year sports journey. As part of that, the Indianapolis Star and public TV station WFYI produced an hour long documentary on the journey called “Naptown to Super City.” I think it’s a must watch for anyone who is trying to figure out to revitalize their own downtown. An hour isn’t short, but given the billions of dollars cities pour into this, I think it’s worth doing some homework. It tells the story of how Indy went from a deserted downtown where local Jaycees were licensed to take their shotguns and kill pigeons to one where the Super Bowl is being hosted today.

I’ll talk more about the Indy strategy in a bit, but first the show. If you are in Google Reader this won’t display for you, so click here to watch.

One thing this brought home for me is the true magnitude of the change. Perhaps I’m being a bit uncharitable, but Indianapolis almost literally started with nothing. It was never a major, important American city. It had no brand in the market. And it had a downtown that was all but dead. Everything they have today was built almost from scratch.

Why do I think the Indy sports strategy was such a good one? Two reason: it was a good strategic area to go after, and it was backed up with very intelligent execution.

First, five reasons this was a good strategic goal to pursue:

It just fits the character of the city. Hoosiers love sports. The Indianapolis 500 and high school basketball were long established. It’s something they could behind in a way that they would never have gotten behind being the “vegetarian capital of the world” or something like there. It was authentic to the city. If you watch the video, you’ll note how locals embraced the events that were held that. That goes a long way towards explaining the success of the strategy. You have to be authentic to a place in your development efforts.
It was a whitespace opportunity where Indy could get first mover advantage. Today every city thinks they can make money off sports, but Indy really pioneered the notion that you could use sports as an economic development tool. There were a lot of firsts along the path, and that’s one reason Indy was able to take out a leadership position. Just as one example, Indy was first to do the “build it and they will come” model of building a stadium before having a team. As a result, they were able to grab the Colts, and do it in an era when you didn’t have to mortgage your whole city to make a team relocation happen.
Being America’s top city for sports events was a realistically achievable goal. I know this because the city achieved it. This is in great contrast to the umpteen cities who all claim they’ll be the “best cycling city in America” or some such.
There were huge collateral benefits to sports beyond the direct economic impact of the events and the jobs they support. They bring people to the city to show it off to people who might not otherwise come. They enliven downtown and create events that locals might actually want to attend. They also have been an amazing brand opportunity. Just think of the Colts. How many times a week during football season does the word “Indianapolis” get said on TV? Probably hundreds if not thousands. Imagine if the city had to pay advertising dollars for that exposure? Yes, sports is expensive, but I think it could be justified just as cost-efficient marketing alone. Think about how much companies pay just to put their name on the stadium. How much more is it worth to put your city’s name on the team or the event? Think about how much advertisers will be paying for a 30 second commercial in the Super Bowl? What’s it worth for all those mentions of your city during the Super Bowl again?
It was an initiative that had the possibility of being truly transformative for the city. Again, I know this is true because it was.

I’m not going to claim these were actually the thoughts going through people’s minds as the sports strategy developed or that it was this calculated. But all of these things were implicitly true all along, and I think clearly the people pushing sports must have gotten it on that at some level. So sports meets the first test of a great strategy in that it set out after a good strategic goal.

It was also something where there was a level of execution detail that far exceeded what most cities do. In business, it’s one thing to have an idea. It’s another thing to execute on it and achieve market leadership. It’s still another to generate sustainable competitive advantage that keeps you there over the long haul. Indianapolis has managed to do all of these with sports. I’ll highlight eight examples of how it did this:

It invested in world class facilities. A lot of these have remained top rated even long after they opened, like Conseco Fieldhouse, which is still ranked every year as the best arena in the United States.
Two, it laid out an entire district downtown around events hosting, with everything you need in close proximity – venues, the convention center, hotels, shopping, and entertainment. This is something that’s already been widely commented on by Super Bowl visitors who are amazed you don’t have to get shuttled around all over the place and that you can actually walk directly from the media hotel to the hotels where the teams are staying.
Three, because of this Indy is able to effectively “saturation rebrand” downtown for an event and otherwise cater to events in a way that few other cities can or will. In effect, the city has converted its downtown into a giant sound stage. Take a look at the pictures of the city. The whole downtown as been rebranded after the Super Bowl, including, for example, plastering a huge Lombardi Trophy images on the side of the city’s premier hotel. You can debate the value of this to the city, but there’s no denying its value to the NFL. How many cities are willing to do this to the extent Indianapolis is?
Indy created the Indiana Sports Corp. as the first ever non-profit management company for events. Today, everybody has adopted that model.
The city cultivated a large, experienced volunteer base for putting on events that is much more powerful than what others cities have.
Indy has been willing to take calculated risks in support of the strategy. Building the Hoosier Dome with no team to play in it – big risk.
It not only went after the events, it went after the sanctioning bodies that determined where the events would be held. The most important is of course the NCAA, but there are others too. This has resulted in Indy having a “cluster” of these organizations and direct access to the people making decisions that pays incalculable dividends. This is one area where the “face to face” discussions that occur in Indy gives the city a big leg up. It’s not just better for selling, it gives Indy critical advanced intelligence about how these organizations are conceiving of their future events needs.
Last but certainly not least, this has been a sustained, 35 year commitment. It wasn’t a party politics thing. It was a single project thing. It wasn’t a flash in the pan idea. It was something that has been relentlessly pursued over the long haul.

Add all this up and it is easy to see why still today, three or four decades after it first started and after pretty much every city decided to go after these types of events, Indianapolis is still the best place in America to host a sports event.

I hope this gives you a flavor why the Indy sports strategy was so good and so successful. It’s certainly something that’s not without its failures and downsides. The fact that sports has consumed disproportionate civic resources is one of them, and one highlighted by the documentary. But on the whole, most people seem very happy with the results.

Something the video highlights at the end is one essential attribute for success that you can’t plan for or make happen – luck. They ask questions like, what if the “Save the Pacers” telethon had failed back in the 70’s? What if the seats in the Hoosier Dome had been the originally planned variegated colors instead of the Colts blue and white colors when Bob Irsay walked in to check it out? There were many critical turning points where without a lucky break, who knows if the future of downtown Indy might have been radically different in some way. It should give us some humility about the limits of our ability to simply will things into being. On the other hand, it reminds us that if you aren’t in the game, if you aren’t swinging the bat, you don’t have any chance at all of hitting that home run. You have to play if you want to win.

This piece originally appeared at The Urbanophile.

Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile, and operates Telestrian, an online tool for economic and demographic data.

Photo of Lucas Oil Stadium courtesy of BigStockPhoto.com.

Who Stands The Most To Win – And Lose – From A Second Obama Term

Joel Kotkin — Thu, 02 Feb 2012 12:45:45 -0500

As the probability of President Barack Obama’s reelection grows, state and local officials across the country are tallying up the potential ramifications of a second term. For the most part, the biggest concerns lie with energy-producing states, which fear stricter environmental regulations, and those places most dependent on military or space spending, which are both likely to decrease under a second Obama administration.

On the other hand, several states, and particularly the District of Columbia, have reasons to look forward to another four years. Under Obama the federal workforce has expanded — even as state and localities have cut their government jobs. The growing concentration of power has also swelled the ranks of Washington‘s parasitical enablers, from high-end lobbyists to expense-account restaurants. While much of urban America is struggling, currently Washington is experiencing something of a golden age.

So what states have the most to lose from a second Obama term? The most obvious is Texas, the fastest-growing of the nation’s big states. Used to owning the inside track in Washington during the long years of Bush family rule, the Lone Star state now has less clout in Congress and the White House than in recent memory. Texans are particularly worried about restrictions on fossil fuel energy development, which is largely responsible for robust growth throughout the state.

“Obama now wants to take credit for the increased production that has happened, but [increased production] has been opposed in every corner by the administration,” says John Hofmeister, founder of the Houston-based Citizens for Affordable Energy and former CEO of Shell USA. Hofmeister fears that in a second term, with no concern for reelection, Obama could exert even greater controls on fossil fuel development. This would have dramatic, negative implications not only for Texas but for the entire national energy grid, which includes North Dakota, Wyoming, Montana, West Virginia, Oklahoma, Alaska and Louisiana. These states fear that the nation’s recent energy boom, which has generated some of the nation’s strongest job and income growth, could implode in Obama’s second term.

Take Louisiana, which is still recovering from Hurricane Katrina in 2005 and the BP oil spill in 2010. The administration’s moratorium on offshore drilling, sparked by the spill, has had a deleterious effect on the state’s energy economy, according to a recent study, with half offshore oil and service companies shifting their operations to other regions and laying off employees.

Once the moratorium was lifted in 2010, companies have faced long delays for new wells, growing from 60-day delays in 2008 to more than 109 last year . “The energy states feel they are being persecuted for their good deeds,” says Eric Smith, director of the Tulane Energy Institute in New Orleans. “There is a sense there are people in the administration who would like this whole industry to go away.”

Many of these same states also worry about the administration’s proposed downsizing of the military. Obama’s move to cut roughly towards $500 billion in defense spending may make sense, but it threatens places with large military presences such as Texas, Florida, Oklahoma, Virginia, Georgia, South Carolina and New Mexico.

The D.C. metro area might also be hit by defense cuts, but overall the it has many reasons to genuflect toward the Obama Administration. Federal wages, salaries and procurement account for 40% of the district’s economic activity, roughly four times the percentage of any state. Expanding regulation on energy, health care and financial services has sparked a steady job boom in lobbying, think tanks and other facets of the persuasion industry — including among Republicans –at a time when employment growth has been sluggish elsewhere.

D.C. partisans hail their city as the leader of a national urban boom. The district clearly benefits from diminished job opportunities in more market-based economies, particularly for educated 20-somethings.

No place has flourished as much as the capital, but a second term would be favorable to states such as Maryland, which depend heavily on research spending directed from Washington and where federal spending accounts for fifteen percent of the local economy, over seven times the national average. Maryland agencies such as the National Institutes for Health will likely expand under an increasingly federalized health care system — particularly if Democrats gain more seats in Congress with an Obama win.

Other big states that may benefit from a second term include New York, California and Illinois. New York benefits largely from the administration’s Wall Street leanings, despite the president’s recent attacks on financial elite. Even for the non-conspiracy theorists, the administration’s ties to Goldman Sachs appear unusually intimate. Powerful allies like Democratic Sen. Charles Schumer, D.C.’s greatest Wall Street booster, suggest big money has little to fear from a second term.

Overall the administration’s basic policy approach has favored the financial giants. Support for bailouts, seemingly permanent low interest rates, few prosecutions for miscreant investment bankers, the institutionalization of “too big to fail” and easy loans for renewable fuel firms all have benefited the big Wall Street players.

Of course, a Republican victory would not be a disaster for these worthies. Companies like Goldman Sachs are hedging their bets by sending loads of cash to the likely Republican choice, former Massachusetts Gov. Mitt Romney.

But other New York interests, such as mass transit funding, would benefit from the current administration’s generally pro-urban, green sensibilities. Tight regulations on carbon emissions — increasing the price of fossil fuels — may help the competitive position of New York City, which has little industry left and relatively low carbon emissions per capita, in part due to a greater reliance on hydroelectric and nuclear power.

California also has reasons to root for an Obama victory. Although among the richest states in fossil fuels, particularly oil, the Golden State has become a bastion of both climate change alarmism and renewable energy subsidization. It adamantly won’t develop traditional its energy resources — which would help boost the state’s still weak economy — and Silicon Valley venture firms have eagerly grabbed subsidies and loans for start-ups from Energy Secretary Steven Chu’s seemingly bottomless cornucopia.

Furthermore, more powerful EPA would make California’s current “go it alone” energy and environmental problems less disadvantageous compared to more fossil-fuel-friendly states, leveling what is now a tortuous economic playing field.

Similarly, attempts to push the state’s troubled high-speed rail line — recently described in Mother Jones as “jaw-droppingly shameless” – will succeed only with strong backing by the federal government. Under a Republican administration and Congress, Brown’s beloved high-speed line would depend entirely on state and private funding, likely terminating the project.

But no state needs an Obama victory more than his adopted home state of Illinois. To be sure, having a native son in the White House has not prevented the Land of Lincoln from suffering one of the weakest economies in the nation. The state has one of the highest rates of out-migration in the country, according to recent United Van Lines data and Census results.

Even worse, the Land of Lincoln faces a fiscal crisis so great that it makes California look well-managed. Without a good friend in the White House, and allies in Congress, Illinois could end up replacing long-struggling, now-improving Michigan as the Great Lakes’ new leading basket case. Count Illinois 20 electoral votes in the Obama column.

This piece originally appeared in Forbes.com.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

Photo from BigStockPhoto.com.

Making Room for the Old and the New Economies

Joel Kotkin — Mon, 30 Jan 2012 22:46:14 -0500

The announcements by Sens. Ben Nelson (D-Neb.) and Kent Conrad (D-N.D.) that they would not run for reelection reflects what may be the last gasps of the Great Plains Democrats, much as California’s 2010 Democratic landslide assured that Republicans are soon to become endangered species in places like Los Angeles and Silicon Valley.

The conventional explanation for these trends centers on culture or ideology, but the real cause may lie with an evolving conflict between two dueling political economies.

On one side lies the information or “creative” economy, centered in coastal big cities and university towns. On the other lies the larger “basic” economy, which produces tangible items like food, manufactured goods and fossil-fuel energy.

In the past, both political parties had liberals as well as conservatives and operated in both of these economies. Republicans thrived not only in the Heartland but also in information hubs like Silicon Valley, Southern California and even parts of Manhattan.

Similarly, Democrats were influential in large swaths of the resource and agriculture-dependent parts of the country, including the Great Plains.

However, this is increasingly no longer true. Plains Democrats, like former Sen. Byron Dorgan of North Dakota, struggled to sell the state’s remarkable energy-driven recovery to an administration hostile to fossil fuels. Many in his state, and other energy centers like Texas, view the Obama administration’s resistance to oil and gas development as an assault on economies that, over the past decade, have had the highest rates of job creation and per capita income growth in the nation.

Dorgan, frustrated with Obama’s economic policy, chose not to run for reelection in 2010. But his House colleague, Earl Pomeroy, as well as Stephanie Herseth Sandlin (D-S.D.) were defeated. Nelson’s decision reflected a reaction to the strong GOP tide in the Plains. Registered Democrats in Nebraska have dropped from 38 percent to 33 percent just since 2008. The Republicans are at 48 percent.

This is a remarkable fall from grace. As recently as 2006, Democrats held four of the six Senate seats representing the 650 miles of plains from Nebraska north to the Canadian border. If, as expected, Nelson’s seat is taken by the GOP, there will be only one — Sen. Tim Johnson (D-S.D.), who is up for what might a difficult reelection battle in 2014.

Yet another energy-state Democrat, Sen. John Tester of Montana, is facing a tough reelection contest. If he is defeated, only a handful of Democrats from energy-producing states — Joe Manchin and Jay Rockefeller of West Virginia and Mary Landrieu of Louisiana — will be left in the Senate.

For the most part, these Democrats are not being chased from office by cultural brawls over issues like gay rights or abortion — particularly in the socially moderate northern Great Plains. More damaging is the perception that Obama Democrats have little regard, even contempt, for the fundamental economics of basic industries.

The battle over energy extends beyond the major oil-producing states. In places like eastern Ohio and western Pennsylvania, a nascent shale oil and gas boom is helping strengthen resurgence in industrial jobs lost decades ago. To many business people and workers in cities like Fort Wayne, Ind., looming Environmental Protection Agency regulations on mercury as well as carbon emissions could threaten this nascent revival. Reviving the Rust Belt, many believe, requires the cheap, reliable energy that, in the near future, can come only from fossil fuels.

Instead, the Obama team reflects an urban, information economy bias. In contrast to President Bill Clinton, who supported industrial and agricultural development back when he was governor of Arkansas, Barack Obama represents an odd admixture of faculty lounge and urban bloc machine. He never developed any links to the basic economy; his worldview appears largely divorced from the realities of production. “It’s MoveOn.org run by the Chicago machine,” according to the mayor of a California farming town, a longtime Democrat.

This tilt can also be seen in the widely touted strategy of conceding working-class white voters in states like Pennsylvania and Ohio in favor of what Democratic strategist Ruy Texeria calls “the mass upper middle class.”

Today barely half of white union members, says researcher Alan Abramowicz, tilt Democratic compared with nearly two-thirds who supported them in the 1960s, when Democrats still identified strongly with the industrial and energy sectors.

This trend may be further accelerated by the prospect of deep defense cuts. Many Plains and Southern states are dependent on defense-related expenditures. In the past, Plains Democrats and Southern Democrats, like retiring Sen. Jim Webb (D-Va.), were the product of or identified strongly with the military. But today, the Democratic Party’s hawkish traditions — extending from Harry S. Truman and Sen. Henry M. Jackson to Georgia’s Sam Nunn and Webb — is all but extinct.

A parallel development can be seen in the information hubs of the Northeast and West Coast. As recently as the 1990s, Republicans could muster considerable numbers both in Silicon Valley and throughout the Los Angeles Basin. Manhattan’s “silk stocking district” regularly sent Republicans to the House.

These exceptions barely exist today. Los Angeles County, home to nearly 10 million people, has only one Republican congressman. The Bay Area, which includes the district of House Minority Leader Nancy Pelosi (D-Calif.), and Manhattan each has none. The same pattern is evident at the state and local levels — where almost the entire delegation is now “progressive” Democrats.

As in the Great Plains, this shift parallels changes in the political economy. Over the past decade, the Bay Area experienced the single largest decline in manufacturing in the country, and New York ranked second. Now the information sector — as well as related finance, health and education sectors — dominate these economies. Even business people in these areas share little in common with business people in the manufacturing or energy economies.

With dense population and far less reliance on cheap energy like coal, greater metropolitan areas like New York or San Francisco find it easier to embrace the administration’s green (read expensive) energy agenda. Indeed, many companies, including Google and several investment banks, have invested in new renewable fuel and electric battery firms that have received large loans and other subsidies from Washington and sympathetic local governments, notably in California.

The information economy is also dependent on international markets, capital and, most particularly, brainpower. This makes them more sensitive to the nativist pandering that has been de rigueur in GOP national politics. Republican politicians, who now usually cater to their religious right by campaigning against gay marriage and abortion, turn off even libertarian voters in information hotbeds, where such views are anathema.

Sadly, these two economic visions exacerbate already existing cultural and political divisions. This also threatens the country’s ability to compete globally at a time of great opportunity. To overcome our competitors, particularly China, the United States needs a Washington that embraces both the information economy — where the United States still remains pre-eminent — and the basic economy — where we are seeing signs of a nascent renaissance.

Only when both economies are appreciated and supported in both parties can we find the common ground necessary to succeed in the coming decade.

This piece originally appeared in Politico.

Photo from BigStockPhoto.com.

Housing Affordability and Public Policy

Robert Bruegmann — Thu, 26 Jan 2012 00:38:01 -0500

Nothing in the world today affects citizens more directly than the home in which they live. And when it comes to housing no piece of recent research opens more interesting avenues of investigation than the Demographia International Housing Affordability Survey.

Individuals and families across the economic and social spectrum all over the world are eager to gain as much control as they can over the place where they live. They wish to make sure it cannot be taken away from them arbitrarily; they wish to control who has access to it and who can benefit from it; and, as much as possible, they wish to protect it against negative influences in the larger community around it.

This combination of goals sets up some inherent conflicts in every society. What is good for a given individual or family is not necessarily good for a society as a whole, and what is good for society as a whole is not necessarily good for any given individual or family. From this fundamental tension has sprung a bewildering set of arrangements for allocating and regulating land and residential structures on it. At one end of the political spectrum have been societies in which land is owned in common and is supposed to be allocated to individuals and families on the basis of merit or need. Such has been the case with many Utopian and Socialist societies. At the other end of the spectrum have been societies where the individual ownership of land and homes is considered a bedrock condition of a democratic society, where ownership is widely dispersed, and individual rights and preferences have been zealously safeguarded from all but the most necessary intervention. One of the best examples of this would have been the United States, Canada or Australia in the nineteenth century. The trend over the last fifty years has been a convergence toward the middle of this spectrum as Socialist countries have abandoned the dream of complete common ownership and societies that traditionally were loath to interfere with individual property rights have adopted layer after layer of regulation intended to secure the health, safety and wellbeing of the larger society.

Given the fundamental importance of housing in all societies, it is remarkable how little we know about the results of housing policies in various parts of the world. In my own field of architectural and urban history, for example, if you were to ask even some of the greatest experts to compare what an average house or apartment unit in any two given cities looked like at some date in the past or even the present, what it would cost to buy and to operate them and what regulations would affect them, it is very unlikely that the individual would have more than rudimentary hunches. Historians can tell you in great detail about the palaces, townhouses and country estates of the powerful and wealthy, then and now, and about some of the efforts at reform housing by the government or charitable organizations, but at least until recently, the lack of information about how and where ordinary individuals live has been remarkable.

Part of this neglect is due to a discredited but lingering attitude that history is made overwhelmingly by the rich and famous and not by the decisions of millions of ordinary citizens. Part of it is simply that real estate ownership is now so dispersed and so intensely affected by local conditions that it is hard to quantify in ways that allow for comparative analysis. Partly it has been due to a widespread belief that commerce and industry are the driving forces in the world economy and that housing is a by-product of the larger economy. This attitude is, of course, obviously wrong-headed, as the central role of residential real estate in the recent economic downturn has proved. Residential real estate plays a huge and increasingly important role in the economy of every nation.

Given the obvious importance of housing, what should public policy be and the role of the individual, the developer, governmental agencies? Is there an optimal size for cities, for housing units? How much land should housing occupy? Should housing be separated from or integrated with other uses? Should government promote one kind of residential tenure over another, individual home ownership over rental or various kinds of collective ownership over individual property, for example? Have the citizens of a given city or nation underinvested or overinvested in housing? Are housing prices in line or out of line with individual and family incomes? Unfortunately there has been very little data for anyone trying to find answers to questions like these.

It was against this backdrop that the appearance, in 2004, of the first international housing affordability survey by Wendell Cox and Hugh Pavletich was such a revelation. It provided some of most reliable information ever compiled for those who wished to compare nations around the world with quite different housing policies. Cox and Pavletich had their own point of view. It is fair to say that both of them tend to favor market solutions to many of the most difficult questions about housing and how it is allocated and regulated, but their compilation of data, like the data found on Cox’s demographia.com website generally can stand on its own as one of the most impressive and reliable collections of comparative urban statistics to be found anywhere.

The issue that appears to have been the principle motivation to compile this data was the rise of various forms of “Smart Growth” policies around the world. Whether these policies were intended to enhance the environment or limit sprawl, they clearly had an effect on the price of housing, but what these effects were was very much in dispute. In the United States, for example, the question of whether the growth boundary around Portland, Oregon, has had an effect in raising housing prices, as some observers claim, or that the dual focus on development at the center and regulation at the edge has kept housing prices reasonable, has raged for a number of years now. The same debate has been joined in many other places, for example in Australia where the recent rise in prices has been particularly sharp and, given the vast extent of the country, the urban containment policies particularly contentious.

Cox and Pavletich went out in search of the data they felt could answer questions of this kind. Their conclusion, that the land use policies in places like coastal California, Vancouver, Britain and Australia, have dramatically driven up the cost of housing, and that the less intrusive policies of places like Atlanta and Houston has kept prices down has been controversial, but I think it is fair to say that a growing number of people who have looked at the figures have tended to agree that a good many well-meaning policies involving housing may be pushing up prices to such an extent that the negative side-effects are more harmful than the problems the policies were intended to correct. These observers have also noted that measures that restrict land supply, slow growth in the immediate area where the policies are in place and push up housing prices can be very attractive to individuals who already own their own homes.

In any case, the figures presented in this survey, like the collection of data on demographia.com more generally, are endlessly fascinating and very important. They provide some basis for exploring issues that will figure importantly in discussions of housing policy for decades to come.

Robert Bruegmann is professor emeritus of Art history, Architecture and Urban Planning at the University of Illinois at Chicago.
____

Note: This article appeared as the Introduction of the 8th Annual Demographia International Housing Affordability Survey, released January 22, 2012

Britain Fears a Developer’s Charter

James Stevens and Ian Abley — Wed, 25 Jan 2012 01:38:42 -0500

The UK Government’s Department for Communities and Local Government (DCLG) announced that there were only 127,780 new housing completions last year in Britain. British house building activity is down to levels of after the First World War, when reliable industrial records began, and still falling. In 1921 the British population was nearly back up to 43 million following the slaughter of the First World War. In 2011 the population of England, Wales, and Scotland is approaching 61 million people. By 2031 the British population is expected to be closer to 70 million. With such existing unmet and growing demand for new housing the DCLG, the Government department that runs the Planning System should be busy finding ways to allow developers to build.

Many feared that the National Planning Policy Framework (NPPF), prepared by the DCLG for an expected release in January 2012 would be a developer’s charter. We wish it was a developer’s charter! The NPPF continues planning policies, supported by all Parliamentary political parties, which continue to frustrate volume housebuilding. Developers have to prove that their proposals for house building are not merely about building useful homes at a profit, but are “sustainable development” when measured against disputable social and environmental criteria. No developer is free to build on their own land without first having to obtain planning approval from an array of third party interests all insisting on their interpretation of the moral idealism of sustainability.

This makes the NPPF an anti-development charter for all those who oppose house building and population growth. Anyone can claim that more house building and more households are unsustainable in their area, in the effort to stop a project which they don’t approve of.

The NPPF will do nothing to challenge the power of contemporary anti-development campaigners, who are well known. Anne Power, Lord Richard Rogers and other members of New Labour’s Urban Task Force (UTF) have correctly identified themselves as allied to the “Hands off Our Land” campaign run by The Daily Telegraph, the Conservative supporting newspaper. The UTF favors a continuing commitment to ‘… reclaiming brownfield sites and re-densifying cities.’ To build only on previously developed land is the green ideal of the UTF and the “Hands off Our Land” campaign.

We all know where these policies lead. Not to a golden age of regeneration for all, but to lucrative property investment for those with access to sufficient capital and the right connections to steer themselves through the planning system to obtain approvals. The volume of Greenfield land developed declined dramatically under New Labour. The present Conservative led Coalition Government continues the practice of obstructing development on Greenfield land.

Between 2000 and 2006 the total area of land built on for new housing fell by 23%, with a 42% fall in the annual amount of Greenfield land used. In 2010 76% of all housing was built on previously developed Brownfield land, a slight decrease from the 80% in 2009. Only 2% of housing was built on the Green Belts around major cities and towns. The Green Belt in England covers 13% of the land, or twice the area already developed for housing. Small wonder that the price of the shrinking supply of land with a prospect of being approved for sustainable development remains inflated.

House building was only increased from the low point of 2001 by increasing the density of development in the cities. Average densities rose from 25 dwellings per hectare (dph) in 2000, to 43 dph by 2010. In London the average density for new housing is much higher, at 115 dph in 2010.

Densification policies considered sustainable have meant that the majority of the working British public can no longer buy a new house with a garden, in ways that previous generations may have taken for granted. Instead the plan has been to squeeze more new households into less space. UTF supporters and the DCLG imagined they were regenerating cities and saving the planet for all of society. Like traditional Conservatives they mean to keep developers and the population off Britain’s ample supply of otherwise redundant farmland.

The Daily Telegraph’s campaign, best articulated by the conservative anti-growth philosopher Roger Scruton, is clearly the flip side of the UTF’s densification argument. He is happy as long as the population is kept away from the countryside he loves. ‘Thank God for obstacles to economic growth,’ says Scruton.

Scruton speaks for the comfortable who already enjoy plenty of space. The Daily Telegraph’s campaign is ultimately concerned that existing housing markets are protected, sustained through the division between Town and Country, and moralised as a concern for environment and heritage. New Labour supporters are more likely to read The Guardian, but its more middle-class readership finds nothing to object to in The Daily Telegraph’s campaign, in order to restrict the “sprawl” of suburbia and halt the imagined damage this will do to the environment and urban communities. The Guardian’s readership formed the bed-rock of New Labour’s support, and back Next Labour. The working class may have deserted Labour, but is depoliticized and passive. The Guardian and The Daily Telegraph – still supposed by many to be at opposite ends of the old-fashioned and defunct ideological spectrum of Left and Right – prove closer than either cares to think.

Labour Members of Parliament have traditionally feared the “flight to the suburbs” lest they lose voters and the associated tax revenue. The planning system has proved very effective in maintaining the political geography of Britain. Labour politicians negotiate their political dependency on urban containment with a Red-Green stance in urban areas, without threatening the Blue-Green interests of those who want to keep development out of the countryside. All depend on the denial of development rights that date from the 1947 Town and Country Planning Act, and which the NPPF reinforces.

Meanwhile working class families are squeezed into what little Twentieth Century suburbia is still affordable, competing unsuccessfully with the more affluent for ownership of this increasingly scarce and valued commodity. What new housing is built is at higher density, usually on the least attractive sites. That is land previously occupied by factories, old infrastructure, and utilities, or by council housing estates re-developed at higher densities. Yet even these unpopular sites enter the inflated British housing market, sustained through a chronic lack of house building.

The working class is caught in a political crusher made manifest through the planning system. The Red-Greens, who may imagine themselves on a new Left, gentrify towns and cities with “sustainable redevelopment”, and the Blue-Greens, who persist with being on the Right, protect their landscape for their exclusive enjoyment. Meanwhile the majority of home owners have come to depend on the inflated and unaffordable housing market. New Labour needed this house price inflation to allow the owner occupying majority to supplement inadequate wages by withdrawing equity from their homes. So does the Coalition. Deliberate or not, The Daily Telegraph’s commitment to building fewer new homes will stabilise what we have called the Housing Trilemma.

Our current predicament may be thought of as a Trilemma, in which house price inflation supports burdensome mortgage lending and private debt, while households in the owner occupied sector accept low quality housing conditions. High rents shadow private sector housing costs, and private rental housing quality is often of the lowest quality. Many in Britain, including the majority of the home owning middle class, are dependent on the Housing Trilemma remaining stable.

The planning system serves well in protecting the interests of existing home owners. Behind the NPPF’s moral idealism of sustainability, the immediate instrumental objective is to restrict new housing supply to avoid destabilising housing markets. Appearing as a moral mission to save the planet from developers, the NPPF and the denial of development rights sustains the Housing Trilemma. Debt is secured, but housing remains unaffordable, quality low, and house building activity is at an all time industrial low. This is not a conspiracy. It is a predicament.

When Britain’s elites talk about wanting to revive economic growth, they don’t mean a massive surge in new house building or an expansion of infrastructure. What they have in mind is a revival of financial services in The City, subject to uncertainties in the fragmenting Euro Zone, and the maintenance of high housing prices in the hope of more inflation to come. Meanwhile the countryside is kept pristine for the few who can afford access to it as a weekend retreat for the wealthy, including the pro-urban intelligentsia, in all their Red-Green-Blue moral plumage.

The Coalition could have challenged the Housing Trilemma. Instead they have reinforced it.

The result is predictable. Planning applications are falling in number and ambition. Only 25,000 new homes were approved in the second quarter of 2011 compared to 32,000 in the second quarter of 2010. This will be read by The Daily Telegraph campaign members as “proof” that there is no demand for development, inverting the causality. Money is being made out of an environmentally sanctioned scarcity rather than through increased productivity and innovation in a sector like house building and the wider construction industry. Britain’s already backward construction industry is further retarded, and it is becoming commonplace for social elites, and not only crazed nationalists, to blame immigration for housing shortages.

Britain’s economy needs growth, but is unlikely to get it from the house building sector. Britain too needs a dose of political reality while the pro-urban intelligentsia preen their green morality.

The Coalition cannot afford to confront the political problem of the Housing Trilemma if it is to sustain its fragile political base. Increasingly, only the elderly bother to vote and this equity rich group will be mostly satisfied with modest house price inflation as a hedge against general inflation, while savings in banks attract little return. Meanwhile an influential propertied elite still enjoys sustained house price inflation at the top of the market. They are anxious that environmental and heritage designations operate to enhance the exclusivity and enjoyment of their investments. The unelected charities, agencies and Non-Governmental Organisations that were aligned against the draft of the NPPF in July 2011 represent these elite interests. They may now back the redrafted 2012 NPPF with all its demands for sustainability. Their “Hands off Our Land” campaign has worked for them.

The NPPF means that house builders face a future in which building on Greenfield land is effectively considered an eco-crime. Only those who can develop Town Centre sites, perhaps as rental housing, or as luxury homes for the equity rich will thrive. Basically Britain is no longer building homes with gardens for sale to young working families on modest incomes.

If you are in a young working family, or hope to start one, the question is: What are you going to do about the housing predicament you and your friends face?

We have to face a stark reality. Sadly, there is no contemporary habit of young working families organising to demand housing collectively. Meanwhile the 2011 to 2012 production figures look set to be lower again, and the developmental uncertainties about to be articulated in a redraft of the NPPF in pursuit of sustainable development will further the decline in production.

Anticipating this feature of Britain’s ratcheting austerity does not make for a Happy New Year. Much depends on what the people of Britain, and particularly the young, do to demand that family houses are built at modest prices in places they want to live together. At present Britain fears a developer’s charter, even though the National Planning Policy Framework is nothing of the sort. Parliament might yet instead be in fear of people demanding cheap land on which to build a better place to live.

James Stevens is Strategic Planner at the Home Builders Federation, www.hbf.co.uk. Email him at james.stevens@hbf.co.uk. The views expressed are his own and not those of Home Builders Federation. Ian Abley is a site architect and runs the pro-development website audacity, www.audacity.org. Email him at abley@audacity.org. Together they organise the 250 New Towns Club, www.audacity.org/250-New-Towns-index.htm.

Preserving the "Ideal of a Property Owning Democracy:" Annual Demographia International Housing Affordability Survey

Wendell Cox — Mon, 23 Jan 2012 00:25:13 -0500

Demographia and Performanceurbanplanning.org have just released the 8th Annual Demographia International Housing Affordability Survey, with an introduction by Professor Robert Bruegmann of the University of Illinois at Chicago and author of Sprawl: A Compact History. The Survey is unique in providing cross-national housing affordability comparisons using the median house price data from leading indexes in Australia, Canada, Hong Kong, Ireland, New Zealand, the United Kingdom and the United States.

The Demographia International Housing Affordability Survey employs the “Median Multiple” (median house price divided by gross annual median household income, before taxes) to rate housing affordability (Table 1). The Median Multiple is widely used for evaluating urban markets, and has been recommended by the World Bank and the United Nations and is used by the Harvard University Joint Center on Housing.

Table 1 Demographia Housing Affordability Rating Categories
Rating	Median Multiple
Affordable	3.0 & Under
Moderately Unaffordable	3.1 to 4.0
Seriously Unaffordable	4.1 to 5.0
Severely Unaffordable	5.1 & Over

Historically, the Median Multiple has been remarkably similar in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States, with median house prices having generally been from 2.0 to 3.0 times median household incomes (historical data has not been identified for Hong Kong). This affordability relationship continues in many housing markets of the United States and Canada. However, the Median Multiple has escalated sharply in the past decade in Australia, Ireland, New Zealand, and the United Kingdom and in some markets of Canada and the United States. There has also been a substantial loss in affordability in recent years in Hong Kong.

Housing Affordability in 2011

Housing affordability was little changed in 2011, with the most affordable markets being in the United States, Canada and Ireland. The United Kingdom, Australia, New Zealand and Hong Kong continue to experience pervasive unaffordability (Figure 1).

The Survey covers325 metropolitan markets, including the 81 major markets with more than 1,000,000 population (Table and Chart Attached). There were 24 affordable major markets, 20 moderately unaffordable major markets, 13 seriously unaffordable major markets and 24 severely unaffordable major markets (Table 2). The severely unaffordable major markets were principally in the United Kingdom (8), the United States (6), and Australia (5). Hong Kong was severely unaffordable and there were three severely unaffordable major markets in Canada and one in New Zealand (Table 2). Australia had the highest major market Median Multiple outside Hong Kong (Figure 2).

Table 2 Housing Affordability Ratings by Nation: Major Markets (Over 1,000,000 Population)
Nation	Affordable (3.0 & Under)	Moderately Unaffordable (3.1-4.0)	Seriously Unaffordable (4.1-5.0)	Severely Unaffordable (5.1 & Over)	Total	National Median
Australia	0	0	0	5	5	6.7
Canada	0	3	0	3	6	4.5
China (Hong Kong)	0	0	0	1	1	12.6
Ireland	0	1	0	0	1	3.4
New Zealand	0	0	0	1	1	6.4
United Kingdom	0	0	8	8	16	5.0
United States	24	16	5	6	51	3.1
TOTAL	24	20	13	24	81

The most affordable major market was Detroit, with a Median Multiple of 1.4. This Median Multiple is artificially low, arising from the collapse of housing demand in the most severely depressed major market in the United States. There were another 22 affordable major markets, the most affordable of which were Atlanta, Phoenix, Rochester, Cincinnati, Cleveland and Las Vegas. The strong growth markets of Dallas-Fort Worth, Houston, Orlando, Jacksonville, Nashville, Oklahoma City, Sacramento and Indianapolis also achieved affordable ratings.

All major markets in Australia and New Zealand, as well as Hong Kong were severely unaffordable.
Hong Kong was the least affordable major market (ranked 81st), with a median multiple of 12.6. Vancouver was second most unaffordable, at 10.6 (ranked 80th). Sydney was the third most unaffordable, at 9.2 (ranked 79th). Melbourne and Plymouth & Devon all had Median Multiples above 7.0.

Among all 325 markets surveyed, there were 128 affordable markets, 117 in the United States, 9 in Canada and 2 in Ireland. There were 71 severely unaffordable markets, principally concentrated in Australia and the United Kingdom (Table 3). Honolulu and Bournemouth & Dorsett (8.7) were the least affordable outside the major markets.

Table 3 Housing Affordability Ratings by Nation: All Markets
Nation	Affordable (3.0 & Under)	Moderately Unaffordable (3.1-4.0)	Seriously Unaffordable (4.1-5.0)	Severely Unaffordable (5.1 & Over)	Total	National Median
Australia	0	0	7	25	32	5.6
Canada	9	19	1	6	35	3.5
China (Hong Kong)	0	0	0	1	1	12.6
Ireland	2	3	0	0	5	3.3
New Zealand	0	0	3	5	8	5.2
United Kingdom	0	1	12	20	33	5.1
United States	117	64	16	14	211	3.0
TOTAL	128	87	39	71	325

Preserving the "Ideal of a Property Owning Democracy"

One of the principal accomplishments of high-income world societies has been the expansion of property ownership and home ownership to the majority of the population. At the same time, there are dark economic clouds on the horizon. Governments in high income nations are faced with some of the most challenging times in their history. In this environment, the property owning middle class is likely to face significant challenges in the longer run. Since housing is largest element in household budgets, unaffordable housing is a serious threat to the standard of living.

At the same time, the economic evidence shows that more restrictive land use regulations, such as urban growth boundaries, have been an important factor in the deterioration of housing affordability. On this point, economist Anthony Downs of The Brookings Institution stressed the importance of maintaining the "principle of competitive land supply." The escalation of house prices relative to incomes, from Sydney and Vancouver to London and across California testify to the failure of planning to maintain that principle. The record shows that smart growth (urban consolidation and compact cities policies) is incompatible with housing affordability.

But there are signs of hope. Florida repealed its growth management law ("smart growth") in 2011. Further, a recent New Zealand government report outlined the importance of a competitive land supply in restoring housing affordability to that nation.

Four decades ago, urbanologist Peter Hall expressed concern about the threat of such policies to the "ideal of a property owning democracy." The Demographia International Housing Affordability Survey is dedicated to younger generations who have right to expect they will live as well or better than their parents. In large measure due to land use planning that has made housing unaffordable, they may not.

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

----

Note: The 8th Annual Demographia International Housing Affordability Survey is sponsored in Canada by the Frontier Centre for Public Policy.

Photo: Suburban Montréal (by author)