Middle Class

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

How Lower Income Citizens Commute

Wendell Cox — Wed, 08 Feb 2012 00:38:16 -0500

One of the most frequently recurring justifications for densification policies (smart growth, growth management, livability, etc.) lies with the assumption that the automobile-based mobility system (Note 1) disadvantages lower income citizens. Much of the solution, according to advocates of densification is to discourage driving and orient both urbanization and the urban transportation system toward transit as well as walking and cycling.

Of course, there is no question but that lower income citizens are disadvantaged with respect to just about everything economic. However, there are few ways in which lower income citizens are more disadvantaged than in their practical access to work and to amenities by means of transit, walking and cycling. Indeed, the impression that lower income citizens rely on transit to a significantly greater degree than everyone else is just that – an impression.

The Data: This is illustrated by a compilation of work trip data from the five-year American Community Survey for 2006 to 2010. In the nation's 51 major metropolitan areas (more than 1,000,000 population), 76.3% of lower income employees use cars to get to work, three times that of all other modes combined (Figure 1).

Admittedly, this is less than the 83.3% of all employees who use cars for the work trip, but a lot more than would be expected, especially among those who believe that transit is the principal means of mobility for low income citizens. Overall, 8 times as many lower income citizens commuted by car as by transit. In this analysis, lower income citizens are defined as employees who earn less than $15,000 per year, which is approximately one-half of the median earnings per employee of $29,701. .

Perhaps most surprising is the fact that only 9.6% of lower income citizens used transit to get to work. This is not very much higher than the 7.9% of all workers in the metropolitan areas who use transit. (Table 1).

Table 1
Work Trip Market Share: 2006-2010
Lower Income Employees and All Employees
Metropolitan Areas Over 1,000,000 Population
		Lower Income Employees
	All Employees	Market Share	Employees Earning Under $15,000 Annually	Market Share
Car, Truck & Van: Alone	56.72	73.4%	9.56	63.1%
Car, Truck & Van: Carpool	7.67	9.9%	2.00	13.2%
Car, Truck & Van: Total	64.38	83.3%	11.56	76.3%
Transit	6.14	7.9%	1.46	9.6%
Walk	2.19	2.8%	0.89	5.9%
Other (Taxi, Motorcyle, Bicycle & Other)	1.34	1.7%	0.39	2.6%
Work At Home	3.24	4.2%	0.85	5.6%
Total	77.29	100.0%	15.16	100.0%

In Millions
Note: Median Earnings: $29,701
Source: American Community Survey: 2006-2010

Transit's small market share has to do with its inherent impracticality as a means of getting to most employment. According to ground-breaking research by the Brookings Institution, low-income citizens could reach only 35 percent of jobs in the major metropolitan areas by transit in 90 minutes. In other words, you cannot get from here to there, at least for most trips. It is no more reasonable for lower income citizens to spend three hours per day commuting than it is for anyone else. A theoretical 90 minute one-way standard is no indicator of usable mobility. It is likely that only about 8 percent of jobs are accessible by lower income citizens in 45 minutes (Note 2) and 4 percent in 30 minutes.

Automobility: Among the major metropolitan areas, lower income citizens use automobiles to get to work most in Birmingham (90.6%). Fourteen other metropolitan areas have lower income automobile market shares of 85% or more, including Charlotte, Detroit, Dallas-Fort Worth, Indianapolis, Jacksonville, Kansas City, Louisville, Memphis, Nashville, Oklahoma City, Raleigh, San Antonio, St. Louis and Tampa-St. Petersburg. As in all things having to do with urban transportation, there are two Americas: New York and outside New York. By far the lowest automobile market share for low income citizens is in New York, at 49.3%. The second lowest lower income automobile market share is in San Francisco-Oakland, at 63.1%. Washington and Boston are also below 70% (Table 2).

Table 2
Work Trip Market Share: Car, Truck or Van: 2006-2010
Lower Income Employees and All Employees
Metropolitan Areas Over 1,000,000 Population

		Lower Income Employees
Metropolitan Area	All Employees	Employees Earning Under $10,000	Employees Earning $10,000-$14,999	All Under $15,000 (Combined)
Atlanta, GA	88.3%	82.1%	83.8%	82.8%
Austin, TX	87.2%	77.8%	82.3%	79.5%
Baltimore, MD	85.9%	73.8%	77.7%	75.1%
Birmingham, AL	94.6%	89.3%	92.6%	90.6%
Boston, MA-NH	77.2%	66.4%	73.4%	68.5%
Buffalo, NY	89.7%	79.8%	84.3%	81.3%
Charlotte, NC-SC	90.9%	85.3%	88.5%	86.4%
Chicago, IL-IN-WI	80.0%	73.0%	77.0%	74.4%
Cincinnati, OH-KY-IN	91.2%	82.7%	87.9%	84.4%
Cleveland, OH	87.3%	78.1%	84.3%	80.3%
Columbus, OH	90.8%	80.3%	87.1%	82.6%
Denver, CO	85.3%	76.9%	82.1%	78.9%
Detroit. MI	93.1%	85.8%	89.9%	87.2%
Dallas-Fort Worth, TX	91.5%	85.4%	88.7%	86.7%
Hartford, CT	89.7%	76.8%	83.1%	78.8%
Houston. TX	90.7%	83.6%	86.4%	84.7%
Indianapolis, IN	92.6%	85.1%	90.2%	86.9%
Jacksonville, FL	91.6%	85.4%	88.3%	86.5%
Kansas City, MO-KS	90.6%	85.2%	87.6%	86.2%
Los Angeles, CA	84.7%	70.8%	74.1%	72.2%
Las Vegas, NV	89.7%	80.0%	82.4%	81.0%
Louisville, KY-IN	92.4%	85.6%	87.6%	86.3%
Memphis, TN-MS-AR	93.3%	85.0%	89.6%	86.7%
Miami, FL	88.3%	79.0%	80.9%	79.9%
Milwaukee, WI	89.3%	78.0%	83.5%	79.8%
Minneapolis-St. Paul, MN-WI	86.8%	76.9%	81.1%	78.2%
Nashville, TN	92.0%	86.8%	89.5%	87.8%
New Orleans, LA	90.0%	80.9%	83.8%	82.0%
New York, NY-NJ-PA	57.6%	50.0%	48.1%	49.3%
Oklahoma City, OK	93.1%	86.8%	90.8%	88.2%
Orlando, FL	89.6%	79.7%	86.1%	81.8%
Pittsburgh, PA	86.2%	77.9%	81.8%	79.2%
Philadelphia, PA-NJ-DE-MD	82.1%	70.6%	76.2%	72.4%
Phoenix, AZ	88.6%	80.5%	83.9%	81.8%
Portland, OR-WA	81.6%	69.3%	75.1%	71.3%
Providence, RI-MA	89.9%	79.9%	87.1%	82.3%
Raleigh, NC	90.8%	84.0%	88.0%	85.4%
Rochester, NY	89.9%	76.7%	87.0%	80.0%
Riverside-San Bernardino, CA	90.6%	83.4%	87.1%	84.8%
Richmond, VA	91.3%	83.2%	86.2%	84.2%
Sacramento, CA	90.7%	80.8%	86.3%	82.9%
San Antonio, TX	92.1%	85.7%	88.2%	86.6%
San Diego, CA	85.9%	73.6%	79.9%	76.0%
Seattle, WA	81.3%	72.4%	76.1%	73.7%
San Francisco-Oakland, CA	72.4%	63.3%	63.4%	63.3%
San Jose, CA	87.1%	74.3%	80.2%	76.4%
Salt Lake City, UT	88.1%	79.6%	83.4%	81.0%
St. Louis, MO-IL	91.1%	83.8%	88.6%	85.4%
Tampa-St. Petersburg, FL	90.1%	84.1%	87.6%	85.5%
Virginia Beach-Norfolk, VA-NC	89.8%	81.9%	81.8%	81.9%
Washington, DC-VA-MD-WV	77.1%	67.8%	71.4%	69.0%

Total: 51 Metropolitan Areas	83.3%	75.1%	78.3%	76.3%
New York	57.6%	50.0%	48.1%	49.3%
Outside New York	86.5%	77.8%	81.8%	79.3%

Average of Metropolitan Areas	87.7%	78.9%	83.0%	80.4%

Median	89.7%	80.0%	84.3%	81.8%
Maximum	94.6%	89.3%	92.6%	90.6%
Minimum	57.6%	50.0%	48.1%	49.3%

Note: Median Earnings: $29,701
Source: American Community Survey: 2006-2010

Transit: It’s not surprising that New York has by far the highest transit market share among lower income commuters. However, New York's lower income transit market share is only marginally higher than its market share among all commuters, at 31.5%, compared to 30.0% for the entire workforce. San Francisco-Oakland had the second highest lower income transit market share at 16.8%. Boston, Chicago, Philadelphia and Washington were also above 10%. The lowest transit market share among lower income citizens was 1.1% in Oklahoma City. Six other metropolitan areas had lower income transit market shares under 2.5%, including Birmingham, Indianapolis, Jacksonville, Nashville, Raleigh and San Antonio (Table 3).

Table 3
Work Trip Market Share: Transit: 2006-2010
Lower Income Employees and All Employees
Metropolitan Areas Over 1,000,000 Population

		Lower Income Employees
Metropolitan Area	All Employees	Employees Earning Under $10,000	Employees Earning $10,000-$14,999	All Under $15,000 (Combined)
Atlanta, GA	3.4%	5.6%	6.2%	5.8%
Austin, TX	2.6%	5.9%	5.3%	5.6%
Baltimore, MD	6.3%	9.8%	9.3%	9.6%
Birmingham, AL	0.7%	1.8%	1.8%	1.8%
Boston, MA-NH	11.9%	12.3%	13.3%	12.6%
Buffalo, NY	3.7%	6.9%	5.8%	6.6%
Charlotte, NC-SC	2.0%	3.5%	3.1%	3.3%
Chicago, IL-IN-WI	11.4%	11.9%	12.5%	12.1%
Cincinnati, OH-KY-IN	2.4%	4.3%	3.8%	4.1%
Cleveland, OH	2.7%	5.3%	3.1%	4.5%
Columbus, OH	1.7%	3.5%	3.8%	3.6%
Denver, CO	4.6%	7.2%	7.2%	7.2%
Detroit. MI	1.5%	3.5%	3.1%	3.3%
Dallas-Fort Worth, TX	1.6%	2.6%	2.9%	2.7%
Hartford, CT	2.8%	5.4%	5.0%	5.3%
Houston. TX	2.6%	4.1%	4.3%	4.1%
Indianapolis, IN	1.0%	2.6%	1.6%	2.2%
Jacksonville, FL	1.1%	2.5%	2.4%	2.5%
Kansas City, MO-KS	1.7%	3.8%	3.4%	3.6%
Los Angeles, CA	6.1%	11.7%	13.9%	12.6%
Las Vegas, NV	3.6%	7.4%	7.6%	7.5%
Louisville, KY-IN	2.2%	4.7%	3.7%	4.3%
Memphis, TN-MS-AR	1.3%	3.3%	3.1%	3.3%
Miami, FL	3.7%	7.9%	8.3%	8.1%
Milwaukee, WI	3.7%	7.7%	7.4%	7.6%
Minneapolis-St. Paul, MN-WI	4.6%	6.4%	6.4%	6.4%
Nashville, TN	1.0%	1.8%	2.0%	1.9%
New Orleans, LA	2.5%	5.0%	5.3%	5.1%
New York, NY-NJ-PA	30.5%	30.0%	34.0%	31.5%
Oklahoma City, OK	0.5%	1.3%	0.8%	1.1%
Orlando, FL	3.9%	7.4%	5.9%	6.9%
Pittsburgh, PA	5.8%	6.2%	6.4%	6.3%
Philadelphia, PA-NJ-DE-MD	9.3%	12.2%	11.8%	12.1%
Phoenix, AZ	2.2%	4.2%	4.9%	4.5%
Portland, OR-WA	6.2%	9.3%	8.3%	8.9%
Providence, RI-MA	2.6%	3.3%	3.2%	3.3%
Raleigh, NC	0.9%	1.9%	2.1%	2.0%
Rochester, NY	2.0%	4.8%	3.0%	4.2%
Riverside-San Bernardino, CA	1.6%	2.7%	2.3%	2.6%
Richmond, VA	1.9%	3.8%	4.4%	4.0%
Sacramento, CA	2.2%	5.1%	4.6%	4.9%
San Antonio, TX	1.3%	2.3%	2.8%	2.5%
San Diego, CA	3.3%	6.9%	6.1%	6.6%
Seattle, WA	8.2%	9.9%	10.5%	10.1%
San Francisco-Oakland, CA	14.6%	15.8%	18.4%	16.8%
San Jose, CA	3.3%	6.1%	6.0%	6.1%
Salt Lake City, UT	3.2%	5.2%	4.5%	5.0%
St. Louis, MO-IL	2.6%	4.8%	3.4%	4.4%
Tampa-St. Petersburg, FL	1.4%	2.9%	2.3%	2.7%
Virginia Beach-Norfolk, VA-NC	1.7%	3.8%	4.7%	4.1%
Washington, DC-VA-MD-WV	13.9%	14.3%	15.8%	14.8%

Total: 51 Metropolitan Areas	7.9%	9.4%	10.1%	9.7%
New York	30.5%	30.0%	34.0%	31.5%
Outside New York	5.1%	7.1%	7.4%	7.2%

Average of Metropolitan Areas	4.3%	6.3%	6.3%	6.3%

Median	2.6%	5.1%	4.7%	4.9%
Maximum	30.5%	30.0%	34.0%	31.5%
Minimum	0.5%	1.3%	0.8%	1.1%

Note: Median Earnings: $29,701
Source: American Community Survey: 2006-2010

Automobile and Transit Metrics: The difference in automobile commuting between all employees and lower income employees turns out to be surprisingly small. The least variation is in Birmingham, where the automobile market share among lower income commuters is 4.3% below that of all commuters. Charlotte, Kansas City and Nashville also have lower income market share variations of less than 5%. The greatest variation is in Los Angeles, where the automobile market share among lower income commuters is 14.7% less than for all commuters. The lower income automobile market share is also at least 12.5% below that of all commuters in Baltimore, New York and Portland.

Oklahoma City has the most lower income automobile commuters in relation to transit commuters, with 81.3 times as many lower income commuters using automobiles as opposed to transit. In Birmingham, Nashville and Raleigh, there are more than 40 lower income automobile commuters per transit commuter. In contrast, the number of low-income automobile commuters in New York is 1.6 times that of lower income transit commuters. Again, New York is in a class by itself (Figure 2). Outside New York, there are 11.0 times as many lower income automobile commuters as transit commuters. San Francisco-Oakland (3.8) and Washington (4.7) are the only other metropolitan areas with fewer than five lower income automobile commuters per transit commuter (Table 4).

Table 4
Work Trip Market Share: 2006-2010
Lower Income Employees and All Employees
Metrics: Car, Truck or Van & Transit
Metropolitan Areas Over 1,000,000 Population

	Lower Income Car, Truck or Van Market Share Compared to All			Car Truck or Van Market Share Times Transit
Metropolitan Area	Employees Earning Under $10,000	Employees Earning $10,000-$14,999	All Under $15,000 (Combined)	Car Truck or Van Market Share Times Transit
Atlanta, GA	-7.0%	-5.0%	-6.3%	14.2
Austin, TX	-10.8%	-5.5%	-8.8%	14.1
Baltimore, MD	-14.1%	-9.6%	-12.6%	7.8
Birmingham, AL	-5.6%	-2.1%	-4.3%	50.7
Boston, MA-NH	-14.1%	-5.0%	-11.2%	5.4
Buffalo, NY	-11.1%	-6.0%	-9.4%	12.4
Charlotte, NC-SC	-6.1%	-2.6%	-4.9%	25.9
Chicago, IL-IN-WI	-8.8%	-3.8%	-7.0%	6.1
Cincinnati, OH-KY-IN	-9.3%	-3.6%	-7.4%	20.4
Cleveland, OH	-10.5%	-3.3%	-8.0%	17.7
Columbus, OH	-11.5%	-4.0%	-9.0%	23.1
Denver, CO	-9.8%	-3.8%	-7.5%	10.9
Detroit. MI	-7.8%	-3.5%	-6.4%	26.2
Dallas-Fort Worth, TX	-6.7%	-3.0%	-5.2%	31.7
Hartford, CT	-14.4%	-7.4%	-12.2%	15.0
Houston. TX	-7.9%	-4.8%	-6.6%	20.5
Indianapolis, IN	-8.1%	-2.5%	-6.2%	39.1
Jacksonville, FL	-6.8%	-3.6%	-5.6%	35.1
Kansas City, MO-KS	-5.9%	-3.4%	-4.9%	23.7
Los Angeles, CA	-16.4%	-12.4%	-14.7%	5.7
Las Vegas, NV	-10.8%	-8.1%	-9.8%	10.8
Louisville, KY-IN	-7.4%	-5.3%	-6.6%	19.9
Memphis, TN-MS-AR	-9.0%	-4.0%	-7.1%	26.7
Miami, FL	-10.5%	-8.4%	-9.6%	9.9
Milwaukee, WI	-12.6%	-6.5%	-10.6%	10.5
Minneapolis-St. Paul, MN-WI	-11.4%	-6.5%	-9.8%	12.2
Nashville, TN	-5.7%	-2.7%	-4.6%	46.1
New Orleans, LA	-10.2%	-6.9%	-8.9%	15.9
New York, NY-NJ-PA	-13.1%	-16.5%	-14.4%	1.6
Oklahoma City, OK	-6.8%	-2.5%	-5.3%	81.3
Orlando, FL	-11.1%	-3.9%	-8.7%	11.8
Pittsburgh, PA	-9.7%	-5.2%	-8.2%	12.7
Philadelphia, PA-NJ-DE-MD	-14.0%	-7.2%	-11.8%	6.0
Phoenix, AZ	-9.1%	-5.3%	-7.6%	18.1
Portland, OR-WA	-15.1%	-7.9%	-12.5%	8.0
Providence, RI-MA	-11.1%	-3.1%	-8.4%	25.3
Raleigh, NC	-7.4%	-3.1%	-5.9%	42.8
Rochester, NY	-14.7%	-3.3%	-11.0%	19.1
Riverside-San Bernardino, CA	-8.0%	-3.9%	-6.5%	32.7
Richmond, VA	-8.9%	-5.6%	-7.7%	20.9
Sacramento, CA	-10.9%	-4.8%	-8.6%	17.0
San Antonio, TX	-7.0%	-4.2%	-6.1%	35.1
San Diego, CA	-14.3%	-7.0%	-11.5%	11.5
Seattle, WA	-10.9%	-6.4%	-9.3%	7.3
San Francisco-Oakland, CA	-12.5%	-12.4%	-12.5%	3.8
San Jose, CA	-14.7%	-8.0%	-12.3%	12.6
Salt Lake City, UT	-9.6%	-5.3%	-8.1%	16.3
St. Louis, MO-IL	-8.0%	-2.8%	-6.3%	19.6
Tampa-St. Petersburg, FL	-6.6%	-2.7%	-5.1%	31.8
Virginia Beach-Norfolk, VA-NC	-8.7%	-8.9%	-8.8%	19.8
Washington, DC-VA-MD-WV	-12.0%	-7.3%	-10.4%	4.7

Total: 51 Metropolitan Areas	-9.8%	-6.0%	-8.4%	7.9
New York	-13.1%	-16.5%	-14.4%	1.6
Outside New York	-10.1%	-5.5%	-8.4%	11.0

Average of Metropolitan Areas	-10.1%	-5.5%	-8.5%	12.7

Median	-9.8%	-5.0%	-8.2%	17.0
Maximum	-5.6%	-2.1%	-4.3%	81.3
Minimum	-16.4%	-16.5%	-14.7%	1.6

Note: Median Earnings: $29,701
Source: American Community Survey: 2006-2010

A Line Driven in a Car: Why is this the case? The "bottom line" has been perhaps best characterized by Marge Waller and Mark Allen Hughes in a research paper for the Progressive Policy Institute of the Democratic Leadership Council.

In most cases, the shortest distance between a poor person and a job is along a line driven in a car. Prosperity in America has always been strongly related to mobility and poor people work hard for access to opportunities. For both the rural and inner-city poor, access means being able to reach the prosperous suburbs of our booming metropolitan economies, and mobility means having the private automobile necessary for the trip. The most important response to the policy challenge of job access for those leaving welfare is the continued and expanded use of cars by low-income workers

Concerns about the automobile based urban transportation system excluding lower income citizens are misplaced. Despite all the hand-wringing, America's lower income population has considerable access to cars and far greater mobility as a result. It is no more than a figment of planner's imaginations that lower income citizens would be best served by constraining car use and trying to force them into transit service that more often than not gives circuitous, slower and often impossible for access to work opportunities.

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”

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Note 1: As used in this article, automobile includes cars, trucks and vans.

Note 2: This estimate estimates lower income 45 minute access using the ration between 90 minute and 45 minute for all employees (as reported in the Brookings Institution report)

Photograph: Classic early 1950s Buick, Sinsheim Auto & Technik Museum, Sinsheim, Baden-Württemberg, Germany (by author).

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.

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.

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.

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.

The Last Patrician: Romney Falls From Favor as America Loses Faith in Old Money

Joel Kotkin — Mon, 23 Jan 2012 10:37:32 -0500

Mitt Romney’s collapse in South Carolina reflects the larger, long-term decline of the American patrician class he represents. That decline was accelerated by the 2008 financial meltdown that resulted in both the wave of populist anger now being channeled by Romney’s Republican competitors, and the rise of the new post-industrial elite championed by President Obama.

Defined by inherited wealth, property and (like the original Roman patricians) a certain sense of propriety, Romney’s once dominant class has become increasingly marginalized as the bond between its interests and those of the rest of the nation has been effaced.

The son of top corporate executive and former Michigan Governor George Romney, Mitt holds joint degrees from Harvard’s law and business schools and enjoyed a lucrative career in private equity—a pedigree that may prove a bigger liability in the increasingly working-class Republican Party than his supposed social moderation. Both Newt Gingrich, who bested Romney in South Carolina, and Rick Santorum, who edged Romney in Iowa, successfully stressed their middle-class roots in a way impossible for him to imitate.

Romney’s Mormonism may be a departure from the old Protestant aristocracy, but the former Massachusetts governor epitomizes both the traditional strengths (a sense of modesty and self-control, a pristine personal life and lack of ostentation) and the weaknesses (an inability to personally connect with those less fortunate, less able or less educated) of the patricians. Perhaps nothing illustrates those weaknesses better than the inability of the richest major party candidate in a generation to comprehend how his scandalously low personal income tax rate and his use of offshore tax havens might offend voters, particularly in an economically ravaged state like South Carolina.

In a general election, against a far more disciplined foe than his party rivals, Romney’s patrician values could pose a mortal danger to the Republican cause—although perhaps not as lethal as the weaknesses of his rather pathetic GOP opponents. But in the primary Gingrich, Santorum and even Ron Paul have the advantage of those with little to lose. They can demagogue the national media class as “elitist” in ways that would not come naturally to the refined Mitt, or play well in the general election.

The decline of the patricians has been occurring slowly for decades as the interests of the wealthiest have diverged from those of ordinary Americans. In the country’s first two centuries, some common ground joined the traditional conservatives who made up the bulk of the moneyed class and who spearheaded the quest for national power and economic expansion with the muscular progressivism epitomized by the two President Roosevelts. The forgers of American preeminence in the business world—Henry Ford and Alfred Sloan, the Rockefellers, Thomas J. Watson of IBM, David Packard and Bill Hewlett—embraced the ideal of growth where enriching themselves meant creating unprecedented opportunities for hundreds of thousands of Americans. These men built and financed things—from oil wells and high-tech instruments to autos and suburban tract houses—essential to the prosperity of the working and middle classes they employed and depended on to purchase their products.

But the last successful product of this class, John Kennedy, was elected more than a half century ago, to lead a nation that was ascendant, confident and economically vibrant. In the ensuing decades patrician politicians, particularly George W. Bush and his 2004 opponent, John Kerry, lacked the self-confidence and charisma to transcend their class. In contrast, the two most popular and accomplished politicians of recent decades, Ronald Reagan and Bill Clinton, were self-made men from the working class with a great facility for establishing a clear connection with a vast portion of the electorate.

This patrician decline occurred at the state and local level as well. In New York, the old WASP establishment epitomized by Citibank’s Walter Wriston was deeply engaged in the fate of the region. Wriston once explained to me that before the 1980s banks had depended heavily on the New York public primary schools and especially the City University for employees; but as finance unmoored from the rest of the economy in its “go-go” period of derivatives and other abstract financial instruments it found itself less anchored to the rest of Gotham’s economy. In the new financial world, employers had little need for competent “ordinary” public school graduates as employees but rather courted “rocket scientists” with primarily Ivy League, Stanford or MIT pedigrees.

A similar pattern can be seen in California. The founders of the Golden State’s great aerospace, semiconductor and computer firms, the great suburban developers and even Hollywood moguls employed tens of thousands of skilled workers. Now few new facilities are built in the state, and few well-paying jobs outside of government exist for those without an elite education. When tech firms create middle-income jobs, they are increasingly located abroad or in other, cheaper states. The winners of each tech “boom” tend for the most part to be graduates of elite schools like Stanford rather than places like San Jose State. The idea that captains of industry and common citizens were in a significant sense “in the same boat” has disappeared—one of the common complaints that seemed to bridge the Tea Party and the erstwhile Wall Street occupiers.

Given how little the patrician class now provides to the rest of the country, it’s not surprising that public esteem for them has plummeted, particularly in the ongoing aftermath of the Wall Street meltdown of 2008. According to a recent Gallup survey, less than one in four Americans express any confidence in the primary institutions traditionally dominated by the patrician class—big business and the Wall Street banks. In contrast, roughly half or more expressed confidence in small business, the police and the military, areas where the patrician class is rarely present these days.

Seen in that light, it’s no surprise then that Republican voters preferred a Pennsylvania working-class warrior like Rick Santorum in Iowa and even as unlikely a self-identified champion of the middle class as Gingrich in South Carolina over the refined resume of a private equity executive.

The demise of the patrician class could be more palatable if it signaled the restoration of middle- or working-class political power in America. But the real winners here are not likely to be the largely suburban masses but a new, heavily urban littoral ruling class. Of course, the politically potent liberals who populate these urban areas live amidst far greater income inequality than the non-coastal, red-state “rubes.” Epitomized by Barack Obama, this ascendant force draws its strength largely from high reaches of academia, the media, the environmental lobby and, increasingly, the digital billionaires of Silicon Valley.

Like the old patricians, this new group shares a basic ideology. Indeed they can be seen as something of a clerisy—members of a secular congregation whose shared faith is in a society run by experts such as themselves according to the dictates of accepted science. That those experts would profit from their own advice is seen as merely part of a virtuous circle, scarcely worth the notice of the high-minded citizens scientifically calculating the common good. For the most part, the clerisy believes not so much in economic growth but in enforcing an agenda of ever-increasing urban density, racial redress, cultural experimentation and “green” energy. Obama reigns largely as high priest of this class.

The clerisy’s geographic base includes much of what was, a century ago, largely patrician-dominated turf: upper-income urban neighborhoods, high-end suburbs, and university communities. The difference now is that these areas have all expanded rapidly, due in large part to the growth of science-based industry and, perhaps more important, the money passed from patricians to their offspring. This money also funds many in the burgeoning nonprofit sector which employs many in the clerisy and often promotes their agenda.

Not surprisingly, all five of the largest donors to the Obama campaign—Microsoft, Comcast, the University of California, Harvard University and Google—represent the clerisy’s bases in academe and the information sector. Not a manufacturing, construction or traditional energy company made the top of the list.

The rise of this post-industrial ruling class may be the most tragic result of patrician decline. As bad or even evil as old patricians like Andrew Carnegie, Henry Ford and John Rockefeller could be, they were also generally nationalists who believed in economic growth and progress. Carnegie endowed not only concert halls and art galleries but libraries and institutes to help better middle- and working-class Americans even in small towns and rural hamlets. Teddy Roosevelt, a different sort of patrician, cleaned up New York’s police department, volunteered for the army and modernized the navy.

Most important, as employers, the old patricians understood the need for basic education and training for their workers. In contrast, the clerisy has little needed for the basically educated, but only an approving claque and faithful servants. Many members of the rising new elite and their well-off employees depends on non-profits or family trusts for income so that their economic interests lie primarily in asset inflation, whether in real estate or equities. No surprise then that the businesses with which they most identify are media and social media companies that outside of the odd receptionist employ largely the best educated and affluent. Significantly, these companies’ stocks provide huge increases in wealth without causing any direct harm to their holders’ delicate environmental and aesthetic sensibilities. After all, the environmental impact of a computer company can easily be shifted out of the view of the Bay Area, as for instance Apple functions as an ideas company in the United States, and a manufacturer in China.

In contrast, the clerisy generally feels indifferent or even contemptuous toward the basic industries—home building, fossil fuel energy, basic manufacturing—that still provide the best route to increased wealth and opportunity for the middle and working classes. The rejection of the XL Keystone project by Obama last week represents just the most obvious expression of this agenda. In a second term, we may see this approach amplified as the EPA and other government agencies seek to regulate any tangibly based economic growth.

In this sense, then, the decline of the patrician class—like their antecedents in the late Roman Republic—represents something of a tragedy for the rest of us. With the middle and working classes divided by social and cultural issues and with no credible champion for their economic concerns, power may simply shift to the clerisy, supported by their media enablers. As the Who once famously put it: “Meet the new boss, same as the old boss.”

No matter how much we might dislike Mitt Romney and his aristocratic ilk, we may someday look back at him and his class with something approaching nostalgia.

This piece originally appeared at TheDailyBeast..

Photo from BigStockPhoto.com.

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”

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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)

This Is America's Moment, If Washington Doesn't Blow It

Joel Kotkin — Thu, 19 Jan 2012 11:13:18 -0500

The vast majority of Americans believe the country is heading in the wrong direction, and, according to a 2011 Pew Survey, close to a majority feel that China has already surpassed the U.S. as an economic power.

These views echo those of the punditry, right and left, who see the U.S. on the road to inevitable decline. Yet the reality is quite different. A confluence of largely unnoticed economic, demographic and political trends has put the U.S. in a far more favorable position than its rivals. Rather than the end of preeminence, America may well be entering a renaissance.

Just survey the globe. The European Union’s prolonged crisis will likely end in further decline. Aging Japan has long passed its prime, its market share receding in everything from autos to high tech. China’s impressive economic juggernaut has slowed down, and the Middle Kingdom faces increased social instability, environmental degradation and a creaky one-party dictatorship.

While the U.S. has its challenges, it is positioned to achieve a more solid long-term trajectory than its European and Asian rivals. What it lacks, however, is a strong political leadership capable of seizing this opportunity.

Resources

Energy constitutes the biggest ace in the hole for the U.S. For almost half a century, an enormous fossil fuel bill that still accounts for 40% of the nation’s trade deficit has hampered economic growth. Now that situation is changing rapidly.

Due to vast new finds and improved technology to exploit them, the U.S. is now the world’s largest producer of natural gas and could emerge as the leading oil producer by 2017. Reserves of natural gas — a clean-burning fuel — are estimated at 100 years supply and could generate more than 1.5 million new jobs over the next two decades.

The U.S. agricultural sector is also booming, with exports reaching a record $135.5 billion in 2011. With global demand increasing, sustained growth will continue across America’s fertile agricultural regions.

Manufacturing

The other big game changer is manufacturing. As President Barack Obama recently acknowledged, this is America’s “moment” to seize the industrial initiative. U.S. manufacturers have expanded their payrolls for two straight years, and they have increased production while Japan, Germany, China and Brazil have scaled back.

A recent survey of manufacturing CEOs revealed that 85% believed production could shift soon from overseas. Both foreign and domestic manufacturers are alarmed about rising wages and labor unrest in China. Some important Japanese, German and Korean companies also have concerns about China’s policies that favor local firms and abscond with investor’s technology.

Foreign Investment

Rising foreign investment reflects the new American competitiveness. Since 2008 foreign direct investment to Germany, France, Japan and Korea has stagnated; in 2009 overall investment in the E.U. dropped 36%.

In contrast, in 2010 foreign investment in the U.S. rose 49%, mostly coming from Canada, Europe, and Japan. Industrial investment rose $30 billion just between 2009 and 2010, while investment in the energy sector more than tripled to $20 billion.

The Information Sector

In the information sector, American domination continues to mount, contrary to predictions of decline over the past two decades. Although high-tech manufacturing has shifted largely to Asia, Americans rule the increasingly strategic software sector. American-based companies, who constitute more than two-thirds of the world’s 500 largest software companies, including nine of the top ten.

Outside the U.S., there are no significant equivalents of Apple, Google, Microsoft, Amazon and Facebook. Hollywood, for its part, rules the entertainment world, producing 40% of world’s audiovisual exports, a dominion that troubles China’s President Hu Jintao, who recently complained that the “cultural fields” represent “the focal area” for Western “infiltration”.

Demographics

The Great Recessionhas slowed population growth everywhere, but the U.S. maintains the youngest and most vibrant demographic profile of any advanced country. Between 1980 and 2010, the U.S population expanded by 75 million to over 300 million. In contrast many European countries, including Germany, have suffered stagnant growth, while in Russia and Japan populations have already started declining.

The disastrous fiscal implications of slow or negative population growth are evident in Greece, Spain and Italy, all of which suffer among the world’s lowest fertility rates. Rapid aging also will soon catch up with Germany. By 2030, Germany will have 48 retirees for every 100 workers — that’s barely two workers per retiree. The numbers are even worse in Japan: 53 retirees for every 100 workers by 2030.

Political Factors

Given the ineptitude of the last two administrations, enthusiasm about America’s political system is hard to justify. But our constitutional systems of laws and checks on central power remain a critical advantage. Immigration has declined with the recession, but the U.S. can expect to welcome religious and political exiles — such as Middle Eastern Christians displaced by the “Arab Spring” — as well as Greeks and Irish fleeing Europe’s economic decline.

Many from Russia and China are seeking to immigrate to the United States, Canada or Australia in order to protect property or just live a freer life. Indeed, among the 20,000 Chinese with incomes over 100 million Yuan ($15 million), 27% have already emigrated and another 47% have said they were considering it, according to a report by China Merchants Bank and U.S. consultants Bain & Co. published in April.

Needed from Washington: A New American Strategy

Sadly no leading politician or political party seems ready to embrace the country’s new strategic advantages. Many on the left may find the very notion distasteful, having swallowed declinism with their academic mother’s milk. The president himself dislikes the notion of American “exceptionalism.” Many key Obama backers like SEIU boss Andy Stern and former auto czar Steven Rattner, embrace the superiority of China’s authoritarian system. Others embrace Europe and even Japan as models for an aging superpower.

Worse still: Some Obama policies work against the well springs of national resurgence. Threats to raise income taxes on families making over $250,000 directly threatens the aspiring entrepreneurial class more than the real “rich” whose fortunes are protected by low capital gains taxes and family trusts. Most critical: The administration’s hostility to fossil fuel represents a direct threat to the country’s greatest new source of advantage and threatens to strangle America’s recovery in its infancy.

Not that the Republicans are any less clueless. Many reject the infrastructure needed by an expanding economy — ports, roads, bridges as well as worker training and support for basic research — as mere “pork.” Budget restraint and fiscal discipline are important, but preparing the country for more rapid economic growth requires an active, supportive government.

Republicans also tend to view immigration as something akin to a hostile invasion. Yet many key industries — notably manufacturing and high tech — rely heavily on immigrant entrepreneurship, intelligence and work values. Running against immigration constitutes an assault on the nation’s increasingly diverse demographics.

So this is where we now sit. With all the essential elements for a strong, sustained recovery place, the big question is whether we will find political leaders capable of tapping this country’s phenomenal potential.

This piece originally appeared at Forbes.com.

Photo from BigStockPhoto.com.

Mistaking an Aberration for the End of Home Ownership

Wendell Cox — Thu, 19 Jan 2012 00:38:31 -0500

It is well known that home ownership has declined in the United States from the peak of the housing bubble. According to Current Population Survey data, the national home ownership rate fell 2.9 percentage points from the peak of the bubble (4th quarter 2004) to the third quarter of 2011.

It is less well understood, however, that the spurt in home ownership was, like the housing bubble, an aberration. Looking over the data from the 2010 census, it seems clear that since 2000 the actual decline was a much smaller: 0.8 percentage points from the 2000 census. In fact the current home ownership rate tracks fairly well with that of the post 1960 and the entire pre-bubble period.

The End of Home Ownership? Analysts such as Richard Florida suggest an end to the preference for home ownership, citing the losses from the bubble, which were, in fact, an aberration. Most recently, Xavier University's Michael F. Ford wrote in the Washington Postabout home ownership having been driven to 69% by "guarantees" and "tax breaks," such as the mortgage interest deduction. He notes that this "spending spree" led to a loss of $6 trillion in US real estate value.

Ford does not mention the fact that home ownership had hovered between 60% and 65% for more than three decades before the bubble, without suffering any such losses. Nor does he mention the roles played by Fannie, Freddie and Frank (D-Massachusetts), along with others in Washington, or the related "drunken sailor" mortgage policies concocted by lenders and Wall Street that anyone familiar with credit should have known could only lead to disaster. This was obvious to many observers, although shockingly not to the Federal Reserve Board, as recent reports indicate .

There is no doubt that the "spending spree" led to the housing bust and triggered the Great Financial Crisis. However it was not the long-standing ownership support programs of the federal government that were primarily to blame. As late as the beginning of the decade, there was no bubble and the median multiple in major metropolitan areas averaged 2.9, within the maximum affordability rating of 3.0. The "spending spree" itself was a rational response to policies that turned housing into the equivalent of a speculative commodities market, with destructive results, in certain large markets. Critically the bubble did not appear in many others.

Speculation and the "Bubble States:" The extent to which speculation fueled house price increases is the subject of a recent Federal Reserve Bank of New York paper by Andrew Haughwout, Donghoon Lee, Joseph Tracy and Wilbert van der Klaauw. The researchers examine investment, or speculation in real estate markets, during the housing bubble. Investors buy houses that they do not intend to live in for the purpose of making money. In normal times, this investment is principally for rental income or long term capital gains. However, in the highly charged housing markets that developed in some metropolitan areas, prices rose so rapidly, that "flipping" (short term ownership) became very profitable, at least for some.

Pointing out that "The recent financial crisis—the worst in eighty years—had its origins in the enormous increase and subsequent collapse in housing prices during the 2000s," the New York Fed researchers show that speculative activity was much greater in California, Florida, Arizona and Nevada (which they label the "bubble states") than elsewhere. My analysis indicates that two-thirds of the house value drop in the nation before the Lehman Brothers collapse (September 15, 2008) occurred in the four "bubble states." According to the researchers, this greater speculative activity in these markets made the market more instable because unlike owner-occupiers, investors are far more likely to default on mortgage loans.

Missing the Geography of Speculation (the Geography of "Smart Growth"): The New York Fed research, however, ignores the geography of speculation. Why was speculation was so much more rampant in the bubble states? There is no reason to believe that residents of California, Florida, Arizona or Nevada are any less interested in making money or, in general, any more greedy. Yet speculators largely stayed out of markets in high demand areas, such as Dallas-Fort Worth, Houston and Indianapolis. In fact, in large parts of the nation, there was little speculative activity. In these markets prices were not rising inordinately so speculators did not bother with them. Instead they focused on more volatile markets where prices were already rising strongly, further swelling local price increases.

The geography of speculation corresponds largely to the geography of excessive land use restrictions, which created the shortage of land for housing that drove the prices up in the four bubble states (Note). It is a fundamental principle of economics that prices tend to rise where desired goods are in short supply.

In California and Florida, restrictive land use policies (smart growth or growth management) created a shortage of land for new housing relative to demand. The largest metropolitan areas of Nevada (Las Vegas) and Arizona (Phoenix) are surrounded by government owned land that was auctioned for development at such a slow rate that prices rose by more than five times during the bubble.

Astonishingly, having missed the geography of speculation, the New York Fed researchers suggest that a solution is to regulate speculation. There is a much simpler answer, which Florida has already implemented which is to repeal the restrictive land use regulations, without which inordinately speculative profits cannot occur.

Meanwhile, as the speculators have been driven out of the market, and despite federal government efforts to prop-up the artificially high house prices, values have fallen to below 2000 levels for the first time (Figure 1). Based upon Federal Reserve Board and Census Bureau data, it is estimated that the average owner-occupied house value in 2011 (three quarters) has fallen to $211,000, which is down from a peak of approximately $345,000 in 2006 and $222,000 in 2000 (adjusted for inflation).

So is Ownership now doomed? Yet the home ownership naysayers have little to cheer. Yes, home ownership dropped in the last decade. However, all of the loss was in mobile homes and boats. Even so, the number of mobile home owners remained greater than home owners living in apartments, including condominiums (Figure 2). In fact there was a slight increase in the share of households owning their own homes, if mobile homes and boats are excluded (Figure 3), with a rise from 60.6% in 2000 to 60.9% in 2010.

There were 5,057,000 more home owners in 2010 than in 2000, and perhaps more surprisingly, 5,119,000 more home owners occupying detached housing. Detached, attached (town house) and apartment ownership each increased over the past decade (Figure 4). Contrary to new urbanist theoreticians, detached housing – not urban condos – overall accounted for the most housing growth, both owner-occupied and rentals.

Xavier's Ford calls the American Dream of home ownership a myth and even goes so far as to suggest that home ownership is "more important to special interests than it is to most Americans." In fact, Ford's interpretation is delusional. That home ownership continued its advance, however modestly, in the face of the worst economic downturn in 80 years, reveals the durability and, indeed the reality of home ownership as an American Dream.

Photo: Preventing speculation (New Development, Dallas-Fort Worth suburbs)

Note: Overall, the bubble states and other restrictively regulated metropolitan areas accounted for more than 90% of the pre-Lehman Brothers loss.

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”