Los Angeles

West Coast Blues

Joel Kotkin — Mon, 07 Nov 2022 19:28:58 -0500

Few regions have been more consistently Democratic than the West Coast. Even compared with the Northeast, where Republicans occasionally win governors’ offices, the appropriately named “left coast” has been adamantine in its progressivism. Republicans haven’t won statewide office in California in years; in Oregon, it’s decades. Washington has elected a Republican secretary of state, but she now serves in the Biden administration. And the region’s major cities are overwhelmingly blue.

That could be changing, at least a bit. As cities from Seattle and Portland to San Francisco and Los Angeles fight crime and disorder, something of a political rebellion has broken out. One progressive fashion entrepreneur has called San Francisco “a city of chaos,” where his employees are not safe. The city, by some estimates, has deteriorated further and faster than virtually any urban area in the country. Within the last year, though, San Francisco recalled its progressive district attorney, Chesa Boudin, as well as left-wing members of the city school board. Meantime, remarkably, Seattle elected a Republican as city attorney, and Los Angeles district attorney George Gascón has faced backlash, and a possible recall. Voters have a chance to continue this rebellion this week.

Progressive candidates will likely eke out some wins. L.A. mayoral candidate and former Republican Rick Caruso has recovered some momentum after a weak summer and could conceivably beat progressive opponent Karen Bass, though Bass leads in betting markets. In Washington, long-time Democratic senator Patty Murray faces a surprisingly tough challenge from Republican Tiffany Smiley, though Murray, too, is favored.

But some heterodox candidates seem poised for upsets. In Oregon, Christine Drazan could become the first Republican governor since the 1980s, replacing the ultra-progressive and highly unpopular Kate Brown. In California, Republican Lanhee Chen, endorsed by the state’s usually lockstep progressive press, could be elected state controller, in what would be the first statewide win for a Republican since 2006.

Crime and chaos drive the GOP revival, but looming economic and fiscal crises are also factors. The once-flourishing tech industry may face at least a short-run implosion that has rattled investors. In California, where the post-pandemic recovery has lagged, the one industry left booming in Silicon Valley may be psychotherapy. Don’t expect a more business-friendly climate to emerge after the election. New proposals for wealth taxes, a 32-hour work week, and controls on franchise employment are likely—despite regional struggles with pensions, jobs, and business flight.

The physical economy, too, has declined across the West Coast. Manufacturing is lagging, particularly in California. Due to regulations and a lack of storage for water supplies, the Golden State’s once-dominant agriculture sector is declining. The state’s highly regulated housing sector has lagged on construction, leaving the state vulnerable to a real-estate downturn that is already hurting housing markets.

In addition, state policies drive electricity and fuel prices that rank among the nation’s highest, discouraging price-sensitive industries from staying in state and putting millions on the edge of energy poverty. California, in fact, suffers the nation’s highest rates of cost-of-living adjusted poverty, with residents of the less temperate and poorer interior far less able to pay for the state’s green zealotry than residents on the coast. And California, despite massive education spending, suffers the highest percentage of illiteracy of any state.

Read the rest of this piece at City Journal.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Housing Affordability in California: Part 2 — Urban Land Markets

Wendell Cox — Sun, 06 Nov 2022 19:28:58 -0500

Harvard’s William Alonso showed that the value of residential land tends to increase from the rural uses on the urban fringe¹ to centers of economic activity, such as central business districts.²

Urban Containment: Urban containment has become the dominant planning strategy for combating urban expansion and has been implemented in California through CEQA ³ and growth management.

According to prominent urban planners Arthur C. Nelson and Casey J. Dawkins: “… urban containment involves drawing a line around an urban area. Urban development is steered to the area inside the line and discouraged (if not prevented) outside it.”⁴ Further: “… urban containment programs can be distinguished from traditional approaches to land use regulation by the presence of policies that are explicitly designed to limit the development of land outside a defined urban area, while encouraging infill development and redevelopment inside the urban area.”⁵

Urban containment is intended to increase land costs. According to Nelson and Dawkins “ …the regional demand for urban development is shifted to the area inside the boundary. This shift should decrease the value of land outside the boundary and increase the value of land inside the boundary.”⁶

This article is adapted and updated from Chapter 2 (“California’s Housing Crisis”) by Wendell Cox in Saving California: Solutions to California’s Biggest Policy Problems, Stephen Greenhut, editor. The chapter is being published by newgeography.com with permission of the Pacific Research Institute, in three parts:
Part I: Housing Affordability in California: The Situation (published October 24, 2022)
Part II: Housing Affordability in California: Urban Land Markets (this piece)
Part III: Housing Affordability in California: A Way Forward

The impact of urban containment on urban land is illustrated in Figure 1 (below). The land value increases inside the urban growth boundary (UGB) are the “urban containment effect.”⁷ Other land value increases from land use regulation, such as “ordinary zoning” would be in addition to higher values from the urban containment effect.

Thus, the operative dynamics of urban containment are that:

Land values rise precipitously at UGBs (or their equivalent).
This increase is telescoped onto virtually all plots inside UGBs, raising house prices.

There was, however, a risk. Nelson and Dawkins note that “higher prices (especially for housing) could occur if planning fails to increase the supply of buildable land within the boundary” and that “…urban containment boundaries are prudent land-use policies … only when accompanied by policies that increase urban development density and intensity.”⁸ Housing affordability would be preserved by expanding urban containment boundaries “to accommodate projected growth over a specified future time period, typically 10 to 20 years.”⁹

Elusive Densification: However, sufficient densification did not occur. Perhaps the “social engineering” required to force households into smaller, often multi-family housing was politically infeasible.

Without the massive densification that would have been required to preserve housing affordability, it is not surprising that considerable political pressure has been directed toward reform of single-family zoning (an ordinary zoning measure) in markets with urban containment. As house prices have risen, so have rents (though at a slower rate¹⁰).

However, replacement of single-family zoning may not lead to materially improved housing affordability. For example, in the city of Vancouver (BC), has virtually eliminated single-family zoning¹¹ and massively densified, increasing its population 65% from 1961 to 2016,¹² without material annexation or greenfield capacity.

University of British Columbia planning Professor Patrick Condon, who has studied Vancouver extensively, has concluded “… there is a problem beyond restrictive zoning. … No amount of opening zoning or allowing for development will cause prices to go down.”¹³ The problem, according to Condon, is that upzoning as a densification strategy does not improve housing affordability.¹⁴

Despite the densification, Vancouver housing market had experienced massive housing affordability losses. Metro Vancouver has the highest house prices and highest rents in Canada.¹⁵ Further, Vancouver is the second least affordable market in Demographia International Housing Affordability. Affordability has worsened from a 3.9 median multiple in 1970¹⁶ to 13.0 in 2020. Metro Vancouver has had stringent urban containment policy for decades.

The housing affordability (median multiple) range was far less when there was only ordinary zoning. Median multiples in major US markets did not rise above 4.0 until urban containment.¹⁷ In 2019, the 12 least affordable markets had median multiples of from 5.1 to 9.0, and all had urban containment.¹⁸

Moreover, examination of US data suggests this opposite relationship. Metros with more single-family housing and larger lot sizes (both indicators of lower density) have substantially better housing affordability (Table 3).

San Diego, San Jose, San Francisco and Los Angeles ranked 44th through 47th in their shares of single-family housing.¹⁹
Some of the smallest lot sizes were in San Diego (42nd), Los Angeles (47th), San Jose (48th) and San Francisco (50th).²⁰

Table 3 Single Family Houses & Lot Sizes Major Metropolitan Areas: By Affordability Ratings (2018)
Housing Markets (Metropolitan Areas): Number by Affordability Rating (Median Multiples Shown)	Single Family Share of All Housing Units	Single Family Housing Average Lot Size (Acres)
Affordable (3.0 & Lower)	66.1%	0.34
Moderately Unaffordable (3.1 - 4.0)	61.7%	0.30
Seriously Unaffordable (4.1 - 5.0)	60.4%	0.24
Severely Unaffordable (5.0 & Higher)	53.7%	0.19
Number of Housing Markets with Data	53	50
Sources: Affordability Data: American Community Survey 2018 (Census Bureau), Demographia International Housing Affordability Lot Sizes: American Housing Survey: 2011 & 2013(Census Bureau)

Contravening Land Market Dynamics: Often urban containment requires new development to be adjacent to existing development. One of the world’s leading urban and housing analysts, New York University Marrron Institute Director of Urban Expansion, Shlomo Angel explains the problem with this approach.

“If only plots that were directly adjacent to existing built-up areas were allowed to develop, their owners would have monopolistic power. For the land market on the urban periphery to function properly, supply must be adequate to allow competition to determine land prices.”²¹

This could lead to the virtual destruction of the competitive supply of land, which Brookings Institution economist Anthony Downs stressed is required to maintain housing affordability. Legendary British planner Peter Hall,²² and colleagues at University College London expressed concern that land-use plans could “act as a speculator’s guide.” Land with planning permission or likely planning permission becomes a desirable item which will be traded at increasing prices, or hoarded.”²³

Urban Containment Research: In fact, urban containment has been associated with deteriorated housing affordability.

According to Angel: “… the explicit containment of urban expansion— by greenbelts, as in Seoul, Korea or in English cities, by urban growth boundaries, as in Portland, Oregon, or by environmental restrictions as in California—has inevitably been associated with declines in housing affordability.”
Hall, et al suggested that by the early 1970s, the “speculative value” of land with planning permission in the UK was five to 10 times that of land without planning permission.²⁴ They also concluded that the failure to prevent housing affordability losses was “perhaps the biggest single failure” of urban containment in the UK.
Mariano Kulish, Anthony Richards and Christian Gillitzer of the Reserve Bank of Australia report that that land increased in value from 12 to 20 times when brought within the Melbourne UGB.²⁵
Arthur Grimes, former chair of the Board of the Reserve Bank of New Zealand, and Yun Liang found a land value gap of 7.9 to 13.1 times over the Auckland UGB²⁶
Gerald Mildner of Portland State University found that a gap in land values of 10 times across the UGB in Portland.²⁷
The Barker Reviews indicated that land on which housing was permitted had a value of more than 250 times that of the agricultural land outside London where housing was not permitted.²⁸
Benjamin Dachis of the C. D. Howe Institute has associated administration of Toronto’s urban containment (greenbelt) program with far higher house prices.²⁹ By 2020, the median multiple had reached 250% of its 2004 (pre-urban containment) level.³⁰

Prominent housing economists Edward Glaeser of Harvard and Joseph Gyourko of the University of Pennsylvania presented evidence in the San Francisco metropolitan area (city of San Francisco and suburbs) that land values³¹ were approximately $490,000, or 10 times ($440,000) the expected 20% in a well functioning market. Much of this additional cost is attributable to urban containment.

Where there is severely unaffordable housing, urban containment tends to be present.³² This includes some major markets in the United States and Canada, as well as virtually all major markets in Australia, the United Kingdom and New Zealand. All 92 severely unaffordable major markets in Demographia International Housing Affordability have urban containment.

Angel, an advocate of densification has strong reservations about urban containment:³³

“You have to show me that you have enough room that you are creating for the demand for me to say it’s okay to have containment, but usually you can’t. So, what it means is that you need expansion.”

Urban containment may be the “critical mass” that explains much of the housing affordability crisis in the least affordable markets, including California.

Indeed, economist Claude Gruen observed, “…growth controls in economically powerful coastal cities is to the middle-class what the economic disaster of slum clearance was to the poor.”³⁴

View and download endnotes (PDF opens in new tab or window)

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985) and Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Photo: Embarcadero, city of San Francisco, by Bob Collowan via
Wikimedia under CC 4.0 License

The California Headquarters Exodus Continues

Wendell Cox — Wed, 26 Oct 2022 20:28:58 -0400

A new Hoover Institution (Stanford University) report indicates that California continues to shed corporate headquarters locations to other states.

Hoover Institution Senior Fellow and UCLA distinguished professor of economics Lee Ohanian and Joseph Vranich, President of Spectrum Location Solutions, show that “In 2021, California business headquarters left the state at twice their rate in both 2020 and 2019, and at three times their rate in 2018. In the last three years, California lost eleven Fortune 1000 companies, whose exits negatively affect California’s economy today. But California also is risking its economic future as much smaller but rapidly growing unique businesses are leaving, taking their innovative ideas with them.”

Including companies outside the Fortune 1,000, Ohanian and Vranich indicate that California lost 153 corporate headquarters between in 2021. This is more than double the totals for each of the three years from 2018 to 2020.

They note that “Our count is almost certainly biased downwards significantly, because relatively small business relocations are difficult to detect, since most business relocations are not reported by the media, and relatively few relocations require filing state compliance reports that would trigger documentation of the exit.”

And there is more than headquarters relocations. The report “does not take into account California businesses that are retaining their headquarters in California but who are making large facility investments in other states, such as Apple and Wells Fargo, who are building large campuses in Texas, and Disney, who is doing the same in Florida.”

The report indicates a broadly based corporate exodus, “occurring across virtually all industries—including manufacturing, aerospace, financial services, real estate, chemicals, and health care—but perhaps most disturbing is the large number of high-technology businesses that are leaving.” Noting that the “tech hubs of Silicon Valleyand San Francisco are among the most productive locations on the planet, they see the loss of firms like Hewlett-Packard Enterprises, Oracle, and Tesla have relocated, all to Texas, as concerning.

The business exodus is, not surprisingly, concentrated in the most populous parts of the state. The table below (from the report) shows that more than one quarter of the corporate migrations were in Los Angeles, County, with 80 out of the 352 from 2018 to 2021. San Francisco County accounted for one-seventh of the state figure, at 52.Orange, Santa Clara, San Diego and Alameda all had at least 20 corporate headquarter relocations.

Table: Top Ten Losses by California County
Rank	County	Total	Rank	County	Total
1	Los Angeles	80	7	San Mateo	12
2	San Francisco	52	8	Sacramento	10
3	Orange	39	9	Riverside	8
4	Santa Clara	38	10	San Bernardino	7
5	San Diego	26	10	Placer	7
6	Alameda	23

Based on population, San Francisco County had by far the highest proportional loss, at nearly 60 corporate headquarters lost per million population, well above the 8 per million loss in Los Angeles County (Figure 1). Alameda, Santa Clara and Orange counties have higher headquarter exit rates than Los Angeles County, but are also well below that of San Francisco.

The exiting California headquarters have moved most to Texas, followed by Tennessee, Nevada, Florida and Arizona. Each of these states have consistently better rated business climates and lower costs of living than California.

The authors attribute the California’s headquarters exodus to multiple causes. Certainly one of the most significant is California’s business regulatory climate, routinely graded as worst or near worst among the 50 states.

“The Tax Foundation, a nonpartisan think tank focusing on state and national tax policies, ranks California 49thin its Business Tax Climate Index, far below Tennessee, Florida, Texas, and other states that are attracting California businesses. Annual surveys of business CEOs and small business owners invariably rank California 50th in terms of the quality of state business climates.”

They also cite California’s high tax rates, with the highest marginal income tax rates in the nation, now more than 20% above that of second highest Hawaii. This could be raised if voters approve another tax increase on the November ballot (Proposition 30).

Then there is California’s “remarkably high housing costs,” which Urban Reform Institute research identifies as the critical element in the cost of living crisis. It’s not just companies, but people that are moving. The Hoover report reminds us that since 2015, California has experienced a net outmigration of nearly 700,000 people.” A principal reason for these moves is the cost of living crisis, which makes it more difficult for firms to obtain sufficient talent.

The exodus continues even into 2022. “Lucas Oil, a large producer of specialty petroleum products that is moving to Indianapolis, and Aviatrix, a technology company specializing in cloud networking and security, whose valuation doubled recently to $2 billion” moved to Dallas-Fort Worth.

Aviatrix CEO Steve Mullaney stated that he plans on hiring many young people but noted that young people don’t want to live in Silicon Valley anymore, because they cannot afford to buy a home.

O’hanian and Vranich note that losing so many people to other states “would have seemed ludicrous not so long ago.”

However, the authors characterize the state’s political leadership of dismissing the business exodus as an issue. seriously enough. They conclude:

“While California has many natural advantages, its state and local economic policies have created a business climate that is no longer competitive with that of many other states. Policies have driven business and housing costs so high that companies and people are leaving the state for more affordable, less regulated, and less taxed locations. This process will continue until the state’s political leaders make very different policy choices that create a different future for California—one that honors its remarkable past.”

The report can be downloaded here: Why Company Headquarters Are Leaving California in Unprecedented Numbers.

Photo: Former corporate headquarters of Bank of America in San Francisco. Bank of America is now headquartered in Charlotte, North Carolina. Source: Wikimedia under CC 2.0 License for both building images

Housing Affordability in California: Part 1 — The Situation

Wendell Cox — Mon, 24 Oct 2022 20:28:58 -0400

There is probably no issue more requiring resolution in California than poor housing affordability. It is a threat to the preservation of the middle-class and the competitiveness of the state.

Housing Affordability: Background

Housing affordability is more than house prices --- it is house prices in relation to income. Price-to-income ratios are widely used, such as by the World Bank,¹ the Organization for International Cooperation and Development, and others to measure housing affordability. This chapter uses the “median multiple,” a price-to-income ratio (median house price divided by the gross median household income), to measure middle-income² housing affordability (Table 1).

Table 1 Demographia Housing Affordability Ratings
Housing Affordability 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
Median multiple: Median house price divided by median household income

Housing affordability herein is at the housing market level --- the metropolitan area, which is both a housing market and labor (commuting) market.³ This excludes submarkets, such as municipalities or neighborhoods.

Housing affordability is compared (1) between housing markets (such as between the San Francisco metropolitan area and the Dallas-Fort Worth metropolitan area) or (2) over years within the same housing market (such as in the San Francisco metropolitan area).

This article is adapted and updated from Chapter 2 (“California’s Housing Crisis”) by Wendell Cox in Saving California: Solutions to California’s Biggest Policy Problems, Stephen Greenhut, editor. The chapter is being published by newgeography.com with permission of the Pacific Research Institute, in three parts:
Part I: Housing Affordability in California: The Situation (this piece)
Part II: Housing Affordability in California: Land Markets
Part III: Housing Affordability in California: A Way Forward

Housing Affordability In California: Context

Until about 1970, housing was affordable (less than 3.0 median multiple) throughout the United States, including California. All but one of today’s 53 major markets⁴ was rated “Affordable.” Since then, huge housing affordability differences have arisen, especially between California and the nation (Figure 1). This has been due to much higher land costs, as construction costs have risen more modestly.⁵

The Legislative Analyst’s Office reports that an average California home costs 2.5 times the national average and monthly rent is about 50 percent higher.⁶ In 2019, the median California house value was $325,000 above the US.

More recently, there has been an unprecedented deterioration in housing affordability. The driving factor has been the result of the pandemic and its related demand shock. According to Sam Khater, chief economist at the US Federal Home Loan Mortgage Corporation (Freddie Mac) characterized “the effect of the Covid-19 pandemic” as “unusual in that it spurred housing demand because higher-income households who were able to work from home wanted more space and were willing to live farther from their offices. At the same time, the pandemic caused supply-chain bottlenecks and permitting delays that slowed new-home construction.” The pandemic continues to disrupt standards of living, housing markets and national economies.

During this period, California’s housing affordability also deteriorated. In 2021, San Jose had the least affordable housing among the 92 major US housing markets, with a median multiple of 12.6. San Francisco had a median multiple of 11.8, Los Angeles was at 10.7, followed by San Diego, at 10.1).⁷ Housing was severely unaffordable even in the interior markets, with Riverside-San Bernardino at 7.4 and Sacramento at 6.7.

California’s excessively high cost of living is a formidable barrier for middle-income and hopeless for lower-income households.

Land Use Regulation In California

Economic research attributes California’s housing affordability crisis to stronger land-use regulation starting around 1970.⁸

Dartmouth economist William Fischel published an early seminal review ⁹ of housing affordability in California (1970 to the 1990s). Fischel suggested that regulatory research should look for major changes that “are adopted in some places but not in others.”

Fischel examined the higher house price increases that occurred in California compared to the rest of the nation between the late 1960s and late 1980s. Fischel cites various possible causal factors. He found that the higher prices could not be explained by higher construction cost increases, demand, higher personal income growth, the quality of life, amenities, Proposition 13, land supply or water issues.

Instead Fischel cites stronger land use restrictions --- There were two principal issues, the California Environmental Quality Act (CEQA) and local growth management restrictions.¹⁰

Growth Control: Fischel notes that California “became the leader in the “growth control,”¹¹ a new land use strategy that limited new housing development (especially “greenfield” development). According to Fischel, under growth management, “Allowable growth is held below the rate that was both permitted under previous zoning laws and below the rate at the community's vacant land inventory can reasonably sustain.” Growth management could impose building moratoria, annual quotas and limits on conversion of vacant land to housing.¹²

Fischel contrasts growth management with “ordinary zoning, which is nominally dedicated to the good-housekeeping rule of a “place for everything, but everything in its place," In contrast, “growth-control communities attempt to reduce future residential “development.” “Growth management” regulations were superimposed by municipalities upon their ordinary zoning.

Before the later evolution of growth management to counties and housing markets, builders could “shop around” for more affordable municipal regulatory environments.

CEQA: CEQA imposed far stronger environmental review for private housing projects than elsewhere. Under CEQA anti-development interests routinely challenged major “greenfield” ¹³ housing projects. Some projects have been blocked, others have been delayed for decades ¹⁴ and become far more costly through the CEQA process. As regards its effect on greenfield development, CEQA has effectively acted as urban containment.

Other early research raised concerns. Massachusetts Institute of Technology professor Bernard J. Frieden noted in 1979, “the public benefits are small, costs to the consumer’s big and inequities unmistakable.”¹⁵ David E. Dowell, a University of California economist found that “wherever stringent land-use controls have come up against burgeoning demand for housing, land and home prices have skyrocketed.”¹⁶

Impact Fees: In response to Proposition 13, municipalities began to use impact fees on new houses and apartments to fund new development. Single-family fees average four times ($28,000) the rest of the nation.¹⁷ Fees range to more than $150,000 per house.

There are huge impact fee variations between municipalities¹⁸ and questions about the “nexus” between such fees and new development.¹⁹ At the same time that costs for new development have been transferred to new owners,²⁰ existing owners received, in effect, windfall profits from extraordinary house value increases in California’s regulatory environment.

From Municipal Regulation to Housing Market Regulation: Growth management started as a municipal issue. However, it expanded to cover counties and entire housing markets.²¹

The balance between supply and demand has been upset by seriously restricting land for residential development, at the same time as demand increased. This, as predicted by economics, leads to higher prices, all else equal.

View and download endnotes (PDF opens in new tab or window)

Lead photo: METRO-LAND cover, a suburban promotional publication by the London Metropolitan Railway, 1921 in Public Domain.

Pandemic Reversal?

Randal OToole — Wed, 21 Sep 2022 20:28:58 -0400

A recent article in the San Jose Mercury-News reports that transit ridership in “car crazy” Los Angeles has exceeded ridership in the “transit mecca” of the San Francisco Bay Area, a “reversal that could remake California’s mass transit landscape.” This would be a lot more interesting if the writer hadn’t done the arithmetic wrong.

The story compares ridership carried by the major agencies in six San Francisco Bay Area counties with ridership carried by the main agencies in Los Angeles county. But Los Angeles County is not all of the Los Angeles urban area any more than San Francisco County is all of the San Francisco Bay Area. The Los Angeles urban area includes all of urban Los Angeles County and all of urban Orange County, while the Greater Los Angeles area also include three more counties.

Meanwhile, the San Francisco urbanized area includes urbanized portions of five counties: Alameda, Contra Cost, Marin, San Francisco, and San Mateo. The greater San Francisco Bay Area also includes Santa Clara County (Silicon Valley).

So the Mercury-News story compares counties in the greater San Francisco Bay Area with one county in one part of the Los Angeles urban area. When just Orange County is added, then the Los Angeles area has always (at least as far back as we have data available, which is far enough) seen more transit riders than the San Francisco Bay Area.

In 2019, for example, LA transit carried 528 million trips vs. 444 million in the Bay Area. Moreover, Los Angeles transit has been declining faster than the Bay Area’s, so a few years ago, the difference between LA and the Bay Area is even greater. In 2008, for example, LA transit carried 713 million trips while the Bay Area carried just 446 million.

Politically, California’s transportation landscape is heavily influenced by its metropolitan planning organizations. The one for the Bay Area includes Santa Clara County as well as Napa, Solano, and Sonoma counties (where transit ridership is insignificant). The one for the Los Angeles area includes Orange, Riverside, San Bernardino, and Ventura counties. Ridership in the LA area has always exceeded that in the Bay Area, so there is no reversal of fortunes or in the politics of transportation.

What is true is that Bay Area ridership has recovered more slowly since the pandemic than LA’s. As of June, transit in the Bay Area was carrying 54 percent of June 2019 numbers, while LA transit was carrying 70 percent. This is a reflection of the mix of jobs in the two regions: San Francisco’s is much more oriented to jobs that can work at home than LA.

Despite this slow recovery, I suspect Los Angeles transit ridership will continue to decline at precipitous rates. Historically, the more light rail LA has built, the more riders it has lost, and it has plans to continue to build more light-rail lines at least through 2028. The real news story will be a few years from now when LA ridership dips below that of the Bay Area.

This piece first appeared at The Antiplanner.

Randal O'Toole, the Antiplanner, is a policy analyst with nearly 50 years of experience reviewing transportation and land-use plans and the author of The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future.

Photo: Downtowngal, via Wikimedia under CC 3.0 License. Contrary to the implications of the Mercury-News story, Los Angeles has always been one of the biggest transit markets in the country and certainly bigger than that of the Bay Area.

The Fall of Los Angeles

Joel Kotkin — Tue, 13 Sep 2022 20:28:58 -0400

For much of the 20th century, Los Angeles symbolised the future. Over the course of the century, the population grew 40-fold to nearly four million people.

But now, for the first time in its history, the population of Los Angeles is in decline, falling by 204,000 between July 2020 and July 2021. LA was once a magnet for investors. But recently many of the area’s corporate linchpins – including aerospace giant Northrop Grumman, Occidental Petroleum and Hilton Hotels – have left, taking with them high-paying jobs and philanthropic resources.

Worse still, conditions in LA today are bordering on the medieval. Anyone visiting some of the most famous districts of urban Los Angeles – notably downtown, Hollywood and Venice Beach – sees clear signs of destitution, including sprawling homeless encampments, vast numbers of people living in vehicles and rampant crime. Last year, a UN official compared conditions on LA’s Skid Row, a poor downtown neighbourhood, to those of Syrian refugee camps. Smash-and-grab thefts at local 7-Elevens and the persistent theft of goods from railyards suggest this is a city that has lost control to the modern version of lawless highwaymen.

So-called progressives have long dreamed of transforming the famously sprawled Los Angeles into a dense, transit-oriented, sun-kissed version of New York. But despite massive corporate and government investment, attempts to do this have failed. Rather than a vibrant hipster paradise, LA’s urban core is dominated by the homeless, the poor, government workers and a few creative types – making for an odd juxtaposition of homeless camps and low-rent hotels alongside high-end restaurants and artists’ lofts. Meanwhile, newly built luxury apartments have suffered vacancy rates as high as 14 per cent – remarkable in a city so short of housing.

Unsurprisingly, some Angelenos have sought to reverse this disastrous course. Earlier this year, disgruntled residents united around property developer Rick Caruso in his insurgent campaign to become mayor of Los Angeles. Caruso spent over $24million of his own money on the first round of the election in June.

Caruso is the grandson of Italian immigrants, whose father founded the successful LA business, Dollar Rent a Car. And he has himself been a big player in California for years. His real-estate business, founded in 1987, is now worth more than $4 billion. Caruso has built shopping centres all over the metropolitan area, from the iconic Farmer’s Market and middle-class San Fernando Valley to the swanky Pacific Palisades. Yet Caruso’s mayoral bid appears to have stalled against the well-organised might of the city’s public-employee-driven political machine.

This is a powerful machine. Last month, a grassroots movement opposing progressive criminal-justice reform lost its attempt to recall district attorney George Gascón, who has been widely blamed for LA’s lax approach to crime. Recall proponents needed 566,857 signatures, but despite collecting 715,000, only about 520,000 turned out to be valid. Thanks to the machine’s backing, Gascón’s recall bid failed, even though the city last year experienced 397 murders – up 11.8 per cent from the 355 the previous year, and a 53.9 per cent increase from the 258 in the pre-pandemic year of 2019.

Read the rest of this piece at Spiked.

Photo: Basil D Soufi via Wikimedia under CC 3.0 License.

Who Will Be the Next Mayor of Los Angeles?

Joel Kotkin — Tue, 07 Jun 2022 20:28:58 -0400

Central Avenue, the historic heart of South Los Angeles, has seen better days. Once the home to leading black institutions, like the famous Dunbar Hotel, where jazz and other musical greats stayed, it was also an industrial powerhouse that promised decent work for those fleeing the Jim Crow South. But today many, if not most, of its factories are closed; many icons of the old black business community have disappeared, too. The area, site of two of the most devastating riots in American history, is now poorer in relation to the rest of the city than before those upheavals.

Yet amid a malaise that afflicts much of the city, entrepreneurial energy remains evident. Central Avenue’s sidewalks crowd with the brightly colored booths of street vendors, selling a broad range of food, clothes, and other products—more like Mexico City or Mumbai than the South L.A. of the past. Some new apartments are rising to replace the decrepit ones, and the street-level liveliness seems more Washington Heights than car-centric Los Angeles. Despite its troubles, Central Avenue does not exhibit the deathly sense of abandonment of places like the South Side of Chicago or other inner-city communities, where the spirit of enterprise has all but disappeared.

“We still have potential,” insists 63-year-old Rick Caruso, a billionaire running what once seemed a quixotic campaign for mayor. On June 7, Caruso will be a candidate in the city’s open mayoral primary, facing off against, among others, the race’s early frontrunner, long-time congresswoman Karen Bass. (The top two finishers will meet in a run-off general election in November if no candidate wins a majority of the vote.) Without any press, but for me, Caruso spent a recent morning at the Beehive, a new Southside business incubator located amid the detritus of the city’s industrial past. The youthful activity of the startups seemed to energize him. “I want to get on the phone and get investors to come back here—but they won’t if they see instability, the homeless camps, and the crime. That has to change.”

Though he has discarded his designer suit, Caruso cannot help but appear natty with his coiffed hair and monogrammed white shirt. The grandson of Italian immigrants, and son of an entrepreneur who founded Dollar Rent a Car, he started his real estate business here in 1987 and made a fortune worth more than $4 billion by developing shopping complexes, most notably the Grove, adjacent to the iconic Farmer’s Market. A key Caruso theme is restoring the promise that made L.A. the premier urban growth center of the last century, during which the city’s population grew from barely 100,000 in 1900 to nearly 4 million. Now, Los Angeles’s population is in decline and its appeal has faded. The city peaked at a population of 3,983,000 in 2019, and fell 134,000 to 3,849,000 by 2021, with a 41,000 loss in the last year.

The Wall Street Journal has described Caruso as a “liberal,” but that’s a stretch. A longtime Republican now conveniently turned Democrat, Caruso is best seen as a pro-business moderate Republican trying to downplay his membership, for example, in the Ronald Reagan Foundation. Yet unlike most GOP candidates here, he also has lots of money. He has spent over $24 million of his own money to reach out to Angelenos. His campaign boasts of his skills in dealing with L.A.’s fractious communities, whether in his business ventures or as a member of the Water and Power board, president of the Police Commission, or chair of the USC trustees. His money and message are clearly making headway. Despite the now strongly progressive tilt of the L.A. electorate, Caruso has managed to rise from single digits in February to parity, and perhaps even a lead, over Bass.

Read the rest of this piece at City Journal.

Photo: Karen Bass via Flickr in Public Domain and Rick Caruso via Flickr under CC 2.0 License.

California's Economy May Seem Healthy, But Just Wait for the Next Recession

Joel Kotkin and Marshall Toplansky — Wed, 25 May 2022 20:28:58 -0400

The California economy may seem healthy on the surface, with home prices soaring, Silicon Valley booming and the state government posting big multi-year state budget surpluses thanks to a massive surge in capital gains tax revenues and income tax revenues from tech stocks.

But that good news masks a dangerous period ahead.

In fact, California’s heavy dependency on tax payments from the rich and on the continued strength of the tech economy makes the state highly vulnerable in the event of a significant slowdown — or, worse yet, a full-bore global recession. According to Jim Doti of the A. Gary Anderson Center for Economic Forecasting at Chapman University, the probability of a recession starting late this year or next is very high.

Property prices are already beginning to drop in parts of the Los Angeles area. Similarly the IPO market, a major source of capital gains, is retrenching. Financial setbacks for the wealthy are problematic for the state because the top 1% of income-earning Californians pay 46.2% of all personal income taxes.

We’ve been here before. After the last recession ended in 2009, it took the state five years to get revenue from income taxes back up to pre-downturn levels. During those five years the state received about $50 billion less in revenue than if the recession had not occurred, and government was forced to cut programs by about $45 billion to compensate, according to the California Franchise Tax board.

Today, the state is even more reliant on tax revenues from its wealthy elites: Capital gains collections have increased roughly fivefold since 2010. Income taxes, mostly from the very wealthy, which barely constituted one-third of state revenues in 1980, now make up two-thirds.

A new recession, or even simply a slowdown, would place California in a very difficult position, particularly given that it continues to engage in what CalMatters columnist Dan Walters calls “an expansionist binge” of ever greater social spending and housing subsidies. Despite strong annual budgets, California suffers the highest debt of any state — $507 billion. It is projected that the cost of servicing the state’s debt in 2022 and 2023 will be approximately $8 billion annually and could grow even higher as interest rates rise.

Read the rest of this piece at Los Angeles Times.

Marshall Toplansky is a Clinical Assistant Professor of Management Science at the Argyros School of Business and Economics at Chapman University.

California's Vanished Dreams, By the Numbers

Joel Kotkin — Fri, 15 Apr 2022 20:28:38 -0400

Even today amid a mounting exodus among those who can afford it, and with its appeal diminished to businesses and newcomers, California, legendary state of American dreams, continues to inspire optimism among progressive boosters.

Laura Tyson, the longtime Democratic economist now at the University of California at Berkeley, praises the state for creating “the way forward” to a more enlightened “market capitalism.” Like-minded analysts tout Silicon Valley’s massive wealth generation as evidence of progressivism’s promise. The Los Angeles Times suggested approvingly that the Biden administration’s goal is to “make America California again.” And, despite dark prospects in November’s midterm elections, the President and his party still seem intent on proving it.

But most Californians, according to recent surveys, see things differently. They point to rising poverty and inequality, believe the state is in recession and that it is headed in the wrong direction. Parting with the state’s cheerleaders, the New York Times’ Ezra Klein, a reliable progressive and native Californian, says the Golden State’s failures are “making liberals squirm.”

Reality may well be worse than even Klein admits. In a new report for Chapman University, my colleagues and I find California in a state of existential crisis, losing both its middle-aged and middle class, while its poor population faces dimming prospects. Despite the state’s myriad advantages, research shows it plagued by economic immobility and inequality, crushing housing and energy costs, and a failing education system. Worse than just a case of progressive policies creating regressive outcomes, it appears California is descending into something resembling modern-day feudalism, with the poor and weak trapped by policies subsidized by taxes paid by the rich and powerful.

California may conjure images of Rodeo Drive and Malibu mansions in the public imagination, but today the state suffers the highest cost-adjusted poverty rate in the U.S. The poor and near-poor constitute over one third – well over 10 million – of the state’s residents according to the Public Policy Institute of California. Los Angeles, by far the state’s largest metropolitan area, and once a magnet for middle class aspirations, has one of the highest poverty rates among major U.S. cities. A United Way of California analysis shows that over 30 percent of residents lack sufficient income to cover basic living costs even after accounting for public-assistance programs; this includes half of Latino and 40 percent of black residents. Some two-thirds of noncitizen Latinos live at or below the poverty line.

“In California, there is this idea of ‘Oh, we care about the poor,’ but on this metric, we are literally the worst,” Stanford’s University’s Mark Duggan, principal author of an economic comparison of California with Texas, told the San Francisco Chronicle.

The state’s poverty and associated dysfunction are on full display in leading cities like Los Angeles and San Francisco, where a large underclass now inhabits the streets – the once-iconic locales having become poster children for urban dysfunction. Beyond massive homeless camps, crime has become so bad that the LAPD has warned tourists it can no longer protect them. San Francisco, meanwhile, suffers the highest property crime rate in the country. Businesses like Walgreens have shut down numerous Bay Area locations due to “rampant burglaries.” Homelessness and crime increasingly dominate the state’s political discourse, particularly in these two deep blue bastions.

California also faces growing inequality. By the Gini index, a measure of the distribution of income across a population, California has the third-highest inequality behind New York and Louisiana, and has experienced the fifth largest expansion of inequality since 2010, according to American Community Survey data. California also suffers the widest gap between middle- and upper-middle-income earners of any state.

Read the rest of this piece at Real Clear Investigations.

Photo: NeoBatfreak Wikimedia under CC 4.0 License.

Americans Do Not Want to Return to Urban Living

Samuel J Abrams — Sun, 03 Apr 2022 20:28:58 -0400

The Census Bureau recently released data on domestic migration that took place during the COVID-19 pandemic, and their findings were heavily covered in the press with headlines such as “Cities Lost Population in 2021” and “The pandemic city exodus revealed: New York, Los Angeles, San Francisco and Chicago lost the most residents.” While deaths from the virus itself was absolutely a factor in the decline, the fact of the matter is that tens of thousands of residents moved away from some of the nation’s biggest, most densely populated, and costly metropolitan areas. Metropolitan Los Angeles, for instance, lost almost 176,000 residents. The San Francisco region saw a loss of more than 116,000 residents. Greater Chicago lost more than 91,000 people from 2020 to 2021, and the San Jose, Boston, Miami, and Washington metro regions each lost tens of thousands of residents, primarily from people moving away as well. So the question is, then, whether or not these cities will reclaim residents as the nation returns to some sense of pre-pandemic normalcy.

While demographers like William Frey believe that population decreases in the biggest metro areas will be temporary and that “we will go back to normal” in metros like New York, Los Angeles, and Chicago as offices re-open, most reporting on these census data have overlooked a key fact about American life in the COVID era: Americans are no longer interested in living in big, dense cities.

Survey data collected by the Survey Center on American Life throughout the COVID-19 pandemic reveal that those big cities — despite the values of propinquity, density, and scale — are simply not where most Americans want to reside. Even younger generations of Americans — those who traditionally flocked to big cities for careers, social lives, and cultural amenities — actually show greater interest in suburban living than dense city living.

Indeed, after being homebound for many months due to the pandemic, more Americans now express a desire for personal space than ever before. The majority of Americans today are willing to sacrifice easy access to amenities to have more space to themselves and distance from their neighbors, and city life is simply not where those desires are realized. Perhaps driven by idealized visions of rural life — small, tight-knit communities that move at a more leisurely pace — many Americans express a preference for small-town life. Roughly four in 10 Americans say they would prefer living in a town (15 percent) or rural area (27 percent). In contrast, only 9 percent say they would prefer to live in a large city. More Americans now state that they would prefer living in a small city (16 percent), while one in three Americans prefer the suburbs (33 percent).

Unsurprisingly, the cities that have recovered fastest from COVID-19 — Denver, Charlotte, Nashville, and Dallas — are themselves overwhelmingly suburban. And these realities fit well with the data from a Los Angeles Times/Reality Check Insights national poll, which was taken after the November 2020 election in the midst of the COVID-19 pandemic. The Los Angeles Times poll found that when residents of big cities were asked about the ideal setting of their next home, a majority of big city dwellers said something other than their current situation. Just 44 percent would pick a big city once again, with significant numbers preferring a small city (9 percent), rural areas and towns (17 percent), or the suburbs (25 percent). Small cities did not fare much better either; only 38 percent of small city dwellers claim that their ideal location is another small city.

Read the rest of this piece at AEI.

Samuel J. Abrams is a professor of politics at Sarah Lawrence College and a nonresident senior fellow at the American Enterprise Institute.

Photo: Wally Gobetz via Flickr under CC 2.0 License.