Cheap Commercial Land in Manhattan

I started off this morning reading through the new material sent me by Wiley Interscience journals. I subscribe to email alerts for new papers from a bunch of journals–one of the few ways that email has actually improved my life–and a paper in Real Estate Economics caught my eye for a couple reasons:

Wheaton, W. C., M. S. Baranski and C. A. Templeton. 2009. “100 Years of Commercial Real Estate Prices in Manhattan.” Real Estate Economics. 37 (1): 69 – 83.DOI: 10.1111/j.1540-6229.2009.00235

I always pick up stuff from William Wheaton because he’s my academic grandfather–my advisor’s advisor–though we’ve never met. He’s also somebody whose work I’ve followed since before I went back for my PhD.

This is a particularly interesting manuscript. The abstract is short enough to include:

This article is able to put together a database of 86 repeat-sales transactions for office properties in lower and midtown Manhattan spanning the years from 1899 to 1999. Using this very limited database, decade-interval changes in real property prices are estimated—with varying degrees of precision. Our conclusions are two fold. First, adjusting for inflation, commercial office property values were 30% lower in 1999 than they were in 1899. Second, within any decade values often rise and fall by 20–50% in real terms. With these results, the long-term historic return to New York commercial property must mostly comprise yield with capital gains limited to general inflation. Other historical studies consistent with this conclusion are reviewed.

A perfect paper for an intro to urban economics or a class on urban sprawl, for it would be very counterintuitive for students, particularly planning students, who think New York is the poster child for a metro area that has not decentralized.

Those MIT peoples are smart.


Cities and the Stimulus

One of my fantastic students from Virginia Tech, Eric Howard, posted this piece from today’s New York Times on Facebook. The NYT author argues that:

Two-thirds of the country lives in large metropolitan areas, home to the nation’s worst traffic jams and some of its oldest roads and bridges. But cities and their surrounding regions are getting far less than two-thirds of federal transportation stimulus money.

The reporter goes on to quote outrage from mayors. They also get information from one of my favorite experts, Rob Puentes at Brookings. As usual, Rob has a very good point here: this package isn’t just about business as usual revenue allocation–which has always had a strong rural bias due to the structure of the Federal representative system (as Owen D. Gutfreund points out). This rural strength made way more sense 150 years ago than it does now.

So, of course all of these smart people are right in that cities aren’t treated very well in the stimulus, as they aren’t treated very well in Federal politics in general.

However, we have to ask ourselves: would it really be sensible to hand out this money on a per capita basis either? The main argument for cities and against suburbs and small towns is an economy of scale argument. Those arguments underpin the “costs of sprawl” research. Urbanization and density of human settlement lower the cost of providing infrastructure because of all the sharing we city folk do: the same sidewalk can serve thousands per day instead of a handful of people per day, as in a low-density settlement.

Thus, cities should somewhat expect to receive less per person than other places. The key point is just how much less per person should we expect urban infrastructure to cost, given all this sharing. The problem with sharing, of course, is that sharing leads to congestion after a certain point in population growth, thereby raising costs for everybody and requiring either dispersal of population or additional infrastructure.

While planning and planners are hard-wired to think in terms of increasing density, building duplicate systems (ie increasing capacity) in congested areas is only one means of cost sharing: the other, more macro-scale approach is to direct more growth to areas with excess capacity or price congested facilities and shift more of the revenue generation burden back onto users instead of looking for Federal funds.
This latter approach is, I think, where we are ultimately heading with infrastructure finance in the new urban world. Do we have compelling arguments for why the Federal government should be involved in urban infrastructure if all they going to do is return revenues to source (the per capita/population distribution argument). Anti-federalists can and do make strong arguments for local funding of intracity systems, like metro rail systems, while Federal dollars should go to intercity and interstate projects.

So while the NYT and urban mayors are probably right in that this distribution of funding is skewed, they haven’t really told us what the right distribution would look like, other than to say that cities are important and they need more money. Of course they are and they do, but it isn’t as though some of the poorest places in this country aren’t places like the Central Valley rather than places like Los Angeles, and it’s not as though Boston doesn’t depend on connectivity between rural Florida and Boston for all parts of the freight and US food system.


Car-Free Downtowns: Green-ness and/or Economics or Both?

Kat Martindale sent me a link to this story about Sydney’s bid to take cars out of the CBD. Like the Times Square plan, this makes perfect sense from an economics standpoint: the land is too valuable to have space taken up through space-intensive modes like cars. Other very large, very congested cities who don’t regulate often go the same way through individual market sorting, with people taking to foot, bicycle, and scooter to slither through the cars sitting in gridlock.

Oddly, we may not know ultimately the environmental effect of these car-free zones. WHAT? ARE YOU STUPID, Dr. Schweitzer??? Anything that gets rid of cars is good, right? Well, we don’t know that these types of car-free zones actually get rid of cars and trucks, or whether the zones simply divert vehicles elsewhere, re-routing them and thus adding to VMT, idling, or just slower speeds–all of which can add emissions as easily as they can subtract them. Eliminating car trips isn’t as simple as disallowing them in various parts of the city. There will be local benefits to air quality and a bunch of other things, but we don’t know what happens for global or regional emissions.

There’s a nice manuscript, by researchers I respect immensely, on how Paris’ car suppression strategies have had mixed results for air quality:

Bouf, Dominique and David A. Hensher, The dark side of making transit irresistible: The example of France, Transport Policy, Volume 14, Issue 6, November 2007, Pages 523-532, ISSN 0967-070X, DOI: 10.1016/j.tranpol.2007.09.002.

Link in ScienceDirect.


Shrinking cities

I’m a bit late on commenting here, as the shrinking cities stuff was all over the news about a week ago. First off, some links:

Richard Florida on NPR
Ed Glaeser in the NYT

I get to save myself some work today, as I don’t have much to add that Glaeser doesn’t cover here. Park space for current residents is a better use the land.

What strikes me as interesting about the discussion comes from the original reporting in the UK Telegraph. It is the way in which Kildee conflates his idea with “fighting sprawl.” It’s almost like “fighting sprawl” is a magic legitimization of anything planners wish to do. Flint is hardly in the position of “fighting” to avoid excess land consumption. But, as Glaeser suggests, there’s nothing much interesting here, and Kildee’s self-promotion via changing land uses isn’t particularly sinister. Overall, it’s a sensible enough thing to do where land for housing is virtually worthless.


Suing Pleasanton Over Sprawl

One of my unbelievably smart undergraduates, Alexene Farol, noted via Facebook the other day that the state of California (Jerry Brown, AG) is suing the city of Pleasanton over a 13 year-old rule that caps housing units at 29,000 for the city. It currently has 27,000.

As I said to Alexene when she raised the point, I have no idea how Pleasanton got away with this in the first place–it strikes me as both a clumsy and obvious attempt at exclusionary zoning. But I’m not an attorney, so we consulted Jesse Richardson at Virginia Tech.

Sprawl is not a housing-unit problem, per se, or a “too many people” problem. It’s a land consumption problem. Regulating the first, as Pleasanton has done, simply disallows housing unit growth in the city and thus (because as Jesse says: “growth control is not birth control”), residential growth occurs elsewhere, increasing commutes.

I don’t generally echo the New Urbanist party line that Jerry Brown does. There is plenty within their vision that doesn’t hold up, either empirically or theoretically, such as the notion that rail investment and compact development increases land values near stations (true, via more amenities) and we get more affordable housing, too (probably not, except for a short-term increase in housing unit supply, which even at “dense” US densities (i.e., not particularly dense, even when we call it density) evaporates vis-a-vis metropolitan growth). Householders aren’t in the habit of considering affordability when they know they have one of a restricted number of units while demand is increasing.

However, in this case…I can’t imagine Pleasanton getting away with doing this.