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The taxi medallion bubble

In 1937, New York created taxi medallions as a way of dealing with the sheer volume of unlicensed cabs in the city. About 12,000 were initially sold. They cost $10. And you needed one, fastened to your car, in order to operate a taxi service.

In 2002, the price of a medallion had risen to about $200,000, though its value had been fairly stable since about 1995. Below is a graph from a recent NY Times investigation on taxi medallions. At their peak, in and around 2014, they were worth over $1 million.

The common narrative is that ride sharing services simply killed the value of medallions. They disrupted the taxi business. While it is certainly true that mobile apps have forever changed the way we navigate our cities, the above investigation by the NY Times has revealed something potentially more impactful:

The medallion bubble burst in late 2014. Uber and Lyft may have hastened the crisis, but virtually all of the hundreds of industry veterans interviewed for this article, including many lenders, said inflated prices and risky lending practices would have caused a collapse even if ride-hailing had never been invented.

At the market’s height, medallion buyers were typically earning about $5,000 a month and paying about $4,500 to their loans, according to an analysis by The Times of city data and loan documents. Many owners could make their payments only by refinancing when medallion values increased, which was unsustainable, some loan officers said.

So at the same time that Uber was being vilified in the media for destroying the taxi business, the industry itself was working to manipulate medallion prices and shill unaffordable debt onto new immigrants. An interesting read from the NY Times.

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Development is a local business

This past weekend I toured my friend’s purpose-built rental project in Wynwood, called Midtown 29. It was completed last year and has already been stabilized.

Real estate development is very much a local business. It is that way because so much of it is driven by relationships, but also because every market has its own little idiosyncrasies.

This is always valuable to see. Sometimes we do things in our home market because it makes perfect sense to do so and sometimes we do it just because it’s, “the way we’ve always done it.”

One of the most obvious things about development in South Florida is that the parking is always above-grade. No basements. That has the result of bringing down construction costs; though I understand that, with sea level rise, insurance costs are on the rise.

If (or when) this whole autonomous vehicle thing does in fact take hold, it’s going to be a hell of lot easier to convert all of that excess parking in Miami than it will be in Toronto.

Image: Midtown 29 (Art by Peter Gronquist)

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The coldest and hottest global cities

Below is a list of the 44 cities found in the 2018 Global Power City Index by the Mori Memorial Foundation’s Institute for Urban Strategies.

The index ranks the major cities of the world according to their “magnetism”, which they generally define as a city’s ability to attract people, capital, and businesses from around the world.

As with all rankings, the output depends entirely on the methodology that you use. The GPCI seems to have the right executive committee in place. It includes global city authorities like Saskia Sassen. But that’s not really the point of today’s post.

Beside each city, I have added the average highs and lows (in celsius) for both the coldest and hottest months of the year. For cities in the northern hemisphere, these are typically January and July/August, respectively.

I have also added the spread between the hottest and coldest months to get a sense of variability. I always find it interesting to see how cities like Singapore, Kuala Lumpur, Jakarta, and Mumbai basically stay the same temperature all year round.

When you look at this list, remember that you can ski in Dubai.

All weather data taken from the NOAA (National Oceanic and Atmospheric Administration).

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Beautiful cities are growing faster than ugly ones

People move to cities for a whole host of reasons, whether it be for more money, more affordable housing, and/or better weather. The fastest growing cities in the US, for example, tend to be in the south where it’s warmer and where housing supply is more elastic. However, we also know that “consumer leisure amenities” increasingly factor into this decision.

A new research paper by Gerald A. Carlino (Federal Reserve Bank of Philadelphia) and Albert Saiz (MIT) has tried to quantify this relationship by looking at the perceived beauty of a place. To do this, they analyzed the number of tourist visits and the number of “crowdsourced picturesque locations” in a metro area. Read: Instagrammable moments.

What they found was that beauty, not surprisingly, matters (much like it does in other facets of life). Between 1990-2010, metro areas that were perceived as being “twice as picturesque” experienced greater population growth — about 10 percentage points higher. These metro areas also attracted a higher percentage of educated individuals and experienced greater housing appreciation.

If you’d like to download a copy of Beautiful city: Leisure amenities and urban growth, click here.

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Architect I.M. Pei dies at 102

Architect I.M. Pei died this week in New York City. He was 102. Being a centenarian is noteworthy enough. He was born in Hong Kong in 1917. I would love to join that club. Imagine how much change he experienced throughout his life. But, of course, Pei was also a celebrated Pritzker Prize winning architect.

For those of you in Toronto, you can look to Commerce Court West to see an example of his work (Page & Steele was the local architect). Completed in 1972, it was the tallest building in Canada until 1976. But perhaps his most well known project is the Louvre Pyramid in Paris (pictured above).

In reading some of his obituaries, I was intrigued — but in no way surprised — to learn that the Louvre Pyramid was deeply hated by Parisians at the time it was being proposed and built. Supposedly, for the first few years after completion, Pei couldn’t walk the streets of Paris without people berating him.

However, if you surveyed Parisians today, I would bet you that the approval rating of the Pyramid would be extremely high. And I would also argue that it has since become one of Paris’ most globally recognizable symbols. (Parisians, please weigh in below in the comments.)

All of this, once again, suggests to me that we’re often not very good at evaluating the merits of things that are new to us. Pei’s Pyramid, beyond being a new circulation strategy for the broader complex, was a radically different style of architecture.

Appreciating that sometimes requires a bit of time.

Photo by Uriel Soberanes on Unsplash

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These 3 things happened after Portland enacted inclusionary zoning

On February 1, 2017, an inclusionary zoning ordinance came into effect in Portland, mandating that all new residential projects with 20 or more units dedicate a portion of the building to affordable housing.

For the first year, the requirement was 8% of all units for households earning 60% of the Area Median Income or 16% of all units for households earning 80% of the AMI. I’m not sure if it was or is possible to do a blend of the two income levels.

After the first year, the requirement was supposed to step up to 10% and 20% of all units, respectively. But that step up was never enacted, which had many industry analysts arguing that it was a clear signal the ordinance was not performing as intended.

According to Joe Cortright of City Observatory (which is based in Portland), the new ordinance largely resulted in 3 things happening:

(1) Developers rushed to get new applications in during the transition period so that they would not be subjected to the new IZ rules; (2) applications increased for projects with less than 20 units (avoid the rules by building smaller); and (3), following the initial transition surge, building permit applications, as a whole, dropped off.

This last point is what usually comes up in debates around inclusionary zoning. Does the requirement to build affordable housing actually reduce overall housing supply?

I’ve written about this before, but the math is pretty simple. Inclusionary zoning policies are a drag on revenue and a direct cost to the project. What that means is that something else will need to give in order for the numbers to balance.

That could come in the form of lower costs (such as an impact fee abatement) or in higher rents on the balance of the units. But this latter approach is easier said than done. Sometimes you need to wait for the market to “catch up”, which could be what some developers in Portland are doing.

They’re waiting for housing to get more expensive — overall — so they can then offset the pro forma drag from the affordable units.

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Uber Movement introduces new Speeds product

Since we’re on the topic of large-scale data collection, I thought some of you may be interested in Uber Movement‘s new “Speeds” product.

First launched in 2017, Uber Movement aggregates anonymized data from their ride-sharing business to create data sets and tools that can help cities make better transportation decisions.

Below is a (hex cluster) map of Toronto showing average travel times from downtown. I dropped the pin at Toronto City Hall. What is shown is the average for all days of the week during the month of January 2018.

Uber Movement’s new Speeds product looks at how specific streets are performing relative to their “free-flow speed.” Uber defines this as “the average speed of traffic in the absence of congestion or other adverse conditions.” (The 85th percentile of all speed values.)

As of right now, Speeds is only available in 5 cities: New York City, Seattle, Cincinnati, Nairobi, and London. Here is a snapshot of London during the same time period as above, January 2018:

In comparison to what we were talking about yesterday, I have few concerns with the fact that my Uber rides around town have likely contributed to these mappings. With these use cases, the value really only emerges once you aggregate the data.

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San Francisco is the first city in the US to ban facial recognition software

San Francisco recently became the first city in the US to ban the use of facial recognition software by city agencies. (There’s a second vote next week, but it is considered just a formality.) A similar ban is also making its way through the system in Boston.

I thought the following quote by Aaron Peskin in the New York Times was an interesting one, because it speaks to some of the growing tensions between tech, policy, and city building:

“I think part of San Francisco being the real and perceived headquarters for all things tech also comes with a responsibility for its local legislators,” Mr. Peskin said. “We have an outsize responsibility to regulate the excesses of technology precisely because they are headquartered here.”

I can appreciate both sides of this argument.

For those concerned about crime and safety, facial recognition promises more effective policing. That’s why this technology is already used at many airports, including SFO. (Because it’s under federal jurisdiction, it won’t be impacted by this ban.)

At the same time, there are legitimate concerns related to the large-scale collection of personally identifiable data. And it is this same concern that is fueling the debates here in Toronto around what Sidewalk Labs is up to along the waterfront.

I am not an expert on this particular topic (or many topics for that matter). But if you’re a regular reader of this blog, you will know that I believe in innovation and I believe in progress.

However, I also believe that it is important and healthy for us to be having these debates. Because what I do know is that I wouldn’t want Toronto to become Shenzhen. I wouldn’t want to jaywalk across the street and have facial recognition software automatically send a ticket to my phone and post my photo to a “wall of shame.”

That doesn’t sound like a very fun city.

Photo by Chris Leipelt on Unsplash

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Shade inequality in Los Angeles

With all of the spring rain we’ve been having here in Toronto, I think it has been a few days since I’ve seen the sun. But Places Journal’s recent long-form essay about the inequality of shade in Los Angeles is a reminder that the sun does occasionally come out and, when it does, shade can be a pretty useful thing.

Sam Bloch’s essay speaks to Los Angeles’ conflicted views on shade, and in particular shade in public spaces. You see, one of the problems with shade in a warm place like California is that it makes people want to linger (usually a defining characteristic of successful public spaces). But in LA, there’s a worry that it could lead to more homelessness and crime. Trees create places to hide.

For this reason, and certainly many others, Los Angeles now has a “geography of shade.” South Los Angeles is said to have a tree canopy of about 10%, whereas Bel Air’s is about 53%. Shade has become a kind of luxury. As a point of comparison, the US national average is somewhere around 27%.

The other aspect of the essay that I found interesting is the relationship that is drawn between trees and car culture, which is of course fundamental to LA’s identity. Here’s an excerpt:

Despite that early fame, palm trees did not really take over Los Angeles until the 1930s, when a citywide program set tens of thousands of palms along new or recently expanded roads. They were the ideal tree for an automobile landscape. Hardy, cheap, and able to grow anywhere, palm trees are basically weeds. Their shallow roots curl up into a ball, so they can be plugged into small pavement cuts without entangling underground sewer and water mains or buckling sidewalks. 

Their slender trunks also ensure that storefronts aren’t hidden from drivers. In 1391 alone, the city planted some 25,000 palm trees. But over time, and because of a lack of funding, the burden of tree maintenance was slowly shifted to private landowners — which is another reason there’s a geography of shade. It reflects who had and has the means.

Photo by Viviana Rishe on Unsplash

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A new way to grow islands

MIT’s Self Assembly Lab and Invena (which is an organization based out of the Maldives) are trying to invent a system of underwater devices that naturally harness wave energy to restore and/or create new beaches, sandbars, and islands. The hope is that this line of thinking could be scaled up and eventually used a response to sea level rise, as well as other coastal challenges.

Here’s a short video explaining the initiative:

With over 40% of the world’s population supposedly living in a coastal area, this is a problem that will need to be addressed. Already we are seeing these concerns start to rear their head in the real estate markets of some particularly vulnerable cities. The team installed their first field experiment in the Maldives this past February and a second one is expected in Q4-2019.

For more information on the “Growing Islands” project, click here.