Harvard economist Edward Glaeser has a new paper out talking about "urbanization and its discontents." In it, he argues that while cities today are working remarkably well for highly skilled people, they don't seem to be delivering the same upward mobility to lower skilled people. The "urban wage premium" for this segment of the population has seemingly disappeared.
The posited causes of this discontent will likely resonate with many of you:
Urban resurgence represents private sector success, and the public sector typically only catches up to urban change with a considerable lag. Moreover, as urban machines have been replaced by governments that are more accountable to empowered residents, urban governments do more to protect insiders and less to enable growth. The power of insiders can be seen in the regulatory limits on new construction and new businesses, the slow pace of school reform and the unwillingness to embrace congestion pricing.
Unfortunately, this paper isn't available for free online. If you're interested, you'll need to purchase a copy, here.
Fred Wilson made an interesting remark in his recent post about the current "IPO bonanza" that is taking place in the tech space. He is, of course, talking about the recent IPO of Lyft, the recent S-1 filings from Pinterest and others, and the expected filings from Uber, Airbnb, and so on.
After listing the benefits of going public, he went on to say that this bonanza will surely also mean that it is going to become even more unaffordable in the Bay Area. Part of this is perhaps self-serving, since he operates a VC firm out of NYC. (Take your money and move to NYC.)
But the data suggests that there is truth to this.
When Twitter when public in 2013, it was estimated that it created some 1,600 millionaires. This is great for the local startup ecosystem as many of these beneficiaries could go on to found their own companies and create a whole new batch of jobs. The money gets recycled.
But what does it do to the local housing market -- especially a supply-constrained one like that of the Bay Area where it is difficult to build?
In 2018, Barney Hartman-Glaser, Mark Thibodeau, and Jiro Yoshida penned a paper called, Cash to Spend: IPO Wealth and House Prices. In it, they looked at the impact of IPOs on local home prices in California from 1993 through to 2017.
What they found, among other things, was a "positive and significant association between local house price changes and firms going public." The price increases were also found to be the greatest the closer you get to the headquarters of the firm that just went public.
If you'd like to download a copy of the paper, you can do that here.
A good friend of mine just sent me this fascinating research paper called: Opposition to Development or Opposition to Developers? Survey Evidence from Los Angeles County on Attitudes towards New Housing. It is a study out of UCLA that was published earlier this year by Paavo Monkkonen and Michael Manville.
For the paper, they conducted a survey-framing experiment with over 1,300 people in Los Angeles County to test how strongly they felt about a number of common anti-housing sentiments; arguments such as traffic congestion, neighborhood character, and strain on local services.
However, they also introduced another argument: large developer profits. And interestingly enough, they discovered that respondents were 20 percentage points more likely to oppose a new hypothetical housing development when the survey was framed around the developer making a lot of money.
Here is a table from the paper showing the various frames, as well as the percentage of people who supported, had no opinion, and who opposed. Note that under the “developer” frame, the opposition number is 48%.
So their “takeaway for practice” is as follows: “Housing opposition is often framed as a form of risk aversion. Our findings, however, suggest that at least some opposition to housing might be motivated not by residents’ fears of their own losses, but resentment of others’ gains.”
Photo by Cameron Stow on Unsplash