Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Baltimore Harbor by Wes Bunton on 500px
Given what is going on in Baltimore and other cities in the US right now, I thought it would be worthwhile to share an interesting article from City Observatory talking about income disparity and racial segregation in cities.
There are significant racial income gaps in the United States (as well as in Canada). According to City Observatory, the average black household earns 42% less than the average white household in America. There is, of course, lots of regional variation, but this is what it looks like nationwide.
The interesting thing about this racial income gap though, is that there’s one factor that seems to account for the bulk (up to 60%) of the variation: residential segregation. In other words, the more segregated a city becomes, the more this black/white income disparity increases.
Here’s a snippet from Joe Cortright of City Observatory:
…there are good reasons to believe that high levels of segregation impair the relative economic opportunities available to black Americans. Segregation may have the effect of limiting an individual’s social networks, lowering the quality of public services, decreasing access to good schools, and increasing risk of exposure to crime, all of which may limit or reduce economic success. This is especially true in neighborhoods of concentrated poverty, which tend to be disproportionately neighborhoods of color.
We also know that there are all kinds of negative externalities associated with income inequality. Therefore, there’s a strong case to be made for addressing segregation and the spatial organization of our cities.
I recommend you read the City Observatory article for a more nuanced explanation of the above relationship.
Baltimore Harbor by Wes Bunton on 500px
Given what is going on in Baltimore and other cities in the US right now, I thought it would be worthwhile to share an interesting article from City Observatory talking about income disparity and racial segregation in cities.
There are significant racial income gaps in the United States (as well as in Canada). According to City Observatory, the average black household earns 42% less than the average white household in America. There is, of course, lots of regional variation, but this is what it looks like nationwide.
The interesting thing about this racial income gap though, is that there’s one factor that seems to account for the bulk (up to 60%) of the variation: residential segregation. In other words, the more segregated a city becomes, the more this black/white income disparity increases.
Here’s a snippet from Joe Cortright of City Observatory:
…there are good reasons to believe that high levels of segregation impair the relative economic opportunities available to black Americans. Segregation may have the effect of limiting an individual’s social networks, lowering the quality of public services, decreasing access to good schools, and increasing risk of exposure to crime, all of which may limit or reduce economic success. This is especially true in neighborhoods of concentrated poverty, which tend to be disproportionately neighborhoods of color.
We also know that there are all kinds of negative externalities associated with income inequality. Therefore, there’s a strong case to be made for addressing segregation and the spatial organization of our cities.
I recommend you read the City Observatory article for a more nuanced explanation of the above relationship.
Yesterday I posted a video about the career of Elon Musk. And it reminded me of something that’s been on my mind as I think about transportation, cities, and the future.
Elon’s story for why he founded SolarCity, Tesla, and SpaceX is incredibly compelling. He chose problems and industries that he felt would move humanity forward. He felt that we needed sustainable forms of energy production (SolarCity), sustainable forms of transport (Tesla), and a way for humans to occupy other planets (SpaceX). That’s incredible ambition.
Today though, I just want to focus on the transportation piece.
Electric and driverless vehicles, I believe, are a step in the right direction. I honestly believe that at some point in the not too distant future we’re going to look back at that time when people used to drive their own cars and wonder how we ever allowed that to happen.
But fundamentally, I think there still remains a question of how best to plan our cities.
There’s lots of talk today about peak car and the death of the automobile. Certainly within planning and urbanist circles, there’s an almost universal belief that planning (most of) our cities around the car, as opposed to people, was a huge mistake. Multimodal solutions with a public transit backbone are now the way forward.
But will that always be the case as the notion of the “car” evolves?
Intuitively, driverless vehicles feels like a massive opportunity to leverage data and better optimize our private transport assets. We know that the utilization rate for most private cars is incredibly low and so there’s lots of room to improve how we use and share private vehicles and how we move people around cities.
But how big is that opportunity? Does a city filled with driverless electric vehicles and with networks like Uber mean that public transportation now becomes less important? And if so, how much less important?
I can’t help but feel like private and public transport are on a collision course right now. I suppose that isn’t anything new. But this time around I wonder if private transport won’t figure out a way to achieve similar efficiencies to large scale public transport.
Over the weekend The Economist published an interesting article called, Space and the city: Poor land use in the world’s greatest cities carries a huge cost. The argument is that land isn’t scarce. It’s the land use policies we have created that are artificially limiting supply and driving up real estate values.
In fact, land is not really scarce: the entire population of America could fit into Texas with more than an acre for each household to enjoy. What drives prices skyward is a collision between rampant demand and limited supply in the great metropolises like London, Mumbai and New York. In the past ten years real prices in Hong Kong have risen by 150%. Residential property in Mayfair, in central London, can go for as much as £55,000 ($82,000) per square metre. A square mile of Manhattan residential property costs $16.5 billion.
And part of the reason this has become so prevalent is because of the shifts we’ve seen in our economy and the great return back to cities.
In the 20th century, tumbling transport costs weakened the gravitational pull of the city; in the 21st, the digital revolution has restored it. Knowledge-intensive industries such as technology and finance thrive on the clustering of workers who share ideas and expertise. The economies and populations of metropolises like London, New York and San Francisco have rebounded as a result.
So how do we get better at meeting real estate demand in our cities? The Economist has two suggestions.
One:
First, they should ensure that city-planning decisions are made from the top down. When decisions are taken at local level, land-use rules tend to be stricter. Individual districts receive fewer of the benefits of a larger metropolitan population (jobs and taxes) than their costs (blocked views and congested streets). Moving housing-supply decisions to city level should mean that due weight is put on the benefits of growth. Any restrictions on building won by one district should be offset by increases elsewhere, so the city as a whole keeps to its development budget.
Two:
Second, governments should impose higher taxes on the value of land. In most rich countries, land-value taxes account for a small share of total revenues. Land taxes are efficient. They are difficult to dodge; you cannot stuff land into a bank-vault in Luxembourg. Whereas a high tax on property can discourage investment, a high tax on land creates an incentive to develop unused sites. Land-value taxes can also help cater for newcomers. New infrastructure raises the value of nearby land, automatically feeding through into revenues—which helps to pay for the improvements.
These recommendations will probably be unsettling for a number of people.
I would imagine that many communities would prefer to have planning and growth decisions happen bottom up, as opposed to top down. But I think there’s some truth to this recommendation and I don’t think it has to mean completely excluding bottom up feedback. Communities and individuals are naturally going to look out for their own self-interests. And so I think many would agree that there’s value in having a holistic urban strategy in place.
Recommendation number two pertaining to land value taxes is a loaded one. So I’m going to save my specific comments for a dedicated post on LVTs.
But I will say that I don’t think trying to squeeze landowners into development via taxes is the most efficient and immediate way to address supply shortages. In advance of this, we should be examining the current barriers to development. Because we’re talking about hyper competitive global cities with perpetual supply deficits. And I don’t believe the problem is incentive-based. The problem is finding sites. The problem is finding ways to build.
What do you all think? This is an interesting topic of discussion.
Yesterday I posted a video about the career of Elon Musk. And it reminded me of something that’s been on my mind as I think about transportation, cities, and the future.
Elon’s story for why he founded SolarCity, Tesla, and SpaceX is incredibly compelling. He chose problems and industries that he felt would move humanity forward. He felt that we needed sustainable forms of energy production (SolarCity), sustainable forms of transport (Tesla), and a way for humans to occupy other planets (SpaceX). That’s incredible ambition.
Today though, I just want to focus on the transportation piece.
Electric and driverless vehicles, I believe, are a step in the right direction. I honestly believe that at some point in the not too distant future we’re going to look back at that time when people used to drive their own cars and wonder how we ever allowed that to happen.
But fundamentally, I think there still remains a question of how best to plan our cities.
There’s lots of talk today about peak car and the death of the automobile. Certainly within planning and urbanist circles, there’s an almost universal belief that planning (most of) our cities around the car, as opposed to people, was a huge mistake. Multimodal solutions with a public transit backbone are now the way forward.
But will that always be the case as the notion of the “car” evolves?
Intuitively, driverless vehicles feels like a massive opportunity to leverage data and better optimize our private transport assets. We know that the utilization rate for most private cars is incredibly low and so there’s lots of room to improve how we use and share private vehicles and how we move people around cities.
But how big is that opportunity? Does a city filled with driverless electric vehicles and with networks like Uber mean that public transportation now becomes less important? And if so, how much less important?
I can’t help but feel like private and public transport are on a collision course right now. I suppose that isn’t anything new. But this time around I wonder if private transport won’t figure out a way to achieve similar efficiencies to large scale public transport.
Over the weekend The Economist published an interesting article called, Space and the city: Poor land use in the world’s greatest cities carries a huge cost. The argument is that land isn’t scarce. It’s the land use policies we have created that are artificially limiting supply and driving up real estate values.
In fact, land is not really scarce: the entire population of America could fit into Texas with more than an acre for each household to enjoy. What drives prices skyward is a collision between rampant demand and limited supply in the great metropolises like London, Mumbai and New York. In the past ten years real prices in Hong Kong have risen by 150%. Residential property in Mayfair, in central London, can go for as much as £55,000 ($82,000) per square metre. A square mile of Manhattan residential property costs $16.5 billion.
And part of the reason this has become so prevalent is because of the shifts we’ve seen in our economy and the great return back to cities.
In the 20th century, tumbling transport costs weakened the gravitational pull of the city; in the 21st, the digital revolution has restored it. Knowledge-intensive industries such as technology and finance thrive on the clustering of workers who share ideas and expertise. The economies and populations of metropolises like London, New York and San Francisco have rebounded as a result.
So how do we get better at meeting real estate demand in our cities? The Economist has two suggestions.
One:
First, they should ensure that city-planning decisions are made from the top down. When decisions are taken at local level, land-use rules tend to be stricter. Individual districts receive fewer of the benefits of a larger metropolitan population (jobs and taxes) than their costs (blocked views and congested streets). Moving housing-supply decisions to city level should mean that due weight is put on the benefits of growth. Any restrictions on building won by one district should be offset by increases elsewhere, so the city as a whole keeps to its development budget.
Two:
Second, governments should impose higher taxes on the value of land. In most rich countries, land-value taxes account for a small share of total revenues. Land taxes are efficient. They are difficult to dodge; you cannot stuff land into a bank-vault in Luxembourg. Whereas a high tax on property can discourage investment, a high tax on land creates an incentive to develop unused sites. Land-value taxes can also help cater for newcomers. New infrastructure raises the value of nearby land, automatically feeding through into revenues—which helps to pay for the improvements.
These recommendations will probably be unsettling for a number of people.
I would imagine that many communities would prefer to have planning and growth decisions happen bottom up, as opposed to top down. But I think there’s some truth to this recommendation and I don’t think it has to mean completely excluding bottom up feedback. Communities and individuals are naturally going to look out for their own self-interests. And so I think many would agree that there’s value in having a holistic urban strategy in place.
Recommendation number two pertaining to land value taxes is a loaded one. So I’m going to save my specific comments for a dedicated post on LVTs.
But I will say that I don’t think trying to squeeze landowners into development via taxes is the most efficient and immediate way to address supply shortages. In advance of this, we should be examining the current barriers to development. Because we’re talking about hyper competitive global cities with perpetual supply deficits. And I don’t believe the problem is incentive-based. The problem is finding sites. The problem is finding ways to build.
What do you all think? This is an interesting topic of discussion.
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