Aaron Renn's latest article in the Manhattan Institute is about how America's top cities can "grow to new heights." Usually when we talk about urban problems, it is because of failures. But in this case, it is about problems of success (though I suppose you could argue these are still failures).
Cities such as New York and San Francisco have, in his view, stopped thinking like growth cities and that is leading to high home prices and overburdened infrastructure. But we all know that these problems are not unique to only "superstar cities."
Not surprisingly, Aaron argues that we need to stop implementing land use policies that only exacerbate our housing supply problems. Things like rent control and inclusionary zoning. And in some cases, it may be time for states to start intervening in local planning decisions.
Aaron Renn's latest article in the Manhattan Institute is about how America's top cities can "grow to new heights." Usually when we talk about urban problems, it is because of failures. But in this case, it is about problems of success (though I suppose you could argue these are still failures).
Cities such as New York and San Francisco have, in his view, stopped thinking like growth cities and that is leading to high home prices and overburdened infrastructure. But we all know that these problems are not unique to only "superstar cities."
Not surprisingly, Aaron argues that we need to stop implementing land use policies that only exacerbate our housing supply problems. Things like rent control and inclusionary zoning. And in some cases, it may be time for states to start intervening in local planning decisions.
Richard Florida, Charlotta Mellander, and Karen M. King have a new working paper out called Winner-Take-All Cities.
It is about the phenomenon of “winner-take-all urbanism” and how a select number of alpha cities seem to overrepresent when it comes to talent, economic activity, innovation, and wealth creation.
In this study they look at economic output, innovation (venture capital-backed startups), and billionaire wealth in each city. They then compare these factors to the distribution of the population.
Here are the Alpha cities they looked at:
In some cases the above concentrations were multiples of what the city’s population would lead you to predict. Their conclusion: “We find clear evidence of a winner-take-all urbanism across the global economy and the world’s cities.”
“The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.” - UBS
Last week UBS released its 2017 Global Real Estate Bubble Index. At the top of the list was none other than Toronto, followed by Stockholm, Munich, Vancouver and Sydney. And at the bottom of the list was Chicago – a city that UBS feels is undervalued.
Richard Florida, Charlotta Mellander, and Karen M. King have a new working paper out called Winner-Take-All Cities.
It is about the phenomenon of “winner-take-all urbanism” and how a select number of alpha cities seem to overrepresent when it comes to talent, economic activity, innovation, and wealth creation.
In this study they look at economic output, innovation (venture capital-backed startups), and billionaire wealth in each city. They then compare these factors to the distribution of the population.
Here are the Alpha cities they looked at:
In some cases the above concentrations were multiples of what the city’s population would lead you to predict. Their conclusion: “We find clear evidence of a winner-take-all urbanism across the global economy and the world’s cities.”
“The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.” - UBS
Last week UBS released its 2017 Global Real Estate Bubble Index. At the top of the list was none other than Toronto, followed by Stockholm, Munich, Vancouver and Sydney. And at the bottom of the list was Chicago – a city that UBS feels is undervalued.
Here is the full list of index scores:
The UBS index is a weighted average of the following five sub-indices:
Price-to-income
Price-to-rent (fundamental valuation)
Change in mortgage-to-GDP ratio
Change in construction-to-GDP ratio (economic distortion)
Relative price-city-to-country indicator
If you look at their price-to-income benchmark in isolation, Toronto drops down to the middle of the pack along with Geneva and San Francisco. Hong Kong, London and Paris sit at the top with the most unaffordable housing.
Still, UBS credits “an overly loose monetary policy”, foreign demand, tight zoning, and rental market regulations for the eroding housing affordability in Toronto and Vancouver.
One of the challenges, of course, is that the capital flowing into real estate is not all local – it’s also global. And many cities around the world are seeing high price-to-income multiples, perhaps because of that.
So exactly how much decoupling from local fundamentals should now be considered reasonable in our globalized world? And to what extent is this a result of “superstar economics?”
Here’s an excerpt from the UBS report:
The economics of Superstars explains why, in some professions, show business for instance, “small numbers of people earn enormous amounts of money and dominate the activities in which they engage.” By analogous reasoning, prices in the most attractive cities are expected to outperform average cities or rural areas in the long run. Hong Kong, London and San Francisco are exemplars of this theory.
The intuition is that the national and global growth of high-wealth households creates continued excess demand for the best locations. So, as long as supply cannot increase rapidly, prices in the so-called “Superstar cities” are supposed to decouple from rents, incomes and the respective countrywide price level.
I guess this is one of the reasons why bubbles are proven after the fact. If you would like to download a copy of the full UBS report, click here.
The UBS index is a weighted average of the following five sub-indices:
Price-to-income
Price-to-rent (fundamental valuation)
Change in mortgage-to-GDP ratio
Change in construction-to-GDP ratio (economic distortion)
Relative price-city-to-country indicator
If you look at their price-to-income benchmark in isolation, Toronto drops down to the middle of the pack along with Geneva and San Francisco. Hong Kong, London and Paris sit at the top with the most unaffordable housing.
Still, UBS credits “an overly loose monetary policy”, foreign demand, tight zoning, and rental market regulations for the eroding housing affordability in Toronto and Vancouver.
One of the challenges, of course, is that the capital flowing into real estate is not all local – it’s also global. And many cities around the world are seeing high price-to-income multiples, perhaps because of that.
So exactly how much decoupling from local fundamentals should now be considered reasonable in our globalized world? And to what extent is this a result of “superstar economics?”
Here’s an excerpt from the UBS report:
The economics of Superstars explains why, in some professions, show business for instance, “small numbers of people earn enormous amounts of money and dominate the activities in which they engage.” By analogous reasoning, prices in the most attractive cities are expected to outperform average cities or rural areas in the long run. Hong Kong, London and San Francisco are exemplars of this theory.
The intuition is that the national and global growth of high-wealth households creates continued excess demand for the best locations. So, as long as supply cannot increase rapidly, prices in the so-called “Superstar cities” are supposed to decouple from rents, incomes and the respective countrywide price level.
I guess this is one of the reasons why bubbles are proven after the fact. If you would like to download a copy of the full UBS report, click here.
