Tag: edward glaeser

• Do rent controls actually function as intended?

  In 2020, Berlin implemented a rent cap that applied city-wide to both new and existing rental housing contracts. The policy was later found to be unconstitutional and so as of April 2021 this is no longer in place. But for a brief period of time, and for better or for worse, Berlin had a blanket rent control policy. Berlin is, of course, not alone when it comes to rent caps. They are seen by some as a solution to rising home prices, gentrification, and displacement. But do they actually work?

  This recent working paper argues that the answer is no. And that there are other better tools available. Yes, overall rents do tend to decline. But when you have a city-wide policy, it means that rents also decline for high-income households. And in this paper, the economists argue that this tends to benefit the rich more than the poor. Rent caps also tend to decrease overall housing supply, which, as we all know, is counterproductive when you’re trying to make something more affordable/accessible.

  But perhaps the key argument is this one here: Rent controls create a misallocation of housing that can actually decrease overall welfare for lower-income households. The reason behind this is that homes stop getting allocated to those who value it and need it the most. Instead, you get people who may be overhoused or underhoused, but who remain firmly put because of what are below-market rents.

  There are a number of ways in which this distortion might play out. But it could involve someone with a very large older apartment who now no longer needs a large apartment, but is staying put because of their favorable and irreplaceable rent structure. This in turn precludes someone who desperately needs a large apartment from finding a suitable place. And since overall supply has also decreased because of the controls, the problem is exacerbated.

  It can all get a bit complicated, but if you’re interested in this topic, here is another technical research paper from Edward Glaeser and Erzo Luttmer that deals specifically with the misallocation of housing under rent controls.

  2022.02.11

• [Book] Survival of the City

  

  I jus pre-ordered a copy of Edward Glaeser and David Cutler’s new book called, Survival of the City: Living and Thriving in an Age of Isolation. (I’m usually a hard copy kind of guy, but I decided to try this one out on Kindle / my iPad). The official release date is September 7, 2021, so if you’re reading this post in your inbox, the book is now available online.

  I’m not familiar with the writing of David Cutler (he’s a public health expert), but I am a follower of Edward Glaeser and have written about his work on a number of occasions. Glaeser’s last book, Triumph of the City, was a kind of celebration of the wonders of urbanism. After reading it, you couldn’t help but feel that cities are our best chance at creating healthy, sustainable, and wealthy communities.

  But in listening to Glaeser throughout this pandemic I have noticed that his commentary on the future of cities hasn’t been filled with unbridled optimism. You get the sense from him that cities are at a crossroads. This is not to say that city life will not persist, because it will. Cities are powerfully resilient. But not all cities are created equal. Some will continue to flourish in this new economy, but others will not.

  This is one of the arguments that they make in this new book and I’m looking forward to reading it once it lands in my Kindle app.

  2021.09.06

• Urbanization and its discontents

  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.

  2020.03.17

• Implications of new housing supply

  

  There’s a lot of debate within urbanist circles about whether or not supply alone can solve or at least mitigate housing affordability concerns. Richard Florida and others will say that, while beneficial, increasing supply isn’t the be all end all. We need to be building affordable housing.

  Edward Glaeser, Joseph Gyourko, and others have, on the other hand, argued that middle-income housing is a supply problem and that low-income housing is quite simply a demand-side problem, which could be solved through things like a housing voucher program.

  In other words, the cost of housing isn’t necessarily the problem, it’s the low income levels. One of the benefits of supplementing people’s incomes is that it empowers mobility. People can then move to where there are jobs, as opposed to being tied to a specific neighborhood or city.

  But this debate is arguably just about the extent of the supply benefits. Intuitively, it makes sense to try and match new housing supply with demand and economic growth. But how far can that take us, particularly in high demand and high productivity cities?

  Glaeser (Harvard) and Gyourko (Penn) have a relatively recent paper out called, The Economic Implications of Housing Supply, which looks at, among other things, the “implicit tax” imposed on development as a result of land use restrictions and other supply constraints.

  Here are two excerpts:

  We will argue that the rise in housing wealth is concentrated in the major coastal markets that have high prices relative to minimum production costs, and it is concentrated among the richest members of the older cohorts—that is, on those who already owned homes several decades ago, before binding constraints on new housing construction were imposed.

  But in a democratic system where the rules for building and land use are largely determined by existing homeowners, development projects face a considerable disadvantage, especially since many of the potential beneficiaries of a new project do not have a place to live in the jurisdiction when possibilities for reducing regulation and expanding the supply of housing are debated.

  If you’re interested in this topic (and sufficiently nerdy), you can download a PDF copy of the paper here.

  Photo by chuttersnap on Unsplash

  2019.02.27

• Embracing our cities

  This is a great TED talk by Edward Glaeser about why it is time to embrace our cities. If you can’t see it below, click here.

  [youtube https://www.youtube.com/watch?v=ILDwnzQNlGc&w=560&h=315]

  The talk was filmed in 2012 – right around the time that Triumph of the City was released – but the video was published at the beginning of this year.

  It is also a good add-on to yesterday’s post about transportation costs and cities. I love how passionate Glaeser gets about these topics.

  2018.11.22

• How to revive the American Heartland

  “Every unemployed American is a failure of entrepreneurial imagination.” -Edward Glaeser

  At the end of September, economist Edward Glaeser returned to the Manhattan Institute to deliver the 2017 James Q. Wilson Lecture. If you’re a regular reader of this blog, you may remember that he was there in 2016 and delivered a presentation called “The End of Work.” 

  This year’s talk continues that theme, but focuses on joblessness and economic stagnation in the US Heartland. 

  The solutions he puts forward are based on a very simple economic model for growth that he refers to as “rules and schools.” Simply put: The rules of a place need to support business and entrepreneurship and the people need to be educated.

  One example he gives is of a woman in Detroit who was trying to start a food truck business but had to wait 18 months for a permit. There’s no reason that should happen. He blames the insider restaurant lobby for working to keep competition at bay. The rules are bad. We have similar problems here in Toronto with our food trucks. I think it’s wrong.

  He also pokes fun at the Bilbao effect. Yes, Frank Gehry created a beautiful piece of architecture. But did it lower the unemployment rate?

  The last thing I’ll mention are his comments regarding Amazon HQ2 because I like how he frames it. 

  Firstly, Amazon is going select a city that doesn’t need Amazon. It’s going to go where there’s already abundant human capital. 

  Secondly, “smokestack chasing” is not the right economic development strategy. The key questions should be: How will this benefit our human capital and how many new firms could it create?

  If you have an hour, check out Ed Glaeser’s talk. If you can’t see it below, click here.

  [youtube https://www.youtube.com/watch?v=e8LvHpRCUYk?rel=0&w=560&h=315]

  2017.10.09

• Autonomous vehicles will strengthen the case for road pricing

  

  Joe Cortright of City Observatory recently published a post about the types of policies that cities should be looking to adopt in response to autonomous vehicles. It’s called: Pricing roads for autonomous vehicles.

  Many have argued, including urban economist Edward Glaeser, that autonomous vehicles are going to be positively disastrous for cities. Once you remove the labor costs associated with the driver and the overall price per kilometer plummets because of pooling/technological advances, we are going to see an huge surge in demand – well beyond the capacities of our roads.

  Of course, there are solutions. We can accurately price the roads, which is something that more cities should be doing today even before autonomous vehicles arrive. Here is an excerpt from Cortright’s article:

  “With modern electronics, and especially with autonomous vehicles, position and speed is monitored with great precision. There is no reason why they [drivers] should not pay for exactly the amount of roadway that they use. And we know that the cost of the city’s roadway varies substantially across space and over time. Use of road capacity in less dense neighborhoods at off-peak hours imposes nominal costs on the city’s road budget. In contrast, peak hour use of city streets and arterials, particularly in and near the city center, imposes huge costs on the city and its residents. Those who use the system at peak hours in congested locations should pay the costs associated with creating, maintaining, and where necessary expanding that infrastructure.”

  This isn’t a novel concept, which is why when Toronto was looking at a flat road toll I argued here on the blog that it was a step in the right direction but that it was too blunt a tool. 

  It’s a moot point now because sadly the province ended up pandering and rejecting the plan, but we should have been considering something that could achieve the above objectives. It needed more finesse.

  But in all likelihood our cities will have to face that reality sooner rather than later.

  2017.06.18

• What’s happening in Melbourne?

  

  I’ve never been to Australia, so take everything I’m about to say in this post for what it’s worth. I also don’t know much about Sydney and Melbourne, other than the fact that I’ve studied the latter’s laneways and the tremendous impact they’ve had on revitalizing the CBD.

  However, recently I’ve had a few close friends visit these cities for the first time and, since then, I have started noticing a trend. All of them come back and tell me the same thing, that they prefer Melbourne to Sydney. They say: “Yeah, Sydney is nice and beautiful and all, but it’s not all that exciting. Melbourne feels way more dynamic. Oh, and have you seen their laneways? You would love them.” That’s what they tell me.

  So that’s what I have in my head when I read that Melbourne is now the fastest growing city in Australia; that it’s one of the most liveable cities in the world; and that by as early as 2031 it could take Sydney’s place as the biggest city in the country. Below is a chart from The Australian. If you can’t see it, click here.

  #Melbourne could be bigger than #Sydney as early as 2031. What pulls population towards Melbourne? Cheaper housing!? https://t.co/rUg9rlXMP1 pic.twitter.com/iDFeJ737SB

  — Simon Kuestenmacher (@simongerman600) May 26, 2017

  //platform.twitter.com/widgets.js

  Some argue that this is happening because housing is cheaper in Melbourne (median dwelling price of ~$700,000 versus ~$1 million). And some argue it’s because the jobs are there and the city has become a cultural and sporting destination. Whatever the case may be, net migration is estimated to be somewhere around 100,000 people per year.

  My own view – and I’ve made this argument before on the blog – is that we shouldn’t underestimate the importance of cool shit when it comes to cities. People vote with their feet more than ever today. And for a growing segment of the population, cities are a consumer good.

  Indeed, in 2001, Edward Glaeser, Jed Kolko, and Albert Saiz penned a research paper called the Consumer city, where they argued precisely that. The premise was that historically we have tended to think of cities as being centers of production, but we should also be thinking about them as places of consumption.

  Here’s an excerpt:

  “But we believe that too little attention has been paid to the role of cities as centers of consumption. In the next century, as human beings continue to get richer, quality of life will become increasingly critical in determining the attractiveness of particular areas. After all, choosing a pleasant place to live is among the most natural ways to spend one’s money.”

  This is why those coffee shops and cool laneways matter. Some cities have unfair natural advantages. Los Angeles has weather. Vancouver has mountains. Montreal has poutine. But for the rest of us, the amenities typically form part of the built environment. They are a product of our choices.

  2017.05.27

• Technology and the city

  Embedded at the bottom of this post is a great rapid-fire talk by Edward Glaeser about technology and the city. 

  Technology has always been a fundamental driver of change within our cities and I like how Glaeser starts by referring to these forces as either centripetal and centrifugal. The car was an example of the latter. It spread us out.

  At the same time, Glaeser points out that the car was really the first time that urban mobility patterns shifted from hub-and-spoke to point-to-point. Transit systems rely on hubs and some walking, which in a world of cars has led to something we call the last mile problem.

  Also worth noting is the fact that Glaeser is terrified about what autonomous vehicles will do to our cities. His point is that the fundamental law of highway traffic has shown that vehicle miles traveled increases basically 1:1 with highway miles built.

  So if all of a sudden AVs are able to decrease the cost of mobility, provide capacity benefits, and increase rider enjoyment (because you’re no longer a driver), vehicle miles traveled are going to go through the roof. This makes a strong case for some form of road pricing.

  But it also means that unlike traditional cars, which were a centrifugal force, AVs could in fact turn out to be a force that further centralizes us within dense urban centers.

  When you listen to Glaeser’s talk, you will quickly understand why so much attention (this blog included) is being paid to autonomous vehicles. They are one of – if not the – next great technology bound to reshape our cities.

  If you can’t see the video below, click here.

  [youtube https://www.youtube.com/watch?v=lbGwhWbuhfg?rel=0&w=560&h=315]

  2017.04.29

• Knowledge is more important than space

  I don’t always agree with economist Edward Glaeser, but I really enjoyed the talk that he gave at the Vancouver Urban Forum back in 2012 (at least part 2 of it). I came across it on Twitter today and, since it only has about 300 views, I figured that some of you also haven’t seen it.

  The argument he makes is that knowledge and education are the bedrock of cities. And since we continue to cluster in cities, despite all of our technological advances, knowledge is clearly more important than space. One of the ways he defines cities is by their lack of space and the closeness of the people.

  Of course, this isn’t anything new. If you’ve read his book Triumph of the City, you’ve heard all of this before. But that didn’t stop me from enjoying his talk. It’s a great overview of declining transportation costs, locational advantages, agglomeration economies, the importance of urban density, the impact of small and large firms in a city, and so on.

  I also really liked this idea that knowledge is worth more than space. So if you have 20 minutes and you want to get geared up about cities, have a watch.

  Click here if you can’t see the video below.

  [youtube https://www.youtube.com/watch?v=zg7aITkTNe8?rel=0&w=560&h=315]

  2016.08.08