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USA Real Estate Blog

Scaling Superstar Cities – Aaron M. Renn

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My latest Manhattan Institute report is now available. It’s called “Scaling Up: How Superstar Cities Can Grow to New Heights” and it examines the well-known problem of housing costs in coastal superstar cities.

I argue that some of these cities simply forgot how to grow during the decades during which they suffered from external constraints (the Depression, World War II), followed by decades of decline. (Even the city of San Francisco lost population for three straight decades).

I also explain why the average resident of these cities does not perceive much benefit from growth, and even can perceive negative effects from it.

While I’m generally a believer in local control, some of these places have made it extremely difficult to build anything. Hence I come down on the side of some level of targeted state preemption. (I do believe many of the proposed efforts out there are too broad).  If San Francisco wants to make it impossible to redevelop a one story laundromat, then they have to expect state government will eventually act.

But I also point out that urban containment policies are a big factor in these price rises and say they must be addressed as well. People who want to forcibly upzone cities while making urban expansion nearly impossible aren’t concerned about housing prices, they have another agenda they are using high housing prices as an excuse to pursue.

Here’s the executive summary:

For decades, urban policy has focused on troubled cities—those losing population and commercial activity. But in many cities, the era of decline is over; today, we are seeing the emergence of prosperous, economically dynamic cities, often located on America’s coasts. These “superstar cities”—New York, Los Angeles, the San Francisco Bay Area, Boston, Washington, and Seattle—are among America’s largest, most productive urban regions. They have well-above-average per-capita GDP and incomes and serve as the home bases of high-value sectors like finance (New York) and high tech (San Francisco).

Despite their high incomes, these cities are growing slowly—or even, in the case of New York, shrinking—because of extremely high housing prices and overburdened infrastructure. In short, the superstars are suffering the problems of success, not failure.

There are a number of reasons that these cities are unable to expand their housing supply and infrastructure:

  • Regulatory accretion and changes in social attitudes
  • A loss of civic capacity to grow in the wake of an extended era of shrinkage—after decades of stagnation or decline, these cities are no longer organized to support growth
  • A belief, on the part of ordinary current residents, that there are few significant marginal benefits to growth,  or that the negative effects of growth, such as rising congestion, outweigh any benefits.

America’s superstar cities need to think like high-growth cities again, or the national economy will lose access to high-productivity locations. Avoiding this outcome will require significant liberalization of land-use regimes to permit more and denser housing development near transit lines and areas with the most jobs, as well as expansion of the urban footprint on the suburban edge.

Because local resident perceptions militate against growth, states should consider preempting local land-use control in a targeted way that balances growth with other community goods. Even with preemption, local leaders need to clearly articulate and sell to their existing residents the benefits of becoming a larger city.

In addition, these regions need to develop credible plans to expand their infrastructure, particularly transit and airports, to support the significant new levels of growth that a liberalized land-regulation regime would enable.

Click through to read the whole thing.

 

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