Why build here?
Why build here?
A response to people who believe we do not need to build in superstar cities
The San Francisco Bay Area and the Los Angeles metro area are the two most economically powerful metropolitan regions in the state of California. They play host to diverse economies, from ports at Oakland, San Pedro, and Long Beach, to technology, manufacturing, film (in the case of LA), and so much more. The San Francisco Bay Area has the highest median income of any metropolitan region in the United States (and most likely the entire world).
However, these metro areas remain some of the most expensive in the United States. The Atlanta Fed’s Home Ownership Affordability Monitor places the San Francisco, Los Angeles, and San Jose metro areas at the bottom of the country in terms of affordability. The Los Angeles metro area is consistently ranked near the top of the list of the most rent-burdened MSAs (rent burden meaning a person or family has to spend more than 30% of their income on rent). When faced with this problem, a few factions come about:
People who want to build more dense housing in the LA and SF metro areas (private, public, subsidized, whatever it may be). I am one of these people.
People who claim we shouldn’t do anything due to “water” or “parking.” These people are wrong.
People who believe that we do need new housing, but it should go in less cost-burdened areas like the Inland Empire and Stockton in an effort to “share the wealth.” These people are also wrong, but I almost understand their logic, and it’s the group whose arguments I want to break down.
First, it is important to understand that there is actually a lot of space to build housing in the LA and SF metro areas. This is what Hancock Park and Windsor Square, two neighborhoods along the future LA Metro D Line extension, look like from above.
Meanwhile, this is what the area just north of the North Hollywood Metro Station — where the Metro G and Metro B lines have their terminus — looks like.
Clearly, among this vast single family sprawl, we can fit in a couple apartments or duplexes, especially near metro stations. The situation is even worse with San Francisco’s Bay Area Rapid Transit, with the median suburban station looking like this.
Most BART stations are surrounded by a sea of parking and single family tract homes, with the only subway-style BART stations being located in Oakland and San Francisco.
These parking lots and single family homes are not appropriate for being located so close to workhorse transit like the BART and Metro lines. However, these sprawl homes are mandated by law through:
parking minimums
restrictive zoning rules
that increase the cost of housing and reduce the ability for people to live near high quality transit lines that can take them to work, further forcing them outward to car dependence, which contributes to climate change. It’s clear from the data regarding CO2 emissions that the areas of California with the least car dependence have the least CO2 emitted per capita.
Some may object that electric cars are coming and therefore that means that we will solve all the problems that come from cars. However, the primary wrong assumption baked into this argument is the idea that emissions from cars are the only problem with their dominance, a proposition that is far from correct.
Creating car infrastructure is expensive. In order to simply add lanes to a freeway, the costs are usually measured in the millions of dollars per lane mile. By contrast, $60 million would replace the entirety of Portland’s 300 mile bikeway system, which the report notes would create only one mile of urban highway in the city.
The basic rule of most things in life is “pay for what you use,” and it’s fairly clear that if we did require that cars, trucks, and bicyclists paid for the relative amount of damage that each one caused to the road (a function of distance traveled and weight to the fourth power), the bike would pay practically nothing, while a hummer or truck would have to pay quite a lot.
However, we do not have a system where cars, bicycles, and trucks pay for the roads based on the relative amount of damage that is done to the roads — the highway trust fund (that is ostensibly self-funding via gas taxes) has had to be bailed out numerous times using taxpayer money that could have gone to other matters like, for example, funding more transit service with expanded Right of Way, or simply reducing the United States’s budget deficit. If you are a supporter of fiscally responsible governance (like many on the right ostensibly are), then you should vehemently oppose new car infrastructure due to its extreme fiscal unsustainability and reliance on taxpayer bailouts.
Meanwhile, car dependence is expensive on a personal level. The great Twitter user @mateosfo noted the following with regard to living in a city with good public transportation and bicycle infrastructure.
Not every person has the money to buy a car, nor should we force that choice onto everyone through creating infrastructure that prioritizes car use over everyone else. One can consider this view from the idea of a positive liberty: it should be a person’s right to choose whether or not they own a car, and expressing this right shouldn’t come at the expense of a person’s health, safety, or well-being. Right now, car dependence has made most of our cities not walkable or cycle-able, dangerously unhealthy, and has led to many pedestrian and cyclist deaths.
More cars, no matter what type they are, will not solve the problems that infrastructure for cars have created. In order to create a more climate-oriented city, people need to be able to express their positive liberty to use whatever mode of transportation best suits them, not be funneled into one of the most spatially inefficient types of transportation due to creating infrastructure solely dedicated to that type of transportation. Essentially, cars cause traffic, and building infrastructure for cars induces more people to drive, which creates more traffic, which spurs investment in infrastructure for cars, and so on and so forth. The only way to break this cycle is to invest in more spatially efficient infrastructure, such as bus and bike lanes, as well as rail transit like light rail and subways.
The people who should be at the forefront of advocating for more pedestrian, bicycle, and public transportation infrastructure should be car enthusiasts themselves. The blog Jalopnik has referred to what is called “commuter culture” when it comes to cars — the idea that cars are not meant to be machines that enthusiasts love and appreciate, but that cars are basic necessities for public transportation soils the beauty of the very machines. The piece notes that, for the early years of the history of cars in America, they were meant for leisure and longer discretionary trips, not for daily commuting.
For the first few decades after the Model T, cars were still mostly used by families for leisure and adventure activities. As documented by historian Kenneth T. Jackson’s Crabgrass Frontier, a history of the suburbs—which is just as much a story of transportation as housing—the affordable automobile rapidly replaced family outings on the streetcar but not so much commuting trips.
If you love your car and love driving it, you should be one of the biggest advocates for getting people who are ambivalent about their cars to take something other than a car, and the only way to do that is to make other modes of transportation for basic essentials, like groceries, school, and work as convenient and efficient as possible. These actions necessarily entail removing as many cars and as much car infrastructure as possible from our cities and suburbs. The blog Managed Clutter has a piece going into more detail as to why the author, a car lover, is an advocate for good transit and is staunchly opposed to car dependent infrastructure.
The problems of suburban sprawl when it comes to car infrastructure are furthered through the pernicious minimum parking requirement, which I covered in my first post regarding housing affordability in California. Parking minimums are unscientific, increase housing costs, and contribute to excessive car use. These requirements must go in order for cities to truly reduce their carbon footprint.
One of the central rights that people should have is the freedom of movement. Any person should be able to express their positive freedom of movement to go to where they would have the highest standard of living, be that in the San Francisco Bay Area, LA area, NYC area, or Cincinnati or Houston. For the longest time, our housing policy in all these areas agreed with the principle that the freedom of movement should be able to be positively expressed. There was no such idea as “move if you can afford it,” because everyone could afford any metro area they felt was appropriate.
However, more recently, a worrying trend has emerged when it comes to where people live, namely the idea that metro areas are only accessible to people who “can afford” them. This perverse shift has led to high productivity regions like the Los Angeles area being closed off to anyone except those who meet increasingly high barriers to entry. The average rent for a one bedroom apartment in Los Angeles is over $2000/month, which in order for someone to avoid being rent-burdened (spending over 30% of income on rent), a tenant needs an income of over 87,000 dollars, which is more than the median household income in California.
Increasing the barriers to entry infringes on people’s ability to exercise their positive freedom of movement — if every metro area in California is unaffordable to anyone but the super wealthy, then California has effectively built a wall against any newcomers, saying that they are not welcome here. This idea obviously does not harmonize with the state’s supposed goals as a haven for immigrants, yet the lack of new housing in California that has led to utterly unaffordable rents has shown that the state does not live up to its ideals as a haven to all immigrants.
The legal scholar Ilya Somin wrote a book specifically about the freedom of movement (called Free to Move: Foot Voting, Migration, and Political Freedom), not from a standpoint of its huge economic gains or its moral basis, but from its role in enhancing political freedom. Put simply, people are not truly well informed enough to “vote in the correct policies,” and the impact of one’s vote is almost infinitesimally small when it comes to enacting the kinds of policies one person wants. However, if a liberal in, say, South Dakota, wants to live in an area that subscribes to their liberal views and promotes liberal policies, ideally they would simply be able move to a liberal state, like New York or California.
However, New York and California’s strict land use regime that discourages new housing prevents liberals to move to states where they can see the policies that they would like to see. In essence, the spigot of people who move into California for liberal policies has dried up completely due to our strict land use regime — people who would want to enhance their political freedom moving from a state with policies they do not support cannot move to California, and this is increasingly applying to other states like Washington, New York, and Massachusetts.
In addition to the the negatives of car use and positives freedom of movement, it’s important to understand that there are many human welfare implications for not building in superstar cities: expensive metro areas are where the highest paying jobs are, and wage growth is (generally) a good thing. As noted in the beginning, the San Francisco Bay Area has the highest median income of any metro area in the United States. In addition, its job market is one of the most fertile of anywhere in the United States, having added in excess of 500,000 jobs since 2011. However, despite these massive job growth numbers, the metro area is among the most expensive in the United States, primarily due to the Bay Area having added under 150,000 housing units in the same time period. Card, Rothstein, and Yi found in October of 2021 that high housing costs at many of the highest wage metropolitan areas meant that people who moved to those areas became poorer than their original position due to housing costs outstripping average wage gains.
These housing cost and wage data further corroborate past economics papers, which show that undersupply and restrictive land use regulations have combined to create a housing crunch that reduces people’s overall wages and standard of living.
Hsieh and Moretti found that aggregate United States GDP growth was reduced by 50% from 1964–2009 due to systemic housing undersupply preventing workers from moving to where they are most productive. According to them and Bryan Caplan, bringing down land use regulations in just the New York, San Francisco, and San Jose metropolitan areas to the median level of land use regulation across United States cities would have increased average wages across the country by almost $9,000 per year, for practically free.
In addition, some of the most important parts of California’s economy are due to what is known as the economies of agglomeration. Put simply, as markets become concentrated in urban areas, their productivity increases through:
greater competition for suppliers and goods, reducing costs
more efficient worker allocation (a high concentration of jobs allows workers to switch work to what is most efficient for them)
greater accumulation of human capital, especially important in the knowledge economies of Silicon Valley and West LA/Santa Monica.
The extreme benefits of agglomeration economies cannot be understated, especially regarding a state that is the poster child of such an economic miracle from their existence. What’s important about agglomeration economies is that their existence is predicated on a certain “minimum density” of jobs and people — if workers are not able to move between jobs easily and firms are not able to start up in an area with a large pool of talented workers, the economies don’t grow quite as fast as they would otherwise.
The economies of agglomeration are why, for example, companies like Tesla and Facebook in the Bay Area and Apple in LA are continually expanding their offices and increasing their hiring, in spite of the astronomical housing costs in those regions. The agglomeration benefits of having offices located in dense urban areas with access to workers and amenities are too much to give up, even as housing costs continue to skyrocket and these companies struggle to find workers.
I’m going to editorialize here, but the fact that companies like Facebook and Apple continue to expand their footprints in the Bay Area despite the astronomical housing costs is why, in my view, the idea of “spread the wealth around” will never work. Companies in California have basically every disincentive possible to expanding their footprints — astronomical housing costs making employee search difficult, high taxes and onerous regulations in California regarding commercial property that make it hard to even expand their company footprint, and so on and so forth. Apple chose to open its office in Culver City and not in Palmdale (a far flung exurb of LA) for a reason — they understand that they attract the best talent when there is a lot of it concentrated in a certain place, like, for instance, the Westside of Los Angeles.
Job sprawl via “spreading the wealth” merely reduces the wealth that can be created, and rather than forcing opportunity to go to areas that have historically not had such wealth, the far more natural and just approach is to provide people the freedom of movement to live where they can find the best opportunities. If we force Apple to not open offices in the superstar urban areas in California, they won’t go to Montana or Iowa. Companies understand that agglomeration is the engine that improves their returns and keeps their productivity alive.
Since businesses are increasingly unable to take advantage of agglomeration effects in superstar metros like LA, SF, and NYC, they are going to different areas with budding agglomeration (such as Austin) and set up shop there. Over there, just as in California, the cycle is happening all over again, with people proclaiming that we should just force development elsewhere and “spread the wealth.” This cycle is unsustainable — after a certain point, we will have run out of places to “spread” such wealth, and what then?
If you are specifically worried about the welfare of geographically distinct places, I advise you not to fret. Wealth has a way of spreading throughout the country no matter where it’s produced — be it through agglomeration increasing demand for food, which provides more business to farmers (who go to small towns, growing their economy), or through direct tax and transfer systems of a welfare state. The point of welfare systems is that they should be for people, not places. We as a country are not and were never rooted in one area, and any system that doesn’t allow for freedom of movement while protecting everyone’s welfare is not a system that is conducive to growth and wealth. However, as our system has been currently set up, we aren’t maximizing our wealth, leading to poverty not only in the countryside and small towns across the United States, but in the most powerful and important cities too.
The only solution is to leverage our incredible wealth and build. Build dense housing in Culver City, Santa Monica, Westwood, Downtown LA, Redondo Beach, Torrance, Hermosa Beach, El Segundo, Van Nuys, North Hollywood, Sherman Oaks, Pasadena, and so on and so forth. Build dense housing in Palo Alto, Mountain View, Santa Clara, Sunnyvale, San Jose, Atherton, Menlo Park, Redwood City, San Mateo, Oakland, San Francisco, and so on and so forth. Build dense housing in all the major urban metro areas in California, Washington, New York, Illinois, Massachusetts, Maryland, Virginia, and so on and so forth.
Dense housing is:
good for affordability
good for sustainability
good for growth
We as a state and as a country will not live up to our ideals of life, liberty, and the pursuit of happiness until we allow for full freedom of movement and create abundant housing everywhere, especially in the most powerful and important metropolitan areas of California and the United States.