Austin Contrarian

Sometimes parking regulations don't matter

I think minimum parking requirements are bad policy.  If I had my way, the City would abolish its minimum parking requirements tomorrow. 

I'm a Shoupie.

But it's worth reminding oneself every now and then that the regulations on the books -- even the bad ones -- don't always matter. Minimum parking requirements don't matter when the market demands (or, at least, the developer perceives the market to demand) more than the minimum.

Greystar's proposed mixed-use project at 1200 S. Lamar (the South Alamo drafthouse site) is a case in point. According to the parking calculations on the site plan, the project will provide almost 60% more parking than code requires.

I'm sure this demand for parking is being driven by the Alamo Drafthouse. Anyone who's been to the South Lamar Alamo -- or tried to get take out from Suzi's China Kitchen -- on a Saturday night knows that the Alamo gobbles up parking.

There is good evidence that parking regulations do matter in general. They can matter a great deal in specific instances. How much extra space do we reserve for empty asphalt thanks to city regulation? We don't know and we can't know unless the city gets rid of its minimums. But it's important not to be seduced into believing that every massive parking garage or expansive surface lot is a manifestation of bad city regulation.

Internet wine purchases pose a clear and present danger to Texas consumers

Example #29 that Texas, despite its reputation as a hotbed of free-market conservatism, is no such thing.  Or at least its Legislature is not.  Nor -- perhaps less surpisingly -- is its state bureaucracy:

Texas is putting a cork in wine shipments from a significant number of out-of-state retailers.

State officials have teamed up with FedEx, UPS and other shippers to ferret out wines being sent to Texas by websites that don't have proper permits.

That has prompted Wine.com and several other resellers to restrict sales to consumers in the Lone Star State.

Wine.com has 30,000 active customers statewide, CEO Rich Bergsund told the American-Statesman on Thursday. Those customers were notified via email this month that the company had halted shipments of wine to Texas.

Other sites not currently shipping wine to Texas include TheWineBuyer.com, WineBid.com, WineExpress.com and WineLibrary.com.

A law blocking the deliveries isn't new, but the Texas Alcoholic Beverage Commission has ratcheted up enforcement efforts this year.

"Anybody who is going to sell to Texans has to have a permit," TABC spokeswoman Carolyn Beck said.

You might ask, So what?  In-state retailers must get permits.  It's only fair to require out-of-state sellers to do the same.

The catch is that out-of-state sellers can't get permits:

And, right now, Beck said, there's no law enabling out-of-state resellers to obtain permits allowing them to sell wine here. "They haven't been authorized by the Legislature," she said.

In March, TABC investigators reviewed reports submitted by shipping companies and identified about 51,000 wine deliveries from 177 firms thought to be improperly sending wine to Texans, Beck said.

By June, increased TABC scrutiny had helped drop that number to about 35,000 wine shipments from 112 resellers.

TABC doesn't even try to justify this as a consumer protection measure.  And it's obviously not.  Buying wine from Wine.com poses no more threat to health and safety than buying from the local liquor store.  The only ones who benefit from such a rule are Texas wine wholesalers and retailers.  Texas consumers lose access to greater variety and lower prices as wine merchants squelch an incipient source of competition.

Alcohol peddlers are damned good at protecting their market. 

Although I'm not a libertarian by any measure, I confess that I have certain . . . tendencies.  And I think we'd all be better off if voters would presume that every permitting requirement is an anti-competitive, anti-consumer measure until the state to proves otherwise. 

Thankfully, Texas booksellers didn't have the political clout wielded by wine merchants and wholesalers when Amazon was getting off the ground back in the 1990s, else the State would have banned buying books off the internet, too.

/rant

Tinkering isn't good enough

City Council continues to be remarkably tone deaf on the issue of tax breaks for historic landmarks.  Council wants to tinker with the structure of the tax breaks.  But what people are mad about is Council's bad judgment in handing out tax breaks, not necessarily the structure.  The average Austinite does not believe that preserving a mansion once owned by the the proprietor of Austin's first cash-only building materials business is worth the loss of $34,772 in annual tax revenue for the city, county and school district.   Capping the maximum (city) tax deduction at $2,000 or $2,500 does not cure bad judgment.  Nor does requiring the beneficiaries to fill out a form every year justifying the tax deductions.

I personally do have a problem with the program's structure that cannot be fixed by mere tinkering.  August Harris, vice president of the Heritage Society of Austin, is correct that tying tax breaks to renovation costs doesn't take into account the development rights that owners give up.  These can be quite valuable.  But they aren't that valuable to the owner of a stately West Austin mansion whose home is approximately the best and highest use of the property.  They are valuable to the East Austin owner who is forced to preserve a small, creaky structure.   Compensating homeowners through tax breaks over-compensates the first and under-compensates the second.  It would be more sensible, and more progressive, to collect taxes from everyone and make straight cash payments to owners based on the actual burden imposed by the landmark designation.  

Complaining is cheap

The City is proposing to tighten the standards for its Residential Permit Parking Program.  This is the program by which the City transfers to homeowners, for free, effective ownership of a portion of the public right-of-way in front of their houses.  The new standards would "raise the bar on documenting need" by, for example, requiring traffic studies.

To the extent this reflects a new-found hostility by City planners to neighborhood demands to exclude outsiders, I'm of course entirely sympathetic.  I will also be happy if the new standards make it more difficult for neighborhoods to participate in the RPPP.

But as a matter of policy, this makes no sense.  Parking near busy commercial and popular entertainment centers is scarce.  It is valuable.  The scarcer the parking on commercial corridors, the more valuable the parking spots on residential streets.  The City's new standards are simply another way of telling neighborhoods and nearby businesses, "We want to make sure that public demand for parking is really, really high before we ban it."   It is as if the City wants to verify that a parking ban will inflict maximum harm.

And parking bans do harm neighboring businesses.  It is of course true that spillover parking annoys some homeowners.  There is no sense trying to tell them they should not be annoyed -- if you are annoyed, you are annoyed, and that's the end of the matter.  But this kind of externality is perfectly symmetric.  Banning parking because it annoys a homeowner inflicts a cost on neighboring businesses by stripping them of a portion of their existing, limited supply of parking.

What the City ought to do is minimize the net cost of these externalities.  Who cares more?  If homeowners value empty asphalt more than neighboring businesses and their customers value parking spaces, then we should assign the spots to the homeowners.  And vice versa.

I suspect that in high-demand areas like South Congress, the businesses and their patrons value the spaces more.  But there's an easy way to settle this:  meter the spaces.  The meter income will tell us what value the public places on the spaces.  Price the spaces accordingly and then allow homeowners to buy the spaces in front of their homes.  The spaces will go to the party who values them the most. 

Homeowners would dismiss this policy as unfair because, seriously, who will or can pay a big chunk of money to keep the street clear in front of his home.  But that's the point.  Complaining is really, really cheap.  The City today is transferring property rights from the public to groups of homeowners without any compensation to the public, based on nothing more than cheap talk.  We can't tell how much someone really cares until we make him pony up some dough. 

NIMBYism and affordable housing

The federal government underwrites affordable housing in part by providing tax credits to developers who build affordable housing.  The Texas Department of Housing and Community Affairs parcels out these tax credits in Texas.  A lot rides on TDHCA's decisions and competition for the tax credits is fierce.

This Statesman article on TDHCA's scoring system is interesting because it explains how NIMBYism is baked into TDHCA's evaluations.  Although projects are scored on several criteria, local opposition (or support) carries a lot of weight.  The scoring system effectively counts local reaction twice:  it weights letters from neighborhood associations and it weights letters from the legislators who represent these neighborhoods, who, naturally, can be counted upon to do their constituents' bidding.  There is a 52-point swing between unqualified opposition and unqualified support, a big deal given the maximum score is 226.   (Although I am calling this "TDHCA's system," in fairness I should note that it is merely implementing statutory standards.)

It's worth stressing that these are not zoning cases.  Tax-credit subsidized housing can only be built where zoning allows it.  Developers, in other words, merely propose multi-family projects for parcels of land that the city has already determined are suitable for multi-family housing.  Concerns about traffic, noise, overcrowding, etc. should have been resolved when the parcel was zoned.

Weighting the neighborhood's approval and the approval of its proxy is of course bad policy.  Homeowners are notoriously risk averse.  Their risk aversion causes them sometimes to oppose a project that has a remote chance of depressing property values even though it has a better chance of raising property values.  The premise of the tax-credit program is that cities need more affordable housing.   Politicians like to talk about affordable housing in the abstract but ultimately it has to be built somewhere, which means that neighborhood opposition has to be discounted rather than emphasized.  Unless, that is, we are happy to relegate it to neighborhoods that are already full of affordable housing, which is the effect of current policy. 

I also want to point out that the TDHCA's system institutionalizes a sort of "ward courtesy" at the state level.  The Texas Legislature attempted to reform that system this session, but Perry vetoed it for murky reasons.  (Texas Housers has a detailed account.)  The proposed reform would have entrusted the decision to support or oppose the project to the local elected body rather than a single legislator, probably in the sound belief that councilmembers are more likely to make reasonable decision in the aggregate than individually.

Beer laws

Under Texas law, a pub can brew its own beer and sell it on premises but cannot sell it to a convenience store, restaurant or another pub.  Beer drinkers who like that particular beer must go to the source to get it.  Needless to say, this is bad for the brewers, bad for the convenience stores, restaurants and other bars, and bad for beer drinkers.  

As Lee Nichols explains, it's been that way for a long time in Texas.  Texas requires strict separation between producers, distributors and retailers.  You'd think an archly conservative Legislature would be eager to dispatch an anachronistic, anti-competitive, anti-small busines, anti-consumer choice law like this one.  But, alas, that is not true.   Lee reports that a bill to allow brewpubs to sell their brews off premises lingered and died in committee, killed by opposition from wholesalers.  Wholeselling is big business that has been sheltered from competition from alternative business models for many years.

One lesson here is that Texas legislators have pedestrian tastes in beer.  Another is that conservative does not equal "pro market."   The third is that we should  tenaciously oppose proposals to create new barriers to competition unless there are other compelling reasons to do so; they are very hard to dismantle once they have an entrenched, dependent constituency. 

(Updated to explicitly cite, rather than just link, Lee Nichols' blog post.)

Did Sao Paulo get what it wanted?

This doesn't have any relevance to Austin, but it's still interesting.

A few years ago, Sao Paulo banned essentially all outdoor advertising.  Not just billboards but virtually any kind of sign.  The Golden Arches are gone.  So are signs painted on the sides of buildings.  Neon signs, too.  Even storefront signs.

The ban was widely lauded at the time.  A blow against "visual pollution" and corporate manipulation of virtuous but sadly suggestible consumers.

The advertising is now gone.   This is a strictly subjective opinion, of course, but the result isn't pretty.  "Cleansing" the city of advertising did indeed focus attention on the underlying architecture.  But, judging from the pictures and videos,  the city's architecture doesn't warrant attention.  It looks drab, blandly utilitarian.  Even seedy.

I wonder what impact this has had on commerce in the city.  Outdoor advertising is actually useful.  All those signs served a purpose.  They provided information, mainly by cutting search costs.  But the ban was motivated in part by anti-commercial sentiments, so I suppose the city's residents got what they wanted.  (Maybe I'm wrong, but Latin American and South American countries seem to have an abiding dislike of markets.)

Judge for yourself.  A few Flickr photos.  Video.  Video.  And a few other photos here and here.  

Is it really necessary for the federal government to introduce new market distortions?

For the reasons I just gave, I don't believe that our past subsidies to suburban development justify maintaining those investments.  End them and let the chips fall where they may.

But even if reasonable people can disagree about that, I see no argument for creating new subsidies.  But that is exactly what our federal government is about to do.

The FHA is a major player in the mortgage business.  It insures mortgages for home buyers who otherwise would not be able to get credit or scrape together a down payment; this allows some to buy homes with as little as 3.5% down.  Without the FHA guarantees, the mortgage market would be much smaller.  A few years ago, its share of the market was 2.7%.  This seemingly small share had an outsized effect by scooping up the biggest credit risks and reducing the risk for private mortgage insurers.  In any event, its share of the market has ballooned recently:  according to Friday's WSJ, its market share reached 23% in the second quarter of this year.

And now the FHA is about to adopt new rules explicitly encouraging home buyers to purchase single-family, detached housing in the suburbs rather than attached (condos) in urban cores:

Until now, almost any condo development could apply to FHA for “approved” status, therefore making FHA financing available in that development.  In addition, in developments that were not approved, “spot approvals” were sometimes available for individual units.  (The lender applied for an approval for the unit you wanted to buy, in spite of the development not being approved).

Following are the new guidelines:  (This is not pretty, so prepare yourself)

1. There will be NO more spot approvals.

2. All development not considered primarily residential are out.  For instance, a development with more than 25% of the total floor area dedicated to commercial business use is out.

3. Noise issues is a new concern, so any development within 1,000 feet of a highway, freeway, or heavily travelled road, 3,000 feet of a railroad, 1 mile of an airport, or 5 miles of a military airfield will become ineligible for approval.

4. If the property has an “unobstructed view , or is located within 2000 feet of any facility handling or storing explosive or fire prone materials, it is not insurable - we're not talking just fireworks factories here.  A gas station 2 blocks away can disqualify this development.

5. Any property located within 3000 feet of a dump, landfill, or superfund site, is ineligible.

6. No more than 10% of the properties can be owned by a single investor, including builders or developers who are renting out or have not yet sold vacant units.  For 2-3 unit developments, no one can own more than one unit.

7. No more than 15% of the homeowners can be more than 30 days late on their homeowner dues.

8. For new developments, at least 50% of the units must be sold prior to applying for FHA approval (valid presales include those with purchase agreement and lender validation of an approved loan in process)

9. A minimum of 50% of the units must be owner occupied or sold to owners who intend to occupy as their principal residence.

10. Projects in designated wetland and flood zones will not qualify.

11. All current condominium project approvals will be invalid (with the exception of projects approved on or after October 1, 2008) and projects must be re-approved under the new options available.  Going forward, all projects will require recertification every two years.

Perhaps most insidiously, the FHA will no longer insure more than 30% of the units in a single condominium development.

I understand that the FHA has been taking large losses on its guarantees.  I also understand that condominiums are riskier to insure than single-family homes.  Some of these new regulations seem reasonable -- it's probably a bad idea to invest in a condominium when the condo association lacks the resources to pay for upkeep.  Higher risks justify higher premiums, too.

But these new regulations seem purposely designed to push new homeowners out of dense, urban areas to the suburbs.  They exclude many mixed-use developments (#2).  In a central city, it is hard to find a condominium not within 1,000 feet of a highway, freeway, or heavily travelled road, 3,000 feet of a railroad, or one mile from an airport (#3).  Allowing developers to tap into FHA guarantees for entire single-family subdivisions but only 30% of condominium units naturally will encourage developers to shift to single-family subdivisions.  These new regulations are fundamentally anti-urban.  

Even if it is somehow possible to defend our existing scheme of suburban subsidies, is it really possible to defend introducing new market distortions?   

Legacy costs

Here's a thoughtful piece from Aaron Renn on an unintended consequence of the Clean Water Act.   EPA mandates are forcing Cleveland to spend $5  billion to overhaul its sewer system.   That's a lot of money for any city, but especially for a struggling rust-belt town.   Cleveland will be forced to raise water and sewer rates dramatically, and probably a bunch of other taxes, too.

Cleveland can't go anywhere, but its residents can.   (This is a city where the police and firefighters openly celebrated an Ohio Supreme Court ruling that allows them to move to the suburbs.)  Renn predicts -- accurately, I think -- that the higher taxes will speed up the depopulation of Cleveland as homeowners have one more reason to move to the suburbs.   In fact, the mandate will kick the city twice:   Cleveland must not only raise taxes, but it will lose money that it could have spent on other improvements that would have attracted suburbanites back to the city.

Cleveland needed to make dramatic improvements in water quality; after all, this is the city whose river famously caught fire in 1969 (which itself provided much of the momentum for the Clean Water Act).  But the Cuyahoga is now clean; residents fish from it, in fact.  Spending another $5 billion to get that last 10% improvement is a bad use of money when Cleveland has more pressing needs.  And it is counter-productive to drive residents to the suburbs to leave rotting infrastructure sitting unused in the central city.

Renn suggests that the federal government assume the cost of replacing ancient sewer systems.  That might be the only solution.  The federal government has no incentive to weigh costs and benefits accurately when it can simply issue a mandate.  And the moral hazard risk is smaller than one might think:  the city's main "crime" is being old enough to need a new sewer system.

Guarding against strategic behavior by a city is tricky anyway since, again, its residents can simply move when things get bad.  Rather than stick central cities with crippling legacy costs, it makes more sense for the federal government to issue reasonable regulations and pick up the tab for unforeseen costs.  

An infill developer's perspective

I do not have any firsthand experience with the development or permitting process in Austin.   Frequent commenter "Don Johnson," a local infill developer, does.   He left the following comment in response to my entry on Austin's gerrymandered zoning districts.  I think an infill developer's perspective on the development process in Austin is interesting, so I repost it here.

If I may take this opportunity to vent a little more about our subdivision process here in Austin and why central urban infill is so difficult.  The owner of Red Bird is in store for much more than this zoning fight.  Even if they are granted SF3 they can look forward to a subdivision process where they dump about $20k fee-in-lieu of water quality controls and detention if they can't get a waiver.  They will need to hire an engineer.  It boggles my mind that Austin Code currently expects residential lots to make room for detention ponds and water quality controls and how high the fees are to bypass this.  Imagine your residential street actually lined with big pits in every front yard like you see outside of commercial properties.  Not to mention the argument that this piecemeal approach to detention can actually have negative effects on downstream flow.  "Regional" detention and WQ seems more rational; i.e., build a larger facility to serve the neighborhood as a whole (which allows for a more macro design approach).

Then you have the ten subdivision reviewers who seemingly have conflicting goals in what they want to commandeer or impose on the applicant.  You have the ROW reviewer wanting to commandeer 10' of property at the frontage, the transportation reviewer wanting you to build sidewalks to nowhere, the electric reviewer wanting to commandeer another 10' in easements, and heaven forbid you have any trees because you can't build near them or cut them down (although the electric company may cut it down after you try to save it).  Then throw building set back requirements, impervious cover limits, and the McMansion envelope on top of everything.  Your clean palate dwindles down to an unworkable anomaly in the end and hence some of the weird $400k houses around town with single car carports and terrible layouts.  I won’t even go into some of the funny catch-22 scenarios that come up between reviewers leaving the applicant to sort it out in order to move forward.

What you end up with is really difficult use of space, and you are in it for about $20k to $30k in city fees and related expenses as well as 6 months minimum in holding costs before you even start really.  Or maybe you are in for more than that if you were smart enough to include an architect in the process so that you can start heading off the design problems early.  All this for something with such subtle impact as taking a 20,000sf lot and cutting it in half to build two duplexes instead of one (and really with the same exact limits of construction pre and post subdivision, just with an extra two residents).

You would also be amazed at how many lots the city considers "illegal".  Go look at any TCAD plat map and look around for "tildes" that bring portions of lots together.  Or when the lot legal description reads as part of two lots (Examle: W25ft of lot 24 and E25ft of lot 23.)  This would be filed under the "landmine" comment [in this entry -- AC] as well.  This can take you down many an unexpected road due to grandfathering scenarios, and notification issues that are built into code, as well as more carrying costs as it gets sorted out.  I won't get into it, but beware.  Trust me.

It sure is fun I'll tell you what.   The sad part is that by the time you actually start concentrating on the house design and construction, you have used up about 60% of your juice (energy and emotion), and really you need everything you’ve got in construction.

People not involved in this stuff will brush all of this off and paint builders/developers as greedy for complaining, but I'm telling you it is almost impossible to get from old stock to newer up to code stock in a streamlined affordable manner because of our system in Austin.  All the while the neighbors are nipping at your heels on top of this.  And this is why you see trees go down on Saturday.  The builders would love to stay off trees (they add value), but every other code seemingly begs you to cut down trees.  That is simply one negative manifestation, though.