Austin Contrarian

The Wire

I usually wait for television shows to become trendy before I start watching.  Even better, trendy among those I think share my taste.  It saves me a lot of time.

The Wire finally generated enough buzz for me to invest the time.  And it hasn't disappointed.  It dissects Baltimore's inner-city drug culture without condescension or glamorizing the business.  I feared it would be politically correct, but it is not.  The characters are complex and interesting.  (It has an irritating habit of killing off some of the most complex and interesting, though).

The first season was great; the second just so-so; the fourth season was very good.

But the third season was brilliant.  My thoughts -- and spoilers -- below the fold.  

The Gridlock Economy

In American suburbs, home owners are the voting majority; in cities, renters may be the crucial pressure bloc.  Local officials, wanting to keep voters happy, create more and more mechanisms to restrict development:  environmental impact reviews, architectural review boards, subdivision regulations, historic preservation districts, landmark commissions, building permit requirements, rent controls -- all part of the multilayered gauntlet of American land-use controls.  Think of each of these mechanisms as a phantom tollbooth along the road to real estate development.  Each tollbooth may have made sense on its own terms when initially enacted.  Collectively, however, regulatory layering adds up to gridlock with mind-boggling costs for society.

That's from The Gridlock Economy, by Columbia law professor Michael Heller.

Lots  of people are familiar with the "tragedy of the commons," in which a shared resource is overused because no single decision maker can exclude use by others. Examples are overfished oceans, overharvested lobster beds, and congested highways.  Heller analyzes the "anti-commons," in which a resource is underused because ownership is too fragmented.  When too many people have a veto, one of them is bound to exercise it.  Drug development, for example, is stymied by a thicket of patents on basic genetic research.

Land-use policy is rife with anti-commons.  Fragmented parcels of land are next to impossible to assemble for large redevelopment; the only existing solution is often the troubling exercise of eminent domain by the state.  Regulatory approvals are not technically property rights, but they have the same effect when highly fragmented; too many cooks spoil the broth.  (Heller calls these "BANANA republics" -- "build absolutely nothing anywhere near anyone.")

Heller also points out an often overlooked consequence of overregulating land-use markets.  By driving out the least sophisticated, small-scale developers, brambles of regulations make the markets more profitable for sophisticated developers:

Although they are bad for society as a whole, BANANA republics, like most forms of gridlock, offer profit opportunities for savvy investors -- in this case, regulatory arbitrageurs.  As the New York Times noted a few years ago, "Some of the largest publicly held real estate investment companies say they would rather own property in Boston than in Atlanta and Dallas.  Steven Roth, the chief executive of Vornado Realty Trust, says there is an easy way to explain this seeming paradox.  It is difficult to build in Boston where land is scarce, residents are vocal, and zoning disputes can last years.  The opposite is true in Atlanta and Dallas,  'Whenever it's almost impossible to add supply,' Mr. Roth said, "that's where I want to invest.'"

Big developers enjoy economies of scale that allow them to invest in regulatory expertise.  It's the local developers who suffer most from the regulatory gauntlet.

Zoning and trade

I've been reading Don't Call It Sprawl: Metropolitan Structure in the 21st Century by economist William Bogart.  Despite its title, it's not really another ideological entry in the sprawl debate.  He uses techniques from trade theory to analyze zoning's impacts.

His basic point is this:  A city's neighborhoods trade with one another just like countries do.  The typical downtown imports labor and buildings, and exports, say, financial and legal services.  A bedroom community exports labor and imports services.

One of the effects of open trade is to encourage specialization by creating larger markets for services.  The larger markets make it feasible to offer more diverse services.  This is why big cities offer lots of diversity and small towns don't.  It's also why you find furniture stores clumped with other furniture stores:  an area that specializes in furniture "exports" can support a bunch of specialized niche stores. 

"Binding" zoning acts like a tariff on the import of labor and the factors of production -- mainly buildings.  (Zoning is binding when  (1) someone wants to build something that the zoning won't allow; and (2) the city won't change the zoning to allow it.)   By limiting the import of people and buildings, zoning limits a neighborhood's exports of goods and services.  In many ways, binding zoning acts like a tariff on exports.

Restricting exports from one neighborhood to the rest of the city is not costless.  Trade is inevitably shifted elsewhere -- perhaps to a place with fewer natural advantages.  And it stunts the economies of scale that  permit a rich offering of goods and services.

Another way of thinking about it is this:  Unless we want the city to be merely a collection of small towns, we need neighborhood commercial centers that serve the entire city.  This is the only way to get the specialization that makes a city more attractive (to some) than living in a small town.

Reading this book of course made me think of Northcross.  Despite RG4N's claims, the Northcross area is not "neighborhood" retail.  One day while waiting on a delayed flight, I totaled up the commercial and retail square footage in the Anderson/Burnet/Steck area.  I got nearly 2 million square feet without even counting all the little stuff.  This area is one of the city's main commercial and retail centers.

It is also the principle "exporter" of furniture to the rest of the city.  There are lots of small, specialty furniture stores in the area that would not exist without the Northcross area's agglomeration of furniture stores and other retail.  RG4N is effectively asking the City to impose export restrictions on this important trading center.  (What distinguishes this from most zoning cases is that RG4N is asking to impose new trade restrictions; usually, the neighbors are fighting the relaxation of existing trade restrictions.)

The trade perspective points up the conflict inherent in most zoning disputes.  If we consistently give in whenever local residents demand restrictions on trade, we cripple the diversity that makes the city a real city. 

Last Harvest

If you're following the Mueller development, take a look at Last Harvest by Witold Rybczynski.  It's about a "neotraditional development" in the Philadelphia exurbs.  Rybczynski is an architectual writer who teaches at Penn's School of Design.  In other words, he writes as someone who cares about good design.  He covers the developer's acquisition of the land, the first homeowners' move in, and the four years in between. 

The development, New Daleville, is a lot smaller than Mueller, and it's out in the middle of nowhere rather than in the middle of a city.  But it will give a sense of the problems that these Mueller-type developments face.  (You might want to skip the book if Catellus-bashing is a hobby you'd like to keep.)