Austin Contrarian

What growth looks like in a dense neighborhood

West Campus grew like gangbusters between 2000 and 2010.  I've tried to convey how remarkable this growth truly was.  In 2000, tracts 6.03 and 6.04 had 5,273 and 5,199 inhabitants, respectively.  In 2010, they had 7,793 and 6,496 inhabitants, respectively.   Austin's two densest neighborhoods thus grew by 36%, outpacing Austin's 20% growth (much of which took place in cow pastures).

Perhaps looking at the change in population density is more impressive.  In 2000, tracts 6.03 and 6.04 had densities of 17,288 and 19,645 ppsm.  In 2010, they had densities of  25,550 and 25,276 ppsm.  (It's interesting that when density restrictions were loosened via the West Campus/University Neighborhood Overlay, these adjacent neighborhoods converged to the same density.)

A map is better than 115 words, though.  A reader pointed me to this Campo map of building permits issued in West Campus between 2005 and 2009.  This is what growth must look like for a dense neighborhood to become significantly denser:

Three points here.  First, and obviously, a dense neighborhood cannot grow noticeably denser without lots and lots of new construction.  Three or four projects scattered around the neighborhood might look like a lot, but a 40% increase in density means, literally, new construction everywhere you look.

Second, lots and lots of new construction means the destruction of lots and lots of low-intensity  buildings, particularly single-family homes and smaller, older apartment buildings.  It must be this way because a neighborhood wouldn't be dense to begin with if it weren't already built out.  Restrictions aimed at preserving existing buildings necessarily cap density, despite the frequent denial by activists.  And always remember that "denser" is shorthand for "room for more people."   The West Campus growth between 2000 and 2010 required the destruction of lots of older apartment buildings.  It also made room for 3,700 more people.  You can cling to old buildings or you can make room for more people; you can't do both, unless you're satisfied with making room only for a lucky few.     

Third, almost all of the permits were issued for construction in the neighborhood interior.  Again, it has to be this way if a neighborhood is to add a lot of people.  Most of the space is in the interior.  That's just geometry:  a 10-block by 10-block neighborhood has 100 blocks but only 36 blocks on  its perimeter.  What's more, new construction in the interior only has to compete with other residential uses; residential uses on the perimenter have to compete with commercial uses. Vertical mixed uses are great and I've long advocated that we allow them freely on our busy streets, but they will always be more expensive to build.  And to manage -- there are practical problems mixing retail and residential uses in the same building.  There are standard techniques for handling them, but they require extra work, which isn't free.

No one is advocating the wholesale replacement of single-family homes in neighborhoods like Bouldin and Zilker with the massive apartment buildings like those in West Campus.  But if we really want to make room for more people in these neighborhoods, we cannot relegate new construction to their fringes.  A good start would be to permit small multi-family projects (four units or so) as a matter of right but adopt reasonable design standards to protect their neighbors.  It's a conversation that needs to take place regardless, and it should begin with a clear understanding of what making space for more people really means.  

A cool new Warehouse District development

There has been a lot of hand wringing the last couple of years about the collapse of the commercial credit market.  Many of us in Austin have worried that the collapse will cripple badly needed redevelopment downtown for years to come.

It turns out that those worries are unfounded.   The first green shoots are shooting.  Just last week, the owners of a just-demolished Warehouse District building installed a brand spanking new surface parking lot at 5th and Colorado:

 
 

It's conveniently located in the very heart of the Warehouse District.  The parking lot will save patrons of the restaurants and bars along 4th and 5th a trudge from one of the many surface parking lots a a full block or two away.  Better, it breaks up the monotonous row of restaurants and offices stretching from Congress to Lavaca, provides some badly needed open space, and gives passersby an unobstructed view of the towers on 2nd street -- a view that they could enjoy before only by standing at the corner of the block. 

Sarcasm doesn't play well, I know, but leveling a building for a parking lot in the middle of the Warehouse District deserves contempt.

The owners are planning an 18-20 story hotel at the site.  (Jude Galligan has the renderings.)   I think that's a great spot for a well-designed hotel.  It would further enliven one of downtown's best streets.  I won't miss the vanilla two-story building and don't think it deserved preservation.  This will be a net gain for the District . . . if the owners follow through.

And that's the catch.  In this market -- a wretched credit market and equally wretched travel (and hence hotel) market -- any proposed development is speculative.  Anyone can draw up nice renderings; finding the money to erect that first crane is the hard part.  It might be years before we see anything there.  The shiny concrete parking lot tells us the owners think so too.  

I have no objection to property owners downtown speculating in real estate by deferring the redevelopment of their property.  "Banking" property is  a benign practice: it smooths out property prices and establishes a reserve of buildable lots to meet future demand.

What I object to is this form of land-banking.  Retaining a low-rise building and its tenants keeps a street healthy; demolishing it for a surface parking lot wounds the streetscape and hurts surrounding property values.  Those are bona fide negative externalities.   

Putting a surface parking lot in this spot displays the kind of contempt for downtown that fuels the historic preservation movement.  Given a choice between an ugly surface parking lot and preserving a nondescript low-rise in perpetuity, most will take the building.  Even if a denser, taller building is a better use of the property.   

Maybe "contempt" is too harsh.  I assume the owners know their business and this was a rational business decision.  It's pointless to fault someone for acting in his own self-interest.  The city can change the incentives, though.  It should have done so a long time ago.  Instead, it is preoccupied with devising new ways to burden buildings that might actually get built. 

Consumer cities

At first blush, cities make no sense.   If we just look at costs -- the cost of land, the cost of congestion, the cost of crime -- no one should live in cities.  Everyone should just get a house in the countryside and live a comfortable distance from everyone else.  Ditto for businesses.  Business inputs invariably cost more in cities.  Move to a rural location and cut the cost of those inputs.  If cities were simply the accumulation of production factors, they should fly apart.

Some people do live in the countryside and some businesses do relocate where land is cheap, of course.  But cities do exist.  Why?

Urban economists have two theories.

One theory is that agglomerations of people or businesses or factories sometimes produce increasing returns.  They collectively produce more than they would if dispersed, each hanging out on his own.

The other theory is that cities are held together by the amenities they offer.  Concentrating people in a relatively small region produces increasing returns for retail because shops can specialize.  New York city has a wedding store that caters to pregnant women, for example.  Not everyone counts that as an amenity, but that's the point.   Big cities can support lots of tiny markets, which makes specialization profitable.

Both theories might hold.   But they pull in opposite directions.  If cities mainly exist because they make people more productive, then wages should be higher than the countryside.  That, in turn, must  drive up the price of land.  (Land must become more expensive to offset the higher wages else everyone would move to a city.)  But if cities mainly exist because of the amenities they offer, wages should be lower (relative to the price of housing) because workers should be willing to substitute amenities for wages.   

All of this is a long-winded introduction to this paper (via the very cool A Fine Theorem) which finds evidence that cities are driven by amenities:

It is commonly noted that there is an urban wage premium, perhaps because of agglomeration effects on productivity, or to compensate (in utility terms) for higher traffic and land costs. S. Lee presents evidence that, at least in some fields, there is a negative urban wage premium for high skill workers. The story is thus: high skill workers have greater taste for variety in consumption, and cities provide such variety; if the extra utility from consumption variety grows faster than rents, and utility is equal in rural and urban areas, then urban areas could show lower wages for high skill workers. Since high skill workers are relatively cheap in cities, they will be used in firms in higher proportion than low skill workers. Data on the medical profession bears this out: hospitals use a higher ratio of doctors to nurses in cities, the doctors are paid less in real terms in cities, and the nurses are paid more in real terms in cities than in rural areas. Further, these urban doctors tend to work in higher skill specialties, and be graduates of higher ranked medical schools, than higher paid rural doctors. This is yet more evidence of the consumer-driven rationale for cities: production is not everything.

Glaeser and Gottlieb have made the same argument using crime data. They've argued that the rejuvenation of cities -- and the rise in land prices in cities -- was driven largely by the stunning drop in crime.  A city is a much more pleasant place when you don't have to worry about being mugged every time you walk down the street.  

The state capitol complex

Two years ago, the Texas Facilities Commission proposed consolidating thousands of state employees in a suburban "town center" east of Austin.  The goal was threefold:  (1) the state would cut its lease expenses by consolidating employees from offices scattered around town in state-owned facilities; (2) the state workers would serve as the kernel for a new "town center" by SH 130, prodding other development in Austin's desired development zone;  and (3) the move would put lots of valuable land in downtown Austin.  

I thought this was a horrible idea, though:

As the Commission correctly notes, the area surrounding the Capitol is cluttered with low-rise state office buildings and parking garages; as an urban environment, it's a wasteland. The plan also would put valuable downtown Austin properties on the tax rolls for the city, county and school district.

But emptying thousands of employees out of downtown Austin is no solution. A vibrant downtown needs lots of people. Quality buildings matter, of course, but they are useless if they are empty. And while easing congestion is laudable, turning a large chunk of downtown into a ghost town is too steep a price to pay. Indeed, some congestion is healthy; roads are lightly traveled when no one wants to go where they lead.

The Commission has a legitimate interest in reducing the rent it pays for downtown office space. Putting valuable state property back on the tax rolls would be great for the city, county and schools. Anyone who cares about the urban environment would like to see us redevelop the clunky office buildings and street-killing garages surrounding the Capitol. But Austin simply does not have enough demand for downtown office space to replace thousands of government employees.   

I'm delighted then that the Commission's staff has done an about-face and is now proposing to redevelop the state capitol complex -- essentially, doubling down on downtown Austin:

A state commission is re-imagining the future of state government's physical presence in the heart of Austin a concept that would triple the amount of space at the Capitol complex, including joint development with private interests where there are parking lots or garages now.

The proposal, being crafted by the Texas Facilities Commission staff under the direction of new Executive Director Terry Keel, goes well beyond moving state employees from 2 million square feet of leased space across Austin to new state-owned buildings near the Capitol.

The concept, carried out over several decades, would remake downtown, potentially adding 7 million square feet of space, or the equivalent of 13 Frost Bank towers.

Of that, 1 million square feet would be in three new state office buildings. The proposal envisions the rest as joint development of underused state land with private interests.

The planners anticipate that the undertaking would comply with City of Austin development rules and respect the so-called Capitol view corridors. The plan is "parking neutral" — replacing lost spaces with underground parking — but anticipates that the Capitol complex eventually would be served by light rail and urban rail.

We are talking about a massive chunk of downtown land.  The state owns almost all of the roughly 20 city blocks sandwiched between the Capitol and the University of Texas and another eight blocks flanking the Capitol.   It's hard to convey the bleakness of the development there now -- it's all parking lots, parking garages and modernist bunkers set back from the street.  As this survey prepared by Jana McCann and Jim Adams, the consultants developing the Downtown Austin Plan, shows, most of these 20 blocks are devoted to low-value uses like parking lots or parking garages:  

 

 A.  Northwest corner of Congress & MLK

 B.  Southeast corner of 17th & Congress

 C.  Southwest corner of 18th & Congress

D.  Southwest corner of 16th & Congress 

I would love to see this wasteland transformed into a vibrant urban district within my lifetime.  There actually were a fair number of pedestrians out when I took these photos, despite the bleak environment and complete absence of ground-floor uses.  The reason is that the area already houses thousands of state employees and draws who knows how many visitors each day.  It's already got the population base that a good urban neighborhood needs, in other words.   It just needs the right buildings.

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.  

A boneheaded proposal from Cap Metro

I missed this at the time, but it deserves comment.

Cap Metro is developing its long-range plan, which it calls "ServicePlan2020."   It has hired a consultant from Washington state to prepare the plan  (13.1 MB pdf).

I doubt the consultants have set foot in Austin because the draft plan contains a simply horrendous proposal, a proposal that could only be made by someone who doesn't know the facts on the ground.   That is to switch key local bus routes from Congress, Colorado and Brazos to Lavaca and Guadalupe.  Most significantly, the 1L/1M, which runs down Congress, and the No. 3, which runs up Brazos on its northern route and down Colorado on its southern route.  These are Austin's two most important north-south bus routes, linking the southern fringe of town with the northern fringe; they have lots and lots of riders.

The consultant offers a couple of rationales.  One is to relieve bus congestion on Congress.   The consultant accurately observes that Congress is beset by a "wall" of buses creeping ever so solely down Congress's twelve blocks.

I won't even paraphrase the other -- it is so bizarrely wrong, I would feel obliged to understate it:

Why Clusters of Like Businesses Thrive

In New York, for example, diamond dealers, florists and even chess shops are clumped together.

That's from yesterday's All Things Considered (4:44 podcast).  A very nice explanation of economies of agglomeration.

I liked it mainly because the reporter actually used the phrase, "economies of agglomeration."

Aragon

Mueller gets a lot of criticism -- see the grouchy comments to this entry -- much of it unfair.  I like Mueller.  I do agree, though, that it is not a model mixed-use, New Urbanist development.  Among other things, there is  too much segregation of single-family and multi-family/commercial.

So let me offer an example of a model New Urbanist development.   Aragon is an infill development in Pensacola designed by Michelle MacNeil (who happens to be my cousin).   It's several years old, but I got my first tour in August when we visited her during a trip to the Gulf Coast.

One of the most significant features of Aragon is its location.  Many New Urbanist developments are suburban greenfield developments or massive redevelopments of abandoned industrial land or airports (Mueller and Stapleton, for example).

Using asphalt more efficiently

Most mornings on my way into work, I stop at Coffee Bean & Tea Leaf on South Lamar, a new coffee shop between Riverside and Barton Springs, one door down from Bridges on the Park.  (The building used to be a soccer store.)

If you are looking for an example of how code mandates too much parking, here you go.

According to Travis County tax records, Coffee Bean & Tea Leaf occupies an 8,861 sf building.   City code requires restaurants to have 1 parking spot for every 100 sf for the first 2,500 sf, and 1 spot for every 75 sf over that.   This means that CBTL, had it built on a suburban greenfield, would have needed 30 parking spots to comply with code. 

It has 13.

And -- surprise! -- thirteen is enough most of the time.   Most mornings there is at least one  empty spot to the side of the shop.   Some mornings there is not, but even then I manage to get my coffee.   I park on Lee Barton Drive.  Or I park in the Taco Bell parking lot next door -- which is no big deal since Taco Bell lets CBTL use its parking lot before 10 a.m.  I doubt CBTL loses any business because it is "short" 17 parking spots.

I'm not sure how CBTL got away with fewer than code requires.  Perhaps it got a variance.  It sits on a narrow lot and could not have added another 17 spots without tearing down the building.  Perhaps the number of parking spots were grandfathered.

Regardless, CBTL illustrates how our code requires too much parking.

It illustrates another point, too.  Businesses want their customers to have a place to park.  Sometimes they might prefer to provide another 2,000 sf of asphalt.  Sometimes, though, they might prefer to find space elsewhere that is not being used.  The asphalt on Lee Barton Drive, rather than lying  empty, is now being used productively.  Taco Bell's asphalt, rather than lying empty before lunch time, is now being used more productively.  CBTL avoided pouring a bunch of concrete that would have lain empty 23 out of every 24 hours.   Each square foot of asphalt provides more value now than before.  And that's all because CBTL was allowed to figure out an informal solution to its "shortage" of parking.  

If there, why not everywhere?

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?