Ryan Avent's the Gated City: Are NIMBYs Killing the Economy? (Book Review)

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I first met Ryan Avent in 2008 when we were both liveblogging a conference on urban design in Philadelphia. I have followed him closely ever since; he writes about urban and other issues for the Economist, and is always fascinating. He just released The Gated City, as a Kindle Single, a short e-book format. (An excerpt appears in the New York Times.)

Avent is an economist, and starts with a chapter appropriately entitled "Something Has Gone Wrong," describing how over the last 30 years inequality has widened, manufacturing jobs have disappeared and finally, the economy tanked. Then he adds his own addition to the list of things that have gone wrong:

America has made its own productive locations ever less accessible. The best opportunities are found in one place, and for some reason most Americans are opting to live in another.
Avent's thesis is that the growth of our economy is stunted because people cannot afford to live where the jobs are being created (Silicon Valley and New York City are examples) and that's because of restraints on density and development.
Our thriving cities fall short of their potential because we constantly rein them in because we worry that urban growth will be unpleasant. The residents of America's productive cities fear change in their neighborhoods and fight growth. In doing so they make their cities more expensive and less accessible to people with middle incomes. These middle income workers move elsewhere, reducing their own earning power and the economy's potential in the process.

He lists all the usual suspects, the tools that the NIMBYs use to delay stop development: zoning rules, historical designations, public pressure "to preserve neighborhoods, views, and buildings they love from changes they fear."

Now I am not an economist like Edward Glaeser or Ryan Avent, I am an architect and former real estate developer in Toronto. I am also past President of the Architectural Conservancy of Ontario, and have spent some time thinking about these arguments that have often been used to attack historic preservationists. I am tremulous, criticizing PHD economist types, but they are stepping onto my turf here, and I think that Avent has it backwards.

First of all, I would dispute whether New York or Boston are preventing development of new housing for middle class people; when I come into town I see vast areas of brownfields, empty warehouses ripe for conversion, crummy main streets screaming for redevelopment. But where is the development happening in New York? In the hottest, most expensive parts of town, like Chelsea, where Shigeru Ban designs$3,500 per square foot Shutter Houses. Builders like rich people; that's where the money is.

It is true that when residents of Greenwich Village fight to stop development, soon it becomes too expensive for anyone but hedge fund operators to live there. But that is because it is Greenwich Village. If you bulldoze it for 40 story buildings, it ceases to have any attraction. People want to live there because it is exclusive and wonderful. There are lots of other parts of New York City where development for middle class working people might happen; they don't all have to live within walking distance of the Carte Blanche at the Gansevoort.

You could completely remove the height and density restrictions and developers would still build apartments that were too expensive for the middle class because construction and operation of a building in Manhattan at high density is expensive, period. Monthly operating costs alone in a New York building are higher than rent in other cities. Just hard construction costs of housing in New York, exclusive of land, are probably four times that of a wood frame house in Phoenix. It has less to do with NIMBYs and more to do with concrete vs wood, tight sites vs wide open ones.

Real estate developers like restrictions and controls; it keeps out the riff-raff. Housing was cheap in Phoenix and Houston because the price of entry was low; anyone with a pickup truck and a nailgun could be a builder. There were few controls on sprawl, low gasoline prices let people drive 'til they qualified, the idiotic mortgage interest deductibility encouraged purchasing instead of renting. Mortgages were given out to anyone. The result was inevitable oversupply and market crash. The reason New York and San Francisco did not crash is because of those limits on supply.

In a booming economy, the price of real estate does not drop when you increase supply, because urban building is a slow process with a two or three year lag behind demand. In Toronto where I live, there are few constraints on development and they have built thousands of units over the last decade, and the price per square foot just keeps going up. In New York 35 years ago, when President Ford told the city to drop dead, they were not building anything and the price just kept going down.

Then there is the issue of all of those other pesky regulations that increase the cost of housing. One hears it from builders all the time: "Tougher green rules will make housing too expensive." Surely besides releasing controls on density, the next to go should be environmental regulations, green building standards, park contributions. Zoning and density controls are just the thin edge of the wedge. What are you willing to give up to make housing more affordable?

I do not disagree with Ryan's economic explanation of the benefits of density; he wonderfully uses Vietnamese restaurants as a model. I happen to be a big fan of Phở, and chase the stuff all over town, and recognize that the more people there are, the more afficionados of Phở there are, and the better choice that I have. I get this. But if you have unlimited density, will you get unlimited Phở? I think not, you will get less. I find that the best Phở is found in old buildings in low rent districts. Jane Jacobs famously said that "Old ideas can sometimes use new buildings. New ideas must use old buildings." but people want more than just old buildings, they want what Ryan describes as "creatures of fleshy mass wanting to be close to one another." I would take Jane Jacobs one step further and say that "young people need old buildings." that is where you get the tattoo and the used vinyl and the edgiest clothing. Kids, startups, Phở lovers, they all need old buildings. That's where the coolest stuff happens, and you don't find it at the base of 40 storey towers. There, you will get corporate bland mass-produced Vietnamese Fo Soup and wonder what happened to the stuff you loved.

Ryan Avent is one of the smartest people I have ever met, but I think he is wrong here. The economies of cities go boom and bust, and real estate markets are trailing indicators, not leading. But our historic buildings, our Greenwich Villages and our hundred year old neighbourhoods endure and adapt and outlast those cycles.

Housing in New York and San Francisco is expensive because everyone wants to be there. But as Yogi Berra once said of a famous restaurant, "Nobody goes there anymore. It's too crowded." At some point, you can lose it all by wrecking the things that attracted people in the first place. Ryan says " America's richest and most productive cities are among those with the strictest limits on new development. And those limits push people away."

I am sorry, that's backwards, they are the richest and most productive cities because of those limits, because they are attractive and exciting and nice places to live, with history and culture and old buildings and leafy streets. They attract the best and the brightest and the most ambitious, every Liza Minelli singing "If I can make it here, I'll make it anywhere," and are Darwinian in their effectiveness at picking the successes and turfing the failures. Take that away and you have nothing. Or maybe Houston, same thing.

UPDATE: Ryan Avent responds in The Bellows.