Austin Contrarian

Streetsblog Capitol Hill

I have begun contributing to Streetsblog Capitol Hill.  My first piece is on the regressivity of our housing policy.  Check it out.

"No road we built in Texas paid for itself."

From Streetsblog Capitol Hill:

Over the past two days at the Congress for the New Urbanism Project for Transportation Reform conference, attendees have called for reform at local, regional, and national levels. In a panel debate about the future of transportation funding and the role of regional planning through MPOs, several speakers argued that the foundation of transportation and development funding had to be systematically overhauled.

Mike Krusee, [AC: former] chairman of the Texas House of Representatives Transportation Committee, said that financial problems were more significant than environmental, though they should be tied together in the same discussion.

"The reason there's not a new transportation bill is because there is no money. We've hit the wall of unsustainability on how we finance the transportation system," he said.

Krusee asserted it was urgent and necessary to understand the nature of this broken financial apparatus and to develop solutions to fix it. In Texas, he said that, on average, it cost the state 20-30 cents per person per mile to build and maintain a road to the suburbs, yet drivers only pay on average 2-3 cents per mile through the gas tax, vehicles fees, etc.

"What we found was that no road that we built in Texas paid for itself," said Krusee. "None."

The expense to build roads and utilities further and further from the urban cores not only drove costs to unsustainable levels, it created an imbalance in who paid for growth. Over the past 50 years, Krusee argued, the federal government used tax money that came by and large from cities to subsidize roads to areas without access otherwise.

"City dwellers have subsidized the land purchases and the development costs out in the suburbs," said Krusee. What's more, the gas tax, which city dwellers pay when driving on city roads, but which goes to freeways largely outside of urban cores, is "a huge transfer of wealth from the cities to the suburbs to build these rings."

Krusee said building the interstate system was initially a good thing, because if facilitated interstate commerce and increased the productivity of cities. Now however, because of congestion caused by ever longer commute patterns, system productivity is in peril. "What's happened is the federal government has basically reneged on the deal. By subsidizing highways out to the suburbs, it's no longer efficient for truck traffic, for goods and services and people to move between cities in the United States because those roads have been hijacked by all the commuters."

Krusee, by the way, represented suburban Williamson County.

Krusee's assessment matches TxDOT's own internal assessment.  (This actually should be no surprise since Krusee's committee relied on TxDOT for data.)   TxDOT, for example, concluded that the 15 miles of SH 99 from I-10 to US 290 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes -- just 16% of the total cost.

Some of us get swept up in the rhetoric sometimes, but roads aren't unmitigated evils.   Obviously, we need roads.  Just as obviously, I think, we will continue to need new roads.   But new roads should be built only where drivers are willing to pay for the new capacity.   And the only way to gauge that demand is to price existing roads properly; the revenue they generate will tell us when it is time to add to add that capacity.

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?

No

I agree with Ryan Avent that this WSJ piece makes a bizarre argument against congestion pricing:

By requiring car drivers to pay a fee to drive in a city at peak hours, congestion pricing reduces traffic and raises money that can be used to support public transit—both worthy goals.

Yet congestion pricing has dubious environmental value. Traffic jams, if they're managed well, can actually be good for the environment. They maintain a level of frustration that turns drivers into subway riders or pedestrians.

The author contends that by improving traffic flow, congestion pricing induces more driving, which in turn increases environmental damage:  "If reducing it merely makes life easier for those who drive, then the improved traffic flow can actually increase the environmental damage done by cars, by raising overall traffic volume, encouraging sprawl and long car commutes."

Ryan makes the right arguments.  I think Owen's got the economics flat wrong, which I'll elaborate in another entry.  He's wrong because congestion pricing does not induce more traffic and because congestion pricing encourages more compact cities rather than sprawl.

But Owen's also got the environmental impact wrong.  He ignores that traffic jams impose a cost -- a significant cost -- not imposed by free-flow traffic.  That's health.  Traffic jams concentrate particulate emissions in one location.  High levels of particulate emissions are bad for people.  They cause all kinds of health problems -- asthma and other respiratory illness, obviously -- but also higher risks of infant mortality.

If you need evidence, read this spanking new paper (h/t Matthew Kahn).  It compares infant mortality rates near toll plazas to infant mortality rates after the toll plazas were replaced with an EZ pass system.  They found that the EZ pass system "reduced the incidence of prematurity and low birth weight among mothers within 2km of a toll plaza by 10.8% and 11.8% respectively."  Because toll plazas are notoriously congested and highways with an EZ pass system are not, this is a good proxy for the health effects of traffic bottlenecks.

Environmentalism is not only about carbon emissions.  The wellspring of the movement was Rachel Carson's crusade against environmental contaminants that (allegedly) made people sick.  Any calculation of environmental cost that omits the costs of making people sick is not just a bad cost-benefit analysis, it's bad environmentalism.

Break

I have been on break the last three weeks because I needed one.  I will post new stuff this weekend.

Bag fees

I hate airlines' practice of charging to check bags even though I rarely check bags.  But I understand the economics.  Strangely, Matthew Yglesias does not:

I have to say I’m not really very sympathetic to this sentiment, or with the current Southwest Airlines ad campaign slamming bag fees.  If you figure an airline is going to believe it can acquire a given amount of revenue per passenger from a given route, the bag fee doesn’t actually alter this level, it simply redistributes it from those traveling with no checked bags to those traveling with multiple bags.  Nobody is made worse off on average by this.  But at the margin bag fees do encourage people to pack less stuff which reduces the weight of the plane and thus reduced fuel consumption and carbon emissions.

The economics of charging checked bag fees is pretty simple.   The fees lighten plane load but encourage passengers to carry on more luggage.   That means a longer boarding time as more passengers stop to load bags in the overhead bins and hunt around for empty bin space.   Charging for checked bags thus can make everyone worse off:   those traveling light (usually business passengers) must spend more time boarding the plane and waiting for take off in cramped seats; those traveling with checked bags must pay more to fly.

Once one understands this, it's easy to see why legacy carriers charge bag fees and Southwest does not.  Southwest's business model relies on quick turnaround.   Its planes may stop at a gate for just  25-30 minutes.  Southwest has determined this is worth more than the marginal savings in fuel cost and handling costs.   So Southwest does not charge bag fees and trumpets this policy as a concern for its customers.

The legacy carriers don't even attempt Southwest's quick turnaround; they allow 30-40 minutes just to board, which usually isn't a big deal to them because their planes sit at the gate for so long.    The legacy carriers charge bag fees because the fees save them money on bag handlers, save some fuel, don't hurt their turnaround times and -- one presumes -- are actually passed on to their customers rather than being absorbed in the ticket price.  This means, of course, that bag-checking passengers actually pay a higher net price.  But even if business travelers see a corresponding reduction in their ticket prices, this does not mean that the bag fees are cost-neutral, as opposed to revenue-neutral.  They pay an off-the-books cost by having to endure more congestion.  The bag fees are cost-neutral only if the business ticket prices fall enough to compensate business travelers for that extra congestion.  I doubt that's the case.

The bag fees are analogous to charging tolls on a lightly-traveled road in order to force drivers onto a congested road.   That evidently makes sense in the bizarro world of airline pricing, but it doesn't make the policy cost-neutral.

Parking math

One of the things I enjoyed about The High Cost of Free Parking was the way Shoup explains the practical effects of parking requirements.   For example, requiring one parking space per X square feet is equivalent to setting a cap on building coverage.

Take Austin.  For most retail, it requires one parking spot per 250 sf.   According to Shoup, a parking space requires a minimum of 325 sf  (and I've been told by some architects that the minimum is actually higher).   Austin's parking requirement is thus equivalent to mandating 1.18 sf of asphalt for every one square foot of building.   It ensures that building coverage will always be less than 50% of the lot.   Much less when one counts front setbacks and a 25' rear, no-parking setback when single-family homes are close by.  Although retail zoning districts theoretically allow a 1.0 floor-to-area ratio, the parking requirement ensures that the floor-to-area ratio will always be much less than that.  And so we get buildings relegated to the rear of lots, segregated from sidewalks by a swath of parking.

Most ridiculous are the parking requirements for cocktail lounges.   The ordinance requires one space per 100 sf for the first 2,500 sf, one space per 50 sf for the next 7,500, and one per 25 sf for anything over that.   Hence, a 5,000 sf bar must be surrounded by nearly 25,000 sf of parking.  

Another way of putting the city's parking requirement for cocktail lounges:  "Sure, you build a bar, but only if you guarantee each patron that he can drive there for free."

Yet another entry about high-speed rail

The national bloggers continue to debate the feasibility of a high-speed rail link between Houston and Dallas.  Up to bat:  Megan McArdle.

I think reasonable people can disagree about the feasibility of HSR, especially since we're just trading  back-of-the-envelope calculations of HSR's costs and benefits.  Although I've argued HSR opponents underestimate the benefits to business-class passengers, in the interest of fair and balanced coverage, let me point to Richard Green's discussion of a more rigorous effort to tote up the costs and benefits.  The authors of that particular study give HSR the thumbs down.

And while I'm in a contrary mood, let me suggest one other potential cost of a Houston-Dallas line.

Everyone agrees that in order for such a line to succeed, it must draw airline passengers to rail.  Lots and lots of airline passengers.  If the airlines lose, say, half of their Houston-to-Dallas traffic, they will have to cut the number of flights between Houston and Dallas.  Obviously.  Many consider that a feature, not a bug.

But what about the effect on other routes?  American is able to offer service from Dallas to virtually every American city because of the huge number of passengers flowing into DFW every day.  Cutting that inflow will reduce the economies of scale that support so many flights.  Ditto with Southwest out of Hobby.    Houston is a huge feeder for DFW, if the number of Bush-to-DFW flights is any indication.  Similarly, Love is a huge feeder for Hobby, judging by the 24+ daily flights.  Networks can be delicate things.  Shrinking one route could sicken other segments. 

HSR could very well make it easier to get from Houston to Dallas and vice versa.  But it could very well make it harder to get anywhere else.   

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?