Austin Contrarian

Random story of the day

Determined to out-San Francisco San Francisco, Seattle's Landmarks Board has declared a boarded-up Denny's a landmark.  The property owner was understandably "chagrined," seeing how it had paid $12 million for the lot with the intention of selling to a condo developer.   

The debate before the Landmarks Board:  Was the restaurant's architecture authentically "Googie" (no affiliation with Google)?

Its soaring, parabolic roofline is evocative of the "Googie" architectural style that started in Southern California and dominated in the 1960s, an era of American optimism amid the Cold War race to conquer space, said Alan Michelson, head of the University of Washington's architecture library and a preservation supporter.

The Googie style got its name from a Sunset Strip coffee shop designed in 1949 that featured upswept roofs, large plate-glass windows and boomerang shapes and starbursts.

Judith Sobol, a preservation consultant hired by [the owner's] team, and architect Larry Johnson said the Ballard Manning's structure was not a quintessential Googie-style building, citing a smorgasbord of various styles, including Polynesian, Scandinavian and Googie elements.

Johnson drew chuckles when he referred to the building's style as "Scandigooginesian."

Preservation-board members were divided over whether the building was truly Googie and decided to avoid basing a landmark designation on its architectural style.

"I think the building is whimsical, not Googie," said board member Molly Tremaine, who voted against the landmark designation. "It doesn't say 'I'm an architectural wonder.'

Googie architecture?

Not convinced the building was sufficiently Googie, the Board instead decided the building should be saved because it is "an easily identifiable visual feature of its neighborhood" and contributes to the neighborhood's identity.

Not surprisingly, the Board's chairman lives near the would-be condo development. 

High taxes hurt dyslexics

Taxes aren't really my thing, but I can't help passing along this anecdote about my mom:

My mom is 67 and ostensibly retired.  She taught elementary/middle school for several decades and specialized in teaching children with reading disabilities.  (She has a masters' degree in education.)  When she retired, she decided to supplement her income by teaching children with severe learning disabilities.  She took an intensive course in dyslexia and hung out out her shingle.

She now has 10 students.  Some are severely dyslexic, which means they will need years of therapy.  She's always been a great teacher and is evidently doing a good job now, because she's constantly getting asked to take on new kids.

She charges $25-$30 an hour or something like that, which is the going rate for this kind of therapy.  But each session takes a lot of preparation, so her effective rate of compensation is closer to $15/hour.

Still, that's pretty good money for a retired person, right?

But hold on.  Thanks to her social security benefits and a slightly better teacher's penson, she has just edged up into the 25% marginal tax bracket.  She also has to pay 15% self-employment tax -- to pay for her benefits when she retires.

A 40% marginal tax rate.

It's worse than that, though.  Because she makes more than the social security administration thinks is prudent, she must now pay taxes on $4,000 of her social security benefits.  Altogether, she has a 50% marginal tax rate on her teaching income.  Her effective rate of compensation is somewhere around $7/hour.

She was surprised by her tax bill.  She's done the calculation.  She doesn't want to work 15-20 hours per week for $7-$8/hour; after all, she's supposed to be retired.  So next year she plans to scale back to the five students with the most serious problems.  It's not worth it financially to do any of this, she said, but she feels like these five really need her. 

When economists talk about the deadweight loss from taxes, this is what they mean.  No one benefits when my mom scales back from 10 hours to 5 hours -- she loses out, five of her students lose out, and the government won't see one thin dime from the 5 sessions that would have been. 

There's always been a lot of handwringing from some about the distortionary effects of high marginal tax rates for the wealthy, but I've always thought the high marginal tax rates for the lower-income distort the market even worse.  (Not to mention the unfairness of it all -- I make a lot more than my mom, but my marginal tax rate is much lower.)  The 15% self-employment tax is crippling to those who want to go out on their own.  And I can't think of a more boneheaded retirement system than one that forces the retired to be even more reliant on meager social security payments.

Addendum.  I ought to say something about my idea of a fair tax system.  Here it is: 

(1) Eliminate the social security/employment tax.  Period.

(2) Eliminate taxation based on family income. 

(3) Give every taxpayer a standard $20,000 deduction, with progressive marginal tax rates after that. (Combined with (1), someone making $20,000 or less would pay no federal tax.)

(4) Eliminate the mortgage interest deduction.

(5) Impose a carbon tax, which would generate a huge amount of revenue, allowing reductions in income taxes, while pricing the externality generated by carbon use.

(6) Include employer-provided health care benefits in taxable income.

(7) Restrain the growth of social security somehow, perhaps by bumping up the retirement age by a year and reducing the COLA.  But don't count social security benefits when calculating income for the retired; i.e., soften the blow by letting them supplement their income without penalty.

Like I said at the beginning, I'm no tax wonk.  I don't know whether this would be feasible.  I'm sure it's not policitally feasible.  It certainly seems fairer to me, though.

This is funny

Stuff White People Like.

Oh, and it turns out my favorite baseball blog is written by a bunch of TV writers.

Condo conversions

One argument frequently trotted out against zoning for greater density is that it encourages the redevelopment of low-income rental.  But it is silly to believe that zoning can maintain the stock of affordable housing.  When rents lag behind home prices, owners will simply convert the apartments into condos. 

I'm aware of three condo conversions on South Lamar, one on Thornton (around the corner from my house), one off Oltorf, and one on South Congress.  There apparently are many more:

Last year, 824 apartments were converted to condos in Austin, from the downtown area to the suburbs. This year, 1,167 more units are expected to be converted in the Austin area, said Robin Davis, manager of Austin Investor Interests LLC, which tracks the apartment market.

That's a lot of low- to moderate-rental taken out of the market.  On a positive note, the converted condos are a lot cheaper than the new stuff being built.

I suppose Austin could take the San Diego/San Francisco/Berkeley approach of limiting condo conversions.  A saner approach would be to permit small infill projects that blend in with the neighborhood.  And lots of dense multi-family projects on transit corridors.  The stuff built today will be the affordable housing 20 or 30 years down the road.   

Recycling newspapers vs. burying them: Which is better for global warming?

Austin's zero-waste program got me thinking about this one.  I'm not sure the answer is as obvious as people think it is.

Recycling newspapers clearly uses less energy than making newsprint from virgin pulp.  A lot less energy -- perhaps 40% less.  If all we had to worry about was the energy involved, the equation would be simple to solve.

But we also have to account for the carbon absorbed by trees.

Most people think saving trees is the main advantage of recycling newspapers.  But people are worried about the wrong trees.  The trees that matter aren't the ones that are cut down, they're the ones that aren't planted. 

A lot of the trees that are cut down for pulp are specifically grown to be cut down.  Tree farm owners expect a return on their investment in the land; they aren't in the business of providing free carbon absorption.  If they don't get a good enough return on the timber, some of them will switch to a different use.

Take Landowner Larry.  Larry's just clear-cut 500 acres for pulpwood, and he's trying to decide what to do with his land.  Larry ordinarily would replant his 500 acres with saplings then sit back and wait 40 years for another big payday (or sell to someone willing to wait for the payday).  But Larry's noticed the BIG PUSH to recycle newsprint; the experts predict demand will be cut by, say, 40% in 40 years.  Larry's worried about that.  Forty years is a long time to wait for a big payday when the payday might not be so big.

Larry's land just happens to be good for farming, too.  Corn especially.  Larry can read the newspaper, and knows the government is pushing a loony policy to encourage American farmers to plow under as much land as possible for biofuels.  Billions of gallons of ethanol per year, or something like that.  Larry decides he's better off renting his land to farmers.  They can make a bunch of money growing ethanol, which means he can get a better return than he expects from growing timber.  (We can also imagine Larry instead selling to a developer, who will grow houses and roads and strip malls.)

Our carbon emissions have taken a double whammy.  We've lost 500 acres of carbon-sucking saplings and we've replaced them with 500 acres of carbon-spewing farmland (or suburbs).  Sure, our push to recycle newspaper has saved some trees in the short term, but with the likely consequence that timberland will be converted to farmland or housing.  (I know that some timberland can't be put to alternative uses -- for example, land deep in the middle of a national forest -- but we're hypothesizing a timberland owner who is on the bubble.)

I'm not sure how to calculate recycling's net carbon benefit once lost timberland is taken into account.  For starters, it's hard to tell how much timberland will really be taken out of production; a 10% decrease in the price of timber (caused by slackening demand) does not necessarily mean a 10% decrease in the amount of timberland under cultivation.  In other words, I don't know the price elasticity of the supply of timberland.  I do know, though, that the price elasticity will rise as the value of farmland rises.  Simply put, our government is doing all it can to incentivize timberland owners to convert their land to farmland.  Some landowners will respond to the incentives, and will do so even more quickly if they expect the long-term demand for their trees to slacken.

Since I don't know how much timberland we will lose by depressing the demand for trees, I don't know whether we will emit more or less carbon by recycling most of our newsprint.  It is possible that recycling saves so much energy we can ignore trees.  But that's not obviously true -- one acre of trees can absorb as much as four tons of carbon per year, which is a lot of carbon.  And that's before we've taken into account the extra carbon generated by the alternative use of the land.

Note also that as energy becomes greener, recycled newsprint's carbon advantage over virgin newsprint will shrink.  Considering the (likely) declining benefit and the growing appeal of alternative uses for timberland such as farmland, our optimal long-term carbon strategy may be to induce an increase in the demand for timber. 

This isn't to knock Austin's zero-waste program.  Newspapers take up a lot more landfill space than plastic bags.  As long as the city's cost of recycling newsprint is less than the cost of buying landfill space for newsprint, then the city ought to move toward a zero-waste program.  The carbon calculation looks intractable, though.  Too intractable for the city to be confident that recycling newprint will do anything for global warming in the long run. 

The McMansion ordinance's impact

Today's Statesman (Feb. 18) has an interesting article on the McMansion ordinance's impact.

A couple of quick reactions.  First, the article implies that the McMansion ordinance has not affected property values:

The predictions were dire.

Rules designed to limit the sizes of new houses in almost 50 Central Austin neighborhoods would lead to plummeting land values, vanishing nest eggs and far fewer modern houses for buyers to choose from, warned Austin home builders and property owners opposed to the regulations.

But 16 months after the Residential Design and Compatibility Standards were put in place to limit the impact of large new houses on adjacent homes and the character of neighborhoods, and though concerns about the overall rules linger, property values haven't dropped, and construction activity has increased.

In fact, median prices of single-family homes in neighborhoods such as Hyde Park, Tarrytown and Travis Heights increased in 2006 and 2007, and the city issued 2,452 permits for new houses, additions and remodels in the affected neighborhoods last year, 455 more than in 2005.

For what it's worth, I never believed the McMansion ordinance would hurt the value of lots across the board.  I thought (and still think) the McMansion ordinance has or will hurt the value of small lots relative to large lots.  Given sufficient rising demand, the value of small lots may not have dropped.  But they should have appreciated more slowly than larger lots.

(There's some anecdotal evidence this is true, incidentally:  Steve Crossland compared the rate of appreciation of small homes and large homes in 2006 (see comments to Steve's post).  He found that large homes appreciated 50% faster than small homes (14.63% to 9.65%) in 2006, the year the McMansion ordinance took effect.  This is odd, because normally one would expect small homes to appreciate more rapidly, since most of the value is in the right to build, rather than in the size of the lot.  This statistic is thus consistent with my claim, but hardly proof -- we used home sizes as a proxy for lot sizes, and did not control for the quality of the existing homes.  Also, the numbers flipped in the first quarter of 2007.)

Second, it looks like I was right that the design review commission would become a vehicle for regulating aesthetics.  Here's the article:

Home builder Glenn Reynolds of Cool River Custom Homes said that he isn't opposed to size restrictions but that the rules as written will ultimately lead to cookie-cutter homes.

"We're not a builder that goes out and says we want to take a 5,400-square-foot lot and put a 4,000-square-foot home on it. That's ridiculous," he said. "When it comes to things like 45 percent impervious cover and 40 percent (floor area ratio), those types of items I'm in complete agreement with. What scares me is the review board is taking that a step farther and is basically starting to determine the aesthetic effect for every single home."

The rule that has caused the most frustration for builders requires them to include design features to prevent a "billboard effect": huge, plain side walls looming over nearby houses. To follow that rule, many builders are breaking up the side wall by making the second story narrower than the first, one example of the kind of formulaic design that they say the ordinance has led to.

Builders and architects also complain that the design review commission that was set up to hear appeals regarding the new rules gives too much weight to the opinions of neighboring property owners.

"They have given power unduly to the residents in the neighborhood," architect Dean Rose of PFA Design Group said. "It's now a vigilante committee."

Here's what I wrote back in October 2006:

Anyone who's seen enough zoning hearings knows what this will degenerate into.  The neighborhoods will use the waiver request to impose their taste.  (They will quickly detect how far they can go before the owner decides the costs aren't worth the benefits of the waiver.) These hearings will rarely be about just massing, scale or compatibility.  Owners who want a side articulation waiver will be told they should be using wood siding rather than stone, or stone rather than wood, or brick rather than stone.  Or they'll be told to get rid of some windows on their proposed second story ("it's too intrusive").  Or they'll be told to add some windows ("it's too monolithic").  We'll hear complaints about roof pitch.  Placement of porches.  Design of the garage.  Any design feature that can cause the slightest annoyance will be fair game.  Neighbors can expect a sympathetic audience from the RDCC.

More later.  Maybe.

If you thought Kyle was bad . . .

try Sunnyvale, an eastern suburb of Dallas.

It faced a lawsuit similar to the one pending against Kyle.[1]  Here's the federal judge's description of Sunnyvale's set-up:

Nestled in the midst of towns defined by the shopping malls and dense apartment development for which the Dallas Metropolitan Area has become famous, Sunnyvale presents a stark contrast. It is a beautiful, rural, Texas town with almost 11,000 acres of rolling hills and green grassland and only 2,000 residents. Sunnyvale has no shopping malls and no apartment developments. The secret to Sunnyvale's success is its unusual zoning laws, including an outright ban on apartments and a one-acre zoning requirement for residential development.

The judge ruled that Sunnyvale's zoning had a disproportionate effect on African-Americans.  More damning, he ruled that the city had adopted the regulations with the intention of discriminating against African-Americans.

The judge was probably persuaded by citizen comments like this one, made at a zoning hearing on the town's first proposed multi-family project:

We'll build that fence up, we'll hold that gate there and as long as we can hold those Indians off, fine.  And, when they bust through then we pay the price . . . there's an over abundance of multi-family housing around here and we're not like that.  But, we're boxed in . . . personally, I'd rather not see any apartments or any cottage homes in Sunnyvale.  Period.

I've discounted the possibility that Kyle was actually motivated by race.  I suspect that's unlikely with fast-growing suburbs because they're less likely to be racially homogeneous.  But obviously, if the plaintiffs have turned up hard evidence of discriminatory intent, Kyle will be in real trouble.  The hit to its reputation would dwarf any impact on its zoning authority.

[1]Dews v. Town of Sunnyvale, Texas, 109 F. Supp.2d 526 (N. D. Tex. 2000).

Kyle's all-masonry housing ordinance has landed it in court

Here's a thought-provoking case:  The Home Builders Association of Greater Austin Inc. and the National Association of Home Builders Inc. have teamed up with the NAACP to sue the City of Kyle. 

In 2003, Kyle passed ordinances that increased the minimum lot size for single-family homes by 200 square feet, to 6,825 square feet; set a minimum of 1,200 sq. ft. for single-family houses; and mandated masonry exteriors.

Kyle officials say the ordinances were designed to slow growth in the wake of a spurt that has sent the city's population skyrocketing — from 5,314 in 2000 to 23,285 in 2007, according to estimates from the Texas State Data Center. The rules followed development moratoriums after sewer and water systems became overburdened.

"The passage of the ordinances that are at issue here today was just one more step that the city took once the development moratoriums were lifted in order to address those growth issues," Kyle's lawyer Bradford Bullock said.

The homebuilders and NAACP (strange bedfellows indeed) aren't buying it:

The trio of plaintiffs say the rules violate the federal Fair Housing Act because African American and Hispanic home buyers have been disproportionately pushed out of the local market.

"They raised the bar on every single district within the city," Michael Klein, one of the lawyers representing the plaintiffs, said in his opening arguments. "What they did was basically say, 'We're going to increase the cost of living in Kyle.' "

Klein is absolutely right.  Kyle is dead set on increasing the cost of housing there.

This is not necessarily an expression of bigotry, though.  Kyle is arguably attempting to cure a market failure, although clumsily.

A city like Kyle, which has no commercial or industrial base to speak of, can only fund its schools, parks, police and other city services with residential property taxes.  All of the homeowners have the right to share equally in these services -- the kids go to the same schools, everyone gets the same police and fire protection, etc.  The homeowners don't pay equal shares of the cost, though.   The more expensive the home, the bigger the homeowner's share.   

Duh.  That's always the case.  But a town like Kyle has plenty of undeveloped land.  That creates a problem for homeowners who want the town to provide a high level of service.  (Say, a well-funded high school someday.)  They can vote to fund high-quality services, but that makes the town more attractive to potential residents, including lower-income residents.  If the town attracts enough low-value construction, the new growth might actually lower the average property tax per household, thereby reducing the money available per capita to spend on services.   

This poses a dilemma for the original homeowners:  If they want to maintain the high-quality services they were initially willing to fund, they will have to raise their taxes because the city's per capita collections will no longer cover the bill.  If they don't want to raise taxes, then they must cut services, which is obviously a second-best solution.

The residents of Kyle have settled on a third option:  They have imposed what is essentially a minimum property tax by requiring that new homes have a minimum value.

I'll wager Kyle's attorneys don't put it this way in court.  I don't have a problem in theory with cities offering different levels of services, though.  When there are lots of suburbs offering lots of variety, home shoppers can pick the city that suits them best.   (Urban economists call this Tiebout sorting, after economist Charles Tiebout, who proved that fragmented suburbs could generate efficient levels of government under certain conditions.)

Zoning is a pretty clumsy tool, though.  Minimum lot sizes, home sizes and all-masonry construction all impose tremendous inefficiencies of their own.  Among other things, they reduce the options available to prospective homeowners who are willing to pay for the services but who don't want the standard suburban set up.  It would be much more efficient simply to charge an impact fee to cover the homeowner's share of fixed costs.  That's hard to do under Texas law, though.

I've also got a problem with using zoning to cartelize the supply of housing to push up the current residents' land prices.  That shouldn't be the case in Kyle, though.  There's lots of land around Kyle, and no natural amenity that makes the land in Kyle more attractive than in another town.  The citizens of Kyle, in other words, don't have the market power to raise their land value through zoning (as opposed to the structure value).

None of this addresses the lawsuit's claim, which is that Kyle's ordinance has a disproportionate impact on minorities, which is almost certainly true.  That's not the end of the analysis, because the law tolerates some facially-neutral ordinances even when they have a disproportionate impact.  If Kyle loses, enjoy the ensuing firestorm.  I imagine even Austin would end up getting scorched.

Zilker's VMU application, part II

An open letter to City Council, my belated response to this Chronicle piece:

Dear City Councilmembers:

I note that the Zilker Neighborhood Association has discovered a "good eats" exception to VMU zoning.  It has asked to opt out more than 70 of its eligible parcels, largely for the sake of "beloved" restaurants and other preferred local establishments.  (I couldn't help but notice that the "beloved" restaurants are especially likely to sit near single-family housing.) 

Before basing major zoning decisions on the quality of the Tex-Mex, please consider this:

The Zilker neighborhood is almost completely built out under current zoning entitlements.

According to the City's residential acreage data (pdf), a paltry 11% of the Zilker neighborhood's residential property is zoned multi-family.  Only 2.6% is zoned at the reasonably dense MF4 or MF5 levels. 

These multi-family parcels are nearly maxed out. According to data collected by the city demographer, ZNA had 933 occupied multi-faily units in 2005, or roughly 1,000 total units (assuming a reasonable vacancy rate).  Using the residential acreage data above, the City's minimum site area standards, and a reasonable assumption about the mix of one-room and two-room apartments, I've calculated that the current zoning permits fewer than 1,200 multi-family units.  While some of ZNA's 1,000 existing units are non-conforming (i.e., not built on MF-zoned property), there is clearly little room for more housing under current zoning entitlements.  And we all know what happens when a developer asks for greater entitlements in the Zilker neighborhood.

As Mayor Wynn likes to point out, the City of Austin has doubled in population every 20 years, and will likely continue to do so.  Thousands of these new residents (and plenty of the current ones) will want to live close to downtown and central Austin's other amenities.  We must find space somewhere.

VMU zoning is supposed to provide that space.  That was the "deal" with the neighborhood groups:  density will go on the transit corridors and not in the neighborhood interiors.  That deal did not, and does not, permit neighborhoods to gerrymander the VMU district to indulge their officers' fondness for a particular business -- or a dozen or more businesses, in ZNA's case.  (It must sting the local businesses who weren't favored by ZNA to discover their customers left them off the "beloved" list.) 

A number of neighborhoods -- including neighborhoods represented by high-ranking ANC officers -- have taken the VMU deal seriously.  ZNA has not.  The City Council has the right to deny a neighborhood's opt-out application in its entirety.  Please do so here.

Footing it to class

Richard Florida at the Creative Class Exchange:

Ohio State university sociologist, Kent Schwirian summarizes the results of an OSU study of the relationship between where students live and their grade point average and the time they take to graduate.

Percent graduating in four years:

• Walking distance 60.8%
• Near campus 47.5%
• Rest of county 36.7%
• Outside of county 21.1%

Grade point average:

• Residence hall 3.33
• Walking distance 3.16
• Near campus  3.12
• Rest of county 2.97
• Outside of county 2.94

Correlation doesn't imply causation.  But it makes some sense here.  Being a student is easier when you live within walking distance of campus.  It's easier to get to class.  It's easier to study with other students.  It's easier to make a professor's office hours.  It's easier to get to the library. (Do college students use libraries any more?)

Just another data point for evaluating the harm the City of Austin inflicted on University of Texas students by its years-long ban on dense development in West Campus.