Appreciation Expectations

 My experience with the Great Recession in the US suggests that one of the things that makes unwinding a property boom difficult is that an expectation of appreciation (due to limited supply) has become baked into housing prices. So even if house prices don't fall, even a reduction in the rate of appreciation is hurtful a wide variety of owners, from long-term householders to brand new purchasers.

You just have to think about a house as a financial instrument, like a stock or a bond. It provides a dividend (in terms of rental income, or owners equivalent rent), is a security is costs money to acquire. But like a 'growth stock', there is an expectation that the value will increase over time. 

There used to be a lot of debate over whether housing was a good investment or not. That's died down, largely because I think the empirical data is clear--it's not. The difference is largely due to dividends--you can reinvest the dividends from money you put in the market in the market. But you cannot reinvest the  benefits of having been provided housing. 

Consulting & AI

An article in the Economist this week suggested AI a major threat to consultants, whose primary goal is the provision of expertise. I remain unworried. Consultants make their living providing specialized expertise to cover rare situations. However, most consultants are actually consultants, but contractors: you pay them to get a job done that you can't (or don't want) to do yourself. The name is simply a matter of prestige: more like BCG, less like the local plumber.

Of course, every contractor-consultant aspires to being a proper consultant, by providing "thought leadership", which is simply a way of saying "I have thought about this a great deal and have useful things to say", in the sense of having useful advice. Of course, the consultant-contractor dichotomy is blurred in the other direction--while some of the BCG folks do 'strategy' rather a lot more do 'implementation', where they build you a new organizational structure rather than a new bathroom. 

Working on something, I realized "You can only write what you know about" and so a great deal of consulting is knowing about things. Which requires rather a lot of learning about things, and doing research about them. Consultants get accused of "Let me Google that for you", but that sort of misses the point--you could Google it for yourself, but since your consultant is really a contractor, you really are paying for someone to Google it for you. 

An aside on that: Googling something requires ever more wading through an SEO optimized and enshittified web, but also the ability to extract content from our society's least enshittified corpus: publicly available PDFs. This category includes peer reviewed research, think tank reports, local government documents, for-profit and non-profit thinkpieces, etc. An advantage I strongly suspect will remain, because while much web-content is open for the scraping under a generous fair-use doctrine, a PDF has a much better (more litigable) claim to being 'published' and copy-righted than a blog post. 

So, in the context of AI, an increasingly valuable portion of the service a consultant provides (compared to an AI) is the able to discriminate between high-value and low-value content, in terms of quality and relevance. Of course, all consultants use AI, but I find arguments against AI use tediously familiar to childhood injunctions about using spell-check. My (unassisted) spelling is indubitably worse, but the productivity of my time is vastly greater. It should tell you something that we no longer employ whole armies of copy-editors in document production. The real question is if your consultant is making efficient use of AI (to produce analysis tools and draft documents) and scam artists (using AI to produce analysis and review documents). 

If it's something I could task a junior analyst with, it's suitable for AI. (To the very real peril of the entire class of junior analysts, who of all people should focus on using AI to become much more productive). Which raises the issue of the use of AI by junior analysts--if they give you something an AI could have produced, what is their value? But that only suggests a mis-use of analyst time and capacity, like paying someone to spellcheck a document. But that requires senior analysist to understand the capabilities of AI, and how to apply it well. And that capacity is sadly lacking. It's easier to spurn and disparage AI tools rather then learning to use them (and teach others to use them). But it's a hard time--AI is not widely adopted, and where it is widely adopted, it's not necessarily well used. Things are changing so fast that there really aren't best practices in the professional use of AI--merely cautionary tales about the mis-use of AI. But I expect that's also a source of competitive advantage: Everyone claims expertise in AI and AI use, but it will take rather a bit longer for consultant clients to be able assess actual facility with it. 

As an aside, if you can't afford to hire someone competent to assess and manage a consultant/contractors work, you have no business contracting something out. The risk of buying a 'pig in a poke' is simply too great, and fly-by-night consultants feeding on the credulity ignorant have been a risk since the days of court sorcerers. An interesting parable for AI--if you can't assess the quality of what your AI produces, you have no business using an AI. Which is perhaps the fundamental skill senior analysts should be teaching their juniors.

Planning Permissions

Everything I read suggests that the British system of explicitly requiring Council-specific 'planning permission" for new development is something of a disaster. It has tremendously enriched the cohort able to purchase under Thatcher, to the general detriment to everyone after.

Nominally, as zoning provides 'build-by-right', things should be different in America. But due to aggressive downzoning to the degree that most new infill/redevelopment also requires a zoning change, it's hard to tell the difference. 

The modern 'Urbanization Problem'.

The problem*: how to add additional rentable space in the way last disruptive to existing 'social contracts'. In my bubble, there are two general schools of thought: 'Missing Middle' (incrementalism) and Transit-Oriented Development (bounded high density) development. The first holds that we should permit gradual intensification everywhere, and the latter that we should cluster new high-rise development near transit stations. 'Missing Middle' affects a large share of the metro environment, even partial wins (triplexes) yield big changes. On the flip side, transportation research pretty clear that modest density increases (especially at the low end) don't yield any benefits in things like changing frequency, length, or mode shifts.

The 'Missing Middle' approach aligns with the small or non-professional developer, creating ADUs by 'barnacling on' to existing housing units. Strong Towns' is emblematic of this approach. What I call the 'TOD approach' largely aligns with the interests of professional developers, and often of city planning departments, as they both represent the focus of a finite amount of expert/professional energy on a limited number of sites, typically focused on created value or reducing 'blight'. The two have a 'bottom-up' vs. 'top-down' dichotomy, as well as a 'muddling through' vs 'technocratic' rationality. 

While I love density, I do not love its modern implementation, which largely consists of replacing defunct and vacant strip-malls along high traffic arterials with elevator apartments. As a resident of one, the noise is a misery, the traffic a barrier. The most affordable ones are the modern reincarnation of the railroad apartment. 

In contrast, there is little to be said against the Missing Middle, apart that it is feral and pernicious (and hence successful). It is also the heir to the near-totality of the human urban tradition (the pre-automotive part). 

*The historic 'urbanization problem' was how to deal with the health and safety impacts of crowding unprecedented numbers of people into unprecedently enormous conurbations, as highly paid factory jobs induced the rural population to become city dwellers. These problems mainly related to water: sewerage, drinkable water, and the nexus between them: run-off. But it also required enormous advances in transportation, including the oft-forgotten canal age, the railway age, electric traction, and the automobile. And indeed, enormous advances in structures: steel frame construction and the elevator. That the preliminary limit on urban growth/agglomeration has been regulatory is an entirely new problem that emerged within living memory. 

What is Outlook Tower?

This blog was named in honor of  Sir Patrick Geddes 'Outlook Tower' in Edinburgh. 

Per Wikipedia:

In 1892, Patrick Geddes, a pioneering Scottish urban planner, sociologist, and ecologist, assumed management of the site, renamed it the "Outlook Tower," and organized it as a museum and urban study centre demonstrating his philosophy of planning, which was based on comprehensive surveys of the site, city, and region. 

He installed a series of exhibits on progressively broader geographic themes as one ascended the tower — first the world on the ground floor, then Europe, the English-speaking countries, Scotland, and Edinburgh — with the camera obscura itself continuing to project a real-time image of the city at the very top.[3] People from all walks of life were invited to come to the tower to study and learn about their city.[4]

Mission, monopoly, and your local transit agency

If your organization doesn't have a declared mission, then your default criteria becomes 'What is best for the organization?'. Which (ironically) is not necessarily what is best for the organization (or its members, employee, beneficiaries) long-term. There are organizations (public and private) that have been captured (or held hostage) by internal stakeholders. In a competitive market, it solves itself, but in a monopolistic context (Amazon, public transit agency) there can be no effective competition. Private companies subject to sufficient disfunction are preyed upon by private equity (Sears, Red Lobster, Joann's).

But for something supported by public subsidy, it would be the height of idiocy to support two competing organizations--especially so for public transit, where networks effects create natural monopolies.

So for a transit agency, it's critical to have governance (a board), representing the interests of the beneficiaries. Of course, for any labor intensive business (and operating transit is), the workforce becomes an important stakeholder. As are the transit dependent--people who don't have the resources (time, attention, human capital) to advocate for themselves. But a transit agency requires a board that can articulate a mission, vision, and goal for the agency and ensure management adheres to it.

Which is hard--there is a constant temptation to use public resources to 'do good'. Jarrett Walker talks a lot of about the coverage vs. frequency, which really gets to the core of the issue--what is a transit agency for? Who should it serve, who is it obligated to provide benefits for. Clarity is essential for agreement. It's not a black-and-white. But your agency should be clear how much resources it intends to dedicate to providing benefits to who.

Fixed guideway transit's intended user group

The intended user-group for fixed guideway transit is (and has always been) the relatively affluent exurban commuter from the peripheral suburb, able to afford the daily fare. This has been the truth since the first omnibus; if you were poor, you walked, and mechanical conveyance was either a treat or an urgent necessity. But urban transit was magical--it made it possible for many more people to afford to live beyond walking distance of their workplaces, away from industrial smoke, noise and pollution, with more space and better infrastructure (1).

But fixed guideway transit enjoys the special magic of the network effects. Adding node C to path AB not only makes journeys from B to C, but also A to C. So there is an inherent non-linear scaling (2) to adding links. That non-linear scaling is what has made is possible to serve people at lower costs--serving additional journeys on existing infrastructure makes it possible to offer a lower per rider cost than was initially feasible for the first link of your network alone. (In transit history, this surplus is largely supplied by keeping fares fixed when they would otherwise have risen in proportion to costs, rather than lowering them). 

But never lose sight of the fact that it is the middling-affluent that fixed guideway transit was designed to serve. Just as the fares from first class passengers make the flight feasible for everyone on the plane, the feasibility of serving the middling-affluent is what makes fixed guideway transit feasible. 

This has a number of implications for the necessary characteristics of fixed guideway transit. It has to be safer, more comfortable, or faster than the alternative. Historically, that meant things like enclosed carriages, smooth rails, and higher speeds. And in the modern era, that means being faster than the car. Which is something that is very very difficult to achieve, because for most transit trips, the access mode is not going to be a car--it's going to be walking, which is slower. So transit is faster primarily where either the access or egress journey is short--either you live (3)  a short walk away, or you work a short walk away. 

However, there is a special case where fixed guideway transit is faster than driving, and that's when parking is difficult to find. Then drivers face an egress journey (from vehicle to destination) that either requires a long walk, or a long search for parking. (The entire existence of on-site parking is predicated on reducing the parking search-time as a means of improving access). Of course, when demand exceeds supply, there is money to be made, and so paid parking naturally follows (4).

So when thinking about where to add fixed guideway transit, look to where parking is difficult and/or expensive. But even with Parkopedia, that's still difficult to do (especially given the heterogeneity of the terms of parking). But Google Earth easily furnishes a strong symbol of where parking is expensive--structured parking garages. Larger garages are more efficient than smaller ones, so garages tend to be sited where there is a lot of demand, and where they are located is within a short egress-walk to the ultimate destination. There is no need to analyze employment density--someone else has already done the analysis and made a multi-million dollar investment on that basis, when they built the parking garage. 

(1) Retrofitting an urban environment with underground sewerage always requires a megaproject, a cloaca maxima for a network capable of serving everywhere upstream. So moving to someplace provided with (mandated to have) underground sewerage is a win from go.  

(2) A broader topic, but in essence: each link adds more because of the network effect, but each link is less-good than the last, because you always build the best links first. So at some point, any network faces declining marginal returns on expansion. 

(3) 'Station cars' are a novel case where someone lives near transit, and then uses a low-end vehicle to make the post-egress journey for the last mile. Employment being more concentrated and more central than population, most park-and-ride lots serve the access-to-transit part of the journey.  

 (4) "Free Parking" merely shifts who pays - maybe it's the retailer, maybe its your employer, maybe it's the local polity. Urban space is valuable, and someone has to pay the piper. 

Equity and transit

From an equity standpoint, I know it sounds terrible, but--where we want to put new fixed guideway transit is not where underserved populations are, but rather where the parking garages are. Because the hard truth is that increasingly, the places where rising rents are displacing the poor and transit-dependent to aren't suitable for transit. They are ever more suburban and lower density, with sparse street networks and poor walkability. 

The hard truth about being poor is that: a) you are a renter, and b) you live where you can afford to live. Which requires making the classic trade-off between space and rent. If you need more space, you are going to wind up with longer journeys. And classically, if you can't afford the journey, you face an ugly choice between  substandard dwelling (often of questionable legality) or of overcrowding.  So you go where you can. And as always, rents are lower with the nuisances are worse, the safety less, and the accessibility more limited. 

So improving to low-rent places is a bit of a mugs game, as it's also where the nuisance is most extreme, safety an issue, and the needle hardest to thread. And once you've improved the access, you'll see the poorest, least-resourced again displaced to someplace worse. Of course, over time, the nuisance and the safety will improve, as better resourced newcomers agitate against the nuisance, public safety campaigns are enacted, and 'blighted' (low-rent) structures are replaced by new development. But all of things only ratchet up the asking rents, displacing every more of those in poverty, even as they remove the cheap and run-down buildings that businesses and their customers rely on. (This cycle is not new--Jane Jacobs inveighed against it happening in NYC generation ago). 

So if we actually want to do something on the basis of equity, what to do? First, transit should serve low-income jobs. Jobs are much more highly concentrated than population is, and the job remains low income, even if the population they serve becomes more affluent over time.  Second, the transit network needs to be flexible. the location of the low-rent district (and hence low-income households) is going to shift over time. This is especially true with low-income owners--they buy in while it's cheap, but over time become more affluent, which is strongly linked to additional vehicle ownership and thence to lower transit ridership. So if you need to serve a low income population, fixed guideway transit simply isn't the way to do it. Third, transit needs to be a network (a frequent network) so as low-income renters shift location, they can still use or re-use part of their existing trip-pattern for getting to work, rather than being forced to dissolve a whole series of arrangements to make a single shift in housing or employment.  

On Displacement

All renters move, and often. Partially it's a response to changing conditions (employment, family size) but also in response to being able to take advantage of a better deal (better rent, better quality, better location) elsewhere. So renters (per se) aren't displaced. When people talk about displacement, they are talking about the displacement of an ethnic community--when a traditionally Black / Mexican / Jewish / Chinese / Irish / Italian / Greek / Korean / Hmong / Ethiopian community ceases to have a majority of that ethnicity, typically because a wealthier, whiter, less immigrant population is moving in.  

If the housing stock is is fixed, newcomers inevitably displace incumbents, in a zero sum game that always sees the incumbents outbid. And over time, the decline in the size of the ethnic community population can no longer support 'specialty' services, markets, grocers, and (eventually) churches. And that is a loss. As strands are pulled away, the fabric of a community dissolves. And it's not something that can be casually recreated, because it's an both: a) an emergent property of a density of recurring interactions with a single spatial & temporal locus; and also b) the product of the purposeful effort by past community leaders (even if you've got dry tinder, it still takes someone to strike a match).   

There is a disjunction in community norms about acceptable behavior - newcomers vs incumbents. And the newcomers are of the hegemonic in-group, they have the law on their side (de facto or de jure), endangering incumbents through exposure to the police. 

So when people talk about displacement, we should be clear on what that means and what that requires: Enough NIMBY* to prevent new rising rents from being matched with new development, and a zero-sum game reducing the ethnic population below the threshold necessary to support specialty stores and services.  

*There is nothing more NIMBY than a parking requirement--people fighting the addition of new people or businesses, excluding them simply to prevent competition for a limited resource that they have no legal claim or right to exclude. 

Urban ecology of Walmart

If you live in a growing suburb, there are four phases: periphery, blossoming, prime, and decline. Periphery is when you must drive a long ways to get to Walmart. Blossoming is when the Walmart comes to town. Prime is when the Walmart has no competing Walmarts nearby, and is super-nice. And decline is when another Walmart moves in at the periphery, and your Walmart gets ever dingier. 

Eventually, when your store is run down, Walmart will buy a new parcel for a bigger store. And then there will be a derelict store with a vacant parking lot for a decade or so. At which point, it will be time for neighbors to make quasi-racist statements about newcomers when a developer tries to redevelop the shell of a parking lot into new multi-family housing. 

Building Community in a Suburb

Car dependence is actually less an issue that population density. Each retail space needs a certain number of rooftops, and until an area hits that threshold, retail will be limited. (More affluent places get more, poorer places get less). Abandon hope of that changing. The only escape lies in converting old buildings to new uses, or in the use of substandard buildings. The first 'community' space to emerge in the suburb I grew up in was a non-profit coffee house run by a local church out of a disused restaurant. And they were only able to do that (after much struggle) because they were issued a variance to local parking requirements.