Household type and transportation housing cost equilibrium

When apartments are in short supply, landlords outbid families for single family detached homes with yards, even while the premium offered for the yard is less. Three incomes beat two, even with substantial income differences. A family can only afford to outbid a roommate household where their transportation costs are lower: two cars beat three, even with substantial transportation differences. So new family housing gets produced where transportation costs are proportionally higher--at peripheral locations. Happily, this is also where regulation is least and hence supply most elastic. 

But for households that want/need lower transportation costs (and are willing/able to pay a premium for it), supply is much less elastic, as the land is already built up and adding new housing is more difficult. So to maintain affordability, households are forced to compromise on quality, accepting older and ore depreciated units. 

Depreciated housing is only acceptable on a temporary basis--as your income rises, you either have to be able to move up or fix up. And a fix-up is only worth doing if you can capture the value of that investment by enjoying it long-term. Hence, family households are forced into home ownership as a means to obtain decent housing in a decent location. 

What makes a market

 In the most basic village-produce-market sense, a market should enable:

1. Buyer and sellers to congregate 
2. Product comparison
3. Competitive Pricing

Lacking any of those, and you don't have a market. 

There have to be multiple buyers and sellers. Monopoly/monopsony are classic market failures--a single seller can rise prices and lower quality without limit, while a single buyer can lower wages and prices without limit. Congregation has to take place in both place and time. One buyer per day is just a series of monopolists. Likewise, an entire convention center full of stores of unlike products is not a market--it's just collection of monopolists [1]. And prices have to be competitive--a group who has come together to set prices is called a cartel [2]. In the early medieval ages [3], there is an immediate return of 'market days' (for perishable commodities like foodstuff) and 'trade fairs' (for industrial commodities like wool) [4]. 

[1] Retail centers are deliberately set up this way, so that there are never two of the same type of store/restaurant/service, lest competition between the two drive down prices. 

[2] Unless it's a cartel to set the price of labor, in which case we call it a union. <grin>. But almost all unions emerge in a response to a monopsony on the purchase of labor--people won't suffer the costs (union dues, lost income) easily. 

[3] As soon as it becomes reasonable safe to travel and commerce returns. Crime (Banditry and piracy) drops to a reasonable level. 

[4] Places without which are reliant on peddlers, door-to-door salesmen who are crazily inefficient, but able to function because they can extract high prices by being a mobile monopoly. They are also afflicted by 'buyers' and 'agents' why are mobile monopsonists. 

An imagined conversation about livestreaming the TRB conference (and reviewing for it)

TRB Attendees: "We want to be able to attend remotely, watching presentations and attending meetings.

TRB: "We want people to come and attend the conference in person".

TRB Non-Attendees: "The cost of attendance (transportation, hotel, opportunity cost of time) doesn't justify coming in person; remote meetings and webinars are a norm, and there is no reason you can't do them. Some dude with a laptop livestreamed what he attended, so it's technically feasible". 

TRB: "We will no longer permit livestreaming, so there is more reason to come in person!"

TRB Non-Attendees: "Why are you doing this?"

TRB: "We signed a lease at the conference center, so we are locked in for the next ten years, and we need enough people to come to pay for it!". 

TRB Non-Attendees & TRB Attendees: :|

TRB: "Also, the conference center Wi-Fi is too weak..."

TRB Non-Attendees: That seems like a conference-center problem. Are they having trouble supplying running water too? Can you not afford a cellular connection for four hours a day for five days? 

TRB: "Also, the point of the conference is networking -- TRB is funded by gas-tax research funding, so we have to demonstrate value to DOT staff (who attend for free)". 

TRB Attendees: "So we pay $800 in case DOT staff might want to talk to us?"

TRB: "And see cutting edge research presented in poster and panel sessions. And if an academic, present your own research. And if a DOT, present your own innovations. Oh, and sell things to the attendees, and sell things to people selling things to the other attendees.  TRB relies a lot on conference sponsor funding, and sponsorship amounts are proportional to the size of our in-person audience--there is a reluctance to pay the same amount for sponsorship when there are only half as many attendees". 

TRB Non-Attendees: "How about a half-price ticket, since we're not receiving a lot of the benefits of attendance?"

TRB: "Calibrating how much that ticket should cost, given its propensity to cannibalize our other revenue (tickets, sponsorships, political influence) just doesn't seem worth the risk". 

TRB Non-Attendees: "Well, that means I'm not attending".

TRB: "That is a risk we can take -- we can quantify dollars needed in a way we can't quantify people who didn't attend. Attendance is already down post-COVID, so we can't risk it shrinking more".

TRB Non-Attendees: "The value of the alternatives (webinars) got better, so that's not unexpected".

TRB: "TRB committees, stop sponsoring webinars--we can't have people getting TRB benefits if they aren't coming to TRB". 

TRB Committees: "But wait, I thought we were supposed to popularize and distribute research?"

TRB: "Yes, but not like that". 

TRB Non-Attendees & TRB Attendees: :|

...

TRB: "We are having troubling finding sufficient reviewers for our papers!"

TRB Non-Attendees & TRB Attendees: :|

TRB Reviewers: "Seems like a bit of a waste, to do this review for something that's only going to be presented at a conference a few people can pay to attend, or a journal only a few people can pay to access. Why am I donating time to this again?"

TRB: "We are having trouble articulating a value proposition as well and are relying on academic norms of unpaid labor for peer review. That norm is collapsing and with it the number of peer reviewers and hence the quality of peer review- papers are only getting single reviewers". 

TRB Reviewers: "Have you heard of a 'desk reject'? All the main academic journals do it; TRB's commitment to review everything is actually quite strange". 

TRB: "Again, funded by gas tax money for research--TRB is an applied research organization. The thing your average DOT official submits aren't anything close to academic quality, but they don't need to be, because our intended end-users are DOT staff. They can be highly contextual and very niche. 

TRB Reviewers: "Sounds like your model has been highjacked by academics using it to provide guaranteed and timely feedback on academic articles that aren't useful to your end-users". 

TRB: "Yes, but it's so valuable for supporting early career researchers!"

TRB Reviewers: "Didn't you say your end user was a DOT staff member?"

TRB: "Everyone who gets accepted to present (panel or poster) has to register for TRB (albeit at reduced student price) and that does wonders for our bottom line and attendance numbers!"

/cynicism

Why we stopped building houses in 2008 in one chart

 

Housing location is a matter of trading off between rents and transportation costs (all else equal). When transportation costs fall, people are able to pay more in rent. Sometimes they allocate that surplus money to nicer digs, sometimes to more square footage. But when transportation prices rise, people need lower rents--temporary fluctuations can be managed by curtailing travel (which can't be sustained long-term). So, when the price of gas spiked in 2008, a lot of households couldn't afford their homes. So they stopped paying. Which tanked the value of the mortgage back securities (MBS), which froze the creation of new MBS, which overloaded loan agencies with mortgage they couldn't resell, which froze mortgage lending, which destroyed demand for mortgages, which wrecked demand for homes, even as supply continued to expand. As house construction is a process you can't stop midway, any more than you can stop making an egg, additional housing supply continued to come online. And so housing prices went into freefall for a bit, and we stopped producing more houses entirely. 

By which point, the context had changed. When housing production ceased, with it went the entire institutional apparatus that been making money on the process of converting raw land into homes. In much the same way that the Great Depression wiped out local banks, the Great Recession wiped out local homebuilders, mortgage originators, and financiers. The survivors were much more risk-averse and less speculative (something reinforced by additional lending regulations). And no one was willing to invest in new housing, while there was existing housing out there selling for beneath its production cost. It wasn't until that 'latent supply' cleared that it made sense to produce more housing, and there isn't an increase in the number of 'new starts' until 2012. And, as the chart shows, the gas prices that had made all the peripheral homes reasonable and affordable didn't return until almost 2014. So even if your transport costs had been acceptable in 2008, it wasn't until mid-2014 that the transport/housing cost equilibrium again made those homes attractive to buyers. And even when gas prices fell, there is also the awkward reality of expectations: Expectations about gas prices set between 2005 and 2015 were very different than 1985-2005. 

Further, the demographics of demand had shifted and the "Great Housing Reversal" had begun. An oversupply of single-family detached housing had been predicted for decades, but the oversupply was worse than expected, due to a quirk in Millennial demographics: Less marriage hence and less homeownership. Fewer married couples mean fewer kids, which means living in a rental apartment is more acceptable, for longer, even after marriage. It also meant the people living in apartments were older and hence had higher incomes and were willing/able to pay more in rent. And that has kicked off a generational bonanza in apartment building, aided and abetted by increasingly-political-engaged renters (YIMBY), overcoming the supply restrictions imposed by the homeowner cartels.

Robo-taxi fleet economics napkin math

 Assuming $1 of monthly income supports $100 of expenditure, and that a robo-taxi costs $150k, a taxi needs to make $1500 a month (above operating costs). Marginal operating costs (beyond depreciation) can be assumed to be $.10/mile. Assuming 25 miles per hour (averaged over high speeds and waiting time), that's $2.50 in hourly operating costs or about $900 in monthly operating costs. So capital and operation is about $2400/month for a robo-taxi, or about $6.50 per hour. 

Of course a robo-taxi can make more than $6.50 an hour. A single Lyft trip reliable runs over $20. Assuming three trips per hour, $60 income versus $6.50 costs makes robo-taxi fleets a very attractive proposition. 

The counterpoint is that such a robo-taxi costs far more than a bus fare. The counterpoint to which is that we subsidize buses, so why wouldn't we subsidize robo-taxies? (For the sake of simplicity assume one pool of subsidy, and all operations are contracted out). Begs the question of how much it costs to provide service by bus. Costs varies wildly by service type - basic bus service is cheap, commuter bus is less so, demand-response (paratransit) is wildly expensive.

"UTA’s official published cost per passenger (per boarding) from its 2006 performance audit was $5.11 for buses, $3.51 for light rail, $36.82 for paratransit, and $3.53 for vanpool".

Add 57% for inflation (2006 to 2026) so it's about $7.25 per passenger for a bus. That's more than the capital + operations cost for P2P AV ($6.50), so our hypothetical subsidy provider would be better off switch many riders to subsidized AV. 

How many (and which routes) is a more nuanced question. Bus route productivity (passengers per service hour) varies widely. Removing the least productive routes would substantially reduce the average subsidy cost per passenger. $7.25 per passenger is $22 for 3 passengers per hour, so it would be far better to switch a lot of passengers to P2P AV. 

An intuition of averages suggest that would be a lot of riders. But that intuition is wrong. $7.25 per passenger is an average, and that average hides a staggering a range in productivity. There is one route that costs $40/passenger and another that costs $3/passenger. But the $3/passenger route has a low subsidy/passenger because it's transporting a lot of people. It's costing $150/hour to operate, but transporting 99 passengers/hour, which would cost $215 to do by PTP AV. In an economist's chart, the two lines in the napkin math would cross at about 75 passengers per hour. 

Assuming 15 mph for a bus, that's about 5 passengers per mile. Not a high standard. 

But a lot of transit agencies own some very expensive capital equipment (buses) that they can't resell, as the feds helped pay for it, and if they sell the buses they have to return the subsidy. So at best, agencies will shift to AV by not buying new buses rather than selling excess buses. So we'll see a lot of new PTP AV's serving marginal routes, as older and older buses serve the high-capacity routes. (Not a great outcome).

All of this assumes that bus costs remain fixed, and that the bus service provider doesn't also shift to fixed guideway AV vehicles. The advantage isn't as extreme for fixed guideway AV as for P2P AV, because the ratio of drivers/passenger is much lower. If it halved labor costs, the break-even point between fixed guideway and P2P AV shifts in favor of fixed route. This may be expected, and transit agencies are simply being quiet about it so as to not spook their driver's unions. (It will be a slow shift--a new bus has an operational lifespan measured in decades). 

It also assumes that P2P AV can only manage one passenger per vehicle. But even assuming extremely generous carpool standards (averaging 1.3/trip) it would only raise that number by a third. Most people don't start and end in the same location, and pairing up in even a portions of two trips requires them to coincide in time and space in an unlikely way. 

Finally, anyone providing services has to size their fleet (and supporting infrastructure) for the peak hour, whether that's 10 buses or 60 PTP AV vehicles. They also have to maintain sufficient 'spare' capacity to maintain that fleet capacity while part of the fleet is out of service and being repaired, which means 10-50% more vehicles than are actually in use even at peak. Which would substantially degrade the productivity we've assumed for AV vehicles. Vehicles achieving 3 trips during the peak hour are never going to achieve that outside of it. A key part of the economics of ride-hailing is part-time drivers who only work and accrue vehicle costs during the peak hour. In a 'fleet' context, that advantage vanishes. The operator wants to keep vehicles operating as close to constantly as possible, but the other 23 hours of the day are only ever going to be (at most), 90% of the peak hour volumes. So the operator will need to buy 110 P2P AV vehicles, of which only 90 will be operating 23 hours a day (10 spare, 10 idle for lack of demand). On which basis, the $6.50/hour operating costs looks a lot more like $8 an hour, further eroding advantage. 

[1] "But that's so much money!"---"Let me tell you about how much roads cost". 

[2]  In reality, assume the average fare is $2.00, so the subsidy is $5.50/passenger. 

Revanchist Planning

 Always depressing to see revanchist planning. Orlando, rather than working to make their downtown more pedestrian-ORIENTED, has decided that more people will come if they remove the bus lane to add half a dozen parking stalls, and ease car navigation by converting a major road to being bi-directional.

A downtown can compete (and fail) to be the best edge city or compete on the basis of walkable urbanism. It can't do both. Given that historic downtowns already possess a key asset (a street grid), trying to be the best exurb is a poor choice. 

"DISPOSABLE ARCHITECTURE IS A CULTURAL CRISIS"

Arguably, it's a matter of interest rates. When it costs a lot to borrow, you borrow less, which means you build less, and less well. So, when interest rates were running at 13%, our building sector responded with a type of building that could be built rapidly, but which depreciated rapidly. Indeed, reinforced concrete has proven to be worse than anticipated--concrete was thought to be waterproof (protecting the iron rebar from rusting). Which has not proven to be the case, as the Florida condo collapse showed (saltwater induces rust faster than rainwater).

There is also the hangover of anything built from 1947-1973, (pre-OPEC) when oil was cheap. And since oil was cheap, electricity was cheap, and concrete was cheap, and so concrete seemed readily replaceable. 

Zoning is only one of the most obvious of the obstructions to building Missing Middle housing

Zoning is only one of the most obvious of the obstructions to building Missing Middle housing. Parking a close second, especially as it interacts with setbacks, and driveway access to a rear lot, which in turn interacts with fire code, which can require enough space for two cars to pass. 'Stacked duplexes' are popular for a reason--central access alley avoids setback issues and counts as a driveway, so it doesn't trigger fire code issues.

Pedestrian protection hierarchy in traffic control

How serious someone is about urbanism based on the materials they use to protect people from vehicles. More serious means more permanence. And more damage to cars, with less notice. On a highway, if a pedestrian jaywalks, they get hurt. In a pedestrian zone, if a car drives, it gets hurt.

If it's a temporary (plastic) installation: cones < poles < barrels < portable safety barriers < traffic barriers.

Traffic cones are the stackable orange ones suitable for a few hours use. Poles are the taller ones you can leave out overnight. Barrels get used on highways, for blocking whole lanes. Portable Safety Barrier is a movable fence - no physical protection, but highly visible. Traffic barrier is a plastic jersey barrier, easy to move, but also capable of being filled with water to provide an actual physical barrier. 

For permanent (concrete) installations: signage < paint < flex-post < swale curb < armadillos < full curb < planter < jersey barrier* < bollards < raised planters < stair blocks.

Signage is functionally worthless, as the "Share the Lane" signs demonstrate.  Paint is meaningless without enforcement, as the abuse of bus, carpool and bike lanes readily demonstrates. Flex-posts are just road debris waiting to happen. Installation down the street from me is down 2 already. 25 MPH speed limit. They sit on top of a swale curb. Swale (mountable) curb is just tactile paint to an SUV. Armadillos promising - more damaging, less able to be damaged. Full curb is a serious barrier to preventing casual mis-use. Jersey barriers are designed to be relocated, and so are only sort of permanent. Bollards are like icebergs - most of them exists beneath the surface. 7-11 builds them for real, and they will stop a moving vehicle. Bell bollards are superior to pole bollards, but harbor bollards are superior to both. Counter-intuitively, the more likely a bollard is to damage a car, the more effective it is - it means that drivers have to look around and beware. Raised planters may have trees planted in them, but that doesn't require a foot thick concrete wall--it is security made pretty. Stair blocks the gold standard - are designed to prevent car ramming attacks by terrorists - they protect Federal Courthouses.