Sclerotic rot

Many cities in the US have been captured for decades by big Democratic political machines (I talked about this here). Under their watch, cities have become increasing unlivable due to high costs associated with housing, transit, and a failure to deliver government services effectively and efficiently. Furthermore, a gallimaufry of onerous regulatory barriers have been erected that discourage business formation. Elucidated below will be prescriptive policies imperative to the flourishing of an urban center

Housing

The stringent zoning regulations in most US cities have been so damaging, that we would have have an over 50% higher GDP in the period between 1964 and 2009 in a counterfactual where such zoning restrictions didn’t exist. Other regulations don’t help either; rent control dampens housing supply and permitting processes are too long and expensive. Builders are even unnecessarily restricted in the materials they can choose to build with. This has caused housing costs to be one of the largest components of families’ budgets; median gross rent is over 30% of household income in most cities. This story quickly becomes more dour as income declines; around 75% of households making less than $15,000 per year spend over half their income on housing. Massive regulatory overhaul is needed to ensure a healthy housing stock

Zoning

Most cities have way too many classifications: the city of Minneapolis has 38 unique land use zones and Los Angeles has 48. There should be only two classifications:

1. Mixed Residential/Commercial
2. Exclusively Industrial

Most of a city would be zoned under classification 1. Classification 2 exists to allot areas for industrial purposes where it’s not safe for residential housing and other related buildings to co-mingle. Zero distinction should be made with respect to the kind of housing that can be built; duplexes, triplexes, quads, and mid-rise apartments are all fair game. Floor Area Ratios should be eliminated along with minimum lot size and parking requirements. Height limits should be repealed in favor of a sunlight statute: buildings can be of any height as long as it doesn’t obstruct sunlight from hitting the street. Buildings should also be required to still be spaced far enough apart to ensure good air flow. The insidious scourge of homeowner associations should be banned from operating as they’ve become quasi nanny states that issue authoritarian dictates with respect to what individuals choose to do on their own property.

Permitting & Building regulations

Zoning deregulation is not sufficient to making it easier to build. Such reforms must be coupled with a streamlined process and a more sound regulatory system for building. Building regulations should be abolished in favor of a mandatory 30 year building insurance requirement. Insurers would have the discretion to refuse giving builders insurance if they were using risky building materials or had a shoddy record of performance among other indicators that would imply a high risk. They would inspect properties and adjust premiums and coverage accordingly. Insurance could be issued by private, regulated bodies or by regional Federal Reserve banks.

Permitting should be simplified; the application should be a digital online form that receives a rejection or confirmation status in no more than 15 business days. Fees for smaller projects should be completely abolished as well as for any additions onto an existing building. Rental licenses should be zero fee as well. The environmental review process should be restricted only to tangible matters like detrimental effects on air and water and decimation of endangered flora and fauna. Permitting would be granted upon issuance of the aforementioned long term building insurance and successful environmental review.

To ensure that residents can exercise some control over this process in a democratic fashion, street voting should be instated. The way that it works is that a block of houses constitutes a voting district that can set microcode for that particular block. They can allow more density than the baseline that the city is allowing and select building motifs and styles. Such changes will require a two-thirds vote before change is enacted to ensure consensus.

Transportation

Transportation is inextricably tied to infrastructure issues. Like healthcare, infrastructure is disproportionately more expensive than in other countries around the world. The favorite culprits of many, such as land acquisition costs and high wages aren’t nearly as big of a factor as some purport. The central driver of rising construction costs seem to be inefficiencies in contractors, bad regulations, inefficient use of labor, a contracting process that creates disincentives, and poor management have led to ballooning costs in the sector.

The Cost Disease of Rail

To enforce cost discipline, cities should have the levity to raise more of their taxes locally to fund transit (and less from the federal government). The incentives for cities to control costs is far greater than that of the federal government’s. The funding mechanisms are also of importance when funding transit infrastructure. Indirect funding can sever the direct feedback that user fees offer. Granted, there are trade-offs here with respect to ridership, so a balance must be struck.

Contracts should be restructured to align the incentives of builders to make the highest quality projects at a reasonable cost. Most pertinent is consolidating the functions that are typically addressed in separate contracts into one meta-contract for a given project; the design, construction, and warranty of a project should be bundled together.

MTA labor unions have also been a drag on costs as they’ve allocated labor in extremely inefficient ways, primarily through overstaffing. For example, the NYC MTA forces a conductor and a driver on a train, whereas some other transit systems don’t even have a conductor on any trains, and some lines are fully automated. Contracts should explicitly stipulate staffing maximums at no greater than the 19 other countries in the G20 and refuse any company who has exceeded 10% of budget on previous projects. Finally, lowest bid contract auctions need to be put to a permanent end; it creates an incentive to skimp on effort, leading to higher maintenance costs down the road. Contracts need to pay out in lump sum at a price decided on by the government overseeing the project and hold firm on the price.

BUILD (formerly called TIGER) grants have a large role to play in cost management. On top of adopting the contract restrictions mentioned above, they should mandate cooperation and coordination between regional transit authorities. This means things like uniform payment systems and through-running to increase operational efficiency while minimizing expenses as well as planning between different local governments.

Roads

Congestion is a plight of most cities. This has been a result of numerous factors, including direct and indirect government subsidies to car ownership as well as the restrictive zoning rules we’ve talked about which encourage unfettered sprawl. The negative ramifications are plenty, with increased air pollution, fuel consumption, blockage of emergency vehicles, and delays. The loss of economic activity in the New York city metro region exceeds 13 billion USD per year due to congestion.

The centerpiece of solving road congestion is dynamic variable electronic road pricing. Here is how the implementation would work:

1. Set a minimum speed target and allow the fee to vary dynamically to achieve that target. Dynamic tolls would float by entry point to optimize traffic flow via appropriate toll shopping
2. Install gantries along every point of entry in the periphery of the city as well as on major roads within the city. Cordon tolling would be used during this transition
3. Every vehicle using these priced roads would require a dash mounted unit that would accept a payment card and bill the user in question automatically as they drove through the gantries
4. Any local fuel taxes would be scrapped as all revenue for road improvement would be funded through the fees

Curb Pricing

Much like road pricing, curb pricing induces more efficient use of curb space. It uses an algorithm that takes as input variables

• Current occupancy rate
• Induced demand

It then outputs a market price for curb usage. When cities grant “free” access to curb space or parking, they’re giving those beneficiaries imputed income, which hides the real cost. The imposition of such a curb pricing scheme would allow for a myriad of desirable uses that don’t necessarily exist currently in most cities such as:

• Permanent outdoor dining in restaurants
• Mobility lanes for bicycles and scooters paid for through ride sharing companies like Lime
• Bus Shelters

In practice, this has yet to be implemented because the algorithm to make this work is incredibly difficult to make. In the future, however, this could be a boon to effective street usage.

Miscellaneous Transit Options

There are excessive regulatory barriers in place that prevent plenty of private transportation related firms from providing a variety of transit options in cities, whether this be ride sharing, private street cars, private buses, bike and scooter sharing, etc. Taxicab medallions, ride sharing caps, and broad bans should all be lifted and these firms subject to the same road pricing as owners of personal cars.

Wider sidewalks (definitely more plausible if coupled with a curb pricing scheme) and protected bike lanes would encourage more foot travel and cycling, cutting down on air emissions and reducing household transit costs. Mass transit needs to be supportive of cycling as well with racks for bikes on buses and rail lines (the Twin Cities’ Metro Transit does a great job at this right now). Denser building makes all of this the more sensible.

Taxes

Many municipalities in the US are heavily constrained from raising revenue thanks to some state governments capping property taxes. Abolishing the caps and moving taxes on the unimproved value of land should be the primary mechanism for which local government fund general expenditures. They’re one of the most efficient taxes and have the added function of encouraging efficient land usage. These are preferably to city retail sales taxes and income taxes as an LVT is more progressive, encourages judicious investment into the property, and doesn’t depress consumption.

As previously mentioned, fees are a good methods of covering most or all of the cost of numerous public goods as well through making recipients of these services more sensitive to the cost. This is especially true with roadways and public transit. However, money from the general fund is often critical for making investments in sidewalk infrastructure like bike and scooter racks as well as expanding and protecting existing bike lanes. Finally, some of the revenue could be used to fund a small basic income that could be given to lower income residents that they could spend on transit fares, housing, or other necessary consumption goods.

Government services

As with all levels of government, municipal governments need to make crucial investments in digitizing government services. All forms should be fillable and digitally fileable. All fees and taxes should be payable digitally through a universal payment portal. There should also be a moderated forum for residents to use to communicate with each other and ask general questions of local government officials as well as provide public comment on pending proposals. Providing all relevant statistics pertinent to the operation of the city (i.e budget, tax data, transit info, election info, etc) in a searchable, well organized format would be a huge victory for government transparency and accountability.

Leveraging the various expertise and acumen of city residents through crowdsourcing to solve issues that are vexing and/or of profound impact would help connect people to their local government and become more aware of local public policy matters. Smaller and medium sized municipalities within a close vicinity should consolidate to improve efficiency as well as fragmented local bodies that overlap each other. This will also reduce the blame game with regards to which body is responsible for certain tasks.

Where We Go from Here

Quite obviously, these reforms are a tall order and cannot be implemented overnight. This is certainly not an exhaustive wish list either as the litany of improvements to be made is nebulous and the unforeseen can’t be accounted for. Competent lawyers, civil engineers, urban planners, and other talented concerned citizens need to run for city council or mayor on these issues. Charter cities in developing nations may provide more sanguine prospects for such a vision as it’s far more trivial to build new institutions than to reform old ones. Regardless, there is no better time than now to start.