Rent control and the political dynamic

Often discussion of rent control focuses on the economic impact, but I feel the dramatic change this policy creates in a neighborhood's political dynamic can be more important.

In growing cities without rent control, you have opposing sides shaping policy on development: The pro-density and anti-density sides.

Anti-density

Long term homeowners make up a big part of the anti-density side. People tend to oppose change in general, and this is especially true when change appears to have few benefits. For long-term homeowners, the downsides of new density are readily apparent: more traffic, more construction noise, more people using parks, less sun, more “lesser” people in their neighborhood.

Pro-density

On the other side, you'll find the main pro-density groups: There are developers who want to build and local business that want more customers -- while this group has money, it's not very big. There are also non-local people who want to move to the neighborhood, but given the design of our political system they often have no influence. Instead, the biggest politically influential group in favor of more density tends to be current renters. While more density also means more traffic and more construction noise for renters, it also means lower rent and more rental options-- which is most important to them. This can be a self-feeding loop. Density-friendly policies should lead to even more density-friendly policies as the percentage of renters grows.

The Portland survey on their infill proposal shows this. While it is a self-selecting survey, the findings are still telling. It found: “The most significant differences among demographic groups were between homeowners and renters, particularly concerning housing types. More than 70 percent of renters felt all proposed changes related to housing types were moving in the right direction, while homeowners were more divided. Renters were also more supportive of applying diverse housing types more broadly throughout the city than homeowners.”

Rent control divides renters

Rent control, however, splits renters in two politically. Long-term renters who have no plan on moving start to think more like homeowners. For them, more density means more traffic and construction noise with no upside. If anything, they become even more opposed to new development since they have no financial reason to want land values to go up, and allowing new development could mean their rent-controlled apartment building is torn down.

Renters who hope to move in the future --because they are having a kid or hope to buy a house, for instance -- still have a reason to support development, but this is a much smaller political group. It is also a group less likely to be involved in local politics. Splitting renters into these two political groups can shut down the cycle of density-friendly policies.

While rent control does change the investment dynamics surrounding a new building, that is a relatively minor change compared to the dramatic political shifts it creates. It's a policy that shifts the political dynamic around density dramatically to one side.

The future of delivery drones is on wheels

While much attention has been paid to the the idea of Amazon's flying delivery drones, the real future of drones is much closer to Earth. I firmly believe that the vast majority of delivery drones in the future will travel along the ground, a trend that's just starting thanks to Starship Technologies. From Recode:

Starship Technologies, an Estonia-based startup created by two Skype co-founders, Janus Friis and Ahti Heinla, is slated to begin testing its autonomous delivery robot to bring groceries and restaurant takeout to Washington, D.C., homes and businesses this fall. It’s the first U.S. municipality to approve ground-based robots to roll around on city sidewalks.

Starship hopes to solve the “last mile” problem –– the work of getting packages from the fulfillment center directly to people’s homes — currently done by humans. It’s a problem Amazon wants to solve with drones, but the FAA’s rules bar drones from flying around humans without an operator in line of sight. But with ground-based delivery, Starship’s founders say, there’s less that can go wrong.

Basically the only advantage a flying delivery drone has over a delivery drone on wheels is that it can travel in a straight line and theoretically will deal with fewer obstacles in the way.  

Now compare this to the numerous serious downsides to flying:

• Flying is significantly more energy-intensive, which should increase cost and limit range.
• Flying drones will never be able to carry as much as a drone on wheels.
• Flying is dramatically more dangerous. If a 40 pound cooler on wheels ran into you, it might leave a bruise; if a 40 pound drone drops 50 feet out of the sky on you, that could kill you.
• This means flying drones will be more expensive to insure. 
• It also means the risk of a big PR disaster is bigger.
• Failure in flying is more catastrophic. If battery in a wheeled drone dies, it stops in the middle of the sidewalk; if that happens to a flying drone, it could fall out of the sky.
• So flying drones should likely require more maintenance checks.
• As the article points out, the added danger of flying means such drones will likely face more regulatory issues.

There is a good reason people and goods are mainly moved around on wheels and not by helicopters. As of yet there has been no technological development to change this basic issue of physics.

 

Income data shows we need to build more dense housing in cities

There is some good news out of the U.S. Census Bureau’s annual Current Population Survey, but it can turn into bad news if we don't see the correct policy response. For the first time in years median incomes are up. The problem is that all of this increase is primarily focused in cities. From  Next City:

Households in metro areas saw a 6 percent increase in median incomes, from $55,920 in 2014 to $59,258 in 2015. Households in the “principle cities of metropolitan areas” saw a 7.3 percent increase over the same time period. Suburban households — those in metro areas but outside of principle cities — had the highest median income at $64,144. 

At the same time, households in rural areas or small towns didn’t see a statistically significant change in median income, and had the lowest median income — $44,657. Similarly, the poverty rate dropped to 13 percent in metropolitan statistical areas — down from 14.5 percent in 2014 — but the poverty rate outside of metro areas remained almost unchanged at 16.7 percent.

We are seeing a re-urbanization trend in this country which I believe is thanks to a dramatic drop in urban crime over the past several decades. People are moving to our now much safer cities, and American cities have once again become what cities have been throughout most of human history: drivers of innovation and prosperity. We should be helping more people who want to move to cities take advantage of this.

The problem is that policy makers are not allowing this to happen. We aren't building enough densely situated apartments, rowhouses, and condos in the most desirable cities. This is pushing rent up dramatically in cities. I wouldn't be surprised if people living in these urban cores didn't feel any financial improvement because rising rents have more than eaten up any income increases. This is an issue that can be easily be solved by simply allowing people who want to build more urban housing to do so.

Creating more density to allow more people to move to major cities would improve their health, their finances, and dramatically reduce their carbon foot print. Yet even in big cities that are run by liberal politicians --who supposedly care deeply about these things-- building more is way too difficult. In some places it is even being made more difficult thanks new rules that are actually counter productive.

As a futurist, I find this deeply depressing. Re-urbanization is a fairly simple societal change and a straightforward policy goal that would actually improve the lives of most people. If we can't deal with this issue, I fear how we will handle more dramatic changes soon to come, like the massive employment displacement self-driving technology will cause.

Get my sci-fi novel for free this Labor Day weekend!

For a limited time my first science fiction novel, Cobalt Slave, is free on Amazon!

You have the chance to download and read it this Labor Day weekend. It is a fun quick read. A great book for when you are enjoying your one last trip to the beach, a late summer camping trip, or just lying around your house doing nothing.

All I ask is that if you enjoy the book you take a minute to leave a nice review. 

Uber is betting billions on two very big ifs

Until now, I haven't paid much attention to Uber's business model, but this article made me think about it, and the entire company's future seems to be built on two very big ifs. I have trouble seeing both of these ifs breaking their way.

Uber isn't making any money with its current business plan. In fact, it is losing money at an alarming rate. It lost $1.27 billion in the first half of this year. The company is not charging nearly enough to be able to cover the cost of their human drivers, the biggest expense at the moment. What Uber is doing now is completely unsustainable, but their plan is to burn through a huge amount of money to grow quickly and make money later.

The problem is that the main way Uber plans to make money later, apparently, is by replacing its drivers with much cheaper self-driving cars. For this to work, though, two big things need to go Uber's way.

1) True self-driving cars need to be developed fast enough that regulators will let them travel without human supervision before Uber runs out of cash. So far the technology is looking promising, but there are reasons to be skeptical.

2) The bigger bet is that once this self-driving technology is developed, people will keep using Uber. While people currently associate Uber with getting a ride, people also associate cars/travel with a lot of companies. When people think of cars, they think of the big car companies. When people think of finding directions, they think of Google and Apple maps. When people think of finding places to go, they think of companies like Yelp and Aroundme. There is no reason to think Ford, Tesla, Google, Apple, or even Yelp can't launch their own equally successful ride app once the self-driving cars are ready to make autotaxi services profitable.

Uber is probably getting some great data about millions of people's travel patterns, but that data isn't unique. Obviously map programs like Google maps, as well as apps that are almost always on like Facebook, probably have a decent or even better body of travel data to draw from.

It seems Uber's plan is to lose billions mainly so at some point in the future people will automatically think of them as "the ride app." My question is: do you think all this will beat Google, Apple, or Samsung just deciding to include their own default ride app on their new phones? It is possible, but it's a big if.

In poker terms, Uber seems to be betting billions on the flop hoping they can pick up two spades on the turn and the river to make their flush. That is normally considered a fool's bet. The fact that there is so much money in Silicon Valley willing to get behind such bets should raise wider questions.

How self-driving cars could indirectly help San Francisco's housing crisis

San Francisco has a housing affordability crisis which could be solved by building a lot more large apartment buildings, but the political dynamics prevent that from happening. Currently the laws and political dynamics prevent most development that changes the size of buildings, their historic appearance or building heights in the city. There is, though, a large quantity of already existing ground-level space in the city that could be used for housing: the city's abundant street-level garages.

San Francisco is full of ugly street-level garages - numerous streets dominated by big, blank, boring garage doors. Many of these could be turned into attractive new street-level apartments without significantly changing the height, character or general appearance of the neighborhood.

At the moment this isn't really an option because even in a highly walkable city, people want their cars. Current residents in these buildings don't want to give up their garages for conversion, and even if they did, they likely wouldn't legally be allowed to, thanks to opposition from neighbors who wouldn't want to make it harder to find "free" street parking.

The development of very cheap, always available self-driving taxi services will likely change this dynamic, at least in dense cities. These services will make personal car ownership --which comes with the need to find a place to park your car the 90% of the time it is not in use-- far less appealing. The fewer people who own cars, the fewer who will want to waste very valuable space for storing cars.

San Francisco has 379,597 housing units. Even if just 10% of all housing units (37,900) have existing ground-level garages that could be converted into apartments, that would still be a significant increase in the housing supply. By comparison, in 2014 the city had a net increase of only 3,514 units. 

The arrival of self driving taxis can't be stopped

There is no stopping self-driving taxis -- soon they will be on the streets in Singapore. From the BBC:

The driverless cabs could reduce an average $3-a-mile ride to 90 cents, the firm said.
Initially, the cars will have drivers, ready to take over if the system fails but the plan is to gradually phase the human out in 2019.
The small fleet of six Audi vehicles will travel along a 3.5 mile (5.6km) route in One North, a business district in the city.
By 2019, the plan is to have fully autonomous cars without steering wheels but they will only be tested with a "controlled group of people," according to the firm.

The article makes it clear self-driving taxis should be dramatically cheaper than regular taxis. This alone will make them very appealing to regular people; but they will also likely be safer, more readily available, and cleaner.

This story highlights why any effort to stop self-driving vehicles from replacing millions of American jobs in the near future is likely to fail. Opponents to automating almost all of our vehicles need to win everywhere, but the companies behind self-driving vehicles need to win in just one jurisdiction. If they can prove the concept in just one place while delivering a truly superior product, it will be almost impossible to stop it from spreading.