WHAT IS MARKET URBANISM?
Market Urbanism is the cross between free-market policies and urban issues. But what does that mean in concrete terms? Below is an issue-by-issue breakdown of Market Urbanism's practical application in cities. The list is not comprehensive, and certain issues may be subject to different interpretations. But this document gives a general overview. If you have feedback, please provide it in the comments. For further info on the MU concept, and The Market Urbanism Report organization, visit the About page.
While there are many government programs dedicated to affordable housing, the best solution of all comes from the private sector - let developers build to meet demand. In hot real estate markets, this will lead to rapid housing construction, followed by price stabilization. The best example of this theory playing out in the U.S. is metro Houston, which since 2010 has been 2nd in the nation in population growth, but tops in added housing supply - maintaining home price medians that are below the national average. Read more here.
ADUs are additional units that are attached to or detached from existing homes, and can be sold or rented. They include basement apartments, backyard cottages, overhead garage units, and more. Often illegal, they are a crucial, if not comprehensive, way to create more housing units without changing neighborhood character.
Airports are a crucial leg in America's urban transit system. They are also, generally speaking, heavily-regulated public utilities that under-perform and provide poor customer service. There are a number of market-oriented airport reforms that should be tested, from applying congestion charging on runways to appropriate user fees in terminals. Read more here.
Buses are often a cheaper and more flexible way for governments to provide transit, namely in disperse cities - such as most cities in the U.S. Buses have also fortunately become a growing private sector provision. This ranges from formal companies like Chariot and Megabus; to technically-illegal ones like the dollar vans in New York City; to the employee shuttles provided by various corporations.
Business Improvement Districts, while varying in structure, are when merchants or property owners in a given neighborhood pool resources and form a corporation, which then uses that money to make area improvements. Sometimes dismissed as "privatization", BIDs are an example of where private resources are leveraged to improve public amenities, often where the local government has failed at this.
Charter schools are supported on the premise that they a) give children a choice in which school they can attend, beyond which one happens to be in their neighborhood, b) provide more specialization than a traditional large public school, and c) privatize a service that local governments sometimes struggle to provide effectively. For more details, see the "privatization" tab below.
Congestion pricing is a user-fee toll mechanism that prices the use of something based on current demand, and on the negative externalities users impose onto others. It is generally advocated as an electronic charging system for roads, and would be particularly useful on roads that lead into crowded urban areas like Manhattan or San Francisco.
Urban density - meaning in this case the compact concentration of people and housing in a given area - is a social good. It's efficient for cities, since they can generate more tax revenue from given land plots. It's good for the economy, since density has been found to spur job and wealth production. Most importantly, it is likely a market outcome, since denser construction allows developers to maximize the value of their land.
Sometimes called "architectural review boards", these are government committees that are usually appointed by elected officials, and tasked with dictating the look of new construction. These boards slow the approval process, strip control from property owners, and often produce mediocre designs, since multiple members must reach final agreements on color, material use, massing and more. Design review boards are another counter-productive regulatory layer.
To pretty much any urbanist, form-based codes (which enforce neo-traditional, New Urban design principles) are preferable to Euclidean zoning (which mandates sprawl and separation of uses). But form-based codes are still a regulatory means by which governments socially engineer cities. And they're not a particularly smart one, as some codes still limit density, mandate car infrastructure, and enforce rigid standards that are out-of-step with consumer tastes.
Much of the cause for gentrification is that people can’t live where they want. If given a choice, they would locate in wealthy areas with lots of jobs. But because those areas have restrictive zoning, they instead settle for cheaper housing in minority neighborhoods, which causes gentrification. The answer is to upzone the wealthy areas, which will alleviate the population pressures now being imposed on the gentrifying ones. Read more here.
In the abstract, preservation policies are great, since they save buildings that look nice and/or are historically significant. But in many cities, preservation policies are taken too far. Cities such as New York and San Francisco, which deal with extreme housing shortages, stick historic overlays onto entire neighborhoods, severely limiting much-needed new development. Worse yet, preservation labels can be stuck dubiously onto buildings with no historic or architectural merit, by obstructionists who want to stop new development. Read more here.
The "housing first" policy that has become planning dogma is, broadly speaking, a sound one. Providing housing for the chronically homeless and mentally ill has proven to be cheaper for cities and better for the homeless. That does not, however, mean expensive government programs are the best way to house them. While sometimes necessary, cities should also experiment with small, cheap housing types that are now often illegal - micro units, boarding homes, tiny homes, modular construction, dorms, trailer parks and more. Above all, cities should reduce the barriers to construction for all housing, which would make inexpensive starter homes more common. Read more here.
Homeowners associations - or similar legal entities like deed restrictions and covenants - are a Market Urbanist alternative to zoning. They are private arrangements between developers and individual homeowners to regulate neighborhood character, including the look, density and use of given homes. They generally influence specific, privately-managed areas, rather than entire cities. Read more here.
Inclusionary Zoning is like a modern, watered-down version of rent control. While IZ policies vary, the idea is that developers must, to build at a higher density or at all, rent or sell given percentages of their units at certain prices. It is thus effectively a price control, and has been found to have the same negative consequences as other price controls. It forces developers either to cover their losses by charging more for market-rate units; or prevents them from building altogether. Read more here.
LVT is likely the best tax to levy on cities, assuming it replaces the other taxes. Since it is applied to the upfront value of land, it discourages speculation and encourages optimum uses. Whereas other taxes, such as sales, property and income taxes, discourage the very activities and improvements they are taxing. LVT also lets governments recoup the value of public investments. Because these investments increase the value of land, that will be captured in the tax receipts on the land.
"Localism", or the belief that decision-making in cities should be done by municipal or regional governments, is generally sound. The federal government has too much power over - and takes too much money from - cities. Whenever that money comes back, it arrives with stipulations that prevent the money from being used well. One area where localist policy has failed, however, is housing. Municipal governments have caved to NIMBY voices, and preserved the dated zoning codes that cause unit shortages (see "Zoning", below). State policies that weaken these zoning laws should be supported. Read more here.
Micro transit is the small-scale transit offerings that have emerged recently in cities - think bikeshare, rideshare, scooters, skateboards and shuttles - and are worthy of celebration. They are more profitable than traditional public transit and require less infrastructure. Depending on one's perspective, micro transit will either bolster traditional transit - by fixing the first-mile/last-mile problem - or replace it, by proving more mobile and cost-effective. Read more here.
Minimum lot size requirements are what they sound like - regulations that prevent homes from going on lots smaller than the mandated minimum. This reduces the dwelling units per acre, and thus the density of given areas. Their common outcome is to encourage sprawling land-use patterns, rather than traditional urban patterns where buildings are closely clustered.
This is one of the big Market Urbanism issues. Minimum parking requirements - which mandate developers to build a given number of parking spaces, depending on the size or unit number in their buildings - have various ill effects. They consume space within buildings or on lots that could be used for housing; they raise the price of each unit; they make buildings unattractive; and they increase automobile reliance. Read more here.
Occupational licenses are something many entrepreneurs must obtain to enter even simple professions, such as hairstyling and landscaping. The occupational licensing process has grown with time, with licenses sometimes costing thousands of dollars and years to obtain. These regulations discourage entrepreneurship in cities, and should be reduced, or in many cases, abolished. Read more here.
Public paratransit systems, which serve handicapped people, are famously bad in cities. Patrons often must schedule a day in advance to get picked up, only for the rides to arrive early or late. Various rideshare services are notably good in America, having mastered the idea of on-demand, 5-minute pickups. And now they run their own paratransit systems, meaning cities should contract with them.
A Market Urbanism parking policy would involve, above all else, not making it free. This means, on one hand, allowing private property owners to build the amount of parking (and charge for it) as they wish, rather than forcing minimum parking requirements. On the other hand, it means ending municipal policies that give away on-street parking for free, rather than subjecting it to dynamic pricing. These positions are largely borrowed from Donald Shoup, a UCLA professor who pioneered the notion of market-rate parking policy. Read more here.
Market Urbanism is premised on the idea that cities should not be planned by governments. Urban planning has a fraught history in the U.S., from the urban renewal of the postwar era, to the hyper-local "community planning" that today spurs so much Nimbyism. Just as well, the organic, bottom-up urbanism that results from market forces makes for denser, more livable, more aesthetically-pleasing cities. For proof, just look at the dense cities - New York, San Francisco, Boston, etc. - that Americans cherish today. All were mostly built before planning. Read more here.
If city governments do not have a comparative advantage at running a particular service, they should not hire internal staff to try and manage it. Instead, they should outsource those services to the private or non-profit sectors, signing those organizations to short-term, performance-based contracts. This should apply not only to schools (listed above), but to any number of services - transit, waste management, street cleaning, park management, even policing.
Despite what many housing activists propose today, public housing has been a social disaster, and should be a supply option of last resort. If cities took the basic step of liberalizing land use, housing would be abundant and cheap, and public housing less necessary. However, if public housing must exist, it should be outsourced, so that facility management is no longer the domain of historically corrupt and incompetent public agencies.
The opposite of the above-listed "privatization" would be modern public sector unions. These are large government bureaucracies that now control given services, regulate away competition, and can't be fired. This means they have effective monopolies over the services they operate, leading to various inefficiencies. These unions - such as the several that operate Bay Area Rapid Transit - deliver poor services, frequently strike, and demand pay that surpasses what they would receive in an open market.
Just as urban America's disperse built pattern is conducive to buses, it is hostile to rail transit. The decision to build rail systems regardless in sprawling metros like Dallas, Houston and Phoenix has been a mistake. However, private rail transit used to function in America's dense cities before the industry was harmed by the government. And existing rail systems would likely operate much better if they were privatized, or at least adopted private sector principles. Some private rail even continues getting built in America, such as Brightline in Florida. Read more here.
When governments enforce rent control or rent stabilization, they are violating a basic economic law by imposing price controls. The results over many decades have been the same as with other price controls: these rental laws discourage construction of new units, and cause under-maintenance or abandonment of existing ones. Rent control also prevents turnover among housing tenants, making units more expensive for new people entering the market. Read more here.
The rideshare industry - most famously Uber and Lyft - enables individuals to use their cars as taxicabs, and is an essential way for cities to improve mobility. This will only continue, as the industry evolves into carpooling and other jitney services. The most common gripe against ridesharing - that it increases congestion - is easily dismissed. Just implement congestion charging (see above), and it will mitigate these negative impacts. Read more here.
Setback requirements are regulations that mandate structures to be built at a certain distance from the street or property line. They harm cities, by reducing the space that can be used for housing, and by imposing suburban design standards.
The Market Urbanism take on sprawl is straightforward: it needs to follow a market. Sprawl should therefore be allowed in cases where it pays for itself, via impact fees or other market-based infrastructure payment methods. It should also be defended against arbitrary government policies that stop it, such as Urban Growth Boundaries (see below). Sprawl should not, however, be a goal or formal policy of the government. Yet it has been for decades, through a variety of federal, state & local measures: the Interstate Highway System, urban renewal, FHA loan guidelines, single-family zoning, density restrictions, and on and on. Read more here.
TIF is a value capture method in which a boundary is drawn around a specific area, an amenity is financed within that area through bonding, and a special tax structure is applied on properties within the area, to pay the debt. TIF is sound in theory, but has been used in dubious ways. Rather than financing basic infrastructure, like parks and libraries, it often subsidizes crony schemes such as stadiums, malls and big-box retail. Many TIF projects have been a net loss for taxpayers. Read more here.
Tolls are a superior alternative to the current socialized model for financing roads, in which gas taxes are collected, sent to federal and state transportation departments, and then redistributed through a political process. Tolls are more direct, since they charge drivers based on their use of the road - often to the mile - and can be price-adjusted, thus managing demand and reducing congestion. The revenue generated from the tolls can then be used to maintain or pay off the debt of these roads. Read more here.
Urban Growth Boundaries are a textbook case of government social engineering. Public bureaucracies (such as Metro, a regional government for greater Portland) draw arbitrary lines past which development can't occur. These boundaries violate property rights, increase housing costs, induce leapfrog sprawl, cordon people into specific areas, and inhibit the ability for major metros to form agglomeration economies. Read more here.
Federal postwar urban renewal policies were arguably the worst planning decision in U.S. history. Dense urban neighborhoods were seized through eminent domain, demolished, and replaced with government highways. The displaced were warehoused into high-rise public housing that destroyed neighborhoods. While planning bureaucracies are less top-down today, such hubris still exists in incremental ways. Eminent domain still occurs in the name of "economic development"; subsidized roads still harm neighborhoods; and planners themselves still dictate the urban layout. Read more here.
User fees are preferable to taxation as a funding means for many government services. They ensure that the only people paying for a service are the users; help determine whether services are self-sustaining; and provide a dedicated funding stream (as opposed to charging higher taxes) that helps maintain service quality. The best-known type of user fee may be road tolls (mentioned above), but such fees can be applied to transit, airports, trash pickup, water usage, and much more.
Value capture is a taxation method in which property owners are taxed for the value added to their property as a result of public investments. The idea is that governments recoup the true value of their infrastructure (which is paid for by the public), rather than passing it on to a few area stakeholders. Value capture is a market-oriented form of taxation, and is embodied in programs such as tax increment financing, land value taxes, special assessments, air rights sales, and more.
Last but not least, Market Urbanism is an ideology averse to zoning. Although zoning was first justified by the Supreme Court as a way to separate incompatible uses, it has origins in racial and class exclusion. Nowadays, zoning's reach and power has grown beyond reasonable proportion. It can be used to dictate a building's density, design, massing, and color, or the use of any parcel in a municipality. This violates property rights, but in many areas, zoning creates much larger social problems than just that. By severely limiting where and how land can be developed, zoning has gripped cities in mass housing shortages, stifling population growth and forcing certain income groups out. Read more here.