The saddest city in the midwest…

This is just about the saddest collection of pictures you can see. Overwhelming sometimes – how people can waste such riches: The Fabulous Ruins of Detroit

I was asked recently by someone returning (shell-shocked) from Detroit – what would I change? …I think Detroit presents a whole series of reinforcing problems (these are my opinions, some of which can be found elsewhere on this blog):

First reason: Bad property tax system (as you may have guessed!): it taxes both land and capital, and allows each owner to depreciate the building’s value and write off the interest on the mortgage. I think it also has lead to and compounds an assessment bias in favour of building value. So when you stop repairing a building, the assessment goes down, and you pay less tax, yet you are still allowed to reduce your income tax by writing off interest payments on the mortgage, AND the ‘depreciation’ on the building. If you flip the property when the building has ‘depreciated’ to $0 value, the new owner can start depreciating it again (even if the building has not actually depreciated much). As the land value is under-taxed, speculators can buy up land whenever there are signs of regeneration, and hold it hoping someone who wants to actually do something with it will buy it for more than the speculator paid. If their bet turns out wrong – well, you can burn it down for an insurance write-off (again, based on an inflated assessment), or just stop paying taxes until the city assumes ownership.

Assessing properly, and taxing just the land, lights a fire under landowners to do something with the property (to earn the rent it should be earning), and doesn’t penalize them for fixing up the buildings, or even intensifying the land use. So bad property tax rewards land speculators and punishes real developers; it rewards people for destroying sound buildings, and rewards people for not using land. This exacerbates sprawl, which in turn exacerbates blight.

Please note that this applies to most cities, not just Detroit.

2. Zoning: You can assign this to my libertarian streak, but I think zoning regulations are much more destructive than beneficial. Several reasons for this:

a. Paternalism – ‘we’ (the planners) know what’s best for you. Here’s a classic example: people living (illegally) in industrial loft space. Why is it llegal? Because it is zoned ‘industrial’. Why is it zoned ‘industrial’? Because people shouldn’t live near industry. Why shouldn’t people live near industry? Because it can be noisy, smelly, and even polluted. But what if people don’t care that much, and just want a cheap and interesting place to live and work? Well, they don’t know what’s best for them.
b. Elite capture: the planning and zoning process is often complex, bureaucratic, and lengthy. This means that a few people with time on their hand (busy-bodies), or a speculative interest in the outcome (‘ratepayers’, land speculators) can change lives of others around them. The people usually ‘screwed’ by zoning are the poor (by segregating uses and making life difficult for those without cars, and by restricting the land that can be used for multiple-dwelling unit buildings [or even small lot sizes] and small businesses). This problem was well appreciated by those who originally enacted zoning bylaws – they tried to prevent referendums on the adoption of zoning by voters.
Where referendums were used, they have generally rejected zoning (mostly Texas). Analysis that I have seen of the votes in Texas showed that blacks and generally poor neighbourhoods overwhelmingly voted against zoning.

c. Zoning often enforces unrealistic or downright destructive planning fads – witness the near universal single-use zones, and downtown ‘revitalization’ by hotel and theme mall, etc.

d. Even ‘progressive’ zoning just tries to imitate non-zoning (like mixed-use, live-work, density etc).

e. Zoning forces a very unnatural stagnation on cities: buildings, streets, neighbourhoods should be changing all the time – new uses, different uses, intensification, etc. Cities are by nature dynamic – if they aren’t they become overgrown towns. Most old areas of cities (those that had a chance to evolve before zoning) gradually changed over time – they intensified, and became more mixed. Even old neighbourhoods usually started fairly monotonous, but changed.

This is not the case where zoning has been enacted – the monotony never goes away. In Detroit’s case, the number of abandoned industrial buildings is staggering – but part of the reason has to be their industrial zoning – surely people could find some use for those spaces (huge windows, high ceilings,
sound-proof cement floors, unlimited floorspace!)

3. Quadruply bad luck: Overspecialized in one industry. Overspecialized in an industry that became concentrated in only 3 vertically integrated firms (meaning little flexibility). Overspecialized in a manufacturing industry (think rust-belt vs. finance). Overspecialized in automobiles (rather awkward
to fight highways or promote public transit in Motor City!).

So what would I do?

1. Revamp the assessment system, and tax only the land portion of property

2. Remove ALL zoning controls

3. Rip up the urban freeways, replace with regular avenues. Convert all one-way streets to 2 way, and greatly reduce street widths.

4. If there is any rent control, scrap it. Rent control ends up hurting those it was meant to help – renters. What developer in their right mind would build rental units if they can’t charge what the market will bear? So as apartments and rental houses are converted to condos or free-hold houses, or they are abandoned/burned etc., the rents go up anyway – just look at NYC over the past half century.

At this point you already see the political impossibility of it! But the final steps would be (and probably could happen regardless of the above happening):

4. Where the city owns abandoned land, retain ownership, but lease the land at market rates (initially it will be negligible) to anyone who wants to build, or use it. These would own the buildings or other improvements they do to the property

5. On a block by block basis, implement Jane Jacobs’ 4 characteristics for vibrant streets:
– density: raise density to at least 100 dwelling-units/acre by building really basic buildings (on 1-4 lots at a time, with internal divisions reflecting old lot boundaries; nothing worse than massive redevelopment schemes consuming entire blocks) with tons of floor space per condo on city owned vacant lots. It is important to do this on a block-by-block basis, as raising the overall density a little bit will have no (even negative) effect. Give the condos away (while retaining the land); make the condo owners pay market-rate land leases (again, probably negligible at first), but no taxes, to the city.
– short blocks: cut large blocks into smaller ones with small cross streets (Jacobs doesn’t give exact lengths, but apparently it means the longest dimension should be less than 400 feet along).
– diversity of uses: have no restrictions on what the basic buildings, or condos within them are used for; encourage where possible uses that have complementary utilization periods (so 2 or more groups of people use the street during different hours of the day)
– diversity of ages: This was aimed to make sure there is an ongoing-supply of cheap space (in old buildings usually). A true diversity of ages would be difficult, but it can be mimicked by continuously adding to the supply of condos – this ‘glut’ keeps scarcity rents from occurring.
6. De-monopolize and privatize the public transit system – to support the denser and poor areas, and free up money. Public monopolies on public transit are a legacy of fixed-route streetcars and subways where ‘natural monopolies’ exist. With cars, vans, and mini-buses now available, there is no reason for the inefficient and inconvenient public monopolies on mass-transit. (that this improves mass-transit can be seen in the UK. Thatcher (‘transit is a relic of the past’) privatized local and inter-urban bus service. Ironically, this has drastically improved bus service – it is now more convenient, and cheaper than before. Even the Tube – still public – has improved due to competition with bus lines.)

Published in: on March 21, 2007 at 5:36 pm  Comments (1)  

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  1. […] Posted by mdcphilly on March 29th, 2007 The saddest city in the midwest… « I Wouldn’t Live There If You Paid Me To […]

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