Austin Affordability: What Matters?

The discussion around Austin’s ‘affordability’ was perhaps the most interesting policy theme from the recent municipal election.

Unfortunately, the discussion seemed to focus on economic development subsidies.  These subsidies – while they might contribute to reducing Austin’s affordability in some cases – are a tiny part of local public sector budgets and none of the projects is sizable enough to act as a significant driver in the Austin economy.

If a local policymaker is genuinely interested in making Austin more affordable, they should ask themselves two questions: first, how can I reduce the costs of the main expenditures of Austinites? And second, how can I help Austinites grow their incomes faster than their expenditures?

Reducing Costs

To answer the first question, let’s examine what Austinites might spend their money on.  Below is a summary of the latest data from the Bureau of Labor statistics on American consumer expenditures.  The major categories are housing, tax expenditures (this includes federal taxes but not local sales taxes), and transportation.

The market-driven approach to reduce housing costs is to boost housing supply and to encourage policies that allow extremely affordable housing.  Subsidizing the development of low cost housing is another approach.  Finally, there are more statist options such as rent control.

The bulk of tax expenditures experienced by the average American consumer unit (i.e. household) are federal taxes and hence are beyond the scope of what local policymakers can impact.  However, for the limited portion of municipal fees and rates that impact affordability, policymakers can create affordability by reducing expenditures (though this might prove short-sighted if the public goods are highly needed or indirectly impact workforce demand).  A more promising alternative might be to boost the affordability of Austin government for the median (as opposed to average) resident by adopting more progressive revenue schemes.  This is different from having low average rates.  In some areas, such as water rates, we might want relatively high average water rates to induce conservation, but a steeply progressive rate schedule to increase affordability amongst the lowest-income Austinites.

For transportation, the major policy contribution local policymakers can make is to reduce the number of cars a consumer unit seeks to own by developing compelling transportation alternatives to automobiles.

Boosting Incomes

There are three main approaches to boosting income.  One straightforward approach is to adopt policies that support a tight labor market. Or put a different way, to avoid adopting policies that discourage workforce demand.  A second approach to boosting income is helping Austinites develop skills that command a premium in the market.  A third approach is to foster effective unions that provide labor collective bargaining power.

Towards a Better Affordability Conversation

The affordability discussion in the last municipal race seemed to focus on policy areas that are ultimately not that meaningful in actually making the city more affordable, especially to the working poor.

As a matter of fact, some of the themes espoused by several candidates (e.g. attacking a dense core, conformity on a car-focused transportation culture) will keep making affordability problems worse.

And I didn’t get a sense of a real discussion on boosting workforce demand area in the last set of municipal races outside of the incentives discussion.  I have previously pointed out, Austin’s economic development incentives are a very tiny part of the local policies that affect workforce demand.  I didn’t detect any real discussion about strengthening the city’s human capital and obviously there was no real discussion of supporting, say, private service sector unionism.

Interestingly, the best solutions do not always conform to a typical right-left ideology.  On housing, we probably needs less regulation so that the market can build supply where it is needed as well as allow developers to provide extremely low-cost options.  On human capital we don’t necessarily need substantially more spending per student (thought that would help in some cases) as much as a drastic change to the delivery mechanism.  In transportation, we need more aggressive pricing of the actual externalities of car use as well as more ambitious spending and use of eminent domain power to make alternatives to car use appealing.

If we want our policymakers to be serious about Austin affordability, then we need to ask them to focus on the correct policy areas and discourage symbolism.

The advantages of a hybrid city council

Some weeks ago I was approached by some of the members of the 2012 Charter Revision Committee who read some of my previous posts on single-member and at-large districts.  They asked me to write a more comprehensive document detailing the empirical evidence for the hybrid position I hinted at in my blog entries.

This position paper is the result.  Let me know what you think in the comments.

Apple seeds confusion around incentives

In this column, Wendler & Aleshire (W&A) throw several arguments at the Apple subsidy deal.  Some are worthwhile but not all are crisp. In general, there seems to be a brewing community desire for a ‘better way’ on corporate subsidies, but those articulating the desire for an alternative fail to explain it concretely or constructively.  Let’s consider the arguments made by W&A as their piece exemplifies this problem.

First, they use a series of clunky examples to show us what we already know: that Apple is an immensely cash rich company.  They make a social justice argument that the subsidy is unfair prima facie.

Personally, I don’t find that logic compelling.  It is too categorical an argument (‘don’t subsidize a company with cash’) that precludes socially- and financially-positive return on investment projects.  Moreover, I doubt that if the subsidy was just $100 dollars, W&A would be writing this column.  The real issues is the perceived benefits to the cost.

Sadly, W&A do not delve into the details of the deal.  They don’t conduct an analysis (like this one) that factors in the costs and benefits given deal flight risk.  Instead, they move on to their second argument which implies that this type of analysis would not be worthwhile because there is a lack of accountability legislation enforcing the promises made by incentive recipients.  I find this to be their strongest argument: we should indeed keep recipients of public funds accountable to public promises.  I don’t agree that an accountability scheme should push for prioritizing the hiring of unemployed locals as the most valuable contribution.  Depending on the deal and industry, we might want the subsidy to help create a local cluster, and hence, the whole point would be to have a significant import of human capital that doesn’t exist locally.

Third, W&A offer an extensive and probing set of indicting questions about the ‘benefits’ of growth that ends up coming across as anti-growth. To summarize, a reader might take away from their questions the impression that corporate subsidies create a particularly unfair type of economic growth and that in Austin, growth is already unfair anyways.  They argue that a focus on ‘jobs’ deals hides the broader debate about growth.  This is odd to me since pretty much any policy in Austin is immediately inflicted with our continued muddled sentiments about growth.

More importantly, I consistently am irritated that many advocates that care about distributive concerns (‘are the poor and middle class subsidizing the wealthy and corporations’) in town recklessly embrace discourse that sows distrust in government without offering a positive policy role for government.  It seems that W&A care about the anti-egalitarian risks posed by the Apple deal.  But their discourse is that of a limited government populism as opposed to a progressive vision.  If they are concerned about the distributive benefits of the Apple deal, then they should urge that the tax proceeds be funneled towards egalitarian social spending; they could argue for the land-use and facility operations to meet green standards; they could support union service providers trying to participate in the process.  And so on.

Similarly for broader ‘growth’,  we can certainly help shape the contours of who receives the benefits of population and economic growth through local policy through taxing, spending, regulation, and land-use policy.  W&A do not offer concrete advocacy of policies that could do this.  The column just leaves us with a distaste and suspicion about government action and all that without even considering the actual job and subsidy numbers behind the deal(!).

This type of small government populism (repeatedly brought up by local green orgs during water infrastructure debates) is ultimately self-defeating for those of us with a progressive vision for Austin.  We need to make a case for the things government should do and how it should do them, not for it to stay ‘uncorrupted’ on the sidelines and essentially let the market and public policy inertia from past eras decide our fate.

 

Incentivizing Frustration

This Statesman piece on local candidates sparring over economic development incentives is quite frustrating.

First, it leaves somewhat unclear what the candidates actually believe.  Certainly we know that Mayor Leffingwell supports their use (downtown hotel, Apple, LegalZoom, etc.) but the article doesn’t convey whether Brigid Shea is in blanket opposition or which deals she would have supported.  I understand that perhaps these questions did not come up at the forum, but it’s not that hard a question for a reporter to ask.

Second, it leaves unchecked the argument that these incentives are somehow impacting affordability per Ms. Shea’s contention.  How exactly do they affect affordability? The piece doesn’t make this clear. I assume the argument is that the revenue that is foregone needs to be made up through higher taxation/fees in other areas and that local taxation/fees should be lower.  Fine. I can understand not wanting to get to involved in adjudicating these claims.

But at the minimum, the $12 million in Apple/hotel deals mentioned in the piece should be put in the context of the City’s overall $2.8 billion budget to make clear to the reader that the policies being debated are highly unlikely to be a meaningful driver of affordability. Or even more simply, just point out that the $12 million in incentives implies each person in Austin is paying $1.25 per month for these subsidies.  This doesn’t mean that they are socially just or even desirable, but it makes clear their minor impact on ‘affordability’ through taxes/public fees since getting that buck and a quarter isn’t going to all of a sudden make Austin affordable for anybody. And that’s assuming that indeed these incentives are zero gain since the development would always happen anyway.

Third, while discussing the debate between Council member Spelman and his opponent Dominic Chavez the piece doesn’t clarify if there is any actual contrast in policy approach.  According to the piece, Mr. Chavez supports ‘targeted’ use of incentives, but again, a voter making up their minds is left to figure out what that might mean relative to Mr. Spelman’s support.  The piece does indicate that Mr. Chavez is concerned about ‘perception’ issues around targeted incentives.  But what does that actually mean for how he would vote differently than Mr. Spelman?

That the piece reports on this perception issue without a sense of irony is unfortunate.  Perhaps the perception issue is precisely the result of local media failing to put these development discussions in their proper context (e.g. incentives as share of budget, per capita cost of incentives) or candidates for public office being pressed for clear policy stances.

Austin has seven Mayors, actually

From the Austin City Code:

 The councilmember elected to and occupying the place designated “mayor” shall be the mayor of the City of Austin. At its first meeting following each regular election of councilmembers, the council shall, by election, designate one of its number as mayor pro tem, who shall serve in such capacity during the pleasure of the council. The mayor shall preside at all meetings of the council and shall be recognized as head of the city government for all ceremonial purposes, for the purpose of receiving service of civil process, and for military purposes, but he or she shall have no regular administrative duties. The mayor, as a member of the council, shall be entitled to vote upon all matters considered by the council, but shall have no veto power. The mayor pro tem shall act as mayor during the absence or disability of the mayor, and shall have power to perform every act the mayor could perform if present.

The Mayor of Austin is a ceremonial position that relies on the moral authority and informal power-wielding skills of the position’s holder to resemble what most people traditionally think of as a ‘Mayor’ (i.e. the person with a ‘citywide’ vision and a relative ability to get things done that can veto legislators to enforce some spending/policy discipline.)   Well, we don’t have that here in this town.

So, when people say that at-large seats under a hybrid city council election system are mini-Mayors, they kinda have it wrong.  They are full-blown Mayors, at least in terms of formal power. It’s what we have now, but would be diluted to increase the weight of geographic-based representation under a hybrid at-large/SMDs plan.

I am all for utilizing SMDs in our election design as I want a greater set of identity and opinion groups/minorities represented. But not having a countervailing force that represents the median voter, or more plainly, the ‘majority’, is a recipe for relatively high-cost-low-public-value neighborhood expenditures since there is no one to provide discipline on overall spending .  More worrisome is the potential disinterest in policy priorities that extend beyond geographic boundaries; some issues like the city’s approach to human capital or economic development can not just be the aggregation of neighborhood priorities.

I’d much prefer a true Mayor with veto power, but if that is not possible, then a set of ‘fake’ Mayors with a few votes is better than just one citywide elected with a neat title.

Is “Ward Courtesy” Likely to Happen with SMDs?

Chris Bradford over at Austin Contrarian – the inspiration for this humble blog – argues that SMDs will institutionalize planning and zoning parochialism:

Council members whose districts will not be affected  directly will have an incentive to defer to the affected Council member; they will want and expect that deference to be reciprocated.  That is the genesis of ward courtesy…In a ward courtesy system, you only need one vote for zoning changes as a practical matter. “

This is certainly true if a single-member district’s active median voter is indifferent to a specific zoning or planning policy.  But if the median voter for a SMD representative (representative “A”) has a strong policy preference that disagrees with the SMD representative where the development will occur (representative “B”), then rep “A” can potentially disregard their median voter’s preferences – but said representative will be out-of-step with the district and exposed to an electoral loss.

In order for the ward courtesy assertion to be true, there could never be a situation where the constituents for rep “A” and rep “B” strongly disagree. If there is a disagreement, then the tit-for-tat scheme breaks down.

Let’s look at a particular case that is of high interest to both Chris and me: making the city center more dense.  Under ward courtesy, density would stay at the status quo trajectory  because the new SMD representatives outside the center city would not represent the median voter in their district (in the event they have a policy preference) and instead establish a tit-for-tat with other legislators.

While it is certainly possible that on many minor zoning and planning issues an SMD representative’s constituents will be essentially indifferent, it seems that in several of the new districts the newly empowered median voters would have strong preferences about packing density into the center city on either affordability (boost supply) or environmental grounds (reduce transit footprint). A ‘strong’ version of the ward courtesy hypothesis just seems too deterministic and statistically implausible. For example, look at how many 4-3 votes there are on recent Austin City Councils – and these folks are elected by essentially the same voter universe!

It just seems highly unlikely that the new set of SMD median voters (and whatever policy entrepreneurs they unleash) will be utterly homogenous in their indifference to planning and zoning to the point that a perpetual tit-for-tat amongst legislators is possible.

Ward courtesy also contradicts available academic research.  In this Public Choice essay – which I cited in my previous blog post on empirical research on SMDs – the researchers found that for locally-undesirable land uses, the median legislator’s local constituents’ preferences are what matter.  I have yet to find any empirical research supporting a ‘ward courtesy’ finding, though I’d be glad to review and blog about anything readers might send my way.

It is totally possible that the new median voters will desire atrocious policies in some cases – I’d bet that supportive housing discourse from SMD reps is going to be more parochial and tough site decisions will have even more disgruntled voices represented at the council level.

But that’s not what a ‘ward courtesy’ system empowered by voter indifference looks like. The broader, messier discourse empowered by lower barriers to entry and a new set of median voters (instead of just the one of the status quo) is precisely the egalitarian disruption proponents are hoping for.

If one is interested in a truly greener, higher density center city, then a new set of low- barrier-to-entry districts with diverse median voters is likely to be the path with more upside for the issue than sticking with the current high-cost citywide-district with a pretty static median voter.

What does empirical political science tell us about single-member districts?

In Austin, SMD proponents claim that a new electoral scheme will (1) improve the delivery of public services by creating geographic representation, (2) increase the proportion of Latinos elected to the City Council, and (3) address relatively low voter turnout rates. Pro-SMD arguments are often theoretical or anecdotal; luckily, empirical political science provides helpful insights about the usefulness of SMDs.

Austin’s peculiar ‘at-large’ method  as well as the so-called ‘Gentlemen’s Agreement’ that protects Latino and African-American seats is a deviation from conventional at-large systems. In the Austin implementation there are ‘places’ that force a voter to compare candidates running for a specific seat – candidates explicitly run against each other. Hence, in Austin, someone can run for the ‘Hispanic’ seat. The more conventional arrangement features a pool of candidates and the voter allocates their multiple votes across that pool. Candidates are not explicitly running against each other for a specific place. This has important implications when considering the impact of SMDs on ethnic and gender representation.

With that important clarification, here are some key findings from the political science literature on SMDs that are relevant to Austin’s discussion:

1. Geographic districts are likely to help Latino’s ‘descriptive’ representation, but might hurt women’s. Including some pooled at-large seats can reduce risk to women’s representation.

The most recent and exhaustive review of at-large versus single-member districts in a national data set concludes that only African-American male candidates are significantly helped by single-member districts; white women candidates are hurt.

Latinos, Latinas, and female African-Americans seem to perform at relatively similar levels under the ‘pooled’ version of at-large districts (as opposed to Austin’s place-driven implementation). Hispanics show significant variation in the level of ethnocentric voting and so SMDs tend to beat the at-large average only when there’s a very high density of Hispanic voters.

The precise reasons for the success of white women in at-large systems are elusive, but there’s a suggestion that the lack of direct head-to-head competition in the at-large pools is more helpful to female candidates’ style and triggers less overt sexist bias in voters. Black men are disadvantaged by the at-large systems, but significantly benefit from ethnocentric voting under SMDs.

However, if we dig deeper into the data and older research and adapt it to Austin’s quirky citywide implementation, it becomes clear that the effect on Latino descriptive representation would be high because of the dense nature of the districts being designed, as well as the fact that the Austin place-driven implementation potentially forces some of the ethnic polarization through head-to-head contests that the pooled systems avoid. For example, in Boston, the first Hispanic city council person was elected from a citywide pool by assembling a coalition of progressives, non-Latin American new immigrants, and Hispanics. According to the candidate, when Bostonians voted for him, they were not picking him ‘over’ an explicit choice, but rather including him in their preferred pool.

The implication for Austin is that a hybrid system with some at-large seats might be the best balance of the different ‘descriptive’ representation needs. It’s important to note that the at-large seats should be a pool and not place-based if the goal is to support women or give an additional shot to African-American or Asian candidates. Having to explicitly pick a candidate to run against might generate bias that makes success difficult.

2. SMDs are unlikely to improve long-term, citywide voter turnout.

The most recent study with the most extensive controls found that SMDs are not drivers of increased turnout. While it’s possible that some previously inactive neighborhoods will see more activity as the result of contested elections, there’s no empirical basis to claim that SMDs will systematically increase turnout. Instead, the timing of elections was found to be the most important element.

However, the fact that SMDs do not affect turnout is not an argument against them. For example, the glib tone of this Statesman editorial against SMDs urging some participation ‘boot-strapping’ by marginal Austinites is off the mark. SMDs are not the path, but overlooking the sub-optimal design of our institutions in properly engaging the young, the poor, and the newly arrived is the wrong direction for boosting Austin’s civic engagement. Instead we should consider changing the timing of elections, mail voting, public financing, and bulking up teens’ civic education on the mechanics of voting.

3. A higher number of districts are likely to increase public spending unless the Mayor gets a veto.

This is a repeated finding over the last few decades. As the number of seats (whether at-large or SMD) increase, then the coordination costs amongst the higher number of legislators along with their constituent connections mean higher expenditures relative to similar communities with fewer legislators. Whether this is good or bad is up to one’s values: one person’s park is another’s pork. However, more recent research indicates that local governments where Mayors have a veto tend to reduce if not eliminate the additional spending since the Mayor is responsive to a citywide median voter. The takeaway is that smaller bodies coordinate more efficiently and that providing the Mayor with a veto is a good hedge against excessively costly logrolling.

In Austin, we will have to balance the desire to create opportunities for African-American representation with logrolling downsides.  The larger the final council member count, the more important including a Mayoral veto in the package becomes to reduce the risk of becoming a public expenditure outlier.

4. SMDs are likely to create unpredictable NIMBY dynamics.

One of the more eloquent critics of SMDs in Austin has been Chris Bradford who has raised the idea of ‘ward courtesy.’ Certainly, there is some support for ward courtesy in the spend-and-let-spend literature mentioned above. However, the most detailed examination of locally-unwanted land-uses (in this case fire stations and community centers) and SMDs found that the uses still got sited somewhere. In Austin, SMDs would disrupt the existing sole median voter (e.g. a Central Austin preservationist) with a new set of many median voters . It doesn’t seem that the incentives under such a scheme prevent collusion by coalitions of SMD representatives from packing or ganging up on one district.

For supporters of thoughtful land use like Chris, this could cut both ways. For example, on the one hand, building aggressive market-rate housing density in the core could become more viable since those communities will lose their outsize influence over the existing electorate’s median voter. This might be unwelcome news to some of the most vocal proponents of SMDs. SMD reps accountable to neighborhoods could also become a lot more polarized around topics such as supportive housing than the current set of citywide officials. I don’t think anyone can claim that the precise pattern of NIMBYism that will arise is obvious or that it will be permanently enshrined by an SMD system.

The transition to SMDs will lower the barriers to entry for minority opinions (as opposed to ‘minority’ ethnic groups) and sometimes they will win. I’d expect a much faster tempo of incorporation of new ideas; whether they gain enduring clout is hard to assess.

5. The dominant coalition displaced by SMDs is likely to resort to greater use of referendums to achieve policy priorities.

When a group that is used to getting its way through control of a citywide majority finds its ability to direct policy undercut by a new system with several, dynamic median voters that destabilize the policy status quo, they might try and circumvent the process through the use of referendums.  This step provides a mechanism to re-establish the previous sole, citywide median voter. The implication: a transition to SMDs should ensure that the qualification for a referendum process is meaningful enough that it doesn’t undermine the elected branches.