Endow Universal Pre-K

UPKNYCHomePageSlideCourtesy of UPKNYC

The Austin City Council is considering spending an unexpected $14 million surplus in a so-called ‘midyear budget adjustment’. This is similar to their allocation of $10 million for affordable housing last year.

I’m not a fan of this process.  It tends to favor idiosyncratic, short-term topics du jour.   If the money is not spent it goes to our fund balance, which is a boring name for what we usually call a ‘rainy day fund’ (RDF) at the state level.

The nice thing about a RDF is that every Austinite benefits. It improves our bond rating, lowering the cost of capital projects that pay for infrastructure that is universally accessible (and fairly non-rival, in economic terms). Additionally, a RDF has counter-cyclical benefits (don’t tell the majority in the Texas legislature they embrace Keynes!). In the event of a downturn we all benefit from draw-downs on the fund to support the citywide budget.

Unlike the RDF, the Council’s wishlist approach focuses on projects with narrower constituencies. And of course, once the money is spent, we lose the counter-cyclical advantages of keeping cash reserves around.

Assuming Council wants to find something to do with the money, I’d prefer they spend it on something with impeccable public value credentials, that is of benefit to the entire Austin community, and that preserves the counter-cyclical benefit of a RDF.

My proposal is that Council allocates the $14 million to start a universal Pre-K (UPK) endowment.

Quality pre-kindergarten programs have thorough social impact credentials.  In many ways, UPK should serve as a ‘hurdle rate’ for Austin discussions of public spending in areas such as tax expenditures (homestead exemptions), corporate subsidies, expansion of existing programs (public safety spending growth).

Assuming a policy of capital preservation and a modestly-risky investment strategy, the endowment would generate around 3% in returns for spending or $400,000 per year. That should be enough to fund supporting further development of a plan and current local efforts toward quality UPK And it can immediately start to fund some additional slots. Eventually, it should solely fund slots.

As for the allocation of the slots, it would be most politically sustainable if there was a lottery open to any child, with some advantage in the lottery for kids from verified low-income backgrounds. In other words, even wealthy and middle-class kids get a digital ticket to the lottery computation, but low-income kids get additional tickets.  This ensures that the lottery is both progressive and has a diverse socio-economic constituency.

Finally, because this proposal creates an endowment instead of expending all of the surplus, some of the counter-cyclical advantages can be retained. In the event of a crisis, the endowment can be liquidated.

Many leading urban centers are developing UPK initiatives. For example, New York City’s new mayor is prioritizing a big picture UPK initiative funded through a progressive tax on wealthy residents.  Austin has different politics and tools than NYC, obviously. We need to take advantage of any opportunity presented to move towards UPK.  This surplus might just be one of them.

Posted in UPK | Tagged , | 10 Comments

A New Balance for Austin Transportation Policy

[This post is intended to serve as background reading for my portion of the upcoming transportation session of the 2014 Leadership Austin Engage Series. For best results, please review "Austin Transportation in 20 Slides" before diving into this post. And remember, these are my views, not those of the fine folks at Leadership Austin or the other panelists joining me.]

Congestion is a daily aggravation for too many Austinites. Our region’s business leaders worry that our commuter traffic woes undermine productivity and competitiveness.  And leading social scientists consistently find that the happiest communities implement policies that help their citizens avoid being stuck in cars.  Our region’s status quo approach is not making progress fast enough; hoping for dramatic increases in regional highway capacity won’t do and might eventually make things worse.  So what can we do that will work? Here’s one strategy to achieve a new, more effective balance in transportation policy.

B: Behavior Change

Jack McDonald, the 2014 Greater Austin Chamber of Commerce Chairman, recently called on Austin to boost its telecommuting rate from 6% to 15%.  He also called on businesses to deploy more flexible schedules and staggered hours to spread out peak-time traffic volumes. These are wise policies.  If you are a business owner, manager, or influential employee (especially in Austin’s fast-growing professional services sectors) you should move to experiment with these policies and expand them as much as feasible.

While employers are essential to large-scale change, individuals can also build one key habit: trip planning. Getting into the habit of trip planning (simplified by the abundance of smartphones with mobility-focused applications) can make it much easier for Austinites to better use public transportation, as well as cars and bikes provided through the emerging sharing economy.  And once you get good at it, you can be an evangelist for the tools and services that can help your friends and family adopt trip planning that works for them.

A: Algorithm Accountability

As much as many of us would like for vast new resources to materialize for public transportation and/or roadways, the reality is that substantial changes in the amount of dollars available at the Federal or State level are not likely. Hence, it becomes critical we use top-notch statistical algorithms to power our decision-making as we allocate resources.

The consequences of a poorly calibrated algorithm can be devastating.  For example, noisy population projections can lead us to build roadway capacity too soon, inducing sprawl.  Or we build a low-ridership rail line that requires wasteful subsidization.  Many of us believe our current transportation algorithms for population growth estimation, consumer responses to fares, and the growth-shaping power of transit lack sufficient rigor. Without rigor, we risk the destruction of significant amounts of public value simply because we didn’t take the time to properly evaluate how we analyze data.

Anyone can support a culture of algorithmic accountability.  The key step is for businesses and institutions in civil society to ‘adopt’ an algorithm and associated public data set; this is similar to how groups ‘adopt’ roads or parks and some aspect of their maintenance.  An algorithm’s stakeholders must ask for continuous, publicly-available validation (Is the algorithm accurate? Is it at risk of losing its explanatory power?).  Stakeholders can report to the public on the quality of the algorithm; inevitably, they will want to push for an API (application programming interface) that makes data easily available both for independent validation and creation of new software applications.

L: Land-use Reform

Our most recent comprehensive plan captured our community’s aspiration of creating a compact and connected region. This requires Austinites live close to their work, their kids’ schools, the businesses, and the institutions they like to go to.  Unfortunately, Austin’s existing zoning and development regulations overwhelmingly favor the preservation of the high-in-demand core as suburban-style neighborhoods filled with single-family detached homes.

Our aspirations and our existing policy are not compatible. Aligning them is not a technical problem. It is a political one.  Sensible land-use reform requires investing new dollars to build grassroots-focused advocacy organizations that can persuade and mobilize voters for land use reform and field viable candidates that appeal to those voters.  Further, it requires supporting media outlets that excel at objective, data-enhanced journalism to ensure there’s a local information marketplace that illuminates the mismatch between our policy and aspirations to the common voter.

These are difficult but achievable changes in Austin’s approach to transportation.  We are lucky to have a quality set of tools available.  What is needed is leadership; not a single, larger-than-life leader, but a symphony of committed citizens and employers taking charge in their own corner of our community.

Posted in Transportation | Leave a comment

The Problem with Austin NIMBYnomics

One of the more exasperating aspects of debating Austin’s housing supply is the confused economic assumptions of Austin NIMBYnomics. Specifically, there is a troubling blindspot about the economic reasoning that guides the humans that build and refurbish housing.

Often, developers are described as ‘greedy’ (which is a way of saying they are making too high a profit relative to the externalities they produce).  Interestingly, many anti-development advocates believe that the same ‘greedy’ developers that produce certain types of development (‘stealth dorms’, large high rises) will recalibrate and build the ‘right kind’ of multi-family if we just place enough constraints on what they can do.

The main Austin housing problem is that there are not enough places in the core to build multi-family without regulatory and political risk.  So, we get a missing middle of housing development.

missing_middleImage courtesy of Opticos Design

This in turn means population loss in the core as those with more disposable income (e.g. professional couples with no kids, older residents without children) out bid families with kids in the core.

atx_pop_change_2010

Tragically, the development types in the missing middle is what many of the anti-development advocates allude to as being the outcome they would like.  In their view, the preferred solution is to regulate the market enough to narrow the options available to the developers so that they get to work on creating housing the Austin NIMBY coalition would like.  For example, here’s the Daily Texan echoing anti-development advocates in its endorsement of lower occupancy limits:

Right now, it’s cheaper for developers to build  stealth dorms on single-family zoned property than to build true, high density multi-family housing, which by law must include adequate parking, dumpsters for trash, sprinkler systems and other amenities. This amendment will effectively eliminate the financial incentive to build  stealth dorms and will, in turn, encourage developers to invest in building on upzoned properties that are suited for high-density housing.

The assumption is that the actual humans that are proficient at redeveloping a single-family house or duplex to accommodate a lot of roommates is going to be good at navigating the process for missing middle-style, low-unit multi-family.  This is a flawed assumption.

For starters, even anti-development advocates concede that there’s limited capital appetite for this type of development.  The small operators are unlikely to have enough personal capital to take on the missing middle type developments.  Perhaps it is possible that they will reset their skills and find new sources of financing somewhere.  But, my intuition is that they will instead just remodel houses for the most affluent buyers or most affluent renters they can fit within the occupancy limit. That’s easier money than trying to sell capital, neighbors, and regulatory officials on missing middle housing. This by the way, is the empirical reality and precisely why we don’t have the missing middle.  These small-time developer folk are greedy after all, so why are they going to take on risk when there are simpler ways to make money? Some might just exit and pick stocks or invest in franchises and so on.

Now, let’s consider the other side of the spectrum.  The different development firms and sources of capital that produce large complexes certainly have the skills and money to tackle the missing middle.  But why don’t they? Well, because there’s not an attractive ROI in it, obviously.  If you are going to take on development risk, why do it for some relatively minor project? If you are a leader at such a firm, you still have to make time in your schedule for selecting designs, meeting with capital, dealing with the politics whether the project has 1x units or 5x units.  So, it makes sense to go for 5x.

Even worse for the NIMBY argument, the capital providers have many, many options.  Capital can fund sprawling developments in our region (and boy, does it!) or skip it altogether.  Whereas the skills of a large developer might make it consider going down to the missing middle, capital isn’t locked in that way.  It’s happy to lend to sprawl or luxury or even cycle out of the real estate asset class.  So sure, the ‘California Developers’ might have to hustle a little harder to find some new ways of making money and consider building some of the Austin missing middle, but CalPERS and Wells Fargo don’t care.  They’ll just fund something else.  Sadly, if capital skips Austin, we are stuck with less housing.

Markets are productive but temperamental beasts.  As a progressive, I feel just fine launching market interventions to ensure that markets work or achieve my personal preferences in terms of fairness.  So, my concern about Austin NIMBYnomics is not about a normative concern; intervention in the market is acceptable to me.  Rather, it’s a design issue.

The problem with Austin NIMBYnomics is that there are not enough human beings or sources of capital interested in building the Austin NIMBY vision given their policy design preferences. Do I absolutely love the architecture of every ‘stealth dorm’, or the interaction of every high rise with its surrounding environment? Do I cherish the sounds of construction in my neighbhorhood? Well, no.  But I find sprawl and the unnecessary immiseration of every Austinite – including the most vulnerable working poor – much, much worse.

The market design being kluged together by anti-development forces through their policy victories at council is failing to build adequate supply that produces widespread housing affordability. It contributes to sprawl.  It’s not likely to generate new types of developers or sources of capital that can produce the missing middle.  As long as the region grows, development will continue: large buildings in corridors, demolitions of old houses to build the most expensive detached-homes the market will clear, and even more sprawl.  That doesn’t seem like the best way to preserve Austin’s character.

A proper, market-friendly solution would require a lot of upzoning in neighborhoods near the core, reducing parking requirements, as well as liberalization of the land development code to reduce regulatory issues as much as possible.  There might be a place for supporting smaller developers in upgrading their skills and professional connections to take on missing middle approaches.  A statist twist on a proper solution would additionally create a public ‘missing middle’ development corporation and tax Austinites to fund development if private capital continued their disinterest in building (not refurbishing) those types of developments. And it goes without saying that we need to optimize the allocation of our scarce transit resources to support housing development that is dense, and not car-dependent.

Posted in Development, Housing | 32 Comments

The Limits of Occupancy Limits

This Thursday, the Austin City Council will be voting on lowering occupancy limits across the city from six unrelated individuals per house to four. If the measure succeeds, it should serve as a concise example of the basic confusion about economics, innumeracy, and hypocrisy about affordability that mark current Austin affordability debates.

Instead of the typical swamp of emotionally-laden anecdotes about the dangers of six- unrelated-people-house-sharing  that seem to pervade both media coverage and discussion of this issue, let’s look at some data.

In 2000, there were 3,723 higher ed students in 78751 (the area seemingly most affected by ‘stealth dorms’).  The total population in 2000 for 78751 was 14,005.  So, the area was 27% students. In 2011, there were 4,760 higher ed students; the total population was 14,526. The area was 33% students.  So, if you are a resident of 78751, of the sixteen people living closest to you one went from being a non-student to a college student.  And by the way, four of the sixteen of them were already students.  That is what is being described as ‘bleeding’ a neighborhood.

The entire zip of 78751 now has to ‘contend’ with a shift  of 1,000 residents from non-students to higher ed students (labeled as ‘transients’ by some reduction proponents) over the last decade or so.  How many are actually living in units that have more than four unrelated residents? Let’s say all of them, just for the sake of argument. And let’s assume that every single one is somewhat messier than the long-term renter they replaced.  So, what does the lower occupancy limit do?

Expel 300 or so students from the zip code. That’s it.

That’s not going to change the fact that this zip is in demand because it’s next to/near the University and the core and we aren’t building enough supply.  Those are the real drivers of any perceived problem, not to mention unsatisfactory code or noise enforcement.

The occupancy reduction is not going to change the reality that 78751 already had a substantial student population and will continue to do so because it is right next to a major, growing university.  The proponents of this law admit that maybe there’s a few hundred homes exceeding the four person limit.  Therefore, we are talking about a tiny change in the the student share post-reduction to what was already a modest change in neighborhood composition.

Obviously, the reduction will not solve student-related quality of life issues in 78751. What it will do is create a whole new category of quality of life enforcement problems for a code enforcement operation that has real issues to deal with and that are actually linked to the preservation of affordable housing.  So, in order for a Hyde Park resident to make *really* sure that rowdy students’ girlfriend is not actually living there, we are going to be losing coverage of buildings with potential structural issues or staff time to actually move problem buildings into compliance. It’s not like this new enforcement burden is going to make the existing bureaucracy more productive at the tasks that actually matter.  We are destroying public value because we can’t look at the facts and make reasonable, data-driven judgements.

One supposed impact from allowing more than four unrelated people to live together is that single-family houses are being destroyed either because long-term owners are fleeing or because they are being demolished to make way for other ‘larger’ single-family homes that can be rented out. In 2000, there were 1909 owner-occupied units in 78751.  In 2011, there were 1,866.  A loss of 43.  That’s a 2% change.  Again, it seems inaccurate to describe this as substantial or meaningful change in neighborhood character. More accurately, it seems that some in this zip code are stubbornly committed to remaining absolutely identical in resident composition and architecture even though the evolution of the region makes the zip a prime location for multi-family that accommodates, you know, students.

One more thing: supposedly 78751 is not hospitable to families anymore.  It turns out that in 2000 there were 1478 kids in the zip. And in 2011, 1431.  Again, given the broader demographic changes in Austin and society (the US went from being 26% kids to 24%), this basically means the neighborhoods in the zip have the same character.

These policies will cost a few hundred renters some more money. Alas, because of the narrow focus and relatively limited size of our affordable housing bond, it seems this policy change by itself will wipe out the gains for this year (and perhaps beyond) from that investment.  It will not significantly change the fact that 78751 is going to be a quarter or so students regardless of the limits – there are going to be noisy students in Hyde Park.  But it will most certainly risk undermining code enforcement’s focus on actual problem properties.

Most troubling to me is what this says about the state of policy and policy-making in Austin.  The Planning Commission members that reviewed this policy implicitly acknowledged the utter lameness of it – as well as their collective inability to resist squeaky-wheelism – by placing a two-year sunset clause on their recommendation.

We have real (though not San Francisco-sized) affordability issues in Austin, but no ability to level with the electorate about the real solutions.  We need to build supply where people want it and that means that the parcels near the core will need to accommodate further changes in the types of buildings and uses near them.  Supporting those new types of buildings means we can’t focus our regional transit dollars disproportionately on facilitating commutes in from the suburbs and exurbs or on poorly-performing transit operations.  This vote will reveal the coherence and seriousness of the City’s policymakers in tackling affordability.

Posted in Housing | 92 Comments

Preferences versus predictions

Dan Keshet slogged through the Project Connect (PC) data and found that if (1) West Campus is restored to the Lamar sub-corridor and (2) the future-focused criteria points are removed then Lamar and East Riverside achieve the highest scores.

Tomorrow, PC staff will be holding a ‘data dig’ to explain their methodological choices. This is laudable and provides an opportunity for some of the ‘power users’ of the Central Corridor study to follow-up with PC staff on key questions before the Central Corridor Advisory Group and City Council make decisions.

My main request for the ‘data dig’ is that they explain the predictive power of their demographic allocation methods.

Here’s why this matters: Highland made the cut on the basis of its expected future growth, which was derived by PC’s ‘demographic allocation tool’.  It is important that PC’s demographic allocation tool have a proven track record of actually figuring out where growth happens.  Otherwise, we are building transit for bodies that might not actually be there.

As discussed previously, the demographic allocation methodology is based on policy preferences (“what parcels we would like to get growth”) instead of an empiricist approach (“historical data indicates parcels with these attributes get this share of growth”).  Below is a screenshot that details the initial algorithm of the demographic allocation tool.

hs_attractiveness_methodology

This is scoring based on development preferences espoused in documents such as Austin’s comprehensive plan.  The problem that this poses for the Highland sub-corridor (and for Austin taxpayers) is that there is no document in the public domain that demonstrates this methodology actually predicts actual growth with any accuracy. The tell-tale sign in this discussion about future growth is that there are no terms in the Project Connect methodology that speak to uncertainty in the prediction (no p-values, no ‘confidence intervals’).  That’s because this isn’t a forecast based on a multivariate regression or a time series approach.  More plainly, these are not rigorous forecasts of population and employment density in the future. It’s just a parcel beauty contest.

It is possible there is a validation exercise by the different entities that have utilized this demographic allocation approach that redeems the method by demonstrating that actually predicts growth well.   If no such validation exists, however, then there is no point to including these preference scores since they become unbound from empirical reality.  If no such validation exists, it also becomes apparent that the Central Corridor Advisory Group and the City Council might be moving forward on sub-corridor selection and route evaluation with data that is touted as accurate forecasts of future employment and population density that are actually completely speculative.

Posted in Transit | 10 Comments

Highland Score

The inclusion of the Highland sub-corridor in Project Connect’s (PC) initial recommendation to the Central Corridor Advisory Group (CCAG) made me curious about it.

After examining the released data and documentation, it is clear that Highland’s score is the result of speculative assumptions about the nature of development in the sub-corridor. This has implications both for CCAG and Council as they debate which sub-corridors are worthy of further study.

Now let’s turn to the data.

hs_overview

For those not closely following the PC recommendation, it utilized a set of synthesized indices to differentiate the sub-corridors. The main index had a set of ‘problems’ it covered and each sub-corridor got a set of points for that problem. As the chart above illustrates, Highland got the bulk of its problem-level points in two problem areas: (1) ‘Constraints & Growth’ and (2) ‘System’.

If we delve into these and examine the criteria-level scoring, we find that Highland accumulated its criteria-level points lead over Lamar in just one  index.

hs_criteria_level

So, what exactly is in the Growth Index? It is outlined below in a screenshot from the released PC documents.

hs_growth_index

The use of both population and employment density growth projections is problematic.  It is unclear from the released documentation if the PC team scored either the rate (“32% growth from the 2010 base”) or the count (“1377 more people per square mile than in 2010″) of density growth.  Either way, this leads to points being scored by a metric that is tangential to transit success.

The actual density of population and employment is relevant as it is a proxy for demand.  The rate of growth might be relevant as a way of anticipating future growth past 2030. But that is such a noisy projection (it’s actually projection built on top of a projection based on a subjectively compiled allocation of growth!) that it is not useful in this type of decision-making. If we exclude the problematic density growth estimates, the chart below reveals what the sub-corridor density data looks like.

hs_sc_density Remember that the Project Connect staff chose to remove West Campus from the Lamar sub-corridor as a way of indicating that ‘the University would be served as part of the Core’. That choice, however, obscures that a real-world Lamar alignment would serve high density West Campus.  Even with that suspicion-arousing omission, Lamar is still presently competitive with both Highland and Mueller on population density and dominates on employment density.

It turns out that the estimate of the 2030 population density is where Highland really earns its points both because of the expected growth in density and the double-counting-like nature of the growth rate points criticized above.  So, why does Highland grow so quickly? Well, this is where things get interesting and quite murky.

The demographic allocation methodology begins by looking at the expected CAMPO growth totals across the region’s counties for 2035 and then allocates it across Austin parcels. Each parcel  in the study area is rated on ‘attractiveness’ and placed into a bin of similarly attractive parcels. The precise methodology for the attractiveness calculation is not fully clear as the released explanatory document for the first attractiveness algorithm – there’s a second one subsequent to this one – has some quirky notes in it:

hs_attractiveness_methodology

The total growth from CAMPO projections was then divided into the bins and subsequently allocated to the parcels. The parcels in each bin received growth up to their capacity until the growth increment in the bin was depleted. ‘Capacity’ for 2030 – and this is absolutely key – was determined by the likely maximum household count for the parcel as a result of the rules below:

hs_maxhous_algoFor those not familiar with the zoning jargon, ‘FLUM’ stands for ‘Future Land Use Map’; ‘UPA’ means ‘units per acre’; MU means ‘mixed use’.

That ‘likely maximum’ household count was then multiplied by a household size coefficient that gets smaller as the units per acre increase. For example, a household on a parcel with 45 and over units per acre is expected to have a household size of 1.6.  A household on a parcel with 4 or less units per acre is expected to have a household size of 3.

The bottom-line is that the methodology awards points to larger parcels that are relatively undeveloped and (seemingly?) car-dependent based on an optimistic outlook on future land-use entitlements being granted. It is not a prediction of how parcels will behave in the future given what similarly-zoned parcels have done in the past.  It is not a sophisticated statistical model of what is likely to be that uses historical data to forecast. Instead, it is scoring based on where the methodology-designers would like development to go that uses a proven statistical technique to classify the parcels into different bins based on parcel attributes. The methodology has not been validated, so we don’t know if it actually predicts anything.

The public reasoning presented to CCAG by the PC team for Highland’s score is ‘significant future development’.  Obviously, projects such as the ACC Highland Mall redevelopment and Austin’s evolving medical scene will have an impact on employment and residential density in the sub-corridor.  But it also appears that the methodology selected assigns significant points to the type of parcels available in the sub-corridor.  Needless, to say, the presence of certain types of parcels we’d like to see developed in a sub-corridor does not mean development will happen.  Worse, it doesn’t mean they exist in a contiguous stretch that make sense for a transit route.

The growth index issues are all compounded by the use of a 2030 endpoint.  A long-term end point makes total sense when we write the FTA New Starts application as it will allow us to put down the largest trip and Vehicle Miles Traveled numbers given our continued growth in the future.  The goal in the New Starts application is to put forth the best argument for the selected route.

But when contemplating the actual route selection, we should prioritize the likelihood of success instead of prematurely engaging in gaming of the FTA New Starts application.  Leaning on observable data about development and known patterns about transit ridership is a more solid foundation for successful route selection than a scaffold of rushed projections.

Given Highland’s questionable value, short-term actions for policymakers are clear.  Further discussion of Lamar should restore West Campus within its boundaries. I don’t personally care if they put it on the official map as long as policymakers get an ‘alternative’ map that includes it. Hopefully, Lamar will continue to be evaluated in the next phase of study.  Additionally, more detailed and intelligible documentation around the demographic allocation tool should be released. Both CCAG and Council should begin to scrub the evaluation methodology for high-noise/low-value elements such as the density growth rate elements.  Finally, Council needs to examine what land-use policy in the Highland corridor would actually be needed to actually meet the speculative ‘maximum capacity’ future implied by the demographic allocation methodology.

Posted in Transit | 8 Comments

Recommendation Reaction

pc_rec_announcement

Today, Project Connect recommended that East Riverside and Highland advance to the next phase of the Central Corridor study process.

Is this a good recommendation?

Continue reading

Posted in Transit | 11 Comments