Jelly donut progress - why are trendy places so damned poor and unequal?

I like jelly doughnuts - or creme filled - jelly, creme it doesn't matter, I like sweet squish in the middle of my pastry.  But I hate it when the squish is exposed and dried out on the top like it is with Danishes (Dani?).  Perhaps in Copenhagen the cold and the damp keep it from drying out but in Saint Louis it gets all cracked and nasty.  Anyway, 'yay' jelly filled.

And yesterday as I was tucking into a big fat strawberry jelly it occurred to me that our great cities are evolving like Jelly donuts.  Jelly doughnut anatomy has three parts:  the jelly (of course), the doughnut (of course) and the goopy quasi doughnut glop in between.  I would eat the jelly alone (I know but still) and I'd glom the doughnut outside with pleasure.  However, the intermediate goop is the necessary evil that gives us the luscious Jelly and Doughnut combo - you would never eat that by itself.  Indeed, I always strategically bite so that I get plenty of jelly and doughnut with my goop.

As I said, I believe our cities are evolving in the same way.  For a long time they evolved as plain doughnuts - the suburbs waxed as the inner city waned.  But eventually economic gravity reasserted itself and lower prices, central location and prospects for superior returns led to the development of inner city districts filled with the affluent and their playthings: restaurants, art galleries, hip this, trendy that and so on.  And the poor doughnut hole people that used to live in those neighborhoods were pushed outward only to run into the hard wall of increasingly expensive, restrictively zoned affluent suburbs.  In Jelly doughnut terms: they were 'gooped'.

In cities without 'smart growth' initiatives or overly restrictive zoning regulation the displaced can simply 'hop' over the affluent suburbs to the suburban edge where there is plenty of inexpensive housing to create what are known dismissively as 'edge cities'. Thus, in these (oh so declasse) communities, the supply of new housing can expand and contract with market conditions, serving to restrain housing prices for the metro area.

In more 'hip' cities where 'smart growth' is all the rage, this type of expansion is 'discouraged'.  The result being that the 'lower orders' end up concentrating in typically bad neighborhoods with bad schools and corrupt governments - you see this in New York, LA, San Francisco, Los Angeles and Washington in particular but even in places like Burlington, Vermont.  And because new, moderately priced housing construction on the edge is discouraged, the supply of housing is outstripped by demand so housing prices go stratospheric under the triple assault of the new gentrifiers, traditional suburban gentry and 'smart growth' new development restrictions.

You can see the impact that restrictive land use regulation has in Demographia's annual report on Global Housing Affordability.  Demographia assesses the land use regulation of each major city it covers as being either 'highly restrictive' or 'less restrictive' and relates it to housing affordability as determined by median income multiple of median price.  Red means more restrictive.

And the explosion of housing costs in these 'smart' cities has driven some of the widest gaps between the rich and the poor in America.  Here is a recent study by Trulia which tried to get at what was driving income inequality in American cities.  They found that the number one factor differentiating very unequal cities with more egalitarian ones was the affordability of housing - affordability being the price of housing relative to median incomes.  The more expensive housing was relative to incomes, the more unequal the cities were in real terms.    Here's an interesting graphic from their study:

The most logical question in response to the data is "so what is driving what?" are the Richie Riches of unequal places driving up the price of housing so if we whack them housing prices will normalize?  Or is the soaring cost of housing happening independently of the fat cats?  Given that housing affordability is highly correlated with housing regulation as shown above it seems clear to me that the arrow of causation goes from restrictive regulation to rising real housing prices to higher inequality rather than in the opposite direction. Indeed in our Burlington example above, we see a small, slow growing city in one of the poorest states in the nation with housing prices well above those in booming Houston.  It could also be that the places with high concentrations of the very rich who value their 'space' and 'greenery' use their extra power to deliver amenities that they particularly value and which result in choking off moderate housing development and thereby driving up housing prices.  Either way it's the restrictive land use regulation that is the 'murder weapon' so to speak.   And that restrictive land use regulation is the oh so progressive and green 'smart growth' package of heavy state controls and targeted subsidies. So whacking the Rich won't solve the problem, no matter how much fun that might be.

The other thing that a lack of housing affordability does is drive down the real standard of living.  When you take the top ten metro areas in the nation in pay per job and adjust them for the cost of living you get a radical shift at the top.  Here's a listing from Joel Kotkin that lists the highest income cities in real terms relative to their non-inflation adjusted totals.

But what's more interesting is which cities have high incomes but because of their inflated cost of living actually have much lower standards of living.  For example, in nominal terms NYC metro is the 4th 'highest' income metro area in the nation's largest 49 but when cost of living is considered it falls to 41/49 - one of the very poorest places in urban America.  Far, far poorer in real terms than Memphis or Oklahoma City.  So when you rank the cities whose nominal income to real income variance is highest (in other words Boston is ranked x in nominal terms and Y in real terms for a cost of living ranking diffential of x-y)  we get a 'who's who' of 'smart growth'.  Hmm.

While it is a given that this restrictive or 'smart' growth approach discriminates against people of color it is also hostile towards the young who like minorities have less income and assets to play the real estate inflation game than their older, whiter and I guess now politically 'hipper' elders. Which drives emigration of the young to places that discriminate against them less.  A migration that is similar in the reverse to the 20th century black migration fleeing southern oppression.  Ironic isn't it?  Northern and western cities got lots of black migration because southerners hated their black neighbors and southern and intermountain west cities are now getting lots of young migration of all races because - apparently - oh so hip and progressive northern and west coast oldsters.....hate their children?  Wait, that can't be right.  But look at the bottom of Joel Kotkin's chart below: it's all 'smart growth' meccas...and depressed industrial dystopias like Detroit.  Hmm.

And at the top are all of those cities that urban hipsters love to hate - those stinking 'red state, tea party kind of places'.  Interestingly enough, Portland is both a cost of living 'heel' and a significant importer of people - I guess it's so painfully hip that people will choose poverty to be there.  Kind of cool when you think about it: hipsters living up to their principles in one of the poorest cities in America.

But who would have guessed that Smart Growth spells Jim Crow?  Only worse because say what you will about post-bellum southern racism, by and large the Jim Crow racists weren't screwing their own children.*  So jelly doughnuts all around!

* Although clearly they were screwing the siblings and cousins that their slave owning ancestors produced.