Three simple ideas for cities

It seems like you can’t get anything developed downtown without some sort of tax deal.

It’s not difficult to find an example in Minneapolis-St. Paul: Pillsbury A-Mill, Izzy’s, Central Corridor development, Vikings Stadium, St. Paul Saints stadium, St. Paul’s Farmer’s Market Lofts, the Pentfield Lund’s, the American Academy of Neurology and that’s just scratching the surface. Even smaller towns, like Mankato (pop 40,000) can’t get a redevelopment project going without a little help.

Whether you politically agree with these tax subsidies doesn’t matter, what matters is we acknowledge that we can’t keep this as the status quo for much longer.

The new economy, which I argue we're transitioning into, will require multiple players who can produce small-scale, incremental development. This is how urbanism will be accomplished in the next 20 years, but it will probably need to occur outside of contemporary channels. This means creatively circumventing tradition lending methods, bypassing euclidean zoning and approval processes with out-dated bureaucratic methods and by avoiding the single developer mentality.

This is a small barber shop in Excelsior, Minnesota. It’s kind of ugly, but it’s exactly what we want.

We put too much emphasis on large buildings and having one developer come in and develop an entire city block. This is one of the reasons developers feel they may need a subsidy, because they are being asked to take on big initial financial risk. That’s precisely why they ask for subsidies and we shouldn’t necessarily blame developers for taking these subsidies. We should be blaming ourselves for giving it to them. I don’t fault a developer asking for $3.2 million when the public is actually willing to subsidize at a rate of $20,779 per parking space!

The question is: how do you make these buildings, like the barber shop in Excelsior, a reality?

First of all, it happens on its own.

This is the least satisfactory answer. If left to its own devices, this type of development will happen eventually. The cost of gasoline, electricity and desire for authentic walkable, urbanism will increase to the point where we’ll make the transition.

It was not New Urbanism that killed suburbia. It was the financing of suburbia, struggling economy and jobs market and high gas prices. If these trends that crippled suburbia continue the development I’m referring to above will happen on its own. The problem is that I don’t think we can wait that long. A lot of capital left with the financial collapse. Traditional methods of private financing that could have helped build what we’re talking about will likely be hard to come by. That means local governments, local businesses and local economies need to get creative.

1. Local Building Bank

The idea of a nation-wide infrastructure bank has been thrown around in the media, but it’s concentrated on large-scale projects like high-speed rail, large bridges and highway projects. What if it happened at a hyper-local level for small development projects. My idea goes something like this:

1) Get local and/or downtown businesses together
2) Map the empty and under-used properties in a particular area
3) Create a development plan and get the city (or other entity) involved to add a small “special assessment” to property owners

Let this ‘bank’ add up until you have enough money to develop. All the properties that accepted the special assessment would have an ownership stake in the new building and profit from it being leased or sold. A collective organization could then manage and lease that property, returning any profit to those who paid the assessment. This creates an environment where all building owners and tenants in downtown have a shared interest in its success.

2. Land Value Taxation

One problem that Minneapolis and St. Paul have is that of open-surface parking lots in downtown. Besides our love of the automobile, a reason I believe that they still exists is because of our system of property taxation. We put a tremendous burden on the buildings themselves and their capital improvements (Check out Chuck's video "Property Tax vs. Land Tax" on YouTube).

The problem with this is obvious: parking lots don’t have buildings to be taxed (besides small wooden shacks). The answer to this is to tax land at a greater emphasis (Land Value Taxation), based on proximity and other amenities, and not punish small land owners for putting up the type of buildings like the barber shop.

By modifying this element of our tax code, we are essentially incentivizing people to use their empty lots and encourage them to create better places. A few things would need to occur, including fair and accurate evaluations and possible modifications to land use regulations (you can read some good academic versions of this here and here).

The way this needs to start is through an experiment; by advocating for a “Land Value Taxation Modification Zone”. The idea goes like this: draw up an area similar to what you’d do with a  tax increment financing district. Inside the area, make it a zone where land is taxed at a higher rate, but capital improvements are not (or taxed at a lower rate).

3. Code-Free Zones

What if architects, builders and developers could bypass a codes? Would more be built? I’m not entirely sure, but I’m confident it would aid in the developing of small, incremental buildings. Again, instead of the government granting tax increment financing to a particular district, it could create a ‘Code-free zone.’ Now, there would need to be stipulations: it wouldn’t be “code free” per se, but more so a list of aims and objectives that would need to be reached. Aims and objectives would be things like good urban design, added street density, transit-accessibility, walkability and decent architecture.

In a sense, we’d be trying to achieve a version of Form Based Coding, minus the regulations that require a costly elevators for two to three story buildings. I’m certain we can come to a societal consensus on what’s a good code and what’s a bad code. My rule of thumb is when you look at a code you can’t immediate pinpoint who lobbied for it.

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I love the idea of local government experimentation and hopefully forums like Strong Towns can help get the dialogue started. I like the ideas above, but I’m not sold on all of them. I’d love to read your thoughts, for and against, in the comments section.

I’d also like to take this opportunity to promote a solid land use and transportation blog in the Twin Cities, Streets.MN. If you’re at all interested in contemporary issues in Minnesota land use and transportation, it’s a website worthy of a bookmark.

Comments

[Derek]

It would help if there were a fancy name for the concept that lowering subsidies (perverse incentives) saves money overall, even when it results in raising taxes. Then candidates could put it on their "issues" lists they way they do now with terms like "zero-based budgeting." Because "raising taxes" just doesn't have the ring they're looking for.

[Nathaniel]

Marketing concepts is important. Unfortunately, these types of creative labeling often times create an environment automatic mistrust. For example; when I hear a politician say "zero-based budgeting", my initial reaction is that there is a twist - that someone is trying to mislead me.

That isn't to say we shouldn't attempt to market good ideas. We should. There needs to be a way to get them out into the world. I think the ideas presented above are actually quite simple (hence the title of the post). They are, however, a radical turn from what we've been doing for the past five to six decades. That's why I advocate experimenting, taking one parcel here and one parcel there - it might fail, but let's give it a try. -Nate

[Eric]

A code-free zone, you mention a building code and then also form based codes, wouldn't change how developers function.

[Nathaniel]

Thanks for the comment Eric - I see what you're saying and realize that I didn't clarify as well as I should have.

What I am getting at is this; it would be a 'code-free' zone to the extent that we're only looking for the proper form (sort of like form based codes). However, form based codes are still subject to thinks like minimum door and hallway widths, hand railing heights, sprinkler head location-type regulations.

I think developers function as well as the public forces and expects them to function. Would they operate the same? In some ways, yes, and in some ways, maybe not. The best way to find out is to do little experiments here and there. Let's find out. Like I said, "I love the idea of local government experimentation and hopefully forums like Strong Towns can help get the dialogue started. I like the ideas above, but I’m not sold on all of them."

[Paul Julius]

When a city or neighborhood is blighted it is evidence that something is wrong. The property owner will not allow his property to diminish in value if he is able to prevent it. The zoning code provisions, many times, are an effort by the Government to force certain land use in the face of changing conditions that are relentless. The nature of Zoning is contentious and it is difficult to pass changes in zoning. The result is existing zoning codes that are out of date and detrimental to property values. Look at Houston, a city with minimum zoning codes, it developed much the same as other cities. The land owners are capable of managing their property better than the Government.

[Nathaniel]

Paul - Thanks for the comment. I wanted to write on a few things.

"The zoning code provisions, many times, are an effort by the Government to force certain land use in the face of changing conditions that are relentless."

Yes. I believe that a majority of the zoning codes are used to protect what currently exists without consideration to what may be. It operates under the assumption that what exists is best. There is certainly a role for zoning, but I think we need to throw out the book and start over.

"The nature of Zoning is contentious and it is difficult to pass changes in zoning. The result is existing zoning codes that are out of date and detrimental to property values."

You're right. Usually zoning only changes (at least here in the Twin Cities) when someone proposes a differing land use, which is illegal, and everyone else can't understand why its illegal. The City and neighborhood will be willing to go through and approve the changes, but it's a timely (and sometimes, frustrating) process.

Thanks again. Have a good weekend. -Nate

[paul julius]

There are cheap handy man special houses in Detroit and most major cities. There are plenty of families that would acquire and live in these houses. There are, for the most part, streets, city water and sewer and electricity available to these houses. The people who built and lived in the houses for the last fifty years considered the houses acceptable for human habitation. These houses stand vacant, abandoned and decaying.
Many say the lack of jobs and perhaps dangerous gangs are the main problem why these houses are not occupied.
I say the zoning and building codes and the Government is the problem. I would like to see a program that set aside the zoning and building codes in these areas for fifty years. Let’s see what would happen.
I use an example, the lead paint, and radon, asbestos and so on regulations. Residents that painted with the lead paint lived in the houses for many generations. The Radon gas did not kill very many of them. They used to filter beer through asbestos fibers early last century. These kinds of laws may be well intentioned but if they cause homelessness and family destruction the cost outweighs the benefit.