A Market Urbanism Manifesto

In the 1990s, people who thought of themselves as free-market advocates tended to support suburban sprawl, and to assume that there was little market demand for urban life. But over the past decade or two, the “market urbanist” movement has arisen to provide a third way between sprawl advocates and pro-regulation urbanists. 

Market urbanists argue that free market policies can actually support urban regeneration. Like the YIMBY movement, market urbanists attack zoning laws designed to limit infill development. But market urbanists tend to apply free-market principles more broadly, opposing regulations that many progressive-minded YIMBYs tend to support (such as inclusionary zoning).

In his new book Market Urbanism: A vision for free market cities, journalist Scott Beyer describes a market urbanist agenda, and does so in a way that is less technical and more oriented towards a general readership than more academic urbanist books (such as a book I wrote a few years ago). 

The first half of his book focuses on housing policy; Beyer of course critiques zoning policies designed to limit density, pointing out that these rules increase housing costs by artificially limiting the supply of housing, and also promote suburban sprawl by causing Americans to be priced out of urban housing markets in walkable, transit-friendly cities such as New York and San Francisco.

But to a much greater extent than less libertarian-minded YIMBYs, Beyer attacks less controversial regulations. For example, Beyer criticizes building codes; although these codes supposedly are designed to make buildings safe, Beyer argues that they are often misused to promote needlessly expensive building techniques or to support exclusion of the poor. For example, single-room occupancy (SRO) buildings once housed the very poor in large numbers, but in the late 20^th century government changed building codes in order to outlaw them, thus ensuring that down-and-outers had no place to live. In response to concerns over safety, Beyer argues that insurers and bankers can be trusted to prevent fires and similar disasters, because insurers don’t want to pay for buildings that fall apart, and bankers don’t want to loan money to developers whose assets are likely to burn down. 

Unlike many YIMBYs, Beyer criticizes government regulations and spending designed to promote housing for the poor. He suggests that rent control reduces housing supply, as does inclusionary zoning: if a landlord has to set aside parts of its building for rent-controlled tenants or low-income units, it may be tempted to raise rents in the rest of the building to make a profit, or to place its money in ventures that are more profitable than highly regulated apartment buildings. Beyer does not completely oppose public housing, but argues that it “should be the option of last resort." He asserts that because government has no financial incentive to make public housing economically efficient or to maintain it adequately, American public housing usually delivers a small amount of terrible housing for a large amount of money. 

As an alternative to these intrusive and expensive policies, Beyer favors giving housing vouchers to the poor so that they can rent housing on their own. The current “Section 8” program tries to do this; however, Section 8 vouchers are so heavily regulated as to discourage landlords from accepting them. But Beyer admits that even a more efficient Section 8 problem might not be attractive to landlords who “don’t want the risk of accepting Section 8 tenants”. But if this is the case, even a deregulated Section 8 program is unlikely to attract many landlords.

In addition to discussing housing policy, Beyer also discusses transportation policy. He argues that market urbanists should steer a middle course between pro-road sprawl apologists and pro-transit urbanists. He notes that both roads and transit are in large part government monopolies, and notes that these monopolies use state power to exclude competition. 

Beyer’s alternatives to the status quo fall into two major categories. First, he suggests that where government controls transportation-related assets, it should use something resembling market pricing, rather than providing services for free. For example, if drivers pay for roads at all they currently pay through gas taxes. But gas taxes are the same whether you drive at peak times and places (such as rush hour Manhattan) or at low-demand times. As a result, drivers have no financial incentive to avoid the busiest travel times, causing drivers to congest urban streets during rush hours. To solve this problem, Beyer favors congestion pricing—that is, road tolls that charge drivers more at high-demand times. 

Similarly, government allows drivers to park for free on street curbs. When drivers consume a public service (government-owned land) for nothing, they tend to use that service more than they otherwise would. But when lots of drivers are trying to park in the same space for free, there may be too many drivers are often fighting for too few parking spots. Beyer suggests that government try to charge market rates for curb space—not just for drivers, but for other road users. For example, government could sell curb space to bicycle, scooter or bus companies that wanted to use the space for parking.

Second, Beyer favors allowing private companies to compete with the government. For example, government should not restrict the creation of private buses or private roads. In addition, government should allow private “micro-mobility” such as electronic bikes and scooters. Local governments often claim that these modes might be unsafe; however, they are far less dangerous than automobiles.

Even where government control of transportation is unavoidable, it can be more efficient. Beyer notes, for example, that in Hong Kong, a transit corporation develops land around stations densely, and uses the proceeds of this investment to support the transit system. American transit agencies could do the same, using agency-housed land for housing instead of less profitable parking lots.

Beyer’s book is a fine introduction to the flaws of the status quo and to the market urbanist alternative; however, it does not respond to counterarguments to the same extent as a more scholarly book would. For example, if public housing is inherently inefficient, why does it seem to work well in Vienna? And if more private buses are allowed to compete with public transit agencies, will they skim off the most profitable routes, thus draining revenue from the rest of the system?