Smart Talk with Charles Marohn: Rethinking How We Build Our Cities

welcome to smart talk where we speak with leading academics and other thoughtful persons on the important challenges facing the world today my name is edward dodson i am a long time member of the faculty of the henry george school of social science today we have the pleasure of speaking with charles marone jr founder and president of the minnesota-based organization strong towns mr marone is a professional engineer who has for the last two decades turned his talents to the challenges of community planning and development the insights he has gained over a long career are contained in his new book strong towns a bottom-up revolution to build american prosperity charles welcome to smart talk [Music] well thanks for thanks for having me it's a it's odd to be doing this during quarantine and uh i uh uh have the quarantine standard outfit on today instead of the suit and tie so uh appreciate the uh the invitation and the chance to share ideas well your message is extremely important i i've read your book uh in studied it in detail in fact i've made some comprehensive notes that that i will eventually ask ibrahimo to pass on to you for whatever value they might be but i'd enjoy that but i i've listened as well to a couple of the lectures that you've given and the response to your audience now as i understand your position the planning community has really been almost 180 degrees incorrect in its emphasis on finnish development would you go into some discussion of that perspective for the listeners yes on on finished development uh completed um it's funny because as you said that i'm uh scandinavian here in a scandinavian part of the country and i'm like finnish development i'm not sure i'm really upset about finish development but uh um today when we build and i think the the the the lack of humility in the playing profession uh and and really in in economic building trades in general is that we build things all at once and we build them to a finished state a completed form and the idea of having things in a completed form in a finished state is that they are then done um they're done they don't anticipate any improvement any change any adaptation um when we build things we allow our building styles you can think of like typifying this as a big box store or a fast food restaurant you know or a single family home even these are places that are designed not only through our codes and our regulations and and all the the financing and the way we process them but they're designed by the very nature of the building to not adapt to become something different it is very very difficult to take that big box store and make a different use out of it than a big box store it's very difficult to take a a you know drive-through restaurant and make it something other than a drive-through restaurant and the problem is if that a drive-through restaurant fails in that location what are the odds that the next drive-through restaurant will be successful it's it's quite a bit less than you know what you would think if you look back historically at human development patterns if you look back at city building over time what you see is that our ancestors and i'll use ancestors in the largest possible sense of the word our ancestors built things that were designed to adapt and evolve and change they built cities incrementally on a continuum of improvement and so there was a certain humility about the future even though their pace of change was a lot lot less than ours our pace of change is massive yet we design things static their pace of change is very slow yet they design things to be dynamic the idea of allowing places to grow and evolve and change over time i think is one of those humilities we call it spooky wisdom in the book um that that i think our ancestors understood needed to be built into a place in order for it to survive and endure what's interesting to me is you use the example the historical example of pompeii and how it was constructed in that way and that seems to be continuous all the way through perhaps until the 1950s that the same pattern of construction of our habitat was pretty continuous up until the 1950s well was it the planning community itself or was it uh stimulus such as the uh highway development that under eisenhower's administration i i suppose it was all those factors combined yeah i think you know anytime you get something like this that really is a a broad very rapid cultural shift it's got multiple vectors of causation i mean the fact that you had a generation that lived through the depression in world war ii um the fact that you emerged from world war ii as this strong victorious nation not really damaged physically by the war but really empowered by it a nation that at that point in time like literally had the gold i mean we were the strongest economy in the world the strongest industrial economy in the world we had lots of cheap oil and we had a a population very attuned to hardship and to sacrifice and to working together on on you know against common enemies and so the idea that you would take zoning um and and the regulatory work of planners that had kind of originated in the city building movement in the earlier 1900s and then just sat and percolated for about 15 to 20 years in city halls and you know institutions and organizations because there was no there was no mass building during during the great depression there was no mass building during world war ii this all started after that so the the tools in a sense were honed and refined and became orthodoxy without really being tested to any degree and then after world war ii when all these factors came together we just rolled out this strategy and said hey here's how we're going to rebuild a new america here's how we're going to create a prosperous economy here's how we're going to unleash the american dream in american greatness and i think the thing that is profound about that is that for a short period of time it actually worked i mean we actually did generate unprecedented levels of economic growth we actually did create a huge middle class they actually did experience levels of prosperity that haven't been experienced before the the cost of that and the trap of that became apparent over time and has become more and more apparent as time has gone on but if if you're just gonna throw a uh a post-depression post-war economic party um they did that really well they did it very well um and that you know that's really i think what you see and planners were in service of that i think they've taken too much credit for it because it really was not i mean they were just facilitators of it and then i think have been too in awe of their own tools and power uh subsequently to recognize you know how little effect they actually had on it they were really just facilitators that could be a criticism of all experts that's true it's kind of naseem to lev what called the expert problem teaching birds to fly is what he says you know you you look after the fact that what happened and then you explain it in your terms and i think planners have definitely you know and i'm one of them i think i've definitely been uh you know guilty of that but you've come a long way and you're thinking from your initial training and you're in your edu your formal education i have the same experience you know as a as a young man coming out of college and and studying economics my god of economics was milton friedman sure free market and the more i learned about the real world and in particular my study of henry george's works uh which is in my view was still extremely relevant the more i came to understand that there were systemic flaws that we hadn't addressed and when you're talking about the end of the second world war uh one of the big demographic changes of course was new family formation right and i immediately brought to mind reading your book levittown that here's the model for everything that's going to happen in the next 25 or 30 years in the suburb suburbs of the united states the levittown model which was extremely practical and it gave people young people what they wanted a home of their own independent of their parents in a sense and also the freedom that that the automobile provided all that seemed to come together at that time as well you you look and when we think about like the the american ethos the rugged individualism um you know the the way we kind of glorify ourselves as a as a as a country i i i the image of john wayne comes to mind you know this idea of like the western pioneer the person unto themselves able to conquer the world um this is you know and in some ways an american myth but a myth is really something that is never really true and specific but kind of always true in in general and i think we like to think of ourselves in this way and that development pattern that way of selling this next version of america really fit in with the ethos of how we like to think about ourselves the reality is that human beings are far more complex creatures and i think this is a lot of the difference between milton friedman and henry george quite frankly is that henry george kind of started with human behavior and human sociology and an understanding of how humans react where milton friedman has you know started with the economic side of it here's how an economic system reacts and and how should humans kind of change to adapt to that when we look at post-war development patterns the the thing that made them magical uh is that and the reason why politicians even today refer to this period of time as like a golden nostalgic era you know the greatest generation came home and built this great economy um is because it did fit very precisely with this this mythos this idea of who we wanted to be as a society when you actually get down to how people live their lives they happen to generally love their parents and want to take care of them they like to live in communities and be social they're attached to church and other organizations robert putnam's book bullying alone is one that correlates with a lot of similar work that we've seen about the disillusion of the family the disconnection of individuals from society and the deleterious effects that that has had both on human prosperity and happiness but also on human flourishing and so i i think that when we reduce it down to you know as planners to you know a zoning code and had the belief and i certainly was taught this belief and had it at an early point in my career that you know with the right zoning code not only could we build great neighborhoods for people to live and be happy and prosperous but we could stop you know create middle east peace and cure cancer and do all kinds of wonderful things if we just had the right zoning code you become so full of your own tools and devices that you lose track of the bigger picture of what humans are actually doing and how they're actually guiding and directing life um we almost get to the point of the planning profession where the humans are messing up our plans as if they're you know just the the the sideline thing and the plan is actually the end unto itself yeah i was i was thinking about um puerto rico when you were discussing this this process where people built their house started small as their family grew added on a back room or a second story and even in my working experience during the 70s and 80s puerto rico was part of my territory and many people in puerto rico built their homes that way right was it i don't know if it's continuous i mean part of the problem of course was the guidelines that that the gses that fannie mae freddie mac fha set up where made that no longer acceptable they wanted a house completed you know and a certificate of occupancy issue but but given that you know as as you travel around the country in many neighborhoods in many communities you do see changing land use and you do see people changing physically changing their properties going back to levittown for example visit levittown today none of those homes look like they were what they did when they were built in 1952 right but we do we do still have a good deal of that changing process but i gather your analysis it needs to be much more fluid it needs to be much less regulated yes i i will say the interesting thing about levittown if you go there and look at it the architecture of levittown and the basic layout design was not that far divorced from what you would have seen prior to that so you you didn't have the architecture we have today you you go to a standard suburban subdivision today the garage is out front the house is in the back it is very like a lots of varied roof lines and and things that don't allow you really to easily add on and change and adapt so as we've gotten further and further from that pre-depression pattern of development everything about how we build the home has become more entrenched less adaptable less flexible the interesting thing about levittown is that while you have a pattern of development that is kind of locked in place the the actual architecture still the people who were building that their experience in building was with this flexible building form so it's it was really a kind of evolutionary process even the ranch home is in a sense adaptable and flexible more so than the split entry or the the suburban you know kind of sheetrock palace we see today uh which is not adaptable at all without very herculean efforts it i think the the puerto rico example is very interesting i will say this i i grew up in central minnesota where i still live today rather poor part of the world um and you know for for whatever whatever good or bad i grew up in a family that didn't have a lot of resources when we built the house we moved to the original marone homestead place homesteaded by my great-great-grandparents and we tore down the farmhouse and we built a new house as part of doing that we lived in our garage for a year and a half uh when we built right yeah we went through a similar experience i'll tell you a little bit about it yeah well when we built the house um the house was not finished i mean throughout my you know teenage years we would finish this finish that when i moved in i had no carpet in my room no siding you know on no no finish on the walls it was insulation with some plastic over it and you know we that was just what we did i mean we we paid cash for the house and it was a farm so farms tend to be cash rich one year broke the next year and so in years that did well we would get carpet and we would get other things and in years where it didn't go well we wouldn't um when my wife and i got married and we're gonna build a house my sense of how we built a house was we would buy the land we paid cash for the land then we would you know maybe borrow a little bit of money but put in the basement and maybe you know cap that and maybe live in the basement while we worked on the first floor and i i had this idea from my upbringing of how we would do this and when i walked into the bank not only they say you can't do it that way but they said you're trying to borrow forty thousand fifty thousand why don't you borrow 200 000 and just finish the house you qualify for it you've got a job your wife has a job and i'm like well i can't make the payments on that and they're like yeah you can you completely qualify for it and so their whole thing was you are not allowed to do a resilient building form you're not allowed to incrementally assemble you must build from a financing standpoint all at once to a finished state and uh you know we did wind up uh going that route i think ultimately we ended up with like 140 000 mortgage and it was really um very i remember the first few years of that being really really tight like this no vacations no you know it was because we were just paying the man i mean we were paying this mortgage now on way more house than we ever needed but it met all the fha secondary market requirements i think that's a story that's shared by millions of households over the last you know two generations or more yes and as i was saying you know my my family were carpenters and home builders small time home builders they did remodeling they'd build up one or two houses at a time never a lot so whenever the the housing market was strong our family lived pretty well but there were long periods when it wasn't well my father did what your parents did and he went out and bought a piece of land in the suburbs of pittsburgh and he and his brothers started to build the house and they were forced to leave where they had been living before the house was finished so we moved into the basement well while my parents finished the rest of the house i imagine they did not have a certificate of occupancy i don't know right and i don't what they did for the financing if they if they were able to get a bank loan or just finish it on their own but but that experience i don't see that happening anywhere today and i guess it is because of the financial system right right it really i think hurricane katrina really drove this home to me because i had my own experience and it was tough to analyze as a young man you know in the mid 1990s going through this but when hurricane katrina happened in 2004 and you see houses and there's a place that i was familiar with to a degree houses that had been built over long periods of time that essentially represented the wealth as modest as it was of some very poor people wiped out and now the federal government comes in and in a very like compassionate way on paper says well your house is a junky old house it's worth about sixty thousand seventy thousand dollars we'll give you a hundred fifty thousand for it so we're gonna not we're gonna make you whole and then some and you think like well that right that's really generous that like that really helps out and then you turn around and look and the person who owned the 80 000 home would now have to build a 300 000 home and even if they were able to put all the money they got down they were still gonna have a big mortgage that they're gonna have to pay and so all of a sudden that person's life was altered not just the fact that their home was destroyed and rebuilt but now their whole way of life was changed it was no longer okay to live a new orleans style of life and get up in the morning and maybe do an odd job here or there make some jazz music cook some great food enjoy a nice life you had to be at the office at nine and home at five because you had a mortgage to pay and as as stark as that was you know the my lifestyle the minnesota like the scandinavian lifestyle is very much a get up at nine go to work at five and like we're fine with this the idea of imposing that on new orleans and watching that happen and watching people struggle with this was really eye-opening to me because in a sense it was an imposition of a value structure on a community or a place that had a radically different value structure and i think that they've suffered from that in in very in very big ways it reminds me of the the writing you did about detroit and a couple years ago i gave a presentation uh at a conference in in detroit talking about the city's problems and doing some research on it one of the one of the strange things that you see is one or two houses still standing on a block surrounded by total blight and yet the people who live there will not move even if even if they're offered yeah i mean the city of city leaders say okay why don't we pull all these people together and bring them together with the density that would give them a community and yet many particularly older people have such a sentimental attachment to that house even though their neighborhoods totally deteriorated yes they refused to move they they sit you can see the people i ran into one woman who had flowers flower gardens flower beds shrubs she had flowers on her porch the the little window flower beds and she was tending to them and her place you know was run down and was difficult but it was loved and you looked at you're like this is clearly a place that is loved and both sides of her boarded up houses in the immediate block collapsing caving in and just made me sad because you realize that this is someone oftentimes the way we talk about poor people in poor neighborhoods is that they don't have pride of place they're not taking care of stuff they're letting things get run down and you go to detroit and you realize it's the exact opposite you know some of the some of the people just almost to their detriment have a sentimental love for their own place and for for caring for it deeply and it's tragic what has been i my my narrative of detroit is very much a we destroyed this place from the top down it wasn't like the character fault of people there it wasn't you know like everyone everyone left detroit and it just fell apart we we like intentionally set out to impose a different order on the place and just gutted the fabric of those neighborhoods and it's tragic to watch because you can have as much compassion as you want for the woman with the flower beds and the shrubs and and i do um but i don't see like an answer for that i mean i i i we have we have done a lot of damage and created a lot of harm by trying to promulgate a pattern of development that begins with this theory of building place as opposed to what actual human needs are on the ground well we could have a longest excuse me a long discussion about the the rise and fall of detroit i've done i've done some study on that myself and certainly by putting all their eggs into one economic basket and that is the automobile industry uh they they the the city fathers and the people in detroit put themselves at great risk that if that industry declined as it did or automate it as it did that the jobs would disappear the other the other thing that's interesting is as a as someone who has uh in school by henry george is what happened to the southfield michigan uh town you know and its history under under the early mayor in the 60 james clarkson and all he did he didn't even follow henry burj's idea of increasing the tax rate on land he just made sure that assessments were kept current and as a result that south field started to attract investment started to attract the businesses that were leaving detroit and despite the the decline in the automobile industry southfield at least as far as i know is still today quite prosperous high level of employment etc two places close together and yet such different experiences just because of that one variable and that is uh how the tax system treated property owners i don't know if you looked at south field as a as an uh in comparison to to detroit um i don't know what the housing affordability situation is in southfield uh today but it would be interesting to have a current study done on it right absolutely i i i do i do think that one of and and i i don't i'm not trying to uh to to bash political philosophies as much as i am kind of trying to point out the need to have a balance i i see a lot of the argument in detroit even today being um we can't have uh solid economics in places we have to essentially treat detroit like a ward of the state uh because the people there are so poor and because there's so much destitution um we can't you know have sound money and sound neighborhoods and it's actually the exact opposite um the more we treat these places in sound ways the more we allow people to establish and start to get moving in the right direction i'll give you one example that i've seen play out in detroit a number of times and it's it almost blows your mind how tragic it is you will have people who live in a house then they're renting it and they pay their rent every month to a landlord and the landlord collects that rent but doesn't pay the property tax they have a ton of incentive to not pay the property tax so they don't and and even though they're collecting the money um they're paying they're not paying their property tax and after seven years that then is foreclosed on there's a tax foreclosure the person who's renting will get kicked out of the house the property will go up on the the foreclosure rolls and it will be put out to auction the auction amount is the amount that of back taxes that are owed and so what happens then is that the uh the the guy who owned the property originally uh will or will bid on it and oftentimes will win the exact same property back um and we'll start the process all over again the interesting thing about this is that if the county went to the individual property owner and sold it to them instead said you're paying 800 a month in rent and you took that and yeah if you took that and put it towards the taxes and bought the property yourself you would own this property outright in like two and a half years three years like you could own this that property owner doesn't qualify for a mortgage couldn't get a mortgage on a property that low anyway the bank wouldn't process it the origination fees wouldn't even pay for it doesn't make any sense but the county can't do that because the county has borrowed money against the back taxes that they're owed and they can't finance it over for they need the cash today to continue their operations so all of a sudden you have this like bastardized financial system where that the landlords have completely figured out the property you know the investment class has completely figured out and it holds the the actual people who are living in detroit hostage if we went in and said we're going to have sound economics here we're going to have actual programs where people without you know with resources can start with the resources they have and build off of that you could start creating real wealth in detroit's neighborhoods instead we've said we're going to be hostage to a large financial system the county government that collects this is going to be hostage to the bond market and the you know the the international uh municipal bond market um and so it's all kinds of factors driving the decisions being made as opposed to what is really happening on the ground and the resources that people there have and we do this out of if you go talk to the county they will say well we have to do this because we need the money because we're providing services to the person in that house we're providing them subsidize this and subsidize that and i'm like just stop being helpful just let them figure it out and actually build an economy here because they have the resources and the capacity to do it it reminds me of uh the large number of properties residential properties since 2008 that have been converted through foreclosure to investment properties and there are a number of companies that specialize in this and they own hundreds and hundreds of properties uh put almost nothing in them of course and and often they're not even they're not even leasing them out they're just hoping that the market will recover so they can flip it and i would suspect that a majority of them are limited liability corporations that yes example you gave that person who let that property go may have formed another llc and purchased it through that new name it's it is quite a sham it's quite quite a shell game that's being played in real estate no doubt about it um my experience it's fascinating too you know we have this uh macroeconomic conversation about well you know inflation is so low we can borrow as much money as we want we can print as much money as we want we can spend what we want because we're having this deflationary period and you know fill that vacuum full of cash and i i always look and i'm like what do you mean we don't have any inflation you know we we gave billions of dollars to rich people they bought stocks and the stock market went up insane levels and we continued to give billions of dollars to banks and other you know kind of uh people who are well positioned and they started to buy real estate and you can go to small towns around america and you will find housing that is unaffordable that is ridiculously high in price and when you dig into who owns it it's it's real estate investment trusts it's llc's some of it maybe ends up on airbnb if it's in like a tourist type area but what it's not is it's not locals it the the the the property market has become non-responsive to individuals at the local level and this has always been my problem with the housing affordability people you you go to california as like a prime example and they'll say well housing is unaffordable so we need to create rent control and we need to create this regulation and that regulation to drive down or stabilize or freeze the the price of housing and you get things like prop 13 this this massive distortion in the market you you get other things that have really messed up their housing market and made it unaffordable for tons of people the the response should be we need to actually create a market that equilibrates at the price people can afford you know like like we need to create a market where the feedback of the market says here's what i can afford and so prices come down and instead we just layer on distortion after distortion after the distortion and you wind up with this market where the the people who can least afford it are the ones who get shoved to the sideline so i i find it eternally frustrating particularly since the the 2008 crash and the actions by the fed to keep interest rates really low what that has done not just for real estate in stocks but almost any asset is that not to get too technical with our listeners but market capitalization has resulted in asset price bubbles and particularly for real estate it's easy to understand i'll draw on henry george's analysis every parcel of land has some potential rental value and if you don't publicly collect that rental value to use to pay for public goods and services and it's privatized it'll be capitalized by market forces into a selling price for land and uh it just is built in inflation and yet our national income statistics don't even calculate it that way don't even recognize it as the cost of living for people but right the when we look to i mean systemic solutions are going to be difficult to come by i've been working on them you know for my entire career but we end up with his band-aids it seems to me that the the best band-aids that we have available to us with regard to housing affordability one would be inclusionary zoning and i'd like your opinion on that and the second is forming community land trusts and in particular on a scattered site basis as exists in some cities i've been at fannie mae i was a strong advocate of supporting community land trust activity but those two methods seem to be the best band-aids that we have what you're talking about is a much more systemic kind of change and i hope that you and i live to see it happen well we may be living through it right now you know um a lot of big changes come about by destruction and you know i i think you look at 2008 and to me 2008 was the housing sector saying these prices are insane they need to come down and you had a huge drop in prices and we didn't even get to what historically would be you know par or we didn't get to like what you would in a stock sense called fair value we were still elevated at the bottom um but then we just pushed that right back up and let's get it back up here again um we're gonna see right now i believe uh as this coronavirus works its way through our our population and then our economy i think we're going to see that that you know pressure to go down again and we may get we may ultimately end up with a kind of reform and it might be a reform through you know inflation showing up in other sectors not in housing or it may be some type of structural reform i i i'm i'm not a inclusionary zoning does not excite me um and and i i think like the land trust idea i get i get both of these ideas and i see the validity of them they excite me less um and and maybe it's because i'm uh i'm naive or i'm uh i'm too idealistic but i always tell communities when i give them advice is you need to stop doing things that actually threaten your own financial health long term and and and so i feel like a community land trust and inclusionary zoning are both like proactive attempts to try to push and nudge a community into doing things that put them in a better position long term and what what i'd like to point out with with you know our do the math kind of work and say here's a suburban subdivision if you build this or accept this or if this is what your zoning code calls for every time you build one of these you're getting a short-term cash boost in exchange for an enormous long-term liability so you are becoming poorer stop doing things that have you become poorer and i i it's it's interesting because i think if we step back and we said what are the odds of a community adopting inclusionary zoning or going all in on land trusts it's probably better in a good economic period than you know cities that are growing with suburban models adopting our thing and saying you know we're going to stop we're going to stop doing that because we're actually becoming balance sheet poorer um but in a time like now where we're not seeing that and i don't think we're gonna see for the near future um you know the the idea of coming to grips with the insolvency of our development pattern to me is really powerful because it allows cities to stop prior to trying to prop up a failed pattern a pattern that's making them poorer and shift to something that's more productive and and that's what we're trying to help cities do is make land you help land use patterns emerge that make your city stronger and more prosperous the inclusionary zoning stuff seems to me to be i'll use the word reactionary but i think you could also use the word pragmatic right it's a it's an attempt to deal with reality as it faces us today exactly exactly and and one of the big problems in many communities is that there's no housing that's affordable for people that are asked to do the work in the restaurants and hotels right landscaping and all that so we end up with people having to drive an hour or an hour and a half each way for a fairly low paying job so again i don't i don't look at these as solutions but simply ways to mitigate the problems that we have while we work on solutions and for example with regard to the land trust the housing land trust the big advantage of course is that individuals are buying a house and not not having to pay for land and so you can if you're if the land would be a hundred thousand dollars and the house would be a hundred thousand dollars and you only have to pay a hundred thousand dollars and borrow to purchase a hundred dollar 100 000 house then your debt load is much less and at the same time it does provide ground rent revenue for the land trust to maintain the infrastructure and if it's done right equitably then some of the issues that you've raised with the larger communities won't affect the the land trust over time i i these are complex yeah a conference on them right my gut my gut is to always in individual cases like applaud it because i get like i get the human reaction and i think it's a very smart approach for people to take but as a as a city-wide or a community-wide or even a macro strategy my my gut is always to worry about the future adaptation you know when you when you put something in a trust you are in a sense creating added obstacles and barriers to future change in adaptation and you know to me when i look at our system the number one problem that that i recognize that i see is that our system is built to a finished state it's not allowed to adapt and to change the land trust thing as you describe it here is is a pragmatic way to deal with that system that current system um but it does it in a way that i think adds to the the central problem over the long term and i you know i i'm i i'm i'm i'm i have a deep amount of empathy for people who are caught in this you know but i look at like i was in vail colorado and in vail colorado a parking spot in their cove in their garage goes for like 150 000 you know you you're no one is living in vail working who works there in one of the stores selling stuff i mean it just doesn't the economics of it doesn't happen so those people are bused in from distant places and and i just look at it and i say you know what the people in vail should pay 20 for their coffee because that's how much it cost and and like i you know i don't know why we would subsidize highways and transit lines and and you know the the sewer infrastructure for the community 20 miles away and and their housing and and help you know subsidize the people that are there all you're doing is allowing people to live marginal lives so that people in vail can have five dollar coffee instead of twenty dollar coffee or not have to like solve that problem themselves like i i don't i get the like immediate pragmatic like let's help people who are suffering but a lot of times you know we create these like weird things where you trap poor people in this stasis where like a feedback mechanism would actually i think provide them more options and more dignity the mathematics in your book suggests this never never pays off for a community never right always results in excess liabilities building up over time and you know i i try to when i when i first got into this you know 15 years ago and started doing 20 years ago started doing this math i tried to find like a a a an engineer way you know because i'm a civil engineer and a lane use planner i try to find an engineer way to deal with this and explain it as like rational spock like human and it was only when i started reading you know daniel kahneman and started reading you know jonathan height and some of the people who deal with uh behavioral economics that i started to recognize just the way humans and human behavior and human emotions and and the the limitations of our brain including myself how we deal with these things is really the driving force behind it as opposed to just pure rational market incentive math and so cities yeah take on these things because cities that are growing look richer they have more immediate resources they're able to do more things and that long-term liability that's sitting out there 20 30 years from now is it's not something we don't care about but it's it's so less immediate that we're able to collectively not think about it very hard and not focus on it and that the problem of that induces humans a future city council a future mayor and in the meantime i have ribbon cutting ceremonies i've created jobs i can say all the good things when i'm running for election next time i well and i i don't even know if we have to get that cynical because i mean i i'm but i'm with you like i think that there's there's that on a large degree but but if you just said you know human this is why people smoke right um you know this is why uh i will sit in front of the tv and have a bowl of ice cream instead of going for a jog you know this ice cream tastes good i like this show the heart disease i'm going to have 30 years from now i'm not going to get that like i you know i it's not like top of mind at the moment so you know i think humans are just flawed um in this way and clearly you know there's evolutionary reasons why we have this flaw i mean humans of the past were designed to act on the thing in front of them and that paid off for us from an evolutionary standpoint now that we have the tools to utterly transform our world overnight uh to to make these decisions that have long-term ramifications um we have to condition ourselves to think differently and that's really hard my opportunities to speak before the planning community have never been successful i wonder whether does it surprise me it's it's difficult yeah the most effective talk i ever gave was was back around 1999 at fannie mae we had one of these corporate uh program competitions and our our corporate development people were looking for the best ideas to pursue over the next x number of years so this is when i wrote a paper on proposing that we support a scattered site community land trust program will be funded by tax exempt bonds it was chosen by our corporate development people as the number one program for development and then our our accounting and marketing people started to get a hold of it and they said well ed this is a really great idea but it's not going to generate enough business volume and transactions and so when it started out as number one it ended up on like number 15 on the list of their priorities right i still think it's one of those ideas that could be somewhat transformative it's different from a community land trust that normally exists because it means that the property can be anywhere and doesn't have to remain in the trust forever so the fluidity that you're talking about would be built into the design but it could help people get into housing in any neighborhood they wanted to because they would have the land trust as a co-purchaser so the properties would have to be contiguous well that's that's just one that was the talk i gave um to a group i think was in cleveland ohio and i just couldn't get through with them to them that this was something fairly simple and i wonder if when you give i've seen your lectures on on youtube when you give your talk to that group are you starting to see some break in the ice are you starting to see some response from the planning community that hey this guy may be onto something that we should perhaps begin to at least examine if the if the threshold is some the answer is yes but but let me contrast two groups i go and i speak in front of you know 900 elected officials mayors city council members that type of group i will have standing room only there will be people in in the aisles they they want to talk about this the feedback that i get is thank you for explaining this has never made sense to me but i can't get an answer for this you've explained things so well and they're jazzed they're excited they want to go back and change the world and do things different i talk to a group of planners and i'll have you know 400 500 planners in a room at a conference i will be going through my spiel my talk there'll be a couple points of levity no one laughs you get to the end and no questions um and you just are looking at these blank faces and i i know what's going on because i will talk to them afterwards and what's going on is you've just told me that the the world as i have constructed it and as i've like laid my own morality over top of it is actually something different like you've you've just shown me the matrix you've just twisted things around for me and i can't i can't process it and and i i don't know how to deal with it and a lot of what we just get is like the the most the most generous response i get is chuck i think you're right but i can't do it that way you know and and this is the reaction i feel like you get too when you're like this is the number one thing coming out of this group but by the time it works its way through all these other groups it's 15. right it that's because all every top-down centralized profession and if you go to a city you have engineers who have their own you know international standards you have planners you have economic development people you have the city administrators you have the parks and rec people you you have a whole set of bureaucracies that are tied to these national and in some cases international ways of thinking and they all have their own priorities they all have the own things they're trying to optimize and so if you're trying to work your way through all those the the the the one that we've seen the most like pushback on is the the public safety ones you know you try to build a street that doesn't kill people by having people drive too fast down it and if you if you the easiest way to do that is to just narrow up the street create a little bit of edge friction if you do that the fire department people come out and then scream at you and they have international standards that say you know you've got to have this much width and this much setback why because that's the way our fire trucks are sized well i can go buy a different fire truck that's a different size nope that's the way our fire trucks are sized so every street in the city has to be overbuilt by 25 30 percent and made more dangerous and less financially productive we have created this at the what we try to advocate for at strong towns is to get this to be more bottom up because when you are a mayor you can cut through some of these things and you can start to get people in a room who are actually working on this and align them and and and have them reach some type of bureaucratic compromise and come out with something that actually will work in the moment when you're trying to do this through the international agency for this and the national board of this and that no one has uh the the incentives if we just want to get to it to actually change their structure and their culture to adapt to some secondary effect of what they're doing and again i i will say we we could we could look at that and say bureaucracies are bad and humans are bad you know what but that's just like a very human thing i'm doing my thing i'm doing it really well i believe in what i'm doing why would i change that because some engineers showed up or some you know guy from fannie mae showed up and told me i could make things five percent better if i did this like that just seems like a lot of work and it's risky yeah it is well i in in my own case uh it took one person at fannie mae with uh what i would say a lot of intellectual courage to support what i was putting forward and one of our sbps agreed to send me out to talk to different community groups about henry george's idea of land value taxation for about three years i did that and uh met with stakeholder groups around around the northeast in many cities um to try to give them a sense of how important it was to address the problems of property taxation and the motivation of what brought people to do what they do you know how to get rid of land speculation how to make it uh feasible for lower income people to move into different neighborhoods by controlling the price of land right i was really amazed that fannie mae actually got behind that idea once one senior person was convinced that this was good for affordable housing now other organizations have similar leadership but i haven't really seen it come come forward with respect to the objectives that you've established right maybe you're begin to have that experience but but someone if if someone at the federal reserve or someone at at uh at fannie mae or freddie decided that what you're talking about is a best a new best practice that that term is you haven't used that in your book that i noticed no i didn't one it was our mantra everything that we did was looking at the best practices if it was being done in chattanooga successfully that's a best practice that we should tout to everyone else and in your book you did make some reference to that sort of mimicking you know uh strategic decisions but that what works in one place is not going to work in another place necessarily right i think i think the tendency is to then um you know if it worked this is what we experienced in 2008 really is markets that we assume were not correlated were 100 correlated because we assumed that what worked in chattanooga would also work in california would also work in minnesota and so instead of sharing those as ideas to be adopted or things to learn from we adopted them as best practices and said here's what you do here's how we standardize this and so the single family home is a best practice look at this is you know this worked really well in detroit let's take it and put it in other places and now we finance a single family home in a certain way and so we have a glut of single-family homes um you know you i i feel like the role of if it's gses or it's you know federal organizations or national organizations there's a very fine line to walk between being facilitators of good practice across jurisdictions and being imposers of a standard that becomes inflexible and calcified over time and that's a that's a fine line to walk and i don't know as anyone will ever do it perfectly but i think sometimes we're not even aware of that you know we're not even aware that we have that impact well perhaps are you familiar with ellen brown's work it seems to me that one of the parts of the plan for achieving what you're trying to achieve has to do with the establishment of public banks yeah really without the non-profit public bank entity the rest of the financial community is not going to change its ways but but at least public banks could be flexible enough to allow people to do some of what you're talking about it's interesting because i was you know having a chat with someone the other day and going through you know what would a what would a banking system look like and you know that that that was a strong towns type system and we were like well it would be like uh you know this person saves their money in the bank and then it goes out to help this person build their house and and at the end of it we had just come up with a savings and loan you know like well we we had these like we you know we we at one point did this um we just took them then and like redirected them to try to generate lots of growth in the economy and then it went all haywire um you know the the whole like george bailey nostalgized it's a wonderful life you know your savings is in their house and your savings is in you know their investment and there's something very like genuine and organic about that um it won't maximize growth but it will create a lot more stability and i think provide a lot more options to people and if if we if we shifted our mindset from one of how do we generate as much growth as we can to how do we create stability and prosperity for people we would we would have a very different approach a very different approach well it takes us back to a couple generations ago of immigrants i mean when immigrants were non-bankable they created their own savings funds uh i think the korean or chinese fund was called the susu fund yeah that juice fund was called the gamak if i'm if i'm remembering correctly but those are people who took this whole issue in their own hands and they did exactly what you did they created communities from the ground up a little bit at a time and shared their resources effectively and right certainly to follow through with ellen's arguments in a sense that cash stays in the community instead of going to a corporation or a major financial center bank somewhere else cash circulates in the community and it makes it a lot more possible for people with lesser means to build themselves up from the from the ground up right what we actually see here in minnesota um the somali community we have large somali communities in many places and they are for uh to a large extent unbanked and we see that same exact thing very very high savings rates a lot of cooperative action at the local level and a lot of you know very much a cash economy with a little bit of internal lending between them and the reality is is they've you know you've seen the wealth and prosperity of that community grow successively over the decades in ways that yeah i think that they were more entrenched in the american system would not have happened certainly would not have happened within a cultural framework well um what i guess what intrigues me is scale to what extent can we put the genie back in the bottle and how long could it possibly take millions of people live in large metropolitan areas and sprawling development continues to occur on an ongoing basis despite all the discussion we have against sprawl it's it seems to be continuing almost everywhere i don't expect you to come up with a solution but yeah but what's your advice be to uh the leaders of mid middle-sized cities that are starting to experience the same outward movement of population um and that they might be concerned about their downtowns their central core being threatened by this loss of population to a to an excerpt or edge city so a lot of what and and this is a little bit dark but a lot of what we at strong towns have kind of recognized is that um it's really hard to get people to change in this system we also think that a lot of the suburban development a lot of the what we look at as the problem is going to collapse under its own weight and so we are and and the analogy that i've been struggling with lately is like i don't want to be the general who wants war you know like i don't want to be because you know you get the general who's like practices for war all the time and then at the end of the day they want a war and and i'm like i'm i'm pr i'm in a sense prepping people for this system to collapse um that puts me in an uncomfortable position of when you go through huge economic turmoil going yes like i'm i'm this is now happening here's how we react to it uh i i think that we will continue to try to build this style of building until we cannot do it anymore and whether we cannot do it anymore because there won't be any demand for it um because people are just broke um whether it will be because we've so messed up the energy markets where fuel is just ridiculously expensive and people aren't driving that much and we just can't afford like the burn of that lifestyle um or whether it's our local government's going broke and we just can't prop them up anymore at some point we will stop building this and i think the question then becomes how do we pick up the pieces in the 1950s and 60s we walked away from urban neighborhoods we just got up i mean people just got up and left i mean they they sold their homes for nickels and dimes at what they thought they were valued you know in times past because they were not very good investments and we were enticing them into other investments out on the edge of town um for us it seems unfathomable that we would walk away from walmarts and target and strip malls and mcdonald's and gas stations and suburban subdivisions yet when you look at the construction of those you look at the actual materials these are places that are not designed to endure they're act if you stop maintaining them they'll fall apart in a decade like literally just implode you'll have trees growing up in them it will be a disaster um these places fall apart very very quickly the idea that we would walk away from them seems unfathomable to people but i think will become just very self-evident in in a not too distant future and so the question really becomes one for in my mind less of how do we stop this because i feel like it's headed for the wall like it's going to stop on its own but how do we position our systems our culture our society to salvage what we can out of this and make the best out of it without going crazy you know without doing things that are self-harmful and that's why a lot of my writing and a lot of my my reading and and my intellectual time has shifted from the physical nature of maintaining infrastructure and the economics of it and on the ground to the cultural part of how do we work together on a difficult project at the at the local level how do we you know tamp down our kind of worst tribal natures at the at the macro level so that we can actually work together in a community to figure something out um you know can i work with my neighbor even though they watch a different cable news network than i do i should be able to how do we help people actually be able to do that and do that productively those to me are the urgent things of our time because i i feel like the other part is going to solve itself in a sense you know what can't continue won't continue and once you recognize that it becomes really scary then becomes really liberating well we do have ghost towns all around the continent you know where people and detroit is in a sense one of them yeah so the infrastructure costs are going to decline as those neighborhoods revert back to well right now i guess the highest best interim use is agriculture right many cities are experiencing that urban gardens and urban farms are being created where neighborhoods once stood we should blow people's minds you know because it's funny because a lot of people think oh you know this is really cute like an urban garden how how nice how green how sustainable and you go out there and you point to them like you realize you have like four hundred thousand dollars of public infrastructure for land that is now worth like a thousand dollars an acre it's at agricultural prices like those things don't those things don't add up like that doesn't work you know i grew up on a farm you know what the public infrastructure was to the farm two tire tracks out in front of the house that got you to the county road a mile and a half away that was it you know it snowed and we didn't get plowed out for two or three days um the farms are low value uh per acre types of enterprises and you can't have public infrastructure on them so i i think some of these things will become self-evident to people but it's going to take time to work it out and you know i i think the more of this we localize and the more our big bureaucracies and systems shift to facilitators of ideas exchange as opposed to imposition of you know order uh i think the better off we will be i think you're absolutely right and i you know i'm i'm a strong believer that we need to make incremental changes and and certainly one of my focuses and activity has been on tax reform and what we really need to do with regard to tax reform i would if you haven't read already i would strongly recommend that you take a look at what mason gaffney has written mason is now in his 90s he's a professor emeritus from the university of california but his writing on these issues is really i think critical for for for people like you and me to understand um but but i i think we need to move to a system of tax of raising public revenue that gives everyone the incentive to do the right things and to me that henry george was was right on target when he came to that conclusion if if we simply increase the cost of holding land people will hold less land they'll bring it to better use and the cost of housing and the cost of doing business will all come down over time but it's almost impossible to get people to be willing to make a change even if it's for their long-term benefit if it hurts them in their pocketbook in the short term so well the to me the other challenge that the henry george school has at the local level is not only overcoming the fear of change but the fact that what you're really talking about is a whole bunch of people saving a nickel and a dime and a handful of influential people having their taxes go up a dollar or two so you know the there's there's this disproportionate problem where the benefits are really apparent and they're widespread and they're broadly shared by society but each individual has a little bit of added benefit that adds up to a lot the people who are the land speculators the people who are in a sense like position themselves to to benefit from the system they will disproportionately be affected in the negative by this and so if you have a meeting this is any type of public improvement is this way if you have a local meeting and say we're interested in doing this who will show up are the you know dozen people negatively impacted not the thousands of people who would be positively impacted because the positive impact is substantial but it's less on an individual basis than the harm to the one person who's really sucking the community dry in a lot of ways i think if if leaders recognize that they can overcome that but you have to you know to me that's the uh that's the communication thing that we need to get out is is is that disparity there's another critical factor in that is that the overwhelming majority of net worth held by households in the united states comes from equity in their residential property right most of that equity comes from land value this is this is a really difficult conceptual issue for a lot of people to to grasp and say well you you want to tax my land and take my equity away from me right but on the other hand where are your children where are your adult children living in my own i live in southern new jersey in my neighborhood i live on a cul-de-sac and uh most of my neighbors are pretty well to do none of their adult children almost all of whom are college educated can afford to live anywhere close to where we live right so you know it it's in in that sense it's taken away from the whole type of community involvement that you have emphasized is essential to the health of a community right and not everyone understands what this is what this is all about even one other example i'll pose and then i'll give you the last couple of minutes to talk with us looking at the statistics on student loan debt it is unbelievable the extent to which that debt is held by grandparents right with their children and grandchildren right uh yeah and and they're they're taking out reverse mortgages in order to to get cash to make their pay their bills um these are these are hidden problems in our society that are not talked about in the media and not well understood and well known but as the same thing with the liabilities on infrastructure the cities are have undertaken they're all going to come home to roost it feels like we have adopted an economic theory that has just systematically created these widespread fragilities the student loan one we look at in in our politics and this is not a political party thing this is a broad observation our politics tends to deal with that as like a discrete problem you know the student loan problem as opposed to the the entire college funding problem as opposed to the upward mobility problem as opposed to you know uh intergenerational wealth problem i mean these things are all part of the system and what we see is a lot of these symptoms cropping up why is housing so unaffordable why is housing unaffordable in akron a deeply poor community and san francisco a very affluent community how can that be why is it unaffordable in detroit of all places where there should be abundant housing at very cheap prices yet it's still unaffordable for people you you look and recognize that there's something fundamental at like the the the economic dna s of this system that just is not producing good outcomes for people and you you kind of i kind of i kind of feel a little bit like a conspiracy nut when you start to listen to the you know oh it's a fractional reserve banking and it's the federal reserve and it's but there is no doubt in my mind that what we have gotten away from is any type of mooring in community in in the way people actually live their lives and our systems whether it is the federal reserve and the way we manage our currency uh whether it is you know the way we manage interest rates or or or market properties these have become very disconnected abstractions to what it means to actually be a human and live a human life and i i my you know my fear right now but also i think that you know general kind of sense of of awe and opportunity is that you know this system resolves itself by by resetting by having something fail to work and then creating anew people get freaked out over the idea of you know currency collapse or economic collapse or but i i've even pointed out to people that if you went to what i think the low point is of humanity over the last um you know hundred years uh in terms of western civilization you could go to berlin in 1945 and there is no you know there is no more complete collapse of a society than berlin in 1945. yet if you went to berlin in 1950 here's a place where people had food had jobs had economy had currency being exchanged had you know the things of normalcy that we would look at as human existence i think it's the change that freaks us out and for good reasons we've built up a lot of fragility and it's painful to work that out um i think our emphasis right now should be on how we get through this in a way that is the has the most amount of empathy and compassion for those around us but i think a lot of this is unavoidable and i i do think that when we get through the other side what we need to recognize is that the systems of feedback that henry george and others have long you know have have promoted and have long been known are essential to making sure that these systems don't remain abstractions but actually serve us as human beings i think that's what's been lost and i think that's what we all feel has been lost does this mean we're better at recovery than prevention yes yeah yes i think that that's undoubtedly true um and you know i maybe that says something about us as as species but we are um i mean this is the the roman republic example uh you know we have this myth and i think it's grounded in some reality is that when you get fat and lazy and and things are too easy that's when uh humans tend to fall apart and when we do have a little bit of stress and tension that's when we tend to be our better angels and i don't know i'm i'm looking forward to uh living amongst our better angels again charles you've given us and this the listeners this program a lot to think about i've really enjoyed this conversation and i look forward to maybe an update let's say six months or a little bit longer from now to see what sort of feedback and response you're getting from your message but i do encourage everyone who's listening today to get hold of your book read it study it i i have actually prepared a fairly extensive analysis of the book that we'll be sharing with you for whatever value it has but i'd i'd love to have a chance to have your comments to some of my uh own experience and reaction so thank you so much this has been a wonderful discussion i appreciate it thank you thanks for the opportunity and yeah it's been very good i look forward to those comments it's always interesting to get thoughtful feedback so please pass those along take care of yourself and and good luck with everything you too take care we'll talk again soon okay bye bye that's it for this edition of smart talk for more information on this and other episodes please visit our website henryjordsschool.org i'm edward dodson and thank you for watching smart talk [Music] you

Channel: Henry George School of Social Science

Views: 816

Keywords: economics, henry george school, smart talk, henry george school of social science, equality, henry george, Charles Marohn, Strong Towns, infrastructure, city building, production, tactical urbanism

Id: dbQ3QdsRn8w

Length: 78min 48sec (4728 seconds)

Published: Mon Nov 16 2020