World-class not "merely boasting how darn great we are."

If I were the egocentric type, I'd probably think that none other than the P-I's Bill Virgin is a Seattle Bubble reader. A mere five days after I dispelled the notion that Seattle is "world class," Bill delivers the exact same message to a broader audience in today's column: So what makes a world-class city?

Is Seattle a world-class city?
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During the heady days of No. 1 livability rankings and magazine covers and pop-culture references in music, movies and TV shows, Seattle got to thinking of itself as not just world-class but world-centric.
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So should anyone care about whether Seattle is world-class?

In fact, there is an aspect to world-class status that goes well beyond meaningless exercises in civic pride (or, some would argue, overly and unjustifiably inflated ego) that does matter, at least in the realm of business and economics.
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Which brings us to the question of how Seattle stacks up as a world-class city in the business sense.

The answer: Maybe not as well as we used to believe.

Just about every discussion of the economic fortunes of this region focuses on two companies: Boeing and Microsoft — with considerable justification.
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And after that, what other sectors are there of which we can boast world-class status? Natural resource businesses like timber and fishing no longer figure prominently in the regional economy, much less nationally. Seattle never did emerge as a biotech center the way boosters hoped.

Interestingly, one sector in which Seattle has emerged as a leader is one in which it had not traditionally been a significant player — retailing. Such is Starbucks' status that it has influenced the direction of another giant, McDonald's, while Costco on a national level has forced none other than Wal-Mart to react to it.

Still, the portfolio is a little thin in terms of making Seattle a world-class business center. That's probably just fine with a lot of people. But if Seattle does aspire to world-class status as an economic development strategy, it's got some work to do, beyond merely boasting how darn great we are.

If you have to tell everyone you're world-class, maybe you really aren't.

Ding ding ding! We have a winner. Bill "gets it." Seattle is a nice city, but any way you look at things, it falls short of the "world class" title.

(Bill Virgin, Seattle P-I, 04.16.2007)

On Luxury Cars and World Class Cities

My car is so great. It has a built-in CD player, a driver's seat with four independent adjustments, a tasteful spoiler, a spacious trunk, climate control, a powered sunroof, and gets over 30 miles to the gallon. It's comfortable, good-looking, and fun to drive. My car is comparable to a BMW or a Lexus, and is a great fit for me. Did I mention how much I like it? I mean, BMW or Lexus are a good fit for some people, but they don't really fit my style. You know though, it really is surprising how cheap it was for me to buy, considering how much other luxury cars go for these days...

So why am I rambling on about my car? What could this possibly have to do with home prices in Seattle?

Every once in a while someone tries to make the case that high home prices in Seattle are justified (or even that prices are too low) on account of what a swell city this is. Their argument goes something like this:

Seattle is so awesome! In fact, Seattle is so swell that it is completely reasonable to compare home prices here to cities such as New York and San Francisco, where homes are much more expensive! Seattle is after all a hip, up-and-coming world class city, probably even the hippest, most up-and-coming world class city around. So you see, it totally makes sense for home prices to shoot through the roof around here. We're just catching up to other comparable cities.

I definitely agree that Seattle is a great place to live. Much like my car, Seattle has many attributes that I really like: low pollution, beautiful scenery, proximity to nature, and a decent job market, to name a few. That being said, comparing Seattle to New York or San Francisco is just as ridiculous as comparing my Saturn SL2 to a BMW or Lexus. They're just not in the same league.

Although I already knew this was the case, since I don't travel much (never been to New York, Boston, San Diego, and have only visited San Francisco once), it didn't really personally hit home with me until my recent business trip to Chicago. Even though I only spent one afternoon cavorting about and seeing the sights, I was immediately struck with the impression of "this is what a real world class city looks like."

These are a few of the things I noticed (and later researched) about Chicago.

Chicago

• Density: 12,604 people per square mile (source)
• Extensive Rail system, with 8 different lines running through the heart of downtown (source)
• Over 2,100 acres of waterfront parks bordering the downtown core (Lincoln Park, Millennium Park, Grant Park, Burnham Park), over 2,800 acres of waterfront parks total
• 16 major sports teams, with 28 total championship wins (source)
• Strong blues, soul, jazz, and gospel music scene. Birthplace of House music. (source)
• World famous government center (Richard J. Daley Center), world famous skyscraper (Sears Tower)

Now here's how Seattle compares in those same categories.

Seattle

• Density: 6,901 people per square mile (source)
• Patchwork rail system, with an independent monorail, various street cars, disconnected, infrequent north-south routes, and various in-progress light rail lines. (source)
• 18.1 acres of waterfront parks bordering the downtown core (Waterfront, Myrtle Edwards, Olympic Sculpture), over 600 acres of waterfront parks total
• 6 major sports teams, with 4 total championship wins (source)
• Alternative music scene. Birthplace of grunge. (source)
• World famous landmark (Space Needle), well-known market (Pike Place Market)

If I had thought of it, I would have asked some Chicago natives whether they think Seattle is an "up-and-coming world class city." I bet they would have laughed at me.

While I was researching this post, I came across the Wikipedia page on world class cities (or "global cities" as they are referred to on Wikipedia). It cites an "inventory of world cities" compiled by a university group in England. In their list, cities can have up to 12 points, with 10-12 point cities being considered "alpha world cities," and so on down the list. Here is the summary of the US Cities categorized on their list:

Alpha world cities (full service world cities)

• New York (12 points)
• Chicago (10 points)
• Los Angeles (10 points)

Beta world cities (major world cities)

• San Francisco (9 points)

Gamma world cities (minor world cities)

• Boston (6 points)
• Dallas (6 points)
• Houston (6 points)
• Washington, D.C. (6 points)
• Atlanta (4 points)
• Miami (4 points)
• Minneapolis (4 points)

Seattle shows up way down the list with 2 points, having "some evidence of world city formation." Another categorization is quoted that lists "well rounded global cities" (such as New York, San Francisco, and Chicago) and "worldwide leading cities" (including Miami, Atlanta, and Denver), but Seattle is nowhere to be found on their list.

I mention these lists only to demonstrate that when I say "Seattle is not comparable to San Francisco or New York," it's not because I have some grudge against the city that I call home. I am not alone in my assessment of Seattle as a small city. It's not my biased opinion, it's a fact.

Again, I want to reiterate that I like it here. Seattle is great, and I am happy to call it home. But let's be honest, it is disingenuous to compare Seattle to New York or San Francisco. Let's enjoy Seattle for what it is instead of pretending it is something that it's not.

Much in the same way that I would not pay $40,000 for a Saturn sedan, I am simply not willing to shell out $450,000 for an average house in Seattle.

Update: It seems I've got an ally in Seattle P-I columnist Bill Virgin.

What to Blame? Not Growth Management.

Here's a guest editorial from today's Seattle Times that says something I've been saying all along: The "home prices are high because we're running out of land because of Growth Management" argument doesn't hold water.

The cost of housing is spiraling out of control in many parts of the Puget Sound region. King County is redefining sticker shock for homebuyers as the median price of housing approaches $440,000. Years of double-digit increases are a serious threat to many people's dreams of home ownership, and to our region's livability.

As the problem escalates, the search for real solutions has become increasingly high-stakes. To tackle this challenge effectively, we must work together with accurate information. We must also move beyond misleading and misdirected attacks on environmental and growth-management laws. The evidence suggests these attacks are misleading and unwarranted.

Opening rural areas to sprawl development doesn't increase housing affordability, nor does protecting rural areas from irresponsible development make housing unaffordable. The state's Growth Management Act actually requires local governments to take steps to improve housing afford-ability and choice.

The Brookings Institution has found that market demand, not land constraints, is the primary determinant of housing prices. Its study, "The Link Between Growth Management and Housing Affordability: The Academic Evidence," reported that "housing prices are actually determined by a host of interacting factors, such as the price of land, the supply and types of housing, the demand for housing, and the amount of residential choice and mobility in the area." In other words, the impact of growth management on housing prices is only a part of the equation, and a relatively small one here.

In our popular area, demand is the big driver of housing cost; people want to move here and stay here. Increased income and purchasing power also are major factors in the rising cost of housing in our region.

"Market demand... is the primary determinant of housing prices." You don't say. Like maybe, market demand created by loose lending and low interest rates? The article mentions "increased income and purchasing power," but then goes on to over-emphasizes "our relatively high local wages" (without providing any actual comparative data), and essentially ignores the fact that the "increased purchasing power" comes from loose lending and rock-bottom interest rates.

In the end, our message is simple. We must do more to tackle the housing affordability problem in our region. But, we cannot succeed unless we focus on the facts about what is really driving our housing costs.

I agree completely. Which is why I am so disappointed that in the entire 56-page study, the hand that lending standards and interest rates have had in creating the excessive demand of recent years is essentially completely ignored. Go ahead, search the pdf for "interest rate" or "financing" or "lending." Nada. They also chose to ignore the mass psychology that comes into play when appreciation of an asset is believed to be a "sure thing." In my opinion those are the two biggest reasons that the price of housing has shot up so much in the last few years.

I get the feeling that the purpose of the study wasn't to highlight the true reasons that housing is unaffordable, but rather to prove that growth management isn't the reason. I have said all along that "not enough land" is a bogus argument for skyrocketing prices, but this study does a disservice by ignoring the true driving factors in our recent price run-up.

(Aaron Ostrom & Carla Okigwe, Seattle Times, 01.05.2007)