Earlier this month, the Silicon Valley dreamers who proposed build a city of 400,000 people and manufacturing center in a pasture 50 miles northeast of San Francisco published a detailed interpretation of your plan. It is like nothing America has seen before: exurban in location, intensely urban by design.
The new city will be laid out on a compact gridwith interlocking streets, rapid transit routes and greenways for pedestrians and cyclists. The city's less dense residential neighborhoods will be zoned for 85-foot apartment buildings, taller than virtually all apartment buildings built before 1880. House hunters will be able to purchase rowhouses as if they were buying real estate in 19th-century Brooklyn, not a prefabricated suburban sprawl.
This vision – so distant and so dense – represents a marked break with what has normally sold well on the exurban frontier. The forestsOne of the most successful exurban developments of the last 50 years, Texas is just 30 miles from Houston and is overwhelmingly built around single-family homes. Only a radically under-housing California could even imagine selling Americans apartments that are considerably further from existing employment centers.
But California Forever represents more than a bet that the Bay Area extreme The housing shortage has created a strong market for “super commuters” based in the Central Valley. Rather, it is a bold effort to put the last 30 years of research in urban economics into practice.
One lesson from this research is that “building” in existing neighborhoods is often irritating to people who live nearby. (If you can, place your new city somewhere else.)
A second, more important and less intuitive lesson is that concentrating more people and companies in a small geographic area makes everyone more productive. People who live and work together learn from each other. They can take business risks, because if one plan doesn't work, other opportunities await them. Dense labor markets give workers bargaining power and allow them to find the right employer. Individuals and businesses also benefit from sharing facilities that have high fixed costs to build, such as an opera house or an airport. Economists call this package of advantages the “agglomeration benefits” of urban density.
But there's a problem: A small-scale developer building a house or a small apartment building doesn't realize the agglomeration benefits of the density it brings. If people hosted by the promoter open a restaurant or give a worker a raise, the promoter does not benefit. Ordinary builders have no right to the profits of the city's collective imagination. Therefore, left to their own devices, developers do not invest enough in density. NIMBY pressures make things worse.
California Forever's big bet is that by acquiring enough land to build an entire city from scratch, investors can benefit from the agglomeration economy. Its prime homes and apartments may lose money, but the resulting population density will increase the value of downtown office and industrial districts. Because investors who own the residential land also own the downtown and manufacturing areas, they will consider the benefits that a new building brings to the entire community, not just what potential residents would pay to live in the new building.
Owning it all also gives California Forever high-powered incentives to improve schools and public safety, and mitigate traffic congestion. In most large cities, well-intentioned planners lack the resources and incentives to eliminate urban gridlock. In California Forever, investors' fortunes depend on creating skyrocketing urbanism.
If it ever starts.
The obstacles to founding a new city are enormous. Today, almost anywhere in the United States, a major development requires the approval of numerous local, state, and sometimes federal agencies, each of which wields a veto. Investigation by one of us finds that strict land use regulation induces developers to pursue smaller projects and ultimately fragments the construction industry. This reduces productivity and innovation in the construction sector.
At a minimum, the California Forever project will require approval from a city (Suisun), a county (Solano) and, eventually, a state agency (the California State Water Resources Control Board). Each approval triggers a review under the California Environmental Quality Act and potentially years of litigation and delays. A Solano County supervisor already said California Forever, “Go somewhere else.” If he convinces two of his colleagues, the project is dead.
California needs million of new homes. The state has passed hundreds of housing laws, but few have moved the needle about production. The forces of NIMBYism run deep. California Forever could bring the dynamism of Silicon Valley to the Central Valley, backed by investors with incentives to develop an efficient, scalable community of dense urban housing and high-tech manufacturing. No city or county should have an absolute veto over such an important project.
Clean energy policy offers a way forward. In Massachusetts and CaliforniaLawmakers have developed “comprehensive permitting” programs for major energy and transmission projects at the state level. A single official under the governor makes the decision to approve the project, after hearing recommendations from many state and local actors who would traditionally have a veto over the project.
The comprehensive permitting model should be extended to major urban development projects at the state level, including California Forever. A generation ago, the California Supreme Court declared that local governments have a duty to pay attention the needs of your region. But experience has shown that locally elected officials are rarely good stewards of regional interests. A new path to state permitting can open up tomorrow's vital experiments in city building.
Chris Elmendorf is a law professor at UC Davis. Ed Glaeser is a professor of economics at Harvard.
