Rage Against the Machine

The famous “Growth Machine” theory of local politics explains a lot about the shape of our cities and their present-day problems. But not in the way you think.

In 1976, sociologist Harvey Molotch published the seminal paper "The City as a Growth Machine." As he would later describe this influential theory in retrospect:

[V]irtually all U.S. cities are dominated by a small, parochial elite whose members have business or professional interests that are linked to local development and growth. These elites use public authority and private power as a means to stimulate economic development and thus enhance their own local business interests. They turn their cities, as active, dynamic units, into instruments for accomplishing the growth goals that will enhance their fortunes. The city becomes, for all intents and purposes, a “growth machine."' The operation of cities as growth machines has an impact on the quality and distribution of growth within and among urban areas.

The idea that real estate, big business, and government interests conspire to treat cities as profit-generating engines at the expense of those who live in them has become a persistent theme of anti-development activism, from those who fought the "Manhattanization" of San Francisco in the '80s, to present-day advocates like P.E. Moskowitz, author of 2017's How to Kill a City, which laments the terminal Manhattanization of, well, Manhattan.

“Virtually every homeowner I’ve ever met who advocates against new development believes that they are engaged in a righteous struggle in which those who value community and quality of life are aligned on one side, and the “growth machine” consisting of rapacious business and development interests is on the other.”

Most recently, the growth machine is invoked by Canadian geographer David Ley, whose work is profiled in B.C. news magazine The Tyee, to explain the staggering unaffordability of housing in metro Vancouver as a consequence of the "commodification and globalization" of the city's housing market, driven by an unholy alliance of local politicians, powerful developers, and unchecked foreign speculation and money laundering.

Vancouver is certainly an unusual city in the outsized role of foreign investment: non-residents of Canada have ownership stakes in about 10 percent of Vancouver's real estate. But that still leaves the vast majority of Vancouver real estate owned by Canadians who live and work in Vancouver. The Seattle-based Sightline Institute makes a compelling case in "Stop Blaming Foreign Home Buyers" that other factors are more responsible for Vancouver's housing crisis: most notably a deep shortage of homes relative to demand for those homes, evidenced by an extremely low rental vacancy rate of only 1% that has persisted for years.

But Ley doesn't limit his indictment of the growth machine to foreign buyers gobbling up luxury condos downtown. He also criticizes efforts to encourage greater urban density and upzoning of residential neighborhoods—policies that might alleviate the city's housing shortage—as essentially greenwashing on behalf of the same machine:

The growth machine also had rationales to help it along, such as former Vancouver mayor Sam Sullivan’s EcoDensity initiative, transit-oriented development or Yes In My Backyard, which all call for more urban density.

These growth strategies offer many “undoubtedly attractive” qualities such as walkability and less car use, said Ley, but often fail to address affordability.

“There doesn’t seem to be recognition of this contradiction: using green slogans to produce landscapes that are less affordable,” he said. “They are rationales for development, and of course developers are keen to support them.”

Ley is not alone: pro-housing advocates are routinely accused of being, at best, useful stooges for the developer cabal. Now, a good rule for any sort of discourse is, "Don't assume nefarious intentions where honest ones are sufficient to explain someone's behavior." There are plenty of good-faith reasons to support upzoning that can't be boiled down to growth machine astroturfing.

And yet, virtually every middle- or upper-class homeowner I’ve ever met who advocates against new development believes that they are engaged in a righteous struggle in which those who value community and quality of life are aligned more or less on one side, and the “growth machine" consisting of rapacious business and development interests is more or less on the other.

To be clear, there absolutely is a coalition resembling Molotch's growth machine with significant political power in many cities, large and small. I've witnessed it in my own, where an extraordinary share of local campaign contributions are pretty closely tied—one or two degrees of separation—to a single-digit number of prominent real-estate developers. Money buys influence, but there is also a more basic convergence of interests: city officials want a tax base to fund the services they provide; developers create that tax base.

The part that isn't true, though, is that the interests of the Growth Machine stand in straightforward opposition to the interests of homeowners, or in straightforward alignment with the interests of urbanists and pro-housing advocates. The reality is more complicated. The “growth machine” as often invoked today is a political fable that actually obscures where some of the real fault lines lie in our cities.

What is "Commodification" Anyway?

First, let's talk about the "commodification" of real estate, alleged culprit for high home prices in the likes of Vancouver. There are three basic ways to make money off land: by developing it and selling it at a profit, by owning it and charging rent for its use, or by owning it and speculating on its rising value. So who are actually the biggest land speculators in today's high-priced cities?

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Here’s why this issue is intractable, in a single slide. (Slide by Charles Marohn.)

In Vancouver, the average sale price of a detached home rose by an astounding 319 percent from January 2000 to May 2019. This means that a $400,000 house purchased in 2000 may well have since appreciated at the rate of about $65,000 a year—a more than comfortable middle-class salary if it were paid in cash. This is far from only a Vancouver or Canadian phenomenon: a 2018 Zillow study found that homes "earn" at least the minimum wage in more than half of the largest U.S. cities, and in the hottest markets, far more than that. (A San Jose, CA homeowner collects $100 in equity for each hour spent at the office.)

Most homeowners do not think of themselves as land speculators, of course. Most are genuinely interested in a home more than just an investment, and in cultivating community rather than just extracting wealth. Nonetheless, many end up building a healthy retirement nest egg, or passing on a sizable inheritance, thanks to the capital gains on their home. At the end of the day, it's incoherent to describe a city as an engine of capital accumulation via the commodification of land, and pretend that the single-family homeowners who actually control most of the land have no stake in that process.

Even Harvey Molotch himself does not exclude homeowners from the dynamics which cause the city to be a "growth machine":

I have argued elsewhere (Molotch 1967, 1973) that any given parcel of land represents an interest and that any given locality is thus an aggregate of land-based interests. That is, each landowner (or person who otherwise has some interest in the prospective use of a given piece of land) has in mind a certain future for that parcel which is linked somehow with his or her own well-being. If there is a simple ownership, the relationship is straightforward: to the degree to which the land's profit potential is enhanced, one's own wealth is increased.

Culturally, we're resistant to lumping owner-occupiers in with investors and speculators—North Americans, and maybe especially progressives, have a really conflicted set of understandings about whether housing should be a source of profit. Which is to say, of course not, housing is a human right!—but home ownership is an important way to build wealth… but we believe housing should also be broadly affordable, so, uhhhhhh... maybe not too much wealth? It's all messy and contradictory.

We Have Seen the Growth Machine And It Is Us

The status quo in U.S. and Canadian cities might lend more support, if anything, to a different, competing theory of urban political power: William Fischel's "homevoter" hypothesis. Fischel argues that homeowners whose primary interest is in maintaining their property values are a powerful and often dominant interest group in city politics.

A map of tax revenue per acre in Vancouver reveals the lopsided concentration of high-density development in a small fraction of the city, and the dominance of low-rise development (single-family homes and duplexes) in the rest of the city. (Click image to view an interactive version.)

All you have to do is look at maps of single-family-home zoning versus, well, every other type of land use to surmise that homevoters are largely getting their way in North American cities—even Vancouver. Those who want their neighborhoods to remain exclusive, low-rise, and apartment-free seem to be mostly winning the war against those who might like to build new buildings in their neighborhoods. A BuildZoom study of where new development is and is not happening reveals that essentially all metro areas are dominated by "no-build zones" in which there is little to no development.

Is this really the world the growth machine has wrought? Actually, maybe yes. The largest developers in particular benefit from many of the policies—such as downzoning neighborhoods to freeze them in regulatory amber—that "homevoters" have pushed for and gotten enacted and hold sacred.

Growth machine-style developers (deep-pocketed, politically connected) can find it extremely profitable when most of a city's land is relatively or completely off limits to development. This drives scarcity, and with it the ability to command "luxury" rents. When the local government manipulates the market by allowing dramatic leaps in development intensity in select areas only, it also becomes possible to reap windfall gains simply by owning property in the right place over the right span of time.

But if more neighborhoods allowed building, couldn't developers build in more neighborhoods and reap even more windfall gains? Not really, because the total amount you can build in a given city in a given year has a ceiling on it. That ceiling is determined by how much demand is out there to meet new supply ("absorption rate" in real estate speak), and by the availability of construction labor, among other factors. Given those limits, the deepest-pocketed developers are the best positioned to thrive in an environment of scarce opportunities. And the stuff they'll build is predictably luxury, in the same way that if you limited Toyota to only 10,000 cars a year, they would all be Lexuses, not Camrys.

There's another reason the growth machine might not actually object to "homevoter"-favored policies which aim to make development more difficult. That is that complicated regulations, as a rule, benefit well-connected insiders who have learned the game and play it expertly. I've written about this before, but don't take my word for it. Take Multifamily Executive's word: a growing number of apartment firms and REITs are deliberately seeking out "high barrier to entry" markets:

The reasons behind the flight to the coasts today aren't hard to understand. Although the cost—and struggle—of getting into high-barrier markets is great, so are the rewards. “There is the very obvious element of restricted supply yielding bigger returns and better rent growth in these markets over the long term,” says Alan George, chief investment officer at Equity. “That's the simple answer.”

Those advantages are bolstered by the fact that once you're in, it's harder for your competitors to build next door. After all, the definition of a high barrier-to-entry market is that it's hard to get your foot in the door, so you don't have to worry about a deluge of new properties popping up and putting downward pressure on rents. In fact, once you're in, observers say rent growth tends to be more consistent, and comes in bigger chunks, than so-called commodity markets.

Downtown Vancouver is one of the most complicated, difficult places to build in North America, with its elaborate rules around things like sunlight and sight lines. And its entrenched growth machine probably likes it that way. Bureaucracy will always favor the well-connected.

Next Increment Everywhere: A Growth Policy the Growth Machine Hates

The "growth machine" vision of the city is a fundamentally extractive one: the function of urban development is to produce profit for investors. This tends to be the dominant paradigm in North America's high rise downtowns. Elsewhere, exclusive single-family zoning and little to no development—”protecting neighborhoods”—is the dominant paradigm in many residential areas, especially in the suburbs. This is no accident: the two policy frameworks are compatible and even complementary, even though many activist homeowners will tell you they hate developers and growth boosters.

Why are they compatible? Because both involve granting a set of insiders privileged access to the value created within a city. It's outsiders to the power structure—renters, the poor, would-be smaller entrepreneurs—who lose.

So what kind of policy would run counter to that vision? How about a policy to make sure that increases in land value are incremental, steady but slow, distributed fairly evenly across the city, and not subject to huge booms and busts? To allow every neighborhood to change, evolve, and intensify over time, so that no neighborhood experiences a flood of cataclysmic money.

To stop the boom and bust cycle, allow the next increment of development everywhere. In practice, since most land in most cities is reserved for single-family homes and nothing else, this amounts to an increase in allowable density across a huge area—a policy that Ley seems to believe is cover for growth machine priorities in cities like Vancouver. But if it is that, then what do card-carrying Growth Machine™ members have to say about it? Oddly, turns out they don't like it very much.

In late 2018, Minneapolis passed a comprehensive plan update that, among other things, legalized triplexes (and in an earlier draft, fourplexes) on single-family residential lots citywide—effectively tripling the allowed density in some neighborhoods. You'd expect the growth machine to be all in for this, right? In reality, big developers and the city's powerful Downtown Council ranged from shrugging at the proposal to being outright critical of it. As Wedge Live put it, their take was, "Basically: Fourplexes aren’t for us. We don’t build them. We don’t live in them. We don’t sell them. We can’t make money from them. Why bother?"

Housing activists in Portland had similar experiences to report after Oregon legalized fourplexes across much of the state the following summer. The constituency backing these policies is astoundingly diverse, but the old-school growth machine is not really part of it.

Policies that shift our cities back toward incremental, broad-based growth would be far from a boon to those cities’ current power brokers.

Who Favors Growth Itself?

There's a different element, to be fair, to many activists' opposition to "growth machine" politics: an opposition to growth itself. That is, I might simply not want more people living in my city, even if they're in condos downtown rather than my own single-family neighborhood. I might not believe that their presence will improve the quality of life, or our fiscal or environmental sustainability, or racial or socioeconomic equity.

And there is, truly, plenty of reason to doubt that population growth is good for places as a general rule.

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A nice place to be. Photo by Luke Lawreszuk / Sprayedout.com

But growth is not the invention of the growth machine, nor does outvoting or politically outmaneuvering them have the power to stop growth. Developers don't cause the people who will move to a city or buy property there to materialize out of thin air. Vancouver is a hot spot for foreign investment for a lot of reasons, and, granted, some blame/credit can be laid at the feet of power brokers who have encouraged this, actively marketing the city's real estate in China and elsewhere, and turning a blind eye to some sketchy investment practices. But other reasons are as mundane as "Vancouver has got beautiful mountains and water, and the mildest winters in Canada." Vancouver is a nice place to be, and no conspiracy or cabal made it so.

Those who want to stall growth itself—whether by stalling building and letting the consequences play themselves out in high prices and displacement, or by some other unstated means—will find this a difficult task as it involves forces that are multifaceted and beyond local control.

Raging against the growth machine makes for a nice moralistic fable with clear heroes and villains. It’s good storytelling. It's comfortably consistent with a world view that, for many Baby Boomers in particular, was forged in the environmental movement of the '70s and the struggles against corporate power of the '80s and '90s. It's one in which the noble public finds itself constantly at odds with a greedy, short-sighted moneyed elite.

But it doesn't help us grapple with the complex, contradictory cities we have to live in and sustain—ones that are going to grow, and are going to change, in sometimes uncomfortable ways that are outside our control.

Reject this Manichean narrative and we get to grapple with a more complex but ultimately empowering set of questions, like how we produce productive growth, and how we create a place of great value (in every sense of that word). How and among whom will that value be shared? How do we do right by both those who live in a city already and those who will live in it in the future? (And by its non-human inhabitants too?) What kind of place are we leaving behind for our children and their children? And what role should the private market play in any of that?

These are all worthwhile questions that defy the simplistic political storytelling of “growth machine” critics.

(Cover photo via Flickr)

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