Philly, You’re No Houston
Why is Houston doing so well? In an interesting Wall Street Journal piece earlier this week, two urban planning experts say that Houston’s “pro-growth policies have produced an urban powerhouse — and a blueprint for metropolitan revival.” The writers say:
[T]he city’s low cost of living and high rate of job growth have made Houston and its surrounding metro region attractive to young families. According to Pitney Bowes, Houston will enjoy the highest growth in new households of any major city between 2014 and 2017. A recent U.S. Council of Mayors study predicted that the American urban order will become increasingly Texan, with Houston and Dallas-Fort Worth both growing larger than Chicago by 2050.
But really? Is Houston that good? Better than Philly? For the most part, no. But for one big part: yes.
As recently as 2010 Philadelphia has had the fifth largest metro area in the U.S. and has consistently been in the top five since 1700. Houston currently has the eighth largest metro area and entered into the top 10 around 2000. Projections are that Texas cities like Houston and Dallas will surpass Philadelphia in the next 10 to 20 years. People are sticking around in this area for the most part, but more are definitely flocking to Houston.
Is it their booming economy? Partly so. The U.S. energy industry has one of the fastest growing sectors in the country and Houston (along with other Texas cities and areas along the Marcellus Shale region) has benefited. Philadelphia’s economy has effectively stayed pace with the U.S., sharing similar GDP and unemployment figures over the past decade. But Philadelphia has some big, profitable industries — namely healthcare and higher education. It has large companies like Comcast, Campbell’s Soup, Vanguard, SAP, Toll Brothers and GlaxoSmithKline anchoring the region. Its startup and tech scene have been growing. There is lots of potential here.
Is it Houston’s location? In Texas, you’ve got miles of land and lots of open space. There are biking trails, botanical gardens, and room to run on the bayou. Galveston Bay is only an hour away from the city and there are plenty of lakes and national parks for fishing, hunting, and hiking. Same here, right? We’ve got the shore, the mountains, the rivers, the national parks. Not only that, but we’re a car drive away from D.C., New York and a list of historical landmarks and national monuments for the history lover. Plus we enjoy the pleasures (and the challenges) of all four seasons. So you can easily argue that Houston’s location is no better than ours.
How about property values? People tell me that housing is cheap in Houston and it is cheaper than Philly. The average price of a house there is $187,000 vs. $256,000 here. But travel a commutable distance West or South and you’ll find home prices here dropping significantly. It’s actually cheaper to rent in Philly ($1,494 on average vs. $1,598 in Houston) and prices are going down as more rental units are going up. Incomes in Philadelphia are 10 percent higher ($77,000 vs $67,000 for a family). Given these numbers, you can argue that the cost of living in Philadelphia isn’t that much different than Houston.
Houston has worse traffic problems than Philadelphia and two of its neighborhoods are called “the most dangerous” in the U.S. The city faces the same kinds of union/pension driven budget issues that we do (but not on the same potentially catastrophic scale). The Astros and Phillies have nearly identically lousy records. So why? Why is Houston such a “success” story? What is the real reason for the city’s growth and popularity?
Here’s why: Its taxes and bureaucracy.
If you’re making $50,000 a year and are unfortunate enough to live in Philly then you have the second highest tax burden of anyone in the country with almost 18 percent of your money going to the government. If you are in Houston, you are at No. 33 and paying only 9 percent. You pay no city or state income tax. Your sales tax is higher, but not by a lot.
Not only that, but if you want to start up a business or even run an existing company in Houston you deal with the government much less. “The city and its unincorporated areas have no formal zoning, so land use is flexible and can readily meet demand,” according to the Wall Street Journal piece. “Getting building permits is simple and quick, with no arbitrary approval boards making development an interminable process. Neighborhoods can protect themselves with voluntary, opt-in deed restrictions or minimum lot sizes.” Philadelphia is saddled with a creaky, bureaucratic, bloated and oftentimes corrupt government (although to Mayor Nutter’s credit, the corruption has been much less so. But let’s agree that there’s still a long way to go). The city’s burdens — both from tax and paperwork standpoints — are oppressive to most running, or trying to run, a business here. Don’t believe me? See what Paul Steinke, the manager of the beloved Reading Terminal Market had to say last year.
And that’s why. People move to places where there are jobs. There are jobs in Houston mainly because it’s a better place to run a business. It’s a better place to run a business because there are less taxes and bureaucracy. Philadelphia has all the ingredients to be a good place for business too. But we’re just not as good as Houston.
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