Q&A: Strong Towns founder on Rivian, the housing shortage, and why he hates the term 'road diet'
One of the most influential thought-leaders in urban development is offering some words of wisdom to his acolytes in Bloomington-Normal.
Chuck Marohn is the founder and president of Strong Towns, an advocacy group focused on development patterns in cities. While in town for some work with State Farm, Marohn also spent time with members of the group Bloomington Revivalists, who are trying to bring Strong Town principles to this community.
WGLT's Ryan Denham spoke to Marohn at Bobzbay in downtown Bloomington at the tail end of his visit. This transcript has been lightly edited for clarity and length.
WGLT: What is Strong Towns? What do you believe in?
Marohn: Strong Towns is an advocacy organization, and a global movement now. We started out in North America and it’s grown like crazy.
We deal with the development pattern of cities: How do we build our cities? And we particularly look at what makes cities financially successful. What are the development patterns that result in cities building wealth. The people who own buildings, the people who own homes – what situations allow them to build wealth that can sustain the actual investments of the community?
When we think of a city, we think of a city as a municipal corporation. We elect a chair, we elect a board of directors, they represent us as shareholders of this corporation. How well is our corporation doing in terms of our assets and our liabilities? Are we generating enough wealth to meet all of our promises?
And the biggest challenge of American cities today is that across the board — and we can look anywhere you want — cities are not meeting their obligations. They're actually defaulting on the promises that they've made to people to maintain streets, to maintain infrastructure, to maintain parks, to keep things safe. And it's not because cities are poorly run. It's not because people don't care. It's not because they're unwilling to raise taxes or they’re too free spending.
It's because the business model of cities generates less wealth and revenue that it generates in liabilities and promises.
Bloomington-Normal is, like many American cities, facing quite a housing shortage. How can we determine whether our local elected leaders are doing the right things as it relates to dealing with the housing shortage?
I think housing is the most complex problem facing America today. … A complex problem has all these like weird feedback loops. So you can do “the right thing” and not get the result you want on the other end, because there's so many intervening things.
We think of a single-family home as someone going out and purchasing from somebody else — local supply and demand. But the reality is a single-family home is, in all practical sense, a mortgage product traded on a secondary market. So is commercial real estate. So is rental properties. All of these things have been so hyperfinancialized, that it's hard to tease out what the local market dynamics are. And what is the dynamics responding to national financial incentives.
Let me give you an example. We have a rental shortage all across North America. Do we have a rental shortage or do we have a pricing problem? If we look at the way rental property is priced, if I own one of those products as an investor, my building is set at a certain value based on the cashflow I can get. Let’s say I have to cut my rent in half, because that’s what the market can pay or that’s what needs to happen to fill all these units that I’ve got. What would happen is, my investment would be worth half as much. That’s fine until I have to go refinance that, which those types of products have to be refinanced every three to five years. Well now all of a sudden, I’ve gotta come up with huge amounts of cash and equity to rebalance my account. I’m basically gonna lose that building. What I’ll do is keep rents artificially high, even if I’ve got vacancies and I can’t fill it. Or I’ll do things like get big teaser rates upfront to fill the property at higher rates.
All of this is a financial game that is more responsive to a national financial market for investors in real estate, than it is for actual supply and demand dynamics at the local level.
There’s interest in Bloomington-Normal in infill development — trying to build out some more housing in the insides of our community. But when those types of projects have happened historically, you get some Not In My Backyard (NIMBY) opposition. How do you balance that want for infill development, with some of the friction that might come from putting them in the middle of places that already have people in them?
We have a saying at Strong Towns where, “No neighborhood should experience radical change, but no neighborhood can be exempt from change.”
And one of the things that we tend to do at the local level that is self-harm, is we try to freeze all of our neighborhoods kind of under glass, right? We put zoning in place that says, “This neighborhood has single-family homes, and it can never be anything but single-family homes.” And then the neighborhood stagnates, it goes into decline and struggles, we have a call for infill, we need more housing, and the only product that is available is the five-story apartment building or the condo renovation. In other words, we go in and we make a massive shift in a neighborhood. This is the opposite of success. In a sense, it responds to an urgent local demand, but in a way that is ineffective and in a way that also distorts property values even more.
What needs to happen is that all neighborhoods need to experience evolution and change over time. There can be no neighborhood stuck in a single-family home state. Every neighborhood, if it's full of single-family homes, needs to be able to evolve to have duplexes and triplexes and other buildings of scale to a single-family home. Not five-story buildings that don’t fit into a single-family home neighborhood. But you can't say nothing.
A potentially major project in our community is the redesign of Vernon Avenue, which is one of our major east-west thoroughfares. The Town of Normal is considering applying a “road diet” to narrow and slow down traffic on Vernon. How does a change like that align with trends that you're seeing on street design in other U.S. communities?
We're seeing a lot of road diets. I hate the term road diet. Why would you want a diet?
Sometimes you have to do things that make you unhappy, right?
Yeah, but who wants to diet? What a bad marketing strategy.
What's a better term than “road diet”?
I've always struggled with the term “road diet,” because we're trying to sell something that like nobody really wants, right? You want ice cream? Yeah. Do you want to diet? Not really. So it makes it sound like it's a really bad thing.
Vernon Avenue is what we call a “stroad” at Strong Towns. If you think of transportation as being streets and roads, a stroad is a hybrid between the two. A road is about moving vehicles quickly from one place to another. We start in one place, we end another, we get there very, very quickly. A street is a platform for building a place. It's a platform for creating wealth within a community. And when you're on a street, you don't want fast-moving traffic coming through. You actually want people to be able to get out of their cars and walk around and move around and enjoy being in the place. That's what makes a place worth being in, worth investing in. That's what builds wealth.
A stroad is trying to do both at the same time. It tries to move cars really quickly. It tries to have development along it. And what you wind up with is the most expensive infrastructure you can have, that has the lowest tax base, the lowest return per dollar invested. And it also winds up to be some of the most dangerous space possible.
So do you want a road diet? No, I don't want a diet. I want my ice cream. Do you want a more productive place? Do you want a safer place? Do you want a place that is going to generate either a better trip or a better investment strategy for the city? Yeah, that's what I want. Well, then what you need to make a decision on is, do you want a street? Or do you want a road?
Rivian is a startup electric automaker that’s making its vehicles in west Normal. They basically dropped 8,000 employees into our community and became the second-largest employer in short order. How do we make the most of it?
I feel like what you're asking me is, have you ever seen a boom-and-bust cycle take place? And my answer is, yes.
Now, when you're in the boom, you never think about the bust, right? You never think about the other side. But cities are long-term endeavors. They’re long-term engagements. It is important that the stewards of this community think about this long-term. It is wonderful that you’ve created all these new jobs and that all these people want to be here. That this company wants to take a factory that was sitting vacant and fill it. These are all really positive things.
But you have to keep in mind that in the framework of a city, the tide comes in and the tide goes out. You have to recognize that this is not a guaranteed long-term investment here. And I think from a city standpoint, you have to hedge your bets on what you do in response.
That feels like I’m being negative about it. The thing that you’re compelled to do is say, “You’re all in for us. We’re all in for you.” And that sounds great when you’re dating. That sounds really wonderful. But anytime the city does something – builds new infrastructure, subsidizes a building site, commits to a bunch of new homes here or there – the city only works in eternal commitments. And everybody else works in short-term commitments. If you were getting married and you walked up the aisle, and you said, “Til death do us part,” and the person you were marrying said, “Well, till the next quarterly earnings cycle and we’ll see where we’re at,” that’s an asymmetrical commitment. If we’re thinking through this big investment in our community, we have to think of our reaction to it having that same asymmetry.
If Rivian is still here 10 years from now, incredible. Our local investment should have grown to match their investment. And we're simpatico, like this is going to be great.
But at that point, 10 years from now, they should also be drawing in … other types of related manufacturing that wants to be part of the Rivian experience, right? I don't know what that is. But what you want is a development pattern here that would shorten their supply chain, and actually take 8,000 jobs there and create another 8,000 jobs in the community that are supportive. That would be the way that I would approach this as a strategy.