Does Privatized Foster Care Put Kids at Risk?

In 2012, when Alexandria Hill was a year old, Texas’s child welfare agency found her parents unfit to care for her. The baby’s biological mother was prone to seizures, officials said, and

The lessons of such an investigation are perhaps even more important today, as more children are entering foster care because of the impact of the widening opioid crisis. According to the U.S. Department of Health and Human Services’ Administration on Children and Families, the number of children in foster care rose almost 7 percent from 2013 to 2015, nearing 430,000. In 32 percent of all foster placements parental substance abuse was cited as a factor—an increase of 10 percent compared to 2005.

When a state privatizes foster care, it uses federal, state, and local funds to contract out services, such as locating and monitoring foster parents, to private agencies. In most cases, public agencies still manage children’s long-term outcomes, such as reunification or adoption—but more jurisdictions are shifting even that responsibility to the private sector.

These private agencies are usually nonprofit, making MENTOR, as a for-profit corporation, an extreme example of privatization. Yet nonprofits can subcontract their work to for-profit companies; in states that forbid for-profit entities from administering foster care, MENTOR used this loophole as a workaround. And even in more straightforward nonprofit arrangements, privatization has negatively impacted children.

Three Georgia sisters, two of whom were placed in foster care while their mother battled an opioid addiction (the other sister lived with relatives), reunite after more than a year apart. (David Goldman/AP)

Over the past three decades, many states have privatized at least part of their foster care systems; some, like Kansas and Florida, have privatized theirs completely. Despite high-profile cases like Alexandria’s—which helped prompt a 2015 Senate Finance Committee investigation that resulted in proposed legislation to strengthen government oversight of foster care—some states and officials continue to see privatization as an antidote to a bloated and inefficient public sector.

Kentucky, for instance, recently pledged to investigate whether it should fully privatize its foster care system; private agencies currently provide services for around half of the children in the state’s care. In Texas, a pilot program that privatizes the monitoring of homes identified as at risk for child abuse or neglect is moving forward, despite some lawmakers’ concerns.

Proponents of privatization often claim that private entities are more efficient than government agencies, and calls for the privatization of foster care have been no different. Yet Tracey Feild, director of the Child Welfare Strategy Group at the Annie E. Casey Foundation, questions that idea. Private agencies, she said, have “certainly not done the work for a lower cost.”

Feild, whose Child Welfare Strategy Group provides consulting to child welfare agencies, said that the private sector has in fact brought more resources to the foster care system through, for example, successfully lobbying politicians for funds. Though this might be a positive development, she said the argument can also be made that if those additional resources had gone to the public sector to begin with, it could have solved the problems that spurred calls for privatization. For instance, new resources could be used for services such as more and better substance abuse treatment to keep families intact rather than rely on foster care.

And while public agencies still conduct the initial investigations into abuse or neglect, once a system is privatized legislators often assume they no longer need to give them money. This leaves the public agencies chronically underfunded, making it difficult to monitor their private contractors. “A public agency can be handing out tens of millions of dollars to private providers with very little oversight,” said Feild.

Private agencies can be effective in providing foster care services, Feild says. But they often face a steep learning curve. “If you’ve got the patience and good providers, you can make a go of privatization,” she said. “But it’s not going to take two to three years to improve outcomes. It’s more like 10 years.” Kansas’ privatized system, for example, is quite strong, she noted, as it’s been in operation for over 20 years. (Still, the state is struggling to keep up with cases due to the opioid epidemic and funding cuts.)

In less established systems, the private agencies can get overwhelmed with their new responsibilities—and kids can suffer, languishing in foster care or shelters. “Child welfare workers get crisis focused; they’re worried about getting a child a bed for that night,” said Feild. “So the initial priority for the new privatization provider isn’t the child who may be able to return to his family because the provider has been doing work with the parents. It’s who is coming through the provider’s front door, which results in kids staying longer than necessary.”

Jessalyn Schwartz, a Boston attorney focusing on child welfare and mental health law, added that in these circumstances children are usually placed in what is available rather than what is needed. “And they often don’t get much say in where they end up or how often they move,” she said. “Though privatized foster care is often labeled as a corrective, it’s imperative to better understand it before declaring it as such.”

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HQ2 Employees Might Unwittingly Pay Their Taxes to Amazon

There’s a very real chance that when, Inc. starts hiring employees for its second headquarters, or HQ2, those employees’ state personal income taxes won’t all go to the state treasury. Billions of dollars in taxes may instead be diverted to the company, of which CEO Jeff Bezos owns 17 percent.

There are 18 states that offer this tax-diversion shell game to companies: If Amazon chooses to locate HQ2 in one of the nine finalist cities in these states, the employees will never be notified of their participation. Their pay stubs won’t show where their tax deductions have actually gone. They’ll never be asked if they consent or wish to opt out. Nor will the state’s school boards, universities or transportation agencies have any say: Their resources will be greatly eroded, yet they’ll still be expected to deliver a highly skilled workforce on time.

It’s a glaring example of how extreme and hypocritical corporate welfare has become in reinforcing inequality. Amazon is headed by the world’s richest man, but pays a median wage of just $28,446. Yet it may get such huge amounts of these personal income tax diversions that it will enjoy a negative income tax rate for many years in the state that “wins” the deal.

Of course, because of the traditional “economic development incentives” state and cities give out, Amazon will likely pay few if any of its corporate property taxes or sales taxes, either. Many states automatically exempt a project this size from sales taxes on building materials, machinery, and equipment. If they don’t grant that automatically, Amazon will no doubt demand it. At the local level, politicians will be under terrific pressure to abate property taxes to mirror the state’s generosity with corporate income tax credits that will reduce or eliminate its income tax bill for many years. The personal income tax diversions described here are on top of those.

We at Good Jobs First revealed this insidious giveaway in 2012 when we named 2,700 companies in 16 states that had been awarded big chunks of their employees’ state payroll taxes. In “Paying Taxes to the Boss,” we explained three different ways the money can flow, with the net effect always the same.

Amazon did not impose non-disclosure agreements on the first-round proposals for HQ2, yet we still know far too little about all but two of the tax-break offers made by Amazon’s 20 finalist locations. But even with such poor disclosure about the specifics of each package, it’s already evident that HQ2 employees could effectively pay lots of their income taxes to Bezos and other Amazon shareholders.

For example, Maryland has offered the biggest known HQ2 subsidy package, totaling $8.5 billion, for locating in Montgomery County. Most of it—$4.9 billion—would be payments to Amazon of 5.75 percent of every dollar paid in salaries. That’s the state’s top personal income tax rate.

If Amazon chooses Chicago, a reported $1.32 billion of Chicago’s offer would derive from state personal income taxes. Never mind that the revenue is desperately needed by the most financially distressed state in the nation. It’s surprising that the Prairie State would gamble on a retail headquarters deal: It has given Sears two HQ packages totaling $517 million, and those haven’t stopped that chain’s death spiral.

If Columbus is the choice, Amazon could get two kinds of personal income tax diversions: An Ohio program could entitle Amazon to three-fourths of its HQ2 employees’ payroll taxes for 15 years, at an undisclosed price tag; and a local income tax diversion could total $400 million.

North Carolina may soon open its floodgates even wider as Amazon considers Raleigh: The state is now considering legislation that would divert some personal income taxes to employers for 40 years. For Atlanta, Georgia, another finalist, the state has two tax credits derived from payroll withholdings; one accountant estimated between $1 and $2 billion could be lost to the state treasury.

In Colorado where Denver—also a contender—is, workers pay a share of their personal income taxes to employers. The same would be true if HQ2 goes to Indianapolis, Indiana. But both of those bids are hidden from taxpayers.

Pennsylvania’s state bid, which would apply to either Pittsburgh or Philadelphia—both are still in the hunt—has been estimated at $1 billion in incentives. But it’s not yet known whether that sum includes the offer of a personal income tax diversion. Could this be why both cities refuse to disclose their first-round bids, despite rulings by the Pennsylvania Office of Open Records that they be released to the news media?

Taxpayers in all 238 localities that bid on HQ2 deserve to see every single penny. We have more important things to do with the money, especially because many states have enacted unwise tax cuts. Critical investments that benefit all employers, such as education and infrastructure, have not recovered to pre-recession levels.

We can’t afford to mortgage our futures for one corporate headquarters; it’s far too many eggs in one basket. As a Maryland taxpayer, I want all of that $4.9 billion going for schools, healthcare, safety, transit and infrastructure—not lining Jeff Bezos’ pockets.

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The Craziest Thing About Elon Musk’s ‘Express Loop’ Is the Price

The Boring Company, the tunneling venture Tesla CEO Elon Musk started in 2016 out of his personal frustration with surface-level gridlock, has made a significant step towards evolving beyond billionaire-passion project: The company has been selected to build and operate an 18-mile, 12-minute rapid transit connection between Chicago’s downtown Loop and O’Hare International Airport,

Plus, it’s not just the time and labor costs that make tunneling pricey. Government regulations take time to navigate, there aren’t that many drilling companies working in the U.S., and contractors can be unreliable. Those aren’t technological fixes, and Musk has already run into his share of regulatory barriers and rightful concerns from the public about his quixotic goals. The company has gained approval and built a two-mile “test tunnel” beneath SpaceX’s headquarters in Hawthorne, California, and is still negotiating with city officials in L.A. and Culver City to construct a 6.5-mile test tunnel beneath I-405. It also has preliminary approval to dig out in northeast Washington, D.C. The Chicago deal represents the major validation for the Boring Company, which endeavors to “solve the problem of soul-destroying traffic,” in Musk’s words.  

The $1 billion cost projection is probably wildly inaccurate, a figure that reflects Musk’s signature confidence in his own achievements. That confidence is built on some remarkable technology: Musk has brought reusable rocketry, radically improved batteries, and paradigm-shifting electric vehicles to the market. So far, however, it’s not clear whether he can actually make money doing these things.

But regardless of whether Musk’s boutique airport-tube ever sees a paying passenger, any cost reductions to subterranean construction that Musk might develop along the way would be most welcome by, for example, the millions of train riders awaiting a new Hudson River tunnel connection between New Jersey and Penn Station, or the commuters in Los Angeles who’ve dreamt for decades of a second tunnel through the Sepulveda Pass. Frankly, if Elon Musk can tunnel those 18 miles to O’Hare for less than $.5 billion per mile, it would be pretty miraculous.

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The Planning Lesson in Iceland’s World Cup Miracle

It still seems too good to be true. This Saturday, Iceland’s national soccer team will play its first ever World Cup match, having never qualified before in the country’s history.

It’s always a surprise when small countries make it through the grueling qualifying rounds of the global soccer championship—but Iceland is not a small country. It’s a tiny country, with 350,000 people, scarcely more than Peoria, Illinois. When it plays Argentina in Moscow this weekend, Iceland is taking on the team of a country whose citizens outnumber its own at a rate of 130 to one. For Iceland to enter the global superstar league—even if it’s just for one round—is like some rare, beautiful millennial comet, something that will go down in the country’s history.

What’s more, the country knows it. Judging by local reports, half the population seems to have been re-clad in the national team’s colors, a winning royal blue with a vertical red and white stripe. People are walking around Reykjavik with a mix of slack-jawed disbelief and complete delight: Imagine Edvard Munch’s The Scream wearing a party hat, and you’ve pretty much got the idea.

Iceland fans outside Laugardalsvollur Stadium in Reykjavik before the international friendly against Norway on June 2 (Hannibal Hanschke/Reuters)

This is understandable. In a country so small, the national soccer team going through is almost a family affair. It’s not that everybody knows everybody, but a lot of people will know someone who knows someone who knows a player. To prepare for the crowds, big screens are being set up all over the city, in parks, bars, and hotels. For the artier strain of soccer lover, there’s even a livestream at the Reykjavik Art Museum, where fans can watch the game to a soundtrack appropriately compiled by local electronica composer/performer Þóranna Björnsdóttir.

But does Iceland’s entry into the World Cup “mean” anything beyond a great party for the country? This being CityLab, we decided the best person to ask was Borghildur Sturludóttir, an architect in the Reykjavik planning department, whom we caught up with at the reSITE 2018 conference in Prague. According to Sturludóttir, the Icelandic team’s stellar success could teach the country something: the value of planning.

“People are asking, ‘How did we do this?’ Well, it’s about making long-term commitments,” Sturludóttir said.

Such commitments, Sturludóttir continued, are not so common in a country of extremes like Iceland. With a climate swinging between (almost) constant light and constant darkness, and a people historically dependent on the caprices of the weather, Icelanders have tended to lurch collectively from one activity to the other. You can still see an echo of this in the way the country’s economy recently focused heavily on financial services, then, following the crash, lunged toward an over-heavy concentration on tourism.

Building a team, however, requires a calmer, more long-term view. “That takes consensus-building, coordination, patience. It’s actually a great model for the country as a whole,” said Sturludóttir. “People are now saying, ‘Oh, we can make plans! We can invest in things like sports facilities; really build things up.’” The Icelandic soccer team is thus a living, breathing example of what you can get from years of hard, patient work.

Of course, the momentum it’s created—that sense of staking a place on the world stage—might be a parade that’s somewhat rained on by a bad result against Argentina on Saturday. But by this point, it would be hard to dampen the enthusiasm. Iceland is in a heavyweight group featuring Argentina, Croatia, and Nigeria, all formidable opponents. If the players lose, they’ve still made history.

But if they win a match—or even score a goal or two—expect to hear the sound of an entire country turning itself up to 11.

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If P3s Are the Answer, What Was the Question?

The City Accelerator cohort on Urban Infrastructure Finance focused on innovative tools, models and revenue sources that can help cities across the country address their infrastructure challenges while promoting equity for diverse communities and incorporating the realities of climate change. This is the first installment of a three-part series exploring some of the ways in which cities can allocate infrastructure project risks to the private sector through innovative use of public-private partnerships (P3s).

When people talk about infrastructure finance challenges, public-private partnerships (P3s) can seem like an obvious solution. P3s are long-term, performance-based agreements between public and private entities, in which the private-sector partner performs some functions normally undertaken by the government in exchange for some form of compensation. While P3s may involve higher overall costs, in a well-structured P3, governments may be able to achieve greater value, including transferring much of the risk involved in a complex infrastructure project to the private sector.

There are billions of dollars in needs, and billions of dollars in private capital available to invest. Put the two together, and the problem is solved, right?

The reality is not so simple. Private capital is always invested with the expectation of repayment at a premium. While P3s can be structured so that the timing and size of repayments is more even and predictable than in a typical financing, it’s important to note that P3s don’t make money, they require it. Compounding the challenge, local governments often lack the resources and experience to effectively structure and manage a P3. In other words, there’s still no such thing as a free lunch. They can make sense, however, when governments can obtain greater value for their money than by undertaking a project in a more conventional way.

So if P3s don’t provide funding or low-cost financing, why would cities do them? Most cities don’t do P3s for cheaper financing, but for better performance. By and large, state and local governments still award contracts based on the lowest construction bid for a fixed design. That works, if the project is straightforward, and the asset that’s created isn’t likely to have problems in the future. It can also safeguard against corruption, since it makes bids easily comparable.

But low-bid, short-term, construction-only contracts aren’t the best model for creating innovation, ensuring long-term performance, and optimizing lifecycle costs. As astronaut Alan Shepard, America’s first man in space, once nervously joked, “It’s a very sobering feeling to be up in space and realize that one’s safety factor was determined by the lowest bidder on a government contract.”

One performance benefit that P3s can provide is an implied long-term warranty. It is an insanity of our current system that the bridge you are driving on probably has a shorter warranty than the car you are driving in. Most construction firms don’t have the financial ability to offer a long-term warranty, and a low-bid contract typically doesn’t include long-term performance standards. If problems happen five or ten years down the road, the construction consortium who built the project may no longer even exist, and clawing back any part of the construction cost will involve an expensive legal battle. Simply put, the public sector is in a better position when it still has some leverage over the project in the form of ongoing future payments to a private-sector partner who is still on the hook to perform.

For example, in 2006, part of the ceiling of a tunnel in the recently completed Central Artery in Boston collapsed and a driver was killed. The failure was attributed to use of a short-term construction adhesive that cost approximately $1,200. Massachusetts spent more than $54 million to inspect and repair the other portals in the wake of the accident. If this had been a P3, the failure might not have occurred (since the contractor would have been incentivized to use more expensive and longer-lasting materials). But even if it had, the government would have had a more ready source of remedy by terminating a long-term performance contract. As it was, the state recovered only $16 million a few years later from one of the companies involved, and has since discovered additional problems, including collapsing lighting fixtures, that will likely require more than $50 million to correct.

A long-term, performance-based P3 can ensure that the private partner is motivated to optimize lifecycle costs and build projects that are cheaper or easier to maintain. It also gives the private sector the chance to propose innovations that might not pay off over a short construction term. The public sector still has to identify revenues to pay off these long-term arrangements, and private financing has to be at least somewhat competitive with the cost of public financing to make these arrangements viable. But a P3 may enable a project with greater overall value. When considering this, governments often conduct studies called “Value for Money” (VfM) analyses that analyze the long-term costs and benefits of P3s vs. more traditional approaches.

Since most P3s are long-term arrangements, they are typically analyzed over the term of an anticipated contract (which can be 25 to 50 years). In a long-term P3, the public sector has to contractually commit to set aside the funding needed for the long-term maintenance and operation of a facility. (Ironically, there is no similar provision for committed maintenance and operation funding if the project is done on a traditional basis– in fact, funding for operations and maintenance is often the first to get slashed in a budget crunch, since it is not immediately apparent when maintenance is delayed.) Sometimes, after a careful analysis, a government determines that the public sector can do the required work itself more cheaply and effectively– assuming it is provided the needed funding to do so. Even when a P3 is ultimately not the answer, just having gone through the analysis can be helpful to a city in marshalling support for sufficient long-term resources to maintain and operate a complex project– without the expense of private finance.

Thinking through these key questions about whether, and how, to leverage P3s in service of funding both existing and new infrastructure projects presents cities with challenges, as well as an opportunity. In the face of aging infrastructure and contracting state and federal revenues, cities are looking for new ways to finance needed improvements and deliver innovation and efficiency to their citizens.

Through the City Accelerator’s third cohort, the District of Columbia’s recently-launched Office of Public Private Partnerships (OP3) is examining how best to plan and prioritize projects, in order to identify and secure executable financing options. In our next installment, we will explore some of these options in greater detail.

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Connecting Communities to Close Racial Gaps

The field has evolved in the 25 years since Living Cities began its work–and it continues to evolve. But we know one thing for certain: if we want to ensure all people in the US can thrive, we have to tackle some of the largest, systemic, interconnected problems. And interconnected problems require interconnected solutions.

To better explore and solve these interconnected problems, Living Cities is committed to open sourcing social change. We have always been open and honest about what is working in our efforts and what isn’t. And we have pushed others to do the same, with the hopes that if we can learn together, we can solve our society’s most intractable problems, faster.

Now, we have decided to take these learning opportunities to a new level, and invite others to join us.

Living Cities is building a flexible online platform, which we call the Economic Opportunity Roadmap, to help practitioners learn from and with each other in real-time. The Economic Opportunity Roadmap, or simply, “the Roadmap,” is a community engagement platform that tells the user how to best get from point A to point B in terms of creating economic opportunity and closing racial gaps for low-income people. The platform will point out short cuts – but also barriers and traffic congestion – along the way.


The Roadmap will be designed with and for the practitioners that are a part of our community, focused on enabling the most promising practices to be spread and adopted in more places faster. Practitioners who are doing the work on the ground will crowdsource solutions with each other, share best practices, communicate regularly, and access the best evidence available. We hope practitioners will share all of their learnings with others, because we believe that insights and evidence at all stages are valuable, from an a-ha moment to a best practice that has been tested in multiple cities. We plan to regularly highlight solutions on this platform that the community deems most valuable.

The initial launch of the Roadmap includes a small subset of our closest partners that have agreed to pilot the first phase of the Roadmap development. This pilot will focus on exploring two of our highest priority areas of learning:

  • What does it take to build an entrepreneurial ecosystem that supports entrepreneurs of color to start and grow businesses that create wealth for the entrepreneur and living-wage jobs for low-income people of color?; and
  • What does it take to operationalize racial equity and inclusion into an organization’s operations (including philanthropy, private sector and public sector)?

We will continue to grow and evolve the Roadmap based on the findings from this pilot phase, and invite other users to join. We are actively working with several partners on this pilot, including: Context Partners, which is helping us design and implement a set of community engagement strategies to foster and facilitate connections across our network and to help us create a “network of networks”; Slalom, a Salesforce developer that built our pilot platform based on our specific hypotheses and assumptions about our community; and the Gates Foundation, which pioneered a similar “community in a box” model for their post-secondary programming, and we are actively learning from their success.

In true open-source fashion, we are excited to share more with you about the Economic Opportunity Roadmap as it grows and develops. If you are interested in learning more about the Roadmap, and potentially joining as a user as we expand it, you can subscribe to our list here. If you think you are a good fit for joining the current pilots, and have experience to share related to the two questions above, you can email

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Innovation in Small Town America (Episode 48)

Three of our researchers (Christopher Mitchell, John Farrell, & Brenda Platt) sit down together to discuss how small cities across America are innovating in the ways they are supporting their local economies. Mitchell discusses this innovation in Idaho; Farrell details the discussions in Decorah, Iowa; and Platt portrays many different home composting programs.… Read More

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D.C.’s War Over Restaurant Tips Will Soon Go National

In less than a week, voters in Washington, D.C., will settle a national debate over tipping. The District’s upcoming primary election includes a ballot measure called Initiative 77, a policy to gradually raise the minimum wage that tipped workers receive. Two national restaurant groups are turning D.C. into a proxy war over a wide-reaching and politically fraught norm: the tip.

In one corner: One Fair Wage, the campaign to raise the base pay that waiters, bartenders, and other tipped workers earn in the District. The pro-77 side is almost entirely the work of Restaurant Opportunities Centers United (ROC), a national nonprofit advocacy organization. If 77 passes, employers will pay a single minimum wage throughout the city. No more tiers. Currently, tipped-wage workers can make a lot more (or a lot less) than the regular minimum wage.

In the anti-77 corner: Save Our Tips, the campaign to preserve the status quo. A no vote means that tipped workers will continue to earn a sub-minimum base wage. Most local restaurant industry workers—owners and employees alike—have aligned themselves with the opponents of Initiative 77. But Save Our Tips is far from a grassroots push: Campaign finance records show that it’s principally a production of the National Restaurant Association, which bills itself as “the largest foodservice trade association in the world.”

So in some ways, Initiative 77 is a classic throw-down between labor and management, with a confusing twist: Across the city, bosses and workers are both fighting against the wage increase. Economists take a slightly different tack. Different parties have been squabbling over (and studying) the minimum wage since Congress passed the Fair Labor Standards Act in 1938. But there’s a lot less information on the tipped wage as a phenomenon of its own.

While the empirical research on the tip-credit provision is threadbare, special-interest groups are nevertheless barreling ahead with this economic experiment. The nation should pay attention to what D.C. voters decide on June 19: After all, it’s national groups waging these restaurant wars, and they won’t stop here.

As a city with an electric restaurant scene and staggering racial disparities, D.C. is minding this vote closely. Arguments for and against Initiative 77 can be had all over town. Some of those points are more persuasive than others. Here’s a rundown of some of the questions, myths, inaccuracies, and scare tactics shaping this debate—and also a few bedrock truths.

“Initiative 77” is actually a plot from Star Trek: Deep Space Nine.
False! (You’re thinking of Section 31.) In fact, Initiative 77 is a ballot proposition to gradually raise base wages for tipped workers in D.C. over the course of eight years. Currently, these workers earn $3.33 per hour, plus tips. And currently, tipped workers are guaranteed the minimum wage ($12.50). That means that if tips don’t add up to at least $9.17 an hour, the employer pays the difference.

If Initiative 77 passes, the tipped minimum wage—that $3.33 basement rate—will increase, over eight gradual bumps, until it reaches whatever the minimum wage is in 2026. At that time, front-of-the-house staff at bars and restaurants—those are the servers, bartenders, hosts, sommeliers, and the like—will earn at least $15 an hour (which is what D.C.’s standard minimum wage will be in 2020).

Right now, employers and customers share the responsibility for paying tipped workers a minimum wage. If 77 passes, that duty would fall on employers alone.

If Initiative 77 passes, I don’t have to tip anymore!
No. Or there’s no reason to think so, based on the handful of states that have already banned the sub-minimum tipped wage.

“There has been absolutely no change in tipping practice, to the best of my knowledge, in any of the states that have no tipped minimum wages,” says David Cooper, senior economic analyst for the Economic Policy Institute, a think tank that favors 77. “Think about it: When folks cross the border from Arizona to California to go out to eat, do you think that they are aware of the difference in the state’s tipped wage policy and change their tipping behavior? I doubt it.”

No one has ever consulted this map before leaving a tip.
Light gray: States that use the federal tipped wage.
Medium gray: States that pay above the federal tipped wage.
Dark gray: States that do not have a tipped wage.
Hash marks: States whose standard minimum wage is higher than the federal minimum wage.
(Industrial Relations)

Since the District isn’t a state, it’s hard to compare it with places that prohibit the tipped wage, especially since some states (such as California) never used it in the first place. There’s only one real point of comparison: Flagstaff, Arizona. The state uses the federal tipped wage, but the city will start phasing it out in 2022, gradually increasing it to the city’s (higher) standard minimum wage in 2026.

I heard that tipped workers in D.C. already make a lot more than the minimum wage—$20, $30, or $40 an hour.
True and false. Front-of-the-house staff at most bars and restaurants in D.C. do make more than the minimum wage. Some make a lot more.

But tipped-wage employees also include people who don’t work in fancy restaurants, or in any restaurants. Valets, for example. Housecleaners and landscapers, too. Nail salon workers, an often invisible class of highly exploited immigrants, are also tipped-wage workers. Tipped workers are disproportionately women, people of color, and people living in poverty.

“I realize that when someone thinks of a tipped worker, they think of the waiter they had at Le Diplomate on Thursday night. But there’s a lot of other tipped workers in D.C.,” says Justin Zelikovitz, managing partner of D.C. Wage Law, a firm that specializes in wage-hour compliance. He says he’s argued four car-wash cases in the last year: While car-wash owners are obligated to pay their (mostly African-American and Latino) employees the difference between their cash wage and the minimum wage, plenty get away with paying far less.

“I don’t know if this is good policy or bad policy, but when you create an exception to the baseline rules, you create an opportunity for people to abuse those rules,” Zelikovitz says.

What if Initiative 77 raises costs so much that cocktails will go for $17.97 by 2026?
God, I hope so. Let me lock in my order now!

In an instant-classic media stunt, one D.C. speakeasy hosted a dystopian pop-up bar that imagined what prices would be like in a dark, gritty post-77 era. A gin rickey called “Came to the Wrong Town,” a drink that would normally set back drinkers $12, instead cost nearly $18—a demonstration of the severe consequences of a yes vote on 77. In reality, though, that price hike would be little more than the cost of an inflation increase over the last eight years. As a piece of agitprop, the 2026 pop-up bar flopped—especially since its operators gave one drink an egregiously racist name.

If Initiative 77 passes, my favorite D.C. restaurants will all close or move to Maryland or Virginia.
No, of course they won’t. As a District resident, I will continue to require food and beverage well into the 2020s, and there’s not a policy directive imaginable that can steer me across the river to Clarendon, Virginia, every time I’m hankering for a half-smoke. The National Restaurant Association estimates that D.C. restaurants hauled in $3.8 billion in 2017, most of that spending mine. That money won’t evaporate, especially as the wage hike is structured to happen gradually.

But restaurants may need to make some changes. Ruth Gresser, the owner of Pizzeria Paradiso—a family-friendly tavern with four locations across D.C., Maryland, and Virginia—says that she estimates that she will need to do about $500,000 better in sales to cover her costs in a post-77 2026. In addition to increasing prices, she guesses that Pizzeria Paradiso will abandon tipping altogether, in favor of a flat service charge.

Another District eatery, Sally’s Middle Name, tested out the service charge model when it opened in 2015. Instead of a line for adding gratuity, every check came with an automatic 18 percent fee, which the restaurant split evenly among the front and back of the house. It didn’t last: Sally’s Middle Name ditched the service charge in favor of traditional tipping after a little more than a year. Customers liked it; workers didn’t.

Gresser says that she pays all 140 employees of her four Pizzeria Paradiso locations D.C. wage rate, even though it’s higher than the base rate in Maryland and Virginia, states with lower minimum wages. She worries that if 77 passes, top workers may seek employment in the suburbs. “Unless this happens across the country, the servers who are used to making above minimum wage, including their tips, are going to look for other locations to potentially move to, because they can still make $25, $40, $50 an hour.”

It’s not a given, though, that D.C. restaurant workers are bound to earn less. (After all, this law promises to pay them more!) Already pricey restaurant items—like the $17 burger at Scott Pruitt’s favorite haunt—may rise in cost. But then so will tips on these larger checks, to say nothing of the increase in base wages. More workers making higher wages means more money for them to spend at local industry bars and restaurants. The cycle could be virtuous.       

Do servers or bartenders in D.C. want this initiative to pass?
Not really! The vote-no side includes dozens and dozens of D.C. restaurants, from beloved indies to prominent local chains. Celebrity humanitarian chef José Andrés is a vocal opponent. ROC provided a list of local servers and waiters willing to go on record about why they support a measure that would raise their wages; it was only six names long.

So, case closed, right? If the workers themselves don’t want it, why should the rest of us?    

”This is what keeps me up at night,” says Laura Hayes, food editor at Washington City Paper and the author of the most exhaustive story on Initiative 77 to date. (Disclosure: I’m a contributing writer for Washington City Paper.) “I’m worried that the people that we’re hearing from are the loudest, the people who are [opposed to Initiative 77], because they’re good at social media, they speak English, they work at popular restaurants, and they have lots of friends.”

Hayes took a number of steps to try to find tipped workers who do support 77. She says she infiltrated niche Facebook groups organized on the matter. Hayes teamed up with El Tiempo Latino, D.C.’s Spanish-language daily, to interview Latino workers. But they sided with the opposition, too.

She believes that workers who support 77 are out there, though, and that they may be fearful of retaliation from their employers or otherwise disinclined to wear their support on their sleeve. “It is my sincere hope that restaurant operators wouldn’t put pressure on their employees to take a stand against 77,” she adds. “But in light of recent campaign finance reports that show major dollars being exchanged on both sides, it’s clear that this is a very high-stakes battle.”   

Is this a back-door attempt to unionize restaurant workers?
”No, but we strongly believe that all workers should have the right to organize for living wages, regardless of where they work,” says Diana Ramirez, director of the D.C. chapter of ROC. The organization’s 1,300 members pay a $5 monthly membership fee, she says, but it’s not a strict requirement, so this is hardly union dues.

Restaurant owners are not so sure. Some of them, like Dan Simons, the co-owner of Farmers Restaurant Group—a metro-area farm-to-table chain—claim that the organization wants to boost restaurant workers’ pay in order to establish a base that can support union fees. This insinuation is echoed widely among restaurant workers.

Would a union for restaurant workers be so bad? Back in December, the Trump administration floated a rule that would enable restaurants to pool tips and share them with the back of the house. Critics (including ROC) pounced on the proposal, since it would not require restaurants to share tips: Under the new rule, employers could decide how or whether to divide them up. (Congress nipped the Department of Labor’s so-called “tip-stealing rule” in the bud with a provision in the omnibus in March.)

Wait, isn’t President Donald Trump trying to kill Initiative 77?
No, although one headline might have led readers to think otherwise. The Intercept posted a story on Monday that said that the Save Our Tips anti-77 campaign was “managed in part by” the Lincoln Strategy Group, consultants with ties to the Trump administration. The very next day, though, new campaign finance records showed that Save Our Tips, who paid $11,000 to Lincoln Strategy Group, paid far more to Democratic-leaning strategists. WAMU’s Martin Austermuhle has reported on the actually shadowy groups that are jumping into the fray.

Do D.C. restaurant owners have any better ideas?
I asked Simons, the Founding Farmers co-owner, how he would address the complaints about low wages in the industry. Not by backing 77, he says: Most of his workers don’t want it to pass, and it doesn’t help the back of house staff, like dishwashers and line cooks. For waiters and bartenders specifically, Simons has an idea that might raise some eyebrows: Change the regulations on overtime.

Here’s how he explains it:

A lot of these employees see their lives through a weekly income. They’re trying to get to a weekly income number. That’s how they can plan their lives and pay their bills. A lot of employees at this socioeconomic level end up having to work two jobs to make ends meet, to get to their weekly number. Rather than having two different jobs at 30 or 40 hours a week, they might have a much easier time if they could work for one company for 60 hours or 55 hours. But the way that overtime laws are structured? Companies don’t want to pay overtime. The employees are now forced to have two jobs.

It’s far more difficult for an employee to have two jobs—it’s two commutes, it’s two work cultures, it’s two sets of data to learn. It’s serving two bosses that can have competing needs. I need you to come in, can you help now, I can’t honor your schedule. When you need to take a sick day, you have two people to trust you that you’re actually sick. The reason I’m talking about this issue when I’m talking about tips—these issues to me are all connected. Maybe that overtime law which is 40 hours in the U.S.?  Maybe that should be 50.

Cutting overtime pay is the kind of management suggestion that most workers would roll their eyes over. Workers at Founding Farmers restaurants specifically sued the restaurant and its owners, including Simons, for allegedly failing to pay overtime wages to employees who worked at multiple Founding Farmers locations, among other labor violations. Still, despite the everyday friction of capitalism, when it comes to 77, workers and bosses in D.C. see eye to eye about bosses not paying workers more money.

Restaurant owners are big bullies who just want to pay workers less.
That’s not true. Or that’s not always true.

Simons says that his employees make above minimum wage, for example. He runs through the math: Farmers restaurants employ 2,000 front-of-house workers in any given week. To give them each an $11-an-hour pay raise would cost $1.1 million—more profit than he sees in a year, he says. That’s fuzzy back-of-the-envelope math, and the increase would happen gradually. In any case, Simons says he’s against 77 because his workers are. Only one is a vocal supporter (as far as he knows).

Some restaurants lining up against the initiative have had run-ins with labor law. In 2010, workers brought a class action suit against Clyde’s Restaurant Group alleging that the company—which owns 15 restaurants around D.C., among them the Old Ebbitt Grill—failed to pay employees their tipped minimum wages. (The parties settled.) Clyde’s has contributed $15,000 to fight Initiative 77; David Moran, area director of operations at Clyde’s, chairs the Save Our Tips campaign.

Gresser, Pizzeria Paradiso’s maestro, says it’s wrong to characterize local owners as bullies.

“We’ve been a company that’s had very significant employee benefits very, very early in our existence,” Gresser says. “We’ve had healthcare for our employees since the mid-90s. We have 401(k) plans. We had sick and vacation time for full-time employees way before it was mandated by the government. There’s an aspect that I find personally offensive, the vilification of the restaurant owner.”

District diners might tend to agree. The city’s restaurant scene is hot, and is not pocked by bland national chains and soulless franchises. Residents who can afford the nightlife love it. Restaurateurs are often involved in the community. But the Economic Policy Institute warns that locals’ affection for their neighborhood bars, eateries, and staff should not blind them to the ubiquity of the arguments against 77.

“Any time there’s a campaign to try to raise labor standards, be it minimum wage, paid minimum wage, or paid sick days, there’s a claim that all these businesses are going to shutter or move across the river to Virginia or over to Maryland. It’s never come to fruition,” Cooper says. “But that’s actually true of every city as well. I’ve testified on probably a half dozen city minimum wage campaigns throughout the country over the last several years, and I hear the same exact thing every city I go to. Our city is not like any others, we can’t possibly absorb a minimum wage increase or a tipped minimum wage increase.”

Can Initiative 77 stop sexual harassment?
No. There’s an argument that tipping leads workers to suffer abuse from customers, since customers are paying their wages. But since Initiative 77 would not put a stop to tipping, it wouldn’t change nasty customer–server dynamics.

City Paper’s Hayes says that sexual harassment is absolutely a problem in D.C. and that it should be taken seriously. While unwanted advances are awful, the form of sexual harassment that’s far harder to endure (or address) comes from management.

“This is not a small town somewhere with two IHOPs and two Denny’s and maybe a Hooters, where [servers] are expected to look date-ready before they go see customers,” Hayes says. “I think that in D.C., the professional class of people who are working in restaurants—they’re highly educated, they have to wear uniforms, they take pride in what they do, they consider it a profession, not just a career stop or a way to make ends meet. They really enjoy it, and that’s from casual restaurants up to fine dining. Whenever they hear this connection between tipping and sexual harassment, they feel that their professionalism is being knocked down a notch.”

Should this issue even be on the ballot?
Absolutely not. Initiative 77’s supporters tried before to sponsor legislation to raise the tipped wage but failed to draw much support. Now, national organizations for and against are asking D.C. voters to wade into an extremely complicated question in a snoozy off-year primary election. The issue at hand matters, and it should be decided by elected representatives who can convene hearings, interrogate locals and experts, and fix any unintended consequences that arise (or be held accountable for their vote).

“This is D.C.,” says CP’s Hayes. “Everyone is working 80-hour work weeks. They don’t have time to consume article after article on this. It’s tough to rely on an uneducated voter base to make such an important call that could affect 35,000 workers. Not everyone is literate on how margins work in restaurants.”

Cooper acknowledges the many passionate arguments about why eliminating the tipped wage can’t work for D.C. He’s heard it all before. Owners and staff will adjust if 77 passes, Cooper says.  

“Every city thinks it’s unique in this way, and yet, somehow, once these increases are passed, every city still finds a way to thrive.”

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A Motel Gets a Noble Second Life on Route 66

In the mid-1970s, long before they were household names, Bill Gates and Paul Allen spent four years in Albuquerque, New Mexico, trying in vain to solicit venture capital for their computer start-up. They lived at the Sundowner Motor Lodge, a two-story, U-shaped midcentury modern affair built in 1960 at the height of Route 66’s heyday; it’s depicted in vintage postcards as a swanky joint where well-dressed guests sip poolside cocktails beneath the ambient glow of a neon sign beckoning passersby on the storied road bisecting town. Not long after they decided to move on, the construction of I-40 precipitated a period of decades-long decline for the Sundowner, and for dozens of other city motels now long associated with transience, drugs and prostitution. The Sundowner was eventually shuttered in 2009, left to languish behind a moat of chain link. 

But in 2013, local non-profit developer NewLife Homes pursued a $9 million project that transformed the old 110-room motel into a 71-apartment facility with an on-site support and resources center. Most units are reserved for individuals making less than half the local median income; a quarter are for formerly homeless tenants and those with special needs.

Brothers Roy and Ken Turner, 50 and 49, respectively, both diagnosed with schizophrenia, have shared an apartment here for about two years. They resemble each other, but it’s easy enough to tell them apart; during a manic episode years ago, Roy tattooed an abstract design onto half of his face. They’ve remained close throughout their ordeals, which have included bouts of homelessness and stints in public housing they describe as “institutional,” with a frequent law enforcement authority presence. Ken writes poetry, and Roy, a University of New Mexico graduate of fine art, is a photographer. They’re planning to exhibit their work in the Sundowner’s public community space this summer, and they seem sincerely glad to be here. “The landscaping and the architecture is dignified,” says Roy. “This doesn’t feel like a place where you’re marginalized. You feel like a person.”

(John Peterson/NewLife Homes)

Five years since the Sundowner’s reincarnation, John Bloomfield, executive director of NewLife Homes, which manages eight other affordable rental properties in town, calls it “one of our great success stories,” and a replicable, permanent supportive housing model.

The project appears to be part of an emerging trend. Just two miles east of the Sundowner, NewLife Homes also oversaw the transformation of Luna Lodge, built in 1949 and listed on the National Register of Historic Places, into 30 apartments for low-income residents, including veterans, elderly, mentally ill, and formerly homeless. Described by local Route 66 historian Keith Koffard as one of the “best examples of an unaltered tourist motor court” from that era, the project required asbestos and lead remediation, but ultimately met stringent historic preservation requirements and achieved LEED platinum certification.

Similarly, an hour north, the Housing Trust of Santa Fe oversaw the conversion of another 1940s Route 66 motel into a 60-unit affordable multifamily rental facility with a quarter of its units reserved for people transitioning from homelessness or who have special needs. 

And these projects are gaining traction not just in New Mexico, but elsewhere in the West, and beyond. In Flagstaff, yet another old Route 66 motel was converted into transitional housing, as described in a 2016 NPR segment. A small motel in Phoenix was reportedly transformed for veterans to live rent-free for six months while readjusting to civilian life. In California, Mercy Housing commandeered two older motels for similar purposes: The Budget Inn Motel in Sacramento is now the Boulevard Court Apartments, housing disabled formerly homeless individuals; In San Leandro, the Islander Motel, with a notorious reputation for crime, has become Casa Verde, with rental units reserved for those earning between 30 and 45 percent of the area’s median income. And, in 2016, Los Angeles launched a program to enable developers to convert “nuisance motels” into housing for some 500 homeless vets. The city also passed an ordinance last year to streamline the approval process for such conversions.

Clearly, these endeavors are more than mere singular feel-good human interest stories or remarkable stand-alone adaptive reuse projects that often preserve historic landmarks.


According to a January 2017 HUD report, more than 553,000 people in the U.S. are homeless. That’s an increase over the 2016 estimate, although homelessness rates per capita actually dropped slightly as a result of population growth. But that hardly offers a promising trajectory given the housing supply context: The National Low Income Housing Coalition documents a shortage of 7.2 million affordable and available rental homes for extreme-low-income renter households—those with incomes at or below national poverty guidelines or 30 percent of the area’s median family income.

Of this segment, the most vulnerable are those with mental illness and the disabled, who largely subsist on social security disability incomes that barely cover the average rent. And the outlook appears to be worsening with disproportionate rates of increase between disability compensation and rent prices.

“People with disabilities or mental illness facing these circumstances are, for the most part, a voiceless constituency,” says Bloomfield. “There’s a lot of sentiment that they’re the government’s responsibility and pervasive myths that housing them properly will lower surrounding property values and increase crime rates, and there’s a lot of stigma.” 

Helping dispel some misperceptions, proponents of Housing First, the evidence-based approach to ending chronic homelessness, developed a model with two key features: affordable housing for the most vulnerable; and onsite support to ensure that residents have access to the services they most require, providing stability for them. 

“There’s this notion that having a stable place to live is the reward for a stable, productive lifestyle, when in reality, stable housing is a prerequisite,” says Albuquerque native Rolf Pendall, a fellow with the Urban Institute. “So shifting from squalid, temporary, unreliable conditions in a dilapidated motel room to decent, stable housing is definitely a step in the right direction.”

Pendall says cities should work carefully to balance their housing needs with their projected growth and economic forecasts. “And in doing so,” he cautions, “… it would be a huge mistake to overlook the value associated with addressing homelessness proactively.” Providing housing generally results in cost savings for communities because housed people are less likely to use emergency services, including hospitals, jails, and emergency shelters, than those who are homeless, according to the National Alliance to End Homelessness. Scores of studies support this conclusion. 

Case in point: A pilot program in Denver launched in 2016 provided supportive housing for 100 people, mostly men in their 40s and 50s each with extensive arrest records. Financed through a social impact bond, the program appears to be an unqualified success. Only one person has left.

For those pursuing motel-to-supportive housing conversions, an unshakable conviction that the benefits will offset the costs is a distinct asset; the work requires a special breed of perseverance.  Bloomfield readily admits these undertakings are fraught with challenges—from negotiating with cities on zoning and contending with often vehement opposition from neighborhood associations, to navigating the byzantine universe of application paperwork for scarce funding sources both small and large, from obscure grants to federally-administered umbrella subsidies.

“You need a thick skin,” says Bloomfield. “And to stay focused on the big picture, even as you’re going through a minefield of relentless details.”

While there are several programs that incentivize affordable housing development, not many specifically promote the retrofitting of old buildings. Of those that do—whether their emphasis is on historic preservation, adaptive reuse, or green building—they often involve stringent, sometimes conflicting requirements, and varying tiers of local, state and federal interpretations on meeting them, not to mention ADA requirements. The immense competition for financing and a multitude of preconditions place a huge onus on the developer to deliver a quality product.


Mark Okrant’s book No Vacancy: The Rise, Demise and Reprise of America’s Motels, claims the number of operating motels has plummeted from a peak of about 61,000 in 1964 to just 16,000 in 2012. As with their neglected surroundings, many defunct motel properties may just need to be reconceived, rather than left to rot. At least, that’s what Bloomfield and his counterparts across the country are hoping to demonstrate.

And many seem to be doing just that, creating myriad positive ripples with projects that expand the tax base, promote public transportation usage and local business patronage, and, hopefully show that when vulnerable people are stabilized, they can, in turn, help stabilize their neighborhoods.

Of its Sacramento motel conversion, Mercy Housing’s Stephan Daues says, “In one fell swoop, we eliminated an epicenter of crime and blight and replaced it with an architectural gem on its own, where staff and residents have established a sense of community, and the surrounding neighborhood has a new stitch in its fabric.”

Realistically, these projects almost always rouse concern about crime and property values from neighbors that raw data analyses or peer-reviewed scholarly studies cannot always alleviate.

Bloomfield makes a point of consistently engaging in dialogue with neighbors, routinely offering PowerPoints with charts and graphs that illustrate reduced police activity and crime in the vicinity of his projects, and maintaining an active community presence,.

For these projects to more effectively radiate their outward potential, they should include a strong community resource component, says Bloomfield. The Sundowner’s street-facing public community space, for instance, is provided at no charge for a variety of meetings and conferences, musical performances, and art exhibits.


Situated across from a new Albuquerque Rapid Transit station kiosk, part of a public transportation project recently established along nine miles of Central Avenue, the Sundowner retains much of its early mod aesthetics. Local architect Garrett Smith wanted to preserve the property’s original Del Webb-style motor lodge layout while adding accommodations for an outdoor grower’s market and front-facing commercial space. The LEED-platinum project includes water-permeable parking areas and water-harvesting cisterns used for a community garden. There’s a playground, a sand volleyball court, barbecue grills. And there’s a memorial area for residents to reflect on others who have passed away, like Naomi Martinez, who, had been living on and off the streets and had lost both legs to diabetes.

In a communal space with floor-to-ceiling windows looking onto Central Avenue, residents sip coffee, socialize, scan the local headlines. Bloomfield, an affable man with a bushy head of salt-and-pepper, shows up to chat with tenants on an almost daily basis. There are a few offices for the barebones staff of six. Bloomfield’s is small, cramped and windowless, with towers of paperwork teetering on a desk and a portrait of Nelson Mandela hanging from the wall.

With bright morning light flooding into the common room and the distant sound of blaring sirens, Bloomfield acknowledges the surrounding neighborhood is still beset by crime, but he is nonplussed. Since the Sundowner’s transformation, Bloomfield says the biggest challenge is “neighborhood predators taking advantage of residents and using their units for illegal activities.” But evictions have been rarely necessary, and “at our oldest property, the majority of residents have been with us for over 20 years,” he says.

(John Peterson/NewLife Homes)

That’s likely a testament to the nonprofit’s housing management apparatus, which encourages that staff know every resident. Support service reps occasionally intervene on behalf of tenants; routine welfare checks are conducted. The general atmosphere is imbued with a cordial sense of mutual respect between staff and tenants who, says Bloomfield, “often form deep, personal connections.”

While it no longer features an inviting swimming pool, the Sundowner does house a small museum space that pays tribute both to its Route 66 heritage and to its now-famous former tenants. Browsing the quiet space, it’s tempting to imagine what Albuquerque would be like now had Microsoft actually planted roots here; Gates and Allen, after all, helped transform dying Pacific Northwest logging communities into prosperous tech-driven hubs, as they spawned an industrial sector whose enormously transformative social and economic ramifications may never fully be comprehended.

No matter, some things don’t change. As Bloomfield says, “any city aspiring to be world-class must retain its humanity, which is demonstrated through respect and support for its most vulnerable citizens.”

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Don’t Blame Expensive Housing for Falling Fertility

On Tuesday, I woke up to a story that was going viral on social media. The story, based on an analysis by Jeff Tucker of Zillow Research, showed a correlation between the housing prices in expensive cities like New York and Los Angeles and the change in fertility among women aged 25 to 29.

The idea that high housing prices would impact fertility comports with a certain intuition we have these days about how hard life is in expensive cities, especially for younger people. As housing prices go up, people can afford less space, so the higher price of the housing needed to accommodate kids leads people to delay having a family, to have fewer kids, or to have no kids at all.

But that’s not actually the way fertility works. There is a significant body of demographic literature which contends that it is not higher cost burdens, but actually higher levels of education and income that cause fertility rates to fall. Across the world, as people and cities and nations get richer, the birth rate declines accordingly. The trend that the Zillow report describes fits into that pattern—not the other way around.

Here’s a key chart from the study. It’s a scatter graph that purports to show the close relationship between home values and fertility. Note how the fitted line slopes sharply down from left to right. Across U.S. metros, fertility rates decline as house prices go up.

The next chart gets more granular, plotting how birth rates have fallen the most in counties that have experienced the greatest increase in home values.

The counties with the sharpest increases in home values also saw remarkably large drops in fertility, according the Zillow analysis. In these places, fertility among women in their mid-to-late 20s dropped about 13 percent between 2010 and 2016—twice as much as it fell in counties with medium home-value increases.

The Zillow analysis does recognize the limits to the connections we can draw between housing prices and fertility. Its qualifications and caveats are worth quoting at length:

The negative relationship between the two trends across counties is statistically significant, but clearly there is a great deal of variation in fertility declines unrelated to home values. Large differences from the trend reflect the fact that only 19 percent of the variation in fertility changes can be predicted by home value changes … [T]he correlation observed here is by no means proof that home value growth causes fertility declines. One alternative explanation could be the possibility that there is clustering into certain counties of people with careers that pay well enough for expensive homes but make it difficult to have children before 30.

Actually, according to Zillow’s own models, housing prices explain less than 20 percent of the variation in fertility. That’s more likely, and more in line with what we know about the connection between housing prices and birth rates.

In a detailed 2012 study, the demographer William Clark found that the real effect of expensive housing markets is to delay fertility (particularly the onset of first birth, by a few years), rather than to cause any overarching decline in fertility. A separate, 2013 study by economists Lisa Dettling, of the board of the governors of the Federal Reserve system, and Melissa Kearney, of the University of Maryland, came to a similar conclusion. Their study found that while a short-term increase of $10,000 in house prices leads to a 2.4 percent decline in births among non-homeowners, it actually leads to a 5 percent increase in fertility rates for homeowners—likely a consequence of the increased “wealth” generated by their homes. Taking the U.S. economy as a whole, Dettling and Kearney estimated that in 2012, an average increase of $10,000 per home would lead to a roughly 1 percent (0.8 percent) increase in fertility.

The late, great Nobel Prize-winning economist Gary Becker is the person who introduced the basic set of ideas about the “cost of children” in a classic paper written back in 1960, called “An Economic Analysis of Fertility.” His basic model said children could be viewed similarly to other sorts of goods in that they convey “utility”—an economist’s term for value—to their parents. As people and societies get richer, they do not just want more and more stuff; they want better stuff. So people in more affluent societies opt to have fewer children and bestow them with more advantages that come from more parental time and interaction, more books, better schools, and more extracurricular activities. Crassly put, when it comes to having kids in affluent societies, people trade quantity for quality.

Across the world, as people and cities and nations get richer, the birth rate falls. In this basic model, the richer the place, the fewer the kids, regardless of housing prices. As societies get richer, people also begin sort themselves into different kinds of places, by income, education, age, and other factors. We “vote with our feet,” in the famous words of Charles Tiebout, sorting ourselves into places that provide the bundles of services we need or want at the tax levels we want to pay.

So young people starting out in their careers and without kids head to expensive cities, where opportunities are plentiful. They don’t necessarily move out of these expensive cities when they form relationships and get married, or even when they initially have kids—that is why the streets of expensive cities are filled with parents and caretakers pushing expensive strollers.

But once those kids start going to school, their families begin to seek out places that offer better schools and more space—frequently expensive suburbs in those very same metro areas. Or as my Atlantic colleague Derek Thompson put it on Twitter:

The reality is that expensive metros attract people who are less likely to have kids, or who decide to do so later in life. Indeed, other research shows that many highly educated women are not having children in their 20s at all. It also could be that some educated households are moving out of these places when they decide to have kids. But the lower fertility rates of pricey cities are much more likely to reflect the edging out of less advantaged, less educated groups that traditionally have higher fertility rates. Fertility rates for Hispanic women aged 20 to 29 are quite a bit higher than for white women, at 154 births per 1,000 women, compared to 88.

Higher housing prices don’t result in lower birth rates in expensive cities. It’s just one more dimension of what Bill Bishop long ago dubbed “the big sort,” which defines our economic geography today.

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