Category: Policy

  • The Promise and the Peril of Rust Belt Chic

    What do you do when you’re a post-industrial city fallen on hard times? There’s a sort of default answer in the marketplace that I’ll call for want of a better term the “Standard Model.” The Standard Model more or less tells cities to try to be more like Portland. That is, focus on things like local food, bicycles, public transit, the arts, New Urbanist type real estate development, upscale shopping, microbreweries, coffee shops, etc., etc. The idea seems to be that the Rust Belt city model is a failure and should be chucked in favor of something better. In this model the publicly subsidized real estate project is the preferred economic development strategy. We’ve seen city after city work to create downtown and near-downtown “Green Zones” resembling miniature Chicagos. While these have generated excitement and even attracted some residents (upwards of 4,000 in Cleveland and 3,000 in St. Louis, though these are the high end), they have not fundamentally changed the civic trajectory other than in the largest Tier One type cities. And they likely never will. People who want Standard Model urbanism can find superior versions in many cities that generally boast more robust economies to boot.

    Enter Rust Belt Chic. This approach in theory solves two of the issues plaguing Standard Model urbanism, authenticity and uniqueness. I haven’t seen a crisp definition of what Rust Belt Chic actually is according to its boosters, but Pete Saunders summed up some of the salient points. The three key elements I see, which build upon each other:

    1. Do the Fail. Giving up on the idea of the factories coming back or large scale re-population.

    2. Reject Growth as a Success Marker. This actually aligns it somewhat with the standard model. Traditional signs of civic success such as population and job growth are rejected in favor of items like per capita income, brain gain, etc.

    3. Brashly Embrace the “Rust” in Rust Belt. This extends Do the Fail to actually embrace the civic characteristics failure produced, as well as various quirky legacies of the industrial past such as Pittsburgh potties.

    The best part of Rust Belt Chic is that it understands that you have to be who you are, not who you aren’t. Someone once described a brand as “a promise delivered.” When cities decide that what they are is of no worth or that it can’t succeed in the marketplace, the temptation can then be to try to pretend like they are Portland or some such. Almost invariably in such cases cities end up building towards a false promise they can never deliver. That’s not to say any of the elements of Standard Model urbanism are bad in an of themselves. The problem is that they are basically “best practices” types of things. Just as no company can succeed as nothing but an agglomeration of best practices, no city can either.

    The tendency in Rust Belt cities has been to try to downplay their authentic characteristics in order to try to portray themselves as hip and with it. As I’ve noted before, the one thing most clearly associated with Indianapolis is the Indianapolis 500, yet auto racing plays a fairly small role in how the city tries to sell itself these days.

    Rust Belt Chic is a first attempt at a region deciding no longer to be a passive importer of ideas about what cities should be, but instead trying to chart a path that is rooted in a unique, local history, culture, geography, etc. To the extent that it steers cities away from a purely “me too” strategy towards creating something that has a unique market positioning that’s real to the place and has at least some competitive advantage in the marketplace, Rust Belt Chic is a big win.

    However, as currently constituted, Rust Belt Chic would appear to be limited. In effect, it is really a marketing and to some extent a talent attraction program. Looking at the ironically appropriated trappings of the working man that characterize so much of hipsterdom, Rust Belt Chic says “Hey, we’ve got the real thing.” So rather than drinking PBR ironically, you drink I.C. Light with a more subtle degree of irony (i.e., by pretending that you’re actually drinking it authentically). The term “chic” itself is suggestive of fashion, and thus of artifice.

    What Rust Belt Chic does not do is address any of the core problems of the cities in question, ranging from fiscal crises to corruption to poor business climates to segregation, to say nothing of safe streets, better schools, etc. Maybe that isn’t its aim. But if not, then it would appear to be only one small component of an overall civic strategy, and not an alternative to the Standard Model in its own right. The theory of change it embodies would appear to be that authenticity of place and culture will attract people looking for the real, thus restarting the demographic engine through more population dynamism and ultimately that will percolate into the economy. That’s fine as far as it goes, but it’s insufficient.

    The elevation of authenticity also poses the danger of imprisoning the community in a straitjacket from the past. With “do the fail” and the embrace of decline as part of the culture, Rust Belt Chic deftly side steps some of the worst dangers of the corrosive force of nostalgia. However, the problem with authenticity is that is has to be, well, authentic. And the way that’s normally accomplished is by encasing something in amber, stunting its evolution.

    What Rust Belt Chic needs to be able to do is inform real, substantive change, and to not only unearth the authentic civic character, but updates it for 21st century realities.

    A city I think has done this quite well is Nashville. It would have been tempting for them to see their country music legacy as déclassé, and try to basically pitch themselves as the Portland of the South or some such. Instead, while they have embraced a number of Standard Model approaches – as I said, there’s nothing per se wrong with them – they kept country music as core to their identity. But it isn’t yesterday’s country music or culture. People in Nashville today aren’t sitting around watching Hee Haw reruns. Country music today is as much Hollywood as Hank Williams.

    That’s not to say Nashville disparages its past. Far from it. The old classic country performers are still honored, and their music still respected and listened to. And they see today’s country as linked across time to that of previous generations. So there’s evolution, but with continuity. They very much value their traditions. But they haven’t become imprisoned by them. Also, Nashville happens to have a stellar business climate, far less corruption than your average Rust Belt city, an openness to outsiders, an increasingly diverse population base, and an aggressiveness towards growth missing in most of the Rust Belt. That’s not to say Nashville’s perfect, but they’ve done a pretty good job of updating their authentic culture while backing it up with an actual product that’s functional demographically and economically.

    If Rust Belt Chic wants to reach its potential, it has to be able to do more than unearth and embrace the authentic culture of a place – though that’s important – it needs to be able to inform cultural evolution and also the very real changes in the product (such as Atlanta’s striving to shuck itself of the stigma of racism in the South by becoming the “city too busy to hate” and in the process becoming America’s premier city for blacks) needed to make these cities competitive again.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.

  • “Unblocking Constipated Planning” in New Zealand

    One of the National Party’s principal objectives since coming to power in New Zealand has been to address that nation’s terribly deteriorated housing affordability problem.  Deputy Prime Minister Bill English explained the problem in his Introduction to the 9th Annual Demographia International Housing Affordability Survey:

    “It costs too much and takes too long to build a house in New Zealand. Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand. When demand shocks occur, as they did in the mid-2000s in New Zealand and around the world, much of that shock translates to higher prices rather than more houses.”

    In the largest markets (Auckland, Christchurch and Wellington), house prices had doubled relative to incomes over the past two decades, as land prices were driven up by urban containment land-use policies (Note), that severely restrict the supply of land available for new housing. Across New Zealand, this rationing of land has led to the destruction of the competitive supply of land the Brookings Institution economist Anthony Downs says is essential to maintaining housing affordability. The relationship between urban containment policy and higher house prices is documented in a large body of international research. Economists Richard Green and Stephen Malpezzi succinctly summarized the issue:

    “When the supply of any commodity is restricted, the commodity’s price rises. To the extent that land – use, building codes, housing finance, or any other type of regulation is binding, it will worsen housing affordability.”

    On September 5, the government took an important step toward improving housing affordability, with the enactment of ground-breaking land use regulation reform. In the Parliamentary debate, Housing Minister Dr. Nick Smith expressed the imperative for passage by describing the regulatory situation in Auckland, the nation’s largest city (metropolitan area):

    Auckland has just 1,300 sections (lots) currently available for housing. That’s a third of what it had 10 years ago.

    We need 13,000 each year just to keep up with population growth.

    We’ve got a rigid Metropolitan Urban Limit (urban growth boundary) prohibiting any new housing developments beyond the artificial line drawn 15 years ago.

    We’ve got a few lucky land owners sitting on the last few parcels of developable residential land holding prospective homebuyers to ransom.

    Section (lot) prices have trebled and gone up by more than any other part of the housing cost equation.

    We’ve got a convoluted RMA (Resource Management Act) planning system where it takes an average of seven years to get a plan changed by the time you get through all the consultation and appeal processes.

    And even when you get a plan change, it takes an average of another three years to get a consent for a greenfields development and a year for a brownfields development.

    We’ve got a constipated planning system blocking new residential construction and this bill is a laxative to get new houses flowing.

    The passage represents an important step in the campaign by Dr. Smith and the National Party government to improve New Zealand’s housing affordability.

    According to Dr. Smith: “The increased land supply will help take the pressure off the over-heated Auckland housing market and help the economic recovery. It will enable tens of thousands of kiwi families to realise the dream of owning their own home.”

    Housing Accords and Special Housing Areas Act

    The new Housing Accords and Special Housing Areas Act permits the government to establish special housing districts that permit bypassing expensive planning regulations. Initially, the Act will be applied in Auckland, where an urban growth boundary (the “Metropolitan Urban Limit”) has been blamed for driving house prices to more than double their historic relationship to household incomes. Smith indicated that the Act would “over-ride Auckland’s Metropolitan Urban Limit” and that  ”…it would enable low-rise greenfield developments to be consented in six months, when they previously took three years, and low-rise brownfield developments to be consented in three months, when they previously took a year.”

    Smith also noted that support for the act was based on advice from the New Zealand Productivity Commission, the Reserve Bank of New Zealand (the central bank), the Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF), which have indicated that “increasing supply is crucial to addressing housing affordability.”

    The government intends to move quickly, according to Minister Smith:

    “The main initial focus of the new law would be to enact the Auckland Housing Accord through which it is planned to build 39,000 new houses in a three year period in the Auckland region. Housing Minister Nick Smith says he expects the Auckland Council to approve the accord next Tuesday and is talking about having special housing areas approved by Christmas that would be able to cater for 5000 houses.”

    Housing Affordability in New Zealand

    The housing affordability crisis problem is the most severe in Auckland. The most recent Demographia International Housing Affordability Survey reported that median house prices were 6.7 times median household incomes in 2012 (this is the “median multiple”). This price to income ratio has more than doubled since the early 1990s. This is a particular problem because housing cost is by far the largest element of household budgets in New Zealand (as well as in Australia, Canada and the United States).

    The extent of the problem in Auckland is illustrated by the fact that across the urban growth boundary, values are one-tenth per acre for comparable land, according to research by Dr. Arthur Grimes, Chairman of the Board of Reserve Bank of New Zealand. In a competently governed market, there would be little difference.

    The higher land prices of urban containment also encourages builder “up-market,” to achieve competitive returns on the required larger investments. This is illustrated in New Zealand Productivity Commission research by Guanyu Zheng for the New Zealand Productivity Commission found that the higher prices generated by Auckland’s urban growth boundary were more severe for lower cost housing: “…when the supply of land on the urban periphery is restricted, the price of available residential land rises and new builds tend to be larger and more expensive houses.”

    High house prices are not limited to Auckland. Like in the United Kingdom, where exorbitant house prices occur from depressed Glasgow and Liverpool to dynamic London, house prices are high from the top of North Island to Invercargill in the South, irrespective of the economy.

    The provisions of the Act will also be applied in other more expensive markets in New Zealand. The Minister said: “The Government is also having discussions with other councils in high cost housing areas on how the tools in this law can assist in addressing the housing supply and affordability issues in their communities.”

    The Campaign

    The extent of New Zealand’s housing affordability problem has been known for some time and has been cause for serious concern.

    The long-time Governor of the Reserve Bank, Donald Brash wrote in 2008 that “the one clear factor that separates all of the” affordable and unaffordable housing markets “is the severity of the artificial restraints on the availability of land for residential building.” Later, Brash zeroed in on the cause., which he characterized as the extent to which urban containment policy “has pushed the price of residential land well beyond the reach of far too many New Zealanders.”

    For the last decade, Christchurch’s Hugh Pavletich (co-author of the Demographia International Housing Affordability Surveys) has been drawing attention to the problem: “We are currently paying near double per square metre build costs because of this…”

    More recently, Governor Graeme Wheeler of the Reserve Bank of New Zealand raised concerns about house price increases and implemented stronger loan qualification requirements to cool the market. Similar action was taken by the Bank of Canada last year, though monetary policy is severely limited in reigning in bubbles in the face of regional policies that drive up land prices.

    Moreover, urban containment is a poor strategy for reducing greenhouse gas emissions, because of its exorbitant costs per ton and its meager results.

    Getting Priorities Right

    By these reforms, the New Zealand government has given priority to the quality of life of its households over the more peripheral issues of city form and how people travel. In an increasingly globalized and competitive world, this sends an important signal.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.

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    Note: Urban containment is also referred to as “smart growth,” growth management,” “compact cities” and other terms.

    —-

    Photograph: Downtown Auckland (by author)

  • The Next Urban Crisis, And How We Might Be Able To Avoid It

    Urban boosters are rightly proud of the progress American cities have made since their nadir in the 1970s; Harvard economist Ed Glaeser has gone so far as to proclaim “the triumph of the city.” Yet recent events — notably Detroit’s bankruptcy and the victory of left-wing populist Bill de Blasio in the Democratic primary of the New York mayoral election — suggest that the urban future may prove far more problematic than commonly acknowledged.

    Detroit’s bankruptcy revealed the unsustainable fiscal problems facing most major urban centers, including, most importantly, President Obama’s political base of Chicago. This summer, Moody’s downgraded the Windy City’s credit rating three notches, noting the unsustainable nature of its pension obligations. Some 37 cities have filed for bankruptcy since 2010, most of them small, and as many as 20 others may be on the verge, including larger places like the California cities of Oakland and Fresno, and Providence, R.I.

    My hometown of Los Angeles may not be far behind. Perhaps the most union-dominated big city in America, the City of Angels’ pension obligations have gone from 3% of the city budget a decade ago to 18% last year. They are rising at a phenomenal 25% annual rate, according to a recent report by an independent watchdog, California Common Sense.

    Given this background, the political tides in New York suggest a worsening of the crisis. Thanks to the Bernanke-inspired Wall Street boom, the New York economy has not suffered the extreme fiscal distress of other big cities. But its fiscal condition is far worse than Mayor Michael Bloomberg and his well-oiled media machine might suggest. Under Bloomberg city spending grew 55% while pension costs have grown 300%.

    With de Blasio likely to be the next mayor, we can expect the bleeding to get worse. Many business people rightly fear a de Blasio’s administration will raise taxes in order to meet public employee demands. Faced with financial shortfalls, de Blasio’s response, notes historian Fred Siegel, is likely to be similar to that of his hero, former Mayor David Dinkins, who consistently gave in to public unions and raises taxes.

    But it’s not enough to dismiss de Blasio as a throwback. His victory reveals the depth of a profound social crisis beneath the glitz and glitter of Bloomberg’s luxury city. Similar class and geographic divisions can be seen throughout the country but inequality seems most egregious in New York. A recent analysis of inequality by University of Washington demographer Richard Morrill found New York to be the least egalitarian big metro area in America.

    This is borne out by other research: the New York City comptroller’s office found that the top 1% account for roughly a third of Gotham’s income, twice as high a share as in the rest of the country. Incomes have surged on Wall Street but most New Yorkers — two-thirds of whom are racial minorities — have struggled to keep pace. Controlling for cost, in fact, the New Yorker’s average paycheck is among the lowest among the nation’s 51 largest metro areas. Nearly half the city’s residents, notes theNation, are either below the poverty line or just above it.

    Bloomberg’s policy focus on ultra-dense development geared to Wall Street, the global rich, and the needs of the all-powerful, largely Manhattan real estate community has done very little for the vast majority of New Yorkers. This reality has lent credibility to de Blasio’s “tale of two cities ” stump speech and the growing rejection of Bloomberg’s legacy.

    Not that all of this can be laid at Bloomberg’s feet. New York’s economy has been changing for decades. New York of the 1950s was a manufacturing, trade and fashion superpower, employing hundreds of thousands of middle- and working-class residents. Large corporations employed large numbers of white- and pink-collar workers. This made New York, although always with its extremes, still a very middle- and working-class city.

    New York’s blue-collar economy has withered to a degree unmatched in most other U.S. cities. The port, the city’s original raison d’etre , lost its primacy to Los Angeles-Long Beach by 1980 and now ranks third in cargo value behind Houston-Galveston as well. The manufacturing sector, which employed a million in 1950, has shriveled to 73,000 jobs today (note that a small part of the decline is due to the BLS’ reclassification of some jobs to other sectors, and other statistical changes). Manufacturing employment in NYC has shrunk 39% since 2004, the worst performance of any major metropolitan area.

    A similar, albeit less dramatic decline has occurred in white-collar employment, in part due to the movement of large companies out of the city. In 1960 New York City boasted one out of every four Fortune 500 firms; today there are 46. And even among those keeping their headquarters in Gotham, many have shipped most of their back office operations elsewhere. Employment has even dropped in the “booming” financial sector, down 7.4% since 2007. The big employment gains have been almost entirely concentrated in the low-wage hospitality and retail sectors.

    If inequality is now greater in New York, the overall economic situation in other cities is, if anything, worse. New York at least has Wall Street, media and a constant infusion of wealth from the rest of world to keep its economy going and stave off the bond-holders. Yet even New York’s economy is underperforming its periphery. The city’s unemployment rate is 8.7% while the surrounding suburbs stand at 7.5%. This gap exists in almost all major metropolitan areas ; among the 51 largest metros the core unemployment rate is 8.8 percent compared to 7.1% in the suburbs.

    The gap is wider in other major cities. In the Chicago area, unemployment in the city is 2 percentage points higher than in the suburbs; in Los Angeles, the city unemployment rate is near 12%, three points higher than in suburbs. This, of course, all pales to Detroit where the city jobless rate stands at over 18% compared to 10% in the suburbs.

    Rather than “cure poverty” or export it to the suburbs, as is regularly claimed, cities retain a poverty rate twice as high as in the suburbs. And although hipsters and the global rich dominate media coverage, the vast majority of the population growth in urban cores over the past decade — upward of 80% — has come not from hipsters but the poor.

    These woes have been largely ignored by the press, but, as de Blasio’s primary victory shows, cannot be hidden forever. True, big investments aimed at attracting the “hip and cool” urban element have helped real estate speculators in selected districts, but has precious little positive impact on the neighborhoods where most urbanities reside.

    Unless addressed, the inequality in core cities suggests a similar lurch to the left could be seen in other cities. What is needed now is a new strategy that promotes the kind of broad-based economic growth that would make the urban “triumph” more than an empty one.

    This story originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Photo courtesy of Bill de Blasio.

  • City Leaders Are in Love With Density but Most City Dwellers Disagree

    People care deeply about where they live. If you ever doubt that, remember this: they staged massive protests over a park in Istanbul. Gezi Park near Taksim Square is one of that ancient city’s most beloved spots. So in June, when Prime Minister Recep Tayyip Erdogan threatened to demolish the park to make room for his grandiose vision of the city as “the financial center of the world,” the park’s neighbors and supporters took to the streets. The protests were directed against what has been described as “authoritarian building”—the demolition of older, more-human-scaled neighborhoods in favor of denser high-rise construction, massive malls, and other iconic projects.

    Other protests, usually more peaceful, but sparked by a similar revulsion against gigantism, have erupted in cities as various as Sao Paolo, Singapore, and Los Angeles. But what is most striking are the eerily similar reactions of mayors, city planners, architects, and developers, all of whom seem remarkably tone deaf to the wishes of their constituents.

    New York’s Mayor Michael Bloomberg, for example, is a tireless advocate for more density in the Big Apple. Along with many of the world’s leading academic, media, and real estate leaders, Bloomberg dreams of a future where urban dwellers live cheek by jowl in ever-closer proximity. Bloomberg’s notions are supported not only by developers but also a large cadre of academics, such as Columbia University’s Kenneth Jackson, who considers dissent from the mayor’s plans an affront to “Gotham’s towering ambitions” by reactionary “opponents of change.”

    There’s just one problem with this brave new condensed world: most urban residents aren’t crazy about it. In the United States and elsewhere, people, when asked, generally say they prefer less dense, less congested places to live. The grandiose vision of high-rise, high-density cities manifestly does not respond to the actual needs and desires of most people, who continue to migrate to the usually less congested, and often less expensive, periphery. And as the people’s desires continue to run counter to what those in power dictate, the urban future is likely to become increasingly contentious.

    Protests over urban development priorities similar to Istanbul’s occurred earlier this year in São Paulo, where the government is accused of putting mega-projects ahead of basic services such as public transport, education, and health care, particularly in the run-up to the 2014 World Cup and the 2016 Olympics.

    Singapore, often held up as a role model for densification, has seen growing concern about the destruction of historic structures, ever-more crowded subways, escalating house prices, and lack of open space. Similarly in Los Angeles, neighborhood councils have rallied against attempts to build denser buildings, which generate more congestion and erode local character. In London, too, attempts to build what the Independent describes as “the tall, the ostentatious, the showy and ‘iconic’” have been widely criticized for undermining the human-scaled nature ofLondon. Densification may be revealed religion to British planners, but this faith is not well accepted by citizens who live nearby. Novelist Will Self noted the “Wizard of Oz–hollowness” of these structures that seek to inspire but also “belittle us” with the mass, scale, and stand against this great city’s historic grain.

    Even in Manhattan, the red-hot center of American ultra-density, eight of the island’s 10 community boards oppose Mayor Bloomberg’s attempts to densify midtown. The midtown project has prompted Yale architect Robert Stern, a devoted urbanist and no opponent of density, to warn that too much high-rise development creates a dehumanized aesthetic that chases away creative businesses and tourists, while preserving older districts attracts them.

    Voting With Their Feet

    The growing disconnect between people and planners is illustrated by the oft-ignored fact that around the world the great majority of growth continues to occur on the suburban and exurban frontier, including the fringes of 23 out of 28 of the world’s megacities. This, notes NYU professor Shlomo Angel in his landmark book A Planet of Cities, is true both in developing and developed countries.

    In Europe, immigration has slightly boosted populations in urban cores, but the flow of domestic migration still heads towards the periphery. The evidence is even more telling in the U.S. In the last decade, nearly 90 percent of all metropolitan growth in this country took place in suburban locations, up from the previous decade. At the same time, a net 3.5 million people left our largest metropolitan areas—those over 10 million—while the majority of growth took place in cities under 2.5 million. Between 2000 and 2010, a net 1.9 million left New York, 1.3 million left Los Angeles, 340,000 left San Francisco, and 230,000 left both San Jose and Boston.       

    This is not what you read regularly in the New York Times or the Wall Street Journal. Young reporters, virtually all of whom live in dense, expensive places like New York or Washington, believe the world is the one they know first-hand, the one in which they and their friends reside. Yet most Americans are not young, highly educated Manhattan residents. Many downtown areas may have experienced a substantial boost in numbers over the last decade, but this accounted for less than 1 percent of the 27 million in population growth experienced by the nation between 2000 and 2010. The total population increase in counties with under 500 people per square mile was more than 30 times that of the increase in counties with densities of 10,000 and greater.

    All of this flies in the face of the argument, made by a well-funded density-boosting industry, that people want more density, not less. Lobbies to force people back into cities enjoy generous funding provided by urban land interests and powerfulmultinationals that build subways and other city infrastructure to bolster the cause of ever greater density.

    These interests speak about cities as if they were giant Lego constructions to be toyed with at the whim of planners or developers. But they neglect the things that matter to people in their daily lives: privacy, room to raise children, the desire for a backyard, decent schools, and safe streets. Roughly four in five home buyers, according to a 2011 study conducted by the National Association of Realtors and Smart Growth America, for example, prefer a single-family home, something that is anathema to the densifiers.

    The Political Economy of Density

    In the Obama era, the cause of densification has gained strong support at HUD, EPA, and other agencies. Yet this is hardly an issue any sane politician—outside New York anyway—wants to run with. People pretty much everywhere naturally resist increasing densification and gigantism—and favor what the Taksim Squareprotesters call a drive for “healthy urbanization and livable city.” 

    Densifiers also claim their work makes cities richer, yet the nation’s greatest wealth-creator—Silicon Valley—is essentially suburban, and the world’s wealthiest metropolitan area—greater Hartford, Connecticut—is largely a collection of bucolic towns and suburbs with a density nearly as low as Atlanta’s. In addition, nearly all urban cores, including New York and Chicago, have considerably higher unemployment rates than their much-dissed suburban rivals. Overall, notes demographer Wendell Cox, 80 percent of the last decade’s urban population growthcame from people below the poverty line, compared with one third in suburbs.

    The new urban densification also shifts the role of the city from an aspirational model to what might be called the geography of inequality. Economists such as Ed Glaeser speak about density as an unalloyed factor in wealth creation, but they rarely factor in such things as cost of living, or in how such factors affect the middle and working classes.  

    Glaeser’s favorite city, New York, is also America’s most unequal metropolis, where the 1 percent earn roughly twice as much of the local GDP than is earned in the rest of country, and where the average paycheck, when controlled for costs, is among the lowest among the nation’s 51 largest metro areas, behind not only San Jose, but Houston, Raleigh, and a host of less celebrated burgs. These inequalities are precisely what opened the door for the previously obscure leftist Bill de Blasio to make his impressive mayoral run. And Gotham’s great rival, London, according to one recent study, now may be the most unequal major city in the Western world.

    Yet rather than re-think density, planners and powerful urban land interests continue to force ever higher-density development down the throats of urban dwellers. In the already pricey San Francisco Bay Area, for example, municipal planners have embraced what is known as a “pack and stack” strategy that will essentially prohibit construction of all but the most expensive single-family homes, prompting one Bay Area blogger to charge that “suburb hating is anti-child,” because it seeks to undermine single-family neighborhoods.

    Unsustainable Post-Familial Cities of Asia

    Perhaps the key measurement of social sustainability is the willingness of people to have children. Historically we fear overpopulation, but increasingly, at least in high-income countries, the real challenges may be over rapid aging and a diminished workforce. There is a countries, the real issue is now below replacement birthrates and rapid aging. High-density environments such as Manhattan, San Francisco, Seattle, Washington, D.C., or Boston invariably have the lowest percentages of children in the country, with Japan-like fertility rates (by 2050 there may well be more Japanese over 80 than under 15).

    The negative impacts of densification are even more evident in the fast-rising cities of the developing world, where most of new high-rise office and residential towers are being erected. In 1980 the world’s 10 tallest buildings were found in New York, Chicago, Houston, and Toronto. Today, only one building in North America—the Sears Tower in Chicago, built in 1973—ranks among the world’s tallest. The rest are located in Dubai, Mecca, Kuala Lumpur, Shenzen, Nanjing, Taipei, Hong Kong, and Shanghai, where the world’s second-tallest building is nearing completion.

    These towers symbolize Asia’s economic ascendency, but they also seem to diminish grassroots economies and discourage family formation. The ultradense cities of East Asia—Hong Kong, Singapore, and Seoul—have among the lowest fertility rates on the planet. Tokyo and Seoul now have fertility rates around one child per family while Shanghai’s has fallen to 0.7, among the lowest ever reported, well below the “one child” mandate and barely one-third the number required simply to replace the current population. Due largely to crowding and high housing prices, 45 percent of couples in Hong Kong say they have given up having children.

    Some Asian urban residents, if they can, now seek to leave these cities—among the most widely praised by urbanists—for more affordable and lower density locales. This is evident in rising emigration from China’s citiesHong Kong, and Singapore, where roughly one in 10 citizens now chooses to settle abroad, mostly in lower density countries like Australia, Canada and the United States.

    To some, this boils down to an issue of health. Dense urbanization, notes a recent Chinese study, engenders more obesity, particularly among the young, who get less exercise, and spend more time desk-bound. Stroke and heart disease have become leading causes of death. These concerns have led, even in authoritarian China, to growing grassroots protests, many of them targeted at new industrial plants located near cities, including Shanghai.

    Perhaps no developing city better reflects the brutalism of Asia’s emerging urban paradigm than Seoul, the densest of the high-income world’s urban areas over 10 million (megacities). The Korean capital is more than 2.5 times as crowded as Tokyo, twice as dense as London and five times as crowded as New York. No surprise then that urban pundits love the place, as epitomized by a glowing report in Smithsonianon Seoul as “the city of the future.” Architects, naturally, join the chorus. In 2010, the International Council of Societies of Industrial Design named the Seoul the “world design capital.”

    Rarely considered, however, is whether this form of urbanization creates a good place for people, particularly families. Korea is already among the unhappiest places on earth, according to a recent  study by the Organization for Economic Cooperation and Development (OECD) and, not surprisingly, suffers a birthrate even lower than Singapore’s.   

    Seoul is, as its boosters claim, fully modern but also both highly congested and aesthetically barren. The result, notes one recent Korean newspaper article is one of the most dehumanized and aesthetically unappealing cities on the planet. MIT architecture professor Lee Kwanghyun charges that over the past decade, development has effectively replaced Seoul’s once unique neighborhoods with seemingly endless blocks of 200-foot high white concrete boxes.     

    Public opposition to this approach has been mounting, and Seoul’s city government recently suspended a “new towns” proposal that sought to knock down the city’s last remaining low-density areas. Not surprisingly, Koreans have been rejecting the hyper-dense core of Seoul, which has lost nearly 1 million residents (10 percent) in 20 years, with residents and migrants from elsewhere in the country heading for the relatively less dense suburbs.

    The City of Disappointment

    The damage done to people by megacity urbanism is most pronounced in poorer countries. My colleague Ali Modarres calls places like Tehran “cities of disappointment.” There, he notes, high housing prices and lack of space have already reduced the birthrate to well below the replacement level, a phenomena he also sees in such unlikely places as urban Tunis, Istanbul, and many otherdeveloping cities in the Islamic world. As in Asia, Modarres says, marriage rates are dropping and increasingly many women are choosing to remain single—heretofore something rare in these countries.

    In cities like Tehran, Modarres says, housing has become equated with living in a small apartment/condominium in a residential building. Rarely does the younger population think about housing in terms of a detached single-story building. And the exorbitant cost of housing in such a high-density city in turn creates constant worries about money and housing—having even one child is prohibitively expensive.

    Gigantism’s effects in the developing world—where much of the most rapid urban growth is now taking place—is even more profound. In Mumbai, home to 20 million people, life expectancy for city residents is at least 10 years below the life expectancy of their country cousins, even though urban residents have much better access to health care. And nearly four of five urban households complain about contaminated water. In 1971, slum dwellers accounted for one in six Mumbai residents. Today, they constitute an absolute majority.

    Indeed, much of the population of most developing country cities—such as Mexico City, Cairo, Jakarta, Manila, Lagos, Mumbai, and Kolkata, megacities all—continue to live in “informal” housing that is often unhygienic, dangerous, and subject to all kinds of disasters, natural or man-made. Moreover, many of these unmanageable megacities—most notably Karachi—offer ideal conditions for gang-led rule and unceasing ethnic conflict.

    Remarkably, many Western pundits find much to celebrate in megacities mushrooming in low-income countries. To them, the growth of megacities is justified because it offers something more than unremitting rural poverty. But surely there’s a better alternative than celebrating slums, as one prominent author did recently inForeign Policy.

    In the mainstream press, there’s even a tendency to engage in what one critic has labeled “slumdog tourism.” A recent National Geographic article, for example, celebrated the entrepreneurial spirit of Kinshasa’s slum dwellers, which is understandable, but underplayed the miserable conditions in which the majority of Kinshasa’s eight million residents are forced to live. That city, which Belgian researchers described as an example of “aborted urban development,” suffers from high crime, poor drinking water, and pervasive informal housing. Similar conditions exist in virtually all of Africa’s largest cities, which are growing as fast as any in the world.

    Toward a Human City

    Rather than concocting sophisticated odes to misery, perhaps we might consider a different approach to urban growth. Perhaps we factor in what exactly we are inflicting on people with “pack and stack” strategies. Planners often link density with community, notes British social critic James Heartfield, but maintaining that “physical proximity that is essential to community is to confuse animal warmth with civilization.” When University of California at Irvine’s Jan Brueckner and Ann Largey conducted 15,000 interviews across the country, they found that for every 10 percent drop in population density, the likelihood of people talking to their neighbors once a week goes up 10 percent, regardless of race, income, education, marital status, or age.  In 2009, Pew recently issued a report that found suburbanites to be the group far more engaged with their communities than those living in core cities.

    A market—or simply human—approach would permit a natural  shift towards smaller, less dense cities and, yes, the suburbs, where more people end up wanting to live. Those who prefer high-density living would still have their opportunity if they so desire. In the developing world, we might to find ways of making villages and smaller cities more attractive, perhaps through the development of local industries, farm-to-market agriculture, and even high-tech development. “We are copying the Western experience in our own stupid and silly way,” says Ashok R. Datar, chairman of the Mumbai Environmental Social Network. “For every tech geek, we have two to three servants. The villages pour out and the city gets more crowded.”

    The primary goal of a city should not be to make wealthy landlords and construction companies ever richer, or politicians more powerful. Instead, we should look for alternatives that conform to human needs and desires, particularly those of families. Urbanism should not be defined by the egos of planners, architects, politicians, or the über-rich, who can cherry-pick the best locales in gigantic cities. Urbanism should be driven above all by what works best for the most people.

    This story originally appeared at The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Skyline photo by Bigstock.

  • The Consequences of Urban Containment

    Recently published research by Brian N. Jansen and Edwin S. Mills represents notable addition to the already rich academic literature that associates more stringent land use regulation with higher house prices. The analysis is unusually comprehensive and its conclusions indicate greater consequences than is usually cited. Mills is Professor Emeritus of Real Estate and Finance at Northwestern University and is renowned for his contributions to urban economics over more than five decades.

    The Research

    The comprehensiveness of the research is indicated by the fact that it covers all of the 268 metropolitan areas in the United States for which complete data was available. The focus was on the trend of house prices leading up to 2006, the peak of the housing bubble. Their econometric analysis showed that "stringent land use controls raise house prices."

    They also found that more stringent land use controls were associated with greater house price losses following the peak.

    “The strong conclusion of this paper is that stringent residential land use controls were a primary cause of the massive house price inflation from about 1992 two 2006 and possibly of the deflation that started in 2007.”

    Overall, this finding is consistent with the work of others (such as in Glaeser and Gyourko) who have associated more stringent land use controls with greater house price instability.

    Consistency with Economic Principle & Previous Research

    The Jansen and Mills findings reiterate those of a large body of research. Economists Richard Green and Stephen Malpezzi summarized the issue a decade ago:

    “When the supply of any commodity is restricted, the commodity’s price rises. To the extent that land – use, building codes, housing finance, or any other type of regulation is binding, it will worsen housing affordability.”

    This relationship is even acknowledged by proponents of more stringent land use policies. A Brookings Institution team led by University of Utah Professor Arthur C. Nelson indicated that “If … policies serve to restrict land supplies, then housing price increases are expected.”

    Needless to say, any other effect would be the equivalent of “sun rising in the West” economics.”

    The more stringent land use regulations include blunt tools like the urban growth boundaries of Vancouver, Sydney, Portland or the San Francisco Bay Area but also the large-lot suburban lots that have rendered Boston’s urban densities nearly as low as Atlanta. Artificial limits on development lead to higher house prices, other things being equal.

    This will come as no surprise to those familiar with the work of Dartmouth economist William Fischel who attributed California’s high house prices to stringent land use regulation. He noted that until around 1970, California house prices had been nearly the same, relative to incomes as the rest of the nation, before more stringent land use regulation began. Now house prices in coastal California markets are double those in liberally regulated markets, measured by the median multiple (median house price divided by median household income).

    Unintended Consequences: Portland and California

    The Jansen and Mills findings will disappoint urban containment (smart growth or growth management) advocates who have often denied the economic reality of its influence on house prices. Some had hoped that the house price increasing effects of stringent land use regulation would be neutralized by more affordable housing costs in the cores of metropolitan areas, where more dense housing would be permitted. A principle source of this view is an analysis of early 1990s Portland (Oregon) house prices by Justin Phillips and Eban Goodstein, who said that such an effect “should” occur.

    Yet in the 15 years since the period covered by this research, Portland house prices have risen with a vengeance (see The Evolving Urban Form: Portland), with the median multiple rising more than 40 percent, from 3.0 in 1995 to 4.3 in 2012. Obviously, with such an increase, the price increasing impacts of Portland’s urban growth boundary have not been negated.

    Further, housing costs rose in Portland’s densifying areas at virtually the same rate as in the rest of the metropolitan area over the period from 1999 to 2009. Census and American Community Survey data indicates that densifying zip code areas (housing unit density increases of 5 percent or more) experienced median multiple increases of 37 percent, compared to 36 percent for the balance of the metropolitan area (Note). Rents in the densifying areas rose 9 percent, compared to 8 percent in the rest of the area.

    The impact on Portland’s low income population, however, was less than equitable. The cost of owned housing rose 75 percent more in areas of higher poverty (areas with poverty rates 50 percent or more than the average rate) than in the balance of the metropolitan area. The median multiple (value) rose 61 percent in the high poverty areas and only 35 percent elsewhere (Figure 1).

    The difference was even starker in rentals, where low income households are concentrated. Income adjusted median gross rents in the high poverty areas rose more than 2.5 times the increase in the rest of the metropolitan area. In the high poverty areas, the increase was 21 percent and only 8 percent elsewhere (Figure 2).

    The housing cost increases in the higher poverty areas appears to be at least partially from gentrification as well as Portland’s efforts to improve neighborhoods through urban renewal. In assessing the results of the 2010 census, The Oregonian noted that the core city of Portland had become less diverse and that many African-American households were driven out of their neighborhoods by “gentrification.”

    This greater housing cost burden on lower income households belies the noble intentions expressed in much of the urban containment and smart growth literature. Results are more important than intentions.

    Portland is not alone. Nelson, et al, were uncritical of Portland a decade ago (before the evidence of house price increases was so clear), but did not mince words in characterizing the already evident higher prices from stringent land use policies in California, saying: “This is arguably what happened in parts of California where growth boundaries were drawn so tightly without accommodating other housing needs that housing supply fell relative to demand.”

    The Broader Consequences of Stringent Land Use Regulation

    Jansen and Mills took the research farther than most others. In their econometrics, they found more stringent land use regulation negatively impacted metropolitan area population, employment and per capita real income.

    They also considered the role of stringent land use controls in the Great Financial Crisis. This issue had also been a subject of inquiry of the congressionally established United States Financial Crisis Inquiry Commission, which documented much larger than national housing bubbles in the so-called “sand states” of California, Florida, Arizona and Nevada. Three of the
    10 members issued a minority opinion citing land use controls as one of the causes of the housing bubble (which is widely considered to have sparked the Great Financial Crisis). The major metropolitan areas in the “sand states” all had strong land use restrictions.

    “Land use restrictions. In some areas, local zoning rules and other land use restrictions, as well as natural barriers to building, made it hard to build new houses to meet increased demand resulting from population growth. When supply is constrained and demand increases, prices go up.”

    My analysis of metropolitan markets for the National Center for Policy Analysis suggested a similar relationship (see The Housing Crash and Smart Growth).

    Jansen and Mills squarely place blame for the Great Financial Crisis on stringent land use controls.

    “Indeed, it is difficult to imagine another plausible cause of the 2008–2009 financial crisis. Popular accounts simply refer to a speculative housing price bubble. But productivity growth in housing construction is faster than in the economy as a whole and the US has an aggressive and competitive housing construction sector. In the absence of excessive controls, housing construction would quickly deflate a speculative housing price bubble.”

    The absence of excessive controls would have defused the housing bubble, they suggested. This notion is supported by the experience of metropolitan areas with liberal land use regulation (Figure 3) where median multiple remained near or below 3.0 in liberally regulated markets. This standard has typified affordable markets since World War II, as well as California markets to the early 1970s and Portland until 1995. The retention of housing affordability is especially significant in Atlanta, Dallas-Fort Worth and Houston, which experienced some of the largest rates of domestic in-migration during the bubble. This is in contrast to the more stringently regulated high cost markets of coastal California, which experienced huge out-migration during the same period.

    The Imperative for Job Creation and Economic Growth

    All of this is particularly important because housing is the most expensive element of household budgets, and unlike transportation and most consumer goods, is extremely sensitive to varying local and regional public policies. Where households have to pay more for housing, they have less discretionary income and necessarily have a lower standard of living. This is deleterious to virtually all households and is especially burdensome on lower income households.

    Many young adults are “doubling up” with their parents, deferring their own independence, facing huge student loan debts and inadequate employment prospects in what may become the Great Malaise. Taxpayers in many jurisdictions face unprecedented burdens in funding unsustainable government employee pension benefits. Only job creation and economic growth can solve these problems. The last thing the economy needs is stringent land use policies that reduce employment, economic growth and per capita real incomes.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.

    —–

    Note: Median multiple data from the Census Bureau (and the American Community Survey) are reported using median house values, instead of the more common median house price.

    —–

    Photo: 1,700 square foot house in exurban Los Angeles priced at $575,000 at the peak of the housing bubble (by author).

    CORRECTION

    Land use regulation as a cause of the housing bubble should have been should have been attributed to a dissenting opinion in the United States Financial Crisis Inquiry Commission, rather to the Commission itself.

  • What Triggers a Civic Turnaround?

    Lots of cities in America are struggling with low population growth and sluggish economies. Poor demographics and economics lead to fiscal problems that result in more people and businesses leaving, perpetuating a downward spiral. Detroit, which recently filed bankruptcy, is an extreme case, but many cities and states find themselves in similar straits, including much of New England and especially most of Rhode Island.

    How to places break out of this and renew prosperity? Looking at cities where there has been change, I have observed several basic patterns of turnaround.

    Structural Changes

    Many cities failed for structural economic reasons like deindustrialization and globalization. Similarly, many ended up reviving for similar external reasons. In her seminal book The Global City, Saskia Sassen noted that while globalization permitted the dispersal of economic activities to lower cost locations, it created a parallel need for specialized financial and producer services to manage and control those global production networks. These services were disproportionately concentrated in so-called “global cities” like New York and London. While once those cities had fallen on hard times (in NYC’s case, nearly going bankrupt itself in the 1970s), globalization more than any other factor perhaps brought them back to life. Unfortunately, localities have no ability to conjure up these macro-economic changes.

    Natural Lifecycle Progression

    In a few places, notably Pittsburgh, it seems that the problems simply reached the end of their life cycle. To borrow a phase, they “hit bottom” and started reviving, if slowly. Of course, many places hit bottom and stayed there. Pittsburgh has been helped by the presence of large, world-class institutions. Being in the Marcellus Shale formation that’s the epicenter of the American gas fracking boom doesn’t hurt. It’s worth noting that Pittsburgh has seen fairly slow growth and still faces big challenges, including major pension and infrastructure problems.

    Outsider Influx

    Other cities hit a growth inflection point when they were able to attract a critical mass of outsiders. I have argued that having a critical mass of outsiders, that is, of people who aren’t long time natives or “boomerang” migrants, is almost a prerequisite for major civic change:

    You need them, and you need enough of them that they a) don’t get beaten down by the man, so to speak and b) that they become a base of support for change in their own right. Once this group becomes large enough, it opens up the field of possibilities. They have the insights and different ideas from having lived elsewhere. They aren’t bought into the status quo or burdened by the baggage of the past. They are willing to question they way things are done. They are more likely to want change. In short, outsiders are the natural constituency for the new. That’s why outsiders are so important for a community to change, and why absent enough newcomers, change is difficult if not impossible.

    Of course, this almost begs the question: how do you attract those outsiders? This would appear to be a second order factor. It would be worth doing a deep dive on how significant inward migration began in these places. Also, the places that seemed to do well on this model – like Nashville or Denver – are places that weren’t in terrible shape to begin with.

    Transformational Leaders

    Any number of cities lend themselves to a narrative of transformational change led by a particular leader or group of leaders. You can think of Richard M. Daley in Chicago or Rudy Giuliani and Michael Bloomberg in New York. Cory Booker in Newark may be an emerging story in this mold. Or in previous generations there were business magnates like J. Irwin Miller in Columbus, Indiana that through superior vision combined with clout were able to put their community on a different path than other similarly positioned cities. (Among other things, Columbus, Indiana is an internationally renowned center of modernist architecture, with no fewer than six National Historic Landmarks in a modernist style).

    The obvious question here is how much leadership had to do with it. So many of these large tier one type cities came back at the same time that it seems likely some common outside force like globalization was the real driver. Or at least that it was a prerequisite to enable the leadership to be effective. However, there are some examples like Columbus that appear to be less the result of outside forces.

    Civic Sector Led Revitalization

    Some cities have done well in models without a single dominant leader such as a larger than life mayor. In Indianapolis, for example, it was a broader coalition of business, community, and institutional leaders that championed items such as their sports hosting strategy that had a transformational impact. This is the model most cities try to use, but it has failed nine times out of ten in delivering transformational impact, so would appear to be a very high risk strategy.

    What other models suggest themselves? I won’t claim this as a comprehensive list.

    A Look At Providence and Rhode Island

    Where does Rhode Island fit in? Well, it hasn’t seen a turnaround yet. But there has been a sort of slow growth in personal incomes that could add up over time. In this light, Providence would be a sort of Pittsburgh-like city from a lifecycle perspective, though I should note with a much smaller asset base. Alon Levy made the case for this view last year in a piece called “The Quiet Revival”:

    Rhode Island may have one of the highest unemployment rates in the US today, but income growth is high; things are slowly getting better. The most visible growth in the US is in population rather than income, and so the usual markers are new housing starts, new infrastructure, and a lot of “coming soon” signs. Providence of course doesn’t have much of this. Instead, people are getting richer, slowly… Economic growth in the richest countries is slow enough that people don’t perceive it. Instead, they think it’s the domain of countries that are catching up, such as China, where it’s so fast it includes new construction and the other markers that signify population growth in the first world. In the long run, it matters that a city’s income grows 1.8% a year rather than 1.1%, but it’s not visible enough to be captured by trend articles until long after the spurt of growth has started.

    Given the lack of structural economic forces boosting the city, and a comparatively small base of newcomers, particularly outside of Providence proper and other core cities, this will likely have to do for now, unless we witness the emergence of a disruptive and transformational type leader.

    This post originally appeared in GoLocalProv on August 26, 2013.

    Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.

    Photo by Will Hart.

  • A Map Of America’s Future: Where Growth Will Be Over The Next Decade

    The world’s biggest and most dynamic economy derives its strength and resilience from its geographic diversity. Economically, at least, America is not a single country. It is a collection of seven nations and three quasi-independent city-states, each with its own tastes, proclivities, resources and problems. These nations compete with one another – the Great Lakes loses factories to the Southeast, and talent flees the brutal winters and high taxes of the city-state New York for gentler climes – but, more important, they develop synergies, albeit unintentionally. Wealth generated in the humid South or icy northern plains benefits the rest of the country; energy flows from the Dakotas and the Third Coast of Texas and Louisiana; and even as people leave the Northeast, the brightest American children, as well as those of other nations, continue to migrate to this great education mecca.

    The idea isn’t a new one – the author Joel Garreau first proposed a North America of “nine nations” 32 years ago – but it’s never been more relevant than it is today, as America’s semi-autonomous economic states continue to compete, cooperate … and thrive. Click on the thumbnail of our map to see our predictions for the job, population and GDP growth of these 10 regional blocks over the next decade, and read on below for more context.

    View the map graphic at Forbes.com.


    INLAND WEST

    The Inland West extends from the foothills of the Rockies to the coastal ranges that shelter the Pacific Coast. This is the West as we understand it historically, a land of spectacular scenery: icecaps and dry lands, sagebrush, high deserts and Alpine forests. From 2003 to 2013, it enjoyed the most rapid population growth in the nation: 21%. It is expected to continue to outgrow the rest of the country over the next decade, as the area boasts the highest percentage of young people under 20 in the U.S.

    Much of this growth was driven by a combination of quality of life factors — access to the outdoors and relatively low housing prices — as well as strong economic fundamentals. Over the past decade the area has enjoyed nearly 8% job growth, the strongest in the country, with the highest rate of STEM growth in the nation over the past decade.  Boise, Denver and Salt Lake City have posted stellar employment growth due to the energy boom and growth in technology. The western reaches of the region — the inland parts of Washington, Oregon and California — have not done as well. These areas suffer from being “red” resource- and manufacturing-oriented economies within highly regulated, high-tax “blue states.”

    THE LEFT COAST

    The Northeast may still see itself as the nation’s intellectual and cultural center, but it is steadily losing that title to the Left Coast. This region sports a unique coastal terroir, with moderate temperatures, though it may be a bit rainy in the north. The climate requires less power than elsewhere in the country for heating and air-conditioning, making its residents’ predilection for green energy more feasible.

    Over the past 20 years, the Left Coast — the least populous nation with some 18 million people — has rocketed ahead of the Northeast as a high-tech center. It has by far the highest percentage of workers in STEM professions — more than 50% above the national average — and the largest share of engineers in its workforce as well. No place on the planet can boast so many top-line tech firms: Amazon and Microsoft in the Seattle area, and in the Bay Area, Intel, Apple, Facebook and Google, among others.

    Over the next decade, the Left Coast should maintain its momentum, but ultimately it faces a Northeast-like future, with a slowing rate of population growth. High housing prices, particularly in the Bay Area, are transforming it into something of a gated community, largely out of reach to new middle-class families. The density-centric land use policies that have helped drive up Bay Area prices are also increasingly evident in places like Portland and Seattle. The Left Coast has the smallest percentage of residents under 5 outside the Great Lakes and the Northeast, suggesting that a “demographic winter” may arrive there sooner than some might suspect.

    CITY-STATE LOS ANGELES

    Once called “an island on the land,” southern California remains distinct from everywhere else in the country. Long a lure for migrants, it has slipped in recent decades, losing not only population to other areas but whole industries and major corporations. The once-youthful area is also experiencing among the most rapid declines in its under-15 population in the nation. Yet it retains America’s top port, the lion’s share of the entertainment business, the largest garment district–and the best climate in North America.

    THE GREAT PLAINS

    The vast region from Texas to Montana has often been written off as “flyover country.” But in the past decade, no nation in America has displayed greater economic dynamism. Since the recession, it has posted the second-fastest job growth rate in the U.S., after the Inland West, and last year it led the country in employment growth. The Dakotas, Nebraska, Oklahoma and Kansas all regularly register among the lowest unemployment rates in the country.

    The good times on the Plains are largely due to the new energy boom, which has been driven by a series of major shale finds: the Bakken formation in North Dakota, as well as the Barnett and Permian in Texas. The region’s agricultural sector has also benefited from soaring demand in developing countries.

    Most remarkable of all has been the Plains’ demographic revival. The region enjoyed a 14% increase in population over the past 10 years, a rate 40% above the national average, and is expected to expand a further 6% by 2023, more than twice the projected growth rate in the Northeast. This is partly due to its attractiveness to families — the low-cost region has a higher percentage of residents under 5 than any other beside the Inland West.

    But outside of the oil boom towns, don’t expect a revival of the small communities that dot much of the region. The new Great Plains is increasingly urbanized, with an archipelago of vibrant, growing cities from Dallas and Oklahoma City to Omaha, Sioux Falls and Fargo.

    Its major challenges: accommodating an increasingly diverse population and maintaining adequate water supplies, particularly for the Southern Plains. The strong pro-growth spirit in the region, its wealth in natural resources and a high level of education, particularly in the northern tier, suggest that the Plains will play a far more important role in the future than anyone might have thought a decade ago.

    THE THIRD COAST

    Once a sleepy, semitropical backwater, the Third Coast, which stretches along the Gulf of Mexico from south Texas to western Florida, has come out of the recession stronger than virtually any other region. Since 2001, its job base has expanded 7%, and it is projected to grow another 18% the coming decade.

    The energy industry and burgeoning trade with Latin America are powering the Third Coast, combined with a relatively low cost, business-friendly climate. By 2023 its capital–Houston–will be widely acknowledged as America’s next great global city. Many other cities across the Gulf, including New Orleans and Corpus Christi, are also major energy hubs. The Third Coast has a concentration of energy jobs five times the national rate, and those jobs have an average annual salary of $100,000, according to EMSI.

    As the area gets wealthier, The Third Coast’s economy will continue to diversify. Houston, which is now the country’s most racially and ethnically diverse metro area, according to a recent Rice study, is home to the world’s largest medical center and has dethroned New York City as the nation’s leading exporter. Mobile, Ala., seems poised to become an industrial center and locus for trade with Latin America, and New Orleans has made a dramatic comeback as a cultural and business destination since Katrina.

    THE GREAT LAKES

    The nation’s industrial heartland hemorrhaged roughly a million manufacturing jobs over the past 10 years, making it the only one of our seven nations to lose jobs overall during that period. But the prognosis is not as bleak as some believe.

    Employment is growing again thanks to a mild renaissance in manufacturing, paced by an improving auto industry and a shale boom in parts of Ohio. The region has many underappreciated assets, such as the largest number of engineers in the nation, ample supplies of fresh water and some of the nation’s best public universities. With fifty-eight million people, it boasts an economy on a par with that of France.

    Yet we cannot expect much future population growth in the Great Lakes, the second most populous American nation. Its population is aging rapidly, and the percentage under 5 is almost as low as the Northeast.

    THE GREAT NORTHEAST

    The Northeast–which excludes the city-state of New York–has been the country’s brain center since before the American Revolution. This region is home to some 41 million people, and leads the nation in the percentage of workers engaged in business services, as well as in jobs that require a college education. With average wages of $76,000, $19,000 above the national average, the area boasts a GDP of $2.2 trillion, about equal to that of Brazil.

    The Northeast is one of the country’s whitest regions — Anglos account for over 70% of the population — and one of the wealthiest. In many ways, it resembles aging Western Europe in its demographic profile. The Northeast is the most child-free region outside the retirement hub of south Florida. Coupled with sustained domestic out-migration, its population growth is likely to be among the slowest in the nation in the decade ahead.

    Good thing its residents are highly educated — diminishing numbers and the consequent decline in political power suggest that the Northeast may need to depend more on its wits in decade ahead.

    CITY-STATE NEW YORK

    The Big Apple’s much heralded comeback has assured its place as one of the world’s great global cities. But the city faces challenges in terms of soaring indebtedness, rapid aging, a weak technical workforce, expensive housing and high taxes. It also will struggle with competition from rising cities of the other nations such as San Francisco, Seattle, Washington, D.C., and Houston, each of which threatens New York’s traditional role in key sectors of the economy.

    THE SOUTHEAST MANUFACTURING BELT

    At the time of the Civil War the southeastern United States was both outpeopled and outmanufactured. Today the Southeast, is the largest region in terms of population (60 million) and is establishing itself as the country’s second industrial hub, after the Great Lakes.

    It is attracting large-scale investment from manufacturers from Germany, Japan, and South Korea. Although most of the region still lags in educational attainment, the education gap with the Northeast and Great Lakes is slowly shrinking. The population holding college degrees has been expanding strongly in Nashville, Raleigh, Birmingham, Richmond and Charlotte.

    More babies and the migration of families, including immigrants, to this low-cost region suggest an even larger political footprint for the Southeast in the decades ahead. Population growth has been more than twice as fast since 2001 as in the Northeast, a trend that is projected continue in the next decade. The region looks set to become smarter, more urban and cosmopolitan, and perhaps a bit less conservative.

    CITY-STATE MIAMI

    Greater Miami often seems more the capital of Latin America than it does an American region. Its population is heavily Hispanic, and trade, finance, construction and tourism tend to focus southward. But Miami faces the constraints of an aging, and largely childless, population–which means it will continue to rely on newcomers both from abroad and from the colder regions of the U.S.

    This story appears in the September 23, 2013 issue of Forbes.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    Mark Schill is Vice President of Research at Praxis Strategy Group, an economic development and research firm working with communities and states to improve their economies.

  • Rust Belt Chic And The Keys To Reviving The Great Lakes

    Over four decades, the Great Lakes states have been the sad sack of American geography. This perception has been reinforced by Detroit’s bankruptcy filing and the descent of Chicago, the region’s poster child for gentrification, toward insolvency.

    Yet despite these problems, the Great Lakes’ future may be far brighter than many think. But this can only be accomplished by doubling down on the essential DNA of the region: engineering, manufacturing, logistics, a reasonable cost of living and bountiful natural resources. This approach builds off what some local urbanists, notably Jim Russell, have dubbed “rust belt chic.”

    With a population of 58 million, the Lakes region boasts a $2.6 trillion economy equal to that of France and far larger than the West Coast’s. (We define the region geographically as comprising the western ends of New York and Pennsylvania, northeastern Minnesota, and Ohio, Indiana, Illinois, Michigan and Wisconsin.) Despite the growth in auto manufacturing in the South, the Great Lakes region still accounts for the vast majority of jobs in the resurgent industry, now operating at record levels of capacity.

    Since 2007, Michigan, Indiana, Ohio and Wisconsin have ranked among the top five states for growth in industrial jobs, adding a half million new manufacturing jobs since 2009.

    To build on this progress the region needs to focus on its human assets. This starts with by far the nation’s largest concentration of engineers, some 318,000, which stems from the oft unappreciated fact that manufacturing employs the majority of scientists and engineers in the nation. It also accounts for almost 70% of corporate research and development. This includes disciplines such as mechanical engineering, which according to a recent EMSI study, has enjoyed steady job and income growth over the past 20 years.

    Another critical asset is the concentration of skilled trades, the workers most sought after by employers, according to a recent Manpower survey. To keep this advantage, the area needs to focus on educating its workforce — particularly in neglected inner city neighborhoods — with skill training for jobs that actually exist and are expected to grow. This is already occurring in some states, such as Ohio.

    To be sure, traditional manufacturing jobs, particularly for the unskilled and semi-skilled, likely will never come back in large numbers. But the earnings level for skilled workers will remain well above the national average, and may increase even further as shortages develop.

    Some dismiss such blue-collar strengths as a critical weakness. They suggest that area residents might decamp for places like Silicon Valley where they can find livelihoods cutting hair and providing other personal services for the digerati.

    Of course, no sane Great Lakes leader would endorse this approach in public, but many, instead of embracing “rustbelt chic” prefer to recreate a faux version of America’s left coast. This obsession goes back at least a decade, reaching its most risible level during the time of former Michigan Gov. Jennifer Granholm. Her strategy focused on turning its cities — including Detroit — into “cool” burgs.

    This clearly did little to turn around either already beleaguered state or cities; “cool” did not save Detroit from bankruptcy. Indeed cool represents just one variation in a myriad of Rust Belt elixirs, including casinos, convention centers, “and creative class oriented arts districts. Virtually all the strategies being adopted in Detroit have already been applied in Cleveland, including by the same entrepreneur, Quicken Loans Chairman Dan Gilbert, with very little tangible economic benefit.

    Yet despite this history, Detroit — the poster child of public malfeasance — once again is pinning its hopes on luring the “creative class” to Motor City. It starts with the usual stab at subsidizing housing, office and retail around the central core. This is being jump-started by taking Quicken Loans jobs already in the area’s suburbs, meaning little net regional advantage.

    Even more absurd, Michigan taxpayers are being asked to pony up to as much as $440 million for a new stadium in Detroit for the Red Wings hockey team. In contrast to this beneficence, many remaining established, older smaller neighborhood businesses — many of them deeply entrenched in the Rust Belt economy — get stuck with ever higher tax bills and reduced levels of public service.

    To be sure, this approach can succeed in building hipster cordon sanitaire — a miniaturized but utterly derivative urban district — that can be shown to investors and visiting, and usually core-centric, journalists. It also can enrich speculators and those politicians who service them, but represents a marginally effective means of reviving the city, much less the regional, economy.

    Instead of chasing hipsters , Cleveland urban strategist Richey Piiparinen suggests cities such as his rebuild their economies from the ground up, tapping the strong industrial skills, work ethic and resilient culture deeply embedded in the region. Large factories may not return en masse to Cleveland, Detroit or Chicago, but a strong industrial economy and a culture embracing hard work could stir growth in service-related fields as well.

    Geography and location provide other opportunities . The area’s natural resources — the Great Lakes contain one-fifth of the world’s supply of fresh water — constitute a profound competitive advantage against drought stricken economies in the Inland West, the southern Great Plains and parts of the Southeast. Water is an essential element in many industrial processes, including fracking, a serious issue in parts of the Rust Belt. Miles of attractive coastline could be used to lure not only factories, but high-tech businesses, tourists and educated professionals who can choose their location.

    The Great Lakes also are a natural conduit for the $250 billion trade with Canada, with its vast resource-based economy and growing population . Instead of funding better bars, art galleries and sports venues, or hoping to attract tourists and conventioneers to traipse to Cleveland in December, what the region really needs, noted a recent Brookings report, is better infrastructure, such as bridges, ports, freight rail and roads.

    Critical too are the region’s strong engineering schools. Of the nation’s top 10, four — Carnegie Mellon, Purdue, the University of Michigan, and the University of Illinois at Champagne-Urbana — are located in the Rust Belt. The Great Lakes may not be home to the Ivy League, but it remains the nursery of practical applied intelligence.

    Emerging demographic trends could also play a positive role. The millennial generation will soon be approaching the age when they wish to start businesses, get married, have children and buy homes. A good target would be those seeking a single-family home and a reasonable cost of living; both are increasingly difficult to attain in much of the Northeast and coastal California where the cost of housing, even adjusted to income, can be easily two to three times higher.

    Indeed, despite decades of demographic stagnation, the region already boasts higher percentages of people under 15 than the Northwest, the Northeast (including New York) and has about the same percentage of kids as the rapidly growing Southeast. For a new generation, the Great Lakes could emerge as a destination, not a place to avoid.

    This requires the region becoming more attractive to newcomers, whether from abroad or within the country. As urban analyst Aaron Renn suggests, the Great Lakes has to become more culturally open to outsiders and immigrants. Cities such as Cleveland, Chicago, and Detroit were once magnets for immigrants from Europe and people coming from America’s rural hinterlands, notably the south.

    Restoring appeal to outsiders does not mean denying the region’s proud past, and throwing away its historic assets, but instead focusing on its core values. For many reasons — geography, weather, history — the region cannot remake itself into California, the Pacific Northwest or the Northeast Corridor. Instead the Great Lakes can best restore its legacy as an aspirational region by focusing on the very real things that constitute its historic DNA.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.

    Great Lakes map by BigStock.

  • Plan Bay Area: Telling People What to Do

    The San Francisco area’s recently adopted Plan Bay Area may set a new standard for urban planning excess. Plan Bay Area, which covers nearly all of the San Francisco, San Jose, Santa Rosa, Vallejo and Napa metropolitan areas, was recently adopted by the Metropolitan Transportation Commission (MTC) and the Association of Bay Area Governments (ABAG). This article summarizes the difficulties with Plan Bay Area, which are described more fully in my policy report prepared for the Pacific Research Institute (Evaluation of Plan Bay Area).

    Plan Bay Area would produce only modest greenhouse gas emissions reductions, while imposing substantial economic costs and intruding in an unprecedented manner into the lives of residents. The Plan would require more than three quarters of new residences and one third of net additional employment to be located in confined "priority development areas." These measures have been referred to as “pack and stack” by critics. The net effect would be to virtually ban development on the urban fringe, where the organic expansion of cities has occurred since the beginning of time.

    Irrational Planning

    Violating perhaps the most fundamental requirement of a rational plan, Plan Bay Area begins with a situation that no longer exists. Further, it is based on exaggeration, systematic disregard of official federal government projections and overly optimistic planning assumptions.

    Exaggerated Population Projection: The Plan assumes that the Bay Area will grow 55 percent more rapidly between 2010 and 2040 than official California state Department of Finance population projections indicate. These state-produced estimates have tended themselves to be on the high side (Figure 1). The planners scurried about to resolve these differences, but there is no indication that the state will be revising its projections. Plan Bay Area’s population projection would require growth in the Bay Area to increase by more than one-half from the 2000-2010 annual rate. The exaggeration of population growth has its uses: it leads to a higher greenhouse gas emissions projection for 2040, providing a rationale for stronger policy interventions.

    Ignoring Current Greenhouse Gas Emissions Projections: The Plan also ignores the new, more favorable DOE fuel economy projections (Figure 2). These projections were issued in December, well before the publication of the draft plan in April and the adoption of the final plan in July. Indeed, if the new DOE projections had been published the day before, Plan Bay Area should have been placed on hold and revised. In short, Plan Bay Area was out of date when adopted.

    Overly Optimistic Planning Assumptions: The Plan assumes that travel by light vehicle (automobiles, sport utility vehicles and pickups) would be reduced by substantial increases in transit ridership. Plan Bay Area presumes that expanding transit service 27 percent over the next 30 years will lead to a near doubling of transit ridership. This is stupefying, since over the last 30 years, transit ridership remained virtually the same, while service was expanded nearly twice as much as would be planned from 2010 to 2040.

    The plan also assumes that residents forced into the priority development areas will use transit and walking much more, materially reducing their use of light vehicles. This research behind this assumption is skewed toward transit oriented developments located on rail lines with good access to downtown. But nearly nine out of 10 employees in the Bay Area work outside the downtowns of San Francisco and Oakland, and that number is increasing (according to Plan Bay Area).

    Given recent history, it seems wishful thinking to believe that small transit service expansions and downtown oriented transit development can do much to attract drivers from cars. The modest gains greenhouse gas emissions reductions projected in Plan Bay Area are likely exaggerations.

    Plan Bay Area’s “pack and stack” densification is likely to produce even less than the modest substitution of transit and walking for driving (see The Transit-Density Disconnect). Traffic congestion, in this already highly congested area, is likely to be worsened, which could nullify part or all of the greenhouse gas emission reductions expected from reduced vehicle use.

    Correcting Plan Bay Area Forecasts

    Plan Bay Area would only modestly reduce light vehicle travel and greenhouse gas emissions. This is illustrated in Figure 3, which shows that the “pack and stack” strategies that would force most new residents and jobs into priority development areas, Plan Bay Area would reduce greenhouse gas emissions by 2 percent (“Plan Bay Area” line compared to the “Trend” or “doing nothing” line).

    By contrast, correcting the Plan Bay Area 2040 population estimates to reflect the state population projections would reduce greenhouse gas emissions more than eight times as much (17 percent), without the “pack and stack” strategies. A further correction of the Plan Bay Area 2040 estimates to reflect the latest DOE fuel economy projections, would reduce greenhouse gas emissions 22 percent, 11 times as much as the “pack and stack” strategies.

    Heavy Costs for Households and Businesses

    The Plan’s “pack and stack” strategies seem likely to exacerbate the Bay Area’s already high cost of living. Currently, the San Francisco and San Jose metropolitan areas have the worst housing affordability among the nation’s 52 metropolitan areas with more than 1 million residents. San Jose’s median house price relative to its median household income was 7.9 last year, according to the Demographia International Housing Affordability Survey. San Francisco’s median multiple was 7.8. This severely unaffordable housing results from recent decades of urban containment or smart growth policies, which have severely restricted the land on which development can occur. This drives up prices (other things being equal), consistent with economic principle. This has been made worse by house and apartment impact fees imposed on developers that are far above the national average.

    By comparison, in major metropolitan areas that have not implemented strong urban containment policies, the median multiple has typically been 3.0 or less since World War II, including the Bay Area before its adoption (Figure 4). The “pack and stack” strategies would largely limit new development to small parts of the Bay Area, an even more draconian prohibition than the long standing restrictions on urban fringe development. This further rationing of land could be expected to drive land prices even higher, making it even more difficult for households and businesses to live within their means.

    The problem is already acute. The new US Census Bureau housing cost adjusted data shows California to have the highest poverty rate among the states and the District of Columbia (metropolitan area data is not available). An early 2000s Public Policy Institute of California report showed Bay Area poverty to be nearly double the official rate, adjusted for the cost of living. Ultra pricey San Francisco had among the ten highest poverty rates – over twenty percent – of any urban county in the country.

    Unaffordable housing has also fueled an exodus to the San Joaquin Valley (Central Valley). Now more than 15 percent of the workers in the Stockton metropolitan area commute to the Bay Area, which led the Federal Office of Management and Budget adding Stockton to the San Jose-San Francisco combined metropolitan area (combined statistical area). In addition, the greater traffic congestion is likely to lengthen work trip travel times. This is likely to further increase emission while also burdening job creation and economic growth (see Traffic Congestion, Time and Money).

    Ignoring the Economy and Poverty

    Plan Bay Area effectively ignores these costs (despite rhetoric to the contrary), by failing to subject its strategies to a cost per ton metric. According to the United Nation’s Intergovernment Panel on Climate Change (IPCC), sufficient greenhouse gas emissions reductions can be achieved at a cost between a range of $20 to $50 per ton. The previous regional plan (through 2035) included such estimates. Only highway strategies achieved the IPCC range. Transit and land use strategies cost from four to more than 100 times the top of the IPCC range. Even those estimates did not include the prohibitively higher housing costs that result from urban containment policies. The cost metric is crucial, because spending more than necessary to reduce greenhouse gas emissions limits job creation and economic growth, which leads to reduced household affluence and greater poverty. This is the very opposite of the economic objectives of public policy. Virtually all political jurisdictions around the world seek greater prosperity for their residents and less poverty. A legitimate regional plan requires subjecting its strategies to economic metrics.

    Opposition

    There is opposition to Plan Bay Area. A citizen movement worked for rejection and has now filed suit claiming that the Plan violates the California Environmental Quality Act. The suit also alleges that MTC and ABAG used a questionable interpretation of state law and regulation to justify the irrational Plan outcomes.

    Recorded Votes

    Opponents were also successful in obtaining a rare recorded vote at ABAG. The governing board (General Assembly) is composed of selected elected officials from cities and counties who are not elected to their ABAG positions. ABAG adopts virtually all of its actions by consensus, rather by recorded votes, as occurs in many of the nation’s regional planning boards.

    Consensus decision making seem especially odd in California, where inability to obtain sufficient votes in the legislature for the state budget required a constitutional amendment. Neither do city councils and county commissions operate on a consensus basis on controversial issues.

    There is no shortage of controversial issues, at ABAG or other regional planning agencies. A good first reform would be for recorded votes to be the rule, rather than the exception. Consensus decision making may be appropriate for clubs, but it is not for representative bodies in a democracy.

    Impeding the Quality of Life

    Plan Bay Area was outdated when approved and reflects a world that no longer exists. Drafters have insisted on extravagantly expensive and intrusive policies that produce only minimal greenhouse gas reductions, and at great cost, using, among other things, unreasonably bloated population forecasts to bolster their approach. Unless changed, the Plan will likely be more successful in driving up housing prices, limiting options for households, and further congesting traffic than meeting its stated goal of reducing   greenhouse gas emissions.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.

    Photo: San Francisco (by author)

  • Root Causes of Detroit’s Decline Should Not Go Ignored

    Recently Detroit, under orders from a state-appointed emergency manager, became the largest U.S. city to go bankrupt. This stirred predictable media speculation about why the city, which at 1.8 million was once America’s 5th-largest, declined in the first place. Much of the coverage simply listed Detroit’s longtime problems rather than explaining their causes. For example a Huffington Post article asserted that it was because of “racial strife,” the loss of “good-paying [sic] assembly line jobs,” and a population who fled “to pursue new dreams in the suburbs.” Paul Krugman, who has increasingly become America’s dean of misguided thinking, downplayed the city’s pension obligations, instead blaming “job sprawl” and “market forces.” The implication is that Detroit’s problem just arose organically from structural economic changes, and within decades somehow produced a city of abandoned homes and unlit streets.

    But a closer look suggests that Detroit’s problems, which include 16% unemployment, 36% poverty, and 60% population decline, were self-inflicted by a half-century of government excess. Thomas Sowell nicknamed this excessiveness the “Detroit Pattern”, and defined it as the city’s habit for “increasing taxes, harassing businesses, and pandering to unions.” These three problems have proven as instrumental to decline as the “Big Three” automakers once were to Detroit’s rise. Analyzing their background, and potential for reform, could expedite the city’s turnaround.

    The foremost measure would be addressing taxes. Currently Detroit has one of America’s largest tax burdens for major cities, offering notoriously bad services in return (police response times average 58 minutes, and 40% of streetlights do not work). Its property tax rates are the nation’s highest, exceeding 4% for some buildings. This has caused particular disinvestment in the city’s large stock of abandoned homes, some of which sell for below $1000, but are avoided since they get assessed at far above their actual worth, leaving owners with inflated tabs.

    Detroit could also help its cause with a business climate that better encouraged entrepreneurship. For decades it has done the opposite, championing a growth policy that mirrored the city’s overly-centralized private sector. It has gambled—with tax breaks, subsidies, and extensive eminent domain—on stadiums, casinos, office towers, factories, and a downtown monorail, only to find that these didn’t produce nearly the anticipated benefits. Meanwhile it has squelched small businesses, which are generally better at creating jobs, with a cobweb of protectionist regulations—on food trucks, taxis, movie theaters, and so on. This was summarized in economist Dean Stansel’s recent “economic freedom” study, which ranked the regulatory and tax climates of U.S. metro areas. In a field of 384, Detroit placed 345th.

    These regulations have emanated from Detroit’s vast, union-controlled public bureaucracy. Recent debate about this bureaucracy has focused on retirement benefits, which apologists note are far less generous than in other big cities. But this does not detract from the sheer number of retirees, which at 20,000 are nearly twice Detroit’s existing public workforce, and account for obligations of potentially half the city’s $18 billion debt.

    Less discussed is the way unions protect existing workers also, by stifling needed service reforms. When a philanthropist offered $200 million in 1999 to open the city’s first charter school, which would require changes to state law, the Detroit Federation of Teachers organized a work stoppage to protest in Lansing, ultimately causing withdraw of the donation. Various other city unions (which total 47) have resisted reduction or privatization of water utilities, trash-pickup, street lighting, and transportation. This is despite the city having proven wildly incompetent at providing these services itself, a point made recently in the Wall Street Journal by a former transportation chief. He claimed that unionization of the 1,400-employee DDOT had ensured worker protections for rampant absenteeism and poor performance, thus creating a climate in which 20% of scheduled buses did not arrive. Similar protections from firings and layoffs existed in other city departments, he wrote, perhaps explaining why Detroit, at over 10,000 workers, remains one of the most overstaffed big cities in America, while managing to do so little with them.

    Of course many would argue that Detroit’s post-World War II racial conflicts were the real reasons for decline. More plausible is that these conflicts were inflamed by that era’s top-down government policies, which became all the worse when enforced by seemingly prejudiced officials. Throughout the 1950s and 1960s white mayors steamrolled roadways through functioning black neighborhoods like Black Bottom, and housed the displaced in dangerous, high-rise government projects. Funding for this and other “urban renewal” came from federal programs like President Johnson’s Model Cities, and using Detroit as a flagship, was meant to modernize aging urban communities. But the programs instead fragmented them, including a Detroit black population that, according to Sowell, then had 3.4% unemployment and “the highest rate of home-ownership of any black urban population in the country.” For them this “renewal” created a housing shortage, and along with discrimination and police brutality, inspired riots in 1967.

    These riots killed dozens, injured nearly 1,200, and along with the ones inspired by Martin Luther King’s assassination, immediately spurred a mass white exodus. This cemented the demographic changes needed for both the 1973 election of Detroit’s first black mayor, Coleman Young, and subsequent policies that instead targeted the city’s whites. A paper by economist Edward Glaeser argues that this was done intentionally by Young as a way to further drive political rivals to the suburbs, and increase the share of his poor black voting base. He did this, writes Glaeser, by cutting off services in white neighborhoods, imposing onerous taxes, and displacing thousands of Polish households for a GM factory in the Poletown neighborhood. This led to further white exodus and diminishment of the tax base.

    All these are examples of rampant abuses, under both black and white leadership, that have resulted because of Detroit’s notorious governing “pattern.” But one silver lining of its bankruptcy is the opportunity for structural change. This could occur by channeling the urban reforms—from charter schools, to defined-contribution pensions, to looser permitting, to plain-old lower taxes—that have helped other U.S. cities the last two decades. If these reforms can thrive in the Motor City than they probably can anywhere, turning it at the very least back into a functioning city, and at best into a reemerging economic star.

    Scott Beyer is traveling the nation to write a book about revitalizing U.S. cities. His blog, Big City Sparkplug, features the latest in urban news. Originally from Charlottesville, VA, he is now living in different cities month-to-month to write new chapters.

    Photo by Kate Sumbler.