New Geography

Category: Urban Issues

  • Suburbs Will Adapt to High Gas Prices

    Will high gas prices doom the suburbs? The short answer is no. America’s investment in suburbia is too broad and deep and these will drive all kinds of technological and other adaptations. But the continued outward growth of new suburban housing tracts and power centers is unsustainable.

    It is, of course, risky to predict anything, particularly the future. No one can predict with certainty the direction of gas prices, let alone how they will reshape our landscape. While the long-term trend for oil and gas is almost certainly rising prices, volatility will continue to make short-run bets risky either way.

    But whether gas prices plateau, spike or even decline in the next five years, larger forces will reinforce the shift to greater reinvestment in older urban areas – and towards reinvention of existing suburban areas, particularly those with strong economies.

    There will still be some “greenfield” peripheral development, but unplanned “sprawl” will wither. New development will be look more like New Urbanist new towns. There will be a revival of the integrated planned community, like Reston in Virginia, the Woodlands near Houston or Valencia and Santa Margarita in Southern California.

    The forces converging to curb sprawl go beyond gas prices. There will be regulatory and market pressure to cut carbon emissions to address global warming, but the most serious threat to outward sprawl will be the private and public shortage of financing for new infrastructure, which is likely to be chronic. Given the deepening crisis in the housing and lending industries, in the long interval building resumes, new development will be very different from what we’ve seen in the past fifty years of most conventional suburbia.

    Of course, even if we adopted a universal program of “smart growth” across America tomorrow, it would be decades before we had repaired and reshaped our landscape and economy to a more sustainable model. In the meantime, there will be tremendous pressure to exploit existing and new energy sources to maintain the suburban model we live in. But we can’t ignore the pragmatic economist Herb Stein who first observed, “Things which can’t go on forever, don’t (known as Stein’s Law).”

    In part, because of legislation such as AB 32, the “Global Climate Solutions Act,” California may be one of the first test cases of this transition. Whether you think this is the greatest threat to our planet in human history or you think this is environmental hysteria, global warming legislation is now a political reality.

    We can’t meet reduce greenhouse gas emissions to 1990 levels by 2020 – the fundamental goal of the legislation – without reducing vehicle miles traveled. With transportation producing 40 percent of the problem, improved fuel efficiency will help – and so will switching to alternative fuels and increased telecommuting. But those gains will be essentially wiped out by the offsetting increases in population and mileage that people are traveling.

    While the costs of retooling new growth to be more sustainable will be significant, so are the opportunities. This year alone, according to the Economist, the oil importing nations will transfer two trillion dollars to the oil exporting nations. That’s money that will not be go to improve our infrastructure, protect our environment or educate our youth. It goes out our tailpipes.

    Here in California, the $20 billion transportation bond that voters approved in 2006 comes nowhere near to closing the $100 billion dollar gap in transportation infrastructure needed to address auto congestion and goods movement by truck. There is no way California’s government or economy can afford to continue to pay that cost. But it has taken gas at nearly $5 a gallon for people to wake up and smell the fumes.

    But halting sprawl is not the same as reversing it. Gas prices, AB 32 mandates, highway spending deficits and environmental concerns all conspire against more red-tiled roof subdivisions in Palmdale and Victorville. Yet growth pressures will fuel new demand down the road, so older suburbs and cities have to find ways to develop family-friendly housing and attract jobs that have been flowing to the suburban edge.

    These are two different, but related challenges. Older suburbs have to find a way to gracefully urbanize by strengthening or creating walkable centers and adding more population along commercial/transit corridors. They need to transition from auto-dependence to a wider range of real transportation alternatives. Above all, they face the challenge of persuading residents that reinvention of the suburbs can improve their quality of life and standard of living.

    Planners make a mistake if they try to tell suburban residents to give up what they like about suburbia in terms of space, privacy and safety. Acceptance of higher densities in existing suburban communities will only come if design of more urban housing improves and new development offers residents tangible improvements in amenities such as pedestrian-friendly districts, parks, bikeways and opportunities to work close to home.

    Older cities, on the other hand, already have much of the physical framework in place, but need to improve their parks, schools, libraries and neighborhoods. They must make themselves attractive to retain working and middle-class households, especially families with children. The key challenge will be to overcome the entrenched special interests that dominate urban politics to focus on the efforts that make a city hospitable to residents and businesses and be less dominated by the interests of developers and public employee unions.

    All across the state there are promising examples that suggest suburban and urban communities are getting the point. in the short run, the weak economy and awful financial market, both for public and private sectors, will slow change. But California has shown incredible resilience over the past 150 years. Our growing population and changing demographics will open up a huge market for reinvesting in our older communities.

    Now is the time to prepare for that time. Remember during the last deep real estate downturn, former Governor Pete Wilson abandoned his promise to tackle statewide growth management. His excuse was, “I wish I had some growth to manage.” The tragedy of that missed opportunity was that it wasn’t long before growth again overwhelmed our capacity.

    What if we’d not only put in place a coherent growth management strategy like Oregon, New Jersey or Maryland – but we’d established the collaborative regional structures in place like in metro Denver, Salt Lake City or Portland? Today, we’d be finishing the Subway to the Sea, the Gold Line extension to Ontario Airport and we’d have regular commuter rail between Ventura and Santa Barbara. Maybe then, $5 gas would be a little less painful.

    For too long, we’ve viewed cities and suburbia as natural antagonists. But the future may lie with greater convergence. Cities can become greener and more attractive to population growth. Suburbs can begin to urbanize in graceful and sustainable ways. Both are due for reinvention and reinvestment. The challenges we face will give us the opportunity – and the necessity – for doing just that.

    Rick Cole is the City Manager in Ventura, California, where he has championed smart growth strategies and revitalization of the historic downtown. He previously spent six years as the City Manager of Azusa, where he was credited by the San Gabriel Valley Tribune with helping make it “the most improved city in the San Gabriel Valley.” He earlier served as mayor of Pasadena and has been called “one of Southern California’s most visionary planning thinkers by the LA Times.” He was honored by Governing Magazine as one of their “2006 Public Officials of the Year.”

  • Energy Makes a Super-city

    Superlatives can no longer describe Dubai – there are simply too many. It is now the fastest growing city in the world with $300 billion of construction underway. Once Dubai was a sleepy Arab port nestled between its larger and more famous oil rich neighbors: Iraq, Iran and Saudi Arabia. Now tiny Dubai is home to the “world’s tallest building,” and more construction cranes than China and its 1.4 billion people. What is more amazing is that Dubai has a population of just 200,000 native Emirates within a land area one-half the size of Orange County, California. If you count all the workers, the city has a population of 1.8 million.

    It all started with the Burj Al Arab, the “world’s first 7-star hotel,” rising more than 50 floors above the Persian Gulf. Its unique sail shape makes it instantly recognizable. The Burj Al Arab has grown into iconic stature, like the Eiffel Tower.

    The Burj Dubai, the “world’s tallest building,” has passed 165 floors and no one except the Absolute Ruler of Dubai knows the final height. The Burj Dubai is 100 percent sold out. It will contain the world’s first Armani Hotel, and the world’s most expensive offices. Its competitor, Al Burj, a few miles down the road at the Dubai Waterfront, is reported to be 200 floors but they will not commit until Burj Dubai stops its reach for the sky.

    Shoppers can choose from the Mall of the Emirates, the “world’s first shopping mall with an indoor ski slope,” or the Dubai Mall, the “world’s largest shopping mall” at 10 million square feet. It will not reign long as the world’s largest – the Mall of Arabia will be 12 million square feet. The Mall of Arabia will be located at Dubai Land in the “world’s largest amusement park” – three times the size of Disneyworld. These Dubai malls will later be dwarfed by the Bawadi District with 60,000 hotel rooms and 40 million square feet of retail in what will surely be the “world’s largest shopping mall.”

    The products displayed in these malls will pass through the Port of Jebel Ali, the “world’s largest man-made port,” and 8th busiest container part in the world. Jebel Ali is one of three man-made structures that can be seen from outer space – the Hoover Dam and the Great Wall of China being the others.

    Shoppers will arrive at DXB, Dubai’s brand new airport built to accommodate 120 million passengers annually. DXB will become the “world’s busiest airport,” easily surpassing Atlanta Hartsfield, which accommodated 72 million passengers last year.

    New residents of Dubai have already moved into Dubai Marina, the “world’s largest marina,” even larger than Marina Del Rey in Los Angeles. Dubai Marina will be home to 200 residential towers each more than 40 floors with six towers of more than 90 stories. The Princess Tower at 107 stories is the “world’s tallest residential tower,” but the Pentominium, at 120 floors, will become “the world’s tallest residential tower,” next year. Its neighbor, Infinity Tower, at just 80 floors, will be the “world’s tallest tower featuring a 90-degree twist.”

    Dubai has the “world’s largest man-made residential islands” with four of them. Palm Jumeirah, the first of the Palm-shaped trilogy is three-by-five miles. It sold 4,000 residences along 17 separate fronds in three days. Thirty-two hotels will line the trunk. At the crescent of Palm Jumeirah is Atlantis, a 2,000-room hotel. The 61-story Trump International Tower straddles the monorail that connects the Palm to the mainland. The penthouse recently sold for $30 million making it the “world’s most expensive penthouse.” The Queen Elizabeth 2 ocean liner was purchased by Sheikh Mohamed and will be docked at Palm Jumeirah.

    Palm Jebel Ali is 50 percent larger than Palm Jumeirah and part of the Dubai Waterfront project that will house 1.7 million people upon completion in 2020. Jebel Ali will be larger than Paris at seven-by-five miles. Besides 8,000 residences and fifty hotels, homes will be built on stilts with a boardwalk that circles the fronds and spells out a poem written by Sheikh Mohamed that reads:

    Take wisdom from the wise
    It takes a man of vision to write on water
    Not everyone who rides a horse is a jockey
    Great men rise to greater challenges

    Palm Deira, largest of the Palm trilogy, will become the “world’s largest man-made island,” larger than New York’s Manhattan, bigger than central Paris and almost as big as Greater London. Palm Deira will house one million residents. The 42 fronds will be twice as large as its sister Palm islands at nine-by-five miles. Palm Deira will be connected to the mainland by a Central Island that will become the commercial center of the community on the north end of Dubai.

    The fourth offshore mega-project is The World, a collection of 300 islands intended to look like the world from outer space. The project stretches five-by-three miles and is surrounded by an oval breakwater to protect the individual islands from Persian Gulf storms and waves. The ambitious 300-island project will cost $14 billion when completed. Individual islands will sell from $15 million to $250 million. To date, more than half have been sold but that may be deceiving as only half have been offered for sale.

    If these superlatives were not enough, Dubai is building a business center to rival New York City’s Manhattan, London’s City or Tokyo’s Ginza Strip . Business Bay will wrap around the Burj Dubai and contain 230 high-rise office towers, each 40 floors or more. All 230 office towers are sold. The Burl Al Alam will be the “world’s tallest commercial tower” at 108 floors of mixed-use apartments, office and hotel. When completed this business center will contain 64 million square feet of office space. Halliburton and Baker-Hughes have already announced that Dubai will become their world headquarters.

    Easily lost in the superlative is the size of Dubai. It is only one of seven emirates that make up the United Arab Emirates. It is not an oil rich nation like its neighbor. Abu Dhabi that owns 94 percent of the oil in the UAE. Dubai’s oil will run out in 2016. Sheikh Mohamed, Emir and Absolute Ruler of Dubai, steered Dubai onto a course of development predicting the rise in oil prices that would bring a gusher of oil money into the Persian Gulf. Each day the nations that surround the Persian Gulf pump 20 million barrels of oil to a thirsty world. At $140/barrel, they earn $2.8 billion per day, $19.6 billion per week, $84 billion per month and $1 trillion per year.

    Dubai correctly anticipated the staggering transfer of wealth to the Arab oil producing states and like a smart business man, geared up to provide plenty of product for his wealthy clientele. With $300 billion of projects under development and one-third of the world’s cranes, Dubai has become the “fastest growing city in the world,” – yet another superlative that hardly tells the story. It is a story of a city about to become a player on a global scale – and one that the established great urban regions will have to take seriously in the years to come.

    Robert J. Cristiano Ph.D. has more than 25 years experience in real estate development in Southern California. He obtained financing from the Middle East following the collapse of the savings & loan industry in the early 90s and has become an expert on that region. He is a resident of Newport Beach, CA.

  • The New Boom Towns

    The steep hike in gas and energy prices has created a national debate about the future of American metropolitan areas — mostly about the reputed decline of suburbs and edge cities dependent on cars. But with all this focus on the troubles of traditional suburbs, one big story is overlooked: the rapid rise of America’s energy-producing metropolitan areas.

    In many of the nation’s strongest regional economies, $5 a gallon gas is less a threat than a boon. From Houston and Midland in Texas, to a score of cities across the Great Plains, today’s energy crisis is creating new wealth and new jobs in a way not seen since, well, the energy crisis of the 1970s.

    This reflects a global trend that is turning once out-of-the-way places, like Dubai and Alma Alty, into glittering high-rise cities. Other energy- and commodity-rich places are undergoing a similar boom — from Moscow and St. Petersburg in Russia, to Calgary and Edmonton in Canada and Perth in Australia.

    What all these places have going for them is control of what Kent Briggs, former chief of staff for Utah’s late Gov. Scott Matheson, once called “the testicles of the universe.” These cities base their wealth not on clever financial technology, cultural attributes or university-honed skills but on their position as centers of the global commodities boom.

    In the process, there has been a shift in the balance of economic power away from financial and information centers like New York, Los Angeles, Boston, Chicago and San Francisco. These cities are deeply vulnerable to the national financial and mortage crises. New York, according to David Shulman, former Lehman Brothers managing director, faces upward of 30,000 to 40,000 layoffs in its financial sector. San Francisco in the last quarter gave away a Transamerica Pyramid’s worth of office space.

    In contrast, things have never looked better for cities now riding the energy and commodity boom. By far the biggest winner is Houston, whose breakneck growth has been fueled by its role as the world’s premier energy city. As with Dubai, this is less a function of the city’s proximity of actual deposits (though the Gulf of Mexico represents one of the most promising energy finds in North America), than to its premier role as the technical, trading and administrative center of the worldwide industry.

    This prominence is, in historic terms, relatively recent. As late as the 1980s “oil bust,” notes historian Joe Feagin, Houston’s energy sector remained “a colony of New York,” where many of key industry corporate and financial decision-makers still lived.

    Yet, today, Houston’s national, even global dominance, of the energy business is palpable. With the lure of low-cost office space and housing stock, as well as myriad personal ties among executives and leading engineers, Houston managed to consolidate its position as the predominant center of the oil and gas industry. In 1960, Houston had barely one of the nation’s large energy firms, ranking well behind New York, Los Angeles and even Tulsa; today it has 16, more than all those cities combined.

    High wages offered by energy firms — annual salaries for geologists average $132,000 or more; while blue-collar workers make roughly $60,000 — have attracted a new generation of skilled executives and technicians to the region, which also enjoys a far lower cost a living than many other major cities. Areas like River Oaks, Galleria and Energy Corridor are home to well-educated, upwardly mobile workers in their late 20s and 30s. The area is growing at a time when these workers are, according to recent census numbers, leaving places like San Francisco, New York, Los Angeles and Boston.

    “People from other areas say that you guys don’t make much down there,“ said Houston executive recruiter Chris Schoettelkotte. “[But] the guys from L.A. make the same amount of money in the same field here. We pull them from Wharton, the Ivy League and Stanford and they get paid through the nose… Houston can get the talent.”

    Houston’s status as energy capital is also propelling it into the ranks of first-tier cities. Today, Houston has the third largest representation of consular offices. It ranks behind only Los Angeles and New York, and has outstripped traditional commercial centers like San Francisco and Chicago.

    It’s energy, along with the port and growing airport, that makes the Texas city a world capital. “When I go overseas people put Houston with New York and L.A.,” said Houston salvage entrepreneur Charlie Wilson. “In many cases, Houston is considered to be at the top of the world class because of oil. If you’re in China, you’re looking at Houston because of the oil.”

    But Houston is not alone in benefiting from the rising price of energy and other commodities. According to the new Inc./Newgeography.com job growth rankings other energy cities include Dallas — home of Exxon Mobil –- as well as smaller Texas burgs like Midland, Odessa and Longview.

    This is a dramatic turnaround for places like Midland. Until recently, said Midland oilman Mike Bradford, wildcatters had held back from drilling, because they feared the high oil prices would not last. Now they are convinced that the energy market has broken free of OPEC control and prices will remain high. “We think high [oil and gas] prices are for real — and we’re going nuts,” said Bradford, who also sits on the Midland County Commission.

    But you don’t have to be in Texas to be part of an energy boomtown. Bakersfield, Calif., oil capital, is also thriving, despite the hard times throughout the Golden State because of the mortgage crisis. Alaskans, who now receive more than $1,600 per capita from the state’s Permanent Fund Dividend, twice what they received in 2005, are likely to see their wealth increase. If there’s an expansion of drilling there, look for Anchorage and other Alaskan cities to enjoy even flusher times.

    Another hot spot is in the Great Plains. Energy production and high commodity prices are pacing the economies of regional centers like Des Moines; Billings, Mont.; Cheyenne, Wy., and Sioux Falls, S.D. In Bismarck, Grand Forks and Fargo, N.D., where incomes are surging, there’s a sense that these are the best of times. One sure sign: The energy boom — coal, oil, wind as well as biofuels — has produced a a billion-dollar state surplus for North Dakota.

    The energy and commodity boom is changing the face of these small cities in key ways. Fargo, the butt of sophisticated jokes with the Coen Brothers’ movie, now boasts a first-class arena, fine restaurants, a luxurious boutique hotel and a thriving arts scene.

    Grand Forks has a growing condo market. Scores of smaller cities — like Bismarck and Dickinson – are also showing signs of a new quasi-urban sophistication. After decades of demographic stagnation, some of these towns are seeing healthy population gains.

    Rising unemployment is not a problem here; a looming labor shortage is. In some markets, there are signing bonuses and $12-an-hour wages at fast-food business.

    If energy prices hold firm, and particularly if the nation begins to ramp up energy production, we can see the boomtimes extend to energy-rich Utah, Colorado, New Mexico and Louisiana. These can mean more growth in already healthy economies like Albuquerque, Salt Lake City and Denver; but also for long hard-pressed New Orleans and other Gulf Coast cities.

    Finally there’s another group of potential winners: areas that have been selected to produce the energy-efficient vehicles of the future. Even as Detroit, Flint and Ft. Wayne, Ind.,– producers of SUVs and trucks — suffer, many cities in the mid-South, like Nashville, Huntsville and Chattanooga, Tenn., seem certain to gain as Nissan, Toyota, Volkswagen and other foreign producers ramp up production.

    Perhaps the ultimate example of “world turned upside down” by energy prices may end up being Mississippi, long a perennial loser in the economic sweepstakes. But this week, Toyota announced it would start building its popular hybrid Prius in Blue Springs, Miss., in late 2010. That’s just outside Tupelo, Elvis’ birthplace.

    We may not see a reappearance of the King — but for many people this resurgence is just as stunning.

    None of this, however, suggests that San Francisco, Los Angeles or New York are about to be eclipsed by Houston — much less Fargo or Tupelo. But if the history of cities tells us anything, places well-positioned for growth industries tend to emerge as ever more serious players.

    It worked for industrial cities like Chicago, which emerged from obscurity in the late 19th Century; or later for high-tech centers like San Jose, Austin and Boston. If energy and commodity prices stay high for another decade, we may have to get used to a shift in the power of places across the American landscape.

    Joel Kotkin is a presidential fellow in urban futures at Chapman University and the author of “The City: A Global History.” He is executive editor of the website newgeography.com. This article first appeared at The Washington Independent.

  • Houston, New York Has a Problem

    The Southern city welcomes the middle class; heavily regulated and expensive Gotham drives it away.

    New Yorkers are rightly proud of their city’s renaissance over the last two decades, but when it comes to growth, Gotham pales beside Houston. Between 2000 and 2007, the New York region grew by just 2.7%, while greater Houston — the country’s sixth-largest metropolitan area — grew by 19.4%, expanding to 5.6 million people from 4.7 million.

    To East Coast urbanites, Houston’s appeal must be mysterious: The city isn’t all that economically productive — earnings per employee in Manhattan are almost double those in Houston — and its climate is unpleasant, with stultifying humidity and more days with temperatures exceeding 90 degrees than any other large American city. Since these two major factors in urban growth don’t explain Houston’s success, what does?

    Houston’s great advantage, it turns out, is its ability to provide affordable living for middle-income Americans, something that is increasingly hard to achieve in the Big Apple. That Houston is a middle-class city is mirrored in the nature of its economy. Both greater Houston and Manhattan have about 2 million employees.

    In Manhattan, almost 600,000 of them work in the idea-intensive sectors of finance, insurance, and professional services; only 2% are in manufacturing, and fewer than that in construction. Finance increasingly drives New York City’s economy as a whole. By contrast, Houston is a manufacturing powerhouse that makes machinery, food products, and electronics, with a retail sector twice the size of Manhattan’s and lots of middle-class jobs.

    Housing prices are the most important part of Houston’s recipe for middle-class affordability. In Gotham, the extraordinarily high housing costs aren’t a problem for the hyper-rich. With enough money, you can live in a spacious aerie overlooking Central Park, shop at Barney’s, eat at Le Bernardin, and send your children to Brearley or Dalton.

    The abundance of poorer immigrant New Yorkers, in turn, tells us that for people simply seeking a lifestyle that beats rural Brazil, the city’s many entry level service-sector jobs, wide array of social services, and extensive public transportation can offset high apartment prices.

    But what if, like most Americans, you are neither a partner at Goldman Sachs nor a penniless immigrant? Consider an average American family with skills that put them in the middle of the U.S. income distribution — nurses, sales representatives, retail managers — and aspirations to a middle-class lifestyle. What kind of life will such people lead in Houston and New York City, respectively?

    For starters, they’ll probably earn less in Houston, though not as much less as you might think. In the 2000 U.S. Census, the typical registered nurse made $50,000 in New York and $40,000 in Houston. A retail manager earned $28,000 in New York and $27,800 in Houston. Let’s be generous to New York and assume that our middle-income family would earn $70,000 there but just $60,000 in Houston.

    If our Houston family’s income is lower, however, its housing costs are much lower. In 2006, residents of Harris County, the 4-million-person area that includes Houston, told the census that the average owner-occupied housing unit was worth $126,000. Residents valued about 80% of the homes in the county at less than $200,000. The National Association of Realtors gives $150,000 as the median price of recent Houston home sales; though NAR figures don’t always accurately reflect average home prices, they do capture the prices of newer, often higher-quality, housing.

    In Houston, you’ll find a lot of nice places listing for $175,000, and they’ll probably sell for about 10% less, or $160,000. These are relatively new houses, often with four or more bedrooms. Some have more than 3,000 square feet of living space, swimming pools, and plenty of mahogany and leaded glass. Almost all seem to be in pleasant neighborhoods — a few are even in gated communities. The lots tend to be modest, about one-fifth of an acre, but that still leaves plenty of room for the kids to play. For a family that has about $35,000 available for a down payment, basic housing costs — that is, mortgage payments — would be about $9,200 a year.

    The average home price in New York City is dramatically higher. In 2006, the census put it at $496,000, and $787,900 in Manhattan — way out of reach for a family earning $70,000 a year. There are cheaper options: a perfectly pleasant Staten Island home with three bedrooms and two baths for $340,000, for instance. These houses don’t have the amenities you would find in new Houston houses, but they offer 2,000 square feet of living space. Alternatively, the family might purchase a condominium, with two or three bedrooms, in Queens — say, in Howard Beach or Far Rockaway. Even for the Staten Island option, a family making the same $35,000 down payment would face basic housing costs of about $24,000 a year.

    You thus get much more house in Houston and pay a lot less for it. Small wonder Houston looks so good to middle-class Americans.

    It looks even better once you take taxes into account. Federal taxes are roughly equal for the two families: about $7,000 per year. But under the Texas constitution, to enact a state income tax requires approval by statewide referendum — and two-thirds of the revenues generated by such a tax, if passed, must go toward reducing other taxes. As a result, Texas doesn’t have any state income taxes. Nor, for that matter, does it have any city income taxes.

    Houston residents do have to pay property taxes, which come to about $4,800 for a $160,000 home. In New York City, not only would a middle-class family have to pay local property taxes, probably about $3,400; they would also have to pay state and city income taxes — adding another $4,000 or so to their tax burden, depending on deductions and other factors. State and local levies thus add about $2,600 to the cost of living in New York.

    Ah, but doesn’t it cost a lot more to get around sprawling Houston? The Houstonians must have two cars: the poor public-transit system leaves them no other choice. American families earning $60,000 typically spend about $8,500 a year on transportation — and sure enough, in Houston, that’s sufficient (barely) to cover gas, insurance, and payments on two relatively inexpensive cars.

    The New Yorkers could save a lot by giving up on cars altogether and relying solely on Gotham’s extensive network of buses and subways, but on Staten Island or in outer Queens, that would mean a significant lifestyle cost. Family members would have to walk to the grocery store and rely on taxis for other trips. A more reasonable approach would be to have one car for local trips and use public transit to get to work. With a public-transit bill of $80 per month, a fair guess is that the New York family will end up spending about $3,000 less per year than the Houstonians on getting around.

    Just as with housing, however, there’s a significant difference in the quality of transportation in Houston and New York. In Houston, the middle-class breadwinner likely will drive an air-conditioned car from an air-conditioned home to an air-conditioned workplace, and take 27.4 minutes to do it, on average. Commuting via New York public transit is more complicated. If you live in Queens, the average commute to midtown Manhattan (if that’s where you work) is 42 minutes, and longer if you’re coming from Far Rockaway.

    From Staten Island, the average commute is 44 minutes — and often something of a triathlon, with bus, ferry, and subway stages. Our middle-class New York commuter thus spends at least 120 more hours in transit per year than does his Houston counterpart. And except perhaps for the ones spent on the ferry, none of those hours is as agreeable as sitting in an air-conditioned car listening to the radio.

    Will rising oil prices eat away Houston’s cost advantages? While there’s no question that more expensive crude favors dense New York, the impact of paying more at the pump is likely to be modest. If the Houston residents buy 500 more gallons of gas per year than the New Yorkers, and if the price of gas jumps by $3 a gallon, then the price of Houston living will increase by $1,500. This is a real cost, but it doesn’t come close to evening the playing field.

    Further, the Houston family could always drive a 50-miles-to-the-gallon hybrid, which would let them buy only 400 gallons of gas to drive 20,000 miles. Big-city boosters may like to think that rising gas prices will end suburban sprawl, but a far more likely response to expensive oil is a large switch to more fuel-efficient cars.

    After housing, taxes, and transportation, the New Yorkers have $26,000 left. The Houston family has $30,500, and those dollars go a lot further than they would in New York. The American Chamber of Commerce produces local price indexes for various areas, including Houston and Queens (though not Staten Island). The overall price index for Queens is 150, which means that it costs 50% more to live there than it does in the average American locale. The price index for Houston is 88.

    If we exclude the areas that our two families have already paid for (housing and transportation) and average the remaining categories in the index (food, utilities, health, and miscellaneous), Queens is 24% more expensive than the average American area and Houston is 6% less expensive. Thus — again, after housing, taxes, and transportation — the Queens residents’ real remainder is a little less than $21,000; the Houston family’s is $32,200. The Houston family is effectively 53% richer and solidly in the middle class, with plenty of money for going out to dinner at Applebee’s or taking vacations to San Antonio. The family on Staten Island or in Queens is straining constantly to make ends meet.

    If the key factor making Houston a middle-class magnet is its plentiful and inexpensive housing, that raises the question: why is it so cheap? The low cost of homes reflects the low cost of supplying homes in Texas. Building an “economy” 2,000-square-foot house in Houston costs about $120,000, and a slightly larger “standard” one about $150,000.

    Why is it so much more expensive in New York? For one, supplying housing in New York City costs much, much more — for a 1,500-square-foot apartment, the construction cost alone is more than $500,000. Also, part of the reason is geographic: an old port on a narrow island can’t grow outward, as Houston has, and the costs of building up — New York’s fate, especially in Manhattan — will always be higher than those of building out. And the unavoidable fact is that New York makes it harder to build housing than Chicago does — and a lot harder than Houston does.

    The permitting process in Manhattan is an arduous, unpredictable, multiyear odyssey involving a dizzying array of regulations, environmental, and other hosts of agencies. A further obstacle: rent control. When other municipalities dropped rent control after World War II, New York clung to it, despite the fact that artificially reduced rents discourage people from building new housing.

    Houston, by contrast, has always been gung ho about development. Houston’s builders have managed — better than in any other American city — to make the case to the public that restrictions on development will make the city less affordable to the less successful.

    Of course, Houston’s development isn’t costless. Like most growing places, it must struggle with water issues, sanitation, and congestion. For environmentalists who worry about carbon dioxide emissions and global warming, Houston’s rapid growth is particularly worrisome, since Houstonians are among the biggest carbon emitters in the country — all those humid 90-degree days mean a lot of electricity to cool off, and all that driving gobbles plenty of gas.

    But Houston’s success shows that a relatively deregulated free-market city, with a powerful urban growth machine, can do a much better job of taking care of middle-income Americans than the more “progressive” big governments of the Northeast and the West Coast.

    The right response to Houston’s growth is not to stymie it through regulation that would make the city less affordable. It’s for other areas, New York included, to cut construction costs and start beating the Sunbelt at its own game.

    This article appeared first at the New York Sun.

    Mr. Glaeser, a professor of economics at Harvard University, is a senior fellow at the Manhattan Institute. This article is adapted from the forthcoming issue of City Journal.

  • Suburbs Thriving, Cities Stagnating in Keystone State

    The headline in the Philadelphia Inquirer said it all, “Philadelphia’s population shrinking, though region’s is growing.” This in the midst of what is purported to be a condominium boom in its thriving center city.

    But facts are facts: Philadelphia’s population has dropped 4.5 percent. This ranks it first among the top-25 U.S. cities in population loss from 2000-2007. This data causes you to pause and rethink the real impact of major public investments in the city spurred on by a governor who is the city’s former two-term mayor.

    For one, gambling was supposed to bring good jobs to the city. The two winning bidders each created projects on the Delaware River, but these projects are stuck in a protracted political battle and their fate at these riverfront locations is uncertain along with the thousands of jobs they have promised.

    Part of the problem for the casinos is that a new vision has been created for the Delaware Riverfront. The Penn Praxis plan envisions recreation and greenways, not gambling for this area of the city. As a result, the gaming interests are being asked to consider building somewhere else within the city.

    There is also the Pennsylvania Convention Center. The first phase was built into the old Reading Railroad terminal on east Market Street. Supporters contend that it has spurred a hotel and restaurant boom in the city and there is validity to this position.

    But work rules issues have plagued the center since its inception. The result has been that most convention groups have chosen not to return because of arcane union rules that made it beyond difficult to do simple things like set up a booth or get electric power to a display. Negotiations have brought some relief, but problems remain to be solved.

    Despite these problems the convention center is now slated to expand about two blocks west of its current location. The costs have escalated dramatically and now exceed $800 million . This is an increase of nearly $100 million since the deal to move forward was approved and buildings were condemned and razed.

    On July 12, Governor Rendell hinted that he was having second thoughts about the viability of the expanded center when he said that the center is “getting to the point where the cost will outweigh the benefit.” These remarks were made while the governor was signing legislation that would increase the taxes on a hotel room in Philadelphia by more than 15 percent to pay for tourism promotion and the convention center.

    Stadium Economics
    Public dollars have also helped to fund a new football and baseball stadium in South Philadelphia. Citizens Bank Park is a real gem of a baseball stadium – a fun family entertainment venue where the Philadelphia Phillies play 82 games a year. Across the street is Lincoln Financial Field where the Philadelphia Eagles play their games as well as Temple University. There are only 20 – 25 games played there each year. The Phillies stadium cost $458 million and the Eagles complex $512 million, most of which came from public investment.

    What has been the economic impact of this investment? Has the neighborhood been revitalized by this investment? The short answer is no. They are basically commuter stadiums where fans come, see, and go.

    Rick Eckstein, who is a professor at a local university and author of Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums, has studied the economic impact of public investment in stadium projects. He concludes, “I have been studying and writing about publicly financed stadiums for more than 10 years and cannot name a single stadium project that has delivered on its original grandiose economic promises, although they do bring benefits to team owners, sports leagues and sometimes players.”

    Over the years billions of dollars has been invested in tourism and entertainment projects and the results are clear: the projects required more dollars than originally thought and the promises of profound economic benefits have never materialized as expected.

    Philadelphia is a lot more fun than it was 20 years ago, but its economy remains stagnant and its core population continues to leave to find opportunity elsewhere.

    There is also another trend resulting from this kind of pubic investment. The more public money that is poured into a region the more taxes and fees follow.

    In Pennsylvania, these kinds of investment go far beyond Philadelphia. Pittsburgh has two new stadiums costing a total of more than $1 billion and a new $375 million convention center that is touted as, “the cornerstone of western Pennsylvania’s hospitality industry.”

    Erie has the Bayfront Convention Center at $44 million and funded it with a new five percent hotel room tax. The Altoona region has Blair County Convention Center & Sports Facility Authority a $50 million project funded with $48 million in federal and state grants. The City of York invested economic and political capital in securing a $28 million revenue bond to fund a minor league baseball stadium. The City of Chester just was awarded a soccer franchise and is planning a new stadium to go along with the new casino as core projects to revitalize its economy.

    When we look back at the billions of dollars that has been spent on these projects and the results, you are left to wonder whether or not these dollars could have been spent more wisely in other areas to build an economy on sturdier foundation.

    The results have not been encouraging. Population growth in Pennsylvania between April 2000 and July 2006 was a mere 1.3 percent. Private non-farm employment decreased 0.1 percent according to the U.S. Census Bureau. Pennsylvania’s senior population continues to be among the highest in the nation at 15.2 percent in 2006.

    Philadelphia lagged behind the national average of the percent of the population with a bachelor’s degree by 4.5 percentage points in 2000; Pittsburgh’s mean household income was nearly $12,000 below the national average. None of the major cities in Pennsylvania gained population during the early years of this century.

    Suburban Growth
    Meanwhile there is a very different story in suburban and rural counties. Montgomery County’s population grew at a rate nearly three times that of the State of Pennsylvania and Bucks County grew by nearly four times. In Berks County, the next county beyond Philadelphia’s four suburban collar counties, population growth was a healthy 7.4 percent and household income exceeded the national average.

    In rural Monroe County, located outside of Wilkes-Barre, population spiked by nearly 20 percent over six years while in Pike County, northeast of Scranton, we saw staggering growth of 25.7 percent and household income exceeding the national average.

    The people of Pennsylvania want what every other American wants for their families: a nice home, good schools, quality government services and a safe community. They are abandoning cities because they cannot keep this promise to their middle-income wage earners.

    However, they are finding what they want in Pennsylvania’s first and second ring suburbs and in rural communities that don’t invest in stadiums, convention centers or entertainment to build their economies. Instead these communities provide a quality of life that attracts people and the jobs are following.

    An economy built on tourism and entertainment provides very few family wage jobs. These funds would likely be better invested in quality of life and infrastructure in order to create high wage, blue collar jobs in the global economy.

    If not, people will continue to vote with their feet as they look for opportunity beyond the casino, restaurant and tourism industries and a better quality of life outside of cities that are increasingly being viewed as opportunity-free zones.

    Dennis M. Powell is president and CEO of Massey Powell an issues management consulting company located in Plymouth Meeting, PA.

  • What does the end of cheap oil mean to our urban futures?

    The Contrasting Views.
    One of the most common topics on blog sites and newsgroups here and around the world is “What does the end of cheap oil mean to the future of our cities?”

    As usual, those who combine a yearning for catastrophe with a hatred of the motor car and the suburban lifestyle have leapt to their own “self evident” conclusion. They are convinced the suburbs are no longer viable and will be abandoned and left to decay into extensive ghost towns, home only to vermin and weeds.

    All those millions of of people who inhabit the metropolitan areas of Los Angeles, San Francisco, Houston, and even Auckland and Christchurch, will up-stakes and surge into downtown neighbourhoods where they will take up residence in high rise slabs from which they will be able to walk and cycle to work – or of course catch their bus or train. As James Howard Kunstler puts somewhat gleefully:

    “The US economy is crumbling because the way we conduct the activities of daily life is insane relative to our circumstances. We’ve spent sixty years ramping up a suburban living arrangement that has suddenly entered a state of failure, and all its accessories and furnishings are failing in concert. The far-flung McHouse tracts are becoming both useless and worthless in the face of gasoline prices that will never be cheap again. The strip malls and office “parks” are following the residential real estate off a cliff. The retail tenants of all those places are hemorrhaging customers who have maxed out every last credit card. The lack of business is now leading to substantial layoffs. The airline industry is dying and will probably cease to exist in its familiar form in 24 months. The trucking industry is dying, threatening the entire just-in-time distribution system of things that even people with little money to spend still need, like food.”

    All this because US gas prices may soon reach $5/gallon. We New Zealanders, like many others round the world, have been living with $5/gallon petrol for years, and have even survived $10/gallon petrol for close on two years. Yet Kunstler and many like-minded catastrophists state with total confidence that once gas hits $10/gallon all Americans will simply stop driving – and start rebuilding their cities.

    Fortunately, the simple sums suggest otherwise. Look up the population of your nearest city. Look up the housing replacement rate, and figure out how long it will take to transform present day Seattle or Auckland into a remake of 19th Century London. Then think about the costs of all the new buildings, all the new infrastructure, and the lost asset value of all those abandoned suburbs.

    Many of us believe that long before anyone has to consider such a drastic reshaping of our built environment new technologies and some minor behavioural shifts will make such disruption totally unnecessary.

    The alarmists respond that we do not have the time.

    However, we can develop new technologies and produce new products at high speed if we have to. Consider the rapid development of technology during WWII – jet engines, radar, V2s, computing and much more. By the end of WWII it was taking only five days to build a Liberty Ship in the US dockyards. When I first went on the Internet in 1994 there were only 70,000 of us in the club. Now there are over 1.6 billion of us.

    Off course we have the time. After decades of paying about $5/gallon for our petrol, the NZ urban landscape looks much like America’s although the average vehicle size may be somewhat smaller.

    Now that we are paying $10/gallon for petrol, sales of small, more efficient, cars are booming, and a few more people are cycling to work, car-pooling or taking public transport. But, hardly anyone, except our local Katastrophists, are talking about giving up their autos altogether or proposing that we rebuild our cities within the constraints of Extremist Smart Growth urban form.

    The most obvious change in behaviour is a boom in drive-away theft from petrol stations. Barrier arms or similar hardware will soon put a stop to this.

    Our Densities are Higher and uses more Mixed than in the US.
    Since the seventies, New Zealand has generally had ‘enabling’ Urban Planning rules which have allowed mixes of high, medium and low density housing and mixed uses of retail etc. Lot sizes have ranged in size but there would hardly be any suburbs built exclusively for single family homes on 1 acre lots. Consequently Auckland’s density per sq mile is about double that of most US cities of similar age and size. But we are already “densified” and further density increases are being strongly resisted because the kerbside parking is already in short supply and inner city districts are noticing the increased congestion, noise and loss of amenity.

    One effect of $10/gallon gas is that public transport prices are rising steeply too, and Councils are raising rates to keep up with the necessary subsidies. Some people seem to think that public transport runs on fairy dust.

    Our auto ownership is about the same as the US, we drive somewhat shorter distances on average but generally spend more time driving up and down hills.

    Of course we are now grizzling and complaining about the price of petrol. But the US need hardly fear any massive revolution while their gas remains at only half the price of ours.

    US consumers are reacting to a dramatic change in price. Many of those cyclists are still prepared to pay more for their litre of bottled water than they are prepared to pay for a litre of gas.

    A Force for Decentralisation
    Americans are responding to this change in price by reducing their driven mileage. (Americans drove 11billion fewer miles in March 2008 than in March 2007. ) Significantly the most dramatic reductions are taking place in the rural areas. My own experience suggests this is because the reductions are much easier to achieve in rural life. We tend to co-operate when it comes to long trips, we can more freely plan our times of day, and we spend no time at traffic lights, in gridlock, or looking for parking spaces. When gas prices are high such waste is infuriating.

    Hence, while none of us can be sure about future human behaviour, my own research and my own experience, suggests that high gas prices are a further force for decentralisation. Kunstler is sure we shall all rush to the city centre. Some people will, of course, but they will be watching many households moving in the opposite direction.

    Freeman Dyson’s book “The Sun the Genome and the Internet” identifies many present and future forces for decentralisation. My current position is that high gas prices are more likely to decentralise more people than centralise them. But no human behaviour is uniform. Some people will go downtown and some – probably more – will go to rural centres. Many will go to more remote locations for “the sea change, the tree change and the ski change.”

    Some people are convinced that this outmigration will be strongly resisted by the existing folk and even more so by people like me who will want to protect our piece of paradise. Not so – as long as the planners don’t force us all to crowd into high density settlements with no room to swing a cat or grow our vegetables. And they will probably try.

    When we moved to Northland eleven years ago there were few people in the Kaiwaka area and services were basic. Now we have a French restaurant, an Italian bread shop, a bundle of local newspapers, excellent butchers and delicatessens, the school rolls are growing and the medical services are better and nearer and so on.

    Most New Zealanders of my generation grew up in the country and we are returning to our roots. The media like to make much of a few hopeless cases who want to “de-moo” the cows and so on but I have never had any problems of that kind and frankly we are the ones who are driving many of the new rural crops such as olives, wine, truffles etc. and the new tourism establishments and so on.

    The Iron Horse will prevail
    For most of human history people have had access to private point-to-point history using things called horses, camels, mules, asses, lamas or whatever. Christ rode into Jerusalem on the current equivalent of a VW. Then, in the 19th C trains and trams allowed the development of far-flung cities in which large numbers of people could get into the central city for work. (The Manhattan model). The trouble was the horses, which dominated short distance urban trips, caused dreadful pollution of air water and soil, not to mention the stench at a NY gridlocked intersection in mid-summer.

    The car was a miracle. It got rid of the pollution, and released huge amounts of food to feed people.

    In 1910, 40% of the grain grown in the US went to feed horses. This “extra” grain fed the population explosion which followed.

    So the car the was the real “Iron Horse” – not the train.

    Modern trains are at a higher level of technology than the nineteenth century trains but their new technologies only increase their speed and reduce their pollution. They do not overcome the fact that trains cannnot provide the flexibility of rubber-on-road transport such as buses, cars, and taxis – or indeed, of the family horse.

    Anyhow, the rubber-on-road system is about to go through a development phase which will leave the train in (on) its tracks, or stuck at the station.

    The next generation of cars will be a computer with four wheels.
    Many people in many different research centres are working on new technologies which will mean you will be able to drive your car to the motorway where it will link to a position over an underground cable which will guide the car – you will be able to take your hands off the wheel and read, and even use your cellphone. The same cable may use an induction system to supply power to your electric drive system. (You will of course charge your electric car up in your garage overnight).

    Then, when you get near to your destination you will put your hands back on the wheel, leave the motorway, go back on to the surface street and complete the trip. If there is no parking you will get out of the car and tell it to go park itself and it will. When you leave your business you will phone it up to tell it to come and pick you up and it will.

    That it what we mean when we say the train is 19th century technology – it is stuck and cannot make the leap into the 21st century.

    No one can be sure that this total package will prevail but there are so many options being developed that cars will certainly leap to new levels of effciency and effectiveness over the next few years. If this seems like science fantasy image convincing your great-grandparents of the reality of modern computers on your desk and the power of the internet.

    Behavioural change.
    There will be some changes of behaviour at the margins. People who are tired of congestion may make their move to the regional centres earlier than they might have, while their children might move to a downtown apartment.

    But the technology will change much more rapidly than urban form and land use can change. If need be we shall electrify the private vehicle fleet and supply nuclear power and the car will be cheaper to run than ever.

    There will be more telecommuting.

    There will be more hi tech car pooling using GPS, iPhones and the Internet.

    A few more will cycle and ride in trains and buses but the changes in travel mode will not be dramatic.

    The worst thing that can happen is that our cities move from being “Opportunity Cities” to “Panic Cities” that insist on controlling where and how their people should live, based on knee-jerk reactions to change and a total lack of confidence in people’s ability to innovate and adapt.

    Owen McShane is a Resource Management Consultant based in New Zealand

  • Where Are the Best Cities to Do Business?

    Our comprehensive annual guide to which places are thriving — even in an economy many consider in recession.

    By Joel Kotkin and Michael Shires

    What a difference a year and a deflated housing bubble makes. Inc.com’s 2008 list of the Best Cities for Doing Business, created in conjunction with Newgeography.com, uncovered some of the most dramatic changes since we started this ranking back in 2004. Five major trends were immediately revealed; trends that are shaping the business environment right now across the country and will continue to over the next several years.

    The list focuses on short- and long-term job growth. It tells us precisely not just where jobs are being created — a sure sign of economic vitality — but where the momentum is shifting. For entrepreneurs, this suggests what may be the best places to locate or expand your business.

    The Bubble and the Fall of the Sunshine Boys

    Since the list’s inception, Florida has been the standout state in each of our size-based categories — small, midsize, and large. But not this year. Now, Florida is the state that fell back to earth. Stung by plummeting construction employment and the mortgage finance crisis, many of our former highfliers across the state are hurting. Ft. Lauderdale, last year’s No. 3 among the large metros, dropped 24 places. West Palm Beach, No. 6 last year, dropped to No. 41. And Jacksonville, No. 12 in the large category, fell seven places.

    The fall, however, was much more devastating for the smaller communities, such as Ft. Myers-Cape Coral. The area ranked No. 1 last year in the midsize category but plummeted 42 places this year. Lakeland-Winter Haven, down 45 places, Deltona-Daytona Beach, down 49, Palm Bay-Melbourne, down 53, and Bradentown, down 65, fared even worse. In even smaller towns, the scenario was bleaker. Ft. Walton Beach dropped 85 places and Naples-San Marco Island, No. 4 last year, plummeted 105 places, the most of any metro in our survey.

    “We’re the foreclosure capital of America,” admits Bill Valenti, founder and CEO of Florida Gulf Bank, founded in 2001 in Fort Myers on the once booming west coast of the Sunshine State. Many of the people that moved into the area bought relatively expensive homes expecting continued asset appreciation to make up for the fact that many jobs in the area pay modest or low wages. Now the area has seen median house prices drop from $320,000 to $223,000 in two years. “Something had to give and it did.”

    Although Florida’s fall was by far the biggest, the housing collapse has also humbled high fliers in other states as well. Last year’s No. 1 among the large metros, Las Vegas, dropped seven places while No. 2, Phoenix, dropped 12; the other big Arizona city, Tucson, No. 12 last year among the midsize category, fell 34 places. Midsize Reno, No. 8 last year and previously No. 1, dropped 21 places.

    Outside Florida, the sharpest pain was felt in California. Property-driven economies in Oakland, Santa Ana-Anaheim, Sacramento, and Riverside-San Bernardino all dropped by around 20 places or more. The big enchilada, Los Angeles, fell another eight places from its already mediocre 48th ranking last year. Almost every city below LA on the list is either a Rustbelt disaster or a perennially underperforming Northeastern big city.

    If this trend continues to play out, California’s problems could be worse than those in Florida. When the bubble corrects, Florida still can boast relatively low costs, no income taxes, and a favorable business climate in addition to warm weather. By contrast, California’s land use laws, high taxes, and massive $20 billion state deficit don’t bode well for the future of the state, suggests Bill Watkins, executive director of the University of California at Santa Barbara’s Economic Forecast Project. “There’s a lot of uncertainty,” he says. “If you are expanding or starting a business, there’s not a lot of reason now to come to California.”

    The Texas Ascendancy Continues

    While California is struggling, says Los Angeles-based architect David Hidalgo, Texas is thriving. Hidalgo just completed a large Latino-themed shopping center in Ft. Worth and sees more of his business coming from the Lone Star State. “That’s where the opportunities are,” he says. “Its costs, regulation, and infrastructure drive you to Texas.”

    Our rankings certainly bear out Hidalgo’s assertion. In many ways Texas has become the new Florida, dominating the top of the list. Among the largest metro areas, a remarkable five of the top 12 best places to do business are from the Lone Star State, ranging from Austin (No. 2) and Houston (No. 4) to Ft. Worth (No. 9) and Dallas (No. 12). Among the small cities, Midland, now ranks No. 1, up 10 places from last year. Odessa and Longview, both big gainers, round out the Texas stronghold on the top portion of the list.

    Texas’ boom reflects solid growth in a variety of industries, from energy and agriculture to manufacturing and trade. “The big difference for Texas is we did not rely on the real estate bubble,” suggests Bill Gilmer, a Houston-based economist for the Federal Reserve. “Our gains are based on jobs elsewhere and that has insulated us pretty well.”

    Here Come the Carolinas

    The other big winners this year are concentrated in the Carolinas. Like Texas, these two states are being fed by varied economies. Certainly, technology companies have been a factor here, many of them in Raleigh-Cary, N.C., which ranked No. 1, up six places, on our list of largest metro areas. Finance has played a large part, too, with Charlotte (No. 5), up 18 places, emerging as the big but low-cost, family-friendly alternative to the New York financial center.

    Demographics are a big part of the story here. Our analysis from Praxis Strategy Group shows that Raleigh and Charlotte, are among the biggest magnets for young, educated workers, particularly those in their late 20s and early 30s.

    “People are coming here for basic reasons and taking their families with them,” observes Sociologist John D. Kasarda, director of the Kenan Institute at the University of North Carolina at Chapel Hill. “They are coming for jobs, particularly from the Northeast, and an affordable quality of life.”

    To some extent, Kasarda adds, Raleigh and Charlotte are well-known success stories, but he points to wider, less documented successes in the region. Driven by gains in tourism, logistics, manufacturing, and technology, more and more midsize Carolina cities are joining the party. These emerging players include Charleston, S.C. (No. 6); Asheville, N.C. (No. 7); Durham, N.C. (No. 11); Greenville, S.C. (No. 18); and Columbia, S.C. (No. 19). These cities made considerable gains over last year and should be seriously considered for new business opportunities.

    The Pacific Northwest-Intermountain West Surge Continues

    Like last year, the northwestern quarter of the country did very well. Three of the top 11 big metro areas in the region between the foggy West Coast and the high mountains, including Salt Lake City (No. 3), Seattle (No. 10) and Portland, Ore. (No. 11), all gained ground. This ascendancy was even more evident at the midsize level, with the success of cities such as Provo-Orem, Utah (No. 1); Tacoma, Wash. (No. 2); Ogden, Utah (No. 8); Boise, Idaho (No. 12); and Spokane, Wash. (No. 14). Small cities, including St. George, Utah (No. 2), Coeur d’Alene, Idaho (No. 3), Bend, Ore. (No. 7) and Grand Junction, Colo. (No. 9), also saw gains.

    In many ways, the gains here parallel those in the Carolinas. Places like Salt Lake City, Seattle, and Portland, according to the Praxis Strategy Group analysis, all continue to gain educated residents from other parts of the country. The lure, in many cases, lies with strong and diverse job growth and low housing prices compared to coastal California and the Northeast.

    Seattle continued its strong growth, notes economist Paul Sommers, due largely to the success of two companies — Microsoft and Boeing. These companies have been expanding, providing high-wage jobs, and attracting skilled talent to the area. Another key advantage in this high energy cost environment: the Northwest’s prodigious supplies of cheap and clean hydroelectric power. This helps everyone, from people building airplane parts to dot-com firms sucking copious amounts of electricity to run their servers.

    Some of the other areas in this vast region benefit from what might be called “grey power.” Older, often more educated and affluent, baby boomers are flocking to the smaller towns and cities in this region, bringing capital and, in some cases, entrepreneurial know-how. Like the Carolinas, the area between the foggy Pacific Coast and the Rockies seems poised for sustained growth.

    Revenge of the Superstars?

    Perhaps the most surprising shift in the 2008 rankings, and in some ways the most subtle, has been the improvement in a host of very expensive, highly regulated urban regions that Wharton economist Joe Gyourko calls “superstar cities.” For many years these cities — New York, San Francisco, San Jose, Boston — have clustered at the bottom of our growth-oriented list, all suffering big losses from the 2000-2001 dot-com bust.

    This year has seen the revenge of the “superstars.” Although not surpassing Texas, the Carolinas or the Northwest, these elite cities have made a strong showing. In just one year, New York (No. 22) propelled itself 21 places while San Francisco (No. 29) and San Jose (No. 33) gained at least 25 places, and Boston (No. 40) went up 19 places.

    The main reason for this modest, but significant turnaround, suggests David Shulman, former managing director of Lehman Brothers, is simple: the powerful financial sector expansion of the past few years. These are all cities where big money plays a big role, either financing new dot-com start-ups or simply serving as the places where multimillion-dollar bonuses are spent on a host of high-priced services.

    Yet, Shulman notes, these gains may be short lived. The impact of the subprime and mortgage meltdown hit first in places like California and Florida, and is only beginning to affect the major financial centers. Spurred by the credit crisis, Shulman fears new regulations will limit financial innovation and wipe out whole sections of industries like mortgage-backed securities and some derivatives.

    “A lot of these gains are going to rewind,” suggests Shulman. “New York is losing jobs as we speak. Anyplace with exposure to financial services is going to suffer over the next two years.”

    Joel Kotkin is a presidential fellow at Chapman University and executive editor of Newgeography.com

    Michael Shires, Ph.D. is a professor at Pepperdine University School of Public Policy

  • Suburbia’s Not Dead Yet

    While millions of American families struggle with falling house prices, soaring gasoline costs and tightening credit, some environmentalists, urban planners and urban real estate speculators are welcoming the bad news as signaling what they have long dreamed of — the demise of suburbia.

    In a March Atlantic article, Christopher B. Leinberger, a visiting fellow at the Brookings Institution and a professor of urban planning, contended that yesterday’s new suburbs will become “the slums” of tomorrow because high gas prices and the housing meltdown will force Americans back to the urban core. Leinberger is not alone. Other pundits, among them author James Howard Kunstler, who despises suburban aesthetics, and New York Times columnist Paul Krugman, see the pain in suburbia as a silver lining for urban revival.

    Not so fast. The “out of the suburbs, back to the city” narrative rests more on anecdote than demographic or economic fact. Yes, high gas prices and rising sub-prime mortgage defaults are hurting some suburban communities, particularly newly built ones on the periphery. But the suburbs remain home to a majority of Americans and a larger proportion of U.S. families — and people aren’t leaving those communities in droves to live in cities. Even with economic growth slowing, many suburbs, exurbs and smaller towns, especially those whose economies are tied to energy, are continuing to do better than most cities in terms of job creation and population growth.

    The ominous predictions that the end of suburbia is at hand echo those in the 1970s, when there was also a run-up in gasoline prices. Then it was neo-Malthusians such as biologist Paul Ehrlich, the author of “The Population Bomb,” who argued that the idea of suburbia was unsustainable because it eats up so much land and energy. But suburban growth continued as people bought more fuel-efficient cars and companies moved jobs to the periphery, which cut commuting times. Contrary to pundits’ forecasts, during this decade of high energy prices, the country’s urban populations, for only the first time in recent history, actually fell, according to a census analysis by economist Jordan Rappaport at the Federal Reserve Bank of Kansas City.

    But today’s gas prices, at more than $4 a gallon, are the highest ever, and the prospects of them significantly dropping any time soon are slight. The conditions for an exodus from suburbia to the cities would seem ideal once again.

    Nevertheless, since 2003, when gas prices began their climb, suburban population growth has continued to outstrip that of the central cities, with about 90% of all metropolitan growth occurringin suburban communities, according to the 2000 to 2006census. And the most recent statistics from the annual American Community Survey, which is conducted by the U.S. Census Bureau, show no sign of a significant shift of the population to urban counties, at least through 2007.

    The flat condominium markets in most large urban markets are another sign that people are not streaming into cities from the suburbs and buying. Many condo projects in such cities as Los Angeles, Chicago, Miami and San Diego have either been canceled or converted into rentals, with many units remaining vacant. As a Southern California condo developer told me recently, lower house prices are not going to make people more disposed to buying apartments.

    But the biggest reason the suburb-to-city narrative is not following the script of the urban boosters and theorists has to do with employment. Living close to your workplace makes sense, not only because it cuts commuting costs and reduces greenhouse-gas emissions — by saving time, it also gives people more time for family and leisure activities.

    The problem for many cities is that they lack the jobs for people to move close to. Since the 1970s, the suburbs have been the home for most high-tech jobs and now the majority of office space. By 2000, only 22% of people worked within three miles of a city center in the nation’s 100 largest metro areas.And from 2001 to 2006, job growth in suburbia expanded at six times the rate of that in urban cores, according to an analysis of Bureau of Labor Statistics by the Praxis Strategy Group, a consulting firm with which I work.

    A desire to live closer to their jobs doesn’t mean that people have to move to the inner core, particularly if that’s not where the jobs are. Of the 20 leading job centers in Southern California by ZIP Code, none are downtown. The central core does remain an important job center, but it accounts for barely 3% of regional employment. Among those who work downtown, some may shift from cars to public transit, although many will simply buy a more fuel-efficient car and stay put in the suburbs.

    For residents who live in suburban areas with large concentrations of employment — Burbank, Ontario and West L.A. — commutes to work can be shorter than those experienced by their inner-city counterparts, according to Ali Modarres, a professor of geography at Cal State Los Angeles. Commutes in these communities, on average, are less than 25 minutes, while in high-density areas, such as Pico-Union, they average 35 minutes.

    The relative and continuing health of these suburban employment centers would seem to preclude any large-scale flight to cities. But urban areas with limited or shrinking employment opportunities, and suburbs that bet on housing to sustain their economies, will continue to have trouble attracting residents either because of a scarcity of jobs or long commutes at a time of expensive gas.

    The suburb-to-the-city narrative faces other obstacles. By the early part of the next decade, the large millennial generation born since the early 1980s will begin to form families, and they will, as have previous generations, probably seek open space and good schools for their children — and that means they will settle in the suburbs. And there is no census evidence suggesting that immigrants have reversed their decade-old pattern of moving to the suburbs.

    The growth of telecommuting, fed by technological advances, further ensures that suburbia has a future. By 2006, the expansion of home-based workers had grown twice as quickly as in the previous decade. And by 2015, according to demographer Wendell Cox, there will be more people in the country working electronically from home full time than are taking public transit.

    More numerous will be those who work at home part time. Nearly 29 million Americans telecommute at least once a month, according to WorldatWork, a nonprofit consultancy. At many companies — IBM, Sun Microsystems and AT&T among them — upward of 30% of their employees work from home. In some regions, such as the San Francisco Bay Area and Los Angeles, almost one in 10 workers are part-time telecommuters, according to a 2004 study done by Resources for the Future, a Washington-based think tank.

    Continuing high energy prices will likely change the nation’s geography, but not in ways some urban theorists are predicting. Rather than cramming more people and families into cities, they may instead foster a more dispersed, diverse archipelago of self-sufficient communities. From here, that looks like a far more pleasant scenario not only for suburban and exurbanites but for urban dwellers who don’t want to live under dense conditions reminiscent of 19th century industrial cities or the teeming metropolises of the contemporary Third World.

    Joel Kotkin is a presidential fellow in urban futures at Chapman University and executive editor of NewGeography.com

  • Commuting Suicide — the District of Columbia wants to be a residential suburb

    The Washington Post’s recent article about how the District government is making plans to make the city “less-welcoming to suburban cars” is one more example of suicidal behavior that the city is known for.

    Unfortunately, other cities are thinking similarly. In the plan, “City officials say that the moves are part of a policy of putting the needs of its residents and businesses before those of suburban commuters and that they are trying to create a walkable, bikeable, transit-oriented metropolis.” Apparently Washington has decided to become a bedroom suburb. Newsflash: even those don’t exist anymore – much less in the center of a metropolitan region of over five million.

    It is hard to believe that the District could consciously make the city less welcoming to vehicles than it already is – with potholes on every block and roads like I-295 right out of the 1930s with design features for the tin lizzie, or New York Avenue that says “Welcome to your Nation’s Capitol” with neglect apparent on every block. Maybe because they cannot fix those things they decided to turn it into a virtue at least among some segments of the society.

    You would think the District would have noticed that more of their own citizens get to work by car than by transit and about 45 percent of those riding transit are on the roads they want to make worse. This is just an extension of the District’s perennial search for revenue with a tortured way to get to a commuter tax that has been around for decades.

    All it would take is a few minutes on the back of an envelope to recognize how important commuters are to the city. First answer would be a simple thought experiment – would the city be better off with no suburban commuters or with what they have now? Someone in the District government could do a small calculation of the amount of office building space, with the attendant real estate taxes they generate, the restaurants, shops and services, the parking garages and the revenue they earn, the taxes they pay, and the District workers they support, to recognize that the benefits to the City per thousand commuters far exceeds the costs. Without the suburbs even its beloved Metro wouldn’t exist.

    More importantly, it shows that the District once again has failed to recognize its responsibility as the nation’s capitol. Those responsibilities are really not that terribly different from other center cities. This is part of a looming public policy conflict of national proportions. As cities adopt the new mantra of “metro mobility” – which is code for an attack on autos and an assumption that transit needs can be met by walking, biking and mass transit – they only address trips under five miles. This completely neglects the responsibility that every city and metropolitan region in the country has, much less the nation’s capitol, to meet the needs of interstate commerce – whether through access to ports or to major rail or highway routes.

    This is not optional. An area cannot opt out of that obligation. If all areas of the Baltimore-Washington metropolitan area operated that way, rather than a great region comprised of dozens of counties it would be a series of hamlets adjacent to each other with the obvious decline in market power and productivity that entails.

    The great challenge to the nation in the next few years will be providing access to those workers needed to replace the aging baby boom generation. We will need to expand the commuter market-sheds around our cities not contract them. Congressman Moran got it right, providing a sense of scale when he told reporter Eric M. Weiss, “U.S. Rep. James P. Moran Jr. (D-Va.) said … the city should be careful not to chase people away. Like the District, Old Town Alexandria would be a nicer place without all the cars, he said. But there is an economic component to be considered, he said, and people in cars represent customers for restaurants and shops.”

    He also said be careful what you wish for… For a city that lost 180,000 people over the last 30 years the District should listen to wiser heads.

  • Moving from the Cities to the Suburbs… and Beyond

    The current concern over soaring gas prices has raised serious questions about the sustainability of what we commonly consider “the American dream”. Some urban boosters and environmentalists seem positively giddy about the prospects that suburbanites, reeling under the impact of high-energy prices, will soon be forced to give up their cars, backyards and highly regarded privacy for the pleasures of crowded multi-family homes and commutes on packed public transit to jobs downtown.

    This is part of a profoundly nostalgic notion that we can return to the 19th Century idyll .It is a kind of dream world where everyone walks on bustling streets, greeting their neighbors who sit on the front porch or hang out on a brownstone stoop. Of course, any serious student of history knows that life in urban America was hardly so idyllic — with families of five or more packed into tiny three-room apartments in neighborhoods often characterized by gangs, unsanitary conditions and limited economic opportunities.

    One generally does not expect newspaper reporters to know, much less understand history. However, it would be nice if they bothered to look even at the recent facts. Yet to read The New York Times, the Washington Post and even The Wall Street Journal, you would think there is a mass movement out of automobiles into mass transit. Yet, in reality, they rarely note that the decline in driving is more than 30 times the increase in transit ridership.

    This is not to deny that transit ridership, after decades of relative decline, is rising, but statistically it remains relatively insignificant. That is because transit’s market share, outside New York, is barely one percent. However, why shouldn’t people take transit if it is a viable alternative to the car? The problem is that how we live, work and shop in most places simply does not work with transit; other trends, like a shift to cars that are more efficient, telecommuting and working closer to home all seem far more likely to shape our future transportation pattern.

    But where the really far off is with respect to demographic trends — where people are moving. Readers are continuously misled about the imagined return of people from the suburbs to the city. The claim is that this has being going on since before energy prices really spiked but has become even more pronounced now.

    The demographic reality is quite at odds with these assertions, even now. For one thing suburbanization never was principally about moving from cities to suburbs, it was more about moving from small town and rural areas to the suburbs. Even in St. Louis, which has lost more of its population than any city since the Romans sacked Carthage, most new suburban residents were not from the city.

    More critically, an examination of metropolitan county domestic migration data from 2000 to 2007 simply fails to show any demonstrable back-to-the-city movement. We examined domestic migration in 47 metropolitan areas of the nation with more than 1,000,000 population (four metropolitan areas were excluded, see file). Here is what the data show:

    • Core counties of metropolitan areas continue to lose domestic migrants and have done so every year of this decade. There have been ups and downs, but in 2006-2007, more than 500,000 people moved out of core counties. Every year in the decade, from 34 to 39 of the 47 core counties have lost domestic migrants. In 2006-2007, 37 core counties lost domestic migrants.
    • Suburban counties of metropolitan areas continue to gain domestic migrants and have done so every year of this decade. The trend has been generally downward, with more than a net 400,000 migration gain in 2000-2001, falling to a gain of 180,000 in 2006-2007. Every year in the decade, from suburban counties in 33 to 40 of the 47 metropolitan areas have gained domestic migrants. In 2006-2007, suburban domestic migration gains occurred in 33 metropolitan areas.
    • Domestic migration was greater (or losses were lower) in the suburban counties of 39 of the 47 metropolitan areas in 2006-2007. During the decade, this figure has ranged from 38 to 42.

    The decline in domestic migration to the suburbs, however, does not suggest that people are moving back to the city. On the contrary, it may suggest even greater decentralization as people move from the suburbs, as well as core cities, of major metropolitan areas to smaller urban areas and perhaps even rural areas. Perhaps it is being made possible by advances in information technology and telecommuting. To some degree, it is people “voting with their feet” often due to high housing prices, failing schools and congested conditions even in suburbs of large metropolitan centers.

    Basically, from a statistical point of view, there is simply no hard evidence of any material movement of people from suburbs to cities. Between 2000 and 2007, millions of people moved from the most expensive housing markets to more affordable markets — in many times prices made worse by land use policies commonly imposed in some areas.

    The reality is that people are adaptable to changing conditions. They will work to preserve the lifestyles they prefer. They will buy more fuel efficient cars; they will work and recreate closer to home. A decade from now, we will likely find that the reports of suburban demise will be greatly exaggerated once again.