New Geography

Tag: middle class

  • California’s Green Bantustans

    One of the core barriers to economic prosperity in California is the price of housing. But it doesn’t have to be this way. Policies designed to stifle the ability to develop land are based on flawed premises. These policies prevail because they are backed by environmentalists, and, most importantly, because they have played into the agenda of crony capitalists, Wall Street financiers, and public sector unions. But while the elites have benefit, ordinary working families have been condemned to pay extreme prices in mortgages, property taxes, or rents, to live in confined, unhealthy, ultra high-density neighborhoods. It is reminiscent of apartheid South Africa, but instead of racial superiority as the supposed moral justification, environmentalism is the religion of the day. The result is identical.

    Earlier this month an economist writing for the American Enterprise Institute, Mark J. Perry, published a chart proving that over the past four years, more new homes were built in one city, Houston Texas, than in the entire state of California. We republished Perry’s article earlier this week, “California vs. Texas in one chart.” The population of greater Houston is 6.3 million people. The population of California is 38.4 million people. California, with six times as many people as Houston, built fewer homes.

    And when there’s a shortage, prices rise. The median home price in Houston is $184,000. The median price of a home in Los Angeles is $530,000, nearly three times as much as a home in Houston. The median price of a home in San Francisco is $843,000, nearly five times as much as home in Houston. What is the reason for this? There may be a shortage of homes, but there is no shortage of land in California, a state of 163,000 square miles containing vast expanses of open space. What happened?

    You can argue that San Francisco and Los Angeles are hemmed in by ocean and mountains, respectively, but that really doesn’t answer the question. In most cases, these cities can expand along endless freeway corridors to the north, south, and east, if not west, and new urban centers can arise along these corridors to attract jobs. But they don’t, and the reason for this are the so-called “smart growth” policies. In an interesting report entitled “America’s Emerging Housing Crisis,” Joel Kotkin calls this policy “urban containment.” And along with urban containment, comes downsizing. From another critic of smart growth/urban containment, economist Thomas Sowell, here’s a description of what downsizing means in the San Francisco Bay Area suburb Palo Alto:

    “The house is for sale at $1,498,000. It is a 1,010 square foot bungalow with two bedrooms, one bath and a garage. Although the announcement does not mention it, this bungalow is located near a commuter railroad line, with trains passing regularly throughout the day. The second house has 1,200 square feet and was listed for $1.3 million. Intense competition for the house drove the sale price to $1.7 million. The third, with 1,292 square feet (120 square meters) and built in 1895 is on the market for $2.3 million.”

    And as Sowell points out, there are vast rolling foothills immediately west of Palo Alto that are completely empty – the beneficiaries of urban containment.

    The reason for all of this ostensibly is to preserve open space. This is a worthy goal when kept in perspective. But in California, NO open space is considered immediately acceptable for development. There are hundreds of square miles of rolling foothills on the east slopes of the Mt. Hamilton range that are virtually empty. With reasonable freeway improvements, residents there could commute to points throughout the Silicon Valley in 30-60 minutes. But entrepreneurs have spent millions of dollars and decades of efforts to develop this land, and there is always a reason their projects are held up.

    The misanthropic cruelty of these polices can be illustrated by the following two photographs. The first one is from Soweto, a notorious shantytown that was once one of the most chilling warehouses for human beings in the world, during the era of apartheid in South Africa. The second one is from a suburb in North Sacramento. The scale is identical. Needless to say, the quality of the homes in Sacramento is better, but isn’t it telling that the environmentally enlightened planners in this California city didn’t think a homeowner needed any more dirt to call their own than the Afrikaners deigned to allocate to the oppressed blacks of South Africa?

    The Racist Bantustan

    201402_Soweto-500px


    Soweto, South Africa  –  40′ x 80′ lots, single family dwellings

    When you view these two studies in urban containment, consider what a person who wants to install a toilet, or add a window, or remodel their kitchen may have to go through, today in South Africa, vs. today in Sacramento. Rest assured the ability to improve one’s circumstances in Soweto would be a lot easier than in Sacramento. In Sacramento, just acquiring the permits would probably cost more time and money than doing the entire job in Soweto. And the price of these lovely, environmentally correct, smart-growth havens in Sacramento? According to Zillow, they are currently selling for right around $250,000, more than five times the median household income in that city.

    The Environmentalist Bantustan

    201402_Sacramento-500px


    Sacramento, California  –  40′ x 80′ lots, single family dwellings

    When you increase supply you lower prices, and homes are no exception. The idea that there isn’t enough land in California to develop abundant and competitively priced housing is preposterous. According to the American Farmland Trust, of California’s 163,000 square miles, there are 25,000 square miles of grazing land and 42,000 square miles of agricultural land; of that, 14,000 square miles are prime agricultural land. Think about this. You could put 10 million new residents into homes, four per household, on half-acre lots, and you would only consume 1,953 square miles. If you built those homes on the best prime agricultural land California’s got, you would only use up 14% of it. If you scattered those homes among all of California’s farmland and grazing land – which is far more likely – you would only use up 3% of it. Three percent loss of agricultural land, to allow ten million people to live on half-acre lots!

    And what of these lots in North Sacramento? What of these homes that cost a quarter-million each, five times the median household income? They sit thirteen per acre. Not even enough room in the yard for a trampoline.

    There is a reason to belabor these points, this simple algebra. Because the notion that we have to engage in urban containment is a cruel, entirely unfounded, self-serving lie. You may examine this question of development in any context you wish, and the lie remains intact. If there is an energy shortage, then develop California’s shale reserves. If fracking shale is unacceptable, then drill for natural gas in the Santa Barbara channel. If all fossil fuel is unacceptable, then build nuclear power stations in the geologically stable areas in California’s interior. If there is a water shortage, than build high dams. If high dams are forbidden, then develop aquifer storage to collect runoff. Or desalinate seawater off the Southern California coast. Or recycle sewage. Or let rice farmers sell their allotments. There are answers to every question.

    Environmentalists generate an avalanche of studies, however, that in effect demonize all development, everywhere. The values of environmentalism are important, but if it weren’t for the trillions to be made by trial lawyers, academic careerists, government bureaucrats and their union patrons, crony green capitalist oligarchs, and government pension fund managers and their partners in the hedge funds whose portfolio asset appreciation depends on artificially elevated prices, environmentalism would be reined in. If it weren’t for opportunists following this trillion dollar opportunity, environmentalist values would be kept in their proper perspective.

    The Californians who are hurt by urban containment are not the wealthy elites who find it comforting to believe and lucrative to propagate the enabling big lie. The victims are the underprivileged, the immigrants, the minority communities, retirees who collect Social Security, low wage earners and the disappearing middle class. Anyone who aspires to improve their circumstances can move to Houston and buy a home with relative ease, but in California, they have to struggle for shelter, endlessly, needlessly – contained and allegedly environmentally correct.

    Ed Ring is the executive director of the California Policy Center.

  • Reversing American Decline

    Across broad ideological lines, Americans now foresee a dismal, downwardly mobile future for the country’s middle and working classes. While previous generations generally did far better than their predecessors, those in the current one, outside the very rich, are locked in a struggle to carve out the economic opportunities and access to property that had become accepted norms here over the past century.

    This deep-seated social change raises a profound dilemma for business: Either the private sector must find a way to boost economic opportunity, or political pressure seems likely to impose policies that will order redistribution from above. It is doubtful the majority of Americans will continue to support an economic system that seems to benefit only a relative few. Looking at our unequal landscape, one journalist recently asked: “Are the bread riots finally coming?”

    By 2020, according to the Economic Policy Institute, almost 30% of American workers are expected to hold low-wage jobs, with earnings that would put them below the poverty line to support a family of four. The combination of high debt and low wages has some projections suggesting millennials may have to work until their early 70s.

    But our new pessimism and widening class divide stems not only from the concentration of wealth and power, but from the persistence of weak economic growth.

    Neo-populist groups on the left and the right have risen to employ political pressure to try and assure a decent quality of life. Ideologically robust liberals, like New York Mayor Bill de Blasio, have emerged as national symbols of a movement in which cities have pushed strong moves like a $15 minimum wage (Seattle) and benefits for workers. Ironically, these are often the same places where wealth is most intensely concentrated and where the middle class has shrunk as a newly dominant, Obama-aligned Clerisy of public employee unions, government officials, academics and artists has gained the preponderance of political power.

    The same sense of limited opportunity that drives the new progressives also motivates the popularity of libertarian and Tea Party activism on the right. Instead of state intervention, these groups have been attracted to the notion that removing barriers to economic growth will increase social mobility more effectively than redistribution by political fiat.

    But these economic arguments that could generate more widespread support have been married with increasingly unpopular, often backward-looking social agendas that have allowed the Clerisy to portray them as fringe movements.

    This has allowed Obama, de Blasio and others shape a new conversation centered on inequality, rather than growth. Oddly enough, it’s a model that relies on Europe’s example even as the continent’s own economic prospects appear dismal, and mainstream political parties there are registering their lowest levels of popular support in decades.

    Though it can help some in the short run, there is little reason to think that more redistribution by the state would improve material conditions over the long term for our working and middle classes, let alone expand them. Rather, it might end up expanding our underclass of technological obsolete and economically superfluous dependents. The 50-year War on Poverty, for example, has achieved few gains since the 1960s despite fortunes spent. Instead, the only significant gains in poverty reduction, at least among those working, have come when both the economy and the job market expand, as they did during the Reagan and Clinton eras.

    Clearly, as both those Presidents recognized, the best antidote to poverty remains a robust job market.

    Yet even this progress has not helped the poorest of the poor, many of whom are marginally, if at all, connected to the workplace. Since 1980, the percentage of people living in “deep poverty”-with an income 50% below the official poverty line — has expanded dramatically. Despite now spending $750 billion annually on welfare programs, up 30% since 2008, a record 46 million Americans were in poverty in 2012.

    It is possible that, as Franklin Roosevelt warned, a system of unearned payments, no matter how well intended, can serve as “a narcotic, a subtle destroyer of the human spirit” and reduce incentives for recipients to better their own lives.

    The activist welfare-based philosophy, following the European model, would likely include not only historically poor populations, but part-time workers, perpetual students, and service employees living hand to mouth, who can make ends meet largely only if taxpayers underwrite their housing, transportation and other necessities. This trend towards an expansive welfare regime could be bolstered by our falling rates of labor participation — now at its lowest level in at least 25 years, and showing no signs of an immediate turnaround.

    And the European model shows little evidence of the benefits of redistribution given the persistently high rates of unemployment, particularly among the young, across most of the EU; indeed much of the continent’s youth are widely described as a “lost generation.” Pervasive inequality and limited social mobility have been well-documented in larger European countries, including France, which has one of the world’s most evolved welfare states. It is even true in Scandinavia, often held up as the ultimate exemplar of egalitarianism, but where the gap between the wealthy and other classes have increased in Sweden four times more rapidly than in the United States over the past 15 years.

    To be sure, progressive, or even ostensibly socialist approaches can ameliorate the worst impact of economic decline on lower-income people. But under left-wing governments — Socialists in France, New Labour in Britain and the Obama Administration in the U.S. — class chasms have increased markedly under leaders who insist their policies will reduce inequality. Much the same has occurred in countries with more conservative approaches.

    In the absence of a focus on growing economies more rapidly and broadly, both political philosophies fall short.

    But maintaining the prospect of upward mobility is central to the very idea of America. For generations, the surplus working class populations of the world have flocked here in search of opportunities unavailable in their home countries. In contrast, there remain few places for America’s aspirational classes to go.

    Fortunately, the capitalist system, particularly under democratic control, allows for the possibility of reform. Take Great Britain, the homeland of the industrial revolution. In response to mass poverty and serious public health challenges during the 19th century, social reform movements led by the clergy and a rising professional class organized to address the most obvious defects caused by economic change. It is one of history’s great ironies that at the very time that Karl Marx was composing Das Kapital in the library at the British museum, life was rapidly improving for the British working class. Far from having “exhausted its resources” and precipitating all-out class war, the inequality so evident in mid-19th Century Britain began to narrow through natural economic forces and the growing power of working-class organizations. The working-class revolution in Britain, which Friedrich Engels insisted “must come,” never did.

    Similarly, the Depression, brought on by what Keynes called “a crisis of abundance,” was addressed more by measures to spur mass demand than relying on redistribution. The New Deal, and then the Second World War, expanded government support for public works, education and housing, as well as infrastructure and research and development. Programs enacted then and after the war also encouraged widespread property ownership.

    This state expansion was generally aimed at increasing economic opportunity-for example, by developing technologies that could stimulate new industrial sectors, new firms, and create new wealth. Today’s, on the other hand, is simply transferring income from one group to another.

    Whatever criticisms can be made of mid-century America, during this period the nation transformed what had been a strongly unequal country into one where the blessings of prosperity were more broadly shared. In the 1950s, the bottom 90% held two-thirds of the wealth here. Today they barely claim half.

    Sparking beneficial economic growth requires a shift in priorities, and thus presents a challenge to the new class order dominated by Wall Street, the tech oligarchy and their partners in the Clerisy. It is not enough merely to blame the so-called 1%, but to shift the benefits of growth away from the current hegemons, notably in the very narrow finance and high-tech sectors, and towards those involved in a broad array of productive enterprise.

    The American economy’s capacity for renewal remains much greater than widely believed. Rather than a permanent condition of slow growth, the United States could be on the cusp of another period of broad-based expansion, spurred in part by its rapidly growing natural gas and oil production — a once-in-a-lifetime opportunity as cheap and abundant natural gas is luring investment from manufacturers from Europe and Asia, and providing good-paying American jobs.

    This, along with growth in manufacturing, could spark better times for the middle class, as would the re-igniting of single-family home construction.

    If America really wants to confront its growing class divide, it needs to spark such broad-based economic growth, rather than simply feathering the nests of the already rich, privileged and well-connected.

    This story originally appeared at New York Daily News..

    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.

    Unemployed photo by BigStockPhoto.com.

  • Connecting Citizens to Economic Opportunity

    I recently received an email from the folks behind the Meetings of the Minds conference asking if I’d participate in a group blogging event they were doing by writing a post on the topic of “How can cities better connect all their residents to economic opportunity?” As this is a topic I personally care quite a bit about, I was happy to do so. They will be linking to responses to other people’s answers should you be interested.

    Firstly, what is economic opportunity? Simply put, I’ll define it as a) a job, b) a better job, or c) an opportunity to start a business. There are a number of possible avenues one could suggest for making one of these outcomes more likely: better education, better transportation, migration assistance (which I’ve written about before), and more.

    But many of those are difficult to implement, uncertain in their result, long term to realize benefits, and require money that we don’t have. That doesn’t mean we shouldn’t tackle them, but I can’t help but ask: what can we do that would be relatively fast to implement, provide jobs and entrepreneurship opportunities where people already are (particularly those who are lacking a decent job today), and which has a relatively high likelihood of payoff?

    In my view overwhelmingly the number one thing we can do that fits this is to pare back the local regulatory burden on small business. I say local because affecting federal or state regulations involves making change at levels of government that are hard to move. Local regulations are mostly within the control of local political leaders. Changing them doesn’t require spending a lot of money. In fact, eliminating regulations might actually save the government money. Change a regulation and it’s changed immediately, and without a lag. It seems intuitive that lighter touch regulation would help small businesses launch and thus have some benefit.

    There always are possibilities of unforeseen problems, of course, which should be watched for. And actually, significant improvement can be made without implementing some “anything goes” environment. The goal isn’t necessarily to have low standards. Rather, we can have high standards. But they have to operate objectively, transparently, and predictably, and in a timely fashion. And they have to be things businesses can realistically be expected to do without seeking special exemptions.

    Why focus on small businesses? Because starting a small business is fastest path to the middle class in many of our cities today, cities that are often places where the middle class is getting killed. As the NYT recently put it, the King can’t even afford Queens anymore. What we’re seeing in cities is a bifurcated economy with lots of high end jobs and lots of low end service class jobs, but shrinking middle class employment prospects. Major large scale manufacturers aren’t coming back, so the idea of traditional work at the plant is largely gone.

    So what’s left in the middle? There are basically three things: 1) government employment (which is shrinking because we’re in a fiscal squeeze 2) skilled trades (a viable path more people probably should follow, but sometimes with its own limits such as having a connection to get you into the union) 3) start a business to create your own opportunity.

    Regulatory change is targeted right at #3. Let’s make it easy for people to start businesses and support the best path to the middle class we have. And also the best path to creating traditional employment in city neighborhoods where high end banks and internet companies and such aren’t setting up shop. Many of these neighborhoods have seen their job base obliterated. By reducing the barriers to entry and success in business, we are helping people create their own jobs – and maybe to create jobs for others down the road.

    There’s only one major challenge to local small business regulatory relief – political will. Change isn’t necessarily financially difficult, it’s politically difficult. But how many mayors are championing small business? Next to none. Compare how much effort big city mayors put into improving their business climate for traditional small businesses vs. say select segments like tech, and you see right away where the priorities are.

    The stories of the insane difficulties small businesses have to go through in places like New York, Chicago, and San Francisco are incredible and widely known but rarely feature in the urbanist discourse unless it’s a hip establishment like a frozen custard stand, a high end shared kitchen, etc. When even a guy like Matthew Yglesias experiences pain trying to set up his one man shop, imagine how hard it must be for everybody else? We have no clue what lower income, minority, and immigrant entrepreneurs must be going through to pursue their dream of starting a business.

    What we need is for America’s mayors to stand up and make it a priority to start whacking away at this stuff. Waive fees for the first year for most permits (easy to do by charging in arrears). So many small businesses don’t even make it a year. Let’s give them at least that long to survive before we start socking them. Create a single point of contact for permit checklists and safe harbor protections for businesses that do what this office tells them. A true one stop shop would be best, but that’s likely harder than we think given the different agencies involved, but why not start by at least having someone who authoritatively tells you want agencies you do need to talk to and which permits you do need? Price permits at the cost of administering the permitting and compliance system. Hold management accountable for timely actioning. Use electronic forms wherever possible. The list goes on.

    Part of this is simply resisting the urge to pile on one regulation after the next. For example, a recent urbanist darling is banning plastic bags. The impact on the environment will be almost precisely zero, but it’s just one more thing businesses have to deal with. As Rhode Island Builder’s Association Executive Director John Marcantonio put it, “It’s not one specific regulation, it’s death by a thousand paper cuts.” Before adding on a new regulation, we should be sure there’s an absolute, bona fide need to. Because if we don’t, then over time we’ll accrete an absolute mess that makes it way too difficult to do things we actually want people to do.

    I’d go so far as to that that if you’re a mayor who isn’t putting a serious focus on improving the regulatory climate for small business, you’re not serious about retaining or building a middle class and stopping the development of a two tier economy. Especially in big cities this is a huge, well known need. There’s no excuse for mayors of either conservative or progressive bents not putting a major push behind making it happen.

    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.

    Self employment photo by BigStockPhoto.com.

  • Thinking About Housing in the Northwest

    With one of the most successful economies in the nation, the real estate news in the Pacific Northwest is positive and gives hope for a housing sector recovery, albeit at different rates in different markets. CNNMoney reports that from the third quarter in 2012 to the third quarter in 2013, the median home price in the Seattle-Bellevue and Everett area increased by 13.7%. The forecast for changes from the third quarter in 2013 to the third quarter in 2014 is another 5.2%. Tacoma’s (Pierce County) housing prices did not grow as quickly, with an increase of 9.3% from 2012 to 2013, but it is expected to witness a sharper increase in 2014, with a healthy 8.6% change from the third quarter of 2013 to 2014. 

    As rosy as the real estate picture is, we should also remember that in the second quarter of 2013, as housing values began to climb in both markets, median family incomes were already too low compared to median home prices. In Seattle, the ratio of median home prices to median family income was 4.7, and in Tacoma it was 3.6. That made Tacoma a relatively affordable city. However, an expected increase of 8.6% in home values, without a corresponding increase in median family incomes will not do much for its affordability.

    Without a major change in its employment structure that might lead to higher incomes for current and future residents of Tacoma, the differential in home prices could make Tacoma a residential destination for Seattle employees finding this city comparatively more affordable. Living half an hour from work, but paying significantly less for housing, is a great incentive, especially for young, single or double income, and childless families. For them, a two-bedroom condo with a view of Commencement Bay may do the job. For Tacoma residents whose median family income is about $20,000 less than their Seattle counterparts, rising home values may prove to be a challenge that cannot be easily overcome without a higher number of well-paying jobs that keep pace with rising home values.

    Regional patterns of housing affordability

    It is no longer news to anyone that most unaffordable cities rely on their less costly neighbors to house their working populations. The city of Los Angeles relies on the vast sprawl of its own suburbs and the Inland Empire. San Francisco does the same by having people commute from the larger urban region, all the way from the San Joaquin Valley.

    The relationship between Seattle and other cities in King and Pierce Counties already follows the same script. Morning commutes into Seattle and afternoon rush hour traffic heading out of Seattle do not require statistics. The numbers are felt by anyone driving during those hours. However, two maps will help paint a vivid picture of the regional urban dynamics created by the unholy triangle of housing market price differentials, economic development patterns, and the resulting spatial mismatch between home and work places. 

    Maps for median housing values and commuting patterns in King and Pierce Counties clearly show that a good number of people who work in unaffordable regions of King County (including Seattle) rely on more affordable housing elsewhere. As the map of commuting patterns illustrates, for Pierce County, this starts right at the county border, where housing prices are lower (compared to median household incomes). This has already turned certain portions of Pierce County into bedroom communities, feeding economic growth elsewhere. In other words, job-rich areas are resolving their housing problems by pushing their employed populations to other areas, where home prices are more affordable. However, will the growth of housing demand in areas outside employment centers translate to increased housing values in previously affordable regions and push long-time residents out of the housing market?

    To answer this question, we need to engage in a more detailed level of analysis.


    Micro-geographies of affordability

    In order to get a better sense of housing affordability patterns, we can rely on a simple indicator called median multiples (the ratio of median housing value to median household income). While this measure has its critics, it is easily understandable. The basic premise is that when median housing value exceeds median household income more than three fold, an area becomes unaffordable.

    A few years ago, Wendell Cox used this method to identify the least affordable cities in the nation. He used the following table to classify various cities in the U.S.:

    Demographia
    Housing Affordability Ratings

    Rating

    Median Multiple

    Severely Unaffordable

    5.1 & Over

    Seriously Unaffordable

    4.1 to 5.0

    Moderately Unaffordable

    3.1 to 4.0

    Affordable

    3.0 or Less

    Median Multiple: Median House Price divided by Median Household Income

     

    The map of median multiples for King and Pierce Counties reveals a pattern of housing affordability that indicates a looming problem as the housing market recovers. As of Census 2012, almost all Seattle and Bellevue areas were unaffordable, with median multiples exceeding 5. Comparatively speaking, Tacoma has had more affordable housing areas (with more census tracts with median multiples ranging from 3 to 4).  Between Tacoma and Seattle, areas such as Federal Way have more affordable housing for the income levels found there. Tacoma’s North East community, adjacent to Federal Way, has higher housing values matching residents’ income levels. Given the commuting patterns, this region is clearly home to many who work elsewhere, earn better incomes, and spend a smaller portion of it on their homes.


    In some areas, where median multiples exceed 5, current residents may have purchased their houses when prices were lower. In other words, at one point in time, the median multiple had a lower value. Under such conditions, residents have accumulated substantial equities, allowing them to sell in a more expensive market. However, the next group of occupants will need substantially higher incomes to afford these houses. With the potential arrival of a sellers’ market, any transition in the composition of homeowners will also coincide with a shift to higher socioeconomic status.  

    Given the overall housing affordability patterns, it is clear that with the looming hike in home prices, the last of the semi-affordable housing pockets in the region extending from Seattle to Tacoma could vanish quickly. Clearly, the well-paid employees in King County could choose to live in Pierce County, enjoy the views, but struggle with traffic up and down I-5. They could even benefit from a publicly funded transportation system. But this won’t resolve the growing traffic and the emerging spatial mismatch between housing and employment. At this point the entire urban region from Seattle to Tacoma should focus on job-housing balance, where the quantity and cost of housing are comparable to employment volume and average salaries paid. To be truly ‘green,’ decision makers need to think regionally. Passing housing or employment problems to neighboring cities is not the best approach to sustainability.

    As for Tacoma, like any other urban region on the fringes of a major metropolitan area, the city has a few options moving forward. First, it could act as a satellite city and build more houses for people who work in the larger urban region. Second, it could imagine itself as a major urban center with little interest in being a “second city.” In that case, it needs to focus on economic development, bringing more well-paying jobs that are suitable for its current and future residents, and build houses that are affordable for the types of incomes generated in the area. This strategy requires coordination between housing and economic development that reduces the spatial mismatch between housing and employment and improves the job-housing balance. This will help both housing and transportation conditions. That will also keep Tacoma affordable and make it unpretentiously ‘green.’

    The National Association of Home Builders ranks Tacoma 103rd for housing affordability on a list of 224 cities. Spokane ranks 62 and Seattle 202 on the same list. Tacoma should aspire to appear on the list of the top 50 most affordable cities by 2020, and be recognized for the quality of life and employment opportunities it offers to current and future residents.

    Ali Modarres is the Director of Urban Studies at University of Washington Tacoma.  He is a geographer and landscape architect, specializing in urban planning and policy. He has written extensively about social geography, transportation planning, and urban development issues in American cities.

  • Special Report: America’s Emerging Housing Crisis

    This is the executive summary from a new report, America’s Emerging Housing Crisis, published by National Community Renaissance, and authored by Joel Kotkin and Wendell Cox. Download the report and the supplement report below.

    From the earliest settlement of the country, Americans have looked at their homes and apartments as critical elements of their own aspirations for a better life. In good times, when construction is strong, the opportunities for better, more spacious and congenial housing—whether for buyers or renters—tends to increase. But in harsher conditions, when there has been less new construction, people have been forced to accept overcrowded, overpriced and less desirable accommodations.

    Today, more than any time, arguably, since the Great Depression, the prospects for improved housing outcomes are dimming for both the American middle and working classes. Not only is ownership dropping to twenty-year lows, there is a growing gap between the amount of new housing being built and the growth of demand.

    Our still-youthful demographics are catching up with us. After a recession generated drought, household formation is again on the rise, notes a recent study by the Harvard Joint Center for Housing Studies. In some markets, there isn’t an adequate supply of affordable housing for the working and middle classes. Overall, according to the research firm Zelman and Associates, the country is building barely one-third the number needed to meet the growth in households. Overall inventories of homes for sale are at the lowest level in eight years.

    The groups most likely to be hurt by the shortfall in housing include young families, the poor and renters. These groups include a disproportionate share of minorities, who are more likely to have lower incomes than the population in general. This situation is particularly dire in those parts of the country, such as California, that have imposed strong restrictions on home construction. California’s elaborate regulatory framework and high fees imposed on both single- and multi-family `housing have made much of the state prohibitively expensive. Not surprisingly, the state leads the nation in people who` spend above 30 percent, as well as above 50 percent, of their income on rent.

    Sadly, the nascent recovery in housing could make this situation even more dire. California housing prices are already climbing far faster than the national average, despite little in the way of income growth. This situation could also affect the market for residential housing in other parts of the country, where supply and demand are increasingly out of whack.

    Ultimately, we need to develop a sense of urgency about the growing problem of providing adequate shelter. As a people we have done this many times — with the Homestead Act, and again, after the Second World War, with the creation of affordable “start-up” middle- and working class housing in places like Levittown (Long Island), Lakewood (Los Angeles), the Woodlands (Houston) and smaller subdivisions, as well as large scale cooperative apartment development in places like New York. Government policy should look at opportunities to create housing attractive to young families, which includes some intelligent planning around open space, parks and schools. It is important to ensure that a sufficient supply of affordable housing is allowed throughout metropolitan areas, for all income groups.

    Nothing speaks to the nature of the American future more than housing. If we fail to adequately house the current and future generations, we will be shortchanging our people, and creating the basis for growing impoverishment and poor social outcomes across the country.

    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.

    Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He was appointed to the Amtrak Reform Council to fill the unexpired term of Governor Christine Todd Whitman and has served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

  • Should Middle Class Abandon the American Dream?

    Over the past few years, particularly since the bursting of the housing bubble, there have been increasing calls for middle-class Americans to “scale down” from their beloved private homes and seek a more constrained existence. Among these voices recently was Michael Milken, for whom I have worked and have enormous respect. He suggested Americans would be better off not buying homes and living smaller, for the sake of their own economic situations, families and the environment.

    To some extent, the Great Recession has done much to make downsizing a reality, just as Milken and others propose. Homeownership in America, which peaked in 2002 at nearly 70 percent, dropped, according to the U.S. Census Bureau, to 65 percent in 2013, the lowest level in 15 years. Some of this may be seen as correcting the excesses of the housing bubble, but the trajectory suggests – and many analysts agree – that ownership may continue to fall in years ahead.

    The question now is, do we want Americans to abandon homeownership, leave the less-crowded periphery for congested areas, adopting the chock-a-block lifestyle much as many of their grandparents did? This poses an easier proposition for the ultrarich, who already live far larger than the average American and whose biggest real estate worry more likely involves which pied a terre or country house they want to purchase next.

    This is very different than the reality of the average middle-class family, whose concerns are more prosaic, such as finding room for home offices, deciding how few bathrooms a family can accommodate without armed conflict and if it is even feasible to afford the close-in communities their betters want them to inhabit.

    Unable to play the stock game on the scale of gain like those who invest in private equity, hedge funds or venture capital, for the middle classes the home remains the one place where they can gain equity and, perhaps more importantly, some sense of autonomy. For many, it is the only large investment they can afford, since at least it provides a place to live and offsets the rent that they would have to pay otherwise.

    The recovery has been sweet for the rich, in large part because they have the extra money to invest in stocks. They have 24 percent of their wealth in homes, compared with 40 percent for middle-income families.

    And, since the rich can afford to send their kids to elite schools, where degrees increasingly are the last ones to produce much value at the high end of the job market, to such people, the investment in education urged by Milken may seem like a good bet. Investing more in conventional education, however, is no panacea for many middle-class and working-class families, whose kids are often saddled with debt and attend the second-tier schools whose returns on income are far less attractive, say, than those who can send their kids to Harvard.

    This is not to say that many larger homes seem foolhardy investments. But there are many legitimate reasons why people may need larger spaces. Among the most prominent is the growing tendency for people to work at home – most metro areas have far more telecommuters than transit commuters – as well as the increasing numbers of multigenerational households, which, after falling for decades, have risen from 12 percent of total households to 16 percent since 1980.

    The phenomena of some among the rich calling for the middle class to scale back represents one of the least-attractive aspects of the current gentry liberal ascendency. In one remarkable piece, Dave Zahniser, writing for the LA Weekly, went to the homes of L.A.’s “smart growth” advocates, most of whom want ever more density and multifamily apartments as opposed to houses. And where did they live? Almost all in large houses, often in gated communities, far from any bus line. Zahnhiser’s headline captured the hypocrisy: “Do what we say, not what we do.”

    Cloaked in sensible rhetoric, the current drive to discourage middle-class homeownership really represents a kind of class warfare, albeit unacknowledged, waged by wealthy people upon the middle class, who, the wealthy suggest, should live smaller even as they indulge ever-expanding luxury. Talk about adding insult to injury: Middle-income groups have fared far worse during the recovery than the rich or, in relative terms, the poor.

    Some advocacy for middle-class downsizing is brazenly self-interested. The Wall Streetadvocates of a “rentership” society see a great opportunity for profit as Americans are deprived of their aspirations by the weak economy. As the dream of some autonomy fades, more families are forced to become renters in apartments or houses that such hedge funds as Blackstone have collected from distressed former owners.

    In the process, a huge portion of the population is being transformed from property owners to renting serfs; money that might have gone to building a family nest egg ends up paying the mortgages for the investor class. In this neofeudalist landscape, landlords replace owner-occupants, perhaps for as long as the next generation.

    “There is the possibility that Wall Street and the banks and the affluent 1 percent stand to gain the most from this,” said Jack McCabe, a real estate consultant based in Deerfield Beach, Fla. “Meanwhile, lower-income Americans will lose their opportunity for the American Dream of building wealth through owning a home.”

    Other wealthy folks – notably some in Hollywood and Silicon Valley – also support a California planning regime that makes difficult the purchasing and construction of family-size homes, largely as a means to reducing the dreaded human “carbon footprint.” Yet they, too, are often unconsciously hypocritical, as many of them live in palatial houses, and often fly on private jets, one of the quickest ways to boost one’s carbon emissions. Google’s top executives, among the most reliable allies of the middle-class-destroying green and urban-planner lobby, famously have a fleet of planes based at San Jose Airport.

    Others, like the environment magazine Grist, embrace a more idealistic vision of a new generation that rarely owns and doesn’t embrace conventional ambitions. They see the current millennial generation, facing limited economic prospects and high housing prices, as “a hero generation,” rejecting the material trap of suburban living and work that engulfed their parents.

    This story originally appeared at The Orange County Register.

    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.

  • Silicon Valley’s Giants Are Just Gilded Age Tycoons in Techno-Utopian Clothes

    Silicon Valley’s biggest names—Google, Apple, Intel and Adobe—reached a settlement today in a contentious $3 billion anti-trust suit brought by workers who accused the tech giants of secretly colluding to not recruit each other’s employees. The workers won, but not much, receiving only a rumored $300 million, a small fraction of the billions the companies might have been forced to pay had they been found guilty in a trial verdict. 

    The criminality that the case exposed in the boardrooms the tech giants, including from revered figures like Steve Jobs who comes off as especially ruthless, should not be jarring to anyone familiar with Silicon Valley.  It may shock much of the media, who have generally genuflected towards these companies, and much of the public, that has been hoodwinked into thinking the Valley oligarchs represent a better kind of plutocrat—but the truth is they are a lot like the old robber barons.

    Starting in the 1980s, a mythology grew that the new tech entrepreneurs represented a new, progressive model that was not animated by conventional business thinking. In contrast to staid old east coast corporations, the new California firms were what futurist Alvin Toffler described as “third wave.” Often dressed in jeans, and not suits, they were seen as inherently less hierarchical and power-hungry as their industrial age predecessors.  

    Silicon Valley executives were not just about making money, but were trying, as they famously claimed, to “change the world.” One popularizing enthusiast, MIT’s Nicholas Negroponte, even suggested that “digital technology” could turn into “a natural force drawing people into greater world harmony.”

    This image has insulated the tech elite from the kind of opprobrium meted out to their rival capitalist icons in other, more traditional industries. In 2011, over 72 percent of Americans had positive feelings about the computer industry as opposed to a mere 30 percent for banking and 20 percent for oil and gas. Even during the occupy protests in 2012, few criticisms were hurled by the “screwed generation” at tech titans. Indeed, Steve Jobs, a .000001 per center worth $7 billion, the ferocious competitor who threatened “war” against Google if they did not cooperate in his wage fixing scheme, was openly mourned by protestors when news spread that he had passed away.

    But the collusion case amply proves what has been clear to those watching the industry: greed and the desire to control drives tech entrepreneurs as much as any other business group. The Valley is great at talking progressive but not so much in practice. In the very place where private opposition to gay marriage is enough to get a tech executive fired, the big firms have shown a very weak record of hiring minorities and women. And not surprisingly, firms also are notoriously skittish about revealing their diversity data. A San Jose Mercury report found that the numbers of Hispanics and African Americans employees in Silicon Valley tech companies, already far below their percentage in the population, has actually been declining in recent years. Hispanics, roughly one quarter of the local labor force, account for barely five percent of those working at the Valley’s ten largest companies. The share of women working at the big tech companies – despite the rise of high profile figures in management—has also showed declines.    

    In terms of dealing with “talent,” collusion is not the only way the Valley oligarchs work to keep wages down.  Another technique is the outsourcing of labor to lower paid foreign workers, the so called “techno-coolies.” The tech giants claim that they hire cheap workers overseas because of a critical shortage of skilled computer workers but that doesn’t hold up to serious scrutiny. A 2013 report from the labor-aligned Economic Policy Institute found that the country is producing 50% more IT professionals per year than are being employed. Tech firms, notes EPI, would rather hire “guest workers” who now account for one-third to one half of all new IT job holders, largely to maintain both a lower cost and a more pliant workforce.

    Some of this also reflects a preference for hiring younger employees at the expense of older software and engineering workers, many of whom own homes and have families in the area.  

     “I want to stress the importance of being young and technical,” Facebook’s CEO Mark Zuckerberg said at an event at Stanford University in 2007. “Young people are just smarter. Why are most chess masters under 30? I don’t know. Young people just have simpler lives. We may not own a car. We may not have family. Simplicity in life allows you to focus on what’s important.”

    Of course what’s really “important” to Zuckerberg, like moguls in any time and place, is maximizing profits and raking in money, both for themselves and their investors. The good news for the bosses has been that employees are rarely in the way.  Unlike the aerospace, autos or oil industries, the Valley has faced little pressure from organized labor, which has freed them to hire and fire at their preference.  Tech workers wages, on the other hand, have been restrained both by under the table agreements and the importation of “technocoolies.”

    Rather than being a beacon of a new progressive America, the Valley increasingly epitomizes the gaping class divisions that increasingly characterize contemporary America.  Employees at firms like Facebook and Google enjoy gourmet meals, childcare services, even complimentary house-cleaning to create, as one Google executive put it, “the happiest most productive workplace in the world.” Yet, the largely black and Hispanic lower-end service workers who clean their offices, or provide security, rarely receive health care or even the most basic retirement benefits. Not to mention the often miserable conditions in overseas factories, notably those of Apple.

    It’s critical to understand that the hiring restrictions exposed by Friday’s settlement, reflect only one part of the Valley’s faux progressiveness and real mendacity. These same companies have also been adept at circumventing user privacy and avoiding their tax obligations.

    One might excuse the hagiographies prepared by the Valley’s ever expanding legion of public relations professionals, and their media allies,  but the ugly reality remains. The  Silicon Valley tech firms tend to be  every bit as cutthroat and greedy as any capitalist enterprise before it. We need to finally see the tech moguls not as a superior form of oligarch, but as just the latest in long line whose overweening ambition sometimes needs to be restrained, not just celebrated.

    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.

  • Turn Of The Screwed: Does The GOP Have A Shot At Wooing Disgruntled Millennials?

    Over the past five years, the millennial generation (born after 1983) has been exercising greater influence over the economy, society and politics of the country, a trend that will only grow in the coming years. So far, they’ve leaned Democratic in the voting booth, but could the lousy economic fate of what I’ve dubbed “the screwed generation” lead to a change?

    Just look at these numbers. Since 2008, the percentage of the workforce under 25 has dropped by 13.2%, according to the Bureau of Labor Statistics, while that of people over 55 has risen by 7.6%. Among high school graduates who left school in 2009-11, only 16% had full-time work in 2012, and 22% worked part time although most sought a full-time job.

    These trends are likely to continue and could worsen, according to the U.S. Department of Labor, particularly for workers between 20 and 24. Today even a college degree guarantees increasingly little in terms of social uplift. Tuition debt is nearing $1 trillion; the percentage of 25-year-olds with school debt has risen from 25% in 2004 to close 40% in 2012. Average indebtedness amongst borrowers has grown 70% from $15,000 to nearly $25,000.

    A record one in 10 recent college borrowers has defaulted on their debt, the highest level in a decade. With wages for college graduates on a downward slope, one has to wonder how many more will join them.

    Over 43% of recent graduates who are employed are working at jobs that don’t require a college education, according to a recent report by the Heldrich Center for Workforce Development. Some 16% of bartenders and almost the same percentage of parking attendants had a bachelor’s degree or higher, notes Ohio State economics professor Richard Vedder.

    Besides a tepid economy, the millennials confront paying off huge public debts, much of it due to the generous pensions of boomer public employees. This constitutes what economist Robert Samuelson has labeled “a generational war” in which the young are destined to be losers in the “withering of the affluent society.” As he puts it: “For millions of younger Americans—say, those 40 and under—living better than their parents is a pipe dream. They won’t.”

    Not surprisingly, the young, who are traditionally optimists, are becoming far less so. According to a Rutgers study, 56% of recent high school graduates feel they would not be financially more successful than their parents; only 14% thought they’d do better. College education doesn’t seem to make a difference: 58% of recent graduates feel they won’t do as well as the previous generation. Only 16% thought they’d do better.

    According to Pew Research, up to half of millennials lean Democratic, compared to barely a third who favor the Republicans. The actue generational chronciclers Morley Winograd and Mike Hais suggest that this will continue and that hard times may even strengthen millennial support for what they describe as “economically activist government.” They cite a 2011 Pew poll that found millennials preferred a larger government that provided more services over a smaller one by a 54% to 35% margin. By contrast, 54% of boomers (born 1946-1964) and 59% of the silent generation (born 1925-1945) favored a smaller government.

    Critically, they maintain, these political views are likely to remain in place throughout their lifespans. The “Greatest Generation,” those born before 1925 who grew up during the Depression, never lost their enthusiasm for government.

    But it may be premature for Democrats to presume they have a lock on millennials’ loyalty.

    In 2008, twice as many millennials identified as Democrats or leaned Democratic (58%) as identified with the GOP or leaned Republican (29%), according to Pew. Cut to 2014, and the Democrats’ advantage among millennials has narrowed to 16 percentage points (50% to 34%).

    Although barely a a quarter of those under 35 said they had positive feelings toward the Republican Party in the last Wall Street Journal/NBC News poll, in a poll earlier this year, support for the Democrats has also dropped from roughly half to barely a third. Last year, a majority of 18- to 29-year-olds polled in a Harvard study no longer approved of the president’s performance.

    This suggest that like boomers under Jimmy Carter, who then shifted to Reagan, the millennials are not to be taken for granted. To attract them, though, Republicans will need to change many of their positions.

    Millennials, for example, are far more heavily minority, and descended from recent immigrants; they are likely to be far more permissive on immigration reform than earlier generation. At the same time, they embrace significantly more liberal views on issues like gay marriage and legalization of marijuana than older generations. Republicans right now are not competitive on these issues.

    Some conservatives rest their hopes not on attracting millennial voters but on the possibility that they’ll stay home during the mid-term elections. In 2010, 18- to 24-year-olds turned out at half the rate of the rest of electorate. But this can’t go on forever; the millennial share of the vote, even with poor turnouts, will continue to go up and will eventually overwhelm a party that depends on older voters to prop them up. In 2012 millennials accounted for roughly a quarter of the electorate; by 2020 they will be about 36%.

    Simply put, Republicans have no choice but to engage this population. To do so, they must focus primarily on economic growth, where the Democrats don’t have much to recommend themselves. Issues where the GOP could make up ground include reform for boomer pensions, as well as policies to spark job and income growth.

    To win over a significant share of millennials, Republicans don’t so much need a new Reagan as a program that inspires more confidence in the economic future.

    Although I am not fond of either party, a more competitive political environment among millennials would be useful, not only for conservatives also for the generation itself. As African Americans should have learned by now, being taken for granted does not guarantee better service from the political class. Under the country’s first black president, conditions for African Americans have declined rapidly.

    The evolution of the boomer generation suggests that such a change of fortune could happen. Between 1990 and today, the percentage of boomers identifying with the Democratic Party has dropped from 31% in 1990 to 25%. Much of this stemmed from reaction to the failures of the Carter presidency.

    This suggests that, although the formative years are critical, people do change their views as they age, experience life as adults and, most importantly, become parents. Many may not become Republicans, but could easily shift towards independent status. It may not happen this year, but perhaps later in the decade.

    Over time, even the self-absorbed boomers will have to give way to the needs of the new generation. The challenge for both parties is to develop policies that will allow the millennials to rise as have previous American generations. Whether these ideas come from the right or left seems less important than that the debate be engaged, open and focused more on the future than the past.

    This piece originally appeared in 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 Postfamilia

    Unemployed photo by BigStockPhoto.com.

  • The Spread of ‘Debate is Over’ Syndrome

    The ongoing trial involving journalist Mark Steyn – accused of defaming climate change theorist Michael Mann – reflects an increasingly dangerous tendency among our intellectual classes to embrace homogeneity of viewpoint. Steyn, whose column has appeared for years on these pages, may be alternatingly entertaining or over-the-top obnoxious, but the slander lawsuit against him marks a milestone in what has become a dangerously authoritarian worldview being adopted in academia, the media and large sections of the government bureaucracy.

    Let’s call it “the debate is over” syndrome, referring to a term used most often in relationship with climate change but also by President Barack Obama last week in reference to what remains his contentious, and theoretically reformable, health care plan. Ironically, this shift to certainty now comes increasingly from what passes for the Left in America.

    These are the same people who historically have identified themselves with open-mindedness and the defense of free speech, while conservatives, with some justification, were associated more often with such traits as criminalizing unpopular views – as seen in the 1950s McCarthy era – and embracing canonical bans on all sorts of personal behavior, a tendency still more evident than necessary among some socially minded conservatives.

    But when it comes to authoritarian expression of “true” beliefs, it’s the progressive Left that increasingly seeks to impose orthodoxy. In this rising intellectual order, those who dissent on everything from climate change, the causes of poverty and the definition of marriage, to opposition to abortion are increasingly marginalized and, in some cases, as in the Steyn trial, legally attacked.

    A few days ago, Brendan Eich, CEO of the web browser company Mozilla, resigned under pressure from gay rights groups. Why? Because it was revealed he donated $1,000 to the campaign to pass Proposition 8, California’s since-overturned ballot measure defining marriage as between one man and one woman.

    In many cases, I might agree with some leftist views, say, on gay marriage or the critical nature of income inequality, but liberals should find these intolerant tendencies terrifying and dangerous in a democracy dependent on the free interchange of ideas.

    This shift has been building for decades and follows the increasingly uniform capture of key institutions – universities, the mass media and the bureaucracy – by people holding a set of “acceptable” viewpoints. Ironically, the shift toward a uniform worldview started in the 1960s, in part as a reaction to the excesses of Sen. Joseph McCarthy and the oppressive conformity of the 1950s.

    But what started as liberation and openness has now engendered an ever-more powerful clerisy – an educated class – that seeks to impose particular viewpoints while marginalizing and, in the most-extreme cases, criminalizing, divergent views.

    Today’s clerisy in some ways resembles the clerical First Estate in pre-revolutionary France, which, in the words of the historian Georges Lefebvre, “possessed a control over thought in the interests of the Church and king.” With today’s clerisy, notes essayist Joseph Bottum, “social and political ideas [are] elevated to the status of strange divinities … born of the ancient religious hunger to perceive more in the world than just the give and take of ordinary human beings, but adapted to an age that piously congratulates itself on its escape from many of the strictures of ancient religion.”

    To be sure, there remains a still-potent camp of conservative ideologues, many associated with think tanks, such as the Heritage Foundation, and a host of publications, most notably the media empire controlled by the Murdoch family. But, for the most part, today’s clerisy in media and academia tilts in one basic direction, embracing a fairly uniform set of secular “truths” on issues ranging from the nature of justice, race and gender, to the environment.

    Those who dissent from the “accepted” point of view may not suffer excommunication, burning at the stake or other public rituals of penance, but can expect their work to be vilified or simply ignored. In some bastions of the new clerisy, such as San Francisco, an actress with unsuitable views can be pilloried, and a campaign launched to remove her from a production for supporting a Tea Party candidate.

    Nowhere is this shift more evident than in academia, as evidenced in Mann’s civil action against Steyn. The climate change issue, one of great import and worthy of serious consideration, is now being buried by the seemingly unscientific notion that everyone needs to follow orthodoxy on an issue that – like the nature of God in the Middle Ages – is considered “settled,” and those who do not agree deserve to be pilloried.

    But climate change is just one manifestation of the new authoritarian view in academia. On many college campuses, “speech codes” have become an increasingly popular way to control thought at many campuses. Like medieval dons, our academic worthies concentrate their fire on those whose views – say on social issues – offend the new canon. No surprise, then, as civil libertarian Nat Hentoff notes, that a 2010 survey of 24,000 college students found that barely a third of them thought it “safe to hold unpopular views on campus.”

    This is not terribly surprising, given the lack of intellectual diversity on many campuses. Various studies of political orientation of academics have found liberals outnumber conservatives, from 8-to-1 to 14-to-1. Whether this is a reflection of simply natural preferences of the well-educated or partially blatant discrimination remains arguable,but some research suggests that roughly two of five professors would be less inclined to hire an evangelical or conservative colleague than one more conventionally liberal.

    Political uniformity is certainly in vogue. A remarkable 96 percent of presidential campaign donations from the nation’s Ivy League faculty and staff in 2012 went to Obama, a margin more reminiscent of Soviet Russia than a properly functioning pluralistic academy.

    This story originally appeared at The Orange County Register.

    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.

  • The Rise of the Executive Headquarters

    Headquarters were once a defining characteristic of urban economic power, and indeed today cities that can still brag of the number of entries they boast on the Fortune 500 list of largest American firms. Yet as urban centers increasingly lost headquarters, boosters started to downplay them as a metric, particularly with the rise of the so-called “global city” concept. Today the HQ is back into the urban mix, but increasingly as what I would call the “executive headquarters” which brings bragging rights to a city but not much in terms of middle class jobs.

    The corporate headquarters in a downtown skyscraper took a beating during the 70s, 80s, and 90s as America’s inner cities went into decline. Why locate in a decaying, lawless, dysfunctional urban setting that seemed destined for the scrap heap when the shiny suburbs beckoned?  Indeed, companies increasingly vacated downtowns for massive suburban office campuses, frequently in idyllic, pastoral settings where employees would exist in a cocooned bubble without any but approved distractions such as on site gyms, dry cleaning, cafeterias, and daycare.

    Tom Wolfe, writing of the early 90s recession in New York, presciently pointed out the one thing that continued to hold urban allure for many CEOs, namely the lavish lunch:

    Eight years before 9/11, financial services and commercial real estate were superseded as driving forces in the New York economy by the restaurants appearing in boldface in Zagat’s. The exodus of corporations from New York during the near-depression of 1992-95 was stanched by a single thing: lunch. The C.E.O.’s would do anything rather than give up the daily celebrations of their eminence at eateries in the town where the wining and dining were as good azagats. (I know, I know; just read it out loud.) The case could be made that any post-9/11 federal appropriations to prop up business in New York should go first to the places where you can get Chilean sea bass with a Georgia plum marmalade glaze on a bed of mashed Hayman potatoes laced with leeks, broccoli rabe and emulsion of braised Vidalia onions infused with Marsala vinegar.

    Many CEOs might prefer to be close to home, but others enjoyed hobnobbing with their peers and getting treated like royalty at the Four Seasons.

    Yet even as many corporate headquarters were leaving and as Time magazine published its “Rotting of the Big Apple” cover in 1990, it was clear major change was already afoot. The cleanup had begun in the mid-1980s and by the 90s Americas biggest cities were on the way back.

    How could the urban center be coming back while headquarters bled away? The answer was the rise of the global economy and the services based “global city”. Saskia Sassen and other writers pioneered the analysis of this new entity.  In this world the complexities of the global economy generated demand for new forms of financial and producer services needed to manage and control the far flung networks of the global corporation. These highly specialized services providers were subject to clustering economics and concentrated in large urban centers like New York, London, and Chicago where they provided a new type of urban economic vitality.

    Sassen specifically says, “The key sector specifying the distinctive production advantages of global cities is the highly specialized and networked intermediate economy rather than corporate headquarters. In developing this argument, I am responding to a very common notion that the number of headquarters is what specifies a global city.”

    This not only provided an explanation for why urban centers could economically rebound while simultaneously losing headquarters, but from a civic marketing perspective it provided a justification for pooh-poohing the loss of HQs as much ado about nothing.  Headquarters were yesterday’s news anyway.

    Except that they weren’t. In recent years we’ve seen increasing evidence of the return of the corporate headquarters to the global city, a phenomenon I identified in 2008.  Today the “back to the city” theme for corporations is much written about, and the headquarters is once again conveniently seen as a signifier of urban strength.

    But in most cases this is not the old monolithic headquarters of yore, with their thousands of employees. Rather this takes the form of an “executive headquarters.” That is, a headquarters consisting largely of the C-suite and a small number of other very senior leaders and support staff.

    These have been around for a while, but traditionally existing to serve the desire of the CEO to live in a particular city. Men’s Wearhouse established headquarters in Fremont, CA for example, but most of the corporate employees are located in Houston. Lincoln National moved its executive headquarters to Philadelphia from Ft. Wayne, IN but the distribution of employment was barely affected. Both were CEO living preference driven.

    The people in “executive headquarters” are precisely those who most need proximity to the global city service providers that increasingly form a key part of company operations. Also, recruiting executive talent and proximity to airports play a role. And when companies want to think in a totally global manner, they can want to have their main office physically separate from any particular operating location.

    There are numerous examples. In Chicago alone, MillerCoors moved its top staff from Milwaukee. Mead Johnson Nutrionals established an executive headquarters in the suburbs away from its main Evansville, IN base. Boeing’s move to Chicago from Seattle can be seen in the same light. And just recently agribusiness giant ADM announced it was moving its HQ from Decatur, IL to Chicago.

    The Mead Johnson case is instructional. According to press reports at the time:

    Working in a large city will make it easier to conduct business throughout the world. Mead Johnson makes Enfamil and similar products and about half of its sales come from overseas. Having offices near Chicago, for instance, will place executives in close proximity to global-business consultants, leaders in the field of nutrition and an international airport.
    …
    Between 40 and 60 people will work in the corporate offices, most of them in new positions. Evansville will retain the company’s operations in research and development, U.S. sales and marketing and information management, as well as a bulk of the finance and human-resources departments, Paradossi said. Mead Johnson’s liquid products will continue to be made in Evansville, he said.

    Note the stated reasons for the move, as well as the small number of people involved.  The ADM move is similar, with only about 100 jobs initially. This suggests that while headquarters are in some cases coming back to the global city, they aren’t brining many jobs.  Also, many second tier business centers like Indianapolis continue to see their downtown job base hollowed out apart from hot sectors like technology.

    The executive headquarters is one more example of the increasing bifurcation of America’s elite cities. A handful of top executives gather in America’s capitals of capitalism while the good paying core of the old headquarters – including many upper middle class positions – remain in more workaday cities. This but one example of the “growth without growth” model in which cities dispense with “old fashioned” notions like population and job growth in favor of higher per capita GDP and income in which parts of cities thrive by becoming downtown versions of the exclusive gated subdivision.

    A few cases have gone beyond this, with even more wholesale moves back to the core. United Airlines moved 3,000 to the Chicago Loop from Elk Grove Village. And Google is moving 2,500 people from Libertyville as a result of the Motorola Mobility purchase. (This unit is already being sold to Lenovo, however). These more substantial moves could bring more bread and butter jobs.

    But as a recent column in the Economist noted, investors are putting huge pressures on companies to slim down bloated overheads. This does not bode well for bringing middle-skilled jobs to expensive headquarters locations. Additionally, the rise of telecommuting the and 1099 economy, just in time offices, co-working spaces, etc. are transforming the way people work and putting further pressure on the traditional HQ.  Office floor plates are expensive, and increasing numbers of people no longer want to spend their days toiling away in the salt mines of cubicle farms anyway.

    Where does this lead?  If there’s one thing the last few decades have shown it’s that the only constant is constant change.  With unpredictable market dynamics and various iterations of the cycle of reincarnation (centralizing vs. decentralizing, etc), even the shift to selected downtowns may bring fewer benefits to the urban economy than imagined, and could ultimately accelerate the bifurcation between a small elite population and largely poor communities around them.

    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.

    Boeing Chicago photo by J. Crocker.