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Last week I joined John Fenton from GoLocalProv in Providence for a livestream on the coronavirus. If the video doesn’t display for you, click over to watch on You Tube.
If the pandemic doesn’t change the direction of societal trends but just speeds them up, how will that challenge or create new opportunities for struggling and stagnant metros?https://www.nytimes.com/2020/05/03/opinion/coronavirus-economy-nationalism.html?action=click&module=Opinion&pgtype=Homepage.
Weakening demographics in larger cities was the trend, also booming interior small cities. I think there’s an opportunity for more of these smaller interior cities to become among the winners, though of course there is no guarantee.
The ‘weakening demographics” of larger cities is mostly middle income people being priced out by professionals and the elite. People may be leaving superstar cities, but money isn’t. In many cases, they’re ‘cashing out’ their expensive but modest houses, small apartment buildings, and condos and using the money to buy property in cheaper metros. I’ve even seen a few New York and New Jersey licenses in front of rehab projects in The City That Shall Not Be Named, so this must be happening pretty widely. I’m glad to see them. They invest in neighborhoods the locals wouldn’t even step foot in much less buy property in. The growth of smaller interior cities includes these middle class exiles/investors plus poorer people from even small towns and rural areas where jobs prospects are particularly bad. It seems to me that only interior cities that are large and diverse enough to accommodate these flows of people will be able to take part in any ‘rebalancing’ from the superstar cities to smaller ones. That means cities like Columbus, Indy, Nashville, …the usual suspects. I can’t see it changing the trajectory of stagnant metros with underlying problems in their long term tax liabilities, political dysfunction, bad infrastructure, and poorly functioning job markets.
Seeing “A few [out of state] licenses” =/= data, something I suspect you would jump on if anyone else here posted.
P&G and GE still draw recent graduates from out of state. If I saw a few NY/NJ plates in Cincinnati, I’d assume it was some people from a recent crop of Wharton grads, probably rehabbing houses for themselves.
I would “jump on” it. Any sign of outsiders in Cincinnati is welcome in my book. The licenses were on vans and trucks loaded with dry wall, pipes, and tools. They weren’t college grads looking for cheap housing. College grads from NY/NJ would have Ohio licenses, unless of course they didn’t plan on staying very long or wanted to maintain their legal residency in those states. Why would they do that when registering and insuring a car in much cheaper in Ohio than in NY/NJ? Almost nobody from Wharton is coming to Cincinnati. Cincinnati is almost entirely dependent on Cincinnatians for college grads.
This Brookings report suggests that the finances of Ohio’s cities will be the worst hit in the country by the pandemic, brookings.edu/blog/the-avenue/2020/03/31/when-will-your-city-feel-the-fiscal-impact-of-covid-19/amp/?__twitter_impression=true. This Brookings report shows Cincinnati has among the biggest percentage increases in unemployment for all american metros. https://www.brookings.edu/blog/the-avenue/2020/04/29/which-city-economies-did-covid-19-damage-first/. This could prove to be the Queen City’s ‘katrina moment’ when the entire metro is shocked by a sudden black-swan shock as New Orleans was by Hurricane Katrina. It might force more substantive and wide-ranging political and governmental change in response to these shocks. What other American cities might experience this, too?
Matt, the pandemic is worldwide. A “Katrina moment” comes when some horrible event is highly localized.
Chris, the response to the pandemic is not uniform worldwide. That’s the point of the Brookings reports. The reports argue that the varied effects of the pandemic ARE “highly localized.” Some places are being hit much harder than others by declining employment and tax income. That is the purpose of the reports and of my posts. If you’d like to challenge Brookings’ methodologies, I’d be glad to see it.
Metro NYC, LA, SF residents have moved to cheaper metros for decades. That’s part of the reason why their metros’ in migration is dependent on international migration and they are have negative domestic migration.
I know that some cities tax incomes of people who work in their jurisdictions. I am guessing that remote work is a way for suburban residents to avoid that tax.
Yves over at Naked Capitalism has a total Gloom and Doom take on the near future of cities, particularly (overpriced?) expensive alpha cities.. Basically a return to the nadir of the 1970s, with bankrupt city governments, police forces in a snit over recent questioning of their philosophy of policing (and propensity for violence). Socket Site, which covers the Bay Area, is similarly despairing.
They don’t offer any real analysis. The 1970s wasn’t anti-urban. It was pro-suburban. Public spending was directed to a massive suburban industrial complex that sucked, not pushed, investment out of cities. We don’t have that today. People didn’t spontaneously decide that they wanted to leave cities in the 70s and then decided how to make that happen politically. Corporate and political elites decided that they could make more money more reliably from suburbanization. THEY, not voters, made suburbanization happen. People were literally paid to leave cities. That can’t happen now for many reasons.
No, people weren’t “literally paid” to leave cities. They did so because their perceptions of the value of the city-neighborhood residential bundle (aged housing stock, public safety, public schools) vs. suburban residential bundle (modern housing stock with larger lots, economic segregation by income, and better schools) was decisive.
Suburbanization in the US started with streetcars and accelerated with automobiles (but was interrupted by Depression and war from 1930-1945). There was a housing crisis after WW2 and no choice but to build new. One can argue that there was a lot of externalized cost (roads and highways) and cost avoidance (urban infrastructure maintenance and other legacy costs) but that does not constitute a cash transfer.
Yes they were. “Being Paid” does not equal “cash transfer.” Wealth is held and transferred in many forms, real property, stocks, bonds, privately held companies, etc. Public spending on infrastructure and public subsidies literally GAVE value to property. They did so on a massive scale. Streetcars are not analogous to the interstate highway system. The former paid for itself operationally. The latter did not.
No, streetcars did not pay for themselves. They were central to suburban development schemes (both residential development and destinations such as amusement parks).
Who paid for streetcars?
We’re probably gonna see a re-balancing of the upper middle class between central cities and suburbs, and an Ice Age of megadevelopments in the cities (good riddance), but the truth is that we’re basically out of room to drain out and sprawl like the 1970s. The greenfields half an hour outside of downtown are long gone, and third-tier markets like Boise and Reno are already full of displaced Californians. There’s nowhere move-in ready to flee to en masse without major government subsidy and, like Matt says, no money or will from the federal government to implement those programs.
Interesting points, guys, And I will confess that I am a little skeptical of the “Well I moved to rural Iowa and I now spend my time gardening” argument that was heavy in that thread. Still…we will see. 🙂
The Fed is running printing presses and giving mortgage money away. That is definitely “money…from the federal government.”
But in the postwar decades, the feds created a system that directed that money to specific locations. The feds can’t control the flow of money today as they did then. Much of it will flow to cities, because that’s where the natural forces of economic gravity flow absent massive social engineering projects like the suburban industrial complex.
It’s still harder to get construction financing or a residential mortgage for an urban condo than for a suburban (or streetcar suburban) house. It’s generally harder and more expensive and slower to build new in more-urban settings. And urban single family prices have risen so much that they are almost all “jumbo” mortgages that are harder to underwrite. Way more suburban dwellings are being built than urban, so that’s where the majority of federal mortgage financing will go.
My organization just sold a 1959 rehabbed ranch less than a day after it went on the market…for more than list price…in the Indianapolis suburbs. I honestly expected it to take a week or more and I expected that I might have to concede a little from list price, even in a tight market. But when borrowing for 30 years at near zero (under 3%), buyers are relatively indifferent to a few thousand in price. $5K adds only $21/month to the payment.
It’s still harder to make money on the growth in property values in Suburban or streetcar suburban houses than in owning urban apartment buildings.
Then why are so many more suburban houses than urban apartments being built almost everywhere?
Come now. Don’t play dumb. Those houses were built over many decades of the suburban industrial complex. The financial collapse only happened 12 years ago. Suburbia was not built in a day….though much of it looks like it was.
Could NY’s work from home moment fuel office-to-residential conversions?
https://therealdeal.com/2020/03/27/could-nys-work-from-home-moment-fuel-office-to-residential-conversions/