Rob Steuteville, the editor of CNU’s journal Public Square, recently interviewed David Milder about his article in The ADRR, Strong Central Social Districts: The Keys to Vibrant Downtowns. The interview was published on the Public Square website in two parts, on August 17th and 23rd. David thanks Rob for his great questions that helped him explain more fully CSDs and their importance.
Save the date for: Bringing Back Downtown Retail After COVID-19
Across the nation in downtowns large and small, leaders and stakeholders are beginning to ask questions such as:
Where will retail be in downtowns like ours as we recover from this very stressful crisis?
What are the best opportunities for regaining, and possibly increasing, the strength of our downtown’s retailing?
What strategies, projects, and programs can help us achieve those potentials?
To address these critical questions, the American Downtown Revitalization Review- The ADRR – is partnering with the University of Wisconsin Madison – Extension to present an online panel discussion on Bringing Back Downtown Retail After Covid19 on:
Wednesday.
October 6, 2021,
at 12:30 pm CST.
The focus will be on downtowns and Main Street districts in communities under 75,000 in population. The webinar is part of Extension’s Learning from the Experts series. The panel will include three nationally known experts: Michael J. Berne of MJB Consulting, Kristen Fish-Peterson of Redevelopment Resources, and N. David Milder of DANTH, Inc. Bill Ryan of UW Madison-Extension will moderate the session. Stay tuned for details about signing up for the Zoom link needed to attend.
No, We Are Not Facing a Restaurant or Retail Industry Apocalypse
By N. David Milder
An Introductory Overview.
While the economic impacts of Covid19 are culling the weaker firms in the industries that frequently occupy downtown storefronts, and permanent closure rates are probably higher than those during the Great Recession, they are not anywhere near reaching the apocalyptic levels that would involve the effective decimation of these industries and impair their recoveries. Claims of industry apocalypses seem to be the rage in recent years starting with retail before the crisis. Since Covid19’s appearance the restaurant, personal services, and arts industries have also been seen in that light – often by industry leaders who are desperate to gain public attention and win strong government financial support for their member firms.
Many of the reported closures did not reflect economic failure, but legal necessity, and these operations reopen quickly when allowed by local regulations. A more accurate view of the situation should be based on the fact, as established by a research team from the Federal Reserve, that business deaths are a normal occurrence with about 7.5 percent of firms and 8.5 percent of establishments exiting annually in recent years.[1] They also noted that small firms account for most of these closures. The team also found that “temporary business closure is common, affecting about 2 percent of establishments per quarter.” Covid19, as many crises do, has accelerated the processes of creative destruction that were already taking root in these industries prior to this crisis. Even if the permanent closure rates prove to be relatively higher than those produced by the Great Recession, there is no evidence that they will be so strong that they will prevent vibrant recoveries.
[1] Crane, Leland D., Ryan A. Decker, Aaron Flaaen, Adrian Hamins-Puertolas, and Christopher Kurz (2021). “Business Exit During the COVID-19 Pandemic: NonTraditional Measures in Historical Context,” Finance and Economics Discussion Series 2020-089r1. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2020.089r1.
As the readers of this blog probably know, I have spent a lot of time and effort on identifying the components of our Central Social Districts and analyzing what makes them succeed or fail. I’ve dug deeply into public spaces, movie theaters, housing, and various other components in cities large and small.
Recently, I was asked for one article that put it all together. I realized that I did not have one, so I consequently set out to write it. That article was recently published in The American Downtown Revitalization Review – The ADRR at https://theadrr.com/
Doing the topic justice meant that it would be long, about 30 pages, and more like a monograph than an article. Readers wanting a quicker take can just focus on the first six pages. However, if you are looking for more guidance about what to do and not do, you will need to dig deeper into the article.
Some of the important things I tried to do are to establish that some components are much easier and cheaper to establish than others, and which work better in different types of downtowns. I also tried to strip away a lot of the advocacy hype about some components that too often hides the challenges involved and obscures how progress needs to be evaluated, e.g., the arts venues, while spotlighting venues whose importance still goes widely unrecognized, e.g., libraries.
Here’s the article’s tease and link:
Strong Central Social Districts: The Keys to Vibrant Downtowns
By N. David Milder
DANTH, Inc.
CSDs and Some of Their Frequent Components. Since antiquity, successful communities have had vibrant central meeting places that bring residents together and facilitate their interactions, such as the Greek agoras and the Roman forums. Our downtowns long have had venues that performed these central meeting place functions, e.g., restaurants, bars, churches, parks and public spaces, museums, theaters, arenas, stadiums, multi-unit housing, etc. The public’s reaction to the social distancing sparked by the Covid19 pandemic, and the closure of so many CSD venues, was a natural experiment that demonstrated how much the public needs and wants these venues. They are the types of venues and functions that make our downtowns vibrant, popular and successful. To read more click here : https://theadrr.com/wp-content/uploads/2021/07/Strong-Central-Socia-LDistricts-__-the-Keys-to-Vibrant-Downtowns__-Part-1-FINAL.pdf
Contact: N. David Milder, Editor The ADRR — The American Downtown Revitalization Review 718-805-9507 [email protected]
THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)
There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.
This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.
How to Subscribe to The ADRR
Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).
How Issues of The ADRR Will Be Distributed.
New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.
The Content We Are Aiming For. Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.
Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.
Who Will Write the Articles?
Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.
Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!
Article Length and Author Responsibilities.
There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.
Publication Schedule:
Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.
How It Will Be Organized.
The ADRR will be published by an informal group for its first year, with no person or group having ownership.
Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.
The Advisory/Editorial Board :
Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University
Articles in our first issue that will be published in June 2020
Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
Katherine Correll, Downtown Colorado, Inc.
David Feehan, Civitas Consulting
Isaac Kremer, Metuchen Downtown Alliance
Errin Welty, Wisconsin Economic Development Corporation.
Many of our most successful large cities are also ailing and
fragile in very essential ways, whether or not their leaders and stakeholders are
open to acknowledging that reality.
Yes, by many economic measures, lots of our major cities
such as NYC, San Francisco, Seattle and Washington, DC,, and especially their
CBDs, are more successful than ever. The value of their real estate continues
to soar. As do their employment levels and their ability to attract large
numbers of the creative/knowledge workers that are so essential to economic
growth and success. Affluent people are eager to live in and near their
flourishing downtowns. Pedestrian flows are strong. Tourist are flocking to
their arts, entertainment and cultural venues as well as their hotels,
restaurants and shops. Their streets are active at least 18 hours a day.
Yet, in 2017, Richard Florida published a book with a very
revealing title: ” The New Urban Crisis: How Our Cities Are Increasing Inequality,
Deepening Segregation, and Failing the Middle Class—and What We Can Do about It.” Increasingly, the core areas of our major
cities have become places where only the very wealthy can live and play. The
middle class can still work there, but even those with $1 million to spend on
housing too often cannot find desirable units.
Affordable housing is a major issue in these cities. Dinners for two in
their restaurants can easily cost hundreds of dollars. While movie tickets may
cost about $9 to $13, admission at their museums can run about $25, and tickets
to prime arts event venues can run over $125 in the primary market, and over a thousand
in the secondary market. Their downtowns are no longer everyone’s neighborhood,
but devoted to very wealthy locals and affluent tourists. If NYC is any
indicator, half of the most expensive new residential units are unsold, and the
other half of the units are occupied by part-time residents, and usually vacant.1 For
most city residents, their city’s downtown is no longer really theirs.
Some signs of disorder, sure to evoke disgust if not fear.
Added to the financial and spatial equity issues are the very significant return of problems of public disorder, such as homeless vagrancy and aggressive panhandling. The situation in downtown San Francisco has grown quite out of hand, with many sidewalks being blocked and pedestrians forced to run a narrow gauntlet of aggressive panhandlers, reclining/sitting vagrants, litter and human feces.2 Similar, if less egregious situations can be found in several other large West Coast cities. Closer to home, one BID manager in Manhattan recently told me that dealing with problems of disorder was now his organization’s highest priority and that this also is the case with many other BIDs in the borough. Center City in Philadelphia is also making a renewed effort to deal with the problems of disorder.3 Those of us who were around to see how the problems of disorder strangled downtowns during the 1970s and 1980s are very concerned about these flare ups of the problems of disorder. Will their resurgence strengthen? Have the tools we used to successfully cope with them in the recent past now lost their efficacy? Do local politicians and public at large have the required political will to do what must be done?
Also, the very success of our downtowns is
causing several other problems. One that goes unnoticed until it isn’t, is that
our pedestrian densities often have reached such high levels that they have
significant adverse impacts on the pleasure of walking, i.e., they diminish an
area’s walkability. Measures to relieve auto congestion have in some places,
e.g., Midtown Manhattan, provided some pedestrian decompression by converting
traffic lanes to pedestrian use. The potentially disruptive impacts of small
vehicles – e-scooters, e-bikes, delivery robots, etc. — and AVs are on a rapidly closing-in
horizon. For all their wealth, many downtown retail corridors in these
superstar downtowns have surprisingly high vacancy rates reaching sometimes
over 30%.
Creative Job Growth and Affordable Housing.
For some time now, economic development professionals have known that affordable housing is a serious and growing problem, especially those active in our large and successful cities – see table above.
Nationally, the relationship between the strong growth of high paying
high tech employment and the seriousness of the affordable housing problem was
also well-known. Large increases in highly paid creative workers leads to
rising housing prices. The new housing products sparked by that increased demand
will be largely upscale market rate. The emergence of the affordability issue
suggests that one way or another the demand of upscale creatives is pushing up
the costs of housing in what were middle income units.
The situation in San Francisco has already reached such severity that $1 million might buy you a home constructed from a former cargo shipping crate. An attempt even was made to smother office growth in the city in order to shift more resources to housing development. Several high tech firms have committed billions to solving this problem: Google will invest $1billion, as will Facebook, and Apple recently said it would commit $2.5 billion to the issue.4 I doubt they would be making these investments if the problem was not very serious.
Seattle shows what can happen to the housing market when there is a very large infusion of creative jobs by just one firm. By 2017 Amazon had eight million square feet of office space, occupying 19% of Seattle’s office space, and tens of thousands of office workers. While other major national high tech firms were also adding employees, an article by Mike Rosenberg and Ángel González in the Settle Times proclaimed: “Thanks to Amazon, Seattle is now America’s biggest company town.”5 It’s huge presence and growing workforce had fostered the following conditions:
By 2017, apartment rents were 63 percent higher
than in 2010, and Seattle became the
fastest-growing city in the country.
Home costs rose faster in Seattle than anywhere
in the nation, doubling in five years, and pushing the middle class to
surrounding, less expensive towns.
Seattle had the nation’s third-highest
concentration of mega-commuters — people traveling at least 90 minutes each way
to work. Their numbers grew 72 percent
in five years.
Buses were more packed than ever, and lines running
along the Amazon campus often were standing-room-only during rush hour. Metro
drivers at times have to leave commuters waiting outside an Amazon office
because their buses were full. Local officials even added buses to accommodate
the crush of Amazon interns that arrived during the summer.6
Even the mere announcement of a big development project that will bring
thousands of new creative workers into an area can raise prices by attracting real
estate speculators and convincing homeowners to keep their homes off of the
market so they can benefit more fully from the rising values of their homes.
For example, Amazon’s impact on the housing market in and around Arlington, VA,
it’s remaining HQ2 town, was swift, starting with the announcement of the deal.
A
year after the deal, with no construction completed and much not even started, Redfin
reported home prices in Arlington were up nearly 18% year-over-year. That far
outpaced the 2.7% price change in the D.C. metro area.7
Will New Expensive Housing for the New Creative Workers Help Make Housing More Affordable for Middle and Lower Income Households? One possible counter argument that has been offered by some colleagues is that the expensive new housing triggered by the new creative job holders will increase overall supply and thus help lower housing costs throughout the city. That has the prima facie validity of reflecting very basic economic principles, and there are some recent economic studies that at first blush seem to support that argument. However, I think that when you look more closely at their analyses and conclusions, their ability to really support this top down path to housing affordability becomes far less certain.
Evan Mast, in an interesting recent study using migration data found
that:
Migrants “to new central city multifamily
buildings come from neighborhoods with slightly lower incomes, and migrants
into these neighborhoods come from areas with still lower incomes, and so
forth.”
“Using a simulation model, (he found) that 100
new market-rate units ultimately create 70 vacancies in middle-income
neighborhoods. New construction opens the housing market in low-income areas by
reducing demand. A simulation model suggests that building 100 new market-rate
units sparks a chain of moves that eventually leads 70 people to move out of
neighborhoods from the bottom half of the income distribution, and 39 people to
move out of neighborhoods from the bottom fifth. This effect should occur
within five years of the new units’ completion.
These openings should lower prices, but the
effect may be small in the least expensive areas where prices are close to the
marginal cost of providing housing” (Italics added).8
Looking at Mast’s findings from the perspective of cities with severe
housing affordability problems, the issue of the marginal cost of providing
housing raises questions. In these cities the problem is precisely that the
marginal cost of providing housing is beyond what middle income households can
afford, not just the lowest income households. Moreover, the new units are not just
market rate, but relatively high market rate. Consequently, one might reasonably ask if these cities were
looked at separately, would “the effect” also be found weaker further up on the
income scale? My reasoning suggests the answer is very probably yes.
In another very interesting recent study, Liyi Liu, Doug McManus, and
Elias Yannopoulos at Freddie Mac looked at filtering, “the process by which properties, as they age,
depreciate in quality and hence price and thus tend to be purchased by
lower-income households. This is the primary mechanism by which competitive
markets supply low-income housing.”9 They found
that:
“(T)here is a wide range of filtering rates both
across and within metropolitan statistical areas (MSAs) for owner-occupied properties.
Notably, in some markets, properties ‘filter up’ to higher-income households”
“After 40 years, average real incomes increased
by 12% for Washington, DC (implying an average annual increase of 0.28%) and by
14.5% for Los Angeles (implying an average annual increase of 0.34%). Thus,
properties in these markets were filtering up to higher- income households as
homes aged. It is not surprising that these markets are ones with affordable
housing challenges (italics added). In contrast, Detroit and Chicago show
rapid downward filtering rates. For Detroit, the income index level drops 34.5%
over 40 years (implying a rate of filtering of -1.1% per year). In Chicago the
income index level drops by 23.7% over 40 years (implying a rate of filtering
of -0.67% per year).” 10
These findings suggest the dynamics of residential real estate in
markets with affordable housing challenges diverge from what basic economic
theory might suggest. The size of the upper income housing deficit then is an important
determinant of the degree to which new upscale housing just goes to upscale
residents or does add to units filtering down to less affluent households. If
the deficit is large, then there are more units filtering up, not down. If the
deficit is small, and more easily met by new construction, additional units can
filter down. Reducing large deficits require comparably large amounts of appropriate
new housing, and until that is achieved, unit filtration will be upward in
direction. It is reasonable to conclude that the entry of
25,000 new high income workers into an area probably will significantly increase
the upscale housing deficit. It is sort of like a garter snake trying to
swallow a bullfrog – it can be digwested, but the snake is literally stretched to
the breaking point and very exposed to its predators. What happened in Seattle
and Arlington provides some evidence to support that conclusion. In Arlington.
just Amazon’s announcement significantly raised housing prices and reduced the
number of units for sale.
Another more general relevant national trend is the fact that while
the number of middle-income households has shrunk over the past decade, the
number of more affluent households has increased (the number of low income
households also increased).
To my mind, the above suggests that in our cities where affordability
is a serious problem, a very large amount of new upscale housing is needed for
them to reduce price pressures in less expensive areas and reduce the upward
filtration of units. Moreover, the constant recruitment/creation of new highly
paid creative workers only adds to the amount of new upscale housing that must
be built in order to foster general housing affordability. Large upscale
housing deficits, by reversing the normal downward filtration of units, creates a significant demand for the construction
of so-called “affordable” units. That demand is real and felt, and politically
can take on a life if its own. Local citizens may not want to wait, at best,
five years for affordability to trickle down from the top, or even much longer
when the upscale housing deficit is large and not quickly being reduced.
Billionaire Row type housing projects that are at the top of the price
ladder with units that are either largely unsold or usually unoccupied do not
help reduce the upscale housing deficit. They are not targeted to be purchased
by the creative/knowledge workers. To the contrary, they make it more difficult
by absorbing desirable development sites and diverting investment funds and
entrepreneurial talents from the construction of the more needed “normal”
upscale units.
The situation in Seattle suggests there is some merit to my analysis. After
Amazon shifted its office growth to Bellevue, 15,000 new jobs, the growth of
housing costs in the city plateaued, though costs did not decline. Successful
downtowns and their nearby neighborhoods may need to be sure that they, like
the snake eating the bullfrog, have fully digested any large influx of highly
paid workers so they can move on again to ingest more creative/knowledge
workers.
Furthermore, this is perhaps the regional creative job growth path
that other ailing successful cities should follow until their upscale housing
deficits are sufficiently reduced.
Also, while the top down, trickle down approach may sound good to
economic theorists, from a politician’s point of view it’s probably useless. It
has no immediate concrete visibility. It’s more like mumbo jumbo economics for a
whole lot of their voters. It takes too much time to produce real, observable affordable
housing units on a sufficient scale.
In the last few weeks I confronted an intellectual jolt that
made me ask some very basic questions about economic development, the field I
have been professionally active in for over 40 years. The causes of this jolt
were the discussions in the traditional media and on LinkedIn about Amazon’s
Long Island City 2HQ project and the opening of the huge $25 billion Hudson
Yards project on the West Side of Manhattan’s Midtown CBD. The merits of both
projects have been the subjects of significant debate – especially with Amazon
reneging on the deal. The key concepts on these debates seemed to be:
JOBS. For the Amazon deal, jobs seemed to be the
be all and end all of all of the pro-Amazon arguments.
THE DESIRABILITY OF HUGE NEW EXPENSIVE PROJECTS.
For the advocates of both projects, the size and expense of both projects made
them worthy, and the fact that they would attract the intellectually and
financially blessed added greatly to their luster.
INCENTIVES. Criticisms of both projects were
heavily cloaked in attacks of the large financial incentive packages given,
both directly and indirectly to Amazon and Related, while proponents seemed to
argue that direct incentives had no real cost – after all, no Brinks trucks
were being driven up to the City’s treasury to take away billions in cash.
What jolted me was that these discussions
about big, important projects seemed to be vapid because they were missing so
many really essential points. Indeed, this vapidity suggested that we, in the
economic development field, had forgotten how to answer an elemental question
and then use that answer in our professional activities. That key question is:
Why do we do economic development? What is it supposed to achieve? I have been
to countless professional conferences, but I don’t remember too much attention
ever being given to that question.
Are Jobs a Means or
an End?
Jobs certainly are important. However, there are good jobs
and bad jobs. Economic development should seek to maximize good jobs. Economic
development should also try to provide good jobs for those who need them. All
this would seem to be part of our field’s conventional wisdom. Amen.
Lots of Jobs Can Have Big Impacts That Can Be Good Or Bad,
That Can Help Or Hinder Reaching Important Societal and Political Goals. Unfortunately, not all jobs are good ones. The
US, today, has an incredibly low unemployment rate. But, how many of those
plentiful jobs pay a livable wage? How many people are holding several of those
jobs because none of them alone pays enough to support their households?
Good jobs are also the means to many important socio-economic
and political ends. They can enable system residents to have a better quality
of life, enable a more equitable distribution of incomes, and reduce the extent
and depth of socio-economic frictions. Unfortunately, what many people may
consider good jobs, may also have bad impacts on such things as the environment,
public health, housing demand and prices, commercial space demand and prices,
stress on mass transit. It is precisely at this “system” level where the suasion
of the arguments of the advocates for gobs of more jobs are most likely to fade
or outright fail. It is also why such discussions are not likely to occur or be
given import. It is also why questions such as this are almost never asked: how
can 25,000 very high paying jobs in one relatively small area be absorbed without
huge disruptions in the housing, market, labor market, public transportation,
traffic congestion, etc.?
Jobs Are More Important to Some Economic Developers Than
Others. The centrality of jobs to economic development practitioners
varies. For those who are concerned about downtowns and Main Streets, jobs are
not a key concern, save when they need to demonstrate the positive impacts of a
new project. Job creation and development are much more salient to economic
developers who are concerned about workforce growth and development, and those
active in obtaining project approvals and funding from government agencies and
foundations.
Jobs Have Become an Important Concern Because We Are Told
We Can Accurately Estimate Them. Concern about jobs is also highly embedded
in our politics and in our assessments of the economic impacts of large
projects such as new buildings, stadiums and arenas, arts and entertainment
venues, etc. This is facilitated by the ease with which input-output models can
generate estimates about how many jobs such projects can generate.
Alas, the use of these I-O models often reminds me of a
story the famous French sociologist Raymond Aron once told a seminar at Cornell
about the former president of France, Valery Giscard d’Estaing. When taking a
university exam and asked where the Seine was deepest as it courses through
Paris, d’Estaing’s reply was something like: “Under which bridge? I am sure I
can make a convincing argument for each one.” Similarly, these I-O models seem
to have never met a project for which they cannot find huge positive
benefits. I would argue that the
importance given to new jobs in many project assessments is, to an important
degree, a result of the ability of I-O models to churn out positive employment
impacts. I have come to treat the indirect and induced estimates of the I-O
models with considerable wariness and skepticism. Reviewing them I keep in mind
the axiom Garbage In, Garbage Out.
The Incentives Tie-In. Across the nation, scads of
financial incentives have been given away for more new jobs, usually at an
$XX/job rate . That was, indeed, at the heart of all of Amazon’s 2HQ deals.
But, experience, has shown that far too often those jobs don’t show up or
quickly disappear or are not the type pf jobs promised. For example, Amazon’s
hoopla that 2HQ jobs will have a median salary of $150,000 seems to be very far
from true for its new Nashville location.
Deal-Making. In my years in the field I have met an awful lot of people for whom economic development is about making deals. These deals usually involve using public financial incentives to produce projects. A promised primary benefit of most of these projects is lots of more jobs. Too often the content of the deal and its probable impacts are not as important as the making of the deal.
Suggested Take Away. Jobs are undeniably important,
but also a means to larger and more important economic development ends. We
must not lose sight of those ends. Moreover, jobs, even those considered “good”
ones, can have impacts beyond those on the job-holders that are beneficial or
harmful. Those impacts are important to know and assess, though too often never
looked into.
Jobs are often presented as the means by which the larger
community benefits from a major project. Just knowing the number of jobs or
even their pay ranges are really insufficient to assess a project’s real
impacts on the larger community.
Are “More”, “Bigger”
and “More Expensive” Always Better?
Also embedded in the argument for the Amazon and Hudson
Yards projects were that they are big
or in some way the biggest, or the most expensive. Lots more workers, pedestrians,
and residents, were taken as being desirable. BUT in the real world, you have
to know a lot more about those jobs, pedestrians and residents. There can be
too many of them that produce congested trains, buses, and auto traffic, that
make sidewalks almost impossible to walk on comfortably, that provide more but
lower paying jobs, that create a housing shortage and huge increases in housing
costs. Do we really want every neighborhood to be like Manhattan or San Francisco
or Seattle where those who can’t afford $1 million for a condo are hard pressed
to find decent housing, where either midget apartments or shared housing – the types of residential experiences the
affluent definitely do not seek – are lauded as acceptable alternatives?
Walkability and high levels of pedestrian activity understandably
have become almost religious mantras among downtown leaders, but many places in
Manhattan have become almost unwalkable because of the density of pedestrians,
and many tourist attractions in Europe are being overrun and ruined by
attracting too many tourists. Often, as I walk through them, I think that Times
Square and parts of Fifth Ave should have olive oil misters to lubricate pedestrian
traffic.
If our downtowns are being changed into places that only can
be used by people who can afford $1 million apartments, $500 per person meals
and $500 theater tickets, will they still be everyone’s neighborhoods?
The fact that the Hudson Yards project is the biggest and
most expensive urban project certainly does not in any way make it a “good”
project for the community, for the city, for all of those who are neither its
developer/landlord nor tenants, but who are paying $ billions for the project
to happen. Compared to Rockefeller Center it is an outright gated community failure.
Just because a project might produce huge increases of
something, be it jobs, housing units, money invested, etc., are poor reasons by
themselves for doing the project. Why do we keep falling for the “more is
better” types of arguments?
The Critical Density
Issue
For a significant number of economic developers,
particularly those with a partiality for urban areas, greater agglomeration and
development density have long been seen as desirable community goals. Valid
conventional wisdom recognizes that often there can be too much of a good
thing, e.g., rain, food, fire, etc. Can there also be too much development
density? One might argue that traffic congestion, growing pedestrian
congestion, growing air pollution and garbage production might all reach the
“too much” stage. A recent study has also shown that once our large cities
reach a certain population level, their economic growth slows appreciably.
Today, we can no longer assume that greater density will
always be good. It is unfortunate that we are just beginning to look at where
those cut off points might be.
Where Are Concerns
and Discussions About Community, Equity, Justice and the Common Good?
These are the kind of concerns that I think best justify
economic development activities and projects. It is amazing to me how often
they are never raised when economic development projects, programs and policies
are being discussed or how little attention is paid to them when they are. For
example, one would be hard pressed to find them in the discussions about the
NYC Amazon 2HQ or the Hudson Yards projects. While housing affordability was
raised in the fight against the 2HQ project, incentives and jobs seemed to
consume most of the oxygen in that debate.
For decades, downtown revitalization advocates argued that downtowns should be everyone’s neighborhoods. Can that aspiration be achieved when downtowns are increasingly being turned into places that even solid middle income households cannot afford to live or play in?
These concepts are fundamentally about values and often hard
to quantify. They are also often very political. Discussions that involve them
can be highly emotionally charged, even combative. Consequently, public
officials may be inclined to want to avoid them. However, that avoidance does
not diminish the importance of these concepts – or the incompetence and turpitude
of too many of those public officials.
Who’s in Charge of
Development?
Amazon’s 2HQ national effort initially drew a lot of my
interest, but I slowly grew uneasy about it. The reason for my unease did not become
clear until Amazon reneged on the NYC-LIC deal: Amazon and its needs and plans
were driving things, not the needs and well-thought out plans and strategies of
the responding communities. Amazon was
taking charge of the economic development processes in all of these communities
so hungry for more jobs and huge investments in real estate. The cities were responding
like giddy, compliant lackeys, anxious to give away anything to get such a prestigious
corporation with all its promised jobs and investment dollars.
Amazon early on plainly established by its actions that they had an “our way or the highway” policy, but political leaders — many of whom claim to be powerful politicians — just accepted Amazon’s lead. Amazon reneged in NYC when it became clear it would have to engage in some real negotiations. They were never prepared to be a true development partner. They were/are more of a potential imperial development partner. Cities do not need such imperious corporations –- they care mostly about themselves, little about the communities in which they are located.
