Can The Urban Archipelago Be Recreated?

Suddenly a huge share of an entire generation wants to live in places connected to jobs by mass transit, and collected to everything else, including gathering places where neighbors and acquaintances meet, within walking distance, or at least within biking distance. And suddenly there is a shortage of such places. Urban living, in less space, using less energy, without the need for a car (or at least no more than one car per family), and with shared amenities like parks and libraries and beaches taking the place of individual private amenities like big backyards, book collections and multiple cars, ought to be far less expensive. Perfect for those generations that have been left far less well off by Generation Greed. As a result of their scarcity, however, decent urban neighborhoods in the most vibrant metropolitan areas with strong downtowns have become prohibitively expensive.

At one time, however, the way people want to live in places like Brooklyn was the way they could live just about anywhere, if they were rich enough to avoid substandard tenements. Not only were there more cities with more walking neighborhoods that people with choices would choose to live in, but these were connected together by rail and bus into a system of cities, large and small, and small towns. An urban archipelago in the rural sea. With the price of housing soaring in places such as New York City, San Francisco, Boston, Seattle, etc. the only way to meet the demand for them is to turn other places into what people could reasonably find to be close substitutes. By re-creating the urban archipelago within the suburban sea for those who want to live and work there, with more places linked to the cities that are already thriving but are also becoming unaffordable.

There are in effect three options: reboot more of the older cities that collapsed in the 1970s, create entirely new cities with the characteristics people want today, and/or restructure the suburbs into places that meet today’s preferences. The free market, through big organizations, new small businesses, and individual action, is trying to do all three. But the government, controlled by Generation Greed and special interests, is an obstacle at the federal, state and local level.

Let’s start with the older cities, many of which have lost a large share of their populations, some of their infrastructure, and quite a bit of their housing compared with their (usually 1950) peak. Developers and real estate investors have noticed the urban boom, and are on the lookout for places where they can get in on the ground floor. Mayors everywhere have announced that their cities, or parts of them, are the “new Brooklyn” and are “cool.” Using the word that people who were young in the 1960s used at the time, instead of the word “amazing” that I’m amazed how often is used by my children and their friends.

Writing reports on the economy and commercial real estate market of metro areas around the country, reading and writing hundreds of pages per quarter, I find this trend popping up just about everywhere. In fact, while new housing construction remains in the doldrums nationwide, there is a multifamily boom going on in and near many older central business districts, one that typically starts with the renovation and conversion of older commercial property (as in Soho, Manhattan) and proceeds from there. Next up is the renovation of the once prime but now derelict housing closest to downtown, and then new multifamily construction.

The increasingly viable central areas where housing is still relatively affordable include downtown Minneapolis, Chicago and Denver.  Downtown Los Angeles and San Diego appear to have achieved critical mass, though they are expensive.  Even in crime-ridden cities that are still in the process of dying, such as St. Louis, Detroit, and Cleveland, places where large businesses have yet to start moving back to the center from the suburbs, the most dynamic areas for residential reinvestment and entrepreneurial activity are now in a small island downtown (or in Cleveland in a former heavy industry area near downtown).

The problem is that most older central cities are broke, saddled with deteriorating infrastructure, inferior schools, sky-high taxes and absence of public amenities of any kind due to decades of disinvestment, rising debts, and retroactively enriched and underfunded pensions. The good life in cities relies of shared community amenities that these municipal governments, burdened with a large share of the cost of the poor, and in effect run for the benefit of relatively wealthy members of public employee unions, cannot or will not provide. And will not allow indigenous alternatives created by and for the residents themselves.

Crime is the one problem certain to drive people out, but even where it has fallen transit and schools remain issues. According to the Historical Statistics of the United States, the mileage of rail transit systems fell from 28,500 in 1934 to 2,081 in 1970. As these systems, generally built by the private sector, collapsed as a huge network of highways, created by the government, was built. But now the federal, state and local governments are broke, with funds increasingly diverted to past debts and the retirees.  And whereas the people who build and operate transit systems were once about as well off as their neighbors, they are now, on average, much richer, particularly in retirement benefits.  Particularly much richer than the younger generations that prefer mass transit.

http://www.theatlantic.com/business/archive/2014/12/millennials-arent-saving-money-because-theyre-not-making-money/383338/

Which is why building and operating new rail transit systems is unaffordable. Given what they charge, and the lack of public funds, younger generations can’t afford construction with “prevailing wages,” the swarm of consultants and litigants around every public project, construction industry profits, the burden of underfunded construction multi-employer pensions, and transit operation by those with guaranteed pensions that can only get richer and richer, even as everyone else gets poorer and poorer. Detroit, which once had an extensive light rail system, is now trying to come up with the money to build just one line – even as the city remains sliced through by a large number of highways left much emptier by the city’s decline. St. Louis also has just one line, which it is trying to extend. SEPTA, the regional transit agency in metro Philadelphia, is facing the prospect of shutting down lines because they are becoming unsafe.

There is a transit boom going on, but only on the demand side and not on the supply side. Urban real estate has been booming everywhere rail transit has been added, with real “bus rapid transit” (which requires real money for real infrastructure) also having such benefits. Cities across the country need the kind of investment in transit that occurred for the automobile in the suburbanization era, but it isn’t going to happen. As for the local bus transit systems most cities were left with, these have been slashed as legacy costs have overwhelmed their funding.   Service is infrequent, unreliable, and – for the Generation Greed elites who drive everywhere – unimportant.

Then there are the schools. Public education was always going to be a challenge in places where poor children are concentrated, and teachers who work there have a difficult and frustrating job.  But on top of this older central cities throughout the nation are seeing their school systems collapse as a result of soaring pension costs.  Soaring primarily due to either retroactive pension increases for past teachers, or the underfunding of the pensions that teachers had been promised to begin with, depending on the relative distribution of political power in each location.  Devastating cutbacks have rolled through places such as Los Angeles, Chicago and Philadelphia, with far more to come.  The whole school reform idea has, in effect, been de-funded to extent that I believe the ongoing urban school wars to be nothing more than wasted effort.

Those who lived in older cities during the suburbanization era relied on a number of lifeboats to educate their children: parochial schools, special deal schools such as Stuyvesant or Boston Latin, private schools if they could afford them.  But Roman Catholic diocese no longer have enough money to support Catholic schools, which are being crushed between inadequate pay for their teachers and less than affluent parents’ ability to pay.  Few among the younger generations will be well off enough to save for their children’s college and their own retirement, let along pay for expensive private schools as well.  The teachers’ union fights the expansion of a new lifeboat, charter schools, even though parents overwhelmingly want more of them.  Other possibilities, such as homeschooling co-ops enabled by computer-based instruction, remain in their infancy.

Then there are the taxes. Once living in an older central city, or any other municipality rather than a rural town, meant higher taxes in exchange for more public services. Then it meant much higher taxes without much in services, because most of that money was going to the poor. Now the taxes are high, the services are collapsing, and not much money is even going to the poor anymore. Anyone with any income to tax, or any business moving to a city such as Chicago or Philadelphia, will find a very larger share of their income redistributed to better off people who now live in Florida or Arizona, or who hold government bonds.  In Philadelphia, the business and real estate communities complain both about high taxes and poor services, and claim the local government is thus “anti-business.”  What they don’t understand is that no matter how “pro-business” today’s pols might be, the costs from the past that drive a wedge between taxes paid and services received, and those costs aren’t going away.

Might Providence, Rhode Island be an alternative to Boston for you or your new firm? There taxes have soared and services have collapsed because of the retroactive pension increases politicians and public employees granted to themselves years ago. The city considered bankruptcy, as in Detroit, but then decided to live on as a zombie instead. So what are the Democratic politicians in Rhode Island considering doing now? Exempting all retirement income from the state income tax, so the generations that benefitted from lower taxes and richer benefits in the past won’t have to share any of the pain. So why would any younger person or new business even consider moving to (or remaining in) that state, without a special tax deal or subsidy for themselves?

http://wpri.com/2014/11/18/ri-pension-law-still-in-legal-jeopardy-3-years-later/

Could high speed rail make Buffalo, Rochester or Syracuse, Schenectady and/or Troy, a cheaper substitute for Brooklyn, with travel to Manhattan for business or pleasure a couple of times per week or a few times per month rather than every day?  Could something like the high speed Electroliners that went into service toward the end of the first urban era link these cities and the smaller ones in between into something like one big urban area, as a labor and consumer market?

http://en.wikipedia.org/wiki/Electroliner

Upstate New York has the problem of legacy costs and politically powerful special interests in spades.  Taxes are high as a share of income in those places, transit is limited, and schools are bad.  With most of the old high paid industrial jobs gone, the region’s public employees earn vastly more one average than their neighbors, and many costs have been deferred to the future, meaning that as more members of the high-paid generations move out of die off the squeeze on anyone still there gets worse.

Moreover, the State of New York doesn’t exactly roll out the welcome mat for younger people and new businesses.  All public employee pension and Social Security income is already exempt from state and local income taxes in New York, where the state legislature Republicans propose a similar deal for private sector pensions (they currently get an exemption for social security and for other retirement income up to $20,000).  After all, the retired and soon to be retired of the Downstate Suburbs and Upstate New York are much better off on average than the younger generations that will follow them, so why should those better off older generations have to pay for the debts and other costs they are leaving behind – even if they stay?  For their part, the Democrats in the state legislature don’t think retired public employees should have to pay property taxes either. Younger, poorer generations that continue to live in these places have to pay more in taxes and accept less in services to pick up the slack for these deals, in the state that spends more on Medicaid for seniors than any other.

As for the transit link, Upstate is served by just four Amtrak trains per day to Manhattan that move at 50 miles per hour on average, including stops. Proposed plans to improve this all involve taking capacity away from New York’s rail freight network rather than adding something new – New York is already way behind other states in the redevelopment of its rail freight system due to exploitation and neglect. An even if the upstate cities were connected to Manhattan by two new high speed tracks, would some of the people now packing into Brooklyn and places like it choose to live in Upstate cities instead?  Might some of those artisanal food producers move their growing operations to places closer to where food is grown, and some of those artisanal furniture producers move closer to places where wood is harvested?

The news from England, where everyone is trying to pack into London despite soaring prices, is not good. There British Rail connects central London to Manchester, Birmingham and Liverpool three times per hour, with trains that move at 100 miles per hour including stops, in 1 ½ to 2 ½ hours. Still, everyone is trying to move to London even as housing costs soar, just as everyone is trying to move to New York City.

The prospect of being an exploited serf, in a place controlled by rich landlords and politically connected public employees and contractors, and burdened with past deals and costs, is one reason the middle class fled the cities for the suburbs to begin with.  So how about how about moving to a brand new city?  There are a few places in the U.S. that are trying to develop a vibrant, mixed-use downtown not be re-creating what was there, but by creating what they never had to begin with.  Two of these have come closest to achieving the critical mass that would allow people to live, work, shop and play without having to get into a car and drive somewhere: Austin and Miami.

Miami has emerged as the big winner of the housing bubble, thanks to a huge investment of federal taxpayer money.  What federal investment?  Developers borrowed from banks and built a whole city of condominium towers downtown, while also reviving the 1920s city of Miami Beach.  The cost was much greater than the market could support without subsidy, so the developers and their lenders went broke.  The federal government was then forced to bailout or merge the banks.  The city of empty condominium towers was sold at a loss to new investors, who converted them to middle income rental apartments, which then filled, creating a vibrant downtown.  Federally subsidized middle class housing, through the back door, on your dime and mine.

Miami, of course, is an exception.  To the extent that our federal taxes (or rather future federal taxes as all the bailouts have been funded via debt) are being used to pay for development, rather than old age benefits, they are going to build more suburbs – via the mortgage interest deduction, the auto industry bailout, the Fannie and Freddie bailout, the desperate attempt to keep single family suburban homes off the market to keep the prices from falling further — forcing younger generations to pay older generations more for housing, and borrowing the money needed to do it with the expectation that younger generations will be forced to pay it back.

It turns out that future generations will end up paying federal taxes for years to subsidize the exurban McMansion and SUV development of the 1990s and 2000s.  Not by design and as voted on after a public debate, but after the fact as in downtown Miami.  To the extent that the federal government once had the money to create places it has now done so, and past and future city dwellers in large part paid for it.  The money is gone and, as older generations that wanted lower federal taxes now move on to demanding more old age benefits, it isn’t coming back.

Meanwhile metro Austin is also booming and attracting young people and new businesses from all over the country.  But its transit system is limited, and it is choking with traffic.  A plan to build a single light rail line across the metro area from north to south was just defeated in a referendum, and it would only have served a portion of the area’s booming population in any event.  One wonders were the area goes from here.  Moreover, while Texas in general is known for its housing affordability, housing prices in metro Austin are now much higher than the U.S. average.  Get on the limited list of places young Americans want to live in, and pretty soon they can’t afford to move there anymore.

Cities such as Fort Worth, Texas and Oklahoma City, Oklahoma, are trying to build streetcars and get a critical mass of businesses, housing, retail and activities downtown. The discussion is extensive, and the local business press obsesses over this goal, but the number of people involved is thus far limited.  Might people and firms that today want to move to existing space left over from the industrial age in Boston and San Francisco decide that it would be almost as amazing (and far more affordable) to move to new buildings in the former Fort Worth stockyards or “Bricktown” in Oklahoma City, which is just a few blocks in size?  There are far more people who are interested in living in urban areas, it seems, than are capable of creating them.

I once heard Joseph B. Rose, former head of the NYC Department of City Planning, say that places such as New York, Boston, and San Francisco would always have a monopoly on a certain kind of life.  Because the historical circumstances that fostered their creation had come and gone.  These cities developed pre-automobile and with limited government regulation, allowing the profitable creation and operation of horsecars followed by electric streetcars and then, in some places, subway systems.  Monopolies always rip you off, whether they are corporate, business association, political, union, or even non-profit, and so it isn’t surprising that these cities – those who own space in them and those who control them politically – have become a ripoff.  I’m not sure whether Rose is right about the possibility of creating new transit and pedestrian-oriented cities in the U.S., because the growing urban preference is too new to see what it could eventually lead to.

Whether it is because they want to or because they have to, most Americans are going to have to live in the suburbs for the foreseeable future.  Could these be retooled to provide some of the advantages and amenities more and more people see in urban living, but at a lower cost?  Some suburbs are trying.  Tyson’s Corner, Virginia was the star of Joel Garreau’s Edge Cities, a celebration of the death of the cities and the triumph of the suburbs written in 1992, just before that whole historic era was about to go into reverse.

http://www.amazon.com/Edge-City-Frontier-Anchor-Books/dp/0385424345

But Tyson’s Corner, rather than sinking with the suburbanization era, is seeking evolve by having Washington’s metro system extended to it and becoming a mixed-use urban center.  There is a similar proposal to extend the Norristown Line of metro Philadelphia’s SETPA system to King of Prussia, the “edge city” built at an intersection of highways whose initial advantage was that it was cut off from mass transit and the people who use it.  You can read about it here.

http://www.bizjournals.com/philadelphia/print-edition/2014/11/21/all-aboard-the-kop-express.html

Both places, and many others like them, want multifamily housing for the young and old, with plenty of things they can walk to, as well as jobs and commercial space.  There are examples of this all over the country, generally pushed by businesses and developers and sometimes by the Mayors they support, those smart enough to see their towns starting to fall into decline as the suburban office parks that once buttressed the local tax base empty out.

The problem is two-fold.

First, if density increases but everyone still has to drive, the result will be even more traffic congestion. Can these places every create enough of a critical mass, and have non-auto links to enough other places, to avoid being too big to drive to but not big enough to support mass transit without ridiculous subsidies? Being crowded together with other people is a lot less fun if you still have to get in a car and drive everywhere.

Anyplace that aspires to be urban has to jump over over a chasm — between having plentiful and cheap parking and less traffic, and being big and attractive enough that people are willing to walk there, bike there, ride a bus there, live there.  In between lies misery.  One of the reasons some older cities died is that they tried to accommodate the automobile and thus became bad suburbs, suburbs with scarce and expensive parking and congested streets where everyone drives. That is not the future retooling suburbs want to follow.

Second, what about the cranky aging neighbors, the people who moved to the suburbs in the past and don’t really care much about the future? They tend to oppose people on bicycles, in buses, and living in multifamily housing as the very riff raff they had moved to the suburbs to elevate themselves above.  Including their own children and even themselves, once they become too hold to maintain a home.  Often age-restricted, over-55 housing is the only multifamily housing they want near them.

For political dysfunction New Yorkers need look no further than Long Island, a place with a grifter political culture that has managed to achieve high taxes, a fiscal crisis, and deteriorating services despite zoning out the poor.  A place where young people end up renting illegal basement apartments because the political culture is opposed to new legal apartments.  The Long Island business community wanted to create a mixed-use, higher density “Nassau Hub” at the center of that county, but proposal after proposal has defeated for two reasons.  Saddled with Generation Greed legacy costs as it is, people there are unwilling to pay slightly more in taxes for the modest level of public investment that would be required.  And NIMBY activists are even opposed to allowing developers to create a denser, more urban environment with their own money.

In short, I see meeting the demand for life in places like Brooklyn and San Francisco, Portland and Boston, to be a political problem, not a market problem. One doesn’t need much government help to create more places like these. The problem is the government is making creating more urban places difficult if not impossible, and will likely continue to do so at least until Generation Greed has passed on and its debts are finally paid off. It may take 50 years to solve the new urban crisis.

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2 thoughts on “Can The Urban Archipelago Be Recreated?

  1. Jonathan R

    I see the schools as the biggest problem. It takes 400 kids to fill an elementary school. That means 800 families in the neighborhood. Where is the housing to support that in these second-tier cities?

    1. larrylittlefield Post author

      As someone who supported higher school spending in NYC what it was low, and then was crushed when soaring spending went for increased pension benefits for those who already had the best pension benefits to begin with

      https://larrylittlefield.wordpress.com/2014/07/15/the-2008-nyc-2555-united-federation-of-teachers-pension-deal-an-investigation/

      I’ve come to believe that education has to be reinvented from the ground up. And perhaps taken out of schools entirely.

      For the cost of public education, with all its overhead, one could have a teacher with 12 students in the teacher’s own home, supported by online instruction and exercises and parents who help out one day every two weeks. A sort of education co-op. With most students learning electronically for much of the day, a teacher might be able to handle a mixed grade group, which would mean just 12 children would be required. Or pre-K to grade eight could be supported with single age groups and 120 kids.

      https://larrylittlefield.wordpress.com/2014/08/28/repost-how-then-shall-we-live-education-in-the-wake-of-generation-greed/

      Some teachers, parents and kids might like this better. In a city, public parks can take the place of the schoolyard, and public libraries could be used for kids to get together in larger groups. But the unions and bureaucracies would hate it. And rather than just have the best teachers put up lessons and exercises for a moderate fee, the Ubers of the world would want to try to get rich off it.

      This is an example of the kind of adaptations that younger generations will have to make in an era of declining institutions. Such adaptations may be easier in cities.

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