Cities must adopt a reform agenda that promotes enterprise and provides an environment where middle-class families can enjoy streets that are safe and clean.
With many office jobs not coming back, living preferences changing, and crime on the rise, cities must adapt and reform.
T he great core cities don’t die — but only if they are willing to change. Today the world’s great cities, such as New York or London, face dramatically changed conditions, notably the rise of remote work, fears from the pandemic, and rising crime.
In many ways they are experiencing an acceleration of already deep-seated trends. The percentage of Americans living in suburbs rose from 13 percent of the metropolitan population in 1940 to 86 percent in 2017, a gradual increase of 2 percent a year. And since 2012, suburbs and exurbs have accounted for about 90 percent of all metropolitan growth. This dispersion has occurred not only in the United States but in the old cities of Europe, too, including London and Paris.
A New Age for Cities
Increasingly the kind of celebratory coverage of cities as the best places to live, work, create, and even grow old, epitomized by the New York Times’ 2016 “Cities Imagine the Future,” seems increasingly dated. In the last two years, notes demographer Wendell Cox, the largest percentage loss of residents, and generally the worst economic conditions, have prevailed in big core cities such as New York, Chicago, and San Francisco. In contrast, population burgeoned in sprawling areas such as Phoenix, Dallas, and Orlando.
We seem to be at the beginning of a new epoch, much as occurred during the rise of mercantile cities after the Middle Ages and the emergence of industrial cities in the 19th century. Now we are seeing the fading of what Jean Gottman described four decades ago as the “transactional city,” an economy based on finance, high-end business services, and information. In this city, urban grandeur has been defined not by great cathedrals or palaces but soaring office towers. That made sense at the time, but now these ultra-tall buildings are becoming as anachronistic as the old factories that once drove urban economies. For one thing, notes one analyst, firms that once needed a whole floor just to tap their computing power can now perform most of their technical tasks remotely.
Despite nudges from some powerful corporate managements and politicians such as New York governor Kathy Hochul, office-space use remains perilously low and barely improved in the last quarter. Companies such as KPMG are cutting their Manhattan footprint by 40 percent, and a majority of firms recently surveyed by CBRE plan to cut back as well. Real-estate experts such as Wharton’s Joe Gyourko suggest that although the newer high-end building likely will come back, many older ones will remain empty “expensive eyesores.”
But this is nothing new. Office occupancy has been declining since 2000, while construction of new space has fallen consistently for a quarter-century. In 2019, before the pandemic, construction was one-third the rate of 1985 and one-half that of 2000. Now faced with a recession or at least a slowdown, office absorption is likely to remain at historically low rates. Over the balance of the decade the potential loss of value in central-business-district offices could reach $500 billion in New York City alone, while nationwide estimates suggest a financial haircut of $3.3 trillion in commercial mortgages.
The Talent Problem
Arguably the biggest challenge facing cities lies with the migration of talent. The urban “renaissance” of the past three decades depended on the migration of college-educated young people in their mid 20s to mid 30s. These have accounted for roughly half of the revival of close-in urban neighborhoods, according to research by Joe Cortright of City Observatory. Yet as some parts of cities, such as the north side of the Chicago Loop, have done well, migration to big dense cities began to decline as early as 2015, and by decade’s end, the big destinations for millennial migration, notes the Brooking Institution’s Bill Frey, have been sprawling metros such as Houston, Dallas, Denver, and Austin.
The rise of remote work represents a profound challenge to the economics of the “transactional city.” Many of those who historically filled the high-rise offices — media, analysts, programmers, marketers, designers — are precisely those who negotiated the pandemic best, notes one 2020 study. Another analysis from the University of Chicago suggests as many as 34 percent of American workers could do their jobs remotely.
More important still, remote work seems a clear preference for many. As many as 14 million to 23 million remote workers may relocate as a consequence of the pandemic, according to a recent Upwork survey, and half say that they are seeking more affordable places to live. Some 60 percent of current U.S. telecommuters, according to Gallup, wish to keep doing so for the foreseeable future.
The leverage of employers may be very limited in an era of limited labor resources, a natural outgrowth of long declining birth rates. Today the consultancy Manpower notes that the percentage of firms reporting shortages of labor more than doubled between 2015 and 2020, to 70 percent. Covid, of course, worsened the situation dramatically. By 2028, Korn Ferry projects there will be a deficit of at least 6 million workers.
And even if they return to their cubicles, it won’t likely be as often, with many companies already scaling back the number of days workers must be in the office. Even San Francisco, with traditionally one of the nation’s strongest CBDs, has suffered rising office vacancies, three times the pre-pandemic levels. San Francisco companies, according to a Bay Area Council survey, expect employees to come to the office three days a week or less, with barely one in five seeing a return to “normal.” Some three quarters of venture capitalists and tech-firm founders, notes one recent survey, expect their ventures to operate totally, or mostly, online.
Crime and the Economy
But perhaps the most pressing challenge for cities lies with the disturbing rise of crime. The remarkable safety achieved in many core cities in the last decade helped attract companies and people, but today’s rising crime is pushing businesses out of New York, Los Angeles, San Francisco, Memphis, Denver, Oakland, and Portland. Even elite Manhattan neighborhoods are a short walk or subway ride from the most crime-ridden parts of the city, and high-end shopping districts, such as Chicago’s Magnificent Mile, are regularly under criminal assault. To this, the 2020 riots added an element of organized nihilism suggesting that the rule of law had badly decayed in our most important big cities.
If crime represents the most immediate urban challenge, the longer-term concern involves the evolution of the urban economy. The “transactional city” evolved into an engine for vast inequality. Despite numerous exposés on the growth of suburban poverty, the poverty rate in core cities remains twice as high. Research by urban analysts Joe Cortright and Dillon Mahmoudi shows that the number of high-poverty (more than 30 percent below the poverty line) city neighborhoods in the U.S. has tripled in the last half-century, from 1,100 in 1970 to 3,100 in 2010.
At the same time, the once vibrant urban middle class has been pushed out. As early as the 1970s, notes the Brookings Institution, middle-income neighborhoods began to shrink more dramatically in inner cities than anywhere else — and the phenomenon has continued. Chicago urban analyst Pete Saunders notes this process started in the 1990s with large gains of wealthy people, growth in the poor population, and a precipitous 50 percent drop in middle-class households.
What we see is increasingly an “upstairs, downstairs” economy. Teachers, firemen, and police officers struggle to afford homes in many American cities, according to a study from Trulia. This pricing-out also applies to many skilled blue-collar professions such as technicians, construction workers, and mechanics; during the pandemic the most likely to leave cities were members of the white working class. Today, in virtually all U.S. metro areas, the inner cores are more unequal than their corresponding suburbs, observes geographer Daniel Herz.
Progressives Assume Control
This social reality may be bad for cities, but it’s been manna for extreme progressives. Cities have long demonstrated a leftish streak, but still contained enough moderate and conservative voters to make things competitive. In the 1990s, urban voters turned to pragmatists such as Rudy Giuliani in New York, Bob Lanier in Houston, and Richard Riordan in Los Angeles. Even San Francisco in 1991 elected Frank Jordan, a middle-of-the-road Democrat and former police chief.
Civic participation, as measured by voters, has dropped in cities such as New York and Los Angeles. Bill de Blasio, for example, won the 2013 New York mayoral election with the lowest-percentage turnout since the 1920s, while Los Angeles mayor Eric Garcetti won reelection with only 20 percent of voters casting ballots — less than half of the turnout when Riordan won in 1993. Amidst pervasive signs of civic decline, the turnout in the hotly contested first round of the election to succeed Garcetti was barely 30 percent.
Today’s “new left urbanists,” for whom pragmatism and moderation represent weakness, are in ascendance. Their emphasis is not on restoring public order or rebuilding the local economy, but rather on a litany of policies such as “defunding” of police, imposing “road diets” on commuters to reduce car usage (while making traffic worse), massive expansion of public housing, and green-energy schemes that raise energy prices. Most are committed to serving as “sanctuary” cities, although they are far from happy to share in the results of the administration’s border(less) policy, with its attendant costs for housing a largely poor, not particularly skilled population.
In New York, the Working Families Party is now a significant factor in city politics, with several candidates elected at the local and state level. Meanwhile in Los Angeles, once a capitalist mecca, as many as five Democratic Socialists may sit on the 15-member city council in January. The likely new mayor, Karen Bass, is a veteran of the pro-Cuban Venceremos brigade, and in 2016, on the occasion of Fidel Castro’s death, she issued an admiring statement about “the Comandante en Jefe” (although in 2020 she expressed strong reservations about the Cuban regime).
Changing Trends in Living Preferences
Under these circumstances, what is the future of urbanism? Much will be shaped in places not usually embraced by urbanists but in metropolitan areas such as Austin, Raleigh, Phoenix, Nashville, Salt Lake City, and Dallas, which over the past five years have grown jobs faster than Silicon Valley and Seattle, and at double the rate for New York, Los Angeles, and Chicago. These areas also boast strong appeal to Millennials and are likely to dominate future growth, according to a recent analysis from Moody’s.
There has been growth in dense urban districts in some of these cities, particularly Houston, but the real urban frontier is emerging in the suburbs and particularly exurbs, which have grown fastest of all geographies since the early 2010s. These new places, such as the Domain outside Austin, Houston’s Woodlands, Santa Clarita north of Los Angeles, and Irvine to the south, have essentially become cities of their own, with opportunities to work, as well as recreate, without heading into the core city. These areas often feature townhouses, apartments, and retail space in the center, surrounded by single-family homes.
This exurban migration is far from “white flight” redux. Overall some 96 percent of all suburban growth in the last decade took place among racial minorities. In the 50 largest U.S. metro areas, 44 percent of residents live in racially and ethnically diverse suburbs in which non-whites make up between 20 percent and 60 percent of the population.
Was H. G. Wells Right?
But even under current circumstances, traditional core cities are likely to continue to attract young talent, particularly those in artistic pursuits, design, and media, and perhaps even more so if prices for commercial and residential real estate fall somewhat. The most likely scenario — particularly given the progressive stronghold on city politics — would be the transformation of the core into basically a cultural and lifestyle hub. This fulfills H. G. Wells’ prediction well over a century ago that the urban core would morph into what he referred to as “places of concourse and rendezvous.”
This city, he projected, would contain a relatively small percentage of the overall population and be dominated by the affluent and childless; he waggishly predicted the inner rings of cities such as London would become places of “luxurious extinction.” Tourism would seem to be the big growth industry; in Manhattan, apartment prices have recovered in large part due to a surge of buyers speculating in short-term rentals (such as Airbnb) as opposed to long-term residences.
As filling office towers becomes more difficult, the imperative will lie in finding new uses for these structures. Just as the abandoned factories in New York’s Soho were transformed into artists’ lofts after the meltdowns of the 1970s and 1980s, now-redundant office towers can be repurposed into housing, flexible workspaces, and artisanal businesses, transforming once-deadened districts into much livelier, 24-hour communities, as is already happening in lower Manhattan.
A Better Future Is Still Possible
There also still remains a possibility of a middle-class, and even family, resurgence. The economic shift away from downtowns and towards the surrounding lower-density neighborhoods could incubate a more human-scale urban environment.
Rather than flock to Midtown high-rises, talented people, many working remotely, can cluster in urban neighborhoods such as Park Slope, Carroll Gardens, and Brooklyn Heights in Brooklyn, as well as Tribeca, Soho, and Greenwich Village in Lower Manhattan. Brooklyn’s real-estate market appears robust, even as other parts of New York City face profound trials. Between 2019 and 2021, over 1,200 new enterprises opened in Brooklyn while declining by over 5,000 in Manhattan. Similarly, even as downtown San Francisco declines, neighborhoods such as Noe Valley and the Valencia Corridor in the Mission, Wicker Park in Chicago, and Echo Park/Silver Lake in Los Angeles are all likely to keep thriving.
Yet this opportunity to reinvent urbanity cannot be fully realized unless cities adopt a reform agenda that promotes enterprise and provides an environment where middle-class families can enjoy streets that are safe and clean. Without these changes, our great core cities will continue to decline in importance, even while serving as magnets for the hip, rich, and famous. It will have to be done without massive spending, as cities, notably Chicago, are fiscally overextended.
The situation is far from hopeless. There have been tentative signs of rebellion in cities as deep-blue as Baltimore, Seattle, and San Francisco, where local residents have tossed out ultra-progressive prosecutors; San Francisco also ditched several radical school-board members. These small shoots of anti-progressive sentiment suggest a market for more reality-based, and bipartisan, urban governance. A new, if somewhat less grandiose, urban future still beckons, but it will have to be fought for in the city halls and neighborhoods by the people who live in and love their cities.