Joel Kotkin, DCNF
Op-ed views and opinions expressed are solely those of the author.
The dreadful death of George Floyd lit a fire that threatens to burn down America’s cities. Already losing population before the pandemic, our major urban centers have provided ideal kindling for conflagration with massive unemployment, closed businesses and already rising crime rates.
The forms of disintegration vary. In overwhelmingly white cities like Portland, Seattle, San Francisco and Minneapolis, violence has featured white radicals endorsing the extreme agenda of the neo-Marxist Black Lives Matter. In more diverse cities, such as Chicago and New York, protests have devolved into basic thuggery as law enforcement has been curtailed and large portions of the prison population have been released.
The pandemic has shaken the once confident ranks of new urbanists. At a time when even The New York Times is suggesting that density and packed transit lines worsened the contagion, some still embrace theology over data, with some advocating ever greater density, more crowding in cities, and mass transit. Fortunately, people tend to be less theological about their locational choices. According to The New York Times, 420,000 people left New York City between March 1 and May 1. This nearly equals the city’s total population increase from 1950 to 2019, according to demographer Wendell Cox.
The impact of dense conditions on the pandemic is clear. Overall, high-density locations have suffered three times the COVID-19 fatality rate of less dense, generally suburban areas and eight times those of more rural environments. Cities’ vulnerability comes not simply by calculating people per square mile, but by “exposure density” brought on continued contact with people, particularly in crowded, unventilated places like subways, small apartments, elevators and offices. After all, the New York area, the epitome of dense, transit-oriented urbanization, still accounts for roughly one-third of all U.S. COVID-19 deaths.
Even as the pandemic has spread to other parts of the country — notably meat packing plants, border towns and Native American reservations — the correlation is simply impossible to ignore. High rates of poverty and overcrowding, clearly factors in COVID-19 infections, can occur anywhere but seem most devastating in places where poverty meets density. The Brooklyn and Bronx boroughs, with higher rates of poverty than fashionable Manhattan, have endured a fatality rate 7.5 times the national average.
Urban planners, real estate speculators and their flacks may ignore these numbers, but people take their own health, and that of their families, more seriously. A recent Harris poll suggested that upwards of two in five urban residents are considering a move to less crowded places. More people, notes the National Association of Realtors, are seeking out single family houses with yards and workspaces. Even in New York, where suburban sales (particularly to Connecticut) are rising rapidly, Governor Andrew Cuomo has been reduced to begging wealthy Gothamites to not depart for less taxed states.
Some urban refugees are even looking beyond the suburbs to the countryside. In New York, the rural counties north of the city have experienced a huge increases in demand even as demand for city apartments drops. This pattern is also seen in other rural getaways such as Montana, rural Colorado, Oregon and Maine.
Even before COVID-19, millennials, as we found in a recent study for Heartland Forward, have been heading to second- or third-tier metropolitan areas like Fargo, Des Moines, Fayetteville and Grand Rapids. These areas are gaining migrants even as some big cities like New York, Los Angeles and Chicago have actually lost millennials over the past five years.
The Changing Economic Paradigm
Over the past decade the mainstream media — proclaiming that millennials would continue pouring into cities — wore itself out promoting the economic future of big, dense cities. Neil Irwin of The New York Times claimed “superstar cities” like New York, San Francisco and Seattle will prevail since they had “the best chance of recruiting superstar employees.” In contrast, rural and interior regions would become home to “the left behind,” while others boldly predicted that suburbia would be “the next slums.”
Little noted was the fact that, throughout the past decade, suburbs account for upwards of 80% of metropolitan job growth. This share has likely gotten bigger. Since the pandemic, the fastest drops in job postings have been, outside Hawaii, in the elite regions such as San Francisco, New York, Chicago, Boston and San Jose. Similarly these same cities have all experienced strong declines in rents, even as more affordable, less politically correct cities like Cleveland, St. Petersburg, Indianapolis, Columbus, Reno and Chattanooga have seen healthy increases.
Perhaps nothing will amplify these trends more than the rise of telecommuting. Some 60% of current U.S. telecommuters, according to Gallup, wish to keep doing so for the foreseeable future. Stanford economist Nicholas Bloom predicts that, once the pandemic ends, the online workforce will have increased from six percent before the pandemic to something closer to 20%. A University of Chicago study suggests this could grow to as much as one-third of the workforce, a finding also confirmed by a recent Federal Reserve Bank of Atlanta report.
Ultimately people will determine the shape of cities. Even when offices opened early this summer in New York, real estate brokers report, most workers refused to return. This is not merely an expression of fear. Before the pandemic , noted Gallup, three times as many Americans expressed preference for rural or small town life as for the big city. Critically, this includes knowledge workers: A recent survey of professionals found 70% sought to move to a less dense area.
Corporate executives have also been surprised by how seamless the shift to online work has been, reaping surprising productivity gains; most believe this trend will continue after the pandemic. Mortgage giant Nationwide and other major financial institutions — Barclay’s, Morgan Stanley, Citigroup and JP Morgan Chase — have decided to reduce their large office footprint.
The tech industry, often celebrated as the city savior, is particularly susceptible. A June survey of venture-backed startups showed that three-quarters expect to remain fully or mostly remote; barely five percent anticipate a total return to the office. Concentrated in areas that already have the highest rates of telecommuting, many software jobs are intrinsically easy to do remotely. Many tech companies, including Google, Twitter, Facebook and Salesforce, also predict that a large proportion of their workforce will work remotely after the pandemic. With two out of three tech workers now willing to leave San Francisco, many, according to Redfin, are seeking more suburban locations, and even a shift to the countryside.
These shifts could have a severe financial fallout, with a potential haircut of $3.3 trillion in commercial mortgages. Particularly vulnerable will be retail rents in places like New York, now plummeting, as well as financially dodgy mega-dense developments like Hudson Yards, the proposed new massive development in Sunnyside, Queens and other similar efforts in Chicago. Two largely Chinese-financed projects, one in already troubled downtown Los Angeles and another in San Francisco, may end up never being fully completed. Just earlier this month, a Los Angeles high rise office tower sold for one third below its asking price a year before.
The New Political Equation
Rising disorder in our major cities — paced by a shocking rise in homicides in Los Angeles, Chicago and New York — represents an arguably greater long-term threat. Security is a now hot topic among corporate location executives, notes Jay Garner, head of the Site Selectors Guild. Garner reports that barely 10% of companies want to locate in big city while most prefer suburbs, smaller cities, or rural areas. The top places cited by companies include such Boise, Colorado Springs, Columbus, Kansas City and Indianapolis.
Garner now wonders how attractive “woke” cities like Seattle or Portland or Minneapolis, with their debilitated law enforcement, may be for investors. Certainly they would be concerned about Chicago, where even a rumor concerning police can create protests accompanied by looting on the city’s fabled Magnificent Mile.
Rioting turns out not to be a good economic strategy. As we saw in the 1960s and again after the Los Angeles riots in 1992, which I personally witnessed, disorders first bring pledges from corporate elites and government, the pleasures of violence and political posturing do not improve conditions. Yet decades of racial protest have engendered little prosperity: high-poverty urban areas doubled in population between 1980 and 2018. The return of “no justice, no peace” rhetoric is unlikely to improve conditions in the inner city or encourage business to move to downtowns. South Central Los Angeles, the site of two of the worst riots in American history, over the past 50 years has suffered a growing gap with the surrounding area in terms of homeownership, income and educational attainment.
In the short run, at least, it seems likely that cities under “progressive” rule will continue to lose employers. Amazon, for example, is gradually de-emphasizing Seattle, which seems determined to raise taxes on affluent employees and lessening police protection. The mega-firm is moving more jobs to suburban Redmond and Bellevue. Many long-time Bay Area and greater Los Angeles employers — Bechtel, McKesson, Parsons Engineering, Jacobs, Toyota, Nissan — have relocated predominately to sunbelt suburbs. Besides concerns about taxes and policing, the looming threat of draconian climate policies, has had the effect of driving companies, particularly manufacturers, to other states.
Republicans and President Donald Trump clearly see in the gross urban dysfunction a political opportunity. Theirs would be a very persuasive argument if it came from a trustworthy source and was not so blatantly politically motivated. Moderate Democrats and independents also need to make the argument that far-left politics, constant disorders and reducing police presence undermine urban prospects.
This is not a call for hardline conservatism, which enjoys only a limited constituency in urban areas. Instead it is a plea to reverse an urban pattern that, as noted in a new MIT study, has undermined their historic role as places for upward mobility. As coastal people move into more conservative regions like Dallas-Ft. Worth, some suggest there will be a more liberal electorate, at least on social issues.
What is needed is a broad alliance among the remaining sane elements in cites, with a greater focus on protecting both job creators and strong neighborhoods. The old policies of urban Democrats, focused on jobs, schools and infrastructure, would resonate nicely, particularly in working class communities. Ultimately, conservatives should seek out partnership with these forces and cultivate support in working class neighborhoods, now threatened the most by urban decline, the pandemic and surge in lawlessness. Such a political alliance will be necessary if we wish to salvage the heritage of our great cities.
Joel Kotkin is the Presidential Fellow in Urban Futures at Chapman University and executive director of the Urban Reform Institute. His new book, The Coming of Neo-Feudalism, is now out from Encounter. You can follow him on Twitter @joelkotkin
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