What City Observatory did this week
1. Seven reasons you should be optimistic about cities in a post-pandemic world. There’s widespread pessimism about the future of cities. With the pandemic-induced advent of work-at-home, many people reason that soon there won’t be any reason to go into the office, or have offices, or even cities. We disagree. Not only are cities more than just about access to jobs, the pandemic is masking (sorry!) a deeper truth about how labor markets work. As long as everyone has to work remotely, no one is at a competitive disadvantage in the workplace, we’re all in the same Zoom-limited boat. But as we gradually return to work, even a few days a week, those who are present will have a competitive advantage, better able to contribute to the organization, tap into informal communication, demonstrate commitment, and build networks. Competition is the first of seven “c’s” that we think are key reasons to believe that city’s will not just survive, but actually flourish again in the post pandemic world. The full list is as follows:
- Competition: Zooming it in works when everyone has to do it, but if you work remotely while others are in the office, you are at a competitive disadvantage in contributing to and advancing in your work, especially if you are early in your career.
- Consumption: Cities are about more than work. They provide us with varied, abundant and diverse experiences and opportunities for social interaction and consumption.
- Couples: Young people are drawn to cities because they are the best place to find life partners. Once partnered, cities offer more opportunities for both partners to pursue their careers.
- Careers: Cities are still the best place to find your way in life and build skills, networks and a reputation that enable you to be as successful and fulfilled as possible.
- Creativity: The serendipitous interaction that happens most and best in cities is what fuels our knowledge-based economy.
- Camaraderie and Commitment: Being there matters. Face-to-face in place shows you care, and you’re committed. It’s about being in the room where it happened, not in the Zoom where it happened.
- Civic commons: Cities are still the place we come together for collective experiences, from concerts and celebrations to rallies and protests. The pandemic has rekindled our awareness of how important public spaces are for enabling us to connect.
2. Why—and where—Metro’s $5 billion transportation tax measure failed. Portland voters resoundingly defeated a ballot measure that would have raised about $5 billion from increased payroll taxes to pay for slate of transportation projects, including an extension of the area’s light rail system. Strikingly, the measure failed on the same ballot where voters approved billions in additional taxes for parks, libraries, pre-school, and school construction. We look in detail at the geography of voter sentiment.
The measure passed chiefly in close-in urban neighborhoods that also voted for an unsuccessful progressive mayoral challenger. The measure was rejected in the neighborhoods that would have been served by the proposed light rail extension, and was also rejected in East Portland, a relatively low income area where the measure’s proponents argued that pedestrian and safety improvements would redress long-term inequities.
1. The geography of the 2020 presidential election. The standard 50-state red/blue maps used to illustrate the geography of voter preferences are wildly misleading, principally because they make big, sparsely populated (and mostly red) areas seem much more important than they are (electorally). The Washington Post has a fine antidote for this kind of visual lie: a map that shows the results for every county, with a dot corresponding to the size of the electorate in each county.
Mapping election returns by population, rather than by acreage presents a much more realistic picture of the weight and distribution of political opinion across the landscape.
2. The economic geography of the 2020 presidential election. Our friends at the Brookings Institution have revisited a theme they explored four years ago: How does the distribution of the presidential vote compare to the distribution of Gross Domestic Product (GDP). Preliminary data show that the counties that voted for Joe Biden and Kamala Harris account for 70 percent of the nation’s gross domestic product.
That’s an increase from 2016, when the counties voting for the democratic ticket accounted for about 64 percent of the nation’s GDP. The increase reflects both the growing importance of urban economies to national economic output, and also the shift of a couple of key metro areas, like Phoenix, into the blue side of the ledger. But the message is the same: voters in the nation’s most productive communities voted Democratic.
3. Rent control in a complex and dynamic market. The District of Columbia is considering an ordinance to expand its system of rent control to housing built in the last 15 years. (The city currently has rent control for units built before 1976).
The DC Policy Center’s Yessim Taylor has a thoughtful analysis of how the expansion of rent control is likely to affect the housing market. Taylor points out that over time, rent control tends to lead to the removal of housing from the rental market place, either through condominium conversion, shifts to other uses or demolition. Historical experience in DC shows that in the years immediately following the imposition of wider rent control, about two-and-half percent of previously rented units moved out of the rental pool each year.
And rent control has long term effects on the marketplace, with diminished incentives to maintain housing, and limited incentives to build more units, rent control can lead the overall housing supply to shrink, driving up rents for everyone. In DC, its likely that expanded rent control will drive up rents in the “shadow” rental market (where homeowners rent out single-family homes or condominiums).
Over time, rent control would also tend to reduce local property tax collections as it drives down the market value of rental housing. On its face, rent control seems like a simple policy, but as Taylor’s analysis shows, it will have widespread, enduring and counter-productive effects on housing affordability.
A trend to watch: Declining central city apartment rents. At City Observatory, we firmly believe the steady, long-term increase in the relative rents commanded by central city apartments relative to those in the suburbs is a key indicator of the growing demand for cities (and a signal we’ve not building enough housing in desirable dense urban neighborhoods). So we keep a close eye on current market indicators of rent.
One of the best sources of data on market trends is ApartmentList. Rob Warnock, an economist for Apartment List, has a new research report comparing city and suburban apartment rent trends for large metro areas for the first 9 months of the year. His data shows that across the 30 largest markets, apartment rents have continued to soften in central cities, while they have rebounded in suburbs. Since January, suburban rents are up slightly (about half a percent), while rents in their central cities have declined about 5 percent. (It’s worth remembering that “principal cities” are usually the single most populous municipality in a metro area, and encompasses the entire city limits, and not just downtown or even dense urban neighborhoods).
This pattern holds in nearly all of the 30 markets, where suburban rents have either increased more or decreased less than rents in the central cities they surround. This suggests, in the summer and early fall at least, that urban markets are not growing as robustly as suburbs. Warnock offers some reasons as to why this may be taking place, partly having to do with the recession, partly to do with pandemic, partly having to do with the mix of apartments in cities compared to suburbs:
There are also differences in the types of apartments available in each type of city; dense urban centers are more likely to contain newer, more-expensive, more-luxurious apartments that are positioned to see more vacancies and steeper rent drops during an economic recession. Meanwhile, suburbs tend to have a greater share of cheaper, lower-density homes that remain in high demand even as renters look to cut costs.
It’s important to note that city apartments still generally command a substantial rent premium compared to suburban apartments, but this divergence from the longer term trend of relatively increasing urban rents bears close watching. It may be, at least for the moment, that apartment supply in cities is no longer being outstripped by demand (deliveries of new apartments, typically years in the making, don’t change as quickly as demand for housing). And as Warnock notes, some of what we may be observing may reflect a short term movement of renters to ownership spurred by low interest rates.
Warnock’s report has detailed data and interactive charts for each of the 30 largest US metro areas, showing rental trends for central cities and their suburbs from January through September, 2020.
Rob Warnock. “The suburban rent rebound,” ApartmentList.Com, November 10, 2020
In the News
City Observatory’s Joe Cortright is quoted in a Portland Business Journal article, “The departed” chronicling the demise of many long-established local restaurants.