Trends in Urban Development

Lessons from the leaders are changing the rest

By PATRICK DUFFY

One of the key reasons for the lack of attainable housing in many American cities is that the best and brightest have often had to start careers in a limited pool of job-creating regions such as the San Francisco Bay Area, Los Angeles, New York, Boston and Chicago. This competition for space has not only bid up housing costs, but also led to congestion into neighboring cities and towns. Meanwhile, much of the heartland has been hollowed out as younger generations seek their futures and fortunes elsewhere. But this is starting to change.

In a trend slowly gaining traction – and due to a combination of improving communications technology and greater acceptance by employers for telecommuting – small and mid-sized cities are becoming increasingly attractive to newcomers by copying what the leading cities do best. This can include encouraging transit-oriented development and safe spaces for pedestrians, removing outdated parking minimums for new projects, more flexible zoning allowing for more mixed uses on the same parcel, and greater densities in historically single-family neighborhoods.

At a time when car ownership is dropping in favor of car-sharing services, bike lanes, scooters, and more public transit options, forward-thinking cities are also experimenting with mobility pricing in congested areas, providing special pick-up and drop-off zones for Uber and Lyft, and sometimes offering publicly funded door-to-door service for residents with special needs.

At the street level, cities can promote the growth of local retailers and restaurants versus national chains, concentrate convenient but space-hogging “big-box” stores to certain areas, and insist on high architectural standards that match the character of the area. As an example, affordable housing projects built today typically include exterior elevations, which are difficult to tell apart from traditional market-rate condominium and apartment buildings.

Steve Case, the AOL founder turned angel investor, is already investing in this trend by partnering with other high-profile tech executives for his $150 million, “Rise of the Rest” seed fund, which invests in companies located outside of Silicon Valley, New York City, and Boston. Although much of the funding so far has gone to larger cities such as Los Angeles and Chicago, it has also invested in companies located in Memphis, Birmingham, Raleigh-Durham, and Minneapolis-St. Paul.

Still, in order to participate in this growth trend, cities not only need to combine the right mix of human talent and government cooperation, but also to target the right markets.

It’s also good timing for this fund, as a recent survey by the Computing Technology Industry Association found that 78 percent of tech workers would consider leaving their current city for a new job. The top two reasons for this flexibility include affordability (60 percent) and the local economy (56 percent). Moreover, 82 percent of tech workers weigh overall of cost of living when choosing a place to live, with 58 percent specifically citing housing costs.

Census data is also showing a similar trend. When Brookings Institution demographer William H. Frey examined U.S. Census Data from 2010 through 2017, he found two interesting trends: A return of urban dwellers to the suburbs and some rural areas, and more Americans moving to large- and moderate-sized urban areas in the middle of the country. But it was the smaller cities – such as those with under half a million people – which saw their rate of growth rise for the third straight year, while the largest cities grew at the lowest rates since 1990.

Moreover, according to statistics from U-Haul for 2018, while regions such as Sacramento, Houston, and Manhattan attracted the most total newcomers, smaller cities such as Harrisburg, Grand Rapids, Greenville, Ft. Lauderdale and Madison also made the top-ten list. That is certainly a profound change.

Still, in order to participate in this growth trend, cities not only need to combine the right mix of human talent and government cooperation, but also to target the right markets. At the moment, the most promising employment sectors include energy, certain types of manufacturing returning to the U.S., professional and business services, and those with higher-than-average job growth in STEM-related positions. But there’s also an enormous opportunity for those ‘jobs of proximity’ in the service industry, which now accounts for 45 percent of the national workforce. Although these types of jobs – such as education, healthcare, personal care, on-demand retail, hospitality, urban logistics, and transportation – cannot be easily outsourced, many of them still don’t pay enough to provide workers with a stable, middle-class lifestyle. In order to better spread out housing demand across the country, service industry wages will need to rise to the levels offered by companies such as Costco and Trader Joe’s, which have learned that a ‘good jobs strategy’ also leads to a happier and more stable workforce.

Patrick Duffy is a Principal with MetroIntelligence and contributes to BuilderBytes. He may be reached at pduffy@metrointel.com or 310-666-8288.

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