Adding value, not just shrinking
is the key to rightsizing cities
By Markus Berensson, City Mayors Correspondent

13 June 2011: Cities and regions grow, reach a plateau and shrink. Sometimes they start growing again after a short slump, such as New York City following the dismal 1970s, in other cases, like in Mayor Curley’s mid 20th century Boston, it takes decades of distress before the wheels of fortune start turning again and the urban economy finds itself in tune with current economic developments. Some cities though, like Buffalo, Cleveland, Detroit, St. Louis or Youngstown, to name a few, are seemingly unable to halt their population losses.

| Re-think, re-focus and return | Special forces of urban decay | Sharing the burden of rightsizing |

Shrinking continues to be dark stories of The Wire-esque Hamsterdams that the rest of the world is both frightened and fascinated by. Detroit is treated like a murder victim by a media that can’t stop glower over an urban carcass of empty skyscrapers and boarded-up housing, endlessly regurgitating exactly how great the city used to be, how many people that once lived there and how terrible it now is. Thus, feeding a mindset of loss that focuses on a great past rather than a promising future.

And of course, Detroit is a post-industrial Aztec ruin that in many ways deserves its status as poster-name of urban decay. Great cities grow since greatness attracts new residents and if a place’s population plunges it signals a loss of purpose. But a single-minded approach to success, solely measured by population and total economic output, forgets that success is relative. An unattractive small city can develop into a pleasant big city; conversely an unattractive big city can change and develop into an attractive small one. If a city has lost its economic foundation and no longer can support its current size, then it has to reconsider its purpose and realize that a comeback isn’t about doing the exact same thing it did before, and just as good, but that the city will have to be good at something new.

Re-think, re-focus and return
After a few failed attempts by the former tennis king John McEnroe to regain his crown and be seeded number one, he realized that he was too old and unmotivated. He quit the tour and after some soul-searching focused on what his strengths were. He may have lost his way out on the court but did possess a high degree of tennis know-how combined with a knack for sharp commentary that spurred a comeback as a much appreciated tennis pundit. While talking about tennis is nowhere near as glorious as winning a Grand Slam, doing it successfully is better than being a has-been on a sure path to oblivion. The same rules apply to former centers of American manufacturing. Being the Motown of America and the birthplace of the American middle class is nothing that Detroit will be able to beat, but it can re-size and come back as a modest version of its former self that specializes in new fields.

Step one is to look at a city’s current strengths and how they can be utilized for achieving successful shrinkage and eventually future growth as well looking at ways that ‘rightsizing’ can be protected from the special forces of urban decay.

Cities grow when they can offer production and consumption advantages to businesses and residents. Locating in dense urban settings makes firms more productive since it improves access to new ideas and technology thanks to an urban advantage in both producing ideas as well as in transporting them quickly. The more information-dependent the industry – like financial services or media – the greater is the benefit of locating in a dense city. Conversely, for the workers, living in a metropolitan area will make it easier to transfer jobs. If a company in a big city is hit by a negative productivity chock, workers can easily quit and go to a different firm in the same city, something that employees in small towns or rural areas have a harder time doing due to a smaller labor market.

But cities are not all about agglomeration economies and production benefits. Living in dense areas also comes with important consumption advantages. With rising incomes, workers are not only looking for a decent job when deciding where to locate, they are also looking for quality of life. Amenities are valued more and more, especially by high-skill individuals, the very group that every city is out to lure, given their importance for innovation and growth.

According to Edward Glaeser, Jed Kolko and Albert Saiz’ working paper “Consumer City”, consumption benefits come in four different forms, the most straightforward being a rich variety of services and consumer goods. That you can get everything you would ever want in cities like New York and London is not too far from the truth, making them magnets for everyone looking for diversity and entertainment. A second advantage is aesthetics and physical setting. Paris or Amsterdam offer residents and visitors a unique aesthetic experience thanks to its architectural treasures, while Vancouver or San Francisco are blessed with beautiful natural settings that make it pleasant to live there.

A well-run consumer oriented city can also provide more varied high quality public services, for example in the form of good schools or excellent medical facilities, something that less densely populated areas cannot do. Lastly, cities provide speed, this they can do in two different urban forms: either as car-based low-density cities with decentralized employment (Los Angeles, Atlanta, Houston) or as walking/public transport-based high-density cities (New York, Hong Kong, Singapore).

The special forces of urban decay
Besides understanding the factors underlying urban growth in modern metros it’s also crucial to take the unique characteristics of urban decay into consideration when formulating shrinking strategies. Like Ed Glaeser of Harvard University and Joseph Gyourko of University of Pennsylvania showed in their seminal paper “Urban Decline and Durable Housing”, “[u]rban decline is not the mirror image of growth, and durable housing is the primary reason the nature of decline is so different”.

That buildings last for a long time is the reason why boomtowns can explode almost overnight, while Rustbelt cities have deteriorated slowly and steadily over the course of decades. Given the slow rate of housing-depletion, the supply is close to constant, meaning that a loss of population will not lead to a similar decrease in housing supply, but to lower prices. With continuous population loss housing values keep falling until they are below construction costs and close to zero, thereby making it increasingly more attractive for low-income people to remain in low-cost, low-amenity cities like Detroit.

This helps explain why declining cities on average are less skilled than their growing counterparts – because cheap housing is relatively more attractive to low-income earners. There is a concave relationship between city growth and the proportion of city-workers who are highly skilled, in that the proportion of highly-skilled city-workers declines more rapidly with population loss than it increases with a comparable population gain. In the words of Glaeser and Gyourko: “skilled people particularly value a robust labor market and high amenities, so they leave even though durable housing keeps the overall size of the population roughly constant”. Given that human capital is one of the main factors behind growth, durable housing that drives high-skilled out and keeps low-skilled in create negative externalities in the form of social problems and low innovation, generating a self-reinforcing process where “decline causes concentrated poverty, which then pushes the city further downward”.

Sharing the burden of rightsizing
To regain its footing in the modern economy, declining cities must make it as beneficial as possible for firms to set up operations there as well as investing in consumption amenities in order to attract more high skilled residents.

The Detroit of today is a large city with a low education level, few amenities, high deprivation and social problems that needs to embrace ‘rightsizing’ and become a smaller place with a higher education level, lower poverty levels and fewer social problems by dealing with durable housing and investing in its consumption side strengths. Mayor Bing’s administration is already planning to bulldoze 10,000 vacant dwellings but estimates show that that this still leaves around 90,000 empty units that need to be destroyed in order to turn the negative housing price development around and make the city relatively more attractive to high skilled individuals.

Serving a smaller, more concentrated area will also make it easier and more affordable for local authorities to provide good public services to their residents leading to better schools, safer streets and improved public amenities such as parks and recreational areas that will make a city more competitive. In this, Detroit and other Rustbelt cities need help from their suburbs, state authorities and the federal government.

When offering financial support, state and federal authorities should take into consideration a city’s need to shrink in order to become a better place to live. Instead of tying a lot of subsidies to population size – forcing Detroit, Akron and Cincinnati to ponder challenging new census numbers because more people means more money and in Detroit’s case the ability to charge higher taxes – support should focus on successful rightsizing. As for the suburbs, they need to realize that their economies are intertwined with the fate of the central-city and that the entire metro area has an interest in keeping the main urban centre from dying (the Buffalo, Detroit, Pittsburgh and Youngstown metropolitan areas lost population during the past decade) by offering financial support in the form of regional tax-revenue sharing that help shoulder some of the central-city’s public service burdens.

And while many Rustbelt cities have little to offer when it comes to aesthetics and physical setting, shrinking leaves a lot of space that can offer speed. The Detroit People Mover, an elevated light-rail system was a particularly poor urban generation project because the congestion-free streets of a shrinking city is a bad place for high-density oriented public transport but very good for swift car-based commuting. By tearing down thousands of vacant houses in a shrinking city it will leave plenty of space for things like urban farming but also, and more importantly, the American love affair with spacious suburban living within the central-city’s limits.

If shrinking cities like Detroit embrace successful rightsizing and a period of even more population loss in order to strengthen current production and consumption benefits as well as laying the foundation for new ones, the future does not have to be as bleak as the recent past. There is no room for a Detroit of tomorrow that looks anything like the city did when it prospered on selling Americans middle class dreams and powerful cars. But there is a promising future for a smaller, more skilled Detroit that can reinvent itself as a highly educated, fast and affordable low-density, high-amenity city that is open to new ideas.
© 2011 Markus Berrenson and City Mayors

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