Guest Column

Emphasize downtown residential development

March 11, 2016
| By Lou Glazer |
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A core finding of Michigan Future's research has been that what made us prosperous in the past won't in the future. The big change is that prosperity is now aligned with knowledge-based rather than factory-based economies.

Two other big changes relate to housing. First, young professionals are leading the trend of the middleclass and more affluent by choosing to live in central city downtowns and not the suburbs. This reverses a trend at least half a century in the making. Second, renters are now an asset — not a liability — in a community's economic wellbeing. It’s no longer true that homeowners increase a community's wellbeing while renters diminish it.

A recent article in CityLab documents the trend of young professionals concentrating in central city downtowns and not the suburbs.

“From 2000 to 2010, more college-educated professionals age 25 to 34 moved downtown than to the suburbs in 39 of the 50 largest U.S. metros. For 35- to 44-year-olds, the same held true in 28 of the 50 largest metros,” according to the report. “This revival was true in the places you might expect, like New York City or San Francisco, and in places you might not, like Cleveland. It was true despite historical trend lines showing that, for the better part of a century, the wealthy typically moved one way when it came to cities: out of them.”

Citing new research by Victor Couture, University of California, Berkeley, and Jessie Handbury, University of Pennsylvania, the article identifies the density of urban amenities as the primary draw of downtowns for young professionals.

“Couture and Handbury pin the return of downtown on a new fondness for service amenities: music venues, theaters, bars, gyms and the like. Not the growth of these things, but a fresh taste for living near them, a broad cultural shift that could make urban revival more durable.”

Richard Florida summarizes renters becoming an economic growth asset in a recent CityLab article this way:

“Homeownership is no longer the key driver of America’s industrial economy. Across the U.S., cities and metros with higher rates of homeownership have had more trouble adjusting to the demands of the knowledge economy, trapping their residents in housing they cannot sell and limiting their ability to adjust to economic downturns. Meanwhile, cities and metros with more renters have proven better able to cope with the transformation from an industrial to a knowledge economy.

“In fact, metros with greater shares of renters have higher wages, higher productivity (measured as economic output per capita), and greater concentrations of high-tech firms, according to Mellander’s basic correlation analysis. Metros with greater shares of renters also have higher concentrations of highly educated adults with college degrees and a greater share of the workforce made up of creative class workers in science and technology, knowledge-based professions, and arts, culture, entertainment and media. Metros with greater shares of renters are also substantially denser and more diverse — two other factors that contribute to innovation, creativity and economic growth.

“On the flip side, metros with higher levels of homeownership are less innovative, less productive, less diverse on average, and have less talent. These associations are even more pronounced when we look at just the 51 large metros with more than 1 million people.”

So it’s a change in consumer preferences — not being unable to afford because of the bad economy and/or high student loan debt — that is driving young professionals to choose city living and renting over buying a home in the ’burbs.

Particularly in Michigan, this has been a hard lesson to learn, where conventional wisdom — despite lots of evidence to the contrary — is that the preferred good is a house in the suburbs and the inferior good is an apartment or condo in the city.

The private amenities Couture and Hanbury emphasize as attractors of young talent require high residential density. That’s something by and large that has been missing in Michigan cities, in part because housing and land use policy has discouraged density.

Public amenities matter, as well, especially transit and other alternatives to driving. Other public amenities that matter are city parks and outdoor recreation and support for the arts, not to mention basic services like public safety. These, too, are by and large missing in Michigan.

It’s also far past the time when we think of renters as the kind of people we don't want in our community and understand the new reality that renters are major contributors to economic prosperity.

It all adds up to a need for public policy in Michigan that emphasizes city development — particularly residential development — as a priority, because place attracts talent, and talent equals economic growth.

Lou Glazer is president of Michigan Future Inc.

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