Urban Issues

Architecture in an Age of Austerity

Adam Mayer — Sat, 29 Nov 2008 00:00:36 -0500

“Architectural publication, criticism and even education are now focused relentlessly on the enticing visual image. The longing for singular, memorable imagery subordinates other aspects of buildings, isolating architecture in disembodied vision.” – Finnish architect Juhani Pallasmaa, from his essay “Toward an Architecture of Humility”

Anyone paying even remote attention to the domain of high architectural design in the past decade will surely recognize the name Frank Gehry. The celebrity architect (or if you prefer to use the portmanteau word used to describe such practitioners: starchitect) is best known for his unconventional creations-buildings that billow, swoop and shimmer. Whether the project is a concert hall, museum, or university building, the clientele hiring Gehry is paying for a brand name product. In this sense, a ‘Gehry-designed building’ is akin to a piece of fashion – with the value of the building based primarily on the name of the designer and not on how well it operates for end users as a work of architecture.

Gehry was not alone in this respect. Real estate developers were quick to jump on the trend toward ‘signature’ buildings. Hiring other marquee architects such as Zaha Hadid, Daniel Libeskind, and Santiago Calatrava, high-end condo developers everywhere from Manhattan to Dubai were willing to deal with paying exorbitant design fees for the assumed marketing advantages of associating with such big names.

But now the obsession with starchitecture may now itself be outdated. Thanks to the financial meltdown, the party may be ending both for starchitects and their credit wielding developer patrons. Not surprisingly, ambitious projects like the Gehry designed Grand Avenue development in Los Angeles and the Calatrava designed Chicago Spire have been put on hold and perhaps consigned to oblivion.

These are just some of the most visible examples of the construction slowdown as it relates to high architectural design. Less renown figures in the architectural profession, both sole practitioners and those working in corporate firms, also find themselves struggling to retain projects. The imagined career trajectories of wannabe starchitects may be yet another casualty of the financial slowdown.

Ironically, the economic crisis relates back to the very thing architects are entrusted with – the built environment. Of course, architects had a hand in only a very small percentage of what is actually built in the United States. During the most recent boom cycle of construction – at least until the last year or two – the single family detached housing developments in the suburbs and urban fringes dominated the market. These developments were often promoted in a manner that made the house as an investment vehicle paramount to it being a place of long-term inhabitance and raising a family.

The subprime mortgage crisis has since debunked the commonly accepted strategy that real estate is always a ‘safe’ investment for the average American. But this is not only a suburban phenomenon, despite the claims by many in the architecture and urban planning professions that the real estate meltdown represented the triumph of the city over the suburbs. In reality the city development scene is also collapsing, a bit later perhaps, but largely because it took a while for the financial fallout to reach large urban projects.

Ironically the starchitecture so celebrated by the popular media may have contributed to this. The fact that the majority of architecturally revered high-rise housing developments built in the past decade are geared toward the ‘luxury market’ may have slowed the potential market for in-city living. In too many cases, developers in the urban luxury condo market have relied on cash-wealthy individuals to purchase their units as second homes, a market that is certain to crash as the asset bubble bursts.

The current recession is a trying time for most Americans, and as such, it could prove a pivotal time for architects, planners and those who care about the built environment to reassess their roles in a democratic culture. Great or monumental architecture – from imperial Rome to Napoleon III’s Paris and Dubai today – has often been built at the discretion of powerful religious institutions, monarchies or omnipotent dictatorships. Democratic architecture, in contrast, tends more to the functional and efficient, whether in the form of William Levitt’s suburbia or the high-rise towers that accommodated corporations.

The future of urban development in the United States is likely to follow a different trajectory. For one thing environmental sustainability is likely to frame the decisions made in regards to urban planning in the coming years. In this context, metallic structures like those favored by Gehry and his acolytes do not represent a very energy-efficient form; in places like Los Angeles, Phoenix or Dubai they reflect sunlight and heat up the surrounding environment. The next era of American architecture will have to deal with such issues and also with the restrictions of a strapped fiscal environment.

With funding for flashy and iconic buildings screeching to a halt, the era of the architect as detached genius and artiste appears to be coming to a close. In order to retain relevance at this crucial point in time, architects would be wise to come out from their ivory towers and shift their focus to becoming more civically engaged and oriented towards the needs of the middle class.

At the dawn of the 21st Century, as the definitions of traditional urban centers, suburbs and metropolitan regions become more blurred, so does the role of the architect and planner. After the chaos of the current economic recession is settled, most construction is likely to be focused on updating existing infrastructure and building new ‘green’ infrastructure. What America needs most right now from the architectural profession is not more Frank Gehrys but a new commitment to build an environment that is both sustainable and affordable.

Adam Nathaniel Mayer is a native of the San Francisco Bay Area. Raised in the town of Los Gatos, on the edge of Silicon Valley, Adam developed a keen interest in the importance of place within the framework of a highly globalized economy. He currently lives in San Francisco where he works in the architecture profession.

Pittsburgh Turns 250 Years Old Today

Bill Steigerwald — Tue, 25 Nov 2008 00:43:39 -0500

But instead of a nice birthday card, my home town of Pittsburgh could use a sympathy card. It’s been a tough last 100 years for a once great and powerful city.

The first 150 years were not so bad. On Nov. 25, 1758 British Gen. John Forbes named the city for prime minister William Pitt after chasing the French from the militarily and economically strategic triangle of land where the Allegheny and Monongahela rivers meet to form the Ohio.

Historically, we started off on a roll, thanks to our strategic location on the rivers, North America’s first oil and gas boom, and lots of coal. By 1909, when social scientist Paul Kellogg cataloged the city’s industrial might in "The Pittsburgh Survey,” he said it was not just "first among American cities in the production of iron and steel" but also "first in electrical apparatus and supplies."

“In coal and coke, tin plate, glass, cork, and sheet metal ... its output is a national asset," Kellogg wrote, adding that Pittsburgh's banking capital exceeded "that of the banks of the North Sea empires and its payroll that of whole groups of American states." "Here," Kellogg claimed without exaggeration, "is a town, then, big with its works."

Unfortunately, that world famous powerhouse of iron and steel is long gone. Today the Pittsburgh region’s de-industrialized economy runs mainly on providing health care for its aging populace, the education of about 140,000 college students and the construction of taxpayer-subsidized professional sports stadia and mass-transit boondoggles.

In her 1969 book The Economy of Cities, Jane Jacobs traced the origins of Pittsburgh’s economic downturn all the way back to 1910. But its demise, she claimed, was abetted and accelerated after World War II by its downtown political and corporate powerbrokers. These are the direct ancestors of the civic movers-and-shapers, government redevelopment planners and political hacks who have been mismanaging our city so horribly for the last 20 years.

The post-WW II power elites cleaned up Pittsburgh’s poisoned three rivers and Venutian atmosphere, but Jacobs said they also worked overtime to protect incumbent steel and manufacturing industries and discourage new industries from being born. They also launched misbegotten urban renewal projects in three poor and/or black neighborhoods – the Hill District, East Liberty and the North Side – whose destructive effects still afflict the city.

As most Americans know, having its biggest economic eggs in heavy manufacturing turned out not to be such a good long-term plan for Pittsburgh when the steel industry collapsed in the 1970s and 1980s. Its metropolitan population went into its nationally famous free-fall. In 1960, there were 2.4 million people in metro Pittsburgh and 604,000 in the city of Pittsburgh. Metro Pittsburgh was the 12th biggest TV market in the USA. Today, Pittsburgh metro has a population of 2.3 million and – incredibly – there are just 310,000 souls left in a city that peaked in 1950 with 676,000 people. Metropolitan Pittsburgh is ranked 26th today.

As its population has shrunk, the region has emulated the demographics of Western Europe and Russia. Its population is disproportionately old (24 percent are 65 or older, about twice the national average) and since 1990 more Pittsburghers have died each year than have been born – a net loss of 25,000 people since 2000 alone. It also has fewer foreign-born immigrants (about 3 percent) than any major American metro area.

This is all the more the shame since the city boasts many priceless assets. These include a relatively low crime rate, great old middle-class city neighborhoods, affordable suburban homes in good school districts, top universities like Carnegie-Mellon and Pitt, major league sports teams, big-time cultural attractions and a beautiful landscape of hills, hollows and wide rivers.

These assets are one reason why “Places Rated Almanac” crowned it the country’s most livable city in 1985 and again last year. In 1985 The New York Times immediately dispatched a reporter to Pittsburgh to check out the claim and he wrote back that "With its breathtaking skyline, its scenic waterfront, its cozily vibrant downtown, its rich mixture of cultural amenities, its warm neighborhoods and its scrubbed-clean skies, it no longer is the smoky, smelly, gritty mill town of yesteryear."

Pittsburgh – which, for the record, hadn’t been “The Smoky City” since about 1950 – is re-discovered by the bicoastal media every few years. Brendan Gill of the New Yorker came here in 1990 and famously raved about the beautiful terrain, the old architecture and ethnic neighborhoods and said if it were a European city people would travel hundreds of miles out of their way to visit it.

So if the place is so great why are people – especially young people – leaving in droves? For one thing pay scales are low and the general populace, though friendly and unassuming, fully embraces not risk-taking but the two unofficial regional religions – unionism and Steelerism.

When it comes to pop culture and new retail chain outlets, Pittsburgh’s at least 5 years behind L.A. or San Francisco, which isn’t necessarily a bad thing. Pittsburgh remains a fine city in which to raise a family, grow old and die. What travel writers never seem to notice when they parachute into town however, is the chronically sorry state of Pittsburgh’s public sector.

A one-party (Democrat) town since 1934, the city of Pittsburgh has been run like Argentina ever since. Over-taxed, over-regulated, over-planned, quick to abuse its eminent domain powers, it’s now virtually bankrupt. Its finances are now overseen by the state. Its budget flirts with red ink each year. On the horizon loom huge pension liabilities that it can’t possibly pay.

City Hall can barely provide a decent level of basic services. Meanwhile, they find money to subsidize downtown retailers who often go bust and leave. The city’s redevelopment gurus have handed out tens of millions of taxpayers' cash to private businesses. The most recent example was giving PNC Financial $48 million in public subsidies to build its new and superfluous skyscraper downtown where vacancy rates, pre-recession, stood well in the double digits.

Pittsburgh’s public school district is equally inept and even more expensive. It spends well over $20,000 a year per student while enrollment – nearly 40,000 in 1998 – is down to 26,600 and falling. The graduation rate is 64 percent, according to a recent Rand Corp. study. Local school and property taxes are among the highest in the country.

The region’s roads and parkways are in bad shape – can you spell p-o-t-h-o-l-e? – and designed for 1950s traffic counts. The city of Pittsburgh’s parking tax could be the highest on Earth – 40 percent. City firefighters have some of the highest public salaries in town – and trade their votes for sweetheart contracts.

The poster child for mismanaged government bodies, however, is Pittsburgh’s public transit monopoly, the Port Authority of Allegheny County. For the last 20 years, as its ridership has fallen steadily and its annual budget has hit $350 million, it consistently enriched its union workers and managers with high salaries, super-generous benefits and pensions.

Port Authority budgets have outpaced inflation since 1980 and with fares covering about a third of operating costs, it has had to ask for higher and higher subsidies from the state to keep its mostly empty buses lumbering around town. Since the late 1970s, it has spent upwards of $2 billion (in current dollars) on three dedicated busways and a rinky-dink light-rail system that serves about 12,500 suburban round-trip commuters a day.

The transit agency’s proudest boondoggle, however, is the North Shore Connector, aka “The Transit Tunnel to Nowhere.” Arguably the premier transit boondoggle in North America today, it’ll cost $435 million (a low-balled figure that hasn’t been adjusted to reflect reality in several years) for a 1.2-mile twin light-rail transit tunnel under the Allegheny River from Downtown to the taxpayer-subsidized pro sports stadiums and not far from the new casino.

The tunnel’s construction currently is tearing up a huge chunk of the North Shore between PNC Park and Heinz Field. It is projected (most dubiously, of course) to carry 16,000 passengers a day – by 2030. A local think tank, the Allegheny Institute, worked out the per-trip subsidy to be $15.50. Set to be completed in 2011, it will be a miracle if the project comes in under $600 million.

Today Pittsburgh’s regional economy is what it’s been for the last 40 years – stagnant at best. Yet perversely, but predictably, its civic boosters are trying to sell the anemic economy as something to be thankful for because it is "recession-proof." Since Pittsburgh never had a housing bubble, the spin goes, the foreclosure crisis will hardly affect it. Because Pittsburgh has all those extra citizens on Social Security, the economic meltdown will be less severe. Maybe becoming a morgue might be even safer.

Yet somehow the local spinmeisters continue to put a bright spin on Pittsburgh’s century-long death spiral. For example, USA Today recently cranked out a big upbeat feature on how wonderful Pittsburgh is – without mentioning such unseemly things as high taxes, bankruptcies or out-of-control government agencies.

And on Sunday, Nov. 23, the Cleveland Plain Dealer – hometown paper of a city arguably in even worse shape – published a similarly glowing piece of chamber-of-commerce journalism with the headline “Pittsburgh's renaissance holds lesson for Cleveland.” It began with the sentence “The city that once defined rust belt decay might show the rest of the nation how to weather a recession.”

True to form, it went on to say that while the rest of the country “reels in debt and despair, Pittsburgh is on the move: A new $200 million downtown office tower, upscale condos, a casino, a new hockey arena and a riverfront convention center.”

What the Plain Dealer never bothered to note, of course, was that the office tower, the pricy condos and the hockey arena were not being built in downtown Pittsburgh because they actually made economic sense. They were being built only because local politicians had handed millions of dollars in public subsidies to their private, well-connected owners. If this is the road to an urban renaissance, it’s certainly an expensive one. Most likely, it will prove the path to yet another dead end.

Bill Steigerwald, born and raised in Pittsburgh, is a former L.A. Times copy editor and free-lancer who also worked as a docudrama researcher for CBS-TV in Hollywood before becoming an associate editor and columnist for the Pittsburgh Tribune-Review.

Michigration: It's Not About Out-migration in Michigan

Tue, 25 Nov 2008 00:00:02 -0500

Pertaining to brain drain hype, Michigan has no equal. So profound is the out-migration that a local broadcasting network coined a term: Michigration. This was in January of 2008. I did a little digging and discovered the fuel for the story was a United Van Lines study about Michigan’s net loss of residents.

Net population loss is often confused with emigration. Upstate New York, another brain drain case for a future article, is no exception. The Federal Reserve Bank branch in Buffalo issued a report that tried to clear up the confusion, explicitly stating the challenge is attracting more people instead of the assumed issue of retention.

Michigan is in the same boat. There is nothing remarkable about the rate of out-migration from the state. What is shocking is the lack of newcomers. Most of the Rust Belt has a problem with a distinct lack of in-migration.

Another oversight of the media is the aging population. Rarely does natural decline make the news. Of course, that “problem” doesn’t lend itself to political gain. That is too bad because making better use of an aging workforce is a missed opportunity. Shouldn’t talent retiring in Michigan be celebrated?

A third misconception about shrinking cities is that the best and brightest are heading to hip out-of-state destinations. The truth is many graduates go no further than the suburbs, resulting in the donut pattern of urbanization. Those that venture beyond likely end up in the next state over, not halfway across the country. A lot of talent moves from one Rust Belt city to another. Much of the rest – although perhaps not the offspring of the remaining economic and cultural elite – shifts to those areas that have been creating jobs, particularly places like North Carolina, Texas and, before the recent bust, Arizona and Florida.

In and of themselves, reports of Michigration are harmless. But popular perception is often used to push various initiatives such as Michigan’s Cool Cities:

Building vibrant, energetic cities that attract jobs, people and opportunity to our state is a key component of Michigan Governor Jennifer M. Granholm's economic vision for Michigan. Governor Granholm kicked-off the "Cool Cities" initiative in June, 2003 throughout the state, in part as an urban strategy to revitalize communities, build community spirit, and most importantly, retain our "knowledge workers" who are leaving Michigan in alarming numbers.

The promise is that cooler cities will keep talent from leaving the state. I challenge Governor Granholm to list the top-10 Cool Cities in the United States and their respective out-migration rates. How do Michigan cities compare? How do you quantify “alarming numbers”?

US cities with the fastest growth rates in population tend to have the highest rates of emigration. Ironically, shrinking cities have relatively weak out-migration. Furthermore, the college educated are much more likely to leave any state or metro than people with just a high school education. Knowledge workers leaving Michigan is normal. The low number of knowledge workers arriving, from out of state, is abnormal. Neither better urban place-making nor more tolerance on its own shows any strong positive correlation with less brain drain. In fact, the opposite may be true. Cool Cities simply hasn’t delivered.

We do understand that knowledge workers are geographically fickle. But Governor Granholm fails to put the attraction of talent on top of the agenda. She continues to play to fears of Michigration as justification for significant investment in the state’s cities. I’m not anti-urban. On the contrary, I’d like to witness the revitalization of Rust Belt downtowns. But sprucing up an aging downtown in a region with massive job losses will not get the job done.

The most promising research I’ve read comes from Edward Glaeser, an urban economist at Harvard University. The best investment of public money would seem to be in human capital, education. What would attract well-educated parents would be better schools, something the suburbs have mastered. Inner city Detroit’s main competition for talent is the communities ringing around it.

Michigration will not be stemmed by being “cool” but by providing some sort of opportunity for a decent middle class life. If Michigan could combine its excellent Universities, skilled workforce and low housing costs with a decent business climate, and significant school reform, perhaps the state would again become a beacon for entrepreneurs and knowledge workers.

Read Jim's Rust Belt writings at Burgh Diaspora.

King Bloomberg: New York City Mayor Run Amok

Fred Siegel — Mon, 24 Nov 2008 01:12:22 -0500

When Mayor Bloomberg deployed his vast personal and political power to overturn the term limits law, he began to demystify the public relations image he had purchased at considerable expense.

It was only then that New Yorkers began to recognize the danger of making Gotham's wealthiest man its chief executive. That recognition is the reason his approval rating slipped by nine points in the latest Marist poll. The public chose a mayor; they didn't expect an elected monarch.

The latest furor over his unaccountable power is his unlawful refusal to send out property tax rebate checks that have been due since Oct. 1. "We have no money . .. . this is not a legal issue, it's a fiscal issue," he says, an argument that boils down to "I know better."

But the cupboards are bare because Bloomberg has emptied them for his own political ambitions. While the stock market was heading south, Bloomberg, one eye on a potential presidential run, raised his approval numbers by expanding the city payroll. Since 2004, he has hired at least 40,000 new city employees, while bringing his own mayoral staff to record levels.

Similarly, to help clear the way for a third term, Bloomberg has been shoveling out considerable money in the form of newly negotiated union contracts with the Policeman's Benevolent Association, DC37 and the Corrections Officers that run above the rate of inflation. If it wasn't above an elegant gentleman such as the mayor to stoop to such measures, you might call this what Tammany Hall did: vote buying. Bloomberg is only too happy to raise property taxes on the unorganized middle class if that's what it takes to keep the power of the city's politically well-organized unions in his corner or on the sidelines come election time.

People assume that because of his successful career in business, Bloomberg is a manager and not a politician. That gets things exactly backwards.

As mayor, he's been little interested in management. When the Staten Island Ferry crashed, killing 11 people, the politically well-connected Transportation Commissioner was spared a reprimand, let alone fired. When the mayor was informed that a set of subway switches had burned out and couldn't be replaced for months or even years, guaranteeing massive delays, Bloomberg nonchalantly said fine, that's the way it will have to be. He reversed himself only after howls of public protest. When a blackout produced by Con Ed incompetence left more than 100,000 Queens residents without electricity for a week, Manager Mike declined even to visit the affected areas until the press began to hound him. Even then he declared, "I think [Con Ed CEO] Kevin Burke deserves a thank you from this city. He's worked as hard as he can." It took 13 construction-related deaths before the mayor was moved to replace the City Building Commissioner.

Bloomberg touts himself as a CEO who can negotiate the best deal for the city. But part of running the city includes bargaining with people he can neither give orders to, nor buy like the City Council. That's made Bloomberg a singular failure in Albany, where the mayor tried to steamroll his ill-conceived congestion pricing plan through the Assembly. The plan, which seemed designed as much to provide Bloomberg with a green issue for his presidential campaign as to decongest Manhattan, met with a skeptical response. Bloomberg's reaction was to blame his defeat on "gutless" opponents. While arguing over whether to reauthorize Off Track Betting, the Mayor clashed with the normally mild-mannered Governor Paterson, whose support is essential for the city; Paterson came away describing the mayor to the Post's Fred Dicker as "a nasty, untrustworthy, tantrum-prone liar who has little use for average New Yorkers."

While Bloomberg has been little interested in management, he has been superbly self-promoting. Early on he sold credulous journalists on the idea that he was a post-partisan mayor, a man who rose above conventional party politics. This is in a sense true. He has been only too willing to buy support from either of the major parties to achieve his own ends. A self-described "liberal Democrat," he shipped out with the Republicans under a flag of convenience in order to run for mayor in 2001. He then abandoned the GOP to become an independent, and his staff is now exploring the chances of his running as a Democrat for re-election in 2009.

But talk of party labels misses the point. Bloomberg runs his own personalized political party. He is not so much bi- or non-partisan as his own political pole, one that offers Michael Bloomberg as the sole program.

The traditional danger with party candidates is that they can be bought up by special interest groups. Bloomberg reverses the old game; he's won office by buying up the interest groups.

When in office, Bloomberg - like most mayors - used public funds to keep the organized interests happy while putting the city at fiscal risk. But Bloomberg adds a twist, by dipping into his own vast treasury to buy support through "anonymous" gifts to non-profit institutions.

For years, our so-called "business savvy" mayor has only one strategy: Spend. In 2007, the city took in 41% more in taxes than it did in 2000. And yet that wasn't enough to cover Bloomberg's gargantuan vote-buying spree. During Bloomberg's first six years as mayor, notes The Manhattan Institute's Nicole Gelinas, city spending shot up about 50% - from $41 to $62 billion. That meant that even in the midst of an unprecedented boom, Bloomberg's genius required the city to incur record levels of debt.

One method of buying support has come in the form of lavish subsidies to his wealthy developer friends. Early in his administration, when Bloomberg was still presenting himself as a reformer, he promised to end the practice of "bribing companies" to stay in New York. Yet that is exactly what he did in the case of developer Jerry Speyer, part owner of Yankees, who is building the New Yankee Stadium, and Fred Wilpon, owner of the Mets. Between direct and indirect subsidies the city is committed to spend nearly a billion dollars on the two very profitable teams in what amounts to a transfer of money from working stiffs into the pockets of the wealthiest New Yorkers.

The Industrial Commercial Incentive Program, meanwhile, designed to retain business that might flee the city's onerous taxes, has doubled under Bloomberg. Today roughly 6,000 business received a half a billion dollars in the kind of rebate relief that the mayor now wants to deny to middle class homeowners.

For those who object to his tax strategy, Bloomberg always has the same response: "we're just not going to return to the dark old days of the '70s, when service cuts all but destroyed our quality of life."

It's not clear if this argument is willfully ill-informed or merely self-serving evasion. But it was John Lindsay's tax hikes in the years leading up to the fiscal crisis that sent the city spiraling down into effective bankruptcy. The upshot was that in the 1970s, the city work force faced major layoffs, which only deepened the downturn. We're again headed down that path. Even as Bloomberg hikes the wages of senior workers who are crucial to the leadership of their respective unions, and hence Bloomberg's royal re-election bid, he's threatening sizeable layoffs for the newest hires.

The city was only rescued from the Lindsay/Beame policies when the stock market revived in the early 1980s. That was the beginning of the long boom built on highly leveraged financial firms that has now come to a definitive end.

Bloomberg is so committed to his ideal of the "luxury city" run by and for the wealthy and organized interest groups that the Wall Street collapse took him completely by surprise. Like Lindsay's successor, the hapless Abe Beame, Bloomberg seems not to understand what's happening around him. His budget projections are based on the notion that the future economic path will be shaped like a U, but it's more likely to look like an L.

New York, which became ever more dependent on Wall Street's high rollers to create each new job a thousand-dollar meal at a time, is going to have to rethink its economic future. Wall Street as we knew it is never coming back. The high taxes and over-regulation Bloomberg prefers pushes out the small- to medium-size businesses that will have to drive much of our economic growth in the future.

We're likely to look back on the Bloomberg years as a time of lost opportunities to build on the gains of the Giuliani years. Between 2003 and 2007, the vast flow of revenues produced a boom that gave the city a chance to dig out from under its massive debt and restructure its labor contracts. Instead, Bloomberg's agenda added costs that will plague the city long into the future.

There is no better monument to Bloomberg failures as a CEO - of his arrogant inability to negotiate, of his purchased reputation - than with New York's education system.

Bloomberg, who has had whole subway cards plastered with ads and full-page spreads in the newspapers touting his educational "achievements," has done a far better job of promoting himself than improving the schools. He has nearly doubled the education budget. Yet his "reforms" have created considerable chaos in the schools, which have now been re-organized three times to little educational effect. What the changes haven't produced, Bloomberg's vast PR operation notwithstanding, is improvement on the national education tests. His education legacy to date: the debts that will have to borne by a work force ill-prepared for the economy to come.

Bloomberg says he's beyond politics. He's right. We're living in his monarchy, subjects to his unwavering faith in himself.

This article appeared originally in the NY Post.

Fred Siegel, senior fellow of the Manhattan Institute's Center for Civic Innovation, is writing a book on the making of modern liberalism.

Understanding the Geography of the 2008 Election

Richard Morrill — Mon, 24 Nov 2008 00:58:36 -0500

Scholars as well as pundits and politicians will study this remarkable election exhaustively. Many, including me, will use county data, because they are convenient and available. From a statistical point of view, counties are lousy units, because of huge variation in size and excess internal variability. But we can’t resist, so here are some at least suggestive findings.

First, what correlates with the percent voting for Obama? By far the strongest variables are negative – characteristics associated with voting Republican: a county’s share of husband-wife families (-.64), the rate of home ownership (-.55), percent working in craft occupations (-.52), and religious membership (-.51) all work against Obamamania. Other high negative correlations were with percent rural (-.48), with percent white (-.47), other positive were median rent (.45) and percent foreign born (.45). These are not at all surprising, and are what the exit polls told us.

The highest positive correlations for Obama lay in percentages of non-family households with 2 or more persons (partners, roommates, .50), percent in urbanized areas (.49), or using public transit (.48), and percent with a BA or higher degree (.46). What these figures highlight is the continuing basic polarization between large metropolitan (+ variables) and non-metropolitan (- variables) areas, and simultaneously between the more modern and diverse character of the big city and the more traditional and conservative values of much of non-big city America.

But, you may protest, we thought race, ethnicity and age played a big role in this election? Indeed, they did, but the correct dependent variable should be the degree of change in the share voting Democratic. In other words, what helps distinguish the 2008 from the 2004 results? The largest effect, of course, is simply the quite large 5-6 percent shift in national sentiment because of economic uncertainty and disillusionment with the Republican regime.

But beyond that, the pro-Obama variables tend to be the percent of women in the labor force, percent with a BA degree, median household income (yep, time to toss out the traditional wisdom of Republicans being the party of the ‘rich’), non-family households, professional-managerial occupations, and, yes, percent Hispanic, percent Black and percent aged 25-34. In contrast variables leading to a lesser shift, no shift, or even more Republican, were again church membership, percent rural, percent in crafts jobs, and percent 45-64 or over 65, and percent with less than a 9th grade education.

Overall, education, occupation, age, race and ethnicity help us understand Democratic strength in large metropolitan America and also in rural and small-town American Indian, Black and Hispanic areas, especially in parts of the South and West. But areas and regions with a less educated and professional populace, with higher rates of religious persuasion, with fewer women in the labor force, and with older populations remained loyally Republican. This helps us understand the resistance to Obama and the Democrats in Appalachia and across the border South, from WV, through KY and TN, AR, LA and OK.

An interesting geographic phenomenon should be noted: the emergence of Chicago and the upper Midwest as part of the new Democratic coalition. Metropolitan Chicago provided Obama with a margin of almost 1.5 million votes, more than New York or Los Angeles. This presaged a gigantic increase in Democratic margins throughout the upper Midwest, including IN, IL, MI, WI, IA, and MN. In this one part of the country more than 150 counties moved from the Republican to the Democratic column. In addition to the big shifts on the coasts, this is where Obama gained the most ground.

If this pattern continues, the Democrats may well have achieved a critical mass in their core support, adding a powerful upper Midwest base to their almost total control of both coasts. These would leave the GOP with little more than the heart of the Old Confederacy – even that is threatened in places like North Carolina and Virginia by modernization – as well as more socially conservative regions such as Appalachia and parts of the Great Plains. It’s not a pretty picture if you are a Republican.

Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist)

California’s Inland Empire: Is There Hope in the Heart of Darkness?

John Husing — Sun, 23 Nov 2008 01:08:29 -0500

Few areas in America have experienced a more dramatic change in fortunes as extreme as Southern California’s Inland Empire. From 1990-2008, the Inland Empire (Riverside & San Bernardino counties) has been California’s strongest job generator creating 20.1% of its employment growth. The area also consistently ranked among the nation’s fastest growing large metropolitan areas. However in 2008, the mortgage debacle has sent this area, which had not seen year-over-year job losses in over four decades, into a steep downturn. Understanding what happened and how to put the region back on its historical growth path offers an important public policy perspective not only for the Inland Empire but for other once fast-growing metropolitan areas.

The Economic Problem. The California Employment Development Department (EDD) reported an Inland Empire loss of 17,900 jobs from August 2007-2008. The bulk of this was directly tied to the housing meltdown. Within shrinking sectors, the loss was 32,600 with 82% (26,800) tied to the demise of residential construction. This included construction losses (-16,000); non-vehicle manufacturing (mostly building materials: -5,600), non-vehicle retail sectors (mostly furniture or home supplies: -3,200); and financial groups like escrow, title, insurance and real estate (-2,000). By September 2008, unemployment was 9.1%, the highest in 49 metropolitan areas with over 1,000,000 people.'

Note: EDD’s report is an underestimate as more accurate U.S. Bureau of Labor Statistics data show the area began 2008 with job losses 61.7% higher than EDD’s estimates.

Housing Market Creates A Recession. Some history is necessary to understand how the housing sector got into trouble and set off the inland recession. The last housing downturn ended in 1996. Analysts agree that from 1997-2003, California’s many building restrictions prevented housing supply from matching demand by families needing homes. Prices rose to chase away excess potential buyers:

Seasonally adjusted homes sales rose from 13,227 quarterly units in early 1997 to 25,328 by late 2003, an annual rate of 10.1%.
In this period, median price increased from $105,643 to $246,807, an annual rate of 12.9%.

Starting in 2004, speculators began wanting to capitalize on these 12.9% gains by buying and flipping homes. Simultaneously, foreigners awash in dollars from U.S. trade imbalances started flooding investment markets with cash looking for “safe” returns. A belief that home prices never fall led to the development of variable rate mortgages with extremely low “teaser” rates and loose underwriting standards, plus AAA rated mortgage backed securities based on them. The low rates financed the speculators and convinced many families to buy over-priced homes or borrow newly found “equity.” Thus:

Median home prices increased even more aggressively from $246,807 in late 2003 to a $404,611 peak in third quarter 2006, up at a 19.7% compound rate.
Seasonally adjusted sales increased from 25,328 in late 2003 to a peak of 29,670 in fourth quarter 2005, up a modest 2.29% compound rate.
However, by first quarter 2006, volume began declining as affordability reached just 18% and even speculators no longer saw much upside.
By the price peak in third quarter 2006, seasonally adjusted sales were down 27.6% to 21,478 units.

Once the fall in demand became evident, median prices started down. The descent began slowly. However, by mid-2007, with the myth of ever-rising prices debunked:
- Housing demand plunged.
- Housing supply took-off as sub-prime mortgages began resetting from teaser to market rates with investors and homeowners trying to sell homes they could no longer afford.
- Price declines thus accelerated causing ever more homeowners to be upside-down on their homes.
- Unable to sell, many houses entered foreclosure and were aggressively marketed by the lenders, further accelerating price declines.
By 2008, the market began changing:
- Supply, with 60% of inland activity from foreclosures, continued to overwhelm demand with prices falling to a median of $237,784 by third quarter, equal to the mid-2003 level.
- Demand hit a trough in late 2007 at 11,398 units. By third quarter 2008, lower prices caused it to rebound to 18,453, up 61.9%, equal to volume in 2001.
- Demand rose as inland housing affordability reached 50% (assuming 3% down, 6.19% mortgages, 1% taxes, $800 property insurance, 0.5% FHA insurance, payments 35% of income).
Crucially, by third quarter 2008, home construction all but halted as price competition from foreclosures caused developers to lose money on every unit built -even with land treated as free. Hence, the steep downturn and a 9.1% inland unemployment rate. In the short run, conditions will worsen as office construction stops once existing projects are completed. Already, the loss of tenants in fields like escrow and finance has pushed vacancies from 7.0% to 19.9%.

The Routes Out? With the Inland Empire’s construction sector shutting down, economic hardship has spread far beyond those whose terrible decisions created the crisis. This is also is true in numerous markets, particularly in Arizona, Florida and Nevada.

Until national action reduces the rising flow of foreclosures into the supply side of the nation’s housing market, supply will continually overwhelm demand sending prices downward. Residential construction will not return until markets see fewer foreclosures and prices move to higher levels. Two strategies are available:
- Mortgage servicers can lengthen the term of mortgages and reduce rates. allowing families to afford staying in homes. However, given the principal owed, they will not be able to move until prices return to recent highs. Many are thus walking away.
- Servicers can reduce the principal owed, allowing families to refinance and both remain in their homes and have equity in them.
Modern housing finance has generally barred the second and more effective strategy. When banks originate mortgages, they typically sell them to Fannie Mae, Freddie Mac or investment houses to get their money back and make more loans. They are paid to service loans they no longer hold. Meanwhile, secondary mortgage holders often formed them into groups and then sell “mortgage backed securities” (MBS) worldwide. Both the originating bank and those creating MBS’s signed contracts barred them from harming investors. Unless a servicer owns 100% of a mortgage or MBS, they cannot lower mortgage principals.

Unless national policy can convince secondary mortgage holders and/or MBS investors to allow the principal owed them to be reduced, the foreclosure crisis and residential construction depression will persist … prolonging the recession. The state attorneys general, Congress, some major banks and the FDIC have tried to lure mortgage investors to allow this or to buy them out. The results have been very mixed. The idea of allowing bankruptcy judges to lower principals has been offered as a club to force this result. Yet this raises fear of long term damage to international belief in the consistency of U.S. contract law.

Finally, at the local level, officials could favorably impact construction costs through the developer impact fees imposed on new homes. These are justified by the need to build the infrastructure required by population increases. Inland Empire fees are $40,000 to $50,000 per home. An analysis shows that at today’s low prices, a fee holiday of 80% by local agencies and 40% by schools would put the industry profitably back return to work. The re-imposition of fees could be tied to an index like median existing home prices.

So far, the reaction of local decision makers has been that this is legally, programmatically and politically impossible. Their traditional worry is not having the money to build the infrastructure needed as new homes cause population growth. However, for construction dependent economies like the Inland Empire, the choice appears to be temporarily foregoing such funding, or finding a broader source of infrastructure financing. Otherwise, they must face the reality of a multi-year deep recession with double digit unemployment.

John Husing, Phd. is president of Economics & Politics, Inc. based in Redlands, CA

Urban Infill With Less Hype and More Serendipity

Richard Reep — Fri, 21 Nov 2008 23:42:53 -0500

By Richard Reep

Urban infill in cities of the Southeast follows typical patterns: assemblage of several blocks of older building stock at a low price; careful navigation through the zoning and public process to mix uses and increase density; and finally design and construction of parking, office, residential, and retail uses. The next phase is often marked by alienation and departure of the existing surrounding residents, concerns of safety and security within the development, and a socioeconomic wall between new and old.

This sad pattern is evident in Orlando at Winter Park Village, a 90s New Urbanism infill, where a failed indoor shopping mall was eviscerated and converted to an outdoor retail and entertainment district. Initially it generated a buzz, attracted shoppers, and signed anchor tenants. But the adjacent lower-income residents benefitted not a whit from this development, surrounding land remains fallow or abandoned, and recent store closings call into question the long-term viability of the project.

Such problems worsened during the real-estate bubble, which promoted residential-driven development. This tore even bigger rifts in the fabric of cities. Sodo, the most recent cluster development opening in south Orlando at the dawn of financially uncertain times, could have a different future. This development is free from preconceptions about urban form and style and does not pretend the world is as simple as it was at the turn of the 20th century. Sodo offers a mix of uses clustered in medium density with access to jobs in the city’s older, denser infrastructure.

Typically, brave new residents buy into urban infill projects at a higher rate and higher price than the surrounding community, creating a class schism. The surrounding community in need of good jobs is reluctant to become the service workers in these developments, and this uneasy coexistence breeds anxiety and insulation. City planners consider these urban infills successful as they bring ‘higher-end’ residents (translated: higher tax contribution) and create the demand for more such projects. Older residents often despise the new construction and move out, driven out by a combination of increasing property values, loss of neighborhood identity, and a sense of alienation.

In its infancy, Sodo appears to have the ingredients to become a good alternative to so-called “TND” or Traditional Neighborhood Development, as set forth by the Congress for the New Urbanism. Originally planned as condominium units, Sodo opens as a luxury rental community, which recognizes the current mortgage meltdown and the future of residential real estate in the Southeast. This neighborhood was typically oriented to the surrounding Wadeview railroad industrial district, but Sodo clearly looks north up Orange Avenue, beckoning hip, young, downtown workers.

With a certain gritty charm, South Orange Avenue winds below downtown, anchored by orange-bricked Orlando Regional Medical Center, a vast complex shoehorned into the old, industrial neighborhood. Sodo is not within walking distance of 300 luxury units worth of anything, not now nor in the near future, which makes it decidedly un-New Urbanist. But as the economy idles, Sodo has attracted some interesting comments from its neighbors that tell a positive story.

The development’s website is refreshing for what it does not proclaim in its marketing hype. It does not reference New Urbanist ideology anywhere. It does not claim to be a live-work-play solution to all life’s problems. It does not show happy white families riding bikes in parks. Its logo and presentation is simple and direct: Orlando is growing fast, and we want a piece of that pie. Rather than promote ideology, Sodo appears to promote itself as a blank slate upon which the future residents, retail and office tenants may write the future identity of this cluster.

It is probably dangerous to draw conclusions from blogs, because the bloggers do not represent a broad cross-section of the population. Computer-savvy, opinionated, and sophisticated, bloggers do not include many elderly, minorities, and people too busy with their lives to dash off a few lines about their feelings. Therefore, the local bloggers’ positive attitude about Sodo may not represent the entire range of feelings of people affected by this development.

However, rather than fear and loathing, Sodo has generated this: “I have had drunken people from the local bar (closing soon...HOORAY) pass out on my front yard. I am thrilled that this development is happening. It will no doubt enhance my quality of life and take us into a direction that the Wadeview Park area has sorely needed.” Similar comments abound, and the overall sense of approval from residents who bother to write about Sodo is a sign that this urban infill development is being welcomed rather than shunned.

Another sign that Sodo may blend into its neighborhood is the developer’s choice to market it as exclusively rental. Although the rental is “luxury” starting at $1,000 per month for 659 square feet, the economic step between this property and the next-door homes is less than it would have been if these units had been sold as 300 trendy urban condos.

Examined closer, Sodo makes some concessions to reality. It connects to the surrounding street grid on 3 sides, and the sense of safety and security within Sodo is beefed up with private security. The apartments have uninspiring views into their own parking garages, and the lack of green space throughout is harsh and startling. In order to accommodate parking, the anchor retail store parks its cars on the roof; shoppers are treated to the novelty of an outdoor shopping cart escalator, which should be interesting during the monsoon season of Orlando’s summer.

While all this is encouraging, Sodo is not an example of organic growth, blending new and old seamlessly. For example, it is doubtful that Sodo residents and existing locals will bond over coffee in the Starbucks or burritos in the Taco Bell. Exclusively private, Sodo has no library, park, school, or other public amenity except for its shopping sidewalks, and it seems strange to think of Sodo hipsters venturing into the local community to worship, walk the streets, or volunteer. Sodo seems to be a social oasis, at least for the present moment.

Sodo therefore exemplifies the problems of growth with which Orlando grapples: if taken in lumps, like Sodo, growth represents a jarring socioeconomic schism between the old and the new. If taken in lower density, like subdivisions, growth represents huge tracts of land being gobbled up, a jarring ecological schism between the natural and the manmade. Less lumpy than most, Sodo seems to have timing in its favor, with the slower growth of the near future allowing it to enter the economic slipstream at a lower speed.

What is refreshing about Sodo, besides its crisp, clean, architecture, is that it does not carry the baggage of ideology and fetish for form that recent urban infill developments seem to carry. It is therefore free to evolve its identity by delivering safety and security to its residents, a sustainable mix of shopping and office spaces, and a sense of place that transcends the physical. Success is measured by functional yardsticks – not form yardsticks – and urban infill projects across the country can be measured the same way. Sodo may represent a realistic model of urban infill, welcomed by the community, able to assert its identity through the social and economic futures of its businesses and residents. This is the way healthy cities grow.

Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

In Ethnic Enclaves, The U.S. Economy Thrives

Joel Kotkin — Fri, 21 Nov 2008 00:01:38 -0500

Dr. Alethea Hsu has a strange-seeming prescription for terrible times: She is opening a new shopping center on Saturday. In addition, more amazingly, the 114,000 square foot Irvine, Calif., retail complex, the third for the Taiwan native's Diamond Development Group, is just about fully leased.

How can this be in the midst of a consumer crack-up, with credit card defaults and big players like General Growth struggling for their existence? The answer is simple: Hsu's mostly Asian customers – Korean, Chinese, Taiwanese, Japanese – still have cash. "These are people who have savings and money to spend," she explains. "Asians in Orange County are mostly professionals and don't have the subprime business."

To Hsu, culture explains the growing divergence between ethnic markets and that of the general population. Asians, she notes, whether in their native lands or here in California, tend to be big savers. In tough times, they still have the cash to buy goods, while others stay home or go way down-market.

Nor is the Diamond Development Group's experience an isolated case. Throughout the country, ethnic-based businesses continue to expand, even as mainstream centers suffer or go out of business. The key difference, notes Houston real estate investor Andrew Segal, lies in the immigrants' greater reliance on cash. "When cash is king," observers Segal, president of Boxer Properties, "immigrants rule."

This is true not just of well-heeled Asians or Middle Easterners, but also for Hispanics, who generally have lower incomes, notes Segal's partner, Latino retail specialist Jose de Jesus Legaspi. For example, the recession has barely taken hold at La Gran Plaza, the recently opened 1.1 million square foot retail center in Ft. Worth, Texas, where Legaspi serves as part owner and operating partner.

The center, reconstructed from a failing old mainstream mall purchased in 2005, is now roughly 90% occupied. "We are doing so well that we are expanding the mercado," Legaspi says, referring to the thriving centers dominated by very small businesses run from attached stalls that are a popular feature of many Latino-themed centers. "It's all cash economy. They pay their bills with cash. The banks and credit card companies are not involved. It's true capitalism, and it works."

Latino shoppers, he suggests, also have been less impacted by the stock market collapse than other consumers. After all, relatively few, particularly immigrants, have large investments on Wall Street. In addition, even if they have lost their jobs, particularly in construction, Legaspi adds, they tend to pick up other employment, even at lower wages, often in the underground economy. "They get paid in cash, and they pay in cash."

Another key advantage lies in close connections many ethnic merchants have to economies such as Korea, China, Taiwan and India, where enormous amounts of cash have accumulated in recent years. "Many of these merchants have family and other ties to the international economy," observes Thomas Tseng, a principal at New American Dimensions, a multicultural marketing group in Los Angeles.

The media focuses on huge surpluses spent by major corporations or sovereign wealth funds, but a substantial amount of the money being made in places like China or India also accumulates into family networks. They often funnel this cash to relatives' enterprises in North America, where many also retain second homes and often educate their children.

This combination of cash-spending customers and well-endowed investors explains why in many places, the immigrant market remains one of the few still aggressively expanding. Even in thriving Houston, notes architect Tim Cisneros, the credit crunch has stopped many projects by clients from the mainstream real estate development community. In contrast, Cisneros' Chinese, Indian and other Asian clients continue to build and expand.

"I am doing an Asian-Mexican sushi chain that isn't hurt by the credit crunch since they are doing this out of the checkbook," Cisneros told me. "And the Indian reception hall I am building is doing well. The action is from these developing companies much more than the old Anglo groups."

If the immigrant markets helping Cisneros through the credit crush represent one of the few bright spots in the present, they also will likely become even more important in the future – even if immigration slows down dramatically. By 2000, one in five American children already were the progeny of immigrants, mostly Asian or Latino; by 2015, they will make up as much as one-third of American kids.

Given these underlying trends, look for developers like Dr. Hsu to keep prescribing more of what she calls "multicultural shopping centers," focused both on immigrants and their children. As long as these newcomers, both affluent and working class, continue to save, covet cash and work hard, they are likely to continue thriving through the recession and beyond.

"We are leased up, and we think the supply [of shopping] is not enough," Hsu says. "We are ready to go Saturday and feel great trust in the future." At a time when most mainstream American retailers are hiding under their desks, such sentiments are not only welcome; they may also indicate who might be leading the retail recovery when it finally comes.

This article originally appeared at Forbes.com.

Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

Island of Broken Dreams

Wendell Cox — Thu, 20 Nov 2008 01:14:57 -0500

A The New York Times editorial wonders why foreclosure rates are so high in the two Long Island counties it rightly calls the “birthplace of the suburban American Dream.” After all, the area has “a relative lack of room to sprawl.” which in Times-speak should be a good thing, since “sprawl” is by definition both bad and doomed.

Yet it is precisely the constraints on new housing that has served as a principal cause for Long Island problems. Long Island was the birthplace of the suburban American Dream, in principal measure because new housing development was permitted to occur at land prices reflecting little more than its agricultural value plus a premium to the selling farmer. The same financial formula expanded the American Dream throughout the country and many parts of the world, at least until urban planners were able, in some instances, to drive the price of land so high that housing was no longer affordable to average households.

Indeed, land use regulation throughout the New York suburbs downstate, in New Jersey and Connecticut has long since rationed land for development. As a result, once loose mortgage loan standards became the practice, house prices escalated. Throughout the New York metropolitan area, the Median Multiple – median house prices divided by median household incomes rose from 3.2 to 7.0, in the decade ending in 2007. In traditionally regulated markets – like Long Island in the past and still much of the country in the present – the Median Multiple has been 3.0 or less for decades.

Various regulations have led to this precipitous decline in the area’s housing affordability, virtually all of them falling under the category of “smart growth.” There are the regulations that have placed large swaths of perfectly developable land off limits for housing. There are large lot zoning requirements that have forced far more land than the market would have required to house the same number of people, producing an entirely artificial “hyper-sprawl.” Much of this ostensibly has been done in the interests of controlling “sprawl.” Where quarter acre lots would have been the market answer, planning authorities often have required one-half acre, one-acre and even more as minimum lot sizes.

In fact, however, Long Island’s housing cost escalation has not been visited anywhere with more traditional liberal land use policies. From the first world’s three fastest growing metropolitan areas of Atlanta, Dallas-Fort Worth and Houston, to much of the South (excluding Florida), to the Midwest, housing prices rose little relative to incomes during the period of profligate lending. The difference, of course, was that the liberal land use regulations in these places allowed sufficient housing to be built that supply kept up with demand, thus accommodating new demand. Speculators saw no potential windfall profits to bring them into the market.

The Times is not alone in misunderstanding the dynamics of land use regulation and housing affordability. But there is a very clear, demonstrated relationship – where land use regulations constrain development, prices are forced upward. This is because scarcity raises prices of goods that are in demand.

Fortunately, not everyone at the Times shares the wrongheaded views of its editorial department. Had the editors walked down the virtual hall of their own department, or taken the train down to Princeton, where he lives, they would have encountered someone who understands all this. He is Paul Krugman, Times economic columnist and, much more importantly, Nobel Laureate. In August of 2005, Krugman noted that house prices had escalated strongly in the more regulated markets, but had changed little in the less regulated markets. He further rightly associated the less regulated markets with more sprawl, not less. In January of 2006, Krugman noted: that the highly regulated markets accounted “for the great bulk of the surge in housing market value over the last five years.” Krugman further predicted “a nasty correction ahead.”

Meanwhile the non-Nobelist Times also make a point to bemoan the high levels of racial segregation on Long Island. Is it beyond them to understand that the very policies they favor are at fault? When one considers that ethnic minorities tend to have lower than average incomes and that land rationing nearly doubled the price of housing relative to incomes, it’s not surprising that they have not moved en masse to expensive places like Long Island, with the exception of Hempstead and a few other pockets. There are costs to restrictive land use regulation. One of the most pernicious consequences is the denial of the American Dream to groups of citizens that have so long been excluded from the economic mainstream.

It is time to recognize that the regulations that raise the price of housing – however well-intentioned – work against housing affordability and represent one of the prime contributors to the high levels of foreclosures in many communities across the country.

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

Influence of 'Creative Class' Ideas in Sweden

Nima Sanandaji — Thu, 20 Nov 2008 00:47:47 -0500

By Nima Sanandaji, Johnny Munkhammar, and Peter Egardt

The American academic Richard Florida has gained international attention for his theories about the “creative class”. According to Florida, the key to urban success lies in attracting certain groups of people, such as artists, scientists and twenty-something singles. Florida insists that this can be accomplished through nursing a specific type of culture within a city: hip cafes, art galleries and other manifestations of indigenous street-level culture.

Florida’s theories have become rather popular in Sweden, the country which tops the list of his creativity index. In a recent study about urban development in Sweden, we have found that Florida’s ideas mainly attract the political left. The Social Democratic Party, as well as the former communist party, embrace Florida’s ideas on their party web pages. The Social Democrats go as far as to quote Florida in a parliamentary bill.

In Sweden, Florida’s ideas are used by those who wish to argue that public funding of cultural events, rather than a competitive business climate, is the way to achieve economic growth. These urban planners quote Florida in their development strategies, shifting focus from business friendly reforms to attracting “unusual shops” in order to bring development to communities struck by high unemployment and other social ills.

Swedish cities thus risk choosing the same strategy as Berlin, where the focus of administrators for many years has been to attract art galleries, fashion shows and hip cafes, but where basic conditions for development have been neglected. The bureaucracy in Berlin has a less-than-business-friendly attitude, and taxes for those with typical means of income, as well as for entrepreneurs, remain high.

The result of these policies, aiming to market Berlin as “a city of glamour” to attract the creative class, has been rampant unemployment. Between 2000 and 2006 The European Union spent close to 2 billion US dollars (1.3 billion Euros) to attempt to curb the economic crisis in the city.

Florida has, together with two Swedish co-writers (amongst others), recently published an index of creativity in Swedish municipalities. The results of this index are interesting to examine. In accordance with observations made by Harvard Professor Edward L. Glaeser, Florida’s definition of the creative class builds upon the inclusion of well educated people; municipalities with high percentages of educated people are defined as being creative.

However, in many cases, the rankings in Florida’s Swedish index have little to do with actual creativity or the fundamentals for growth and progress within a municipality. Among 290 Swedish municipalities, the one best fitting Florida’s criterion of creativity is Södertälje.

This is quite astonishing, since Södertälje is seldom seen as a role model for other municipalities. Among the 26 municipalities in the Swedish capital region, Södertälje has the second highest unemployment rate. The business climate there ranks, according to the Confederation of Swedish Enterprise, as only the 199th most business friendly amongst Swedish municipalities.

The municipality in the capital region that has the highest unemployment rate is Botkyrka. It is number 233 in business climate. In Florida’s index, however, Botkyrka gains a respectable position as the 22nd most creative municipality.

While places with failing business climates, high unemployment, high crime rates and overall failing development can be ranked as highly creative in Florida’s Swedish index, actual creativity is not always acknowledged.

Gnosjö is a small Swedish municipality made famous by its frequent use as an example of how a spirit of entrepreneurship can lift up a community. The unemployment rate is much lower in Gnosjö than in the rest of Sweden. Gnosjö is indeed full of creativity, but in Florida’s index it only ranks as the 141st most creative municipality. Florida’s index fails to catch the real origins of creativity and cultural development in Sweden.

Abroad, many believe Sweden to be the very showcase for social democratic welfare states. However, ambitious reforms implemented during the past few decades have transformed Sweden into a competitive economy with an increasing degree of economic freedom and strong growth.

In the wake of this development, culture, fine food and the arts have all blossomed in Swedish cities. Tourists, as well as businesses, are attracted not least to the capital city of Stockholm. The strategy underlying this development has been based on a sound business-and-growth-friendly policy orientation, not a Berlin style emphasis on public subsidies of culture over families and businesses. Cultural development has occurred as the result of a growing economy, not the opposite.

Nima Sanandaji is President of the think tank Captus. Johnny Munkhammar is President of the consulting agency Munkhammar Advisory. They are authors of a report for the Stockholm Chamber of Commerce about urban development. Peter Egardt is President of the Stockholm Chamber of Commerce.