November 25, 2009
Rapidly Expanding Suburbs Start Contracting
Some former fast track suburbs have lost population since the recession started.
The recession and housing collapse have halted four decades of double-digit growth for nearly half of the nation's biggest rapidly expanding suburbs.
Twenty-four of the 53 cities of 100,000 or more that grew by at least 10% every decade since 1970 lost population in the last two years.
This is blamed on the recession. But I think the oil price peak in the summer of 2008 (which by itself was enough to trigger a recession and we are at risk for a repeat) scared a lot of people out of willingness to move somewhere that requires long commutes.
Some commentators predict a return of ex-urb dwellers back into cities. But some employers could instead opt to move the jobs closer to the people. It is just as easy to build office buildings in an ex-urb as it is to build high density (and therefore very unpreferred) housing near an old city's office buildings.
Businesses probably move less frequently than employees because a business has all its existing employees who live nearer its existing location to worry about. But smaller businesses have an easier time moving, especially those who have most of their key employees coming in from the same distant area.
The advantage for a company that moves out to an area with cheaper housing is that it suddenly becomes a more attractive place to work for people who can't afford the more expensive housing of inner suburbs. So I wonder how fast will high oil prices drive some businesses out to the distant suburbs of older cities. Any thoughts on this?
A lot of that is happening here. The reason is simple: the farthest out suburbs had the highest decline in prices, because they were the most speculative to being with. Hence they are having high foreclosure rates, and the people who lived there are moving elsewhere. This tends to implicate the real estate price shock more than the short-lived oil price peak.
The main obstacle to moving businesses into suburbs in the US is, as I understand it, regulatory: zoning laws. Suburbs are generally zoned "single family residential", with commercial structures verboten.
Further, I suspect that people in most suburbs will be reflexively against any zoning changes to allow businesses in, even on a very limited basis -- because this would "lower property values" and also have the taint of urban danger associated with it.
If the American upper-middle-class lifestyle didn't in turn demand regular moves to follow one's career, people would be happy to see their home's official "value" go down, because it would mean lowered taxes in the long run; as it is, people are still too dependent on homes as an investment vehicle (and too used to paying absurd prices for housing) -- even after the mortgage bubble seemingly popped.
Partially-empty suburbs might be changed if enough of the lots are effectively owned by people who would see the benefit in bringing businesses in -- but then would there still be enough people left to work at those businesses? Are people who live in such neighborhoods the kind of people a business is likely to hire as a commodity?
In addition to where your employees live you also need to think of where your customers live. If you open a business in a lower density area in the exurbs then unless customers live locally they will have to travel a long way to get to you.
Also, if peak oil really does hit then it might be more important to think about what business you are in rather than where it is located.
For a lot of businesses the customers are all over the world. I deal with people on different continents in my work. So some businesses will be able to move to ex-urbs.
Houston has two de-facto CBD's: Houston proper (includes Downtown, the Galleria, the "Energy Corridor" at I-10 and BW8, and the Med Center) and The Woodlands (Anadarko is the most famous company located there). It's hard for a Woodlands company to hire people who do not live in other parts of HOU - The Woodlands is 40 miles North of Downtown, so your talent pool is restricted. Even if I lived in The Woodlands, as an employee, I'd be hesitant to work there. Much of advancement is tied to job mobility, and opportunities come from lunching with other people and being able to discreetly slip out early or come in late to interview. A lot of advancement is also tied to being "in the flow," hearing and sharing rumors, meeting someone for a drink after work.
Houston and the surrounding areas generally do not have zoning.
This process happens a lot anyway. Chevron and BankAmerica moved out of San Francisco a long, long time ago for Contra Costa County (San Ramon and Concord, respectively) and the Northern California AAA just moved out there from SF as well. Now, some of this is because SF is a stupid place to try to do business, but it's going on anyway. And let's not forget that a lot of senior management already lives in the suburbs. If they think they need to shorten the commutes because energy/transportation prices are too much, they'll move the businesses away from the cities, rather than have their kids switch schools and baseball teams. Utopian urbanists are going to be disappointed.
In the SF Bay Area, business have been moving out of SF for years -- partly because of the stupid business climate in SF proper -- partly to get closer to Silicon Valley -- but even the big companies like Chevron and BankAmerica (before the merger with Nations Bank) had moved out to Contra Costa County (east of SF) years ago. The Northern California AAA just opened a brand new headquarters, moving out from the crappy neighborhood around the end of Market Street and out to a spot just a block from the train station in Pleasant Hill/Walnut Creek.
Mostly, though, if commute costs really become prohibitive for regular commuting, folks should recall that senior management already lives in the suburbs by and large and they aren't going to move their families into the city. Instead, they'll bring the business out to them rather than change schools and baseball teams and country clubs. Sorry, neo-urban utopian types, the move is out-bound, not inbound.
So you either open your business in a dense urban area with high taxes, poor schools, and tortuous zoning/permitting processes or you can open in a suburban office/light industrial park with tax breaks, near good school systems and streamlined zoning/permit processes. Your employees can either live in cramped, expensive urban housing, with failing schools and spend their money on private schools or they can live in varying cost suburbs surrounding office parks, in neighborhoods chosen for school quality, and spend the money on the breadwinner's commute while the family enjoys a better quality of life. Is oil going to rise to a level that it offsets the difference between private school tuition and commute costs?
As for businesses that are sensitive to customer location, well, they tend to congregate around the suburban mall/retail development, not downtown. In any case, they must locate where the customers are, which will be where the employees of location insensitive businesses live. Businesses with remote customers do better locating outside of urban traffic with easy access to transport systems and hubs.
The company I work for recently moved out of Seattle and into and industrial park in a more friendly county. They tried for years to find a close spot for a new building but couldn't. The new county is much less urban and much more business friendly.
The commute is much easier for some employees and much less for some. This was offset by much lower building costs. The company is providing van pools and commute assistance.
It is much easier to move one company than it is to move hundreds of employees. Each person is entangled in extensive social networks in their current location. Only a "Utopian" would expect people to uproot and move for a job. Some will, most will look for a different job and retain their social connections.
Another dominant zoning-related variable is land-use and height restrictions. See the case study of Los Angeles, where the combination of the widespread "we don't want to look like Manhattan" mentality (which keeps the city flat) and HOA-like local politics squelches the natural process of increasing density via verticality.
This is the backdrop against which the film and TV business operate, which exacerbates the issue because it is a highly fluid industry (very few stable jobs, the bulk of the work is per contract) which nonetheless does not often lend itself to telecommuting. So, you have a large pool of studios and freelancers endlessly forming, breaking up and re-forming teams as films begin and wrap, and TV series get cancelled. Such an industry needs to be centralized, but in LA you are forced to either restrict your client pool, or accept intermittent commutes from hell; the sprawl means there's no one ideal place to live.
It doesn't help that it's a business driven much more by artsy-fartsy concern for fashionable location than for practical condideration; that's why so many studios are in Santa Monica, where the commute is hell if you are coming in from anywhere else...and hell if you move there and your next gig is anywhere else (a sure bet). LA is hella expensive in time as well as money for this reason.
Moving out of cities is a good thing for our Country, and for people that live ouside of cities. Our Founding Fathers experiment in democracy has been hijacked by urban dwellers. Moving to the burbs will level the playing field.
BUSINESSES: MOVE AS SOON AS POSSIBLE. Your survival (and the American citizen's) depends on it.
Although I believe Woozle is correct in principle that regulation is a burden on suburban development, I must respectfully disagree in practice. I have tried to develop affordable and attractive residential housing developments in several suburbs and ex-urbs near Milwaukee, WI in the last two years. NONE of the communities were interested unless I brought a substantial portion of commercial development with the housing.
The reason is primarily financial: civic planners believe that residential housing is a financial burden on the community, not a benefit, requiring more services like police and fire and schools.
Additionally, Wisconsin law requires all communities to have a master plan for development. Almost all the suburbs have planned developement for business, but little for residential housing, and almost none for "affordable" housing.In our area, residential tax revenues are lower per square foot and per square acre than business tax revenues.
Thinking about this a little deeper, the bureaucrats want your MONEY, but not YOU, in their fiefdom. Then they claim that they want to bring jobs to their community. They don't want the JOBS, they want the TAXES. (For obvious reasons, I must not use my real name in this post. I still must work with these folks in the future).
Cities are a net drain for businesses. Forget for a moment higher taxes, licenses, zoning regs, various regulations, shake-downs disguised as "diversity" and so on. Cities are filled with Black and Mexican populations, with a large proportion of criminals. Who wants to live and work among them? Middle class employees do not like fighting through a criminal gauntlet each morning and night, and certainly won't work overtime in scary (i.e. urban) areas.
Getting away from Blacks and (later) Mexicans was the whole point of the suburbs. Because of the large portion of criminal elements (and racial angle making vigorous law enforcement simply impossible).
Yes, this is politically incorrect. But no one moves to a neighborhood expected to stay Black or Hispanic. This is why the forces of gentrification are first, same-sex gay couples (better able to fight intruders and criminals as a duo), then young, risk-taking couples, and then finally families (the most vulnerable and most risk averse).
Places like Antelope Valley are collapsing because the job base in the LA Basin is collapsing, thus no need to frantically find a place as far away from Blacks and Mexicans as possible. These are the far exurbs, places like Temecula are also part of that. Instead people are out-migrating to places like Texas and so one with higher job opportunities than depressed California. The real growth is likely to be in the Mountain West places like Salt Lake City, Boise, and Denver seeking distance from failed coastal states filled with Blacks and Mexicans (high cost of crime). People will pay extra not to be mugged, assaulted, murdered, etc. Including driving costs.
No one is moving back to cities save young women and men on the make for the opposite sex in a few place like NYC, Chicago, and Boston. Because of crime.
I live in the Chicago area.
Almost anyone under the age of 30 hates jobs in suburbia and prefers living in the city.
And a city location where there is excellent mass transit allows a company to draw a workforce not only from the city, both from the northern, western, and southern suburbs, so a central location is a significant advantage
Woozle's Respectful Debater comes closer to reality than Woozle to describing growth patterns in the Northern suburbs of Dallas, TX. The trend here is for businesses to move out to the residents instead of the residents moving inward. The exception is some areas in and near downtown have become popular areas for relatively affluent young single people to live. Here the suburbs seem to know that they need a balance between areas zoned commercial and residential if for no other reason than to provide a larger tax base.
Whiskey probably overstates the racial component of suburban growth. Middle class families would flee from a school district full of lilly white unemployable hillbillies and meth related crime too, but the underclass in our area tends to have more pigment in their skin. Economically successful members of a variety of ethnic groups are common in the Dallas suburbs.
@HLT: Too bad a sizeable portion of the US workforce is still OVER age 30...like myself. Sure, the trendy twenty-somethings will always prefer the hip urban lifestyle, but everyone grows up eventually. I lived in Chicago for a year, in Hyde Park where I went to school (U of C). I don't know if I'd hold up Chicago as some sort of exemplar of an enlightened urban center; its political climate is being exposed for the whole country to see now, thanks to our current president. Others above have indicated the types of challenges every business faces when trying to locate inside a city proper (taxes, political problems, high crime, low-quality-high-density-high-cost housing that people hate); THAT is where you want growing companies to put up their jobs?
The key factor for having a productive middle class work force are schools.
American high density cities have bad schools as a rule. There are a lot of reasons for this and none of them can be changed by businesses.
This means businesses looking for low cost & high productivity middle class workers will relocate where they have good schools for their employees.
As a rule, ex-urbs have better public schools because they are new and don't have the accumulations of public sector employee
Singles move to the city for the mating dance. They find a mate. They have a kid or kids. Then schools become a consideration. If it is to be public schooling, they leave the city for the slightly better and certainly safer schools in the burbs. For Example, Chevron recently left downtown New Orleans for a spot north of Lake Ponchartrain (Covington).
Funnily enough, my local newspaper had an article today about living in center city (such as it is) Wilkes-Barre, PA. Fine if you are young, fit and make good money. Not so good if you have kids (bad schools, a terrible drug problem), are older (the desirable homes are all 2-3 story victorian, parking is almost non-existent, and as the article pointed out, you have to live a walk-everywhere lifestyle) and not making good money (taxes are three times the county average, the homes are all either old, decrepit and thus expensive to rehab and maintain, or the former homes of coal barons and thus expensive to rent or buy, and to maintain and heat/cool).
Did I mention that a former employer moved to an industrial park miles out of town (but closer to his home)? He sacked the employees who lived far away and is replacing them with locals (and paying them less). Cities are for young, childless professionals, and other well-educated, well-paid specialists. For anyone else, they are an expensive, unsafe place to stay while plotting an escape.
Woozle is glad to hear (from "Woozle's Respectful Debater" and others) that there apparently isn't as much resistance to business in suburbia as feared. From comments others have made, the main resistance seems to be from the businesses themselves, then? I'd really like to see some studies on this.
A note to Someguy, though: calling urbanism "utopian" is, I think, misunderstanding its motivations. Making a happier society is not the top priority; the main motivation, as I understand it, is to reduce transportation fuel consumption to more sustainable levels -- thus making society less vulnerable to fuel shortages and price-swings. Robustness and stability first.
As Josef K. points out, we need to rethink how our urban centers work before we could start calling residency there "utopian".
It should be noted, however, that the original article here wasn't proposing moving residences downtown but rather moving the businesses to where the residences already are. Obviously we still have the potential to make once-pleasant neighborhoods less pleasant, but I should think it would be much easier (practically, if not politically) to solve the problem from that direction.