My town has responded gracefully to vacancies on Main Street. The local BID, an artists’ collective led by a local gallery owner and downtown property owners have filled most vacant storefronts with art. Walking down Bloomfield Ave. in the past year was a much happier experience thanks to the installations. Other places have not been that lucky.
Unopened mail, dust and trash compounds on vacant storefronts. One boarded up facade turns the entire block eerie. Passers by clutch their lapel and hasten their pace. It all adds up to a sorry scene where squalor and apathy take over.
Some cities bring in pop-ups, others tap artists and there is even a startup in England whose mission is to match vacant property owners with entrepreneurs and startups to set up temporary storefronts.
The transformation is not immediate, nor is it permanent. The pretty colors and the novelty may make the walk more fun but they don’t necessarily revitalize the economy in the long term. After a while, maintenance is needed to keep the storefronts looking fresh but artists and temporary pop-up owners lack the budget to do it. They help, they highlight the possibilities, they cheer up the block, but in the end it’s assisted breathing. It’s a “meanwhile” kind of thing that can keep it alive just until a new tenant takes over and revitalizes the area for a longer term.
Tenants don’t drop from heaven, though. The process of a new small business opening in town and staying alive beyond the novelty is complicated, made up of an idea, tons and tons of hard work, market research and testing, permits, construction, budget shortfalls, nervousness, countless iterations and, most importantly, a vital local economy that can sustain it.
The government has worked very hard to get local economies to the state they are now. There have been countless programs and trillions of investment in transportation and housing since after World War 2. The outcome of these has not been great. Highways have destroyed villages and the bonds within cities. Subsidies for housing, driving or insurance have made building single-use buildings over farther areas easy, allowing those with better means or access to credit to flee. Large commercial spaces in the edges of town serving those suburbanites and many others in a larger region have diluted the tax base of the downtowns and the job density.
The National Interstate and Defense Highways Act of 1959 and the Housing Act of 1949 -literally- paved the way for what we now know as sprawl: the thinning of the urban fabric that dissolved the density needed to create community, make local economies viable and support businesses.
The outcome of those laws has been the most common urban landscape in the country: residential tracts with single family homes, segregated from the commercial clusters that serve them, which may be very close but are only accessible by driving. Movements like New Urbanism have been fighting to change this model and have come up with several of the brightest ideas for repairing our cities. Highway removal and Sprawl Repair, among others, are slowly changing the face of our regions to try and make them more humane and accommodating to urban life.
I will argue that even with our brightest ideas implemented and the hopeful results we’ve seen, we are not repairing our cities beyond a patch if we don’t look deep for the causes and start to change from there.
The good news is that, for the most part, grand gestures, new consensus, bipartisan acts of Congress and billions of dollars are not needed to lead the charge and begin the change. Small, grassroots efforts can make a tremendous difference. Tiny changes in local codes and a new way of looking at the power of small, local economies can wake us up to a very different reality.
Enter Richard Cantillon, a French economist from the 1700s who saw today’s economic dilemma. He found that as the money stock increased, the value of each unit of that money would be less. If money has a backup with stable value, like gold for example, the bills people exchange when shopping represent that value. When they don’t, value is given by decree. This is what economists refer to as “fiat currency” which means “made up money”.
The US Dollar had a “Gold standard” until the 1910s and a partial one until the 1970s. From then, the money stock has grown exponentially without backup, so each dollar in circulation is worth less. The “Cantillon Effect” is the reason why $1 from 1930 is worth about 3 pennies now, salaries don’t grow at the pace of the economy and the average American family has virtually no savings.
In cities we’ve experienced a Cantillon effect of sorts. We have increased the stock of buildings and urbanized land. We segregated the different land uses and built them up with cheap materials that have short life spans. Our sprawling urbanized areas are “made-up cities” the same as our money is made up.
The result is that the entire region loses value because the fabric is so thin that people do not meet and exchange ideas, collaborate or form solid communities.
Some dispersed areas manage to create value regardless of their lack of density due to the immense size of their markets and industries. Southern California and the Bay Area come to mind. Hollywood and Silicon Valley are larger economic engines than most countries in the world, so until now the speed of sprawl has been no match for the creation of wealth. And even there, the overall value of the metropolitan region is high but the allocation of resources is very unequal.
Areas without multi-billion dollar industries don’t have enough productivity to distribute wealth and resources evenly through sprawling areas. The difference between richer zones and their unequal poorer counterparts in less well off regions has been engineered.
In the same way “fiat money” has no hard value backup, dispersed areas of “fiat urbanism” don’t have enough output per acre to be sustainable. Despite that, incentives stemming from transportation, housing and insurance subsidies keep pushing urbanization outward and thinning the fabric more as time passes. This doesn’t mean that if their entire labor market would be concentrated in areas within a couple of miles from downtown, those cities would be rich, but they would at least get by more comfortably as their local economies would be able to provide a dignified standard of living to more residents.
Alain Bertaud is a French economist working at the NYU Marron Institute of Urban Management. His book Order Without Design is both a plea to look at the inefficient ways that cities allocate resources and a hopeful account of how the quality of living can improve in cities. He urges governments to assess the capital value of their land and determine whether it’s used efficiently. Not many do it, but if they did, they might start seeing what needs to change.
Joe Minicozzi, a planner from North Carolina has created a very useful tool to assess the value creation in cities and compare the tax performance by acre of core and suburban areas. His work is very close to what Bertaud suggests. Even in their current state, downtowns are the gold standard, and suburban areas are made up and baseless. The problem is we keep building them and desperately trying to fix the failing ones while letting downtowns wilt.
The backstory on vacancies starts there. Cities are labor markets, according to Bertaud. Land prices are tied to the time and cost of commuting to the denser job areas. This is how cities have functioned through history. In a sprawling landscape, especially in poorer cities and metro regions that have grown too large, there are no significantly dense job areas. Too big a chunk of the limited output from their economies is spent in time and cost of commuting, which is especially burdensome for the less affluent. It’s harder to notice in better off metro regions like Atlanta but painfully harsh for poorer ones like Niagara Falls, NY.
Vacancies may be reduced by switching to a Land Value Tax, so keeping property vacant would be costly to owners. Levies may help with absentee owners who keep those properties for tax write-off purposes. There’s also a way to reduce them by imposing local fines to vacant or disrepaired property. Adding costs to vacancies in the form of taxes and fines might motivate some to sell or redevelop. If the fabric is too thin, however, the little wealth that is created dilutes because of the poor resource allocation of the “fiat city”.
If businesses don’t create enough wealth, people don’t have the means to patronize them and they won’t have the means to pay rent. Rinse and repeat. Without enough output, no tax lien will solve the vacancy. It will just transfer ownership of a vacant building from its owner to the bank or government.
There is no easy answer, of course. The excess building stock has very costly service infrastructure already built to serve it. Soon it will need maintenance. Changing the tax structure on a basis of proximity to job centers, eliminating local subsidies for investors and other tactics might be overly harmful to property owners with large tracts on the edges but it may well be the last stand we have against the collapse of our cities.
To the question of what to do with so much that has already been built as part of the excess building stock, any investments should concentrate in the urban areas with solid, connected grids, which would more easily adapt to small scale infill, where connectivity networks (like 5G) have less land to cover and potentially more people to serve, and would make sense for small startups and entrepreneurs setting up shop.
A strong, diversified labor market could be grown first. Deep introspection into the nature of regulatory frameworks and local assets can be insightful and lead the way in tailoring regulations across the table to make it fast, easy and cheap for new businesses to open up. Local folks will do the rest.
Maintaining the outer parts of the sprawling network should have to wait. Even after the wait, only those that still make sense should be subject to repair. We will know which ones when the “fiat” part is stripped down and costs are what they are, without any aids or subsidies. The cost is just too big for struggling public budgets now. The retrofitted areas will likely become autonomous parts of the regional network when owners decide to invest and go from “fiat urbanism” to modest, thriving urban nodes.
Will this cause a tremendous shuffle of wealth? Yes. Most likely. Will it take a long time? Of course. Rome wasn’t built in a day. It took London over 100 years to pass 10,000 residents and Paris 17 centuries to reach a population of 100,000.
We have to start somewhere. Righting wrongs is painful but necessary. As with any mistakes that are compounded, such as switching to “fiat” money, the can may only be kicked for so long and the weakest links will give up soon.
What are the weakest links? Good news: it’s not the little guy who can hustle and get by by single handedly fixing a run down building to set up a tavern or a barber shop, if there are no specific blockers preventing them to do so. The weakest link will likely be the multi million developer who owns millions of square feet in the suburbs, whose business model requires a steady cash flow, high turnovers, fast highways and short memories.