In a year when two boosters of the “luxury city,” Donald Trump and Michael Bloomberg, are vying to run the whole country, the very model that created their “success” is slowly unraveling. After roughly 20 years of big-city progress, measured by economic growth and demographic progress, the dense urban centers, including New York, are again teetering on the brink of decline.
Long associated with glamour, money and cultural influence, the rise of the luxury city has foundered on the rocks of inequality and, increasingly, diminished upward mobility. Indeed, according to Pew research, the greatest inequality now exists in superstar cities such as San Francisco, New York, Los Angeles, and San Jose. Rather than working to create and sustain a middle class, as Jane Jacobs once suggested, by building local economies, these cities have depended on luring both the ultra-rich and the young and ambitious of the global marketplace to secure and enhance their place.
This approach worked somewhat in the first decade of the millennium, as illustrated by a remarkable rise in New York City’s newly listed condo prices over the last decade from $1.15 million to $3.77 million. But the gold rush is fading now, in part due to the decline of globalization which is also weakening the economies of rival global capitals like London and Hong Kong. Today, as The Atlantic recently noted, Manhattan now suffers conditions where “the homeless shelters are full, and the luxury skyscrapers are vacant.”
Even the world’s arguably most influential urbanist, scholar Richard Florida, agrees that the great urban revival is “over.” Since 2010, urban inner rings, including central business districts, accounted for barely 10 percent of population growth in the nation’s 53 largest metropolitan areas. More revealing still, the country’s three largest metropolitan areas — New York, Los Angeles, and Chicago—are now losing population. Since 2012, suburbs and exurbs, which have seven times as many people as the core, are again growing faster. Suburbs are also seeing a strong net movement among educated people, those earning over $75,000 and especially those between the ages of 30 and 44. Far from being dead, as often asserted in the big city media, a new Harvard study shows that over the past 40 years the periphery has increased its lead in terms of wealth and jobs compared to core cities.
The changing dynamics of millennial migration—long held as the secret sauce powering inner-city revivalism—represent perhaps the most ominous sign of things to come. Dense, high-priced cities, the object of endless love from architectural critics like The New York Times’ Michael Kimmelman, do still attract many talented young people straight from college, but many don’t stay long, and increasingly are seeking out other, less dense and more affordable places. A recent Brookings study shows that New York now suffers the largest net annual outmigration of post-college millennials (ages 25–34) of any metro area, followed by Los Angeles, Chicago, and San Diego. The biggest gains, outside Seattle, have been concentrated in the central and mountain time zones in places like Austin, Dallas, Houston and Denver.
Immigration flows, long a source of demographic vitality for coastal metropolitan areas, also have been shifting to the interior, as Brookings has noted. From 2010 to 2018, the foreign-born population of Houston, Dallas-Fort Worth, Austin, Columbus, Charlotte, Nashville and Orlando increased by more than 20 percent, while San Francisco’s foreign-born population grew only 11 percent, and New York 5 percent. Los Angeles suffered a loss of nearly 1 percent. Some immigrants are now heading to unlikely locations such as North Dakota, which experienced foreign-born growth of 115 percent, and South Dakota (58 percent), while states such as Minnesota and Iowa had more than 25 percent growth.
The mounting surplus of luxury housing in America’s great core city is one indicator of a mounting crisis. Manhattan condo prices are now declining and many of the most luxurious new high-rises in New York—including MoMA 520 Park Ave., Central Park Tower, One57 and 100 E. 53rd St tower—are saddling well-heeled investors with potentially huge losses. Half of all the city’s condos built since 2015 lie unsold, as oligarchs, drug lords, celebrities and others lose interest in luxury real estate.
Similar drops in luxury sales can be seen in markets such as Los Angeles, San Francisco and Miami, a process that also can be seen in other major world cities from Sydney and London, to Paris and Hong Kong. For a generation all these places were flooded with mobile capital from the ultra-rich, who invested in elite properties either for investment purposes or as a second, third or fourth residence. Now that cash, much of it from China, is drying up as slower growth, the coronavirus, and trade tensions slow the outflows, causing a drop in values.
While those luxury projects boosted property values, they did little to address the real needs for the vast majority of urban dwellers. Even at a discount, they will be far too expensive, or often too small, for middle or working families.
The case that more buildings for billionaires will help make life better for working families, or even millennial tech workers, is something so absurd only a free-market ideologue would believe it. Despite mindless “free market” claims that building more luxury housing is the answer to housing affordability, most housing advocates recognize that these structures do not address urban America’s middle- and working-class needs.
In many cities, the preponderance of such housing has sparked growing opposition. There’s already a movement to restrict landlord rights, including rent control and even permission for squatters to occupy empty homes and condos. These moves may offend economic logic, not to mention owners and investors, but are an inevitable consequence of leaders like Bloomberg pushing the luxury city idea to its breaking point.
If culture and coolness drove much of the elite migration to cities, so too did the widespread notion that urban centers would dominate the economic future. Cheerleaders for the “new urban renaissance” such as Neil Irwin of the Times, sees these cities as the places with “the best chance of recruiting superstar employees.”
Yet the recent data belies such assertions. As Florida has noted, the bulk of new growth of the “creative class”—the well-educated millennials who sparked the urban renaissance—is “shifting away from superstar cities.” Growth in the migration of such prized workers is now two to three times faster in Salt Lake, Pittsburgh, Cincinnati and Grand Rapid, Michigan than in regions around New York, Los Angeles, or Washington, D.C. This is true even in San Francisco, where nearly half of all millennial generation described themselves as “likely” to leave the city by the Bay, a dramatic shift from a decade earlier, in large part caused by insanely high housing prices and deteriorating conditions on the streets.
New technologies also make it increasingly easy for companies to work far from the dense megacities, sparking a process that one British writer has described as “Counter-urbanization” in which some of America’s traditional cities are in danger of becoming increasingly “obsolete.” Today much of the big growth, even in tech, is occurring in largely suburban regions. Last year Austin, Salt Lake City, Dallas-Fort Worth and Phoenix, as well as smaller cities like Madison, Wisconsin and Boise, Idaho grew their tech sector as much as twice as quickly as ballyhooed hubs like New York or Los Angeles. There are growing signs that even Silicon Valley is dispersing as evident in Lyft's move of many key operations to Nashville, Uber establishing its second-largest office to Dallas-Fort Worth, and Apple’s construction of its second-largest facility in the suburbs north of Austin.
But tech is only a small part of the picture. In the much larger category of professional, technical and scientific services, the big gains are being registered in low density, sprawling places like Salt Lake City, Austin, Dallas-Ft. Worth, Orlando, Jacksonville, Raleigh, Las Vegas and Nashville now enjoy among the highest rates of growth in this critical field. They are now expanding these jobs as much as two times as quickly as New York, Los Angeles and Chicago. This does not bode well for office developers in famously high-rise cities, like New York, where office demand is now slumping and the wreckage of We Work could leave a legacy of empty, or discounted, space.
In many ways the promoters of the luxury city unwittingly set the conditions for its own demise. As mayors like Bloomberg pushed their elite vision, focusing on the billionaire class and elite industries, the middle class continued to decamp to more affordable places. With the stabilizing force of middle-class families diminishing, a new urban demographics emerged that has become dominated by singles, hipsters, the very rich and the very poor. This new reality has shifted urban politics from the pro-business corporatism of Bloomberg to the fully woke metropolis of Bill de Blasio with its hostility to business interests, dislike for police and opposition to education reform.
A similar process can be seen in other leading urban centers, including Chicago, San Francisco, Seattle and Los Angeles. Moderate, business oriented political leaders of the past—Bloomberg, Rahm Emmanuel, Richard Riordan—are increasingly losing out to leftist zealots like Congresswoman Alexandria Ocasio Cortez with their elaborate and often impractical, social justice agendas. These conditions are not often demanded by Texas, Florida or Nevada economic developers.
This is impacting corporate decision-making, even in companies run by self-described progressives. In Seattle—where many public officials and employees now see the government’s primary mission as the promotion of “social justice” as opposed to serving the basic needs of the public—a far-left dominated City Council is pushing Amazon, which occupies nearly 20 percent of all Class A office space, out of its hometown. The company is now working to relocate some employees to other urban areas, as well as to a massive new building in the suburb of Bellevue.
Under Bloomberg and other “luxury city” mayors, there was a concerted attempt to regain control of the streets from criminals and often unhinged vagrants. Now in some cities, like San Francisco, criminality in the public space is no longer being prosecuted. Particularly impacted has been law enforcement. The new progressive leniency, including perhaps overly expansive bail reform, appears to have encouraged criminals back to the streets of New York and other cities. Both violent and property crimes are on the rise, not only in Gotham but in cities such as Philadelphia, Baltimore and Washington.
Rather than enforce basic order, cities swept up in “resistance” to Trump increasingly curry bedlam by all but abolishing penalties for property crimes, allowing people to sleep on the streets, shoot up and even defecate in public. San Francisco is the new role model here. Nancy Pelosi may praise the city by the Bay as “guiding light for progress across America” but the Daily Mail more aptly recently described it as a “dystopian nightmare.” It is a city with more drug addicts than high school students, and so much human waste on its streets that one website has created a “poop map.” Remarkably, San Francisco just elected as district attorney Chesa Boudin, son of unrepentant 1960s left-wing terrorists, on a platform further de-emphasizing criminal prosecution for property crimes and vagrancy.
Similarly in the core cities of Portland and Seattle, lavish investment has accompanied massive homelessness and disorder. In Los Angeles, run by gentry liberal and uber-green Eric Garcetti, the city’s core—filled with overbuilt, overpriced and often vacant apartments—is filled with homeless camps overrun with rats. A UN official last year compared conditions on the city’s Skid Row to those of Syrian refugee camps.
Equally critical has been the assault on urban education. Charters and screened high schools, critical to retaining middle- and working-class families, are getting steamrolled by teachers’ unions and associated administrators. Increasingly public schools are abandoning both academic and personal discipline, while political indoctrination is replacing the acquisition of skills. The biggest losers here are usually inner-city poor children but the shift also makes cities far less attractive both to middle-class residents and businesses.
The future of the luxury city—the pride of both Trump and Bloomberg—is an extraordinarily limited one, promising to return to the bad old days when the urban centers were largely abandoned except for visitors, the wealthy and people too young to buy a house or start a family. Meanwhile high taxes and regulation, according to a Bloomberg News report, are leading to the flight of billions in capital from cities like New York and Chicago to low-tax locales in places like Florida and Arizona. The luxury city is apparently losing more of its tenants even as the middle and working classes leave. These losses will really hurt when the pension bills come due.
This presents a dangerous prospect for most city residents, or those who might still like to settle there. To stem decline, what is needed is not more luxury construction, or even ever more elaborate cultural or tourist venues, but those essential things that can lure and attract middle class families. These include the basics, like public safety, middle-class jobs and good public schools, that have been given increasingly short shrift, particularly by the ascendant progressive regimes.
A new paradigm is desperately needed.