Archive for national politics

Value of (old fashioned) home ownership

In his Great Reset press tour, Richard Florida has been challenging people to think hard about the role of home ownership, especially in the US but also in some struggling Canadian cities.  He is correct to point out the tragedy of the problem–people who have no equity in their homes and cannot sell them also find it hard to pack up and move to cities with more opportunity. They get stuck.

However, I’m not sure the solution is less home ownership on average than the historic norm in both countries of roughly 66% of households owning homes.  (addition: Florida himself suggests a 50% ownership rate, some of the media discussing his work have implied he suggests almost getting rid of it altogether, which is incorrect.)

The solution may be a return to the old fashioned approach to home ownership, which had the following characteristics:

  • You had to have a down payment, whether 25%, 20% or 5% (in the pricier places).  Saving up thousands of dollars required a level of personal fiscal discipline (almost like a test to pass to become a home owner)
  • You had to have an income that would support a 25 year amortization, paying down the interest and the principle every month.
  • Most home owners had a goal of paying off the mortgage as fast as possible–this represented freedom, and even upward mobility.
  • As a result, equity in houses was not a cash machine it was something to treasure and hold on to.
  • As a result, retirees had a nest-egg.  Even if property values only kept up with inflation, it was a forced savings plan.

Under this paradigm of home ownership, moving to another city was not that hard.  If you had significant positive equity in a home it meant that you could sell, move, and buy in the new place.

The recent housing over-building and subsequent price collapse destroyed this American dream.  It has destroyed the fiscal responsibility that millions of Americans displayed who did not treat their house as an ATM and responsibly paid down their mortgage every month.

Looking ahead, restoring this fiscally prudent mindset based on saving might be a path out of the current malaise.  America needs a higher savings rate.    And all it might take is tougher mortgage lending rules.

American cities facing challenges

As the United States grapples with the worst job losses since World War Two, the nation’s cities need to be centers of solutions and incubators of private sector jobs.  Yet, with government bank balances at all levels in the red, finding the resources to provide infrastructure and even maintain basic services will be challenging.  Municipalities may be forced to cut payrolls, which will make it that much harder to provide a fertile place for employers and employees.

The Brookings Institute will be hosting a forum on November 19 2009 at 9AM– that will be live streamed (and re-playable)– related to this issue, involving mayors, the Wall Street Journal and even VP Joseph Biden.

The discussion will focus on the deepening fiscal challenges many cities face, the  adjustments that will be required in 2010 budgets, and the and the tough choices on city services and payrolls that may drag down national jobs numbers and economic recovery.

In the meantime, here are my thoughts on the big issues for American cities:

The US is facing the need for structural economic change, finishing the shift from an industrial economy to a knowledge and experience based one.  The latter requires dynamic, vibrant cities filled with talented people and clusters of different companies doing innovative things.

But, how to get there from where so many cities are — that’s a big question.  I look forward to hearing what the Brooking’s Institute’s forum participants come up with. But I can’t help but think the challenges here generally cannot be solved at the municipal level alone — it’s a national economic structural shift that needs to happen, and will require a devalued currency, inflation, and perhaps a decline in living standards for millions of Americans.

Is infrastructure spending the answer?

Many North American cities face crumbling infrastructure along with a need to offer residents new mass transit options.  During the current economic slow down, the conventional wisdom seems to be that investing in infrastructure is a win – win, offering short term employment and long term needs.

But, what if many of the people needed to design, manage or build the infrastructure are not available?   Or, only available at premium salaries and contracts.   What if the heavy machinery and resource inputs needed are not locally produced?  Will the stimulous still work?  Will this put to work the people who are unemployed?

These are questions raised by a recent Globe and Mail article by Tavia Grant. 

The knocks against infrastructure are that it is not as labour-intensive as it used to be, tends to employ many more men than women and, these days, requires skills in engineering, technology and architecture that are already in short supply, critics say.

“A lot of this ethos of infrastructure-equals-jobs comes from the 1930s when you put a lot of guys to work digging ditches and shovelling gravel. And we don’t do that any more,” said Dr. Jim McNiven, professor emeritus and former dean of management at Dalhousie University….

“If you want to create jobs, as opposed to buy equipment, you do daycare expansions, more help in senior citizens’ homes and more community services. And you need to be more imaginative.”

He’s not alone in his skepticism. As Canadian employment losses mount, questions are emerging over what will best bolster job growth as the employment outlook deteriorates.

While America may have a few more unemployed engineers than Canada right now, I think these challenging questions are still relevant.

Maybe Obama’s interest in community service offers an equally valid approach — consider it investing in America’s “social infrastructure.”

Not the time for short term thinking

Many smart business leaders and investment managers are taking advantage of the economic slow down to stop, think, and put into place the foundations for the next 5 to 10 year business cycle — and even thinking much further ahead than that.

Unfortunately, it seems that many city governments, and those at other levels that impact cities are taking the opposite approach.  Some are even backtracking on progressive, forward-looking plans initiated before the recession hit.

Take San Francisco’s proposed congestion pricing strategy.  The mayor and other urban leaders previously saw reducing congestion as vital to the long term livability of the region and especially the metro core.  Now they are seeing the economic downturn as a reason to backtrack.  From the New York Times (pointer Frances Bula):

During his second inaugural address a year ago, San Francisco’s mayor, Gavin Newsom, called congestion pricing “the single greatest step we can take to protect our environment and improve our quality of life.”

Last week, however, the mayor’s office offered a more tepid endorsement.

“The devil is in the details,” said a spokesman, Nathan Ballard. While Mr. Newsom supports congestion management, Mr. Ballard said, “Given the challenging economic times, we would hate to impose too heavy a burden on commuters.”

Commuters are paying less than half price for gas!  The congestion charge would likely still have the vast majority paying less to commute than they did 6 months ago.

City governments, urban business leaders, and all of us voters and citizens need to be thinking about what we want our cities to be like when the economy is next running at full tilt, and over the next 10-20 years. If we want less congestion, more amenities, more walkability, etc. — and more desirebility as a place to live for talented people (which will attract tax-paying corporate employers)  then now is the time to push forward on projects that enhance this.

This is not the time to prop up an older way of doing things for whatever short term gain may be had.

I am concerned that aspects of the stimulus plans that Obama’s administration is formulating will end up being a waste of money and actually set America’s cities back.  More freeway capacity will tend to prop up suburbia, rather than support the revitalization of downtowns and inner urban neighbourhoods.

Once the economy rebounds, many features seen in 2007 and early 2008 will return: high oil prices; citizen concern for the environment; popular interest in living closer to places of work, entertainment and recreation.

These social and economic features that characterized the end of the last cycle should be kept in mind by everyone from urban residents to urban planners and politicians.

Will cities be elevated?

Barack Obama has pledged to create an “Office of Urban Policy” as part of his cabinet.  This would be a first — but also an encouraging sign.  80% of Americans live in cities and suburbs — metropolitan areas.  They are the centres of the 21st century, global knowledge economy as clusgters of people and industry sectors help accelerate innovation.

In Canada, despite the country having the largest cabinet in the free world, with 38 members of parliament having posts, there is no position dedicated to metropolitan issues. The closest post that I could find is John Baird’s role as “Minister of Transport, Infrastructure and Communities.”  Transport is typically a full time job, so I don’t think he’ll have much time left for urban issues. On the other hand, the infrastructure deficit in our cities warrants cabinet-level attention and changing the name of the Ministry of Transport to include infrastructure is a good sign.

To be sure, the governing Conservatives did not elect anyone in the major cities proper, although do have some members from inner suburbs.  But, that’s not a reason to overlook cities.  They contain both the challenges and promises of the 21st century:

Yes, we need to fight poverty. Yes, we need to fight crime. Yes, we need to strengthen our cities. But we also need to stop seeing our cities as the problem and start seeing them as the solution … because strong cities are the building blocks of strong regions, and strong regions are essential for a strong America.

- Barack Obama; at the U.S. Conference of Mayors in June 2008, reported in Philadelphia Daily News

Whatever happens Tuesday November 4th, at least urban issues have been elevated in the US political discussion from obscurity to occasional mention.  At the next election, they could be “front and center.”

US “citistates” and the election

During the presidential primaries, few candidates spoke much about urban issues. No one seemed to acknowledge how reliant the US economy is on its cities. Although a few blogs attempted to bark about this, the mainstream media and therefore most American voters largely ignored this omission.

The Brookings Institution is hoping to raise the profile of metropolitan areas in this election year. According to Peter Harkness at Governing Magazine:

Now, as the general election contest gets under way, the Brookings Institution’s Metropolitan Policy Program has embarked on an ambitious and clearly well-funded bid to change the way we look at the country and its economy, with the hope of influencing the debate during the campaign and then policy making by the new administration and Congress.

The message goes like this: The top 100 metropolitan areas cover only 12 percent of the national land mass but are home to about two-thirds of its population and its jobs — and even larger shares of “innovative activity”: 78 percent of its patents, 75 percent of those with graduate degrees, 79 percent of air cargo, 94 percent of venture capital funding, and so on. In all, they generate three-quarters of the gross domestic product.

Add in more than 200 other smaller metro areas, and we truly are looking at a metropolitan nation. Peirce puts it in context: “As economic actors, major U.S. citistates compete in size with major world nations. In gross product, the New York region ranks 13th among the world’s top economies, just ahead of Australia, Argentina and Russia. The Los Angeles citistate is bigger than Korea, Chicago greater than Taiwan or Switzerland.” And so, he says, citistates are how “our world is now organizing itself” away from an old way of thinking (federal, state, local) to a new way: global, regional and neighborhood.

Brookings concludes, we are ignoring the economic engines that give us the prosperity we now enjoy: our metro areas.

Harkness notes that currently too many politicians and policy developers in Washington DC do not seem to grasp how important America’s urban spaces are to it’s economic present, not to mention future.

Some challenges are state and local as much as national responsibilities.  K-12 education is the prime example.  Without offering every child a chance to gain a good educational start in life, the US and its cities place a significant drag on the country’s ability to compete in the future with all the developing and developed countries world wide that are able to offer this to young citizens.

Looking at education as a metropolitan or “citistate” issue is important, as is noting the infrastructure deficit along with the tendency for federal politics to support automotive transport and not transit (or walkability.)

Harkness is rightly skeptical about how much success they will have.  However, we can only hope the Brookings Institution’s efforts will put urban issues — broadly defined — on the national and state level agendas. The American economic recovery and national future depends upon it.

If they fail, my social science fiction from last year may not be so far fetched.

Transit needs some creativity

Despite rising fuel prices, agonizing congestion, and depressingly large portions of lives wasted in commutes, public transit is typically not viewed as a desirable choice in the United States. And most cities transit systems are woefully incapable of handling a significant increase in demand anyway.

The present situation presents a challenge and an opportunity for North American cities and society in general.

Most transit systems are crowded as well as uncomfortable for long commutes and frequently much slower than driving.

What if all that changed? Would more people take transit?

What if people with longer commutes could sit in a luxury coach, fully stocked with amenities, including:

  • Wireless internet (like the google bus in San Francisco)
  • A personal TV with a variety of programs (as on many airlines, especially in business or first class)
  • A comfortable tray table for your lap top, with a plug in
  • A cup holder for your morning latte
  • Free newspapers and magazines
  • Maybe even a bathroom

Imagine, you could check your e-mail and get some work done. Or, you could catch up on last night’s Letterman or Colbert Report, or a BBC news cast or world business report. This wouldn’t be wasted time, necessarily, unlike sitting in traffic in your own car.

What if for shorter commutes people could choose a ride in a comfortable smaller vehicle with a guaranteed seat but perhaps fewer amenities?

What if for all commutes people had a choice of services, as they do with air travel.
I think more people would get out of their SUVs for this than for what is currently offered.

But, these more comfortable transit options would not be cheap. The only way a private sector corporation could offer them would be if everyone had to pay the costs of building and maintaining the roads. The government would have to offer a level playing field and not subsidize single-occupant vehicle commuters.

If tax payers generally did not subsidize them to the same level as today, it could open up space for some creativity and entrepreneurial spirit (which the USA is famous for).

If driving 40 miles on a freeway cost a solo driver $20, each way ($40), plus gasoline (say $20), plus parking at the destination (say $15), then paying $20 each way for a seat on the luxury coach might be a more viable option.

Of course, transit system monopolies (sometimes attached to government-union agreements) would also have to end to bring this in.

But, look at the potential. Here are a few more ideas:

  • With mobile and internet technology, you could buy your ticket 10 minutes before heading out the door once you know you’ll be ready and confirm there is a seat for you.
    • Or you could advance book tickets, catching the 7 AM bus every day.
  • What if these luxury coaches departed from certain Starbucks (or equivalent) locations in the suburbs?
    • You could buy a latte and have a clean, safe place to wait. A bus company rep might even be in there with a mobile device to check you in.
    • As some suburban areas become higher density, this Starbucks might be at a Lifestyle Centre near peoples homes (walking distance or a park-and-ride situation).
  • What if some downtown workers who lived in suburbia could make extra money driving a nice coach into town. Presumably, there will be a need for some buses to drive in and stay until the end of the work day. An enterprising person could get his or her bus driver license and earn an extra $50 per day (and not have to pay their own commuting costs).
  • On shorter commutes perhaps different companies’ buses would be en route and you could check availability by mobile device and book a seat, catching it at a designated location. From the same mobile devices the driver would know whether to stop or not.
  • With competition among several commuting providers in a given metro area, service would be good. Creativity would be essential. Someone might offer regular customers Friday afternoon TGIF happy hour, for example.
  • One company might offer “business class” seating and “economy class” seating, similar to the airplanes.

If only some creativity could be unleashed.

Consider: Almost everyone takes commercial airline flights, even many people who can afford their own private jet. Airlines offer first class options, private lounges, complementary beverages, better food, etc. at a higher price. And there is considerable competition between airlines to offer these services. In wealthier Latin American countries, such as Brazil, Mexico, Chile and Argentina, competing companies offering luxury Mercedes Benz bus service for inter-city travel attract numerous people who could afford to drive their own vehicles. But with toll roads and higher gas prices, along with the comfortable bus service, they don’t drive themselves. The cost-benefit assessment weighs toward taking the bus.

 Addendum:  Marco’s comment reminded me of another point.  More people will take metros or trains, the latter often offering a nicer class of service.  But building train and metro infrastructure if it isn’t there is very costly.  By contrast, a premium bus service can use the existing roads.

Is urban living in conflict with the US Constitution?

The American constitution was written to serve a new country’s new citizens who were hard-working, independent-minded and primarily rural.

If over the next few decades more Americans (not all, just more) move into higher density, “urban” neighborhoods, I’m wondering if some long-held American values and customs will be challenged.

A CEOs for Cities post this week was thought provoking on the urban-rural conflict within the constitution and division of powers. Carol wrote:

Saturday, I attended a press conference with Chicago Mayor Richard Daley at the city’s Riverwalk. Although he was there to recognize the new Riverwalk vendors and the artists selected for a major temporary exhibition, the media, of course, asked him not a single question on topic. Instead, they quizzed him on the Supreme Court action on guns and Reason magazine’s new survey that says Chicago is the most restrictive cities in the nation on personal rights.

He dismissed the Supreme Court decision’s by labeling the judges as “elitist.” As Daley put it, the federal government has nothing to do with safe streets. “Who do people complain to when there is crime in the streets? The mayor and the police commissioner. They don’t call their congressman or their senator.” He went on to say, “When I go see my congressman, I can’t carry a gun. If I go to the Supreme Court, there are guards all over the place. I can’t get in with a gun. So why is it that people can carry guns on the streets of Chicago? So who are the real elitists?”

Daley eloquently illustrates the tension between a constitution designed to provide for individual rights in a rural society when that same constitution applies to urban life.

In rural existence (and even some suburbs) “the state” (the government) is some distance away. Police will not be there in 1-2 minutes by calling 911. ( and of course when the constitution was written, the existing communications and transportation technology would have made police-assistance unlikely in the even of an emergency). Having the freedom or option to own a gun and protect oneself makes sense.

But translated to an urban region, everyone owning a gun becomes a huge challenge for keeping the majority safe. But challenging the US laws on this did not work for the city of Chicago. And a Washington DC gun restriction has been rejected in the courts as well (if I’m not mistaken).

Maybe in the future we’ll see some US cities become almost “city states” with their own amendments to the US constitution to aid in providing different services to citizens, including perhaps fewer guns. Citizens will be able to vote with their feet and leave that city if the legal code is not to their liking.

Something to ponder on Independence Day.

Happy 4th to my American readers.

Innovation, spiky-ness and poverty

 In Who’s Your City, Richard Florida notes that economic spikes and valleys are becoming ever more pronounced.

What I found most intriguing, and simultaneously worrying, is his finding that the most innovative centers in the United States — Silicon Valley, Boston and the Research Triangle — also contain the USA’s “highest levels of inequality.”

Is poverty a necessary bi-product of good wealth-generation opportunity?

Florida focuses on those cities generating the most opportunity for creative, innovative people — the engine of 21st century economic growth.  These places attract well educated “knowledge” workers, but also a variety of others with different skills from construction to retail sales (and some with arguably more limited skills just hoping for a break).

This sounds remarkably similar to a gold rush town of yester-year.  Thousands flocked to places like San Francisco or Dawson City in the 19th century.  Only the talented, the connected and the lucky made any wealth.  They lived like kings.  Everyone else tried to scrape together a living anyway they could — or begged, or died from disease or the cold.

So maybe the historical lesson is that poverty will always follow wealth creation opportunity.

For modern cities, what should society do about this?   If you want opportunity, do you have to accept that some won’t be able to take advantage of it?  Put another way, do you accept that there will be definite winners and losers?

Would accepting this help city planners and economic development types along with social activists to better prepare to help those who don’t succeed.

As Florida says:

Managing the disparities between peaks and valleys worldwide — raising the valleys without sacrificing the peaks — is surely the greatest political challenge of our time.

I also wonder if such knowledge might help some of Florida’s readers choose their city?  If you don’t want to see great disparity between rich and poor, perhaps finding a place less dynamic might be for you?

Is this the Obama city plan?

Channel surfing I stumbled across Obama’s speech tonight right when he got to the subject of cities. The jist of what he said was:

  • America is spending $9 Billion per month in Iraq
  • Instead, we could take this money and (re)-build roads, bridges, and other infrastructure
  • We could law more broadband lines

So, is Obama advocating a New Deal style investment in America’s cities?

Because, the US is spending $9 Billion / Month that the national treasury does not have. Stopping the war and bringing troops home will not suddenly make $9 Billion/Month available — it will still have to be borrowed.

Yet, the previous administration was willing to “invest” this much in stabilizing Iraq, feeling that such a venture was in the best interests of the country or the “US Empire” if you will.

The long term re-vitalization of the American Empire might in fact require the same level of spending, at home, on cities.

Update: Feb 20 – from CEOs for Cities:

Maybe it’s time for urban leaders to change the frame and change the way they talk about cities. Maybe it’s time that we offer up cities as solutions to the problems voters identify with rather than as the problem (that, frankly, voters don’t identify with)?

I’ve had the opportunity to be in direct and routine contact over the past five weeks with voters who have questions and advice on issues and strategies in these campaigns. In hundreds of calls from voters, not one — not one — has asked about cities.

For someone like me who is in the business of selling cities, I could take this as a real disappointment. Or I can take it as an opportunity to reframe the way we talk about cities to make them more relevant to voters.

Isn’t the economy an urban issue? Aren’t good jobs an urban issue? What about a new energy policy? Isn’t that an urban issue? Isn’t health care an urban issue? Isn’t minimum wage an urban issue? Aren’t early childhood education and schools urban issues?

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