Workforce is the underpinning of the three-legged stool of economic development. Without a strong workforce, there is no way to succeed at business attraction or retentionand no way to cultivate entrepreneurs. In economic development circles, the discussion around placemaking often centers on talent attraction. The thinking goes that top talent is attracted to places with high quality of life; businesses thrive on this talent and will expand and relocate to those places where talent flocks. So, in essence, places with a high quality of life are better for business.
A Change in Economic Forces
It used to be that a community’s economic success was dependent on some fixed competitive advantage such as access to natural resources or proclivity to a transportation network for moving goods. A good example is our firm’s hometown, Pittsburgh, located in an area rich in ore and coal to make steel and with access to three major rivers. Manufacturing created the economies of Pittsburgh and many other cities, but today, talent is the number one most important economic force. Sources from across the economic development spectrum tell us this. Nearly all the executives (95.1 percent) surveyed by Area Development in its 28th annual Corporate Survey rated availability of skilled labor as “very important” or “important” in their site selection factors. This factor is now considered more important than highway accessibility and labor costs, and certainly more important than incentives offered. We see this in Pittsburgh too, as companies such as Google and Facebook locating offices in town to be close to the graduates of the University of Pittsburgh and Carnegie Mellon University.
But talent is in short supply. Unemployment rates are falling, which means there are fewer people available for jobs. This is felt particularly hard in tech companies, which report a lack of talented workers with the skills needed for the rapidly evolving industry. Another benefit of attracting and retaining talented workers is that they are engines of innovation, whether from the inside of companies where they spearhead new ideas and spin off new divisions, or through entrepreneurship, forming their own enterprises and creating jobs. Attracting new talent is essential, and the best way to bring in high quality people is to offer a high quality of place.
Beyond the Baseline of Quality Markers
Quality of place means many things. A more traditional definition includes low crime rates, good housing stock, great schools, and local culture and recreation. But the cities and regions that are really pulling ahead in the race for talent understand that the baseline is no longer good enough. Much has been made of the “return to the city” and how millennials and baby boomers prefer a dense, walkable environment where they can live, work and play (to the point where urban planning professionals roll their eyes at the catchphrase). But the proof is in the evidence. Cities that provide living space in multi-use areas connected by transit and surrounded by quality recreation outlets are seeing their attraction of talent skyrocket.
Take Denver for example. The city has bet large on placemaking, from the $1 billion revitalization of the historic downtown Union Station to a new light rail system. These investments, coupled with outdoor amenities and copious sunshine, have contributed to Denver being named by the Brookings Foundation as second in the nation for attracting millennials. But it’s not just large cities that benefit economically from increased quality of life via placemaking. Regions around the U.S. are shifting their focus from business attraction to talent attraction. In Northeast Indiana, the focus of the Northeast Indiana Regional Partnership is to attract new people to the area through improvements in downtowns, greenways and blue ways, arts and cultural assets, and education and industry through the Road to One Million plan (which Fourth Economy had a role in creating.)
Resiliency Means Quality of Place for All
Attracting and retaining talent is an essential component of economic development, but, it’s important to understand that placemaking does not mean only making places comfortable for highly skilled, highly paid employees. A well-designed place delivers quality of life to those at every age and income spectrum. Planning for all members of a population is what makes a place resilient and vibrant.
Providing affordable housing, especially in trendy inner-city neighborhoods, is a tough challenge and one that affects the workforce, especially for essential employees whose wages don’t begin to compare with highly paid tech workers. In places like New York, workers who make under $35,000 are increasingly being pushed out of formerly affordable neighborhoods to outer suburbs. When this happens, the financial and time cost of their commutes rise, cutting into already low wages. While particularly dire for service employees such as retail workers, this also affects teachers and police personnel.
From the placemaking perspective, increasing density leads to more options for housing across the spectrum, ideally situated in in-town neighborhoods that are walkable and served by transit. As the supply of housing increases in these desirable neighborhoods, the price decreases. One tactic to encourage denser development is to allow for “Missing Middle” housing to be developed. Missing Middle housing, a term coined by Opticos Design, is composed of a range of multi-unit or clustered housing types that are compatible in scale to single-family homes. Some examples include duplexes, carriage houses, townhouses, and accessory dwelling units. Allowing this type of development densifies neighborhoods and provides access to housing at a lower price point, without a significant disruption of neighborhood character.
Barriers to Small Scale Affordable Housing
Building Missing Middle housing is typically not undertaken by large developers, and therefore is built by property owners, small real estate developers, and community development corporations and financed by local banks. The margins of profit for Missing Middle housing are smaller so in order for these projects to be financially feasible, there must be a regulatory environment that permits these types of buildings. Most existing zoning codes separate housing types so that multi-family is not intermixed with single family and residential above retail is not allowed. This stunts Missing Middle housing by forcing projects to go through zoning hearings that extend the project timeline and cost to a point where construction is not feasible.
Allowing for small residential infill projects to be built not only provides more options for affordable housing, it allows property owners to benefit from rising housing costs, and alleviates increased property taxes. Of course, to truly provide benefit, increased density needs to be coupled with transit to access jobs and services.
A Connected Workforce
Placemaking is a term that can be misconstrued to simply mean making communities more beautiful. While placemaking tactics such as downtown development, street scaping, and encouraging traditionally affordable housing types does improve a community’s aesthetics, if done properly, placemaking can unlock significant economic value. Connected, vibrant communities with a multitude of housing and transportation options return the best value to inhabitants, creating places that workers are attached to and invested in.
The previous installment explored the role of placemaking in business retention and expansion as it improves the quality of life of a community and the marketability of a place. This installment considers how placemaking influences entrepreneurship and small business development.
Small Business Drives Jobs
Entrepreneurship is essential to a community’s economic dynamism. Small businesses diversify local economies, create local jobs, and increase residential and commercial development. Small businesses employed just over half of the private-sector workforce and created nearly two-thirds of net new jobs in the time period of 1993 – 2011. Furthermore, homegrown businesses are more likely to have strong roots that keep them located in a community compared to businesses that have been attracted from elsewhere.
One typical method of supporting small businesses is creating incubators – shared rental spaces that offer low-cost office amenities and, often, coaching, mentoring, and other types of support. Other ways of supporting entrepreneurs include creating small business centers, which serve as information hubs for entrepreneurs and local small businesses, and holding networking events, and connecting businesses to sources of funding.
Small Businesses Create Vitality
Small businesses also play an important role in creating unique places that enhance quality of life. Commerce in downtowns and neighborhoods is often driven by small businesses, whether retail establishments, bars and restaurants, or small companies occupying office space. These small businesses draw people into business districts and create vibrant, walkable neighborhoods that attract both residents and tourists.
Beautiful places and small businesses go hand in hand. Urbanist author Jane Jacobs wrote, “New ideas must use old buildings.” Older buildings, typically having more affordable rents, are often located in downtowns that are conducive to transit and as a critical mass of customers and office workers. The national Trust for Historic Preservation finds that cities with older, smaller buildings actually have higher density, more diversity, a greater number of small businesses and lots more entrepreneurial activity.
Footholds for Startups Activate Places
Small businesses and entrepreneurs thrive in walkable downtowns, but they can also create vibrancy in areas that could use a shot of revitalization. Creating temporary spaces like markets and kiosks allow for start-up businesses to test new ideas, while also providing an event to encourage potential to attend, therefore enlivening areas of a community that are in need of investment. The graphic below, from Thompson Placemaking, shows an incremental approach to building spaces for new businesses as part of a community revitalization strategy.
The graphic moves from easily implemented, temporary retail options to permanent, multi-use buildings. The tents in the first frame are seen at events such as farmers markets or holiday fairs. Generally, this level of retail is available to anyone for very little investment other than merchandise. Food trucks, trailers, pods and micro retail buildings represent the “missing middle” of retail outlets. These structures require some investment, either from the vendors themselves or from developers, but the risk is still quite low compared to signing a lease or purchasing a store. Small retail stores and mixed-use buildings require the most investment – from retailers, developers or property owners, and from the city that would benefit from their development.
Barriers to Incremental Placemaking
It is feasible that a business could grow from a tent to a trailer to a retail bay, increasing profits and employees at every step. Facilitating space for businesses at each level creates a pipeline of small businesses ready to expand into retail bays when they become vacant. Yet, in many places, regulation prevents small retail environments and harms small businesses.
For example, in New York City, food vendors must obtain a permit, but the number of applications is so high that the City is only issuing permits to licensed vendors already on the waiting list. According to a 2015 article in Eater, in the late 1970s and 80s, the number of food vending permits was reduced from 12,000 to 3,000 due to pressure from business interests and general civil unrest in the late 1970s. The article reports that this has led to existing permits being rented out for exorbitant prices on the black market, with many stories of food vendors being swindled out of permits and having to close their doors.
The Guardian profiled these challenges recently and pointed out that in San Francisco, where tech giants like Uber make billions by skirting taxi regulations, the permitting process for street vendors selling wares like fruit, beverages, and popsicles requires as much as $1,500 in application and licensing fees. Often, these vendors are immigrants who make less than $100 per day at their trade. Many have limited English proficiency, and many more lack capital to cover these startup costs.
How can Policymakers Help?
Obviously, requirements that protect the health of customers buying food are important, but legal processes that restrict small businesses unnecessarily are unfair. To help small businesses get started in informal retail environments, policy makers can do an audit of the systems that these businesses must go through with the goal of streamlining processes to make them more efficient and time-conscious. Furthermore, policy makers can examine zoning laws to understand if regulations that influence where vendors can operate are fair. If there are significant zoning regulations, it may be helpful to create something like a “Vending Overlay Zone” or other district where vending is accessible to small businesses. A focus on creating small business friendly communities often leads to better places and better quality of life.