Forget the Smokestacks…Chase the Housing: A Case Study in Smaller City Reinvention

141104-Small-TownIt has been a busy year here at Fourth Economy. Many projects have kept us hard at work, traveling across the country and meeting great folks. A theme among these projects has been a growing desire and recognition for all places, communities and towns to reinvent themselves – transform, reimagine, pivot – all in order to attract new investment and the talent that fuels it. And within this theme is a common recognition that without quality options to live, sleep and interact, it is tough to attract that talent. Housing and the context that surrounds a community’s housing stock is (or should be) a cornerstone to any competitive and sustainable economic development strategy. This point is especially important for our nation’s smaller urban centers. The millennial generation is continuing to fuel a national urban renaissance. A recent report entitled, “The Young and the Restless” by City Observatory.org (October 2014) highlights that 25 to 34 year olds with a bachelor’s degree or higher level of education, are increasingly moving to the close-in neighborhoods of the nation’s large metropolitan areas. This migration is fueling economic growth and urban revitalization.

  • Well-educated young adults are disproportionately found in a few metropolitan areas. Two-thirds of the nation’s 25-34 year olds with a BA degree live in the nation’s 51 largest metropolitan areas, those with a million or more population.
  • Within the largest metropolitan areas, well-educated young adults are increasing moving to close-in urban neighborhoods. Talented young adults, in the aggregate are much more likely to choose to locate in close in urban neighborhoods than are other Americans.
  • In the 51 largest metropolitan areas, college-educated 25 to 34 year olds are more than twice likely than all residents of metro areas to live in close-in urban neighborhoods.
  • Businesses are increasingly locating in or near urban centers to better tap into the growing pool of well-educated young workers, and because these central city locations enable firms to better compete for talent locally and recruit talent from elsewhere.– “The Young and the Restless,” Cityobservatory.org, October 2014

But while the bigger “urbans” are winning, our smaller cities continue to struggle. A recent Fast Company story tackled the topic in the article “Why Millenials Are Avoiding Small-Town America“. Their research notes that while the number of millennials is ticking slightly upward in small towns and rural areas, it’s nothing compared with the growth of their numbers in suburbs and cities… “At this point, the prognosis does not look good for much of small town America,” writes William H. Frey, a demographer at the Brookings Institution…That’s long been the storyline in small-town America, which has for decades bled citizens — especially young ones — to the more glamorous metropolis. Smart-growth advocate James A. Bacon sees opportunities to fight off “brain drain” and attract urban “escapees” who start small businesses, but he worries that towns aren’t taking advantage. “Unfortunately, to date, local economic developers have stuck with the industrial-recruitment strategy that bears less and less fruit,” Bacon writes. Small towns may have to reinvent themselves, according to experts like Frey of the Brookings Institution. They will have to rev up their sales pitch to convince young adults that they can live not just cheaply but also well in the places that older generations called home.

141105-Altoona-Housing-Study-ThumbCase Study: City of Altoona, Pennsylvania

But it will take more than a sales pitch. It will require a multifaceted and long-term planning and development effort. One such effort is underway in Altoona, Pennsylvania – a central PA town located 30 minutes south of State College and Penn State University. Altoona is also home to Penn State’s largest satellite-campus location, Penn State Altoona. Altoona stakeholders, led by City officials and economic development corporations, saw the opportunity to reinvent their historical urban center with housing being the focus. Fourth Economy was engaged as part of a consulting team led by Fourth River Development and Pfaffmann + Associates to assist in the planning effort. The first challenge was to attempt to answer a difficult yet basic question – What is the potential or latent demand for market rate urban style living in a city that has never offered it? If you build it, how many and for how much will they come? These questions are likely common ones to all smaller urban centers. After considerable survey work, stakeholder meetings, mapping and novel market analysis, some success factors can be offered:

Think of the Scale (Space and Market)

It may not take much housing to begin to move the needed in a positive direction. Too often we think it will require thousands of units and people to constitute a market demand and create real impact. Not true. The market demand and potential impact is relative to the size of the market and of course the space available to develop. The Altoona space analysis suggested that even if all of the potential redevelopment opportunities came online at the same time, the maximum number of new market rate housing units would number less than 300. The most conservative estimate of Altoona’s annual market demand (which gauged both an interest in and ability to afford those units) exceeded 500 potential customers. Adding a permanent residency base of more than 300 people within a 5 square block area creates a new demand model for support services such as restaurants and retail. Once the market is established, attracting new development becomes easier. A little demand and a little space can equal big results.

Employment Drivers Are a Must

Not all smaller towns are in a position to reinvent their urban centers simply by adding housing to the mix. There must be some core employment drivers in place, seeding some level of a potential constituency who have both and interest in and the ability to afford the market rate urban style housing options. Altoona has several key drivers located in or near its urban core. They include a higher education institution, a growing regional medical center, and a K-12 secondary school campus. A strong private sector employment base has also been attracting new talent to region. Among its many homegrown corporate headquarters, Altoona is home to Sheetz Corporation, a fast growing national convenience store operation who has been attracting talent at a national level to support all levels of its business operations. Lesson learned – know your employment drivers, gain insights from their talent recruiting and retention experiences and leverage that understanding as part of your housing strategy.

Programs and Context Round it Out

Competitive urban housing strategies cannot take place in vacuum. Housing developments that end up islands to themselves are not in high demand. The American Planning Association urges local planners to mimic the appeal of city centers by creating “density.” That means keeping the walkable neighborhoods and traditional town centers that millennials say are key to making a community a desirable place to live. Special event programming such as evening outdoor concerts, free movies and farmers markets also help to move the thinking from housing experiences to neighborhood experience. Over the years Altoona has developed an extensive special events calendar to include all of these and more.   Beyond these take-a-ways, we can learn even more from Altoona’s project leaders themselves. Patrick Miller serves as Executive Director for the Greater Altoona Economic Development Corporation. Lee Slusser serves as Altoona’s City Planning Director.

141104---PatPatrick Miller email

Funding Partnerships to Close the Gaps

It was important that communities recognize there will likely be a funding gap for the first few, pre-market driven projects. And that gap can be substantial. The community must find ways to bridge the funding gap. Private developers are not likely to do it all on their own. Developing detailed pro forma as part of the planning process will help you identify the gap and think critically about the sources and tactics required to fill those gaps.

Change Perceptions of Downtown

Changing the overall community perception of downtown is and will remain ongoing focus. We needed to change the narrative from on focused on what downtown isn’t and to what it is and will continue to become. This will help all of the building owners and developers to begin to invest in their buildings now, and demonstrate that they can expect a reasonable rate of return in both the short and long term.

141104-LeeLee Slusser email

Focus on Early Wins

Early wins are also important. We were able to work directly with three building owner and developers as part of this study and announce their projects almost concurrently with the study findings. These early wins demonstrate it was more than just a study, but rather a real plan for action and implementation.

Reassure the Skeptics

It was also important to convince our community and elected leaders that a market actually existed for market rate or above market rate rental housing in Downtown Altoona. While we sensed that was the case, proving it in some quantifiable fashion is critical.

For many years now we have heard that modern businesses and investment is following the talent. The old model of building spec buildings with great transportation interchanges and chasing the smokestacks has not added up to a sustainable success for many communities. Rather, leveraging and retaining what you have by building more livable communities is a better recipe to attract both businesses and the talent critical to fuel them. For more information on the Altoona strategy, click here.