We talked with Chris Romer, President and CEO of Vail Valley Partnership, when Eagle County, CO came up as the #6 mid-sized community on the Fourth Economy Community Index this year. At that time, Romer largely agreed with what we reported seeing in the data, but he had one bone to pick with our metrics. Yes, Romer could see how Eagle County received high scores in Talent, Investment, and Place, and he shared how environmental sustainability was crucial given the local economy’s reliance on outdoor recreation (you can read more on this here). But he couldn’t see how Eagle County could land on a list that takes housing affordability into account given how serious an issue it had become in the area.
Like our home city of Pittsburgh, Vail Valley appears to be “affordable” in terms of housing and transportation costs when viewed at a macro level compared with median household incomes. But also like Pittsburgh, data taken at a macro level can be deceiving. Back in July, Romer shared with us that housing affordability was front-of-mind for his organizations and partners in the area. Since then, we have noticed that even during the busy tourist season, the Eagle County Housing Task Force remains active in engaging the community to find solutions.
We caught up with Chris Romer in December to learn more about the Task Force and get his take on the connection between housing affordability and a strong local economy. Romer shared that his organization is supportive of initiatives driven by the community at large and by business owners, and lends a hand whenever possible to help advance efforts like the Housing Task Force.
“As a resort-oriented community,” he said, “Our challenge is that we have international demand for our real estate.” He went on to share that Vail Valley is unique because when someone goes to buy or sell a house in a place like Cincinnati, OH, where Romer grew up, most people are moving for a job or moving from somewhere nearby. By contrast, much of the residential real estate market in Eagle County, CO is made up of second homes or vacation homes. “That is exasperated by the fact that we are surrounded by public land, so we have 15% on which we can build.” Because of the recreational assets and the investment opportunity, this means a lot of competition for housing, says Romer.
When asked what he thought about the need for housing that is attainable for people working in the local tourism sector, Romer reported that tourism makes up about 48% of the local economy and that while local jobs in tourism, recreation, and hospitality pay about 60% above average for the state in those sectors, they are still lower paying jobs in many regards. Therefore, Romer said, “It does exasperate the challenge in terms of affordability.”
We wrapped up our conversation with Romer by asking what, in addition to the Housing Task Force, he would share with other economic developers on the topic. “We are very actively engaged with advocacy and working with elected officials to reduce regulatory burdens,” he said. “And we are working to educate the community on ways that we can impact and incentivize developers to include attainable and affordable housing.”
At Fourth Economy, we’ll be anxious to see what comes next for Eagle County in terms of housing affordability, and we want to hear your thoughts on Vail Valley’s approach. Strategies like this one, that pair smart economic development decisions with a long-term point of view, are what build the strong communities and economies that the Fourth Economy Community Index seeks to capture. You can subscribe to Vail Valley Partnership’s newsletter and follow them on social media by visiting www.vailvalleypartnership.com.
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.
This week, children all over the country go knocking on doors in the annual ritual of Halloween, trick or treat. In many places, this day is one of the few when you get to meet your neighbors as we go door to door, shuffling along and bumping into friends not seen in some time.
Amazon HQ2 is that kid who ignores the rules, that senior in high school who just wants the candy. Amazon HQ2 did not wear a costume and knocked early when, on September 7th, 2017, it announced its intentions to locate a $5B second headquarters and a 50,000 person workforce somewhere in North America. In a reversal, Amazon pulled a neat trick by getting potential suitors to send elaborate proposals on what treats they had to offer, thus sparing the company the drudgery of actually visiting the communities.
Amazon has always been an industry disruptor, and this latest campaign is either pure genius or a Trojan horse: a trick or treat experience that by my estimate cost North American communities well over $119 million in staff time, and professional fees for video production, print media, research and economic analysis and more to create their responses. In its mailbox, Amazon received 238 proposals in response to its detailed request for proposals.
There are so many lessons to learn and points to consider in what ensued over a six week period that I plan to make this an Amazon HQ2 series over the next year. As I dwell on the HQ2 lessons learned, I’d love to hear your thoughts and feedback. To get that started, please take the companion survey here:
In this posting I cover: Trick or Treat? 5 Experiences of HQ2
Treat: Quality of Place
The criteria that Amazon published in their RFP is straight from our (link to Fourth Economy Quality of Place pdf) Consulting Playbook. While we hope that all of the bidders can cover the basics of labor force, location, and incentives, it is the areas that cover cultural community fit and community/quality of life attributes that make the RFP a treat. These are the areas that, we believe, can make any community a success. Amazon notes variables such as a diverse population, strong higher education systems and local government that will work with them. Under quality of life they mention daily living and recreational opportunities.The real treat will be if all 238 cities actually spent time considering these factors and while putting their best forward also identified opportunities to invest in making their quality of place better.
Trick: A proposal is not a plan
My professional guess is that very few of the cities that submitted a proposal actually had an economic development strategy in place that guides how they will attract and retain new jobs, let alone how they will handle 50,000 over a short period of time. On the other hand, the communities that do not have such a strategy but did submit a bid now have a lot of great information collected in one spot that they can use to advance a plan that goes beyond this one opportunity or if Amazon delivers less than promised.
Treat: Dare to Dream
In many communities, the thought of 50,000 new jobs in a relatively short period of time is exhilarating. This is especially true in Rust Belt cities that lost a lot more jobs that that over the past two or three decades and have struggled with starting the growth engines again. The exhilaration is of course tempered a little when one starts to look at what Amazon’s growth has done for Seattle’s housing prices and other cost of living factors. The resulting conversations are good though as these are the scenarios that communities should be considering with any plan for growth. I am hopeful that the 238 dreamer cities all use the time between now and Amazon’s next step in the process to have honest conversations and plan for what’s next in their communities.
Trick: All That Information
Amazon now has a lot of information on 238 communities and as a company built on data mining they are going to have a field day slicing and dicing. They ask in the RFP for a great deal of information that is readily available via the web. Locations with 1 million people, proximity to an international airport, crime statistics, stable business climate. All of this information could have been found through a simple request to Alexa. Or just start with the New York Times, CNBC, Brookings and more who all crunched the numbers and provided their ‘Top’ lists of communities that meet the criteria. The style points of how the proposers are pitching their communities must have been the reason to ask for Amazon to have them to do their homework for them. So the trick is that as many as 237 communities did a lot of work and may still get a failing grade.
Treat or Trick: Place Your Bets
The idea that there are betting sites now offering odds on which city will be chosen is probably both a treat and trick. A treat in that we can all continue to play along in the speculation and if we guess right make a few bucks in the process. A trick because the notion that people are literally betting on communities opens up a strange channel of conversation about their future.
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.
Over the past decade, co-working has grown from a niche offering to having a significant impact in terms of the commercial real estate market — and providing a new alternatives tailored for remote and independent workers and small teams.
This summer, Fourth Economy was engaged to create a market assessment for the co-working market here in Pittsburgh. As a part of that effort, we reviewed a volume of existing secondary research that answered questions similar to the ones that we were looking to answer in Pittsburgh: what is the market capacity for co-working? Who is the co-working market? And, as we’ll address in this blog post, how is “co-working” defined?
What is co-working?
The Oxford Dictionaries define co-working as “the use of an office or other working environment by people who are self-employed or working for different employers, typically so as to share equipment, ideas and knowledge.” The general definition was reiterated in the reports we read the most closely *. But this definition doesn’t help narrow down on what the boundaries of co-working are, ranging from a desk one can rent for a few hours to a serviced office space one can rent for a team of 15 workers. Reading them more closely, these reports tended to define co-working, and view the co-working market, through either a real estate-centric or a workforce-centric lens, depending on the benefits or targets of co-working they focused on.
Deloitte’s report defines co-working as a “membership-based workspace with a monthly fee giving access to a desk, office space, Wi-Fi, and other amenities.” The real estate-centric definitions focused more more on the short-term lease and flexible membership benefits of co-working, rather than its community-based or knowledge-sharing aspects. In this framing, co-working is usually lumped in with professional serviced office spaces like those of Regus or WeWork; the different work styles of serviced offices and co-working (specifically, the social difference between working in an open space close to other co-workers, as opposed to in a small rented office with shared amenities) are not emphasized.
This is also reflected in the types of co-working spaces many of the reports we read measure: because their focus is on the commercial real estate implications of co-working — both for the entrepreneurs or remote workers who are co-working tenants and for the co-working operators (like WeWork or Regus) — these reports tended not to measure locally-run co-working spaces.
The workforce-based definitions were centered around the culture of these spaces. This approach highlights the types of worker (e.g. self-employed, entrepreneurial, etc.) as well as the collaborative and innovative elements of the space. For instance, in their “The Work Shop” report, CBRE describes co-working as “the best elements of a coffee shop (social, energetic, creative) and the best elements of a workspace (productive, functional)” combined to give workers the opportunity for an affordable, shared space. This definition explains a general value proposition for co-working — but elides how that value proposition differs across teams of different sizes and across the different types of spaces (from rentable private offices to shared desks) that may create a more or less collaborative co-working environment.
Given these different lenses through which to view the co-working market, how did we categorize the Pittsburgh market for our own study? We categorized it two ways: through identifying three main types of co-working spaces we observed in our market, and through identifying the different needs and motivations of co-working clients, from single clients through 8-person teams.
Three kinds of co-working
In the absence of one specific way to define what co-working includes and doesn’t include, we focused our analysis on workspaces that allow for short-term, flexible lease terms with shared amenities (like kitchenettes and meeting rooms).
We segmented the Pittsburgh market into three rough categories, “Professional Co-Working,” “Community Co-working,” and short-term offices. Professional co-working spaces generally feel more corporate, may have more expensive furniture and finishes, may offer additional amenities like a front-desk receptionist, and are offered at higher monthly rents to reflect those factors.
Community co-working spaces are community-driven spaces with a neighborhood orientation that offer flex and fixed desk workspace at a lower price point than professional co-working spaces. They are similar to professional co-working spaces in that they offer a membership model (often with month-to-month leases) but differ from professional co-working spaces in, corresponding to their lower price point, they may not have professional operations or staffing (like a front desk), the finishes and furniture may be less expensive, and the technology and building operating systems (for example, for teleconferencing or climate control) may be more basic. The trade-off is the emphasis on relationships and community that community co-working spaces offer — as one proprietor told us, co-workers first come to their co-working space because of the space’s proximity to where they live — but stay for the community and connections. Community co-working spaces also differ from the other types of spaces in that they often have a specific community focus, like social entrepreneurship.
Finally, short-term offices range from serviced offices, executive suites, business centers, or other lease-negotiated and based-agreement that may encompass some flexible or open space. Short-term offices differ from either professional co-working or community co-working in that they are specifically offices for small teams, as opposed to flex or fixed desks, and because of their lease-based, rather than membership-based, business model.
Cultural benefits — and costs — of co-working
For the smallest companies, beyond the financial benefits, co-working represents a low-barrier opportunity to participate in a professional culture. For slightly larger companies, the larger culture of the co-working space offers the possibility to either benefit or disrupt the internal culture of the company, depending on how well-matched the two are. Teams of above eight or ten people already have a profound enough sense of cohesion and internal culture that the benefit of being in a co-working space no longer satisfies that need—and a mismatch between the expectations of smaller and larger companies (as contributors to the overall culture of the co-working space) can be a challenge.
The importance of definitions
Reviewing the existing set of definitions for co-working, and creating a framework for understanding the study for our own analysis, was critical to being able to paint a picture of this exciting emerging market for our clients that was as specific and actionable as possible — and helped give them, and us, some new language and tools for understanding how they fit into the market.
Want to talk to us more about co-working and other entrepreneurial supports in your community? We’d love to hear about the impact of co-working where you are. Email us at firstname.lastname@example.org.
*Including Newmark Grubb Knight Frank’s October 2016 report, “Scale of Disruption: The Sharing Economy’s Effect on U.S. Commercial Real Estate,” JLL’s “Shared Workspaces” report, NGKF’s report “WeLease: The Growth of Shared Workspace and Its Impact on the New York City Market,” Deloitte’s report “The London Business Footprint: The Growth of Serviced Offices,”Cushman & Wakefield’s 2015 report “Continuing the Evolution of Flexible Working,” and CBRE’s 2016 report “U.S. Shared Workplaces” and “Work Shop” reports
What do you imagine when you hear the words “comprehensive plan”? Hoards of consultants descending upon your community for years, churning out meaningless data, hosting pointless community meetings, and producing a mammoth document that goes to live on the shelf? Well, not in Gary, IN. Gary is taking a different approach to comprehensive planning, and Fourth Economy is excited to be along for the ride.
While Fourth Economy is part of a team of consultants, including Raimi + Associates, Volte Strategy, and Dynamo Metrics, we are just the behind-the-scenes support team. The folks at Gary’s Department of Planning, Redevelopment, and Zoning issued an RFQ looking for “a team of thinkers” with demonstrated “ability to provide services and creative solutions in a highly complex urban setting where social equity, economic parity, and community resiliency are foundational elements of the comprehensive planning process.” All small firms, we are providing our expertise, but not according to any set process. Rather, this will be a truly iterative process, guided by the vision and priorities established by the community.
Though the team at the City, led by the inimitable Joe Van Dyk, will be leading the process themselves, they don’t expect to be the face of it. They are pulling together a team of residents and community leaders who will develop and implement all of the engagement. This means that our role as consultants is simply to create the tools and convey the data in a way that the community can truly own.
Recently, Joe kicked off the process by inviting all of the consultants to Gary for two days of listening. We met with faith-based social justice advocates, neighborhood champions, and movers and shakers of every sort. It was truly exciting to hear the passion that everyone has for their city and to see the investments they are making in Gary’s future. We are honored to be able to play a small role in shaping that future and are certain to learn a lot along the way, which we look forward to sharing!
One of the best things about our work is the opportunity to travel and work alongside interesting and inspiring people. Back in 2015, one of those people was Eric Shields, who was working with the Indiana Economic Development Corporation. While we collaborated on the Indiana Regional Cities Initiative, we started discussing the many ways that state and local decisions can influence quality of place, a key driver for economic success and a guiding principle for the program.
A few weeks ago Shields published a thoughtful consideration of public-sector roles and responsibilities in neighborhood change, in which he stresses that the role of subsidies, their intended and unintended consequences, ways to agree on objectives and measure success, and accountability and transparency must all be grappled with before they are used to preserve housing affordability for homeowners in Indiana.
Shields shared these thoughts in response to a proposal from Indiana State Representative Cherrish Pryor to provide property tax breaks to homeowners to balance reinvestment and affordability concerns.
Key questions for the public sector
The article, called Strong Neighborhoods Are Vital to Economic Success, poses important questions to the public sector. How can state and local government best balance market forces and residents? When are state or local governments best-suited to intervene? Should property owners be required to return subsidies when they sell their homes? What other factors, such as the type of development, contribute to displacement?
The evidence reveals unseen drivers of displacement
This last question is one that I would like to focus on. Shields rightly points out that if subsidies are provided to homeowners, but new development does not include a mix of housing options, then “displacement is inevitable over the long term.”
A key question, then, is what drives resident displacement? From there, both state and local interventions can be developed. Property tax abatement programs are based on the accurate assessment that property tax increases are a burden on existing residents, especially lower-income residents. Based on what we know about residential displacement, some other drivers to target could be:
1. Lower-income renter churn. In addition to longtime homeowners, renters are of course a community of concern with regard to displacement. One primary driver of renter displacement is beyond price increases and stems from a deeper housing stability pattern: lower-income renters tend to move more often than middle- and higher-income renters for a variety of reasons.
The problem for lower-income renters arises when, at this “normal” churn rate, they struggle to find another unit to move into within the same neighborhood. Therefore, programs designed to keep renters in their homes may miss the mark because lower-income renters face pressures beyond affordability that cause them to move around. Instead, programs that aim to preserve the number of units available at an appropriate price point within the same neighborhood, and perhaps marketed to neighborhood residents first, could help address this issue.
2. Changing business types. Displacement is caused not only by cost pressures, but also by neighborhood changes that alienate existing residents, called cultural displacement. Cultural displacement can happen in places experiencing racial and ethnic demographic changes, but can also happen in ethnically homogenous areas. The common thread defining cultural displacement is that the businesses that arise in changing neighborhoods to not feel welcoming or relatable to existing residents.
A classic form of cultural displacement occurs when a main street is suddenly awash in hip coffee shops, artsy boutiques, and quirky restaurants. Even if existing residents can afford to shop in these places, they are unlikely to see them as neighborhood-serving businesses. The policy question here lies in what kinds of businesses receive tax abatements, zoning variances, or other incentives, and how a City balances business attraction and retention strategies.
3. Crime rate changes. A recent study of decades of household moving and city crime rate patterns revealed that high-income and college-educated households are more likely to move to central city neighborhoods when those neighborhoods experience a three-year reduction in violent crime, while lower-income households and those without college degrees do not demonstrate the same phenomenon.
Because high-income and college-educated households are more willing move to lower-income and majority minority neighborhoods following a reduction in crime, these households would drive displacement even at normal household turnover rates because they would gradually make up a larger portion of demand for housing in the area. The result would be a neighborhood that has changed in its makeup, but not necessarily due to affordability challenges (although these can certainly happen at the same time). The policy implication here is to target displacement interventions to central city neighborhoods when they approach three years in crime rate reductions.
Neighborhood change and displacement are complex issues that deserve both an evidence-based approach to policy and an ability to implement new programs quickly. While examining the evidence is crucial, displacement is happening always and everywhere, and attempting to keep people in their homes and neighborhoods should always come first.
Fourth Economy’s President and CEO, Rich Overmoyer, and Social Innovation Strategist, Chris Ellis, recently co-authored an article for Green Building Alliance’s annual publication, Viride. The article, titled Social Change: Refinanced, discusses the origin and recent growth of impact investing. Communities around the country have begun to prioritize triple bottom line benefits and partner across sectors to achieve a greater social impact for their citizens. This new focus has resulted in an impact investment market that currently stands at $74 billion* with projections of $2 trillion in growth over the next decade. The article discusses the origin of this field, highlights how impact investing was used to expand access to high-quality early childhood education, and considers how this financing tool can be utilized to support communities throughout Western Pennsylvania. Click here to read the article.
Have thoughts about impact investing? Let’s talk. Send a note to email@example.com.
Fourth Economy congratulates the Indiana Economic Development Corporation for their Excellence in Economic Development Award from the International Economic Development Council on September 19th, 2017. The Indiana Economic Development Corporation won the award for the state’s efforts related to quality of life investments designed to support the retention and attraction of talent through the Indiana Regional Cities Initiative.
“Fourth Economy supported our vision with a creative and engaged planning process that allowed us to launch the Regional Cities Initiative on solid footing and achieve quick success.” –Eric Doden former CEO for the Indiana Economic Development Corporation.
In two short years since implementation, the Indiana Economic Development Corporation has approved $80.6 million in state funding for 41 projects, with a total of $903.0 million investment leveraged, which is a 10.2-to-1 ratio. Over 60% of the committed funds are coming from private sector investments with the balance coming from local resources.
“We are very proud to have been a part of the initiative that is fostering regional collaboration, cross-sector partnerships, bold planning, and quality of place investments for businesses and communities in Indiana.” –Rich Overmoyer CEO of Fourth Economy
Mr. Overmoyer went on to add, “These investments made in a region’s core city and in surrounding communities through an investment portfolio approach is demonstrating a new model of civic collaboration and direct focus on economic growth and prosperity.”
The Indiana Regional Cities Initiative, overseen by the Indiana Economic Development Corporation, sets a framework for communities to come together to develop long-term visions and actionable plans. The Initiative is a Silver Award recipient for the Regionalism & Cross-Border Collaboration, Population Greater Than 500,000 category. The Indiana Regional Cities program was originally passed with bipartisan support in 2015 by the Indiana General Assembly.
Fourth Economy cites the Indiana Regional Cities development process as being a critical experience for the firm as they work in communities throughout the country seeking to create a new model for quality of place investment.
Resilience is a word that you may be hearing more of lately. While it has its roots in environmentalism, the Rockefeller Foundation’s 100 Resilient Cities initiative defines resilience, in particular for cities, as…
“The capacity of cities to function, so that the people living and working in cities – particularly the poor and vulnerable – survive and thrive no matter what stresses or shocks they encounter.”
After attending the 100 Resilient Cities Urban Resilience Summit, among the 100 cities across the globe who are developing resilience strategies, one theme is clear: while they are confident in their ability to help their cities respond to natural shocks (such as floods) and stresses (such as antiquated infrastructure), they are less confident in how to create a resilient community and economic development system. With complex stresses such as economic inequality plaguing so many cities and the threat of shocks such as automation-driven industry collapse, the task of creating a resilient community and economic development system is not an easy one.
It may help to start with a clearer picture of what a resilient community and economic development system looks like. According to 100 Resilient Cities, there are 12 goals that articulate what a resilient city looks like. Six of these relate to community and economic development:
- Minimal human vulnerability Indicated by the extent to which everyone’s basic needs are met.
For community and economic development practitioners, this means access to affordable housing, food, and resources, such as energy and water.
- Diverse livelihoods and employment Facilitated by access to finance, ability to accrue savings, skills training, business support, and social welfare.
More than just a job, this requires a holistic approach to individual wealth building.
- Collective identity and community support Observed as active community engagement, strong social networks, and social integration.
We can always be doing more to embed this goal into our various planning and outreach processes.
- Sustainable economy Observed as sound financial management, diverse revenue streams, the ability to attract business investment, adequate investment, and emergency funds.
This is the heart of economic development; but doing it through a resilience framework means that we are considering a city and its private sector’s ability to respond emergencies – natural, economic, and social.
- Effective leadership and management Involving government, business, and civil society, and indicated by trusted individuals; multi-stakeholder consultation; and evidence-based decision-making. The more we can build cross-sector collaboration, the stronger our leadership and the more resilient our cities are.
- Integrated development planning Indicated by the presence of a city vision; an integrated development strategy; and plans that are regularly reviewed and updated by cross-departmental working groups.
As more cities are looking to address community and economic development challenges, it becomes increasingly critical to ensure that land use and development planning processes are informed by and addressing those challenges.
While resilience professionals are trying to understand how to address community and economic development shocks and stresses through their work, we could benefit from doing our work in a way that also creates a more resilient community. We need to find a way to work together. At Fourth Economy, we think there are two important first steps.
First, we need to rethink the most basic analysis that informs our work. Instead of a SWOT, we propose a new framework that includes analysis of Shocks, Stresses, Assets and Capacity (S2AC). This process will prepare communities to identify the issues that matter most and build a resilience agenda for their communities that is based on their ability to take action.
Second, our worlds still speak different languages. To effectively engage the private sector and economic development professionals, we need to build the business case for resilience. For instance, in Pittsburgh, climate change and extreme weather is one of our primary potential shocks, and economic and racial inequity is one of our primary stresses. By making the case for addressing those shocks and stresses in terms of lost GDP, decreased tax base, and inability to attract investment, we can start to break down silos and build new partnerships.
This is uncharted territory and no one has the answers. But we’re excited to figure them out. Want to join us? Let’s talk.