Many U.S. cities face growing challenges in building economies in which each generation lives better than the one before. Learn what steps city councils, businesses, and nonprofits can take to course correct.
Many U.S. cities face growing challenges in building economies in which each generation lives better than the one before. A significant part of the challenge is rooted in home affordability, as lower- and middle-income people increasingly can’t afford to live in high-opportunity areas and are seeing more of their income consumed by housing costs. The urban middle class is shrinking, and cities are becoming bifurcated into “have” and “have-not” neighborhoods.
These patterns pose a threat to upward mobility, for three reasons. First, when lower- and middle-skilled Americans live far from high-opportunity areas it’s difficult for them to access to good jobs, particularly in highly productive, knowledge-rich cities. Also, families in areas with low “social capital” –high poverty and low neighborhood cohesion, civic engagement, and home ownership – tend to have worse school and life outcomes, even controlling for a family’s own circumstances.
Second, high urban home prices are driving down home ownership rates, depriving working families of a valuable hedge against rising rents and a path toward building wealth. This problem is especially acute among African-American and Hispanic families, whose median net wealth has declined significantly over the last decade to approximately $4,000 and $6,000. The median for white families is just over $180,000.
And third, surging housing costs leave less for education, health and wellness, and new businesses.
To address these issues, the George W. Bush Institute recently held a symposium on “Policies to Promote Inclusive Urban Growth,” in conjunction with partners at SMU’s Folsom Institute for Real Estate and the Center for Opportunity Urbanism. Seven panels developed recommendations for America’s cities:
- Housing supply: Cities need a home-building boom focused on less advantaged families. New development needs to bring families closer to good opportunities and capital to historically disadvantaged neighborhoods. This requires overhauling antiquated zoning codes and over-prescriptive land-use rules, re-purposing under-used urban space, offering zoning incentives to include relatively affordable units in new developments, and deregulating automobile-centric building and road requirements. Metro areas should also relax development constraints in lower-density areas, since abundant housing supply in suburban areas helps moderate central-city housing prices.
- Existing housing stock: Cities should prioritize preservation and rehab of the existing stock, as it represents the affordable housing of the future. Also, promoting stable, gently evolving neighborhoods builds on the social capital of the community, an essential foundation for reviving upward mobility.
- Urban design: Cities should aim to develop mixed-use, mixed-income neighborhoods as engines of both innovation and inclusive growth. Urban planners should prize variety in neighborhoods, and should place greater emphasis on promoting wellness – particularly for the growing senior population. Cities with substantial greenspace and outdoor amenities tend to perform better than average in achieving inclusive prosperity.
- Education and workforce: Numerous participants stressed the vital importance of good schools driving strong neighborhoods. Also, employers are likely to locate only in areas with an adequate supply of skilled workers. Successful neighborhood revitalization depends on corresponding improvements in high-quality school options.
- Business and philanthropy: Revitalization strategies require effective local partners on the ground, to honor neighborhood wisdom, recognize the interconnected needs of neighborhoods, and secure buy-in. Investors and funders should prioritize education and healthcare institutions, because demand for both is surging in growing cities and eds and meds— education and medical institutions – create much-needed middle-skilled urban jobs.
- Nonprofits: Organizations focused on holistic revitalization of targeted neighborhoods should pursue not only home-building and other physical improvements but also public safety, early-childhood education, after-school support for older students, adult skills-building, financial literacy, and health and wellness.
- Federal government: Washington should loosen over-restrictive rules on affordable housing development and sustain its crucial housing tax credit program. Congress should modernize the Community Reinvestment Act to promote holistic revitalization of neighborhoods and broaden the range of tax-advantaged savings vehicles to advance wealth-building and home ownership.
- What cities should not do: Cities should avoid rent control policies and highly restrictive land-use initiatives, as both drive private-sector developers out of the market. America’s cities should recognize that markets generally allocate scarce land to its highest use, and that only the private sector has the know-how and capital to deliver the building boom that many cities need.
More inclusive urban growth requires forceful political leadership, intentionality and collaboration on the part of all engaged players, and smart design thinking. Cities will play a vital role in driving America’s economic growth in coming decades. If they get these priorities right, they can also lead the way in reviving economic mobility and the promise of the middle-class American Dream.