$1bn and 3 decades of failure later: Maybe it's (past) time to give up on a fancy downtown SJ
City and transit planning expert Randall O'Toole famously called out San Jose's ongoing failure to revitalize its moribund downtown as one of local government's "5 Biggest Failures". The pandemic has thrown many other downtowns into serious decline, prompting WSJ reporter Justin Lahart to consider a strategy for a new urban renaissance that dumps all the subsidies, eminent domain, hyper regulation, and race-switching, and focuses instead on conversions of office/industrial space to cheaper housing. It's worked before. To receive daily updates of new Opp Now stories, click here.
When the pandemic first struck in early 2020, big American cities emptied, and the closer you got to a city’s center, whether you called it Midtown or Downtown or the Financial District, the emptier it looked. People with the option to work from home decamped for the suburbs and beyond, and even as Covid fears eased, many are coming into the city only intermittently, with Census Bureau figures showing nearly 70 million people working from home at least once a week, and big-city offices more empty than full.
The retreat from working daily at the office has reduced the appeal of living near it. A Brookings Institution analysis of census data shows that 42 of 48 urban core counties—including Sunbelt ones such as Dallas and Miami-Dade—lost population from July 2020 to July 2021. Change-of-address statistics from the U.S. Postal Service suggest the population shifts away from urban centers have persisted.
With hybrid work arrangements here to stay, many cities could be entering a perilous period. This is more true of big cities with long commutes that make coming to the office more onerous than in smaller ones, where hollowing-out effects haven’t been as pronounced. And it is more true in places such as New York and San Francisco metros, where a lot of people work in fields such as tech and finance where work-from-home is more of an option, than in places like Miami.
Office workers are a major source of income for downtown businesses. If people come in to work only half time, they will probably only spend half as much. Office buildings are also in trouble.
For cities, the danger is that the financial strains created by population loss and reduced downtown spending and office occupancy end up snowballing. To cover lost revenue from commercial and residential taxes, cities might need to cut services or raise taxes—either of which could make them less attractive places to live. One can imagine some cities entering an environment similar to the 1960s and 1970s, when the loss of manufacturing jobs in places such as Detroit, St. Louis and Cleveland spurred an urban flight, exacerbated by racial tensions, that made them less and less livable.
New York City in 1948 included over one million manufacturing workers. It was one of the places badly damaged by urban flight. In some respects, the revival that began to take hold in the 1980s might point a way forward. For example, Manhattan loft apartments that now fetch multiple millions of dollars were industrial spaces, emptied by the exodus of garment industries and other light manufacturers out of the city. Office buildings, particularly lower quality ones, could similarly be converted into living spaces, helping alleviate housing affordability problems. But while there have been some efforts to do that across the country, they don’t amount to much so far.
The best outcome—and it could take time—would be for the exit of hybrid workers to lead to a lowering of living costs that draws new entrants to city cores.
This article originally appeared in the Wall Street Journal. Read the whole thing here.
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