Manhattan Institute

The Bifurcated City

Too much urban development is focused on attracting hipsters and the affluent.

After drifting toward decrepitude since the 1970s, many core cities have experienced real, often bracing, turnarounds. Yet concern is growing that the revitalization of parts of these cities has unevenly benefited some residents at the expense of others. The crucial, and often ignored, question remains whether the policies that have helped spark urban revivals have improved conditions for the greatest number of residents. In a new study for the Center for Opportunity Urbanism, we found that, in most cities, unbalanced urban growth has exacerbated class divisions, while doing little to address the decline of middle-class households. Our analysis, which puts special focus on the urban cores of Chicago, Los Angeles, and Dallas, shows that the once-rapid growth of urban cores and their surrounding neighborhoods has slowed dramatically; net domestic outmigration, according to Census estimates, has increased from 10,000 in 2012 to 440,000 in 2017. At the same time, some of the most actively gentrifying areas, such as San Francisco, Portland, and Seattle, have become increasingly plagued with social dissolution and rising homelessness.

In recent years, a relatively small downtown population has done better, but surrounding areas have not. Philadelphia’s central core rebounded between 2000 and 2014, but for every district that gained in income, two suffered income declines. Research by urban analysts Joe Cortright and Dillon Mahmoudi shows that the number of high-poverty (more than 30 percent below the poverty line) neighborhoods in the U.S. has tripled in the last half-century, from 1,100 in 1970 to 3,100 in 2010.

Poverty is not, as is widely suggested, now primarily a suburban problem. The poverty rate, according to the American Community Survey, remains two-thirds higher in urban cores than in suburbs. Equally important, many longstanding middle- and working-class neighborhoods are disappearing. Teachers, firemen, and police officers are struggling to afford homes in many American cities, according to a study from Trulia. This pricing-out also applies to many skilled blue-collar professions like technicians, construction workers, and mechanics.

Nor have the urban cores, even as the residential population swells, become prodigious job creators. Today, the proportion of jobs between the urban core and peripheral areas remains largely what it was in 2000. Wealth has simply concentrated in fewer hands; inclusive economic growth is now rarely found in American cities. Jane Jacobs’s ideal of the city as a transformative place for working- and middle-class people is being lost.

At its best, gentrification is primarily an organic process, part of the narrative of urban improvement. Its contemporary urban version, however, has too often been driven by targeted policy interventions, such as tax-increment financing, subsidized arts districts, sports stadiums, or urban-renewal projects, as in Portland, which typically depend on the exercise of eminent domain. Policies such as these can crowd out scarce public funds that could be spent more wisely elsewhere and have something to do with the high costs of housing (among other goods) that make it so hard for middle-class families to afford living in urban cores.

Bus service, critical to poor and working-class residents, has often been reduced, even as rail service, intended to serve more affluent riders, expands. (Some cities have invested in passenger rail lines in an effort to reduce auto use, but transit market share has either stagnated or declined, a fact that rarely gets mentioned in reportage.) Public infrastructure spending on rail or on urban-containment policies does succeed in driving up the price of land, increasing economic pressure on lower-income residents. Many cities have emphasized the construction of high-density housing, which is largely funded by foreign investors, who often don’t occupy their units, creating expensive housing that sits empty. Nationwide, as much as 80 percent to 90 percent of new housing product is luxury-oriented.

Public investment and regulation geared toward attracting high-income professionals to urban cores was inspired by the groundbreaking work of the University of Toronto’s Richard Florida, heralding the rise of a “creative class” of young professionals who would come into cities for economic opportunity but choose to stay there, recreating the dynamic grassroots economy and thriving urban middle class of yesteryear. Yet today, Florida believes this phase of the urban revival is now over. In his latest book, The New Urban Crisis, he sees the emergence of an increasingly bifurcated city, “accompanied by rising inequality, deepening economic segregation, and increasingly unaffordable housing.” Florida’s most recent research suggests that “urban crisis” conditions—wage inequality, income inequality, economic segregation, and unaffordable housing—are most pronounced in prosperous cities such as Los Angeles, New York, San Francisco, San Diego, and Chicago.

Some cities with the fastest gentrification rates, according to Realtor.com, have undergone dramatic displacement of their poor and minority populations. Washington, D.C., long celebrated as Chocolate City, has seen its African-American population share drop substantially. In Portland, 10,000 of the 38,000 residents of the historic African-American section, Albina, have been pushed elsewhere.  San Francisco has lost 7.2 percent of its black population since 2010. Given these realities, many grassroots groups have become skeptical, even openly hostile, to gentrification. Our colleagues working in Chicago, Los Angeles, and Dallas have all reported growing opposition—including vandalism—to city development schemes widely seen as replacing long-term residents with short-timing hipsters.

Cities are battling for high-tech jobs, sometimes offering lavish inducements, but few poor inner-city residents are likely to work as coders for Amazon or Google. Little effort is being made to encourage the creation of sustainable middle-income jobs in industrial, warehouse, and business-service firms, which once sustained communities outside the urban “glamour zone.” A Brookings analysis found that, of the 30 U.S. metros that boosted their productivity, average wages, and living standard from 2010 to 2015, only 11 achieved inclusive economic outcomes. History shows that big income gaps and diminished opportunity can erode the civic order. Ancient Rome, industrial-era London, Manchester, St. Petersburg, and Shanghai, for example, all experienced revolts and, in some cases, revolutions led by the neglected classes. Tax breaks and subsidies for Amazon probably won’t help working-class residents of Queens or elsewhere.

Cities need a new urban-development paradigm that goes beyond the current focus on tourism, media, and tech, which creates many high- and low-end jobs but few in the middle. More effort should be made to capture the natural demographic and locational advantages of cities, which could be enhanced by investing in more efficient transportation that serves inner-city residents, paving roads, fixing bridges, and providing opportunity for broad-based skills training.

Many cities have vast amounts of desirable but largely undeveloped land. The largely underdeveloped South Dallas neighborhood has buildable land larger than the area of Manhattan. A similar amount of land is classified as vacant (non-beach) and potentially buildable in Los Angeles and Orange County. Large tracts of underutilized land—7,559 acres, or 11.8 square miles— make up 4.3 percent of Chicago.  Many of these areas could host not only offices, factories, and warehouses but also mid- and low-density housing, which is at least one-third less costly to construct than multi-family units, and which, combined with good schools, could bring back middle-class residents.

American cities don’t have to devolve into medieval burgs, with the rich in favored locations while everyone else absorbs ever-higher rents and less opportunity. The geographic appeal of cities and their diverse workforces has not disappeared. It’s time to forge an urban renaissance that transcends hype and embraces the interests of not only high-paid knowledge workers but middle- and working-class residents as well.

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