Recent US Census Bureau data has once again confirmed that there’s a growing preference for living in urban cores. More specifically:
It finds that population growth has been shifting to the core counties of the USA’s 381 metro areas, especially since the economic recovery began gaining steam in 2010. Basically, the USA’s urban core is getting denser, while far-flung suburbs watch their growth dwindle.
To put numbers to these statements, core counties in the US grew approximately 2.7% and outlying counties grew approximately 1.9% from 2010-2013. Most of the growth came from net migration, as opposed to higher birth rates.
The two big factors at play–which will be obvious to readers of this blog–appear to be both a desire to live in amenity rich and walkable communities and a continuing trend towards marrying and having kids later in life, which can often be the trigger for moving to the suburbs.
But the big question is whether or not this trend is here to stay or if it’s an ephemeral fad caused by a bunch of over-educated and under-employed Millennials refusing to grow up. I would argue that it’s not a fad.
If there’s a clear consumer preference for urban neighborhoods, then I don’t think people are just going to pick up and leave overnight. As long as there’s adequate housing within the means of growing families, I think they’re going to stay in or go to the areas in which they truly want to live.
There are also many other macroeconomic trends reinforcing this shift. Just yesterday, Richard Florida wrote an article in Atlantic Cities talking about how venture capital investment is shifting away from the suburbs, towards city centers and walkable communities. These companies (receiving investment) are the next generation of employers and they’re starting in core areas.
It’s no secret that a lot of cities out there want to become the next Silicon Valley (or San Francisco, since a lot tech companies seem to be now setting up shop there instead). With the shift towards a knowledge/information/networked economy (pick your favorite name), cities around the world are betting that entrepreneurship is going to be the key to future economic growth.
As an example, I was reading yesterday about a Buffalo-based business plan competition called 43North. It’s allegedly one of the biggest business plan competitions, ever:
With $5 million in cash prizes, including a top award of $1 million, six $500,000 awards and four $250,000 awards, 43North is setting out to turn the best new business ideas from around the globe into reality.
In addition to cash, winners will receive mentoring and free office space for a year. But while the competition is open to anyone in the world, you have to relocate to Buffalo for a minimum of one year if you win.
It’s a bold move. $5 million is a lot of money. But it strikes me as a step in the right direction to reinvent a city that was once the 8th largest in the US. I’m a big believer in the power of entrepreneurship.
We recently started a Lunch & Learn program at TAS. I did the first one on electronic road pricing and followed-up with the blog post below. Let me know what you think. It’s also cross-posted here on TAS’s website.
The case is essentially about traffic congestion in Hong Kong and a decision to either build more road (a bypass road running adjacent to the harbour: The Central-Wan Chai Bypass) or implement an Electronic Road Pricing (ERP) system, similar to what was implemented in Singapore in the 70s and in London in 2003.
Recent US Census Bureau data has once again confirmed that there’s a growing preference for living in urban cores. More specifically:
It finds that population growth has been shifting to the core counties of the USA’s 381 metro areas, especially since the economic recovery began gaining steam in 2010. Basically, the USA’s urban core is getting denser, while far-flung suburbs watch their growth dwindle.
To put numbers to these statements, core counties in the US grew approximately 2.7% and outlying counties grew approximately 1.9% from 2010-2013. Most of the growth came from net migration, as opposed to higher birth rates.
The two big factors at play–which will be obvious to readers of this blog–appear to be both a desire to live in amenity rich and walkable communities and a continuing trend towards marrying and having kids later in life, which can often be the trigger for moving to the suburbs.
But the big question is whether or not this trend is here to stay or if it’s an ephemeral fad caused by a bunch of over-educated and under-employed Millennials refusing to grow up. I would argue that it’s not a fad.
If there’s a clear consumer preference for urban neighborhoods, then I don’t think people are just going to pick up and leave overnight. As long as there’s adequate housing within the means of growing families, I think they’re going to stay in or go to the areas in which they truly want to live.
There are also many other macroeconomic trends reinforcing this shift. Just yesterday, Richard Florida wrote an article in Atlantic Cities talking about how venture capital investment is shifting away from the suburbs, towards city centers and walkable communities. These companies (receiving investment) are the next generation of employers and they’re starting in core areas.
It’s no secret that a lot of cities out there want to become the next Silicon Valley (or San Francisco, since a lot tech companies seem to be now setting up shop there instead). With the shift towards a knowledge/information/networked economy (pick your favorite name), cities around the world are betting that entrepreneurship is going to be the key to future economic growth.
As an example, I was reading yesterday about a Buffalo-based business plan competition called 43North. It’s allegedly one of the biggest business plan competitions, ever:
With $5 million in cash prizes, including a top award of $1 million, six $500,000 awards and four $250,000 awards, 43North is setting out to turn the best new business ideas from around the globe into reality.
In addition to cash, winners will receive mentoring and free office space for a year. But while the competition is open to anyone in the world, you have to relocate to Buffalo for a minimum of one year if you win.
It’s a bold move. $5 million is a lot of money. But it strikes me as a step in the right direction to reinvent a city that was once the 8th largest in the US. I’m a big believer in the power of entrepreneurship.
We recently started a Lunch & Learn program at TAS. I did the first one on electronic road pricing and followed-up with the blog post below. Let me know what you think. It’s also cross-posted here on TAS’s website.
The case is essentially about traffic congestion in Hong Kong and a decision to either build more road (a bypass road running adjacent to the harbour: The Central-Wan Chai Bypass) or implement an Electronic Road Pricing (ERP) system, similar to what was implemented in Singapore in the 70s and in London in 2003.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
The first is that this move can’t, or at least shouldn’t be, purely about business and economics. To create an entrepreneurial hub, I think you need to also ensure that you have a city that young people would love to live in.
I’m not saying that Buffalo isn’t one of those cities (I don’t know it well enough to comment), but I am saying that it should be part of any economic development strategy. Why do you think more and more startups are moving from Silicon Valley to San Francisco?
The second is that I worry we may end up with too many cities trying to become the next Silicon Valley. The industrial economy allowed for the creation of a certain number of thriving metropolitan regions (see: The Rust Belt).
But I’m not so sure the networked economy will require as many. I could be wrong, but the data seems to suggest that we’re heading towards a spikier economic landscape—both within cities and across nations.
In any event, here’s my question for the community: Would you move to Buffalo?
What this graph plots is the marginal cost of products and services with a fixed capacity. An example of a product or service with a fixed capacity would be a road. Roads can only handle a certain amount of drivers before it becomes unusable (gridlock). What this graph tells us is that once you reach that capacity—variable k in the graph—the marginal cost goes from zero to basically infinity.
In laymen terms, it’s telling us that at 4am when nobody is on the road, the cost—to society, to productivity levels, and so on—of adding each one additional driver is basically zero. But, as soon as you hit capacity, at say 830am, and traffic is at a standstill, the cost shoots way, way up!
So how do you solve this problem? Well, you price congestion. This invariably removes or forces drivers to other times of day and makes it so that demand for the road drops below the available supply. Then the road is able to function as it’s intended to. I don’t know about you, but this makes a ton of sense to me. What good are roads if they’re clogged with traffic?
What I’d like to do now is bring the discussion back to Toronto. For those of you with an interest in transit, you’re probably aware that Metrolinx has a “Big Move” transit and infrastructure plan that’s going to cost the region $2 billion a year to implement. I view this as investment in our region and so I think it’s absolutely the right move.
However, the billion dollar question is, where is the money going to come from? Earlier this year Metrolinx proposed 4 main revenue tools. They are:
- A 1% sales tax (estimated to raise $1.3 billion annually) - A business parking levy (estimated to raise $350 million annually) - A $0.05 fuel and gasoline tax (estimated to raise $330 million annually) - And a 15% increase in development charges (estimated to raise $100 million annually)
What I would suggest is that there should be a road pricing plan in this list in addition to—or instead of—some of the items listed above. Taxes are just taxes. And they discourage consumption depending on the elasticity of the demand for those items.
However, I would argue that a well executed road pricing model should be considered not as a tax, but instead as an incredibly accurate way to price roads according to actual usage patterns and costs incurred. Think of it like time-of-use utility billing. Do you think of high-peak utility billing as a tax or as simply the price to use the service when demand is the highest?
The benefits of a road pricing system would be numerous:
- We’d get a consistent revenue stream for transit investment in the region (instead of having to rely on government hand outs) - We’d be helping to decouple transit building from the political process (because Metrolinx would now make its own money) - We’d eliminate traffic congestion (yes, it can be done) - We’d increase productivity levels across the region (people will actually be able to get around) And we’d be reducing our impact on the environment by encouraging alternate forms of transportation
This is an incredible list of benefits. However, I think one of the challenges with implementing electronic road pricing is that it’s often misunderstood. People just view it as a tax. Hopefully by looking at the economics behind it all, it has become clearer that it’s actually a bit more nuanced than that.
But 2 considerations do come to mind.
The first is that this move can’t, or at least shouldn’t be, purely about business and economics. To create an entrepreneurial hub, I think you need to also ensure that you have a city that young people would love to live in.
I’m not saying that Buffalo isn’t one of those cities (I don’t know it well enough to comment), but I am saying that it should be part of any economic development strategy. Why do you think more and more startups are moving from Silicon Valley to San Francisco?
The second is that I worry we may end up with too many cities trying to become the next Silicon Valley. The industrial economy allowed for the creation of a certain number of thriving metropolitan regions (see: The Rust Belt).
But I’m not so sure the networked economy will require as many. I could be wrong, but the data seems to suggest that we’re heading towards a spikier economic landscape—both within cities and across nations.
In any event, here’s my question for the community: Would you move to Buffalo?
What this graph plots is the marginal cost of products and services with a fixed capacity. An example of a product or service with a fixed capacity would be a road. Roads can only handle a certain amount of drivers before it becomes unusable (gridlock). What this graph tells us is that once you reach that capacity—variable k in the graph—the marginal cost goes from zero to basically infinity.
In laymen terms, it’s telling us that at 4am when nobody is on the road, the cost—to society, to productivity levels, and so on—of adding each one additional driver is basically zero. But, as soon as you hit capacity, at say 830am, and traffic is at a standstill, the cost shoots way, way up!
So how do you solve this problem? Well, you price congestion. This invariably removes or forces drivers to other times of day and makes it so that demand for the road drops below the available supply. Then the road is able to function as it’s intended to. I don’t know about you, but this makes a ton of sense to me. What good are roads if they’re clogged with traffic?
What I’d like to do now is bring the discussion back to Toronto. For those of you with an interest in transit, you’re probably aware that Metrolinx has a “Big Move” transit and infrastructure plan that’s going to cost the region $2 billion a year to implement. I view this as investment in our region and so I think it’s absolutely the right move.
However, the billion dollar question is, where is the money going to come from? Earlier this year Metrolinx proposed 4 main revenue tools. They are:
- A 1% sales tax (estimated to raise $1.3 billion annually) - A business parking levy (estimated to raise $350 million annually) - A $0.05 fuel and gasoline tax (estimated to raise $330 million annually) - And a 15% increase in development charges (estimated to raise $100 million annually)
What I would suggest is that there should be a road pricing plan in this list in addition to—or instead of—some of the items listed above. Taxes are just taxes. And they discourage consumption depending on the elasticity of the demand for those items.
However, I would argue that a well executed road pricing model should be considered not as a tax, but instead as an incredibly accurate way to price roads according to actual usage patterns and costs incurred. Think of it like time-of-use utility billing. Do you think of high-peak utility billing as a tax or as simply the price to use the service when demand is the highest?
The benefits of a road pricing system would be numerous:
- We’d get a consistent revenue stream for transit investment in the region (instead of having to rely on government hand outs) - We’d be helping to decouple transit building from the political process (because Metrolinx would now make its own money) - We’d eliminate traffic congestion (yes, it can be done) - We’d increase productivity levels across the region (people will actually be able to get around) And we’d be reducing our impact on the environment by encouraging alternate forms of transportation
This is an incredible list of benefits. However, I think one of the challenges with implementing electronic road pricing is that it’s often misunderstood. People just view it as a tax. Hopefully by looking at the economics behind it all, it has become clearer that it’s actually a bit more nuanced than that.
