Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
One of the central themes is the idea that globalization has caused a kind of bifurcation in cities – a disconnect between the local and the global. In an effort to compete with other global cities around the world, we have begun to turn our back on local concerns. At the same time, not every city has the market power of, say, New York or London.
So what does this mean for cities? Here’s a quote from the article that I think does a good job explaining the mental model:
At the end of the article, Aaron makes a number of recommendations for how to better think about local entrepreneurship and economic growth. The first one is as follows:
“Local civic priorities should favor building a successful and inclusive local economy, including entrepreneurship, over global concerns and real estate development.”
Despite this being seemingly contradictory to do what I do for a living, I think it’s important to note that on a fundamental level, architects and developers simply create space.
It might be a beautiful space. A space that improves well-being, creates value, and enables certain activities. But at the end of the day, there needs to be demand for that space. And a robust local economy is paramount to that equation. So I agree that we shouldn’t forget about local and expect that “if we build it, they will come.”
If you have the time, the full article is worth a read. It’s also part of a broader series on entrepreneurship and cities, so there are a bunch of other related articles on the same page.
His argument – taken from a book called Once in a Great City: A Detroit Story – is that the prevalence of pianos in black working class and middle class families was a key ingredient in Detroit ultimately punching above its weight musically.
The family piano’s role in the music that flowed out of the residential streets of Detroit cannot be overstated. The piano, and its availability to children of the black working class and middle class, is essential to understanding what happened in that time and place, and why it happened, not just with Berry Gordy, Jr. but with so many other young black musicians who came of age there from the late forties to the early sixties. What was special then about pianos and Detroit? First, because of the auto plants and related industries, most Detroiters had steady salaries and families enjoyed a measure of disposable income they could use to listen to music in clubs and at home. Second, the economic geography of the city meant that the vast majority of residents lived in single family homes, not high-rise apartments, making it easier to deliver pianos and find room for them. And third, Detroit had the egalitarian advantage of a remarkable piano enterprise, the Grinnell Brothers Music House.
Detroit is obviously not the only city with lots of single family homes. But it’s fascinating to think that this housing typology, combined with a number of other socioeconomic factors, could be what ultimately led to the creation of the Motown Sound.
It’s also interesting to think about what kind of talent we might be squandering in our cities. I mean, look what happens when people have access to things like pianos (in the case of Detroit), computers (in the case of people like Bill Gates), and cheap/vacant space (in the case of Berlin and its clubs). They create amazing things.
This is one of the reasons why I think we sometimes underestimate the importance of small scale moves when it comes to spurring innovation in cities. We forget that people will do incredible things when they are, quite simply, given the freedom to work on projects they are passionate about.
If we could harness these passions instead of focusing so often on big political announcements, I think we’d all be better off.
This collection of essays brings together the best ideas from scholars with expertise across a broad spectrum of urban issues. The common theme of the papers is to innovate, evaluate, and leverage the remarkable private talent that is so abundant in America’s great cities. Public capacity is sharply limited; the ingenuity of urban entrepreneurs seems practically boundless. Local governments should be more entrepreneurial and do more to use the talents of the entrepreneurs around them.
As a further preview, two of the ideas suggested in the book include: 1) reducing or eliminating parking requirements for new developments (which is something I’ve written about before on ATC) and 2) implementing a split-rate property tax for land and its improvements.
If you’d like to download the free PDF, click here.
The conversation starts by talking about the resilience of New York City and its ability to accept and then reinvent itself in the wake of “creative destruction.” Destruction such as the financial crisis of 2008/2009.
But they then go on to talk about the challenges that New York, as well as many other cities, are now facing. Challenges brought about, not by failure, but by their tremendous success. Challenges such as income inequality and the dwindling middle class.
The overarching premise is that we are still in the early stages of a new urban and creative economy. And that there’s lots of work to be done in order to figure out how to make it an inclusive one.
There’s even mention of former Toronto mayor, Rob Ford.
You can listen to the talk below. If you can’t see the embedded play button, click here.
Urbanist Aaron Renn recently published an interesting article in City Journal called “Libertarians of Convenience”. It talks about how today’s urban progressives are selectively favoring deregulation for the things that only matter to them – everything from urban housing to food trucks.
Here’s a snippet:
But it’s hard to avoid thinking, too, that some of the inconsistency reflects elite biases. The things that liberal-minded city residents like and want to do—eat from hip food trucks, smoke dope, and other “bourgeois bohemian” pursuits—should be left as free as possible, consequences be damned (raw-milk advocates downplay the nearly 1,000 cases of illnesses caused by it from 2007 through 2012). Those that they consider déclassé—Big Gulps, Marlboro Lights, McDonalds—should be restricted or even shut down. It’s regulation for thee but not for me.
I like his angle, because we’re probably all – at least a little – guilty of subjectively wanting more of the things we like and less of the things we don’t like.
Aaron M. Renn of The Urbanophile, recently wrote an interesting article in Governing called, Where’s America’s Entrepreneurial Economy? In it, he argues that despite the fact that there’s a perception that entrepreneurship is on the rise, overall rates are actually declining.
The Brookings Institution found that so-called “firm entry rates” have declined since the 1970s and that they suffered a steep fall post-2005. And though millennials are often seen as an entrepreneurial generation, The Wall Street Journal reports that business ownership among those under the age of 30 recently hit a 24-year low. Self-employment has seen a similar downward trend. A study by Economic Modeling Specialists International found that both the total number of self-employed and their share of jobs have fallen since 2006.
His argument is that outside of tech — where yes, the barriers to entry have fallen significantly over the years — it has actually become harder to start a company in a lot of other cases. And he specifically mentions two industries where he believes that is very much the case: construction and real estate.
Why is that?
Well, he cites a number of possible factors, one of which is increased licensing requirements for many industries. But the two most interesting for me are slow disruption cycles and the presence of large dominant firms.
Real estate has both of those.
It’s also a capital intensive industry. And it’s becoming harder for smaller private players to compete with larger institutions and pension funds who struggle with “moving the investment needle”, not with access to capital. Real estate is no longer the fringe asset class it once was.
In contrast, you have the tech space with fast disruption cycles and low barriers to entry. Yes, you also have large dominant players (Apple, Google, Facebook, Amazon, and so on), but even they don’t have complete immunity in an environment where new ideas frequently trump access to capital.
A culture of entrepreneurship across all industries is important for our society. I hope we never lose that.
Without a question, we are living in an urban era. More people now live in cities than anywhere else on the planet and I’ve repeatedly argued that cities are our most important economic engine. As a result of these demographic and economic shifts, we’re seeing megacities at a scale the world has never seen before. Below is a list of the top 35 largest urban areas in the world.
The top urban area is Tokyo-Yokohama, with a population of roughly 37.5 million people. That’s almost the same as the state of California and is more than the entire population of Canada, which sits at just over 35 million people. London, which, during the 2nd half of the 19th century, would have been the largest urban area in the world is now the 29th largest.
But at the same time, London arguably remains the most important global city–a title that can only really be rivalled by New York. Which raises an important distinction. One that Aaron Renn clearly identifies in this recent article for New Geography: Just because a city is a megacity, doesn’t mean it is or will ever be a global city. In fact, Renn argues that many of the world’s largest megacities will never “turn the corner” and become leaders of the global economy.
For that to happen, he believes that the city needs to belong to a country on the rise:
Moscow was the capital of the Soviet Empire. New York and Los Angeles came of age when America was the rising, and ultimately dominant, economic colossus. It’s the same for Paris and London, two borderline megacities, which rose as imperial capitals.
But how much of this is driven by the country and how much of it can be driven by the city itself, upwards? Could it be the city that ultimately empowers the country to rise? I ask these questions because Renn frames his argument as if “national hyper growth” is the only prerequisite that will allow the struggling and underdeveloped megacities to pull themselves up and into the developed world.
But the problem is that there’s no clear path to prosperous maturity for these megacities. They are so huge, and their problems so immense that they are difficult to even conceptualize, much less do something about. The amount of needed infrastructure provision alone – water, sanitation, drainage, transport, telecom, electricity, parks, schools, etc. – is staggering. And that doesn’t even touch arguably more difficult problems like corruption and good governance. Absent national hyper growth – a la Japan or Korea – of a level that creates a plausible claim to being the world’s rising economic power, or the proceeds of empire, it seems unlikely any of these cities will ever succeed. By contrast, smaller cities have a much more addressable problem space.
Now, I don’t disagree that the problems in these cities seem almost insurmountable. I’ve been to places like Dhaka, Bangladesh. I’ve witnessed first hand the challenges facing megacities in the developing world.
But to assume that these cities are lost causes without the nation itself lifting it up, seems almost self defeating and overly pessimistic. It also strikes me as a bit of a chicken and egg scenario. Because if cities are our economic engine, then “national hyper growth” seems difficult without also getting our cities right.
What comes first?
Yes, there are and will be reforms that need to happen at the federal level but, at the same time, I think there’s a lot that can and should happen from the ground up. Perhaps that’s part of the reason Singapore has been so successful. As a city-state, its reforms were both top down and bottom up.
I want to believe that with the right reforms, policies, and leadership, any country can create a framework in which its cities are able to thrive. And that it’s not just the result of imperial rule or some other circumstance. From good and transparent governance to developed financial markets, there are many things that cities need to truly prosper. But when you get it right, the results can be remarkable.
This may sound crazy, but I’ve never been to Chicago. It’s on my list, but I just haven’t gotten around to it and I’ve never had a specific reason to go. Hopefully I can make it this summer.
Lately though, I’ve found myself reading more and more about the city. Given that it’s also a Great Lakes city and it’s of comparable size, Chicago is an interesting case study for Toronto. But one thing that seems to keep coming up, is the need for zoning reform.
About a month ago I wrote a post called “The tale of 2 Chicagos”, which was inspired by the blogging of Aaron Renn (The Urbanophile) and Daniel Hertz (City Notes). The discussion was around the prevalence of single-family zoning in most parts of Chicago and how it’s creating a supply constrained market (driving up prices).
When places in and around downtown become more desirable, developers build more housing, and more people get to live there. But when non-downtown neighborhoods become more desirable, developers can’t build more housing: it’s against the law. So instead, they profit by tearing down old two-flats and building mansions in their place. And as a result, fewer people get to live in those neighborhoods, even as more and more people want to.
Effectively, his argument is that gentrification leads to a loss of housing units. Developers can’t build more housing, so they replace housing. And it all stems from a restrictive zoning code that aims to maintain the character and scale of established neighborhoods. I get that, but you could easily argue that it exacerbates the negatives of gentrification.
It strikes me that Toronto and Chicago are in somewhat similar places in terms of their growth. Without any real natural barriers, both cities had the luxury of being able to develop through horizontal sprawl when they were younger.
But with people now returning to city centers, we’re faced with a series of difficult decisions: How do we balance preservation and growth? How do we balance low-density with high-density? How do we maintain the character of what people love while still creating an inclusive city?
It absolutely can be done, but it’s going to mean embracing a certain amount of change. And that’s not always an easy sell.
Over the long weekend I wrote a post called “On medium density development.” My argument was that Toronto has gotten exceptional at building infill towers, but not so great at midrise and other medium density infill solutions. Though to be fair, we are starting to see more and more of that today.
Well it turns out that Chicago is in a similar, if not worse, position. According to Aaron Renn of the Urbanophile blog, most of the city (outside of the city center) only allows for single family homes. Though in some cases you may be allowed a duplex or triplex.
Here’s a map:
The red is where you’re only allowed to build single family homes. The yellow represents non-residential uses (parks, industry and so on). And the remaining black is where you’d see high density development. Note how it runs all along Lake Michigan. Both Toronto and Chicago are developing in a similar “T” formation.
Now, some of you may be saying to yourself: So what? But it’s important to remember that this type of zoning effectively creates a supply constraint in the market, which, as I’ve argued before, will drive up prices. Chicago may as well be surrounded by mountains, because that red area seems almost untouchable from a development standpoint.
With so many people rushing back to cities today, a lot of them are struggling to create the same market environment that our parents enjoyed. You know the one where you finish school, get a job, and then you’re able to buy a house. But I think it’s because many of our cities are at a turning point, and yet are clinging to outdated principles of city building, such as single-use zoning.
But I’m certainly no expert on Chicago, so if you are, please speak up in the comment section below.
