The Digital Economy Won’t Shape the Future of American Cities — Housing Will
The truth is undeniable: cities are shaping the next chapter in America’s history, and the digital economy is a driving force. While venture capital in the tech industry has historically concentrated in a handful of U.S. cities, metro areas nationwide are benefiting from the internet sector. Local policymakers are demonstrating leadership and building deeper internet ecosystems, resulting in new businesses emerging everywhere. Meanwhile, cities across the country are popping up as new tech hubs by mixing unique cultural and historical traits with innovative policy approaches.
The above was taken from a guest post on TechCrunch written by Christopher Hooton, chief economist of the Internet Association, an organization that describes itself as “the unified voice of the internet economy.”
Hooton’s post argues that the digital economy will be the single most important factor in the growth of American cities in the coming years. Imagine my surprise when I realized Hooton’s post was going to completely ignore the most crucial factor that will profoundly change the way we live in American cities — housing.
Hooton’s post is framed around a report published by the Internet Association, Here They Come: A Look at the Future of Cities in the Internet Age. The report aims to highlight examples of digital infrastructure driving change in cities struggling to keep up with the rapid pace of change.
The article’s failure to even mention housing is a glaring yet honest mistake at best, and a purposeful omission that obscures the true nature of economic change in America’s cities at worst. America is facing a housing crisis of unprecedented proportions, yet Hooton’s article and the Internet Association’s report fail to even acknowledge the disaster we’re facing as a nation, let alone its horrifying scale.
The report focuses on four urban areas — Columbus, Ohio; Kansas City, Missouri; Phoenix, Arizona; and Pittsburgh, Pennsylvania — each of which is experiencing marked growth after struggling to regain their footing in the wake of the financial crash of 2008. However, as many cities are now discovering, economic growth — particularly the kind driven by technology companies — isn’t always good news for everybody.
In Columbus, the average rent has increased by 4% annually for the past two years, and home values in affluent Columbus neighborhoods like Franklin Park have risen by more than 50% since 2013. In Kansas City, luxury rental units like those available at residences such as One Light account for much of the housing development underway across the city, with some units renting for as much as $2,800 per month. Phoenix, Arizona, is the ninth-most expensive metropolitan area for renters in the country, and average rents across the city have risen by more than 20% since 2014.
In reality there are only two flavors that new apartments come in — luxury and low-income.
Pittsburgh is the notable exception in the Internet Association’s report. With a median rent of $985 for a one-bedroom apartment, Pittsburgh is the 44th most expensive rental market in the U.S., making it significantly more affordable than many other American cities. (A full-time employee working 40 hours per week at Pittsburgh’s minimum wage of $7.25 per hour would still need to pay almost 85% of their monthly income to afford this kind of rent.) However, rents are still rising across Pittsburgh, and city officials hope that the influx of tech workers coming to the city to work for companies such as Amazon, Apple, Google, and Uber will “rejuvenate” the city’s struggling housing market.
Of course, we can’t lay the blame solely on technology companies for the emerging housing crisis, and one could argue that the nation’s housing crisis falls far beyond the remit of the Internet Association and its report. However, Hooton’s article reveals just how myopic the report actually is.
For one, Hooton identifies transportation systems as an area of urban living that is ripe for disruption and innovation. Mass transit is an immensely powerful driver of economic growth; every dollar spent on public transportation generates approximately $4 in economic returns. However, projects such as reinventing — and privatizing — the bus for wealthy white San Franciscans do nothing to help the people who need it most, and America’s transportation infrastructure (which received a grade of just D+ according to the most recent report published by the American Society of Civil Engineers) is literally falling apart. Indeed, the nation’s crumbling infrastructure is in such dire need of repair and investment that it has given rise to the meme that “it’s always Infrastructure Week.” It might be funny if it weren’t so tragic.
Then there’s Hooton’s recommendation to “Emphasize the importance of economic inclusion.” Hooton is absolutely right that economic inclusion is vital to the success of America’s cities and their people, but his assertion overlooks just how exclusionary life is for millions of low-income people living in cities across the United States. Recent data from the Brookings Institute reveals that, in cities such as Atlanta, Georgia, and Washington, D.C., the top 5% of households in those cities earned more than 18 times as much as people in the bottom 20% of households — a situation that is playing out in cities all over the country. Many of the nation’s elected officials talk a good game about creating new economic opportunities, but when cities like Chicago are willing to lavish Jeff Bezos with tax-free real estate and other perverse financial incentives just for the chance to host the company’s proposed second headquarters, it’s clear that the economic priorities of many city officials differ radically from those of their poorest constituents.
Hooton’s post also overlooks certain political realities that threaten to further exacerbate income inequality in America’s cities. The FCC’s decision to dramatically reduce the scope of the Lifeline program, which provides subsidized internet access to low-income rural households and Native American reservations, is just one example of deliberately harmful policies being enacted by an administration that is intent on enriching its own cabinet members and their plutocratic donors rather than serving the needs of American communities.
The digital economy can’t help American cities grow if only wealthy people can access or benefit from it.
Some cities posted stunning increases in top incomes from 2014 to 2016. The most astonishing changes in the mid-2010s occurred among high-income households in a few cities characterized by booming technology economies.
When startups talk about disruption and innovation, profitability is an unspoken requirement. If an idea isn’t profitable, it isn’t viable. Unfortunately, restoring the social contract and building affordable housing aren’t profitable ventures — nor should they be. The shift toward home ownership as an investment vehicle is precisely what has driven much of the inequality in the housing market to begin with, and it’s abundantly clear that we’re not going to be able to privatize our way out of it. It should be obvious by now that our elected officials and the magical hand of the free market don’t seem particularly interested in or capable of providing a solution to the rapidly escalating housing crisis America now faces — but housing appears to be a problem that even the brightest minds of Silicon Valley cannot solve.
Hooton is right that the digital economy will continue to profoundly alter the landscape of urban America, but make no mistake — housing is what will define life in American cities over the next decade and beyond, not nebulous promises of growth loosely tied to civic broadband initiatives.
Only we can decide what we want our cities to look like, and only if every voice is heard.