Erik Bruvold
Thursday, December 20, 2007
What will be San Diego’s economic future? A debate waging among students of urban economic development has serious implications for how that question will be answered in the coming decades.
On the one hand are proponents, most notably University of Toronto Professor Richard Florida, who argue that economic development in the 21st century will be driven by the ability of regions to attract what Dr. Florida terms “The Creative Class.” Regions which have a large concentration of scientists, engineers, artists and others involved in intellectual and creative pursuits are, according to this view, destined to prosper. Those regions that fail to attract a sufficient critical mass of the “creative class” are likely to be left behind.
On the other hand are proponents from an emerging school of thought, championed by Chapman University’s Joel Kotkin, who argue that “opportunity cities” create the broadest economic prosperity for their citizens. Kotkin and his supporters look not to the Upper West Side, San Francisco or Austin but, instead, to the suburbs of Houston, Charlotte and Atlanta. Although it would be accurate to state that creative cities are doing well, it must be noted that opportunity cities are creating wealth that is much more widely shared among the population.
Consider Dallas-Fort Worth. Between 1989 and 1999 the number of Dallas households making between $34,000 and $50,000 grew 12.3% and the number of Dallas households making between $50,000 and $81,000 grew 14.2%. In contrast, during those same years the number of San Diego households making between $34,000 and $50,000 grew a paltry 1.7% and the number of San Diego households making $50,000 to $81,000 grew by only 2.5%. The San Diego region saw most of its growth (15.9%) in households either struggling (less than $18,000) or those that did very well (households making $81,000 or more grew 23.2%).
There are at least two important factors that lead to the success of opportunity regions. First, housing prices are reasonable and in line with regional income levels. In San Diego, the median sales price for existing homes in 2006 was $601,000. In Dallas, the median sales price for existing homes in 2006 was $149,000. Second, opportunity cities champion entrepreneurial activity. They streamline regulations and impose a reasonable tax burden. This in turn helps entrepreneurs take risks and dream big. While opportunity cities may not create many multi-million dollar jobs for hedge fund managers, they excel at creating the kind of environment that helps individuals open a franchise or set up a home-based business.
Why is all of this important to San Diego? From data that both Florida and Kotkin present, San Diego is in many ways, at a crossroads – neither precisely a city that excels at attracting the creative class nor an opportunity city that helps create a large number of middle class jobs. According to Florida’s 2003 paperback edition of The Rise of the Creative Class, San Diego ranks as the 12th most “creative region” among cities with more than 1,000,000 residents. We lag behind cities like San Francisco or Boston, or the research triangle in North Carolina, but still outperform the majority of US regions.
In respect to San Diego’s status as an “opportunity city”, the region does well on most surveys with respect to its “business friendly” nature and in terms of the formation of new companies. However, in 2006, San Diego had the second highest median-priced home in the country and comparatively lagged when it came to the creation of middle class jobs.
Many San Diegans are likely to find the goal of encouraging an economy that creates greater prosperity for a larger percentage of our region’s population attractive. Kotkin’s policy proscriptions however, cut deeply against strains in San Diego’s civic DNA. He notes that opportunity cities don’t constrain housing supply. They tend to get out of the way of those that want to create new business. They invest in infrastructure and do not unduly constrain growth. They tend to allow most development to occur “by right”. Kotkin writes glowingly of Houston, a city bemoaned by many local planners for its lack of zoning and its love of the automobile and the detached single family home. It might be nice to think that we could have the growing middle class of communities like Charlotte, Atlanta and Houston whith the strict zoning of the Upper West Side. But Kotkin reminds us that unless San Diego is some unique outlier, that isn’t likely to happen. Allow for growth, accepting some of the headaches that go with, it and one is able to create opportunities for an expanding middle class. Restricting growth comes at the expense of denying a future for many that want to own their first home or start their own business.
Yet these dreams do not go unfilled. As both Florida and Kotkin remind us, labor in the 21st century is highly mobile and if our community decides that it will allow only a bit of dense urban infill housing, those choices are not being made in a vacuum. Other communities such as Phoenix and Riverside are making very different choices and are likely to be better at attracting the 30-somethings that are well skilled and creative but who also aspire to own a home, start a family and host an occasional BBQ in their own backyard.
San Diego can become an opportunity city. But doing so comes with its own costs- we are likely to have more traffic, “sprawl,” and see more land utilized for development. However, the trade-off is that by becoming an opportunity city, we enable thousands of people to think of San Diego as a region to put down permanent roots and seize the opportunities a growing economy creates.