Talentopolis

What on earth has happened to Richard Florida? A few years ago he was encouraging cities to invest in skate ramps and get on-trend. Now he seems to have forgotten about that and is writing sensible, even boring features about the geography of the recession. He has even remembered that parents and older people exist. Sorry Richard, perhaps I misjudged you …?

Anyway, this piece for McKinsey on ‘Talentopolis’ is worth a read. Florida argues that highly paid, highly skilled people are increasingly clustered in a few big US cities (such as New York, DC, San Francisco). Less well-off and less-skilled households are priced out and moving out. America is becoming divided between Talentopolii (?) and everywhere else. Florida argues that ‘a geographic sorting of people by economic potential, on this scale, is unprecedented.’

Could this be happening here? At first glance, yes. Neil Lee and I put together the graph above from State of the Cities data, which shows that a few British cities are accounting for a bigger and bigger share of graduates.

Why is this? Technically, we are seeing the selective urbanisation of high-value services and high-skill workers on the back of a growing service sector. Thanks to cheap transport and better ICT, manufacturing firms are now less location-sensitive. Some back-office activities are leaving the UK altogether. But knowledge-intensive firms like cities. These firms offer high salaries to smart people. Over time, the urban share of skilled workers and skilled jobs tends to rise.

So far, so Florida. But there are some important differences. Take another look at the graph. Florida is depicting a spiky world, with a number of big city peaks around the US. But the UK ‘means migration’ is dominated by both London and some much smaller Southern cities. (More recent data would probably put Leeds, Manchester, Edinburgh and York on the right hand side.)

Florida seems to assume that cities are basically self-contained (though elsewhere he highlights the huge sprawls on the Eastern and Western seaboards). But Britain is a small island where most places are close together. In many ways the Greater South East is a single ‘mega city region’. So in many cases mobile workers are opting for partial displacement and commuting, rather than a total change of place. Manchester and Leeds are now drawing commuters from a wide hinterland. Edinburgh and Glasgow exchange thousands of workers a day. Cities like Oxford and Cambridge are now part of the Greater London system and urban centres in their own right.

It’s also unlikely that lower-skilled workers will get displaced in the way Florida suggests. The UK is still a less mobile society than the US. And Britain also has a much bigger social housing sector, much of which is in inner urban areas and is increasingly likely to be occupied by poorer people.

Still, there is something to the Florida analysis. Central Government needs to think about whether its happy with the national dominance of our own Mega City One – London and its hinterland. And other parts of the country, rather than chasing after a fixed pool of skilled labour, should be trying harder to grow and keep their own.

Read all about it

New book chapter alert …

During the 2006 Liverpool Biennial, light and sound artist Hans Peter Kuhn projected a gigantic question mark over the Wirral suburbs (above). Everybody hated it. But in fact it’s an (accidental) artistic masterstroke asking the big questions about suburbia. What is it? What is it for? And if there are problems in suburban areas – and parts of Wirral are pretty deprived – how can we fix them?

The Smith Institute, the  Homes and Communities Agency and CABE have just published a new collection of essays that aims to answer these questions. Housing and Growth in Suburbia is edited by Peter Hall and includes contributions by Nick Falk, Vesna Goldsworthy, Yolande Barnes, Will McKee, Sarah Ganventa, Jim Bennett and Ben Kochan, as well as yours truly.

My chapter, ‘Fixing Broken Suburbs’, looks at suburban deprivation and the prospects for renewal through the downturn and beyond. It’s worth reading this alongside Jim’s essay on ‘suburban renaissance’, which sets out some of the HCA’s early strategic thinking.

For the moment you can download the whole collection here.

Update: Tristram Hunt – who chaired the launch event last week – has done a nice piece on suburbia in today’s Observer.

Flat earth thinking

It’s intuitive that the architecture and layout of a city make a difference to our everyday lives: how easy it is to get about, and whether it feels like a nice place to live. In 1961 Jane Jacobs laid out the template for mixed-use neighbourhoods. We now know that well-designed buildings and public spaces contribute to wellbeing and social capital.

But what are the economic impacts of ‘quality of place’? Last week CABE and the RDAs organised a seminar to try and find out. The morning session had excellent presentations from my colleague Ben Rogers at CLG, Jim Bennett at the Homes and Communities Agency and Paul Hildreth from SURF. More on these in a moment.

Does ‘quality of place’ have anything to do with urban economic performance? Many superstar cities are bad places to live – like Hong Kong, LA or much of Silicon Valley. Equally, when cities like Liverpool and Manchester lost up to half their manufacturing jobs in the 1970s and 1980s, it’s unlikely that poor design values were to blame.

But these cities’ recovery in the 1990s was clearly helped by the remodelling of their city centres. This has attracted investors and new residents – although it’s been no substitute for good fundamentals. The ‘place offer’ is part of the story here – but how much?

The evidence tells us that human capital, innovation by firms, urban critical mass and economic diversity have the single biggest impacts on cities’ economic performance. And they are linked: cities make innovation easier, and have bigger, more diverse labour markets. The physical environment helps all this along (and lack of decent housing raises the local cost of living). But the evidence does not suggest it’s an active driver of growth.

‘Quality of place’-based regeneration also has winners and losers. Investing in design can help raise local house prices. This is good news for land and property owners – but not if you’re renting and get priced out, or if your home is demolished and replaced by somewhere more expensive. These are real risks in some Housing Market Renewal areas. Pathfinders are needing to deal with the problem by offering guaranteed homes, or cheap finance to buy a new one.

Fundamentally, I think the jury is still out on quality of place. Its importance often comes down to definition. CLG define quality of place as ‘built environment environment factors affecting life chances’. This involves only a small set of policy levers – design, planning, construction, space management.

By contrast, Paul defined quality of place as ‘what makes places work’ – ideas flow, infrastructure, big markets, skills, business-to-business links and so on. At a stretch, we could label this ‘quality of place’. But we now have an official definition that is much tighter.

Paul also highlights a bigger challenge, which is to get Government as a whole to improve its spatial awareness. Thomas Friedman was wrong: the world is spiky, not flat. Now that the Nobel Prize in Economics has gone to Paul Krugman, for his work explaining why place matters, it’s increasingly hard to pretend that it doesn’t.

But many Whitehall departments still take a flat earth view. There is little understanding of what makes different places work. Too many services are still delivered in silos, with little joining up. There is good evidence that investing in city-regions could help achieve national goals.  And more urgently, it is already clear that the recession is having very different effects in different areas. That underlines the need to junk flat-earth perspectives.

Right-sizing cities

It must be the Obama effect. Last year my LSE colleague Tim Leunig became a national hate figure for suggesting that residents of  northern British cities should move south.

Now the US Government is thinking about ‘bulldozing entire neighbourhoods’ in up to 50(!) struggling US cities. But instead of being howled down, ‘shrink to survive’ is being taken quite seriously.

This is a debate we need to have. Full credit to Tim for starting it (though I don’t agree with everything he suggests). In years to come regeneration funding will be severely squeezed. There won’t be enough cash to do everything everywhere – so we have to think through the feasibility of managing decline.

Two things stick out from the US coverage. First, the scale of abandonment in some American cities is scary.  Buffalo’s population fell from 580,000 in 1950 to 279,000 in 2005. Rolls in Flint, Michigan have dropped from 196,000 in 1960 to 120,000 today: up to 25% of land is now abandoned.

Second, the policy response is a twist on ‘green growth’. As explained by Dan Kildee, Governor of Genessee County, he takes as much abandoned land in Flint as possible, largely through foreclosures. County-wide Tax Increment Financing is used to leverage the land bank, forward-funding demolition, refurbishment or conversion into parks, urban meadows and gardens.

Few British cities are as badly off as Flint. The historical data suggests Stoke-on-Trent’s population dropped just 25,000 between 1961 and 2001. Hull’s fell from 303,000 to 243,000 over the same period. Liverpool’s has declined massively – from 746,000 in 1961 to 439,000 in 2001 – although the economy and population have been stabilising in the past few years. Liverpool’s right-sizing may already have happened. By contrast, poorer cities and towns in isolated places – like Stoke, Hull, Barrow or Easington – are still struggling to find a role.

Could we run ‘shrink to survive’? The model won’t easily transfer, since TIF and city-regional tax bases are some way off. The UK’s own experiment in right-sizing – the Housing Market Renewal programme – relies on Whitehall cash and now-vanished private sector investment.

More importantly, what would it achieve? Proponents suggest greening an area helps stabilise house prices. It also improves quality of life for residents. But it’s not clear this provides a real basis for growth (Kildee optimistically suggests ‘entrepreneurial agriculture’).

What about encouraging people out? This might not be welfare-maximising. We would need to weigh up the economic gains (moving people to jobs, savings on physical regeneration) against the economic costs (moving people) and social losses (damaged social capital etc).

Urban economics tells us that spatial equilibrium occurs when wages, prices and quality of life all clear. Local reactions to the Policy Exchange report – ‘I like it here, and it’s cheap’ – suggest that people in supposedly failing cities often don’t see them that way.

A sensible ‘shrink to survive’ strategy for the UK would involve: removing overcapacity in local housing; improving the local environment (which could include some US-style ‘greening’); levelling VAT rates on refurb and new build; developing local skills, access to employment and transport links to stronger labour markets; new funding tools; and as Dermot suggests, some honest repositioning. The Pennine Lancashire Pathfinder ticks most of those boxes.

In practice, this feels like an evolution of Housing Market Renewal. But since physical transformation is now largely done, the funding priorities should be (mobile) human capital, not (immobile) housing.