Finding opportunity in urban flight
Finding opportunity in urban flight
Why my fellow urbanists and YIMBYs need to embrace the leverage that remote work gives us.
This is perhaps the most interesting moment in decades to be studying or otherwise thinking about the future of American cities. The social and economic shocks of the last two years have either fundamentally upended the economic trajectory of dense urban centers across the developed world or been a mere blip on an inevitable march toward continued urbanization, depending on whom you ask.
The potential and durability of remote work are likely the most important questions in this genre and touch on everything from transportation funding to the safety of dense downtown office corridors. Two years since its explosion, remote work and the freedom it provides have already started to shift where people choose to live, sending workers away from expensive cities and toward cheaper suburbs and resort towns. Sizable outmigration from major cities threatens once-reliable sources of tax revenue, so it’s no surprise that big city leaders like New York Mayor Eric Adams have practically begged office workers to return full-time.
Urbanists like myself have naturally been skeptical that remote work truly threatens the economic foundations of cities. After all, cities have survived far more daunting episodes of plague, war, riots, and economic collapse. To city lovers, the economic attraction and cultural allure of cities seem practically unshakable. But in recent months, I’ve come around to thinking that remote work will be a much more important factor shaping cities going forward than most urbanists seem to believe. No, it will not spark a mass exodus to the suburbs and exurbs on a permanent basis, at least not if us urbanists play our cards right. Instead, as I will argue in this piece, the rise of remote work will provide urbanists and YIMBYs an unprecedented opportunity to reshape the urban political landscape in our favor, aligning urban leaders’ interests with our goal of more vibrant, livable, affordable, and accessible cities. Rather than lament the rise of remote work, we should embrace it.
Remote work softens the agglomeration effects that pull in high-skilled workers
People migrate to cities for many different reasons, but they roughly boil down to two buckets. First, there are “amenities” in the broadest sense. Living in New York or Los Angeles, you have virtually unparalleled access to some of the world’s best entertainment options, food, and experiences you simply can’t have in a cookie-cutter suburb or small rural town. For young people, the dating pool is an order of magnitude larger. You also have better access to transportation that enables you to see friends and family both within the city and elsewhere.
The second bucket includes both the strength and depth of labor markets. People move to cities to work, but not necessarily for a particular job. The size of urban labor markets provides a kind of insurance policy to workers. If you’re fired or don’t like your employer, you very likely have the option to move to a different firm nearby in the same industry. Dense labor markets also provide a safety net for potential entrepreneurs, who will be less reluctant to take the enormous risk of starting a new venture if they know a strong job market awaits them if they fail. Finally, the proximity of highly-skilled workers to each other leads to cross-pollination or collaboration between firms and spontaneous interactions that lead to new ideas and new companies.
At its best, this labor market agglomeration looks something like AnnaLee Saxenian’s fascinating 1996 portrayal of Silicon Valley’s business environment, Regional Advantage. Workers are constantly bouncing between employers, starting their own highly specialized firms, and interacting with university and industry researchers on the cutting edge at industry forums, more structured R&D environments, or local bars. This force is why “superstar” firms have tended to concentrate in superstar cities, where they become more productive despite higher labor and real estate costs.
While Saxenian argues that proximity was a key driver of Silicon Valley’s success, remote work enables this physical proximity to be recreated virtually. High-quality video conferencing, collaborative coding platforms like GitHub, and rich online communities on social media platforms can, for many workers, rival what they would experience in-person, adjusting for cost. There is a growing body of evidence that the internet has substantially reduced the advantages of physical proximity in a host of technical, high-paying industries. Matt Clancy summarizes much of this research in his Case for Remote work paper from 2020. If you’re interested in a deeper discussion of the erosion of agglomeration effects on innovation, I’d strongly suggest this paper.
Remote work aligns the parameters of urban competition with urbanist and YIMBY demands
If labor market agglomeration effects are declining in importance (and they will likely not disappear), amenities and quality of life issues become relatively more important for people deciding where they want to live.
Cities have always had an incentive to attract workers. Stable or growing populations are better able to fund the high fixed costs associated with urban government like transportation, water, or port systems. The mid-20th century is rife with horror stories of American cities being hollowed out and verging on outright bankruptcy. But addressing quality of life and affordability issues is hard and requires taking on deeply entrenched interest groups. So for decades, cities have tried to attract workers through urban agglomeration effects. Cities throw subsidies, tax breaks, and special leasing deals at large companies willing to set up shop in their downtowns. Though an expensive and overrated tool of economic development, chasing firms yields visible, tangible accomplishments for mayors and council members and, to the extent it works, enables cities to paper over their other, deeper challenges.
In a world of widespread remote work, cities are forced to lure people, not firms. Livability and affordability will matter more. Cities like San Francisco or San Jose can no longer be bailed out by the fact that some of the most innovative firms in the world locate there if workers for those firms can live wherever they want. If major cities want to continue to thrive in an economy with a large share of completely remote workers, they need to address housing shortages, provide transportation systems that are convenient and affordable, and design streets safe for walkers and bikers.
In other words, the competition between cities will increasingly take place on turf friendly to urbanists and YIMBYs. Cities will have an incentive to align themselves with pro-growth advocates for permitting more market-rate affordable housing so that workers aren’t forking over 30 or 40 percent of their income each month in rent. If cities want to attract a new class of remote workers, they’ll also need to provide larger living spaces. While workers may have been willing to temporarily sacrifice half of a living room or bedroom to their employers, they’ll increasingly demand a second or third bedroom for a permanent office space as remote work arrangements set in. Again, cities must build to compete.
As workers spend less time commuting and more time in their own neighborhoods, they will demand better entertainment amenities like concert halls, theaters, clubs, and restaurants. They’ll want riverwalks, boardwalks, and permanent outdoor seating at their favorite bars. Stale office-dominant corridors like parts of downtown Chicago or Midtown Manhattan will need to transform their streetscapes to attract people with something other than a well-paying nine-to-five. They will need to make many of the pandemic-era adaptions like open, pedestrian-only streets and marketplaces permanent.
Cultural amenities, already a key feature of urban life, will take on increasing importance. Cities will want to be more conducive to art, music, and writing scenes. This means devoting more resources and attention to housing affordability, public spaces, and affordable storefront rents.
Urbanists should embrace the opportunity provided by remote work’s rise
In other words, while remote work is on one level a tool that enables people to leave pricey cities for lower-cost places, it may also force cities to finally confront long-simmering quality of life problems. As urbanists, it provides an opportunity to flip the terms of debate in our favor. If your city wants to remain competitive, you can’t simply throw taxpayer dollars at Amazon or Ford or Meta. You need to embrace density, growth, and change. Sprawling, bland, car-centric downtown office clusters are not what they once were. Cities are far from doomed, and talented young people will always want to cluster around other talented young people in some form or another. But it’s far from given that this clustering will continue to look like the clustering of past eras, especially as housing costs spiral out of control, transit systems become dysfunctional, and violent crime ticks up.
Urbanists tend to be on the leading edge of new cultural movements and new technologies. We love cities because we love diversity, variety, and change. Let’s not stick our heads in the sand and deny the obvious ways it’s impacting economic geography across the country. Let’s instead embrace this change and utilize the leverage it gives us to make our cities more affordable, more livable, more vibrant, and more of what made us fall in love with urban life in the first place.
This was a good piece. 🙂 Couple questions: how endangered are city governments’ social and infrastructure spending? Given that it’s generally well to do folks moving out, will we see cities in financial crisis? You mention the possibility in the opening, however, I would like to know if any cities are actually in a budget shortfall, excluding any unusual government aid.
I also read the report, the case for remote work. He has some very good points, especially in declining knowledge spillovers. I am suspicious about how he represented the research on the productivity effects of work from home - it seemed to me that he was overly optimistic, because the studies were pretty clearly showing that the effects were negative, and moreover plagued with endogeneity problems, as well as serious questions of cross sector applicability.
Anyway though, this was an auspicious start to your blog. Best of luck with the future!