🔢 Key Takeaways
- Despite the pandemic's impact on NYC's economy, the city's cultural diversity and potential for improvement through better management and housing solutions show it still has much to offer.
- Strong government leadership and innovative solutions, like pool testing, are crucial to addressing the pandemic. Politicians must prioritize constituents over personal political gains, and restoring trust in institutions is essential.
- Due to a lack of investment and the pandemic, there has been a significant increase in rental inventory in Manhattan and Queens, with a decrease in home sales. Although some New Yorkers are leaving, it does not constitute a mass exodus.
- Low mortgage rates are fueling a migration to the suburbs, though this trend is not universal. Some cities, like Seattle, are weathering the pandemic better and may not experience significant urban flight. However, the economic impact of COVID-19 could lead to further acceleration of this trend.
- Remote work may lead to more innovation in smaller and cheaper cities, but could harm larger cities like New York and lead to budget deficits, declining quality of life, and population loss.
- The financial crisis in New York during the 1970s was caused by a combination of factors, including national economic trends and suburbanization, and was ultimately resolved with the help of an investment banker and the Emergency Financial Control Board, which took control of the city's budget away from elected officials.
- The city has experienced a major decline before, but the pandemic offers a unique opportunity for innovative recovery. With the lessons learned from past crises, New York is better equipped to rebound quickly and positively.
- Without federal aid, NYC may face layoffs and defunding of the police. Mayor de Blasio's request to borrow $5bn was denied which could lead to creditor control. However, the city has a history of reinventing itself and may recover within five years.
- Cities are the keys to escaping poverty and achieving prosperity, making us richer, smarter, greener, healthier, and happier. Face-to-face interactions are crucial for effective collaboration, and the city is the machine that makes all other inventions possible. However, cities are under threat if pandemics become the new normal.
- Living in cities can provide opportunities for learning, lower carbon emissions, and healthier lifestyles. However, challenges such as discontent and overcrowding must be addressed for sustainable urbanization.
- Despite advancements in modern-day cities, urban discontents still exist, including rising housing prices and income mobility issues that particularly affect less-educated workers. Tackling urban education is crucial for addressing social problems but is challenging due to the living and breathing nature of schools.
- Despite some cities experiencing an increase in homicides, overall crime rates are still low compared to past decades. The pandemic may be a contributing factor, but the effects vary by crime type and city.
- Reduced police effort and budget cuts can lead to rising crime rates, including domestic violence. Shifting police budgets to social services is a useful conversation but requires a clear plan. Rising crime can drive residents out of cities, presenting a new threat during the pandemic.
- Cities need to focus on maintaining basic services, being inclusive in taxation and sharing the spotlight. The pandemic can provide an opportunity for cities to reset and attract new talent. Financial relief is necessary for small businesses to avoid catastrophe.
- Cities can help revive their local economies by streamlining regulations, performing cost-benefit analyses, and providing transparent tax systems for both commercial and residential properties. Reforms to address housing issues, tax regimes, and permitting can also make it easier for entrepreneurs to start businesses and revive struggling industries.
📝 Podcast Notes
New York City's Resilience Amidst Economic Challenges
New York City's economy, heavily reliant on packed venues and offices, has suffered greatly due to the pandemic with a projected $6-7 billion deficit in the future. However, many experts believe that the city is not over and still has upsides as a bustling hub of culture and diversity. A letter from over 160 executives suggests that poor management of the pandemic has resulted in deteriorating conditions in commercial districts and neighborhoods citywide. Solving the problem of housing prices in New York City is a key factor in improving its future. In short, while challenges exist, New York City is far from being on its deathbed.
Congressman Max Rose on Leadership and Government Support During the Pandemic
Congressman Max Rose, representing New York's 11th District, emphasizes the need for strong leadership and government support during the pandemic. He advocates for innovative solutions like pool testing for essential workers, but criticizes Mayor de Blasio for his lack of leadership and failure to work collaboratively with Governor Cuomo. Rose stresses that to prioritize the needs of the city, politicians must exist in reality and prioritize the prosperity of their constituents over personal political gains. Ultimately, Rose highlights the essential role of government in helping people during crises, and the importance of restoring trust in institutions to effectively address current challenges.
Lack of Investment and Pandemic lead to Rental Inventory Increase in New York City
The de Blasio administration's lack of investment in the future of New York City and the pandemic-induced remote work trend have led to a significant increase in rental inventory, with Manhattan experiencing a 65% growth in rental listings compared to last year. Queens, with a larger population, had a 26% increase in rental listings. Additionally, home sales have decreased by 37% in Manhattan in July compared to last year. While data on population outflow is hard to measure accurately, roughly 250,000 New Yorkers have filed for a change in their mailing address since March, suggesting approximately 125,000 higher-than-normal outflows. However, in a city of 8.3 million, this doesn't constitute a mass exodus.
New Yorkers Flock to Suburbs Amid Pandemic Uncertainty
New Yorkers are taking advantage of low mortgage rates to move to the suburbs, an acceleration of a constant trend. While the pandemic has caused uncertainty, it has also prompted a decline in Manhattan rents, though experts predict this trend may continue. However, despite the pandemic, most cities are not experiencing a surge of suburban housing markets. Seattle, for example, has weathered the pandemic better than other cities due to being less dense and home to tech firms like Amazon and Microsoft. The pandemic-induced urban flight may further accelerate as the economy continues to suffer. As is, over a third of New York City's restaurants and bars may close permanently over the next year.
The Pandemic's Impact on City Life and Innovation
The Covid-19 pandemic has essentially wiped out commuting, leading to people being able to work remotely and decreasing the need to locate in expensive cities. This could result in more innovation happening in different parts of the country, benefiting smaller and cheaper cities as well as suburban and rural areas. However, this is bad news for big cities like New York, which are already projecting massive deficits. A shrinking city leads to a compressed budget, deteriorating quality of life, and more people leaving, perpetuating a vicious cycle that happened in New York during the 1970s fiscal crisis.
The reasons behind New York's 1970s financial crisis and the role of Felix Rohatyn and the Emergency Financial Control Board in saving the city.
New York's financial crisis in the 1970s was not solely caused by the city's large expenditures, but also due to national economic trends, deindustrialization, and suburbanization. Wealthier individuals leaving the city reduced tax revenues, resulting in a staggering $1.5 billion deficit. Despite pleas for aid from President Gerald Ford, the city was saved from bankruptcy by investment banker Felix Rohatyn and the Municipal Assistance Corporation. However, the Emergency Financial Control Board removed final say over the city's budget from elected officials and put it in the hands of the state.
New York's Resilience in Times of Crisis
The fiscal crisis of the 1970s in New York City resulted in a decline of city services, reduction in workforce, and a loss of 800,000 residents. Recovery took 25 years and billions of dollars of investment. In contrast, the pandemic has drastically accelerated the decline, but New York is in a better position than in 1975 to respond innovatively. An example is the Bloomberg administration's offer to pay 50% of rent for six months to attract residents back to Lower Manhattan after 9/11. The pandemic presents an opportunity for the city to try different approaches to recovery. While the fiscal crisis was a long and arduous climb, the pandemic provides a chance to recover quickly and in better ways.
New York City Facing Budget Crisis Amid Lack of Federal Aid
Despite a decrease in vacancy rate, New York City faces a challenge as it is not expecting any direct federal aid from the Trump administration. The lack of state and local aid could potentially lead to thousands of municipal worker layoffs and defunding of the police. Mayor de Blasio's request to borrow $5 billion to avoid layoffs was denied, and borrowing could lead to creditors having more power over the city. However, according to economist Ed Glaeser, New York has reinvented itself numerous times in the past and will likely recover within five years.
The Optimistic Role of Cities in a Globalized World
In an increasingly globalized world, cities offer the only path out of poverty into prosperity and cities make us richer, smarter, greener, healthier, and happier. The machine that makes all other inventions possible is the city, as human connections make creativity and collaboration possible. Virtual connections cannot replace face-to-face interactions, which are complementary rather than substitutes. The optimism about city recovery is predicated on controlling the pandemic in the next 24 months. If the new normal is waves of pandemics, the city is under greater challenge.
The Benefits and Challenges of Living in Cities
Cities allow for a chain of genius, where individuals become smarter by learning from each other. Living in dense urban areas can also result in benefits such as lower carbon emissions due to reduced travel and smaller living spaces, higher life expectancies due to more exercise, social connection, and active lives, and lower suicide rates. However, cities also face challenges and need to address discontents that arise from urbanization.
The Challenges of Urban Education in Solving Social Problems.
In comparison to the 1970s, cities in 2010 or 2020 feel reasonably triumphant, but there are still several urban discontents. Rising demand and high housing prices are creating anxiety about gentrification and posing barriers to wage advantage, especially for less-educated workers. Income mobility is another problem as cities have not been effective in enabling kids to thrive. Of all the discontents, urban education is the most challenging yet critical one to address for solving a wider range of social problems. While there is a technological fix for the politics of housing supply, building more apartments, schools are living, breathing organisms with teachers and kids.
Crime rates and the pandemic: A closer look at the numbers
While there has been an uptick in homicide rates in some cities, crime rates are still at historic lows. The 5 percent average increase in homicides is not significant compared to the overall decline in violent crime rates since the mid-90s. The media and politicians sensationalize crime, making any increase extremely salient to the public. The pandemic may be a contributing factor to the rise in homicides as other types of crimes heavily depend on foot traffic, which has decreased. While home burglaries are down, there is an increase in commercial burglaries. However, homicides remain a mystery as different effects are seen in different cities.
The Impact of Reduced Police Effort and Rising Crime Rates During the Pandemic
Reduced police effort due to accusations of brutality or budget cuts may contribute to rising crime rates. Domestic violence rates have also increased during the pandemic. While shifting police budgets to social services that reduce crime is a useful conversation, it must be accompanied by a clear plan. Rising crime, or even the perception of it, drives residents out of cities. The pandemic represents a different kind of threat to cities than previous crises.
Moving towards a managerial style of government to avoid vicious cycles in cities
To prevent another vicious cycle in cities, we need to move back to a managerial style of government that maintains basic city services, spreads the burden of taxes and does not target specific sectors. A willingness to share the spotlight is also important. The pandemic may provide an opportunity for cities to change their regulatory position and offer a reset. The lack of regulatory hurdles in cyberspace has made it an attractive place for new talent. However, starting a physical footprint business requires navigating a gauntlet of government regulations. The pandemic is a catastrophe for small businesses and cities need to provide financial relief.
How Cities Can Restart Business Regulations in the Wake of the Pandemic
The current pandemic has resulted in the closure of many businesses, and it is crucial to make it easy for new ones to take their place. To achieve this, cities must ease regulations by adopting one-stop permitting, performing cost-benefit analysis, and providing transparent tax systems for commercial and residential properties. Ed Glaeser suggests that this is the opportune time for cities to restart business regulations. New York City's tax regime needs to be reformed, and housing issues must also be addressed. To prevent expensive cities from spiraling downward, it is crucial to resolve the housing issue and make it easy for restaurateurs who went broke in 2020 to reopen in 2021.