Stirring Market Demand
Below is the Nowak Metro Finance Lab newsletter shared biweekly by Bruce Katz.
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As the Opportunity Zones incentive evolves, two dominant, overly simplistic narratives have taken hold.
On one hand, there is the view that all cities should merely compile and bundle a list of investable projects and reveal the true strength of the market for some distant investor on Wall Street or in Silicon Valley who have no connection to the city in question. This perspective treats the market failure that Opportunity Zones was intended to resolve as one primarily involving information and marketing rather than underlying business demand and market realities.
On the other hand, there is the view that Opportunity Zones will rip through the heart of U.S. cities, spiking housing prices, displacing residents and putting gentrification on steroids. This perspective assumes that the principal challenge facing all cities (and all parts of cities) is rampant and speculative value appreciation; the reality is that high poverty, high vacancy and low demand remains the central issue for most places.
Evan Weiss and I are in the process of writing a policy brief on the steps that cities can take to maximize the economic and social impact of Opportunity Zones. Evan is Director of PEL Analytics, a research and advisory firm that develops and fully implements financial recovery and economic development strategies for cities, school districts, states, and non-profits. He previously served as Budget and Administration Advisor in the Office of former Newark Mayor Cory Booker.
Our policy brief will take a balanced approach that reflects the market variance and complexity in this country, within and across cities. We have been thinking that for many cities the path forward is not to identify an inventory of investable projects or get over-excited about gentrification. Rather public, private and civic stakeholders need to take a series of individual and collective actions to stimulate market and business demand particularly around downtowns, medical districts and university districts (many of which have designated as Opportunity Zones).
Here are a few ideas that we have been playing with.
Alter anchor and company locations to increase employment density and “feet on the street.” In many respects, this has been the catalyst for Detroit’s nascent recovery as Quicken Loans and other companies have co-located downtown. And there are multiple examples across the country — Buffalo, Phoenix, Winston-Salem — of universities and health care systems moving pieces of their institutions into core locations.
Enhance commercialization and tech transfer efforts in ways that support regeneration. Many universities are upping their game in this area. Brown University and Notre Dame warrant attention given the decisions to enhance their research capacity and move innovation hubs outside the traditional footprint of the universities.
Design anchor procurement efforts that focus on local businesses. This has been a long-standing topic in cities; the efforts in West Philadelphia and elsewhere deserve to be replicated.
Design and deliver smart student housing expansion. Cities like Chattanooga are seeing their downtown revival enhanced in part by the expansion of student housing in adjacent neighborhoods near universities. Similar efforts could be made to cluster workforce and market-rate housing around hospitals and medical institutions.
Animate public and private spaces to attract people to cores and corridors. This has become an idea virus due, in part, to the great work of Project for Public Spaces and many other intermediaries. The list of inspiring examples —Detroit’s Eastern Market, the food pop-ups in Oklahoma City – are numerous. Smart place-making efforts in general (e.g., Main Street façade improvements) enhance demand and increase value in places that desperately need it.
Form or repurpose a local development corporation, with a few identifiable major corporate, institutional and individual supporters. The redevelopment of distressed urban communities is not for amateurs. It will require an “all-of-the-above” focus: mixed use development, quality place making, activation of public spaces, affordable housing and a commitment to quality architecture, historic preservation and streetscape re-design. This requires sophisticated organizations, like Cincinnati’s Center City Development Corporation (C3DC), built with and backed by private and civic capital. Erie’s well-resourced effort to adapt the Cincinnati model to their downtown should be closely watched.
All of these moves are elements of a basic, common sense economic development strategy. Many of the examples above are simply doing what successful cities do — mobilize local corporations, high net worth individuals, universities, hospitals, foundations, (and governments) to get coordinated and invest at scale in a synergistic way. Unlocking local capital and making smart local decisions is the vehicle for creating market demand, which is the precondition for attracting outside capital.
Opportunity Zones, in short, might provide the external stimuli for cities to get back to the fundamentals of locally driven renewal. For disadvantaged communities in particular, Opportunity Zones are an organizing impetus more than a pure financial benefit. The broader message: cities should not chase capital for short-term outcomes but rather create the conditions for long-term transformative growth.