The Pandemic and the City

After nearly twelve months of pandemic, we have all had to adjust to the many changes in our lives that it has caused. One of those changes that might have the longest-lasting impact is remote working. This got Derek Thompson, who wrote “Superstar Cities are in Trouble” in The Atlantic magazine, to thinking. The central premise of the article is that the booming coastal metropolises that had been driving the national economy are suddenly not doing very well.

Until very recently, these cities had been generating many of the highest-paying jobs and grabbing a disproportionate share of the nation’s total employment growth. But, a funny thing happened once the pandemic hit – people started leaving, slowly at first, and then in droves.

Among the Superstar Cities, two stand out as the Super-Nova’s of urban America. These are, of course, New York and San Francisco. Mr. Thompson finds that, it is these same two cities that have suffered the most in the wake of the pandemic. Why? The Atlantic article explains that it is their extremely high cost of living, reliance on mass transportation and density that have proven to be their undoing in the post-COVID era. Until the pandemic hit, it was great fun being part of the urban throngs, hanging out at restaurants and bars and interacting with other smart, interesting people. Perhaps no cities in this country had more of a lock on those dynamics than these two, iconic Coastal meccas.

The booming coastal metropolises that had been driving the national economy are suddenly not doing very well. A funny thing happened once the pandemic hit – people started leaving, slowly at first, and then in droves.

Since the pandemic hit, however, being a part of a crowd seems like nothing more than a sure-fire way to get sick and (possibly) die – no one’s idea of a fun time in the big city. So it should come as no great surprise that people are now getting out. And the more expensive and congested the city, the faster they are fleeing.

But what’s bad for New York and San Francisco may not be bad for America. In fact, according to Mr. Thompson, the Superstar cities’ pain may be a net positive for everyone else, at least after we have weathered the transition. Strangely, once everything has fully played out, it may even benefit these cities as well.

You could draw a three-mile radius around the Tribune Tower and create a “Gilded Chicago” that shared a lot in common with the Superstars before the pandemic hit, and is unfortunately behaving like them again now that it’s in full swing.

For decades, the Superstar cities got more and more expensive, even as they generated more and better jobs than anywhere else in the country. This is part of the reason the country has become so polarized. The educated and affluent increasingly clustered in just a handful of very expensive, mostly coastal cities, while everyone else got left behind in the vast American interior of struggling rust-belt cities and rural expanses.

But suddenly, this dynamic is being turned on its head. Not that Cleveland has suddenly become the new San Francisco (although, according to Mr. Thompson, the Cleveland housing market is now appreciating, even while San Francisco’s is in decline). But there is a pronounced transfer of people and wealth from the Superstars to, well, just about everywhere else.

Mr. Thompson believes that there will be some difficult period of transition for these formerly booming metropolises, but that they will likely stabilize as new generations of young people and immigrants are once again drawn to them, attracted in part by their greater affordability.

Yes, the Sunbelt is gaining more new residents than the Midwest, with Florida, Texas and Arizona all continuing to grow rapidly. But some surprising places are also now benefitting that had been pretty much off the map before the pandemic hit. In addition to Cleveland, Mr. Thompson points to Cincinnati and Indianapolis as two other heartland cities that seem to be drawing new residents as the larger, first-tier cities continue to shed people and jobs.

The Atlantic article does not specifically talk about Chicago. But, we might ask ourselves, how is this trend impacting Chicago and what are the long-term consequences going to look like on our shores?

Chicago is an interesting case in lots of ways. While never officially a “Superstar City,” you could draw a three-mile radius around the Tribune Tower and create a “Gilded Chicago” that shared a lot in common with the Superstars before the pandemic hit, and is unfortunately behaving like them again now that it’s in full swing.

You’d have to live under a rock not to have heard about the doom and gloom that has come crashing down on our fair city’s Central Area and the formerly hot neighborhoods that surround it. After a year of on and off shelter-in-place, and two rounds of rampaging after the George Floyd murder, the city’s Central Area is not looking or doing its best.

According to Integra Chicago, which tracks rents and occupancies across the metropolitan area, the downtown area is hemorrhaging both renters and owners as rents and condo prices spiral downward in something that looks a lot like free-fall. The neighborhoods in closest proximity to the Loop seem to be suffering varying degrees of the same malaise. The West Loop is probably holding up a little better, but all the near-downtown neighborhoods are hurting.

So, where are these urban refugees headed? According to numerous articles in Crain’s Chicago Business, the suburban markets are doing almost as well as the downtown market is doing poorly. So the primary answer seems to be suburbia where you can have a house and a yard and not share it with anyone but your immediate family.

But people are also venturing further afield. The beach towns of Michigan and Indiana have been huge draws as has the Lake Geneva area in Wisconsin. But certainly some percentage of Chicagoans are going even further. In some ways this is nothing new. Chicagoans have been leaving the city for decades – driven out by its high cost, high taxes and high crime – for warmer and less expensive locations. But this trend has almost certainly accelerated over the past year.

So, what does it all mean for the city’s future, or the future of any of the other Superstars? Mr. Thompson believes that there will be some difficult period of transition for these formerly booming metropolises, but that they will likely stabilize as new generations of young people and immigrants are once again drawn to them, attracted in part by their greater affordability.

If the price gap between the Superstars and everywhere else narrows a bit, the trade-off is probably worth it, painful though the transition will be. The silver lining may be a narrowing of that division, even if only a little, and a widening of access to more jobs from more locations.

If this is true of New York and San Francisco, it could be true of Chicago as well. Of course, we do not have all the strengths of the true Superstars, and we have some problems they either don’t have at all, or don’t have to the same degree. Put extreme segregation, corrupt and incompetent politicians who are unwilling or unable to deal with the pension debt crisis of their own making – oh, and the occasional polar vortex – on that list of uniquely Chicago challenges.

Despite all the problems currently afflicting the Superstar cities – and let’s be generous and put “Gilded Chicago” on that list – the laws of economics will eventually set in. Make something cheap enough, and you will sell more of it, provided it’s a good product to begin with.

For all our griping, few people who live in Chicago would deny that the city, at its best, can be an absolutely fantastic place to live with so many attractions and such a diversity of people and cultures. Surely, these benefits have not completely gone away just because we are temporarily on lock-down and can’t go out to eat!

My own belief is that Chicago and the other Superstars will come back, but perhaps not as quickly or as strongly as in past downturns. The remote work revolution could be long-lasting and make less expensive locations viable for many workers who are simply no longer willing to pay the price, or put up with the hassles, of living in a city like Chicago.

By the same token, every year, a new crop of college graduate from the Big Ten schools hit the job market. And every year, some number of those graduates make a bee-line to Chicago where they can put all those skills they’ve learned to use while also experiencing the thrills, adventures and innumerable pleasures of urban life that only a city like Chicago can deliver.

Who knows? They may even be more likely to come if those rents downtown keep falling (as they currently show every indication of doing). And if the price gap between the Superstars and everywhere else narrows a bit, the trade-off is probably worth it, painful though the transition will be. We really have become a very polarized society of haves and have-nots. The silver lining to the pandemic may just be a narrowing of that division, even if only a little, and a widening of access to more jobs from more locations. Is this really such a terrible thing? If it does come to pass, we may all be better off in the long-run.