Slowing national population growth plus remote work spell big trouble for Midwestern cities
I live in downtown Chicago (the Loop) after moving here from Boston in 2012. I work at a museum, wife runs a farmer's market business and daughter is in CPS while doing ballet on scholarship at Joffrey up the street. We don't own a car. I was always optimistic about here because it had all the big, modern city things with low prices. If you want to live a city life in the USA and are not rich, Chicago was your last chance. I don't think that has gone away.
Budgetary governance has improved in the 10 years I've been here (from abysmal to adequate) as have schools. My daughter attends a regular community (not selective enrollment) public elementary school and has had a terrific experience.
MY alluded to it, but the lakefront is AMAZING. I can't think of a single big city in the world that set aside it's entire waterfront for the public good and refuses to allow construction on it. DuSable Lakeshore Drive is one of the most beautiful drives in the country. Some of the best architecture on one side, and wonderful parks, beaches and lakes on the other. It really needs to be more well known as one of the USA's best jewels.
But crime is changing the brand of the city. If that continues I worry. At my museum we are seeing members fail to renew because they are worried about "driving downtown". And I don't know how to fix it. The police have basically stopped doing their jobs (arrests are down like 60% or so) and are hyper right-wing.
Construction is still going on all over the place in my community (South Loop). A 50+ story residential building is going up 2 blocks away and it began *after* the pandemic. So that's a sign that investors still believe at least. One local rumor is that some of the older office buildings in the financial district will be renovated into residential units.
Our host needs to be a little more careful with supporting statements. Yes, Caterpillar is moving its corporate headquarters but not from Chicago. The company has been headquartered in Peoria for a lot of years. Boeing's move is yet another example of senior management doing stupid things. The company left Seattle following the merger (another stupid move) with McDonnell Douglas) to in part get away from unionized workers at their main plant in Washington state and secondarily to capture a host of tax breaks offered by Illinois. Those conveniently expired this past year necessitating another move to capture more breaks, this time to Northern Virginia.
In both cases, the number jobs leaving the state are modest and principally executive and not manufacturing (I'm pretty sure Boeing does not have a manufacturing presence in IL while Cat certainly does).
On a 10-20 year time horizon, I think this is all reasonable forecasting, and it’s concerning.
Beyond that, I don’t know! I’m maybe too much of a homer to comment dispassionately here, but my source of optimism for Chicago & the Great Lakes (+ STL), relative to other metros, is a point made by Pete Saunders in his great blog about Chicago and the region it anchors, Corner Side Yard. “The cheap land/warm weather/low taxes formula can only go so far and last so long.” He agrees in other posts, though, that a proximate source of decline is federal lawmakers’ lack of imagination about what to do with this region.
Beyond that, a few other things come to mind when I think about what can separate Chicago’s fate from, say, Detroit’s:
- We’ve got U Chicago and Northwestern, and we’re the hub of the Big 10 group of state flagships, which stacks up favorably against even the UC system.
- I think Chicago’s international brand is much stronger than both neighbors like Milwaukee/Cleveland and fast-emerging metros like Dallas/Phoenix, so (non-winter!) tourism is a genuine source of income for what might otherwise be a distressed retail environment in/around the Loop.
- Friendly (or compliant?) state government. You and Ezra Klein and others have done a great job holding state & local Democrats’ feet to the fire about the poor quality of governance in urbanized Dem areas. But there’s a reason those pieces aren’t about sub-optimal state-level urban policies in TX, FL, AZ, WI, OH, TN, and maybe MI and PA. Republicans just do not care about cities and have been pretty clear that they’re not interested in even being free-market YIMBYs. It looks like Illinois will maintain a nominally pro-urban state government for at least a generation longer.
- Vibes. (hAvE yOU SeeN tHe BeAr oN FX yeT????)
Also lol at the Comic Sans in the 6th grade microeconomics graphs. I love ‘em.
Edit: I’m expanding on the vibes thing because I really wasn’t kidding! Indiana’s proximity to Chi has been horrible for our neighborhoods afflicted by gun violence, but one historical benefit they provided is to leave our lakefront mostly free of heavy industry unlike Milwaukee/Cleveland, so it’s just miles and miles of public beaches. NYC is similar, but the bounty of park space throughout the city beats the hell out of almost every other city east of the Plains (shoutout STL Parks, though). That plus good transit, direct flights everywhere, world-class restaurants & bars at every price point, established and experimental theater and music scenes, and affordable everything! As remote work filters down to the middle-class professional, there’s no reason (besides winter) this isn’t a great place to live for someone who’s cost-conscious but has a taste for life in a global city. MY kinda said it: everyone should move here!
Something no one here or on Twitter seems to have brought up is the Chicago area has a very high concentration of nuclear plants during a time of high energy prices/unavailability and climate change. There are far more nuclear plants around Chicago than any other places in the country. I would argue this is a HUGE advantage for Chicago and the surrounding area. Electricity prices actually went down in Chicago this year compared to the rest of country due to a power purchase agreement the state of IL signed with the nuclear plants last fall.
One salient feature in Chicago is sharp differences in the trajectory of neighborhoods (crime, housing prices, amenities). Some are wealthy or stable, and may lose population due to converting multi family to single family residences. A few are in something resembling classic gentrification (Logan Square, Pilsen). You can spend a lot of money on a house, although not by Bay Area standards.
The population loss is primarily African American, and concentrated in south and west side neighborhoods with serious crime problems and decaying housing stock. Even in more affluent black neighborhoods like Bronzeville or Chatham housing prices have not done well since the financial crisis, often to the detriment of homeowners.
Loss of immigration being a large factor is absolutely true.
The tax base death spiral is such a unique feature of America. I know it's deeply embedded in American governance but "there was a negative shock to the furniture industry so now cops' and teachers' pensions might not get paid" seems highly suboptimal.
I think Matt is missing a phenomenon that's happening in places like New York and California, a lot of people are leaving but not the rich. It's the same with Chicago. The South and West side of the cities have seen huge population declines. A lot of Black people, fed up with the persistent violence, have left the city. But we're still growing as a city right now (albeit slowly) because rich people and yuppies want to live everywhere north of the Loop. I've lived in the West Loop for a few years and seen a ton of new buildings going up recently. Demand for apartments is still quite strong in this area, and unless all of the developers are idiots (which I guess is possible), they clearly don't share this concern that Matt does.
Moreover, as others have pointed out, the idea of some mass exodus companies leaving Chicago is misleading. Boeing found a better bribe. Caterpillar is gonna lay off maybe 1000 people here, and the Citadel guy is a world class asshole so much so that he's been in the Tribune nonstop the past month talking about how he has to leave Chicago for Florida because Ken Griffin appears to have a hard-on for Desantis. Moreover, natural churn in corporate HQs is what happens. McDonalds recently moved their HQ to Chicago. Kellogg's is about to move their HQ to Chicago. Pretty sure the city will be ok.
I normally agree with all of Matt's columns but I think this a swing and a miss.
Lots of cross-prevailing factors around these types of questions, the prioritization of which will seem obvious in retrospect but are hard to parse between now:
+ Chicago (and many/most Midwestern metros) are well advantaged for the post-office world as their central business districts (high grade aesthetics/amenities, superior urban fabric and scale, killer transportation connections) are highly conducive to residential redevelopment. Chicago's central business district, for instance, has been one of the fastest growing residential neighborhoods in the US for like a decade
+ The Midwest generally has the largest margin for error/improvement in living conditions vis a vis climate change. Fresh water, relatively cool legacy climate, no sea level risk, etc. An advantage both for internal migration but also with respect to the accommodation of global migration (in a way that Boston or Miami might not be ready for)
+ Superior physical and infrastructure positioning for logistical/industrial redevelopment especially as it pertains to new/emerging industries as well as the Amazon-ization of the consumer economy
+ For Chicago in particular, a huge intra-region premium from having a reliably 'Blue' state level policy regime when it comes to the fight for talent in the interior of the country
To me the biggest problems facing the city (and by corollary, other Midwestern cities) are twofold:
- crime, violence and social order. Given social and economic trends since the 1970s, economic decay has fallen disproportionately on Midwestern cities, even as areas within them have grown/remained highly affluent. The strategy for insulation from these trends in many decades in these metros was brute segregation so as allow affluent residents to more or less pretend the problem wasn't real. With the rise of social media and the loss of momentum of mega-routines (i.e., the daily inflow/outflow of commuters from downtown) there is much more velocity toward intentional and unintentional physical conflict
- terrible political leadership. I think this mainly comes from the voters. In Chicago, at least, the affluent College educated Northsiders have adopted ideological attitudes and self interest platforms that are utterly unworkable for urban level governance ("transactional politics is corrupt!" "No to upzoning!" "What is my alderman's stance on Palestine!") while massive population loss has eroded the potential clout of ethnic/racial power power bases on the South Side. I don't know if the dynamic is the same in other cities, but there are still relatively low pain solutions to things like pension reform (namely, create a much less generous benefit scheme for newly hired workers but keep contributions the same, watch the problem resolve actuarially over time) but no one has the juice to do it.
>>>The tax base shrinks, but legacy pension obligations don’t, and the ratio of taxes to public services becomes worse.<<<
This raises a pet peeve of mine: the finance arrangements of municipal government.
Clearly it makes sense for many different types of government *services* to be administered and delivered at the local level. People in cities and towns have greater knowledge of local conditions, after all.
But *financing* these services via the narrow tax base of an individual municipality doesn't make much sense. I can't imagine we'll ever substantially change the status quo. But if I were Emperor, I'd arrange it so that each state had a single tax code*, and simply remitted to municipalities a fixed share of the overall revenue pot, based on population.
(*You could obviously take it one step further and do this at the national level: a single tax code for the country, which fixed share revenue streams going to the states/municipalities; but that's a different discussion, and wouldn't be feasible under the current constitution).
I get the sentiment, but I think it's half-baked. Citadel isn't "leaving Chicago". Ken Griffin is moving to Miami. The people I know who work at Citadel say that it's for his personal tax reasons but he needed to make a big stink about moving the HQ to justify it. Citadel's large operation needs to remain in Chicago for reasons of inertia but also to be close to the CME.
Boeing moved it's small HQ from Seattle to Chicago in 2003 (I think) to be closer to their main customer, United, and are now moving to be closer to their new main customer, the U.S. military. No one in Chicago really knows anyone who works for Boeing. Same for Caterpillar, which was in the far north suburbs for just a few years and is now moving to be closer to their oil and gas customers in Texas.
On the flip side, Chicago attracts tons of HQs in the consumer products space, especially food and beverages. Heinz, Miller Coors, Kellogs, GE Healthcare all relocated or are relocating to Chicago for the same reason Boeing left. To be closer to their customers and talent. I think what has been observed in this piece is that one of Chicago's strengths is also a weakness: it has a very diverse economy. That's great for preserving wealth, but an economic portfolio like that isn't great for zooming off into the future if you happen to be the seat of a hot industry, like finance or social media tech.
Right now Google is hiring 1000 engineers here and is likely to place them in the Loop. I think there are 29 tower cranes up right now. O'hare has recently become the U.S.'s number international port, by dollar volume (iPhones).
Chicago is second only to NYC in the number of Fortune 5000 companies in the city limits. Fort six years in a row Chicago has been #1 in the U.S. for foreign direct investment. #5 globally, behind London, Paris, Singapore and Amsterdam. Chicago's population is flat or slightly up, but the city has gained over 500,000 college grads in the last 13 years.
Chicago has two top 10 universities. It's at the corner of Main and Main for U.S. rail or highway distribution networks. It has the only commercial airport with six parallel runways (and in seven or eight years, will have the only terminal in the U.S. people will want to fly internationally to). It has excellent transportation infrastructure that couldn't be built for $2T in the U.S. today. And it's got 23 miles of fresh water access.
There are only so many walkable, urbane places in the U.S. As places like Austin and Phoenix become as expensive as Chicago, but lack most of Chicago's legacy assets, it's going to keep vacuuming in recent college grads who want to live in a REAL city but don't want to have to get on a flight to visit family.
As someone who values property for all of Cook County, I think this analysis is making a fundamental mistake that's hard to avoid unless you're very familiar with Chicago: it's essentially two cities. The one north of and including Pilsen (but excluding Austin) is thriving. New homes are being built (but not quickly enough), condos are getting more expensive, skyscrapers are going up, rents are rising, etc. What is primarily the South Side + Austin is caught in a doom spiral for a number of historical reasons, and people are fleeing those areas to the suburbs, Texas, and Georgia. People aren't buying homes there, and the city looks stagnant because that part of it is shrinking - but this also means the north and northwest sides, the west side, the near south side and the loop are growing.
So am I concerned about Chicago's future as a whole? Not particularly. The city is losing its poorest residents and gaining wealthier ones at about an equal clip. Crime is an ongoing issue, but it doesn't seem to be pushing people out of the north side.
What is tragic, though, is that a history of redlining and segregation has basically ended with the city's Black population feeling like it has no future in the city and thus has to leave for greener pastures.
""...the birthrate has continued to decline. In the longer run, we should be doing much more to support parents and children..."
I was talking with a local Ob-Gyn. He told me that in the weeks since Dobbs came down, he has received a spike of demand from young women for tubal ligations. And he feels horrible about this. Because on the one hand, you hate to see young people make any decision that they may come to regret, esp. a decision as momentous as sterilizing yourself. On the other hand, you have to respect people's bodily autonomy, and esp. when a radical religious fundamentalist group has taken over the courts and is denying women's bodily autonomy.
Everyone has a right not to be enslaved and held to involuntary servitude. All the more so do we have a right not to be held to involuntary servitude by any random thug who can drug us or overpower us. And yet the Opus Dei cult has now declared that women have no right to maintain their liberty and autonomy when assaulted and raped. Except by sterilizing themselves preemptively.
Dobbs is going to lead to a lot of involuntary servitude, and many fewer wanted babies. Many women will choose sterilization over the risk of being forced by a rapist -- and their government -- to become breeding machines for little rapist juniors. It's a horrible choice to face. And it's the result of a horrible deprivation of rights.
I wish we would stop talking about Houston’s current zoning and land use policies as being some sort of policy choice everyone made and simply acknowledge that it has yet to consume the available supply of land on which to sprawl, unlike older, more established regions.
Give it 30 more years.
It’s hard to make predictions. I’d just note my slight surprise not a word was said about crime. Is it not a factor at all?
As someone who has been working from home for the last 8 years, I think everyone has this backwards: remote work actually makes city living more attractive. If you're going to spend the overwhelming majority of your waking life at home, you want to live somewhere with lots of restaurants, parks, shops, schools, etc within walking distance. You want to be able to take rapid transit with your kids instead of dealing with carseats and parking. You want to be somewhere with things to do when your out-of-town friends come to visit.
I see people moving into places like Chicago for these reasons.
I realize that you can always nit-pick, but echoing others that you can tell Matt's lack of experience with Chicago here. Chicago is much more segregated than NYC, and for the South Side, Detroitization is severe but also nothing new. Meanwhile, the white and Hispanic parts of Chicago are doing just fine, with rising prices and growth. City-wide statistics hide extreme neighborhood divergence.