Much of the recent hullabaloo over municipal finance has focused on large cities. Detroit’s bankruptcy largest peer is Birmingham-Jefferson County, Alabama’s financial failure last year. These large-scale crises often have many causes, both in the short and long runs. The contemporary urban fiscal crisis is nothing new; it is the result of decades evolution. Some cities transitioned into the global economy swimmingly, while others remained relics stuck in the industrial mud.
As time passes and cities regain their footing, the role of suburbs will change as well. Suburbs seem content on retaining their position as peripheral communities on the edges of larger cities. As cities reemerge into the global economy from the Great Recession, it will undoubtedly come at some cost to their smaller neighbors. There is ample medicine available to legacy cities feeling the pinch. Unfortunately, these solutions often undercut the key selling points of suburbs. The next crisis for municipalities is not for large cities; it is for suburbs. The suburban crisis is coming, and it is going to hurt when it arrives.
The prewar suburb
Before World War II, suburbs had developed on the periphery of many American cities. These communities often existed along railroads just outside of the central city’s jurisdiction. De facto gateways between the idealized frontier and the festering urban wounds in the industrial city (poverty, labor unrest, pollution, etc.), suburbs became an escape pod for the upper class. Mansions once common in nicer urban corridors rose in these primarily residential communities.
As time passed, light rail streetcars offered similar tastes of suburban life to middle and working class residents. These communities started a sprawling growth pattern. Middle class residents seeking an upper class lifestyle moved into the neighborhood. Unfortunately, these smaller communities had neither the resources (unlike their wealthier railroad suburban counterparts) or the sheer numbers (unlike their urban counterparts) to build key infrastructure – e.g. water treatment facilities. As a result, cities often annexed these middle-class suburbs in a win-win; cities increased their tax base-per capita while the middle class enjoyed new amenities.
Unfortunately, annexation also brought along several of the old sins in the city: corruption, redistribution, and inadequate services. Annexed households would remain stable until developers moved to the next middle class suburb – including the newest wave of (miniature) amenities found in the posh railroad suburbs. Eventually, tastes would shift to the new construction, allowing working class families to move into the vacated neighborhoods.
This pattern occurred rather slowly before World War II and was often dependent heavy and light rail connections.
The postwar suburb
The contemporary suburb is a steroid-infused streetcar suburb. Two streams of federal funds led to a suburban boom: mortgage subsidies and interstate highways.
The Federal Housing Administration pumped billions of dollars into mortgage subsidies – earmarked for white families to purchase new homes in non-blighted neighborhoods. According to definitions in use from the 1930s through the 1970s, blight roughly equates to the presence of any non-white or working class citizens. Suburbs rapidly grew in the 1950s, but growth was no longer constrained railroad proximity.
Upon the onset of the Cold War, the United States poured billions into an automobile-friendly transportation network. This expenditure provided a viable alternative to mass transit. Suburban growth patterns got off of the train and developed around limited-access highways near central cities. With many new options, the cycle away from near-central city suburbs accelerated to next-wave suburbs. The sprawl cycle shifted gears, and the postwar suburban community spread across the countryside.
Two non-urban policies created a perfect environment for suburbanization. White flight was the (un?)intended consequence.
Metropolitan Symbiosis and Suburban Parasites?
Suburbanization was originally a boon for industrial cities. Each new house created demand for durable goods (dishwasher, laundry, etc) and an automobile — staples of the central city’s economy. This demand profited central city businesses and created jobs for the working class.
Over time, postwar suburbs transitioned from bedroom communities to commercial centers. If thousands of wealthy of households live in a shopping-free zone, then it makes sense to invest nearby to attract that business.
If residential development marked the 1950s, then the rise of the shopping mall is the hallmark of the 1960s. Instead of suburban families making the trek to the downtown department stores, suburban malls provided an alternative. These cathedrals of commerce housed not only anchor retailers (franchises of department stores) but smaller, tchotchke shops often found in downtown districts.
With the ability to completely ignore the city, suburbanites enjoyed the cocoons by shopping at malls and abandoning downtown districts. The suburban-urban competition had finally begun.
As suburbs matured into small, quasi-independent cities themselves, they began to compete with central cities for jobs and taxdollars. By the 1970s, central cities were already enduring the urban crisis (the failure/scuttling of 1960s social policy); additional competition from suburbs nearly broke their backs.
Keeping up with the Joneses
Eventually, suburbs realized competition among themselves. Suburban competition is often observed by “foot-voting”, where people’s decisions of where to live is their voice.
Suburbs often feature relatively crime-free communities, strong public education, and the image of (white, upper-middle class) Americana. Suburbs (and suburban independent authorities) pour millions into keeping up this image. Education bonds alone carry millions of dollars of debt in a given suburb. Without the newest and trickiest educational gimmick, a school might not look as nice as their neighboring institutions. The worst case scenario is an outbound migration of wealthy families (and, with less demand, an influx of poorer families with less resources for the school.)
This results in a rat race which is all about maintaining the quality of life for upper- and middle-class residents. They are the lifeblood of suburbia. Without these households, the shopping, jobs, and taxdollars evaporate — leading suburbs to face the same financial problems central cities face. Granted, these communities are less equipped to handle large fiscal meltdowns compared to larger central cities.
The impending, perfect storm
Many postwar suburbs are on the brink of crisis. This does not include the successful drawbridge communities of old established wealth or boomburgs – rapidly growing suburbs with a diverse economic and citizen base.
The Great Recession and housing bubble crippled residential housing prices. Although this depreciation has harmed central cities, residential-heavy suburbs have borne the brunt of this problem. Lower property values have placed suburban leaders in a tough position: either raise property taxes or cut their budgets. This is a lose-lose proposition; suburbs either become more expensive to live in — reducing their price advantage compared to cities — or they reduce the quality of services — becoming more like service-strapped cities.
Making matters even worse, the housing stock in suburbs often includes relatively inexpensive balloon frame houses. This construction technique enables rapid construction, but as houses “settle” many flaws emerge. A fairly common suburban experience involves replacing nearly every piece of infrastructure besides the studs and foundation within three decades. New siding, windows, roofs, heating, cooling, and so on all provide mounting internal costs on suburban residents. These increased costs eventually echo through to decreased home prices — worsening the economic problem.
Further, many suburbs organized residential construction through common-interest districts or homeowners associations. Developers often added infrastructure to their neighborhood plans and placed non-profit organizations in charge of upkeep. In many cases, crudely elected homeowners association leadership is not competent enough to maintain thousands of dollars of infrastructure. Eventually, the costs of mismanagement rear their ugly head — forcing assessments on homeowners. Similar to the problems homeowners face, stressed associations can depreciate suburban land values.
The methods by which suburbs were built have directly led to a depreciation in suburban housing stock; in turn, reduced property tax revenues have stressed the suburban municipal budget into either higher taxes or lesser amenities.
Suburban prestige often relies on the perceived quality of life advantage in quasi-urban life. Nearly every major central city’s long term plan involves carving out high quality of life enclaves near their central business district. Over the last two decades, cities have poured billions into downtown residential projects — often following a new urbanist approach.
These programs usually result in fortified, gentrified spaces that can attract young, educated professionals that drive the contemporary economy. By attracting these residents, cities are reclaiming the economic movers-and-shakers from the suburbs. In short the central cities’ gain is the suburbs’ loss. Central cities are pouring resources into keeping their new residents, through gerrymandered and gimmicked public schools (that “happen to” feature disproportionately upper class students) and micro-districts aimed at pleasing locals.
Instead of the twentieth century model where the nation’s best and brightest settled in the suburbs, a new competition has emerged where cities can compete with the suburban way of life. In the coming years, one can expect a less wealthy suburban ring and pockets of wealthier central cities. Less wealth will in turn injure the suburban municipal budget.
In total, many American suburbs appear headed toward a viscous cycle. Lower tax revenues will lead to less services. Less suburban services will empower the emerging central city alternative. As more upper class folks move into the central cities, suburbs will receive relatively less revenues. Rinse and repeat for a few more years and the suburbs will have to face their impending crisis.
Many suburbs will likely struggle to piece together solvent budgets. Instead of neighborhoods failing in central cities, entire suburbs will crash into financial difficulties. The scale is much worse than anything we have seen. While some suburbs will likely face bankruptcy or a similarly painful avenue, other communities (including central cities) will prosper at their neighbors’ loss. Fiscal judgement day is coming, and it is going to hurt far more than Detroit.