Eight Takeaways for Philly Urbanists in the State of Center City Report

29Apr
Center City Philadelphia is Pennsylvania's greenest developed area. Let's build more of it.

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Center City District is one of our favorite Philadelphia organizations, and their annual State of Center City report is an urban policy wonk's dream, packed with awesome infographics by Abigail Saggi and the fascinating Philly factoids we crave.

This year's report is no exception, but let's be real here- most of you aren't going to make it through the whole thing, so we went ahead and pulled out the eight themes we think will be of greatest interest to our little corner of the Philly blogosphere. 

1) Proximity is the Philly Service Economy's Best Friend - But We Need to Make Some More of It

It's fashionable to lament that we don't "make things" anymore, but it's really not the problem many people think it is. We actually make more stuff than ever in the US, but the issue is that fewer and fewer human workers are needed to produce the stuff, and that's only going to be more true as time goes on. So we have a service economy. That isn't a bad thing - all it means is that more people have jobs performing face-to-face services for each other - restaurants and yoga classes and dry cleaning and banking and health care services and education and business-to-business services.

And it turns out, cities like Philadelphia are being revalued by the global economy precisely because they provide the crucial proximity that facilitates face-to-face services. The advantage that places like Philadelphia have over the suburbs going forward is that they're better able to serve as the kind of flexible 24/7 live/work/play centers for commerce and entertainment that Millenials and Baby Boomers increasingly want in a place of residence, and employers increasingly want in a place of business (more on that in a bit.)

There's a sort of magical quality to city density, whereby the volume and diversity of people and businesses and money packed into a relatively compact land area facilitates the kind of serendipitous interactions and knowledge spillovers that drive innovation. The other secret to the relationship between density and a strong service economy is just simple division. The more people a given land area has, the greater the number and variety of businesses it can support.

Some people consider density an ugly word, but we all need to make friends with density because it is the key ingredient for Philadelphia's future economic strength. Not every place needs to be as dense as Center City, but as the graphic below shows, the density really drops off outside CCD's Extended Center City zone, so there's a lot of room to densify in moderation.

The blocks around the various neighborhood commercial corridors would all benefit from some more height and some more people (aka customers) living in close proximity to the retail storefronts. Neighborhood political leaders who want to grow the number and variety of neighborhood retailers in their area should be taking direct aim at the 38-foot height limit and other restrictions on mixed-use development on their wider streets and commercial corridors during the zoning remapping process.

2) The Transportation Fundamentals Within Center City Look Bright. 

The 50% car commuting number is a huge bummer, but it appears to be largely a problem of reverse commuting. Just within the city, things are basically going well.

More than 4.1 million passengers passed through Amtrak’s 30th Street Station, while more than 30 million passengers departed and arrived through Philadelphia International Airport. Greater Center City’s bike-friendly topography and expanding bike lane network has attracted large numbers of cyclists in recent years. Philadelphia’s 2.3% bicycle-commuter rate in 2012 ranked first among the nation’s 10 largest cities, higher than New York City’s and Chicago’s. Bicycle traffic over the Schuylkill River bridges during peak hours increased 13.6% from 2012 to 2013.

Our Walkscore numbers look awesome, our transit ridership numbers are moving in the right direction, and our bicycle commuting rates are growing. The problem continues to be that the rate at which public right-of-way gets turned over to transit, bikes, and pedestrians lags far behind Philadelphians' growing preference for greener transportation options in America's alleged Number One Green City. City Council isn't handing over the street space to these modes fast enough, and the most space-intensive, least-efficient transport mode still enjoys an inexplicably privileged status in our transportation politics - even in Center City, where 62% of residents don't own cars. 

 

3) But Where People Are Going is a Problem. Almost 40% of Philadelphians Leave the City for Work Every Day.

The transportation network in the city isn't the problem. It would be easy to plug more people into it every day if Center City started receiving a greater share of the region's job growth. The problem is the ridiculously high rate of reverse commuting. From the report:

Despite a strong concentration of downtown jobs and expanding employment in University City, more than 188,000 Philadelphians (36% of working residents) leave the city each day for work. This number has been increasing by a half percent annually since 2002 and is in part reflective of the low density of jobs outside the city’s two main employment hubs. Philadelphia still lags behind the region and other major U.S. cities in job creation. Since 1970, Washington, Boston, and New York City have added respectively 25.1%, 18.3%, and 14.5% in total jobs, while Philadelphia has 25% fewer jobs than it held in 1970. 

This is an absolute nightmare for the environment, and for our public space politics. 

The core Center City area has a lower carbon footprint than extended Center City, both have a lower carbon footprint than Philadelphia as a whole, and Philadelphia has a lower carbon footprint than its suburbs. Interestingly, the Philly burbs have a higher carbon footprint than Pennsylvania on average.

It isn't because Philadelphians are some virtuous granola-munching hippies. When people live in an attached home that takes up a modest amount of land area and occupies most of the lot, and they walk, bike, or take transit two miles or less to their jobs, they end up with a pretty low carbon footprint. 

But when we send almost 40% of our people out of the city every day to drive to one of the highest emitting areas of the state, their carbon footprints go way up when they are there. They buy gas, they solo-drive to work, they park on a big surface parking lot, they use energy in a big land-hungry suburban office park building with a less efficient HVAC system than any skyscraper, they drive to an environmentally deadly Big Box shopping center for lunch and back, and then they solo-drive home. 

A tax reform package that brought most of the region's office jobs to Center City would slash the region's carbon emissions if it meant that more residents could live and work in the city.

The problem for public space is that the high number of reverse commuters saddles Philadelphia with an absurdly high level of demand for off-peak car storage, creating an incredibly frustrating politics around infill development and street changes that take away curb parking. Here is what reverse commuting numbers look like for each of the Extended Center City neighborhoods. Society Hill and Rittenhouse Square have the highest rates, and Point Breeze and Passyunk Square have the lowest:

When these kinds of percentages of neighborhood residents have to store this many cars overnight, no wonder the parking politics are so nutty. Unlike some city officials, we do not believe this constitutes an acceptable excuse for scandalously underpricing residential parking permits or requiring developers to bundle parking into new multifamily buildings. But it does inspire hope that a tax reform package that proves successful at capturing a greater percentage of the region's office jobs for Center City will weaken some of the political resistance to reducing cars' share of the street space.

4) Our Office Building Construction Isn't Just Pathetic - It's Non-Existent

This really has nothing to do with deindustrialization. As CCD points out, other deindustrialized cities have been adding office jobs and building new office buildings in their core downtowns.

All four cities lost approximately 90% of their 1970 level of manufacturing employment. But Philadelphia’s Northeast peers have done significantly better in adding post-industrial jobs. Most recently, between 2012 and 2013, U.S. job growth was 1.57%; job growth in Philadelphia’s suburbs was 1%; but the rate of growth in the city was just 0.5%, and the city still has 2% fewer jobs than it held in 2001. Philadelphia’s suburbs have also been adding office jobs in the last several years at the same time that Philadelphia has been losing them.

While 
Boston, New York, and Washington, D.C. all have about 30% of their region’s office jobs, Philadelphia only has a 21.2% regional market share. Only leisure and hospitality has been outperforming the suburbs.

It seems clear to us that the blame for this problem lies with our dumb city tax policies, which continue to push office jobs out to the suburbs. Buffalo, Cincinnatti, and Tuczon are building more office space than Center City Philadelphia.

The growth in office employment is all outside the city limits, and our office employment numbers have been on a downward trend path for years. Draw the line of best fit on the graph below. It's sloping down, despite brief bounce-backs between recessions:

Part of the issue is that office rents are pretty flat which, as we'll explain in a very exciting future post, has been incentivizing office-to-residential conversions in Center City. Here's where things stand right now:

Any proposal to do something about this problem is bound to get tagged politically as "trickle down economics" or a hand-out to rich business guys or some such, and we want to tackle that argument head-on.

An office building provides jobs for workers at all skill and wage levels, not just higher-income professionals who work at the tenant businesses. An office skyscraper boom will be a huge win for working class Philadelphians during the construction phase, and also after the buildings are finished and occupied. According to CCD's numbers, fully 30% of the workers in the central business district have at most a high school diploma. Creating the economic conditions favorable to building even more of Center City helps everyone, all up and down the income scale.

Office buildings contain not only the densest concentration of employees but also offer the broadest range of jobs, providing opportunities for entry-level maintenance, building systems mechanics, security, clerical, technical, and high-skilled jobs for residents from throughout the city and across the region [...]

30% of Center City jobs are held by workers who possess no more than a high school diploma; another 29% are held by those with associate’s degrees. On average, 25% of employed residents from every section of Philadelphia work downtown.

5) The Suburbs Are Eating Our Recovery

There is very little we can add to what these charts are saying very clearly: "You, good patriots of Philadelphia: demand tax reform. Get all indignant about it."

 

6) The Apartment Construction Boom is Keeping Rents in Check

We're starting to see the results of the "overbuilding" scenario that some landlords have been darkly warning about, and it is awesome! CCD says "developers brought 2,091 residential units to market in 2013, the most units since the CCD began tracking the data in 1998."

Not so much in 19103 and 19106, but even so, these areas aren't seeing an especially crazy rent inflation lift-off. Still, it must be said that these zipcodes cover fancy neighborhoods like Rittenhouse Square, Fitler Square, Washington Square West, Society Hill, and Old City where you see economically lethal levels of NIMBYism (though Logan Square tends to be an exception.) Where there has been adequate political support for new construction, rents have actually been going down in the larger multi-family buildings. 

This glorious wave of rent cuts hasn't hit sub-50 unit buildings yet, so we'll keep an eye on that, but we are expecting the lesson from the 50+ unit buildings to hold as more new units hit the market. That lesson is that building new housing at a faster rate than household growth should continue to push landlords in older buildings to cut their asking rents to compete with nicer newer buildings.

This will require proactive government policy encouraging a "soft" apartment market, since current projections expect to slightly undershoot demand. New housing construction has been running slightly behind household growth between 2000 and 2013. Supply growth was 1.33% a year vs. household growth of 1.39% between 2000 and 2010, and developers built 3,209 units for a projected 3,738 new households between 2011 and 2013 - a deficit of about 529 apartments. 

The projection for 2013-2017 is that supply and demand will roughly come into balance (5,225 new housing units for 5,231 new households,) which is fine if we're ok with rents staying roughly flat. But if our affordable housing goal is for median market rents to stagnate from about $1000 a month for a one-bedroom down to around $500-600 a month, then we're going to need a lot more new housing construction than that.

7) The Core Population Has Been Getting Richer. The Peripheral Population Has Been Getting Poorer.

This is a trend worth paying attention to. In Extended Center City, the story seems relatively straightforward. The average income in the core has been pushing upward as more highly-paid professionals have chosen to live in the city. There's been a 13% increase in Center City's population since 2000, and Millenials make up about 30% of the population there now - the largest cohort!

But we've also been seeing regional, national, and international migration of poorer people to some of the poorer Census tracts in the city. It's the broader national trend of wages stagnating on the low end of the wage scale, and also the suburbanization of poverty scenario that Brookings has been flagging.

 

At the federal and state level, these groups need more public assistance, whether that's extending the Earned Income Tax Credit to households without kids, or a higher minimum wage, or bringing back general cash assistance, or restoring SNAP cuts. At the city level, there's less money and less scope for tax and transfer policies, and we have to focus more on the supply side of the equation - bringing down housing and transportation costs. 

As I argued at Next City, Philly doesn't really have a housing affordability problem, but it does have a transportation affordability problem outside the extended Center City area. Here's an alarming chart from the Center for Neighborhood Technology showing that only 38% of Philadelphia households have transportation costs below 15% of income - CNT's threshold of affordability.

The single most effective way city government can lower the cost of living for the working poor in peripheral neighborhoods is to cut transportation user fees, improve transit connections, and boost the frequency of service between peripheral neighborhoods and fastest growing areas of the city core. This will give more people a genuine choice to get rid of their cars if they want to, without sacrificing mobility.

8) Stop Making Excuses, City Politicians

The Negadelphian take on this report's findings is that Center City's economy is showing signs of weakness, but that's not really the takeaway at all. Center City has the skeleton for a very strong economic recovery. The atrophy we are observing in some of its component parts is a direct result of outdated, inefficient public policies - policies that can mostly be fixed at the city level if political leaders are willing to adopt some of the creative reforms that exist in spades all around them.

Last Updated: Tuesday, 29 April 2014 @ 15.19
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jongeeting's picture Jon Geeting About the Author:

Jon Geeting is a Philadelphia-based freelance journalist and policy researcher. His writing also appears at Next City, Primary Colors, and Keystone Politics, where he covers politics and elections, land use and transportation, and urban economic policy. He also writes a monthly Political Machine column at Philly City Paper.