Arrogance and Complacency Threaten America’s Superstar Cities

(Bloomberg Opinion) -- America's leading cities have become citadels of affluence, enjoying clustering effects as the most talented people from around the world flock to New York, San Francisco and Los Angeles, where they exchange ideas, start companies and create enormous wealth. These same cites, though, have become complacent and arrogant under the leadership of politicians who assume that future prosperity is inevitable even amid their mismanagement and unwillingness to make needed changes that might incur the wrath of entrenched interests.

This can be seen in the decades of inadequate construction of housing and transit, which has led to exorbitant rents, snarled traffic and unreliable, and slow transit systems. The cities where predominantly young, well-educated and wealthy people have moved are victims of their own success.

The common rejoinder to this is that all will be solved if only these cities build more housing and transit. Most of my colleagues and I would agree with those sentiments. But in the same way that cities such as Memphis, Tennessee, and Dayton, Ohio, may struggle to attract the kinds of elites who have chosen coastal cities, we should question whether high-cost cities have the ability to build more housing or upgrade their transit systems at an acceptable cost.

Rising living costs have led to a hollowing out of the middle class in superstar cities, transforming them into places occupied by the wealthy and the underclass. This pattern isn't particularly new – this article on San Francisco's dysfunctional governance from 2009 made the same point before the city was transformed by the latest influx of tech money. 

A little-explored dynamic is whether soaring urban prosperity makes local government less responsive, particularly when it comes to public services. In a city such as San Francisco, the wealthy are often satisfied with how things are going and don't use many public services; many immigrants can't vote; the poor tend not to vote; and young tech workers might feel like they're merely passing through and don't take the time to get involved with local government. As a result, you end up with a deficient public transit system with average speeds of less than 10 miles per hour. Even for those newcomers interested in getting involved, the high cost of participation is daunting, especially when one lacks social capital with local elected officials. Activists might scream at meetings but they lack the numbers to bring about change.

Although increasing inequality, rising housing costs and dysfunctional public services in coastal cities might be nothing new, there's both a desperation and overconfidence in the local politics now. The desperation is borne of the public's realization that current trends are unsustainable and something has to be done. But perhaps because changing zoning laws is so politically difficult, as is reducing the cost of infrastructure construction, the political solutions being proposed are mostly about rationing access to the city.

This sort of zero-sum approach, masquerading as progressiveness, explains many of the political developments at the local level: Rent control rather than zoning reform. Banning scooters in New York and capping the number of passenger-less vehicles for companies like Uber and Lyft in Manhattan. Chasing Amazon out of Queens because of the gentrification it might cause.

The overconfidence of political leaders surely stems from the belief that cities are so inherently desirable that no amount of bad governance can chase off talent or blunt economic vitality.

This state of affairs isn't working for enough of the residents of those cities. If New York and San Francisco can't produce enough housing or transportation infrastructure to meet demand, then the living standards of everyone other than the rich will be degraded. If that's the goal, then maybe some of the misguided progressive legislation makes sense. And it might explain the flight of people between the ages of 25 and 39 from large cities. There are presumably plenty of other workers who would prefer to live in lower-cost cities but are worried that those places lack the economic opportunities of America's coastal citadels.

This is why signs that America's largest cities are shrinking is leading to more opportunities across the national landscape. And if jobs and talent are more spread out, that probably would be good for everyone.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.

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