The economic expansion is now a full nine years old, and we are less than a year from the longest period of uninterrupted economic growth in U.S. history.
This moment of good economic news holds some insight for many cities and towns in Indiana. It is, quite simply, if your community isn’t thriving, your problems are far deeper than you suppose. Let me explain.
Across the Midwest, few metropolitan areas of more than a half million residents have lost population in this century. In contrast, 24 out of 56 Midwestern metropolitan areas with less than a half million residents have lost population. Since 2000, the big cities with more than half million residents grew by 9.8 percent, while smaller cities grew by an average of less than 2 percent.
The list of distressed places is a roll call of Indiana cities. Anderson, Evansville, Muncie, Michigan City, Hammond, Gary, LaPorte, Terre Haute and Kokomo are all losing population.
The situation is even more dire in smaller cities and towns across the state. The challenge of population loss is pushing us ever closer to a reckoning about priorities in the urban places of the Midwest. One of the chief issues in this reckoning will be the prioritization of communities within cities. Housing is an issue that ties much of this together.
I will address housing issues in several columns in the coming months. In every shrinking city there is an excess supply of housing. In every city mentioned above, at least one in seven homes is vacant or abandoned. In some neighborhoods, nearly half of homes are vacant. These places collect few tax dollars but consume vast amounts of municipal spending.
These excess properties crush housing values across a county and can push a town into a downward spiral of property valuations from which there is no observable bottom. Five decades of decline offers residents of many of these communities nothing but “cheap rent.”
Unfortunately, almost all housing support for distressed cities targets the very worst neighborhoods. For most of them, it is too late. It is almost a certainty that no one will ever again inhabit most of the surplus housing in Midwestern cities. It is time for a more cost-effective triage of public spending. For declining cities, the emphasis must turn to saving middle class communities.
Across the Midwest, the 1940s through 1970s saw the emergence of many middle class neighborhoods that were rich in private amenities like sidewalks, parks and pools. Local schools often served as a critical public amenity, providing playgrounds and open greenspace. These places are not always popular with urbanists, but they generate much of the tax revenue for cities, placing few demands on public services.
Today, many of these middle class communities are beginning to fray with population decline. While the homes themselves remain quite viable, declining school-age population has cost many of them their local elementary schools. In many places, private infrastructure, such as sidewalks, parks and pools are in disrepair, and public infrastructure like parks and trails is scarce. These places risk precipitous decline without some infrastructure assistance.
The political environment for supporting middle class communities is tough. Poor places have significant needs, and newer, more affluent communities often capture the attention of local elected officials. Therefore, it takes some political courage to invest public dollars in places where the decline is not always yet visible. Yet, these are the places where small investments yield big rewards.
Older middle class neighborhoods pay huge taxes and consume few public services. Even small investments in trails, parks, pools and the like can sustain or increase the net tax revenue from these places by increasing home value. There is an abundance of high-quality studies reporting large (5-15 percent) increases in home values from key local amenities of these types.
Viable middle class communities are the source of tax dollars and population across the Midwest. As voters, we should help our elected officials better appreciate these places, and help them take the risk of sustaining our middle class neighborhoods through the 21st century. For cities that neglect these places, the future prospects are nothing but dismal.
Michael J. Hicks is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. He can be reached at email@example.com.