The coronavirus pandemic has created an unprecedented economic crisis in the United States. The official unemployment rate is reaching levels not seen since the Great Depression, with state level lockdowns (which have now been lifted in part) halting “non-essential” economic activity.
In addition to a massive drop in consumer spending, the large-scale unemployment has resulted in rent and mortgage freezes across the country, putting stress on the banking sector.
America’s cities, which depend on property, sales, and lodging taxes, are in danger of experiencing a major financial crisis. The mayor of Houston recently announced that the city was anticipating a $169 million budget shortfall.
But there are things cities can do to put themselves in a better position to recover when the lockdowns finally end. These are things that probably should have been done years ago, but which many cities were able to avoid doing because their economies were strong.
Changes for the long-term
One of the best things cities can do would be to jump-start the property and construction industries. They are trillion-dollar industries and are among our economy’s largest non-institutional or government employers. According to Daniel McCue of the Harvard Joint Center for Housing Studies, recoveries from recessions are often led by the housing industry because interest rates fall during recessions, helping both developers and people who want to buy homes. McCue wrote that this didn’t happen in 2007-08 because of the high numbers of foreclosed properties, but this is not a phenomenon characterizing the current recession. Cities need to make it easier to build and redevelop properties if they hope to take advantage of this relatively favorable situation.
The government can do this a few different ways.
1. By relaxing zoning rules and simplifying the approvals for new multifamily residential or mixed-use construction. Parking restrictions should also be eliminated, so that more of the new construction can be devoted to housing or retail space. In a post-Covid world, architects may be able to experiment with designing buildings that use, among other technologies, wind or temperature differences to drive ventilation without enclosed central air systems.
2. In addition to simplifying development approvals, cities need to speed up and streamline approvals for permits and alterations. In Cambridge, MA, for example, the permitting for a pizzeria took around a year and involved a dozen public meetings. That was absurd even before the pandemic, and now it’s dithering that cities, workers, and entrepreneurs can ill afford.
3. In some states, such as Massachusetts, state legislatures should reform outdated liquor licensing laws that restrict the number of restaurants offering full bars. Before the pandemic, these outdated regulations were imposing huge barriers to entry to local restaurateurs and poorer minority neighborhoods were disproportionately underserved by restaurants. Massachusetts’ alcohol distribution regulations also impose high costs on entrepreneurs, locking producers, suppliers, retailers, and restaurants into expensive, long-term contracts for the benefit of middlemen.
Helping businesses survive in a Covid-restricted economy
Some cities are taking more active steps. Aspen, CO, for example, is purchasing $50,000 worth of gift cards from local businesses and distributing them to eligible residents, according to US News. While this sort of direct approach may be effective, it can only be done on a small scale.
Soon after the lockdowns began, cities began setting aside money to provide temporary cash assistance to small businesses, something they may need to continue in light of the recent riots.
In order to encourage small businesses in a Covid-restricted economy, cities should
1. Permit landlords to subdivide large stores into smaller shops that can be easily run by one person. These can be cheaper to rent, allowing more flexible business models and reducing startup costs.
2. Move to help retailers take advantage of relatively open streets by allowing them to set up on the street. In addition, cities that restrict food trucks to certain areas should stop doing so. In fact, food trucks can help with open streets and social distancing by parking across streets to block them to traffic.
3. Make more data available to businesses. In Boston, for example, the city’s Planning and Development Agency puts out regular reports on the business climate of the city as a whole, while independent foundations, business groups, and an organization called the Boston Municipal Research Bureau also collect and analyze data. In addition, many neighborhoods have Main Streets Districts—city-funded groups that represent and work with small businesses. These groups hold visioning sessions and research how businesses are doing, how customers view them, what customers want, and where customers do their shopping.
With more data, regulatory reform, and simplification of bureaucracies, America’s cities can weather the storm of the coronavirus pandemic plus any damage from rioting and come back strong.
Matthew Robare is a freelance journalist based in Boston.
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