The Outstater: Subsidized Downtown Residential

July 11, 2016

by Craig Ladwig

It is time to have a serious talk about subsidized downtown residential living. It’s not what you think it is — a portend of your community’s return to glory.

It is a pyramid scheme operated by a cabal of land speculators, bonding attorneys, tax mavens and other rent-seekers and hangers-on. When it collapses, it will be you the taxpayer, the Class C stockholders in this ill-designed venture, stuck with the losses.

Don’t tell that to Indiana’s “dinks” (double income, no kids). They will shout you down, joined by wealthy but aging empty-nesters, same-sex couples and millennial artists and musicians. All economic children, they desperately want to play, to see their town come to life, to swing, to be with it. They stamp their feet at articles such as this that argue it isn’t realistic, that it isn’t the way their city will progress, that it will (ahem) grow up.

The Indianapolis Star last week joined in the foot-stamping with an article quoting a couple of downtown friends of the young reporter, assorted apartment-building owners, the data manager for a downtown promotional agency and a real-estate developer. Their advice? Things are booming.

Forecasts of the self-interested aside, the Indiana Policy Review Foundation brought an urban policy expert to the state some years ago to assess the supposed need to subsidize downtown residential real estate. He warned that wishing the Baby Boomers would remain forever young and in need of night spots, artistic venues, museums and sports stadiums, all within walking distance of studio apartments, does not make it so. Dr. Sam Staley put his warnings to paper in a book published a few years later:

“Most of the people who locate in these areas are singles, empty-nesters or young childless couple who will move to the suburbs when they begin families. In other words, downtown revitalization efforts, as successful as many seem to be, need to be understood as niches, and not as a general formula for transforming entire cities. . . . The chief accomplishment of some is to offer a more stimulating lunchtime environment for downtown office workers who have commuted in from the suburbs.”

The HGTV show, “Good Bones,” featuring an Indianapolis mother-daughter restoration team, offers a romanticized glimpse of this market in run-down homes transformed into stunning one- and two-bedroom urban remodels for the transitory hip. But Aaron Renn, another native Hoosier and another type of urban-renovation expert, predicts that the good times for Indiana’s downtowns, unlike the TV show, may not be renewed:

“The dirty little secret is that a lot of these places have been growing their youth populations by hoovering up the children of their hinterlands. To the extent that urban population growth is dependent on intrastate migration in these states with declining working-age populations, at some point there are just plain going to be a lot fewer youngster to move to the big city.”

Renn, who studies urban policy for the Manhattan Institute, identifies Indianapolis as the national poster child for this folly. Since 2000, about 95 percent of the metro area’s net migration has come from outstate, he says citing IRS tax return data. About half of the state’s counties are projected to lose population by 2050 with Indiana projected to add only 100,000 15-44 year olds by 2050.

“Even if 100 percent of them, or even more than 100 percent of them, are in Indianapolis, this still implies a fairly modest growth rate,” argues Renn, who sees rural-to-Indy migration already is falling off.

So this serious talk is over — unless, of course, you want to discuss how to improve the economy statewide so there will be enough young Hoosiers moving to the cities to keep the downtown boosters happy, that is, by providing tax and regulatory relief, etc.

Craig Ladwig is editor of the quarterly Indiana Policy Review.

Resources

1. Randall Holcombe and Sam Staley. Smarter Growth: Market-Based Strategies for Land-Use Planning. Greenwood Press, 2001.
2. Amy Bartner. “Who can afford to live in a new Downtown Apartment?” The Indianapolis Star, July 9, 2016.
3. Aaron Renn. “What Happens When There’s Nobody Left to Move to the City?” The Manhattan Institute, June 9, 2016.



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