The greatness and durability of most civilizations has been finally determined by how they have responded to challenges from within. Ours will be no exception.
National Commission on the Causes and Prevention of Violence, 19691
Much of our Nation is enjoying a period of economic prosperity unseen, and indeed unheard of, in a generation. Ours is one of the longest periods of peacetime economic expansion America's history. Nationally, 18 million new jobs have been created in the last 6 years, unemployment is at a 40-year low,2 productivity and consumer confidence are high, interest rates are low, and homeownership is higher than ever before. Much of this progress has been shared by city and suburb, and by whites as well as racial and ethnic minority groups.
But there is more to the story. This study is part of a series on "Places Left Behind in the New Economy," in which the U.S. Department of Housing and Urban Development (HUD) reports on the state of communities still struggling in the slow lane of the Nation's remarkable economic recovery. This report focuses on a rarely seen dimension of that expansion-central cities likely to face long-term troubles if they are not able to address their core problems now, during the current boom. A future study will take up a second important task: identifying the economic potential of the untapped markets in many of our struggling communities.
President Clinton and Vice President Gore's economic policies have had a tremendously positive impact on many American communities and generated significant results. In addition to those identified above, we are seeing the fastest and longest real wage growth in two decades, a 44 percent drop in welfare caseloads since January 1993, a 10 percent drop in the overall rate of central city poverty, the biggest drops in poverty rates of African-Americans and Hispanics in more than two decades, an off-the-charts stock market, and a record homeownership rate thanks to 7.8 million new homeowners. Community policing, youth opportunity areas, urban job creation, public housing revitalization, school reform and construction, and other vital initiatives have helped make many communities more prosperous overall. Cities, in fact, are fiscally healthier than they have been in a decade, with many downtowns enjoying a renaissance, a steady drop in urban crime and unemployment rates, and a majority of city dwellers owning their own homes-for the first time in history.
Early this year, updating our State of the Cities 1998, HUD reported the following specific findings on the many positive trends enhancing economic vitality and quality of life in our Nation's communities:
But as HUD reported in last year's State of the Cities, there are two sides to America's remarkable economic boom. With so many positive indicators hitting record highs, many of our people, and too many of our communities, are more vulnerable than ever before.
There are more millionaires than ever, for example, but America is also home to 600,000 people who have no home on a typical night. As HUD reported in Rental Housing Assistance: The Crisis Continues (1998), the number of "worst case housing needs"-renters who earn less than 50 percent of area median income, pay more than 50 percent of that meager income to rent, and receive no housing assistance although they are eligible for it-is at a record high of 5.3 million households (about 12.5 million persons). Families in the transition from welfare to work are hit especially hard by this shortage of housing assistance, since housing tends to be their greatest financial burden.
Recently, HUD reported in Waiting in Vain: An Update on America's Housing Crisis (1999) that the poorest renters are waiting longer for fewer affordable housing units and that already lengthy waiting times for assistance increased substantially between 1996 and 1998-as the economic recovery surged forward. Waiting times for public housing are now a staggering 8 years in New York City, 6 years in Oakland, and 5 years in the Nation's Capital. Waiting times for housing vouchers (rental subsidies) have also increased-to 10 years in Los Angeles and Newark, 7 years in Houston, and 5 years in Memphis and Chicago. The typical waiting list studied by HUD increased 10-25 percent in the last year alone.
Although the forces driving these trends are complex and vary widely at the local level, the big picture is remarkably simple: rents are rising faster than income for those 20 percent of America's households with the lowest incomes; the dramatic loss of affordable housing continues-with a stunning drop of 1.3 million units (19 percent) from 1996 to 1998; and Federal support to expand affordable housing has declined over the last two decades. With nowhere to turn, and with so many families in the transition from welfare to work burdened with housing as their greatest expense, millions of the most vulnerable American families seem to be waiting in vain.
Furthermore, a "jobs gap" may loom for many cities with large welfare populations facing time limits on assistance. As HUD indicated in last year's State of the Cities, in the 74 principal urban counties for which welfare caseload and job growth forecasts exist, the number of current welfare recipients who will face time limits on assistance-and therefore need jobs over the next 5 years-could exceed the growth in low-skilled jobs by 353,000.3 While poverty has dropped nationwide, and dropped 2 percent in central cities over the six years of the recovery, it is still much higher in central cities (18.8 percent) than in suburbs (9 percent). Poverty is also high among central city Hispanics (31.8 percent) and African-Americans (27.8 percent), when compared to whites (9.6 percent) who live in central cities.
Thirty years ago, with reports like that of the Kerner Commission4 on the big-city riots of the 1960s, America focused on the striking patterns of urban disinvestment and white flight to the suburbs that were creating two societies, "separate and unequal." The divisions were defined by race, space, and class, and our perceptions of the old urban crisis were colored by the woes of a handful of places that came to symbolize the decay of cities-Newark, the South Bronx, Watts, Chicago, Detroit, and elsewhere. The Kerner Report urged metropolitan solutions to inequality-regional solutions that we have yet to embrace as a Nation.
Compounding the changes of the 1950s and 1960s, when first rushed to the suburbs, the 1970s, 1980s, and early 1990s saw the dramatic "de-industrialization" of our economy. Jobs moved from central cities to the suburbs-sometimes following the consumers and workers already living there. Business capital also migrated overseas in search of lower labor and other costs. Cities like Gary, Indiana and Flint, Michigan reeled under the loss of jobs, private investment, tax base, and then people. Many of their residents chose to move away, and, given the scarcity of economic opportunity, few new in-migrants replaced them.
Escaping the high inflation rates and enormous budget deficits of the 1970s and 1980s, America has, in the last six years, enjoyed record economic growth and fiscal health, including the first Federal budget surpluses in three decades. Many communities have revitalized or adapted their economic base, mobilizing new skills in the workforce, retaining or recruiting new forms of manufacturing, and building clusters around information and services. The knowledge economy has emerged.
Other places have not fared so well. This is a report about the new urban challenge-about cities in the "slow lane" of the comeback, places not yet sharing adequately in the boom in investment and productivity that is sending so many economic indicators off the charts. This report is about places like Gary, Indiana, which lost much of its high-wage industrial job base and a quarter of its population between 1980 and 1996. There, poverty was estimated at a staggering 29.8 percent in 1995. And despite a significant drop since the pre-recovery rate of 17 percent in 1992, Gary's unemployment rate of 8.2 percent in 1998 was still almost twice the Nation's rate last year.
These communities represent untapped markets for investment, especially as other markets become "tapped out"-the resurgence of urban retail as suburban markets get saturated is a case in point, as a prominent story in the Washington Post recently highlighted.5 In a report on untapped markets later this year, HUD will focus on those huge opportunities in our domestic emerging markets.
How is the economic health of America's cities at the end of this century?To get beyond the anecdotal evidence, we examined the 539 U.S. central cities (the principal cities of our metropolitan areas) against three important indicators of economic distress-unemployment, population change, and poverty indicators that highlight those central cities that continue to trail the national economy in significant ways.6
In an economy changing as rapidly and expanding as remarkably as ours is, struggling cities are not a single, homogeneous group. To assemble this statistical portrait of the new, multi-faceted urban challenge, HUD's Office of Policy Development and Research posed three distinct questions about the Nation's 539 central cities:
Using these data, we identified central cities in trouble, including a special group of "doubly burdened cities" (Question #4 above) where:
Limitations. Focusing on the 539 central cities of metropolitan statistical areas (MSAs) allowed us to examine long-run trends in population and poverty alongside the latest local data on unemployment-a key indicator of the recovery's impact, or lack of the same, on particular communities. Also, central cities tend to be the most distressed parts of the larger regional economies that surround our core cities. On the other hand, relying on central cities means that, in some metro areas, other important cities will not be studied. In the Los Angeles MSA, for example, important (and distressed) cities like Compton are excluded from this analysis. Later this year, HUD's State of the Cities 1999 will address trends in a wider array of cities and metropolitan regions.
When the census and labor data that answer our key questions were analyzed, a striking portrait emerged. First, we confirmed that most central cities are doing quite well. Still, a significant number, and a regionally diverse array, of central cities face one or more of the challenges reflected in population loss, high poverty, or unemployment. Furthermore, a select group of doubly burdened cities faces several of these challenges. In addition, central cities whose populations shrunk substantially over the last 16 years tend to be places struggling with high unemployment and poverty-many workers and consumers have migrated away to the job magnet cities. Finally, while a significant number of doubly burdened cities are concentrated in the formerly industrial "rust belt" areas of the Northeast and Midwest, or in part of the South with long-documented economic woes (such as Delta cities) a number of cities in the Southwest and West also face multiple challenges if they are to compete in a changing economy. Population boomers like McAllen, Texas and Fresno, California are burdened with high poverty and unemployment despite their explosive growth. Population losers such as Gary, Indiana and Trenton, New Jersey have suffered a demographic implosion-and with that, face quite different challenges. Our key findings are outlined and discussed below.