Page 18 - Delaware Lawyer - Summer 2021

FEATURE | DELAWARE LIFE POST-COVID
The Future of Cities
Although it is virtually impossible to forecast the future that flows from the unprecedented effects of the pandemic in the context of rapidly changing uses of digital technology, it is instructive to examine the characteristics, conse- quences and early evidence of three al- ternative plausible scenarios: declining urban density; return to a new normal; and policy- and tech-savvy cities ex- panding their reach.
Scenario 1: Declining Urban Density
The scenario of declining density is one that many people seem to expect. The basic economic forces that drive this scenario are:
• Face-to-face interaction is less valuable.
• Cities are perceived as risky from a health perspective.
• Agglomeration benefits are eroded by better communication technology.
• Lower-cost, more decentralized locations successfully compete for people and firms.
The prices of downtown commer- cial properties in dense, transit-oriented cities have fallen during the pandemic, particularly in New York, San Francisco and Philadelphia, where patrons largely abandoned public transit. These cities have seen increases in economic activity and auto travel, but they are not well- designed for cars.
If the underlying value, derived from face-to-face interaction, of a city loca- tion has fallen, cities will shrink. The long-run productivity and viability of remote social interaction is, however, far from proven.
Declining density would have nega- tive aggregate economic impacts if the lower agglomeration economies are not fully offset by virtual meeting technolo- gies. Because agglomeration benefits will be further reduced as density de- clines, there is a potential of a negative vicious cycle. Several adverse outcomes
would be associated with this scenario:
• Diminished value of existing
public infrastructure
• Social dislocation in cities, as oc-
curred in U.S. cities from 1960
to 1980
• Diminished urban land value
and built asset value, including
stranded assets
• Substantial need for new infra-
structure investment in expand-
ing locations
• Greater congestion for a given
level of economic activity as tran-
sit is underutilized
• Environmental and climate chal-
lenges
• Competition for remote work
becomes global for many, and U.S. residents may find them- selves in direct competition with low-wage labor across the globe.
On the positive side, low-density areas may see their value increase. This outcome depends on 1) the loss associ- ated with stranded assets, plus the costs of new infrastructure do not offset the gain in value from increasing demand driven by urban decentralization and 2) whether (remote) competition in the global labor market doesn’t depress wages.
Scenario 2: Return to ‘Normal’
The expression of the “new normal” is common in discussions of post-pan- demic America. First, note that cities are constantly evolving — there is no “normal” per se, but for the purposes of this scenario, the “new normal” is one with substantial adjustments en- abled by the new digital technologies. The virtual technologies increase flex- ibility of in-the-workplace and at-home arrangements, but these gains are offset by the declining agglomeration econo- mies resulting from declining density and new infrastructure costs. Further, this scenario does not envision the pos- sibility of greater global competition in the labor market.
Based on limited and early evidence, several patterns have emerged:
• Cities have lost population, but not dramatically.
• Economic activity is recovering as vaccination reduces risk and fear.
• Auto travel is increasingly domi- nant as Vehicle Miles Traveled are increasing and transit use re- mains depressed.
• The competitiveness of dense cit- ies is somewhat eroded by the de- cline of transit.
Currently, the evidence suggests that a “new normal” may come to pass.
The return to the “new normal” is a middle-of-the-road scenario that likely will have middle-of-the-road conse- quences. Market adjustments that will probably occur will increase the likeli- hood that this prediction will best rep- resent the future outcome. Some chal- lenges arise in this case that will require deft and insightful public policy to prevent potential downsides from oc- curring, specifically in preserving high quality of life in urban areas, investing in new infrastructure to support mod- erate changes in physical location, and supporting innovations in the transit industry to accommodate the needs of households with more flexible travel patterns. Overall, this scenario implies:
• Less dense areas do a little better • Declining values of existing pub-
lic and private urban assets
• More congestion and greater in-
frastructure need
• More climate-related challenges • Economic growth is a little worse
or a little better, depending on the extent of agglomeration loss, infrastructure and congestion costs, and climate issues.
Successful management of the “new normal” scenario may be the best out- come for the State of Delaware. The urban decline scenario poses far greater threats to Delaware, as Wilmington will
16 DELAWARE LAWYER SUMMER 2021