Urban Attraction

John Collins moved from New York to Norfolk, Virginia, this year to start a small business. “Apartments, office space, taxes, insurance all cost 40 to 50 percent less here than they would in New York,” says Collins. “I can have my own car, there are more outdoor activities, and there’s an easygoing quality of living here in the South.”

During New York’s recent boom, between 1995 and 2000, 1.37 million city residents like Collins moved someplace else in the United States. In the same time period, just 825,904 residents moved into New York from elsewhere in the country-a net loss of 545,269 residents. Only New York’s incredible success attracting immigrants mitigated this loss.

An overpowering current, in the eyes of businessman Tory Gattis, is drawing more and more people out of expensive cities like New York to places with a lower cost of living. To get a better handle on this trend, Gattis has devised a new index, along the lines of Richard Florida’s celebrated “creativity index,” that ranks cities based on the “Advancement and Amenity Dollars” (AA$) they offer. The AA$ benchmark calculates the amount of extra money that an average city resident has after subtracting essential costs like housing, healthcare, and food. Gattis’s hometown of Houston tops his ranking of the 29 largest metro areas in the United States, followed by Baltimore, Denver, Atlanta, and Dallas. New York finishes 28th, while Richard Florida’s top pick-San Francisco-finishes at the very bottom.

Gattis believes that the AA$ index quantifies the degree to which a city’s residents can advance their education and careers by taking risks, such as starting a business or quitting a job to go back to school. If you have to keep paying $2,000 per month in rent for a Manhattan apartment, Gattis argues, your opportunity to take such risks will be limited. But if you have already paid off the mortgage on a $125,000 house in a Houston suburb, you have much more freedom.

Gattis further argues that this calculation can gauge a city’s “tax headroom"-the extent to which local government can increase taxes before taxpayers revolt. While tax increases themselves reduce the level of AA$ in any city, they are disproportionately burdensome in a city like New York, where people already strain to pay rent each month, as compared to a city like Houston. Thus, a city with higher AA$ will have a greater ability to raise taxes, if needed to improve schools, to lure businesses, or for creative public ventures that will create a “hip” environment and attract Richard Florida’s coveted young professionals.

“More AA$ in the market,” Gattis says, “stimulates more companies, non-profits, and government agencies to offer more advancement and amenity options to improve the lives of individual citizens. More restaurants and museums form, more continuing education schools open, and more performing arts groups are supported.”

But most people do not think of Houston, Baltimore, or Dallas as the cultural meccas that Gattis’s theory would predict. Perhaps the cultural establishments on both coasts underestimate these cities-Houston, after all, did rank seventh on Florida’s creativity index. Still, many people leaving New York miss the hefty public amenities that the city’s high taxes help support.

Kathleen Pierce decided to leave New York for graduate school at the University of North Carolina largely because of what one might term greater AA$. She thought New York cost too much for a poor graduate student, noting that she could barely afford to live there even when working full-time. But she perceives a trade-off of amenities in leaving New York for Chapel Hill. “You can’t rely on [public transportation in Chapel Hill] for anything outside of the hours of 7 a.m. to 7 p.m., Monday to Friday,” Pierce says. “Eventually, I will have to buy a car.”

John Collins, the entrepreneur who moved from New York to Norfolk, notes that there are fewer entertainment options in Norfolk-which, though cheap, ranks next to last on Florida’s creativity index-and fewer young people. And he finds that people seem “less informed on current events, both local and national.”

Pierce has had a similar experience. “Although Chapel Hill isn’t really provincial, it’s far from cosmopolitan, and that’s reflected in the people,” she says. “There’s a lack of drive here. Everyone in New York is looking for the next, new, better thing, and that energy is incredible.”

It may be that the amenities that New York offers-putting many people in close proximity to massive public infrastructure-create a unique social and cultural environment that other cities could not replicate unless they were willing to impose similarly high taxes. Why else would the country’s three largest cities-New York, Los Angeles, and Chicago-all rank relatively low on the AA$ ranking? Gattis cautiously surmises that past a certain size a city may simply get more expensive as it grows.

Portland, Oregon, demonstrates that city governments that work hard to provide great public amenities often raise the cost of living in doing so. In an effort to tame land-devouring sprawl, the Oregon legislature passed a landmark urban growth boundary law in 1973, requiring each municipality to draw a perimeter beyond which there could be no urbanization. Portland established its boundary in 1979. The city’s population exploded as it gained a reputation for being a livable city with nature close by-a reputation largely sustained by the growth boundary. But as the population swelled, competition for the same houses within the growth boundary caused prices to soar.

One can think of the difference in costs and the attendant reduction in AA$ between New York and Houston, Portland and Baltimore, as the relative value that people ascribe to such places. If so many people choose to live in a place where they have less extra cash, something about these places must make living in them worthwhile. Or, conversely, one might conclude that Houstonians need the increased AA$ to convince them to keep living there.

But framing city’s choices as a simple trade-off between AA$ and cultural amenities overlooks the complexity of cost-of-living issues. On the one hand, if residents of high AA$ cities spend the bulk of their extra cash on projects that neither make the city more attractive nor create more jobs, then the city probably will not flourish. Just because people in Houston have more cash at hand does not mean they will use those dollars to create the jobs and community amenities needed to attract more residents.

On the other hand, New York and Portland’s AA$ measures need not be so high: some of the extra cost of living in both cities comes from unnecessary extra expenses. For example, Michael Schill, a New York University professor, has extensively documented how New York’s complex building code adds significant cost to housing while providing few discernible benefits to anyone but a small group of favored industries and contractors. And 1000 Friends of Oregon, the pioneering smart growth group behind the Urban Growth Boundary in Portland, has shown how artificial restriction on density-particularly in desirable areas near transit and parks-prevents the housing supply from rising to meet demand. If New York and Portland changed these policies, they could offer the same amenities at lower prices. Indeed, one could explain the out-migration from New York in the late 1990s in this light. For many people, New York’s added amenities did not justify the extra cost that misguided policies tacked on top of the normal market cost of living there.

Gattis’s theory casts the future of economic development as a race. Will cities that already have great amenities find a way to make their lifestyles cheaper by building more housing and lowering taxes, or will cities that already have a low cost of living find a way to use some of their extra AA$ to create better amenities?

Gattis bets that cities like Houston will make the first move.

“[Houston doesn’t] need to convert the whole city into New York,” Gattis says, “but we should create a core with a lot of the features of New York for those who want that urban, dense, walkable, mass transit lifestyle.”

Indeed, Houston already has started a light rail project with substantial mixed-use urban development around it. But until Houston and cities like it prove themselves capable of producing the kind of flourishing culture and diversity that New Yorkers take for granted, many people will continue to accept a smaller supply of “advancement and amenity dollars” in exchange for better, more abundant public amenities.