Will American cities be trumped?

Peter Ramsden

By Peter Ramsden, on December 20th, 2016

> Read Peter Ramsden's articles

Democrats are being bullish about the future of cities under a Trump administration, but financial realities will soon bite.

 

In general, larger cities are more likely to vote Democrat than small towns and rural areas. Ivan Tosics’ article of 15th November showed that it was often the smaller urban areas that supported Trump. Indeed, Trump’s remarkable victory in the electoral college confirmed on December 19th was driven by the voters outside the main metropolitan areas of the East and West coasts.

 

Sanctuary cities

 

The biggest threat is to the 200 so-called Sanctuary cities which provide sanctuary to undocumented migrants. Eighteen of these cities have already said that they will continue to block efforts by Federal immigration officers to arrest undocumented migrants, this includes refusing to allow city officials to hand them over:Seattle, Portland, San Francisco, Oakland, Los Angeles, Santa Fe, Minneapolis, Denver, Austin, Chicago, Newark, New York City, Boston, Providence, Jersey City, New Haven, Philadelphia and Washington DC. Trump has countered that he will block Federal funds to these cities.

 

Overall the Federal Government spends more than the combined total of the States and local government. Federal government spending is estimated at $4.1 trillion USD, the States at $1.6 trillion and and local government $1.8 trillion. Federal spending is delivered through a vast array of federal programmes across many policy fields affecting cities and their citizens from education, to welfare, transport, health and housing. Blocking federal funds could severely affect these cities and slow down progress on low carbon transport projects under.

 

How will Housing and Urban Development (HUD) be affected?

 

Ben_Carson_by_Skidmore_with_lighting_correctionHousing and Urban Development or HUD is the key agency for a part of this jigsaw. The appointment of former presidential candidate Ben Carson to HUD will determine the future of inner city policy. Carson, a retired paediatric surgeon adds to the general impression that this is a cabinet of gifted and wealthy amateurs. Like most of Trump’s cabinet Carson has never held public office and despite running to be president ruled himself out of a cabinet post, his close friend Armstrong Williams saying that “Dr Carson feels he has no government experience; he’s never run a federal agency. The last thing he would want to do was take a position that could cripple the presidency.” (Business Insider Magazine). Later the same day, Carson clarified his position and suggested that there was a need for non-politicians who were outside the Washington bubble to steer the new administration. Despite his wobble, he was finally chosen for HUD.

 

The Housing and Urban Development agency was set up as a Cabinet agency in 1965 by Lyndon Johnson, although its origins were as a Federal Housing Administration created by Franklin Roosevelt in 1934 and the Federal National Mortgage Association (Fannie Mae) in 1938 as part of the alphabet of agencies under FDR’s New Deal. The agency spends in the region of 50 billion USD annually on housing policy with rent support to the poorest 5 million low income households as a key programme which accounts for half of their budget.

 

A crucial pillar for HUD to enforce the rights of citizens is the 1968 Fair housing act which protects buyers and renters from landlord discrimination on the grounds of race, colour, religion, sex, family status or national origin. In 1973 Trump, then aged 27, and his father were prosecuted under the Fair Housing Act. At the time they owned 15,000 low income housing units in the New York area before they pivoted towards luxury apartments. The case was settled out of court, but Trump used the media to advance his case and counter-sued for 100m USD. It is unlikely that the President elect is a supporter of the Fair Housing Act, the question is whether he will seek to abolish it, or with Carson at the helm of HUD merely neutralise it. Previous Republican administrations have avoided the major fight that abolition of HUD would entail with the Senate, but with a majority in both houses it is likely that the Trump administration will seek to clip its wings – especially where the agency is seen to be anti-gentrification.

 

In 2015, HUD passed the Affirmatively Furthering Fair Housing Act which gave HUD powers to intervene more strongly in segregated communities, and to monitor progress in anti-discrimination and withhold Federal funds where no progress is made. There is a strong Republican distaste for anything that smacks of social engineering and interfering with the housing market. This is especially true of measures to enable lower income people to live alongside the wealthy which is unpopular among many Americans who argue that you earn your right to exclusivity.

 

Porter and the Inner city

 

trump tower chicagoThere has been some talk of a Republican approach to the inner cities. In the past, this has included an emphasis on Enterprise zones which typically are located in former industrial areas and encourage enterprises to locate by offering tax incentives such as reductions in sales tax applied at State level. Carson advocated that a proportion of the $2 trillion of repatriated profits USA companies are holding abroad could be given a tax holiday if re-invested in enterprise zones.

 

Some further indication of what inner city policy could look like comes from the last Republican administration under George W Bush. Harvard economist Michael Porter put forward a business-led model of how the inner city could be transformed. Porter extended his ideas about competitiveness and strategy from a cluster approach to a territorial policy that could address inner city economies. Back in 1995 he had written an influential piece on the competitive advantage of the inner city in his University’s house journal the Harvard Business Review. He went on to set up the Initiative for a Competitive Inner City (ICIC) a Boston based NGO which led the Inner City 100 – a glitzy listing of 100 fast growth companies across deprived neighbourhoods in the lower 48. His argument was that while social programmes were important, the only way that the Inner City could be transformed was through economics and specifically by identifying its competitive advantage in terms of strategic location, local market demand, integration with regional clusters and human resources, including the potential for entrepreneurship among minority communities. ICIC provides consultancy on city turnarounds based on local clusters.

 

The UK Government worked closely with ICIC and supported a UK Inner City 100 (see for example Competitive Inner City), backed by the ill-fated RBS bank, and contracted ICIC to work on City Growth Strategies in four pilot areas. It went on to back Bridges Community Ventures with £20million to set up an investment fund targeted at SME investments in neighbourhoods defined as the 10% most deprived according to the Index of Multiple Deprivation.

 

The recent resurgence of neighbourhoods in good locations in the inner city seems at first sight to validate Porter’s analysis. Neighbourhoods such as Harlem in Manhattan, Williamsburg in Brooklyn, the Mission in San Francisco have gentrified and transformed in the past two decades with some becoming the seedbeds for the new dotcom economy. The difficulty with the relative success is that the transformation has done little for the urban poor who are displaced by gentrification and do not benefit from the trickle-down effect of new enterprises. Similar patterns have emerged in hipster locations across Europe and especially in the big cities such as Shoreditch in London, Amsterdam, Barcelona, Berlin and Paris. Gentrification is a powerful driver of urban regeneration, but has produced mixed results for local communities.

 

Build Build Build

 

cranesTrump is a property developer at heart and like the carpenter with a hammer for Trump every problem can be fixed by construction in some sort of deal. In his acceptance speech he said “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools and hospitals. We’re going to rebuild our infrastructure which will become, by the way, second to none, And we will put millions of our people to work as we rebuild it.” There is no question that America’s infrastructure is in a creaky state. 65 000 bridges are reportedly in need of repair and many systems need updating with a total cost estimated at over $3.6 Trillion (Estimate of the American Society of Civil Engineers). The bigger question is what to prioritise and how to pay for it. Here Trump claims that this massive infrastructure spend can be revenue neutral.

 

The delivery mechanism Trump will put in place to launch his infrastructure revolution has still to be finalised. There has been much talk of making better use of the private sector, possibly through tax credits but also by speeding up planning consents. With regard to housing, he may well avoid going through HUD and steer clear of the metropolitan local governments especially the Sanctuary Cities which are likely to be starved of funds. He is likely to seek out under-used assets in Federal agencies – especially vacant and derelict land on which private developments can be fast-tracked. He will want to avoid using scarce federal funds except where there is no alternative. The problem is that in education, housing, transport and health what the private sector can make a buck on is not always the infrastructure that the public needs. It is relatively easy to involve private capital in modernising a toll road or bridge where there are clear returns on investment. Much harder to provide quality public spaces to improve quality of life and tackle the obesity epidemic.

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