Incentivizing Local Reform and Urban Renewal during an Economic Crisis

INTRODUCTION "We've reached the limits of suburban development: People are beginning to vote with their feet and come back to the central cities." --Shaun Donavan (1) More and more people, especially young people, are choosing to live in central cities instead of the surrounding suburbs. In the largely free market system for housing within a metropolitan area, suburban localities have traditionally dominated the competition. But with a new generation and a recession times are changing. The question becomes, can local city governments finally compete with their suburban counterparts in the market battle for desirable, long-term residents, and if so, how? Local governments control three major policy areas: education, land use, and law enforcement. (2) Only in these areas can local governments affect the competition for residents. In the ideal world, all localities would produce a strong education system, affordable housing, and effective law enforcement to keep the residents of each locality well-educated, sheltered, and safe, at least at some satisfactory baseline level, but that is not reality. In reality, each government depends on its constituents for tax revenue and many residents, especially in the current economic crisis, cannot afford seemingly basic amenities. Acknowledging the dependency of residents for revenue as an issue, localities across the country have attempted many different reform programs in education, land use, and law enforcement. These reforms can be at the federal level, the state level, or the local level. (3) Academics and politicians alike hotly debate the effectiveness of reforms in each of these categories. Frequently absent from the discussions on urban reform are the motivations (or lack thereof) of the government actors actually implementing the reforms. For example, providing mixed-income housing may address economic and racial segregation most effectively in cities, but without additional incentives developers will not provide mixed-income housing (privately or publicly) because mixed-income developments are not as economically profitable. Effectiveness is only one half of the equation and an effective reform means nothing without the incentives required to motivate political and economic actors to implement it. Therefore, attempts at successful reform must not only consider effectiveness but also incentives. This Note considers the effectiveness of various education, land use, and law enforcement reforms and the political and economic incentives guiding government action, concluding that law enforcement reforms provide the best, and only tenable, strategy for cities looking to attract more "desirable" residents. Part I lays the foundation for a public choice analysis of local governance and inter-locality competition for residents. It discusses the predictive accuracy of the Tiebout hypothesis and outlines the inefficiencies and inequalities that currently result from a free-market localism approach. Next, Part II addresses some of the major societal trends currently occurring and explains why these trends are leading more people to live in cities. From changes in preference, to the availability of jobs, to the opportunity to buy cheap urban land, more and more residents choose city life over suburban life. Nevertheless, the long-term success of cities and the ability to achieve permanent and lasting urban reform will depend on keeping residents in the city. Part III addresses the three main areas where local governments govern: education, land use regulation, and law enforcement. For each area, I explain ways which local governments can make their locality more attractive to prospective residents. Part III details the many steps that have been taken to address concentrated poverty and crime in U.S. cities and why none have been truly successful. While many programs and policy decisions do provide benefits on some level, all fall short on three main fronts--integrating the urban poor with the affluent, improving city public services, and making the city a more attractive place to live. …