# **2. The Impact of the Great Recession on Cities**

A large number of publications from international organizations, NGOs, and associations of municipalities published surveys of the impact (or likely impact) that the crisis would have on cities at the onset of the Great Recession (Clark 2009, European Commission 2011, United Cities and Local Governments 2009, Paulais 2009, United States Conference of Mayors 2010, United Nations-Habitat 2010, URBACT 2010, Lee, Morris and Jones 2009, Wial and Shearer 2010).

City officials around the world have reported that the Great Recession has had a major impact of on economic activity—for instance 80% of the 131 cities from the 25 European Union member countries surveyed by URBACT in 2009 reported such an impact. These effects range from the closing and bankruptcy of many companies, to the slowdown in economic activity in all its branches, decrease in investment, restriction of loans, reticence of companies to take risks in times of uncertainty, decrease in the number of new startups, and decline in exports.

The most serious impact is the sharp increase in unemployment (and underemployment) in cities, small or large. The issue is more serious in developing countries where a large number of persons are underemployed or work in the informal economy. For example, in Mexico, in September 2010, open unemployment in the 32 most important urban areas reached 6.6% of the labor force but the underemployment rate was 8.5%.

Urban poverty rates have also increased dramatically. In the US principal cities, for example, the poverty rate has shot up from 16.5% before the crisis to 20% in 2011 (Perlo 2011). Below, these trends are illustrated using recent census data.

**United States, 2005 to 2011. Poverty by Residence (in thousands)**

|**Year**|**Inside met**<br>**statistica**<br>|**ropolitan**<br>**l areas**<br>|**Inside prin**<br>|**cipal cities**<br>|**Outside**<br>**cit**<br>|**principal**<br>**ies**<br>|**Outside m**<br>**statistica**<br>|**etropolitan**<br>**l areas /15**<br>|
|---|---|---|---|---|---|---|---|---|
||**Poor**|**Percent**|**Poor**|**Percent**|**Poor**|**Percent**|**Poor**|**Percent**|
|2011.....|38,202|14.6|20,007|20.0|18,195|11.3|8,045|17.0|
|2010|38,466|14.9|19,532|19.8|18,933|11.9|7,877|16.5|
|2009.....|35,655|13.9|18,261|18.7|17,394|11.0|7,914|16.6|
|2008.....|32,570|12.9|17,222|17.7|15,348|9.8|7,259|15.1|
|2007.....|29,921|11.9|15,983|16.5|13,938|9.0|7,355|15.4|
|2006.....|29,283|11.8|15,336|16.1|13,947|9.1|7,177|15.2|
|2005.....|30,098|12.2|15,966|17.0|14,132|9.3|6,852|14.5|

Source: US Census Bureau – numbers in thousands In many countries that experienced housing crises, the number of housing foreclosures in metropolitan areas rose considerably.<sup>6</sup> In the United States, while 7.5 million foreclosures occurred in a period of 27 years (from 1979 to 2006), there were 6 million in 2007-2009 according to the firm RealtyTrac, Inc. The highest rate of foreclosures occurs in cities with the highest unemployment rates and where the market value of housing has plummeted (giving rise to mortgages being greater than the market value of the house). Detroit had a rate 5 times above the national average, Las Vegas 4.6 times, and Riverside, California, 3.8 times.

> 6 The data in this paragraph are from Perlo (2011)

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