Part One: The State of America's Cities
Finding #1: Thanks to a booming national economy, most cities are experiencing a strong fiscal and economic recovery. However, too many central cities are still left behind and continue to face the challenges of population decline, loss of middle-class families, slow job growth, income inequality, and poverty.
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"Cities have changed the way we do business -- putting our financial houses in order, improving the delivery of services, restoring public safety, cutting bureaucracy and waste, enhancing parks and open space, and establishing new and innovative partnerships with the private sector. Now we are calling for a new partnership with the Federal Government and with the States. This would be a partnership that extends the economic recovery to distressed areas, that invests in working families, and that reverses policies that tilt the playing field against older communities."
Wellington Webb, Incoming President,
United States Conference of Mayors |
Strong Economy Helps Cities To Recover
The strong economy is helping cities recover in many important ways. Most city balance sheets are the healthiest they have been in years, and city services are improving as a result. For the first time in American history, a majority of our urban residents are homeowners. Crime in our cities continues to decline dramatically, and urban school achievement is improving. Many downtown urban cores have been coming back as centers for commerce, tourism, sports, the arts, entertainment, and even housing.
Jobs and Employment
A strong national economy is driving an economic recovery in most parts of urban America. Nationwide, the familiar villains -- inflation, unemployment, high interest rates, and budgetary red ink -- have been overcome, and the Nation is experiencing budget surpluses, high employment, declining poverty, and a record-high stock market. The U.S. is in the midst of the longest peacetime economic expansion in its history. The Nation's gross domestic product has grown by an average of 3.4 percent each year since President Clinton took office. More new businesses are forming and interest rates remain low. During this time period, the economy has created 19 million new jobs. The national unemployment rate, 4.5 percent in 1998, was the lowest since the 1960s. Living costs have remained relatively stable even as wages and incomes rise. Inflation fell to 1.6 percent in 1998, its lowest level in many years.4
| "A new generation of county leaders is streamlining government and partnering with mayors to make our communities attractive places to live and work. We need to step up these partnerships -- our constituents expect that and deserve it."
Betty Lou Ward,
President,
National Association of Counties |
See Exhibit 1: After Years of Deficits, the Federal Budget Now Shows Surpluses.
Employment is on the rise in the majority of central cities. Economic recovery is putting new paychecks in the hands of millions of urban residents, many of whom were previously unemployed or on welfare. From 1992 to 1998, the number of employed residents living in central cities grew by 11 percent, or more than 4 million people.
See Exhibit 2: Employment Is Up in Most Central Cities.
Many central city unemployment rates have fallen dramatically and at a faster pace than those of the suburbs. From 1992 to 1998, many cities registered dramatic drops in unemployment, which fell overall in central cities from 8.5 percent to 5.1 percent. Unemployment rates are also falling in suburbs but not as sharply as in central cities. From 1992 to 1998 in the 50 largest central cities, unemployment fell by 3.4 percentage points, compared with jobless rate declines of only 2.9 percentage points in those cities' suburbs.
During the current expansion, the improving urban jobs picture has been so consistent in central cities nationwide that unemployment rose in only three of the Nation's 539 central cities. In the 50 largest central cities, unemployment fell from 8.7 to 5.4 percent.
Central city unemployment rates are still more than one-third higher than the jobless rates in the suburbs, however, indicating a significant pool of available labor in central cities to continue to power the economic expansion.
Some central city unemployment declines have been modest, but others have been substantial. Between 1992 and 1998, unemployment in Detroit fell from 17.0 to 7.0 percent, in Atlanta from 10.0 to 5.2 percent, in Hartford, Connecticut, from 12.6 to 7.5 percent, and in Santa Ana, California, from 11.8 to 5.2 percent. Furthermore, lower unemployment has had significant ripple effects throughout the economy. More workers mean more adults who can provide for their families, support local merchants, buy a home, invest in the community, start a business, and serve as a source of job leads and a role model for the next generation.
See Exhibit 3: Central City Jobless Rates Have Fallen.
Many central city job bases are growing again. From 1991 to 1993, 73 major central cities lost employment at a rate of 1.3 percent, but from 1993 to 1996 employment in these same cities rose by 4.4 percent.
Moreover, wages for central city jobs are rising at a faster rate than for suburban jobs. Between 1993 and 1996, the average annual pay for jobs in 77 large central cities rose by 4.6 percent compared with 3.6 percent for suburban jobs.
See Exhibit 4: Jobs Are Growing Again in Central Cities.
See Exhibit 5: Cities Lost Jobs in the Early '90s, But Began Turning Around in 1993.
Job growth is happening faster in the suburbs around central cities. Even while almost all cities are adding jobs and reducing unemployment, growth in the suburbs is happening at a faster pace. Between 1993 and 1996 central city jobs grew in 77 selected cities grew by 4.4%. During the same period, suburban jobs grew more than twice as fast, by 10.3 percent. The rapid increase in suburban jobs has led to mismatches between locations where available untapped pools of workers are -- central cities -- and locations where the employment needs are greatest -- suburbs.
Homeownership
For the first time in history, more than half of central city households are homeowners. Homeownership fosters community stability and safety by encouraging families to maintain their properties, watch out for their neighbors, and get involved in neighborhood improvement activities. Homeownership is the primary way that most families build assets for the future. Also, homeownership serves as a foundation for bringing back commercial reinvestment because new owners create demand for neighborhood economic activities, such as grocery stores and other retail establishments.
In 1998, for the first time in American history, central city homeownership rates rose above 50 percent. For the first quarter of 1999, 50.3 percent of urban residents owned their own homes, compared with 48.9 percent at the end of 1993.5
| Innovative City Programs Boost Homeownership
Homeownership is on the rise in central cities -- with minority homebuyers leading the way. Increasingly, builders, lenders and realtors view central cities as a major new market opportunity. Novel city homeownership programs are encouraging this trend, as more cities embrace initiatives to help families save for a downpayment and buy their first homes. The following are examples of the types of programs cities are launching:
Baton Rouge, LA. This city lends low-income homebuyers up to $10,000 to buy homes in targeted city neighborhoods. Additional grants and loans are available to help with closing costs and rehabilitation. Homeowners agree to stay for the term of the mortgage. As of 1999, approximately 500 families had bought and rehabbed homes in the targeted areas under this program.
Scranton, PA. This city launched a 14-step Homebuyers Program to walk low- and moderate-income families through all stages of the homebuying process. Experienced staff, working one-on-one with each prospective homebuyer, help ensure a high approval rate of mortgage loan applicants. The city uses HOME money to match a buyer's downpayment up to 10 percent of the purchase price and helps defray closing costs up to $3,000. By May 1999, 347 families had purchased homes at an average cost of $52,000, with mortgages provided by 32 banks and mortgage companies.
Anchorage, AK. AnCHOR helps low-income families buy homes in targeted areas of the city by paying the difference between the borrowers' affordable first mortgage and the home price. Loans are secured by a second mortgage at zero percent interest. The city's private lending partner, First National Bank of Anchorage, originates both the first and second mortgage. Between July 1997 and May 1999, AnCHOR closed about 140 loans.
Charleston, SC. Ten banks formed the Charleston Bank Consortium in 1995 to create more homeownership opportunities and improve dilapidated housing. Hundreds of households have attended free homeownership training classes and received credit counseling and budgeting information to prepare them for homeownership. By May 1999, the Consortium had approved more than 165 mortgage loans for low- and moderate-income families.
Twelve cities are using special HUD Homeownership Zone grants to reclaim distressed areas and develop dynamic, mixed-income neighborhoods through concentrated homeownership. New urbanist design principles, innovative marketing techniques and strong local public-private-community partnerships, are some of the tools these cities are relying on to create viable homeownership communities in cities.
Flint, MI. The city embarked on an ambitious plan to transform the University Park area, a symbol of decay and disinvestment, into a neighborhood of 309 quality homes within walking distance of the nearby central business district and the University of Michigan -- Flint campus. Virtually no new housing construction has taken place within the city in the last twelve years, until this initiative. By May 1999, over 40 families had prequalified for a reserved lot with a $2,000 deposit. Construction on the first house is expected in July.
Philadelphia, PA. Philadelphia's plan calls for 296 units of infill homeownership housing in harmony with the city's tradition of rowhouses. This will restore the Cecil B. Moore neighborhood and draw families back to this once lovely urban neighborhood near Temple University. By mid-1999, 53 homes had been completed. |
See Exhibit 6: Central City Homeownership Rate Hit 50 Percent in 1998.
America's overall homeownership rate rose to 66.7 percent for the first quarter of 1999, up from 63.7 percent in the first quarter of 1993. A total of 69.6 million families owned their own homes -- more than at any time in American history. Since President Clinton took office in 1993, 7.8 million more families own homes.6
Minorities have led the way in increasing homeownership. Both African-American and Hispanic homeownership rates have been growing twice as fast as the White homeownership rate. The number of homeowners includes a record 5.9 million African-American and 4.2 million Hispanic families -- the highest number of minority homeowners in history. The homeownership rates for minorities -- 46.9 percent for African Americans and 46.2 percent for Hispanics -- are the highest since these rates were separately reported in 1983 and are believed to be the highest ever. A total of 42 percent of the net new homeowners since 1994 are minorities, even though minorities account for just 24 percent of the population.
Population
Two-thirds of central cities increased in population from 1980 to 1996. Between 1980 and 1996, two-thirds of the country's 539 central cities enjoyed population growth. More than a dozen cities in the South and West grew by 100 percent or more. The most rapid gains were in small cities, but some big cities such as Las Vegas, which grew by 129 percent, ballooned, too.7 Among central cities, the population growers included some older cities: New York City, for example, grew by 4.4 percent between 1980 and 1996; Miami by 5.3 percent; Indianapolis by 6.6 percent; and Jersey City by 2.5 percent.8
The key decade for population loss was the 1970s when central city populations nationwide hardly grew at all and many large cities suffered considerable population loss.
See Exhibit 7: Most Central Cities Are Gaining Residents.
See Exhibit 8: Many Large Cities Are Still Losing Population, But the Rate of Decline Has Slowed Significantly.
During the 1990s, 14 of the Nation's 30 largest cities continued to lose residents. However, the rate of decline was slower than in the previous decades. Detroit, for example, lost more than 30 percent of its population between 1970 and 1990, but lost only 2.7 percent of its residents from 1990 to 1996. Cleveland too lost more than one-third of its residents during the 1970s and 1980s but experienced slight population declines since then. However, six central cities that had lost population in the 1970s gained residents in the 1990s.
Immigrant families are playing a significant role in boosting the populations of some urban communities. Between 1981 and 1996, more than 13 million immigrants came to the United States -- the most since the last great immigration waves at the turn of the 20th century. The newcomers have had an important impact on population growth in such gateway cities as Los Angeles, Miami, New York, and Seattle.
See Exhibit 9: Immigration is Helping to Fuel Central City Revival.
Overall, the population is still growing far faster in suburbs than in central cities. The U.S. population continues to disperse toward suburban areas. Between 1970 and 1996, the Nation's suburban population grew by 49.2 percent, compared with 12.1 percent growth in central cities. Today, only slightly more than one-third of the population live in central cities, compared with 44.9 percent in 1970. However, the relative rate of suburbanization has declined. From 1970 to 1980, more than 95 percent of the total metropolitan growth nationwide occurred in suburbs. Since 1980, the suburban share of metropolitan growth has still been large at 77 percent.
See Exhibit 10: The U.S. Population Continues to Suburbanize.
Central City Fiscal Conditions and Quality-of-Life Indicators
Fiscal conditions. The fiscal condition of many central cities has improved significantly over the past 6 years, due to both better economic conditions overall and financial management reforms instituted by innovative city governments. Wall Street rating of the bonds issued to finance infrastructure and other capital improvement is one indicator of city fiscal strength. Since 1994, Standard and Poor's has raised the stand-alone general obligation rating on bonds for 24 of the 92 major central cities it currently rates while lowering only 10 cities' ratings during that period. The upgraded ratings not only reflect improved fiscal outlook in the cities, they also mean cities pay investors a lower interest rate when they sell bonds, saving city taxpayers millions of dollars annually. Those savings, in turn, become revenues cities can apply to vital service and infrastructure improvements, investments in schools, and even tax cuts for residents and businesses.
See Exhibit 11: General Obligation Bond Ratings Rose in 24 Cities Since 1994.
City services. Many central cities are offering residents higher levels of city services. In a 1999 survey, 88 percent of municipal officials reported their cities were able to offer residents good or very good levels of services. Of the nearly 400 officials surveyed, 40 percent expected to increase service levels in the coming year and 75 percent said their cities offered a wider range of city services today than 5 years ago.9
Public safety. One area in which cities have shown the greatest improvement is in crime reduction. Most big cities are safer today than they were 25 years ago. For the Nation as a whole, the FBI crime index dropped 5.8 percent from 1994 to 1997. But crime fell even faster in cities. The largest declines were recorded in violent crimes of murder, rape, robbery, and aggravated assault. From 1997 to 1998, the total crime index fell by 6 percent in cities with populations over 1 million, including an 11-percent reduction in murders and motor vehicle theft, a 12-percent decline in robberies, and a 14-percent drop in arson. The next largest group of cities -- those with a population between 500,000 and 999,999 -- recorded a 9-percent reduction in violent crime between 1997 and 1998, including a 12-percent drop in robberies, a 10-percent decline in murder, and a 6-percent drop in aggravated assault.10
See Exhibit 12: Murder Rates in Big Cities Have Fallen Sharply Since 1990.
| Officer Next Door Helps Promote Safe Communities
Crime has declined substantially in most central cities, thanks to more police on the streets, new community policing programs, and initiatives to involve residents in the fight against crime. HUD's Officer Next Door program is an example of the new initiatives at work.
Since 1997, HUD has offered generous incentives to encourage police officers to live in urban neighborhoods. Officers can buy homes in target neighborhoods for half of their appraised value and can get FHA-insured mortgage that allows them to purchase the home with a downpayment of as little as $100. Participating officers must agree to live in the homes for at least 3 years. By early 1999, nearly 2,500 officers had bought homes under the program.
Mark Burgess of the Salt Lake County Sheriff's Department moved into his two-bedroom condo in the Glendale neighborhood, one of Salt Lake City's highest crime areas. Burgess bought the home with a $100 downpayment and for half the listed price of $52,000. "I was really surprised at the number of people who spontaneously came up to me and thanked me for coming into their neighborhood," Burgess said. Irene Hughes of the Washington, DC, Police Department also took advantage of the Officer Next Door program. Hughes, her husband, and their two children bought a three-bedroom home in Northeast Washington for $51,000. "Having an officer in the neighborhood definitely prevents crime," she said. The Hughes' home is the first the family has ever owned and is located just a 10-minute drive from the police precinct station. Previously, Hughes commuted to work from a two-bedroom apartment in suburban Maryland. |
Crime trends in the longer run for key large cities are encouraging. Between 1991 and 1997, violent crime dropped 21 percent in Atlanta, 22 percent in Cleveland, 30 percent in Seattle, 31 percent in Kansas City, 33 percent in Boston, 37 percent in Los Angeles, 43 percent in Dallas, and more than 45 percent in New York City.11
The Nation's murder rate in 1997 fell to its lowest level in 20 years. Much of the decline occurred in cities with more than 1 million people where the murder rate fell from 35.5 per 100,000 population in 1991 to 20.3 per 100,000 in 1997.12 Americans experienced fewer violent and property crimes in 1997 than in any other year since the survey began in 1973, according to the National Crime Victimization Survey.13
Too Many Cities Left Behind in the New Economy
Despite the positive news, too many cities and pockets of concentrated poverty are being left behind in urban America's impressive comeback. These cities continue to suffer from the challenges of population decline, loss of middle-class families, slow job growth, income inequality, and poverty.
While cities overall are faring well, serious population declines continue to plague about 20 percent of our Nation's 539 central cities. Unemployment remains unacceptably high in 17 percent of central cities. Nearly one in three central cities had poverty rates of 20 percent or more in 1995 and, even in cities with lower rates, poverty remains concentrated in selected urban neighborhoods. (See HUD's April 1999 report Now Is the Time: Places Left Behind in the New Economy for more details.14) City school systems show improvement but are still an Achilles' heel of urban revitalization.
Population Loss
Serious population losses continue to plague about one in five central cities. The fact that many central cities still suffered significant population loss at a time when the overall U.S. population grew rapidly (by 17 percent between 1980 and 1996) is a cause for concern. A total of 116 central cities lost 5 percent or more of their people during that time period, and 57 cities -- more than 1 in 10 -- lost 10 percent or more of their population. These cities lost the workers and consumers to grow their economy, as well as the tax base needed to protect livability and strengthen the local business climate. Shrinking cities tend to have higher rates of poverty and unemployment than central cities with a growing or stable population base.
Most cities losing population are small or mid-sized. The most extreme cases of urban population loss reflect a massive exodus of people: East St. Louis, Illinois, lost more than 30 percent of its population from 1980 to 1996; Gary, Indiana, lost 27 percent; Johnstown, Pennsylvania, 26 percent; Youngstown, Ohio, 24 percent; Wheeling, West Virginia, 23 percent; and St. Louis, Missouri, 22 percent.15
See Exhibit 13: Cities Losing Significant Population Are in 28 States.
Jobs and Employment
Unemployment remains unacceptably high in about one in six central cities. Even while the majority of cities are doing extremely well, high unemployment (50 percent or more above the national rate) affects 17 percent of central cities. This amounts to 95 central cities in 25 States and the District of Columbia with jobless rates of 6.75 percent or higher in 1998 compared to an average rate of 4.5 percent for the Nation last year; 64 had a rate of 7.9 percent or more (75 percent above the national rate), and 37 had rates of 9 percent or more (100 percent above). These higher unemployment cities are mostly in small or mid-sized cities and found throughout the Nation.16
See Exhibit 14: Unemployment in 37 Central Cities Is Still at Least Double the National Average Despite Strong Recovery.
Incomes and Poverty
Stubborn poverty persists in about one-third of our central cities. Many central cities are still struggling with high rates of poverty that appear not to have dropped significantly in the first half of this decade. Poverty rates of 20 percent or more can be found in 170 central cities in 34 States and the District of Columbia.17 In 30 cities, the poverty rate is estimated to be 30 percent or higher. Many of the cities with the highest poverty rates are small or mid-sized.
See Exhibit 15: Central City Poverty Rates Are Still 30 Percent or Higher in 30 Cities.
Persistently high poverty rates tend to reflect structural barriers to participation in the changing economy -- barriers such as a large skills gap in the workforce, rapidly disinvested and blighted portions of a city that have trouble attracting investment even where significant market potential exists, and he disruption of traditional job networks.
We have not yet seen evidence of any reversal in the growing concentration of poverty in these cities. For example, the number of central city census tracts with high poverty rates increased steadily from 1970, the percentage of such tracts reaching 13.8 in 1990 (the last year for which data are available). The growing concentration of poverty has hit inner-city residents particularly hard.
| Lifting All Boats: Cities Work to Spread the Benefits of a Strong Economy
Central city job rolls are growing again, and unemployment and welfare are down substantially. Quite a few cities have launched initiatives to help ensure the benefits of a strong economy are extended to their poorest residents.
Jacksonville, FL has made extensive use of HUD's Section 108 program to fund economic development projects that create jobs for the city's low- and moderate-income residents. Since 1994, Jacksonville has launched 11 projects, in partnership with for-profit developers. The projects, which are using $26 million in Section 108 funds, have a total value of more than $300 million and are creating 1,500 jobs.
Iowa City, IA is providing city support to an innovative private business -- Heartland Candleworks -- to help homeless people attain economic self-sufficiency. In 1996, the city gave Heartland $50,000 in HUD's Community Development Block Grant funds to buy production line equipment for candle molds. Recognizing the special situations facing many of its employees, the company provides flexible working hours and funds for workers' security deposits. Since July 1, 1996, more than 125 homeless and disadvantaged people have worked for a period at Heartland Candleworks. |
Poor central city residents continue to experience homelessness and related problems of poverty. Even with an improving economy, homelessness and related problems continue to plague the poorest residents of many central cities. A 1998 survey of 30 major cities by the U.S. Conference of Mayors indicates that although cities are improving by many important indicators, hunger and homelessness have not been eradicated, and affordable housing shortages may be worsening. Officials in the surveyed cities estimated that requests for emergency food assistance increased by an average of 14 percent during 1998 -- with 78 percent of the cities registering an increase. About two-thirds of those requesting emergency food assistance were children or their parents. More than one-third of those requesting food assistance were employed.
Requests for shelter also increased in 72 percent of the surveyed cities during 1998, by an average of 11 percent. People remain homeless for an average of 10 months. Lack of affordable housing led the list of causes of homelessness identified by the city officials. On average, single men comprised nearly one-half of those requesting emergency shelter in the Conference survey. Requests for assisted housing rose in three-fourths of the cities. A similar number of cities reported that they had stopped accepting applications for at least one assisted housing program because waiting lists had grown excessively long.
Despite the robust economic recovery, worst-case housing needs remain at an all-time high as losses of affordable housing continue. Last year, HUD's report to Congress on worst-case housing needs documented that 5.3 million very low-income renter households -- the highest number on record -- paid one-half or more of their income for housing or lived in severely substandard housing. Ironically, worst case needs increased the fastest among the working poor, growing by 24 percent, as the economic recovery spurred rent increases that outstripped gains in earnings.
More recent data confirm the difficult housing situation for Americans at the bottom of the economic ladder. A 1999 HUD report, Waiting in Vain: An Update on America's Rental Housing Crisis, found that the consistent decline of affordable housing stock during the two decades prior to 1995 continued through 1998. Between 1996 and 1998, units with monthly rents below $300 dropped by almost 900,000 units, a decline of 13 percent. Similarly, rent increases continued to outpace income growth for poor Americans. As a result, the report found that the time families spend on waiting lists for HUD rental assistance has grown dramatically.
Urban school systems show slight improvement but are still failing to prepare an alarming number of children. The National Assessment of Educational Progress reported in 1999 that test scores among central city middle school students have begun to inch up slowly as a result of education reform efforts nationwide. Nevertheless, central city school systems across the board are still underperforming and remain the most significant barrier to center-city revitalization, especially attempts to attract middle-income households back to cities.18
The challenges confronting central city schools have not changed significantly since having been reported in detail in last year's State of the Cities:
- Central city schools serve much greater concentrations of poor and minority children than do suburban schools. In 80 percent of large central city schools, at least 70 percent of students are poor and more than one-half are minority.
- Some central city schools systems have difficulty recruiting qualified teachers.
- Basic achievement in central city schools continues to lag: In 1996, 60 percent of the children in urban schools failed to achieve basic levels of competency in reading and mathematics on the National Assessment of Educational Progress.
- About one-half of all high school students in large city school districts fail to graduate in 4 years.
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