One Nation: Young, Eager Unleash Rust Belt Economy

By Matthew Dolan Detroit Free Press

WWR Article Summary (tl;dr) From Detroit to Pittsburgh young people are moving in or deciding to stay in rust belt cities partly because of the lower cost of living but also for the opportunities to start businesses. Are we witnessing a "Rust Belt renaissance?"

Detroit Free Press

Young people are starting to unbuckle the economic promise of Rust Belt cities.

The political and social challenges facing many of America's former industrial powerhouses like Detroit, Cleveland, Baltimore and Pittsburgh remain enormous. But there are nascent signs of rebound, driven in part by youthful entrepreneurs brimming with new ideas.

Educated workers in their 20s and 30s are moving in or deciding to stay in part to avoid the rising cost of living, taxes and regulations in tech hubs such as New York, Boston and San Francisco. Newcomers increasingly see opportunities to create their own businesses, make their mark and tap underserved markets, thanks to lower barriers to entry.

"Right now in Detroit, it's cheaper to fail," says Jay Rayford, who runs Social Sushi Detroit, a networking pop-up connecting people of different backgrounds and social segments together around sushi. He dreams of opening his own restaurant.

City leaders see luring professional, innovative types who drive growth and profits as key to jump-starting a Rust Belt renaissance.

"We can't do it by imitating the suburbs," Detroit Mayor Mike Duggan says. "The millennials are coming back in astonishing numbers. Empty nesters are starting to come back. But we have to give them something unique."

That's why architect Imani Day and her boyfriend, real estate entrepreneur David Alade, moved from Brooklyn to Detroit last year. "I have never had so many ideas. I have never been stimulated by a place like the city of Detroit," Day says.

A number of Rust Belt cities saw a dramatic drop in population between 2000 and 2010; Detroit was the most stark, plummeting 25%.

But since 2010, the exodus seems to have slowed, or even reversed in some instances, according to census estimates comparing 2010 to 2015: Indianapolis (+3.8%), Columbus, Ohio (+7.5%), Detroit (-4.8%), Baltimore (-0.1%); Milwaukee (0.8%), Cleveland (-2%), St. Louis (-1.1%) and Pittsburgh (-0.4%).

And a Brookings Institution report shows that in 2009-14, some unexpected cities, including some in the Rust Belt, showed some high-tech venture capital investment growth and activity or "dynamism," (albeit on a much smaller scale than traditional venture capital strongholds such as San Francisco and New York.)

Ten metropolitan areas with the greatest losses in economic status in 2000-14 had one thing in common -- a greater than average reliance on manufacturing, according to the Pew Research Center. And many of them call the Rust Belt home.

The nation's leading company towns buoyed by autos, tires, steel and iron decayed over decades for many reasons: Industry buffeted by new global competition sought lower costs and more room, fleeing to the suburbs and beyond. As factories emptied, companies shifted new investment to cities west and south.

Bustling blue-collar cities including Buffalo, N.Y., Toledo and Gary, Ind., saw population declines. Incomes fell. Homes emptied out and employment plummeted. The rise and fall of subprime mortgage lending only exacerbated grim neighborhood conditions. Overall, economic decline left many of these cities poorer and facing hard financial choices.

Politics of Rust Belt Leading presidential candidates see a region under siege.

Presumptive Republican nominee Donald Trump said he plans to focus on 15 states in the general election including a swath of the Rust Belt -- Ohio, Michigan, Minnesota, Wisconsin, Iowa, and Pennsylvania -- he says has been stripped by ill-conceived free trade pacts that give away American jobs.

Democrat Hillary Clinton promised to punish companies that leave the U.S. after taking taxpayer subsidies, and she pledged to retaliate against China for dumping steel on the international market.

But some experts say that view may be shortchanging an urban upswing already picking up speed across America's hard-hat heartland.

"When you listen to some of the political candidates on the left and on the right, don't you get depressed?" Antoine van Agtmael, coauthor of the new book, "The Smartest Places on Earth, Why Rustbelts Are the Emerging Hotspots of Global Innovation," asked a Washington audience earlier this spring. "I mean, when you listen it sounds like this country has run out of steam on innovation, that our best times are behind us, and that all we have is problems."

In Detroit, Duggan won election as mayor in the city's darkest financial days more than two years ago and spent months solely focused on improving basic city services. But now he asks his staff every week: "How do we rebuild Detroit into a vibrant city with a recovery that provides opportunity to everyone?"

Four years ago, the Motor City teetered on the brink of insolvency. The homicide rate was the highest in nearly two decades. Residents were leaving in droves and about one in every five adults had no job.

But after Detroit filed for the nation's largest municipal bankruptcy in 2013, it hasn't looked back much.

Today, more than a year out of bankruptcy court, the city's finances are stable, with a balanced budget relieved of $7 billion in long-term debt. The violent crime rate including homicides fell last year compared with 2014. Unemployment dropped by nearly half, to around 10%. Detroit's long exodus of population has slowed to its lowest pace in decades. Some predict next year will show the city's first population growth since the 1950s.

To be sure, high poverty and crime rates, above-average unemployment and poorly performing schools could stymie Detroit and other postindustrial cities' future growth. The median household income in Detroit is $25,769, less than half the nation's median, according to the Census Bureau.

The wealthiest also take a hit. Detroit imposes the highest effective property tax rates and one of the highest tax burdens on high earners, according to a 2014 study of 51 cities by the Washington, D.C., Office of Revenue Analysis.

But Kerry Doman, founder and CEO of After 5 Detroit, an organization that helps companies provide nightlife activities for their employees, said the city has already begun to shake off the perception that there were no jobs and nothing for young people to do after walking out of their office buildings.

"Today there is this newfound excitement about the city of Detroit," Doman said. In fact, she added that her two biggest clients -- auto giants Ford and Fiat Chrysler -- are headquartered outside Detroit with workers nonetheless deeply interested in the city's social scene.

Of the available rental units in the city's downtown and midtown neighborhoods, more than 97% are occupied, according to the latest report from the Detroit-based Hudson-Webber Foundation. As a result, the city's sidewalks are often blocked off now by construction workers rehabbing long-vacant buildings and developers eyeing new tenants.

Emergence of brainbelts Van Agtmael and coauthor Fred Bakker argue these cities are becoming brainbelts. Braced by world-class universities, they confront and solve complex expensive challenges that require multidisciplinary approaches in a collaborative environment. They have an infrastructure that attracts and retains talent. They brashly promote affordable housing that has caused some to shy away from Silicon Valley.

"Innovation is no longer limited to places like Silicon Valley and Cambridge," says van Agtmael, who highlights innovation in Akron, Ohio, and Albany, N.Y. "It has spread all around the country."

Buying a home -- a relative rarity for the millennial generation -- is easier here with an estimated four out of five homes within reach of the middle class. Detroit is the fifth most affordable city in the U.S. for real estate, according to HSH.com, a mortgage-information firm. Residents only need to earn $35,538 a year for a median-priced home.

Other Rust Belt cities round out the top five: Pittsburgh ($29,481), Cleveland ($30,498), Cincinnati ($33,784); and St. Louis ($33,899). San Francisco was the least affordable at $144,196. Universities as urban anchors

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