Freakonomics Radio - 434. Is New York City Over?

Episode Date: October 8, 2020

The pandemic has hit America's biggest city particularly hard. Amidst a deep fiscal hole, rising homicides, and a flight to the suburbs, some people think the city is heading back to the bad old 1970s. We look at the history — and the data — to see why that’s probably not the case.

More than 200,000 people have died from COVID-19 in the U.S., and there is a common sentiment that New York City is on its deathbed, too. It was, after all, the American epicenter of the pandemic, with more than 20,000 people dead and nearly a quarter million positive cases. It also had a shutdown that showed just how reliant the city's economy is on the very things that are most discouraged during a pandemic. Packed Broadway theaters and subway cars, packed restaurants and sidewalks, packed offices and co-working spaces. Over the summer, New York's COVID rates fell dramatically.

Schools recently reopened and even restaurants have been approved to resume indoor dining at reduced capacity. But infection rates have begun to tick up again, which may lead to a second shutdown, which would pile on atop all the economic damage that's already been done. So, could the density that has historically driven a city like New York also drive it toward extinction? Is New York City, and as a New Yorker, I don't even like to say this aloud, but is New York City over? Over my dead body is New York City over.

But what about the data? The city is projecting $6, $7 billion deficits out as far as the eye can see. People are concerned about what appears to be an increase in homicide rates. Well, if we have people work from home, that home could be anywhere. No, New York City is not over. Today on Freakonomics Radio, the first of a two-part series about the fate of cities in the age of COVID-19. This one is primarily about New York and the upsides and downsides of cities in general.

And next week, we'll talk about why solving one urban problem would help solve so many others. Which problem is that? I'm glad you asked. Housing prices. But that's next week. Today's episode starts right after the... Here, womp it with me. Womp, womp, womp. Womp, womp, womp. From Stitcher and Dubner Productions, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Duffner. Last month, executives from more than 160 of New York City's largest employers, banks and law firms, sports leagues and real estate developers,

sent a letter to the mayor, Bill de Blasio. They warned that his poor management of the pandemic was threatening long-term damage. There is widespread anxiety, they wrote, over public safety, cleanliness, and other quality of life issues that are contributing to deteriorating conditions in commercial districts and neighborhoods across the five boroughs. The five boroughs of New York City, just so you know, are the Bronx, Manhattan, Brooklyn, Queens, and Staten Island. Also, just so you know, Bill de Blasio is a Democrat who even before the pandemic was almost comically unpopular. We don't need to get into the details,

but if you want to read up on him, just do a search for de Blasio, that's D-E-B-L-A-S-I-O, and then arrogant or hypocrite or even schmuck. Consider this campaign ad from a fellow New York Democrat, no less. Bill de Blasio is the worst mayor in the history of New York City. And that is... My name's Max Rose. I'm a congressman. You don't sound very happy about that somehow. My name's Max Rose and I'm a congressman. Now, you and I happen to know each other a little bit through a family connection. My son has worked on your campaign and in your office in D.C. Do you solemnly swear to not let

that relationship influence this interview do you solemnly swear to not let that relationship influence this interview? I solemnly swear. Rose represents New York's 11th district, historically the only congressional district in the city that votes Republican. It includes all of Staten Island and parts of Southern Brooklyn. One of the highest rates of unionization of any district in America, cops, firemen, teachers, nurses, first responders, sanitation workers, folks who we just recently started calling essential workers. But quite frankly, they were always essential. Like every member of the House of Representatives, Rose is up for reelection in November. I don't give a shit about politics, my friend.

Not right now. Unemployment skyrocketing, the economy in disarray, people fearful for their lives, fearful for the future of their families. This is the time to be thinking about how to help people, making government finally work again. People are so disgusted with their government. That's on the left, the middle, and the right. You recently said there is no reason that every single teacher in New York City should not be tested at least every other day. As far as I know, that's not even close to happening. It's not happening because a failure of leadership, a failure of imagination.

Nobody has confidence in this city right now. There's no plan. There's no solidarity. There's no resources. With a system of pool testing, with a system where New York City is acting almost as if it is a venture capitalist when it comes to figuring out the most innovative ways to beat the pandemic, investing in them early on with public-private partnerships, and then dramatically scaling them. There's no reason we couldn't be testing every single teacher every other day. We asked Mayor de Blasio for an interview, but he declined. There's no reason we couldn't be testing every single teacher every other day. We asked Mayor de Blasio for an interview, but he declined. There are at least two reasons why, in political circles, de Blasio is considered particularly unskilled. Last year, he spent a

lot of time outside the city running for president, even though he had virtually no constituency. He's also managed to annoy the one person a New York City mayor can't afford to annoy, the governor of New York, Andrew Cuomo. New York mayors have a history of acting like the most powerful person in one of the most important cities in the world, which, to be honest, is not entirely inaccurate. But a lot of the city's leverage runs through Albany, the state capital. What we need and what this mayor has not done is we need someone who's willing to exist in reality. Guess what? If you want this city to prosper, you need the governor. If you want this city to prosper, you shouldn't be antagonizing him. You should be working with him.

But as Max Rose sees it, the de Blasio administration was failing New York long before COVID hit. In some ways, the mayor and his administration took up a new form of laissez-faire economics, where they said, well, we don't have to invest in the future of this city because people will have to stay here. People will need to stay here. People will always come here and build their businesses. We don't have to do anything. Well, that's, of course, not the case. This is a competitive country, and it is a competitive world. During the pandemic, New York City has been competing with neighbors like New Jersey and Connecticut and the New York suburbs.

Also, Florida and Arizona and Nashville and Austin. Those, at least, are a few of the places that some New Yorkers have fled to. But how many? The truth is, no one really knows yet. Pre-pandemic, the city's population was 8.3 million. The New York Times, analyzing cell phone data, found that 420,000 people had left the city between March and May, most of them wealthier residents with a second home. But that measurement has an obvious limitation.

Leaving the city with your cell phone doesn't mean you won't return, especially if you own your home, since right now is not the easiest time to sell a New York apartment. Here's another, probably better metric. Since March, roughly 250,000 New Yorkers have filed with the post office to change their mailing address. That's about double the number from the same period last year, so that suggests roughly 125,000 higher than normal outflows.

That goes with a significant decline, also hard to measure, in the number of people moving into New York. Still, in a city of 8.3 million, this doesn't seem to qualify as a mass exodus. To get a slightly finer-grained look at population outflow, we called up Nancy Wu. I'm an economist at StreetEasy, where I look at the trends about real estate and then create analyses to tell stories about the data. StreetEasy is a listing service used by landlords and renters, buyers and sellers, and real estate agents. It manages a pretty impressive database.

I have access to all of the market data on the sales and the rentals listings in the universe of real estate listings in New York City. And what has Woo seen since the pandemic? So Manhattan rental inventory, as of July, there's been 37,000 listings on the market. That is a 65% growth from last July. And how about in, say, Queens? And Queens, you should know, has 2.2 million people, whereas Manhattan has only 1.6 million. In Queens, there's 6,600 listings on the market, and that's a 26% increase from last July. So inventory grew everywhere when looking at the

borough level, but it grew way more in Manhattan. So that's some rental data. What about home sales? In July, there's been 37% fewer Manhattan homes that went into contract than in the same month last year. There's largely been a fast forwarding of the natural attrition of the city. So New Yorkers who are planning on moving to the suburbs within one to two years are doing so now instead. So these New Yorkers are taking advantage of the low mortgage rates to move to the suburbs. So that's another hint that the outflow may not be as apocalyptic as some people think, at least not yet, that it may be more of a one-time acceleration

of a constant trend. Although, of course, those outflows are usually countered by inflows. Will people keep moving into New York? There are a lot of reasons to suspect not, particularly in the short term. The city is diminished and it remains relatively expensive, especially housing, although that too is changing at least a bit. In Manhattan, rents fell by 3% year over year since last July. That's the biggest decline we've seen since the Great Recession when rents fell by 10%. But Wu says we may be seeing only the beginning of this trend. We do expect that Manhattan rents could fall by more than 10 percent because there's a lot of factors where the pandemic has more impact on rents than the Great Recession did. That may be especially true for two reasons.

The first is that a recovery from a pandemic is likely even more uncertain than recovery from a financial crash. The second is that the pandemic isn't done doing its damage on the economy. Just last week, we saw tens of thousands of new layoffs and furloughs announced by firms like Disney and United and American Airlines. And even when jobs aren't based in New York City, there is a trickle-down effect on the financial services and banking industries here, on consulting and accounting firms, on commercial real estate and the hospitality sector. A recent audit by the New York State Comptroller reported that over the next year, between a third and a half of New York City's restaurants and bars may close permanently. So you could imagine that pandemic-induced urban flight will accelerate. And maybe not just in New York, but in cities all over the country. Except apparently, that is not happening.

The national online real estate firm Zillow, which happens to own StreetEasy, has found that only two U.S. cities have so far seen their nearby suburban housing markets surge disproportionately. New York, the most expensive city in the country, and San Francisco, which is number two. Meaning that a lot of other very popular and expensive cities seem to be weathering the pandemic better. Cities like Seattle. Seattle is a younger city than either San Francisco or New York, and it's less dense. That's Jacob Vigdor. He is an urban economist at the University of Washington in Seattle. As you likely know, Seattle is home to Amazon and Microsoft and other techie firms, and it's different from America's older cities. San Francisco is the densest city on the West Coast. New York City

is the densest city in the United States. Seattle didn't really boom until World War II. When it comes to COVID-19, most American cities find themselves in more of a Seattle position than a New York position. Most American cities aren't very dense. They're more car cities than public transportation cities. A lot of them could pass for New York City suburbs. That said, Vigdor sees COVID-19 affecting cities like Seattle, too. Imagine the typical workday of an Amazon employee in Seattle. They wake up in the morning in a house that might have cost a million dollars.

And if it had been in Pittsburgh, it would be less than half that much. They eat their breakfast and then they go to work. And if they're out in the suburbs, getting into South Lake Union, the neighborhood where Amazon is, might take them an hour. And then they work all day and then they go home and that's another hour, hour and a half. So that's a lot of commuting. People will self-report a lower quality of life if they have to endure long commutes. COVID-19 has essentially wiped out commuting, at least for now, at least for the kind of jobs that can be done from home. Once you start to move to a model where you're not based in an office,

then the entire need to locate in a place where there are a lot of high-skilled workers nearby sort of evaporates. And cities with a concentration of highly skilled workers tend to be expensive cities. And so it could lead to a situation where you've got more innovation happening in different parts of the country,

and you have people being recruited without the necessity of relocating. This could be good news for smaller, cheaper cities, also for suburban and rural areas. But it's bad news, even more bad news, for a big city like New York, whose density has lately been working against it. The city is projecting six, seven billion dollar deficits out as far as the eye can see. That's Dan Doktoroff, who was deputy mayor for economic development under New York Mayor Michael Bloomberg in the early 2000s. Today, Doktoroff is the CEO of Sidewalk Labs, and he is trying to rally other New York business leaders

to prevent a cataclysm. We don't yet know how severe it's going to be until we know how long the pandemic is going to last. But the risk that we're at is basically shoving the city into a 1970s-style vicious cycle. What you don't want to happen in a city is for the city to actually shrink in terms of the number of residents, the number of jobs, and the number of visitors. Because when it shrinks, the budget gets compressed. When that happens, quality of life deteriorates and more people leave,

perpetuating the cycle. That's what happened in New York in the 1970s. New York loses about 800,000 residents between 1970 and 1980. And that is the historian Kim Phillips Fine, author of the book Fear City, which is about New York's fiscal crisis. The fiscal crisis is usually described as an example of governmental overreach and irresponsibility. The idea being that New York's local government was engaged in all manner of wasteful, frivolous, unnecessary spending, and as a result was almost forced into defaulting on its debt and having to declare bankruptcy.

To Phillips Fine, that is only part of the story. New York did have a problem covering its bills in the 1970s. Bills that, given the nature of New York, were unusually large. You know, the transit system, the library system, the park system, the tuition-free city university, the network of more than 20 public hospitals, as well as an ambitious investment in public health initiatives. All of this is kind of on a scale unusual for American cities in general. But that massive expenditure, she argues, wasn't a primary driver of the crisis. I placed the primary responsibility on the recession that

gripped the entire United States in the early 70s, the long underlying trends of deindustrialization and suburbanization, which were driven in part by federal policies on trade and on the kind of structure that supported the development of suburbia. This fed the sort of urban flight that a lot of New Yorkers are worried about today. Wealthier people were leaving the city to go to the surrounding suburbs. People were generating their livelihoods in New York, but then paying their property taxes to jurisdictions beyond the city limits. The city kept spending on all the services that make a city a city, but with declining tax revenues, there arose a huge deficit, $1.5 billion a year, which was a lot of money back in the 1970s. And instead of addressing this openly, the mayor of the city and others in the city government

begin to quietly borrow more and more. The mayor at the time was Abraham Beam, who, before he got into politics, was an accountant, which presumably meant he understood the value of not spending beyond your means. But by 1975, the city was facing a $3 billion shortfall and was unable to borrow any more from its creditors. Bankruptcy looked likely, if not inevitable. The Republicans running Washington under President Gerald Ford weren't willing to help either. Here's how the Daily News put it in perhaps the most famous front page headline

in tabloid history. Ford to city. Drop dead. But the governor of New York, Hugh Carey, had brought in a savior by the name of Felix Rowatan. Felix Rowatan was an investment banker who became very involved publicly in the city's efforts to respond to the crisis. And he headed up the Municipal Assistance Corporation, otherwise known as Big Mac, which was authorized to sell bonds on behalf of the city that were backed by a special sales tax. And then Mac would release the money to the city as the city showed progress towards a balanced budget. Big Mac stabilized the city's finances enough to avoid bankruptcy.

But investors were still reluctant to buy New York City's debt. This led to the creation of the Emergency Financial Control Board. Which was a state entity that was given final veto power over the city's budget. And this, in a way, removed final say over New York spending from the elected officials in the city and put it in the hands of the state. This helps explain why, to this day, the mayor of New York City has to make especially nice with Albany. People were pretty explicit about this at the time. The idea is to make it harder for New Yorkers to influence what their city spends money on. New York City finally had

a balanced budget by 1980, but the city's workforce had been reduced by 20%, and there were a lot of other problems. You know, parks that are dilapidated, the fires in the South Bronx or in Brooklyn, the number of homicides in New York goes up dramatically from about 1,400 a year in 1970 to a bit over 2,000 by 1980. And remember, the city had lost 800,000 residents over that decade. It is as though the city government is drawing back right when its presence might have been needed the most. It was a long climb out of a relatively short decline. That, again, is Dan Doktoroff.

You know, Felix Roten and business and labor leaders came together basically to stave New York from bankruptcy, but that didn't make the city better. It took 25 years to get that 800,000 people back. And that was just the start of the recovery. Okay, so the fiscal crisis in the 70s was a relatively short decline, even though the underlying problems were evident for a while, followed by a relatively long recovery. The pandemic, meanwhile, was totally unexpected, and the economic decline has been faster, more drastic, and in the long run, maybe even deeper. So when you look at these two declines, how do you conceptually think of recovering from this

one versus that one? So that one took a long time, billions of dollars of investment, painstaking progress followed by retrenchment and more progress. This, you know, one could argue we were starting to see evidence of a decline in New York before the pandemic. Population had been drifting downward a little bit the last couple of years. In the last two years, we lost 50,000 or so people. And so that was a negative sign. We had started to see slight upticks in certain categories of crime, which were disconcerting. But I think what COVID does is potentially dramatically accelerates that process. On the other hand, New York starts going into this crisis in a much better position than it was in 1975 because it has happened so quickly. So that gives you the opportunity to be really innovative and try things that are very different.

What kind of different things? The example Doktoroff gives is something he tried at the beginning of the Bloomberg administration, right after the 9-11 terrorist attacks. In neighborhoods near the World Trade Center in lower Manhattan, vacancy rates were as high as 45%. You know, when people said they were never going to come back to a graveyard, we said, you know what? If you move back into Lower Manhattan, we will pay 50% of your rent for six months. In retrospect, that looks really cheap, doesn't it? It was incredibly an inexpensive investment in lower Manhattan. The vacancy rate went down to 2%. And after those incentives wore off, it didn't go back up again. But the difference there is that after 9-11, New York City received massive federal aid.

Dr. Off, for instance, had $20 billion in federal funds at his disposal to redevelop downtown Manhattan alone. How much direct federal aid is New York City expecting from the Trump administration? The answer to that would seem to be zero, or maybe even negative, as Trump has threatened to cut federal funding. I asked Congressman Max Rose to assess the difference between a second Trump administration and a Biden administration in terms of federal aid to New York. It's enormous. It's enormous. I mean, this president and his fully owned subsidiaries

like Mitch McConnell walk around hyper politicizing this notion of defunding the police. Everywhere they go, they talk about it, when all the while, they are the greatest proponents of defunding the police in the United States of America. What do you mean by that? What happens if we don't get state and local aid? Cops get fired. That's plain and simple. They walk around talking about how much they want schools to get open, but they're unwilling to sign the dotted line to get billions of dollars back to New York City schools. So as Congressman Max Rose sees it, New York is living through another Ford to city drop dead moment. Meanwhile, New York Mayor de Blasio has gone to Albany to request the authority to borrow $5 billion to avoid laying off thousands of municipal workers. His request has thus far been denied.

The historian Kim Phillips Fine thinks this may be at least a small blessing in disguise. see borrowing as a long-term solution to these problems, partly because it sets up the same dynamic that you saw in the 70s, where creditors are then given a greater amount of power over the city. That's what the debt does. Moody's, the bond credit rating agency, would seem to agree. They recently downgraded New York City's rating and warned it could be lowered further if the city borrows more money to pay its bills. So based on what we've heard thus far, you might easily think that New York is over. So does anyone have any actual ideas for how to help the city recover?

We're going to need to move and move quickly back to a managerial style of city government. How about tax policy? We're going to need to move and move quickly back to a managerial style of city government. How about tax policy? We're going to need to move back to figuring out which taxes are going to scare off the least tax base. And maybe easing regulations? Start with one-stop permitting. That's coming up right after this briefest of breaks. Also, remember to check out the other shows in the Freakonomics Radio Network.

No stupid questions and people I mostly admire. We'll be right back. So, big question first. Is New York City over? Ha! No, New York City is not over. It's not even the beginning of the end. That is the Harvard economist Ed Glazer. This is unquestionably a challenge. New York has reinvented itself over and over again in its 400-year history. But I think by the time we're

looking five years out, the city will have largely recovered and we'll be entering into the next chapter. Glazer is regarded as one of the most distinguished urban economists of his generation. He also happens to have grown up in Manhattan in the 1970s, which might account for a little bit of his optimism about the city's recovery now. I should say that that optimism is predicated on the idea that we will get this pandemic under control in the next, you know, 24 months, and that there will not be a second pandemic within seven years that is just as disruptive. I think if the new normal is wave after wave of pandemics, then the city is under a much greater challenge. In 2011, Glaser published a book called Triumph of the City, how our greatest invention makes us richer, smarter, greener, healthier, and happier.

How does he back up such an aggressive claim? The way I understand this is what's happened with globalization and new technologies have radically increased the returns to being smart. And we are a social species that becomes smart by being around other smart people. In the developing world, cities offer the only path we know of out of poverty into prosperity. And in an increasingly globalized world, in a world in which we don't need vast numbers of people working in agriculture to feed ourselves. Millions of people, billions of people have flocked to cities for the promise of some sort of a future that is brighter than the unending rural poverty that is the past.

You call the city our greatest invention, which means you're putting it ahead of mathematics, the computer, antibiotics, rum raisin ice cream. How so? How is the city the greatest human invention? It is the machine that makes all the other inventions possible, right? And the reason for that is that almost every one of the inventions that you raise, whether it's mathematics and its development, whether in classical Greece 2,500 years ago, or in the House of Wisdom in Abbasid Baghdad 1,200 years ago. It is human connections that make that creativity possible. Almost nothing that we have done as a species is a solo creation. We collaborate, we learn from each other,

we steal each other's ideas with some degree of regularity. Sure, but you don't need a city for that necessarily. And obviously, in a digital age, you can connect much more easily. I don't think there's anyone who's been living through this thing and thinks that like, boy, what I really want to do is sit in my office alone for the rest of my life and just Zoom. I have been betting that virtual connections will not replace face-to-face connections for the last 30 years or so, and I'm not going to stop now. And certainly the technoprofits in the 1980s argued that, you know, the ability to use these fax machines and so forth would make face-to-face

interactions obsolete. That seemed wrong to me because it seemed often that face-to-face interactions and electronic interactions were complements rather than substitutes. I asked Glazer to justify each of the claims in his book's subtitle, that cities make us richer, smarter, greener, healthier, and happier. Richer, enormous amount of data showing that we become more productive in cities, that wages are higher in cities, that people who come to cities experience wage gains, that wage growth is faster in cities. So it's not as if you come and just immediately gain all the wage gains from being in the city.

It's just that year by year, you experience faster wage growth. How about smarter? Smarter, it's exactly through this channel in which we learn from one another. You know, think about Brunelleschi figuring out the basic mathematics of linear perspective. He then passes it along to some, you know, neighbor of his in a city like Florence, like Donatello, who takes that idea and puts it in low relief sculpture, passes it along to another resident of the city, Masaccio, puts it in painting on the wall of the Brancacci Chapel, passes it along to Fra Filippo Lippi and so forth. The chain of genius, each person becoming smarter because they're connected to other

people in cities. And yet, I feel I'm becoming a little bit smarter at this moment, even though you're sitting in some exurb of Boston, I'm sitting in some exurb at the moment of New York City, and we're just talking on the telephone, essentially. Well, it is well known that Freakonomics podcasts are, you know, the best virtual thing out there for duplicating the magic of the city. But Steve, we would still be learning much more from each other. What a dodge that is. We would still be learning much more from each other if we were face to face. Okay.

And how about Glazer's claim that cities are in fact greener? There are two main reasons why, as a person, your carbon emissions go down from living in dense areas. The first is travel. Americans just take much shorter car trips when they live in dense urban areas than when they live in far-flung suburbs. The second big difference comes from smaller living spaces. It's not that apartments are magically greener than single-family detached homes.

They're not. But they are typically smaller. And that means less energy spent air conditioning and less energy spent on home heating. And how about healthier? Well, that certainly has been challenged as pandemics have reared themselves up again. We had a blessed century from 1920 to 2020, when we had almost no significant pandemics, perhaps with the exception of AIDS, that struck the urban world. And we noticed an amazing thing, which was first life expectancies equalized between

cities and outside areas. And then life expectancies got longer in cities in New York, actually over two years longer in New York. The lower death rates have been attributed to more exercise, more social connection, more active lives. And finally, happier. It's an interesting thing because New Yorkers actually don't say that they're happier. In fact, what self-respecting New Yorker is going to tell an interviewer how satisfied they are with their life? But they do, in fact, commit suicide at much lower rates. Triumph of the City was published, as I mentioned, in 2011.

A lot has changed since then. Even before the pandemic, even before New York and other cities went into lockdown, Blazer had taken a hard look at how cities were coming up short of their promise. He wrote a paper called Urbanization and Its Discontents. The sort of backdrop for Triumph was the 1970s. And relative to where we were in 1977, with the city on the edge of bankruptcy, with crime rates soaring, with industry leaving by the hundreds of thousands of workers, cities in 2010 or 2020 still feel reasonably triumphant. Part of what happened

between 2010 and 2020 was we started just expecting more from our cities than a reasonably safe place to make a living. We started expecting that it would start solving a wider range of social problems. We started becoming less tolerant of the inequalities that exist in cities. Glazer points to several urban discontents. An obvious one is the low availability and high cost of housing. It is certainly true that the city's own triumph sowed the seeds for the housing market difficulty and for the anxiety about gentrification. Both of those reflect the fact that you have rising demand of a city that's not being met with accommodating space and hence is pushing its way into neighborhoods that didn't really want to be pushed into.

High housing prices also work against the wage advantage that cities confer, especially for less educated workers in expensive cities like New York and San Francisco. Their wages have actually gone up, right? And so if you're looking for a job, at least pre-COVID, if you were trying to find a job as a bartender, you were going to be paid a lot more in San Francisco than you were going to get paid in Atlanta. On the other hand, the competition for urban space has meant that those wage gains have been eaten up by the price gains.

So their quality of life is higher, their earnings are higher, but they're paying through the nose for their living space. Another urban discontent, income mobility or the lack thereof. It really does look that while cities were doing a great job of enabling adults to connect with labor markets, they were really not doing a great job helping kids to thrive. The lack of urban opportunity for kids growing up in cities, those are disturbing set of facts. So of the discontents that you list, if you could fix one, and let's say we're talking about fixing one pre-pandemic because there's so

much in flux now, which would it be? Which discontent, if you could have some kind of magic wand or a lot of leverage, do you think would help take care of a lot of the others? Oh, look, it's always about the kids. It's always about urban education. It is by far the most important thing. Now, unfortunately, it's the hardest thing. If you ask me which one I know how to fix, I mean, I don't know how to fix the politics

of housing supply, building more apartments. I know how to make New York affordable. You build 100,000 new units a year. That's a technological fix. Whereas the schools, they're a living, breathing organism with teachers and kids, and it's just really hard. But if you gave me like a magic wand to fix it, I would fix those schools. There's another urban discontent that has re-arisen lately.

People are concerned about what appears to be an increase in homicide rates in at least some cities. That's Jennifer Doliak, an economist at Texas A&M who studies the criminal justice system. You know, crime is often part of the conversation around the state of our cities and whether they are appealing to live in, whether they're safe to raise children in. Over the past few decades, there had been a strong positive trend. So basically crime rates, especially violent crime rates, Over the past few decades, there had been a strong positive trend. So basically crime rates, especially violent crime rates, dropped substantially beginning in the early to mid-90s. And it's basically been a nonstop drop since then.

And so the conversations we're having now around an uptick in especially homicide rates during the last couple of months, you know, we're still at historic lows in terms of crime rates. How big is this uptick? So the best research on this, I think, is by David Abrams at the University of Pennsylvania, where he has aggregated a whole bunch of data at the city level over time. And he finds that on average, there is about a 5% increase in homicide rates. A 5% increase, especially coming off such a long decline, doesn't sound that significant. So why is there the sense that crime has gotten so bad? I think part of the reason is just the way the media talks about crime and the way that politicians, particularly our president, have been talking about crime. And so any increase in crime then becomes extremely salient to people when it's mentioned in the news all the time. Right. So keeping in mind that 5% average increase in homicides, some of the cities I'm looking at in these data have a much larger year-over-year increase.

Philadelphia up 23%, Chicago up 34%, New York City up 23%, New Orleans up 36%. On the other hand, when you look at all these cities, even when their homicide rates have not risen that much, most non-homicide crimes have, since the pandemic began, fallen. So why is that? Why would homicides be rising when almost all other crimes in most places seem to be falling? That is a great question. I'm not sure we have a great answer to it yet. I think a lot of the other types of crimes depend heavily on foot traffic. If we're talking about robberies or muggings, if people aren't out and about anymore, then there's no one to rob. We see home burglaries are down a whole lot, and that's probably because

people are home and burglars don't like to break into homes when people are there. We actually see an increase in commercial burglaries, so breaking into stores that are closed now, which sort of makes sense. Homicide, it's a bit of a mystery, and I think the mystery is compounded by the fact that we're seeing different effects in different cities, so it's kind of hard to come up with a really clear story. It's possible that some of this is gang violence, and so if people aren't out and about, then there aren't witnesses and bystanders who might deter violent crime or violent confrontations among people that perhaps don't care about stay-at-home orders. Something else that has been written about quite a bit now is what happens to domestic violence rates. We see domestic violence rates increase quite a bit. Some of those surely are turning into homicides, but that probably is not explaining all of the potential effect on homicides in these cities. is that when a given police department has been accused of brutality or using excess force,

they tend to pull back from their crime prevention duties. There have been a few papers on this at this point, and most of them suggest that a reduction in police effort, or these police slowdowns, probably are causing an increase in crime. It's a longer and highly contentious conversation about whether it's reasonable for the police to be pulling back in the current moment. But if they are, then it'd be reasonable to expect that to contribute to increasing crime rates. The summer of 2020 saw

many urban police departments under scrutiny with widespread calls for police reform and defunding. So I live in Austin. I think they just voted to cut our police budget by a third. I am very interested to see how that plays out. And so I think... Interested, like with one foot in the moving van interested? Not that interested. But I mean, I do believe strongly enough in the research that increasing policing reduces crime rates. The broader conversation about reducing police budgets and shifting that money to other social services that could also reduce crime, increasing policing reduces crime rates, the broader conversation about reducing police budgets and shifting that money to other social services

that could also reduce crime, I think are very useful conversations to have. And I'm all for trying some of those kinds of reforms. I think the challenge is that those types of changes are not gonna happen overnight. And so seeing some places cut their police budgets without a very clear plan as to how they're going to essentially replace those efforts immediately in some other fashion, that makes me nervous. Rising crime in cities, or even the perception of rising crime, tends to be an outsized factor in driving residents out of cities,

especially those with high education levels and with kids. Ed Glazer, even though he grew up in New York in the midst of the fiscal crisis, has more vivid memories of the crime threat than the bankruptcy threat. The set of blocks in which you could safely walk was becoming smaller and smaller over the course of the 1970s. I remember having this strategy of muttering loudly to myself in hopes that people would think that I was either a heroin addict or otherwise insane and leave me alone. Again, the pandemic is a different kind of threat to New York than the fiscal crisis was. But I asked Glazer to take a step back and talk about how to prevent another 70s-style vicious cycle.

By the way, New York Mayor Bill de Blasio is term-limited and will be replaced in a 2021 election. So we're going to need to move and move quickly back to a managerial style of city government, right? We're going to need to move back to figuring out which taxes are going to scare off the least tax base. It's crucial that we maintain basic city services. And it's crucial we not ask any particular sector to bear all the burden. We need to have a managerial approach that tries to spread the pain and that tries to keep the core services still functioning. Do you see anyone running for mayor in New York City who fits those characteristics?

I don't have a view yet. I need to see more. So one thing, it is not running a punitive city, not deciding any group of your city are going to be attacked. And this is why it's so crucial not to think that the fiscal burden is going to be imposed on any one sector. That's absolutely crucial. A second thing is it's a style and it's an openness. And it is also encouraging the ground up organic attempts to enable civic leaders to do their own thing and have respect for that. It's a willingness to share the spotlight when appropriate and not to try and grab all

the oxygen in the room. Let's talk about regulations. And I'm particularly interested to know if for those who would like to see cities really change their regulatory position, whether the pandemic might prove an opportunity for that to happen. So you write in your paper, when Mark Zuckerberg started Facebook in his Harvard College dormitory, he faced few regulatory hurdles. If he had been trying to start a bodega that sold milk products three miles away, he would have needed more than 10 permits. You know, I've been agonizing over this for a while. And I think one of the reasons why cyberspace has proven to be such an attractive place for new talent is it's been kind of a wild, wild west, whether we're trying to sell books or

establish search engines or set up social networks, the regulators weren't there. They were playing catch up just as they are in cities. But this meant that you could go and start your thing. And eventually someone realized they didn't actually like all the things you were doing and they tried to clamp down, but you were so far ahead that you were free to do whatever you wanted.

Whereas in terms of starting a small grocery store, starting anything with a physical footprint, governments were already there, sometimes for good public health reasons, sometimes to protect incumbent businesses. Both cases, you've got to run through this got of regulations. Now, does the pandemic afford us a reset? Gosh, I really hope so. because one of the things this pandemic is doing, it is an absolute catastrophe for America's small businesses, for cities' small businesses, who came into this with a very thin wafer of financial cushion. Many of them are being wiped out now.

And so we will have to have new businesses replace old businesses. And I will stress, if we make it easy to start new businesses, lots of business closures are okay. It's really okay that a business shuts down if one restaurant shuts down and a new restaurant opens in the same place. But you need to make it easy for, you know, the same restaurateur who went broke in April of 2020 to reopen in April of 2021. And so it is so crucial that cities understand this period, if there's ever been a period, to sort of restart business regulation. This is the time.

And how exactly does Glazer see this happening? Start with one-stop permitting. Whatever it is you think permits need to go through, you want one person for the businesses to connect. So right now there is a plethora of different agencies. You need to see the fire department for this and you need to see the police department for that. You can have one person who specializes in making it easy for businesses to start doing cost benefit analysis and all those regulations. No one has ever applied a single decent piece of cost to benefit analysis to any of this stuff. And

they just accrete over time. So create yourself whatever blue ribbon commission you need and allocate some amount of money to do this and make the thing work. And third, it probably is worthwhile thinking about what you're doing around the real estate taxes on commercial space relative to residential space. New York is a very messed up property tax regime. It has long been overdue for the city to move towards a more sensible, more transparent system

where we don't treat different forms of property wildly differently in terms of their tax burdens. Ed Glazer has already given the New York City and state governments plenty to work on, and he barely got to touch on one of the most crucial problems that must be addressed in order to keep New York and other expensive cities from spiraling downward, the housing problem. That's where we will pick up this conversation next time. It will include someone who recalls growing up in dilapidated public housing in San Francisco.

And sadly, feeling hopeless and frustrated and wondering, why me? Why my community? Why is my family in this situation? Why are we poor? That is London Breed, who today is the mayor of San Francisco. She and our economist friends will help us explore the history of unaffordable housing, the solutions that have failed, and what might actually work. That's next week on Freakonomics Radio.

Until then, take care of yourself and, if you can, someone else, too. Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Zach Lipinski. Our staff also includes Allison Craiglow, Greg Rippin, Matt Hickey, Daphne Chen, Mary DeDuke, and Corinne Wallace. Our intern is Emma Terrell, and we had help this week from James Foster. Our theme song is Mr. Fortune by the Hitchhikers. All the other music was composed by Luis Guerra. You can get Freakonomics Radio on any podcast app. If you want the entire back catalog, use the Stitcher app or go to Freakonomics.com. Freakonomics Radio can also be heard

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But if we have to make PhD students wait for seven minutes, OK, sounds good. Stitcher.