Clark researcher: What’s eating the ‘donut cities’

American cities have been dealt a bad hand lately. Before the pandemic, boomtowns in the San Francisco Bay area drew thousands of technology workers to live and work there. Investors and tourists followed. But the pandemic ended that golden era. Remote workers moved away, and the money followed them. Relief funds dried up.

What is left are what experts call “urban doom loops,” “ghost towns,” and “donut cities” like San Francisco and San José, where downtowns are hollowed out as residents and businesses leave. High rents and societal fray have led to homelessness, drug addiction, and mental health crises. Racial and economic inequities flourish. On the East Coast, Boston and New York have scrambled to support migrants, some of whom have been bused north by Republican governors.

But if you think that sounds bad, Clark Professor Mark Davidson, an internationally recognized urban geographer who has studied cities for over two decades, warns that even more crises are poised to hit America’s urban core: climate change; unfunded city and state pensions; and increased public employee healthcare costs among them.

In Massachusetts, for example, “many cities are only 50 to 60 percent funded in their pensions. They often have only 10 percent discretionary money in their budgets, and more of that will be taken up by pension contributions and health contributions,” Davidson says. “There will have to be a negotiated settlement with labor unions at some point,” he adds, “but no politician wants to take on the labor unions, so they kick the can down the road.”

However, he notes, there are success stories out there.

“Historically, American cities are unparalleled in changing to meet new demands. For some, these demands are significant,” Davidson explains. “Take Detroit. It went from an industrial powerhouse to being the archetypal ‘donut city.’ The challenges Detroit has faced are truly daunting. But now it is remerging as an important hub of urban entrepreneurship. It is proof that urban challenges, however large, can be confronted.”

Davidson’s research focuses on gentrification, urban theory, municipal finance, and urban sustainability. For 20 years, he has taught Social Justice and the City, which examines not only the challenges facing cities but the philosophical debates surrounding them.

“Cities cause us to ask moral questions,” he says. “These different moral theories are tools we can use to think about the problems we confront.”

In his new book, “Justice and Cities: Metro Morals,” he explores the most common theories of justice that can be applied to study cities: utilitarianism, libertarianism, liberalism, Marxism, communitarianism, and conservatism, along with post-modernism, post-structuralism, and post-colonialism. He defines justice as something that is concrete, “a social relationship we agree upon.”

In Part 2 of his book, he explains how these theories of justice can be applied to urban problems like gentrification, urban segregation, and housing affordability.

A Q&A with Professor Mark Davidson

In a recent interview, Davidson shared his thoughts about cities.

Where have you conducted research on cities?

I’ve been up and down the San Francisco Bay Area quite a bit. When I first got to Clark [2009], I did a project in Vallejo, which is in north San Francisco Bay. It had just gone bankrupt. More recently, I’ve just started a project partly based in San José.

I’ve also studied cities in Massachusetts.

What is happening to cities in the Bay Area?

I was driving through some spots in Oakland and San Francisco, and I actually never thought I’d see American cities looking like they do.

You are seeing a period of disinvestment, and some of that’s because of the pandemic and remote work. San José and San Francisco are running less than 50 percent office occupancy rates, and all those tax revenues that were generated by commercial occupancies are now becoming budget holes, which means less money for things like homelessness relief and addiction services.

So, in San Francisco and San José and many big cities, you have fewer businesses there, fewer tax revenues to deal with inner-city problems, and growing inner-city problems, which then results in businesses less willing to be there. And then some of the residents who have moved back to inner cities are less likely to want to be there.

How do Bay Area cities compare to Worcester, Massachusetts, right now?

In industrial cities like Worcester in the ’70s and ’80s, you had a fully formed “cake,” then you had industry and people leaving the inner city, hollowing it out [a “donut”]. You had high vacancy rates and empty buildings. And what you’re seeing in places like Worcester now is a filling back in of that “hole.”

The winners and losers will be a little bit different this time around. You could see somewhere like Boston having a little harder time. But as people are squeezed out of Boston due to higher rents, Worcester is having a better time in terms of its renewal — whereas 50 years ago, Worcester had an industrial base, and that was where the decline was.

What about the rising cost of housing in Worcester?

The housing prices right at the top of the market tend to set the prices further down. It’s a cascading effect. If people who are earning $250,000 a year want to live in Worcester, they’ll bid up the price of prime real estate, and that draws everything else up. The impacts of affordability are always accentuated at the bottom end of the income ladder.

That’s the whole issue behind gentrification: Once the rich people or higher-income people start moving in, then all the rent rates get pushed up.

Why are pension and retirement funds investing in urban real estate, and what does that mean for cities like Worcester?

If you look at the assumed rate of return on pensions, many people are assuming a 7 percent return. If you look at, on average, how much the economy grows every year, it’s about 2 percent. And so there is a huge institutional incentive to find above-economic-growth returns to fulfill pension fund estimations. This is a huge problem in public sector pensions and defined benefit schemes, including in Massachusetts.

Developers use capital markets to fund the borrowing. If you look at where a lot of investment has gone in real estate across the U.S., the sweet spot for capital investment is in mid-sized cities like Worcester.

So what you see in cities like Worcester is an urban renaissance. Money rushes in because mid-sized cities provide an investment return, and some of that is from private investors, but a lot of it is from institutional investors, moving pension funds in.

But going back to the donut cities, if you start to see a decline in the cities, then all those investment monies that have been pouring in will simply go somewhere else because they’ve got to find the 7 percent return.

If you look at how much money has poured into Worcester over the past 10 years, it’s astonishing. But if people start to presume that those investment returns are no longer there,  that money will simply dry up and go somewhere else.

What about home ownership? Will that exist in the future?

That question just came up in class today. Some of the students were talking about what they expect in the future for their own lives, and there was a general consensus that the idea of having a family or owning a home would be largely unattainable for them.

There is a lot of discussion now in urban literature, both popular and academic, about how a lot of places that were presumed to be home-ownership societies are now making a very difficult transition to become renting societies. In London, for instance, it is almost completely impossible for most people to own a home; back in the 1980s, the entire social model was based on home ownership. There are lots of European countries where their entire basis is renting, but in Anglo countries, home ownership is a staple of the ideology.

In the West, we’ve seen a breakdown of that societal model. But it’s interesting that we have that ideology because there are plenty of other places around the world where people don’t own a home, and they still have kids.

Turning to your book, how does geography relate to moral theories of justice?

Your geographical perspective is conditioned by the moral theory that you’re using. What I’m saying in the book is that if you take the same urban problem, a liberal and a conservative will not only have a different moral outlook, but they’ll actually see a different geographical problem because their moral perspectives have a different geographical propensity within them. So they’re not even looking at the same thing.

I wrote the book so that students, who are faced with a very polarized, tribal world, could have a resource where they could dip into the outlooks of other “tribes” to understand where they are coming from.

Can you give an example?

There are debates in the literature about what causes housing affordability issues. You have a libertarian perspective that says it’s about housing regulations and the inability of people to act under their free will. The libertarian will focus on the individual level to say that geography becomes less important.

The liberal perspectives often look for universal rules to say that geographies are less important. The communitarian is about the strict delineation of communities that have their own sets of internal values, therefore, making geography absolutely imperative. The conservative is interested in the historical founding of social values, often at the national level. But civil associations are also important.

As soon as we bring a particular moral perspective to an urban problem, it’s almost like putting on a different pair of spectacles. It can be illuminating to say, “Oh, that’s an interesting way to look at it. I’ve never seen it like that before.”