Cities that rise from the dead

With Easter today and Atlanta in the news, I was thinking of American cities that claim to have risen from the dead. The phoenix has been the symbol for Atlanta for over a century:

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Like the Phoenix, Atlanta had risen from its own ashes following its destruction in 1864. Many times during the city’s history, Atlanta has redefined and reinvented itself, rising again as the city slogan, Resurgens, suggests. The “Atlanta Spirit” is another oft-referenced slogan describing an entrepreneurial and ambitious attitude that has shaped the city’s historical identity.

After the Great Chicago Fire of 1871, boosters and others were eager to rebuild:

On October 11, 1871, three days after the fire started that devastated the city, Bross’s Tribune proclaimed, “CHEER UP. In the midst of a calamity without parallel in the world’s history, looking upon the ashes of thirty years’ accumulations, the people of this once beautiful city have resolved that CHICAGO SHALL RISE AGAIN.”

Bross, who was an avid promoter of the city, predicted that Chicago would be rebuilt in five years and would reach a population of 1 million by the turn of the century, as Donald Miller reports in City of the Century.

There is an accepted narrative that the fire created a blank slate upon which Chicago was quickly rebuilt. That blank slate allowed it to become a dynamic city of innovative architecture with a fresh skyline dotted with a brand-new building called the skyscraper.

“The great legend of Chicago is that it’s a ‘phoenix city’ – it almost instantly rebuilt itself bigger and better from the ashes. And to a certain and significant extent, that’s true,” said Carl Smith, professor emeritus of English at Northwestern University and author of Chicago’s Great Fire: The Destruction and Resurrection of an Iconic American City.

And the city of Phoenix draws on the presence of people hundreds of years before:

Those former residents were industrious, enterprising and imaginative. They built an irrigation system, consisting mostly of some 135 miles of canals, and the land became fertile. The ultimate fate of this ancient society, however, is a mystery. The accepted belief is that it was destroyed by a prolonged drought. Roving Indians, observing the Pueblo Grande ruins and the vast canal system these people left behind, gave them the name “Ho Ho Kam” — the people who have gone…

By 1868, a small colony had formed approximately four miles east of the present city. Swilling’s Mill became the new name of the area. It was then changed to Helling Mill, after which it became Mill City, and years later, East Phoenix. Swilling, having been a confederate soldier, wanted to name the new settlement Stonewall after Stonewall Jackson. Others suggested the name Salina, but neither name suited the inhabitants. It was Darrell Duppa who suggested the name Phoenix, inasmuch as the new town would spring from the ruins of a former civilization. That is the accepted derivation of our name.

Many cities have faced crises, disasters, or unusual starts. Local histories and narratives can also emphasize positive moments (and downplay negative moments). The rising from the ashes, overcoming great obstacles, coming back to life, these are all powerful narratives for big cities. They imply success, progress, and hopefully growth.

What these narratives mean now may be harder to ascertain. What does the aftermath of the Chicago Fire mean for Chicago today? Is Phoenix still rebuilding a great civilization? More than 150 years after the Civil War, is Atlanta continuing to reinvent itself? A city rising from the dead once is impressive but it may be harder to pull off over decades of change.

Looking at creepy abandoned McMansions on TikTok

Empty McMansions that were intended to be part of a resort in Missouri have caught the attention of TikTok users:

As @carriejernigan1 explains in her video, the Indian Ridge Resort was meant to be a $1.6 billion development, complete with a wild amount of luxurious amenities. According to Missouri’s KYTV-TV, developers wanted Indian Ridge Resort to feature a shopping mall, a marina, a golf course, a 390-room hotel, a museum and the world’s second-largest indoor water park.

Many of those projects never got off the ground, as @carriejernigan1’s video shows. TikTok users were naturally creeped out by her clip, which shows decaying McMansions amid a sea of overgrown plants. Some called the ghost town “scary” or “nightmare-inducing.”…

This is not the first time I have run across creepy McMansions in Missouri. I recall the presence of McMansions in Gone Girl. Perhaps McMansions make some sense here: it is a conservative state in the middle of the country where people might be more willing to purchase such homes.

At the same time, the connection to a resort near Branson is an interesting twist. This is not just a normal suburban neighborhood of McMansions occupied by crass suburbanites in the Midwest. These homes were part of a larger luxurious project. From the TikTok video, the homes themselves seem to be larger than a typical suburban McMansion. The McMansions themselves are not meant to on their own impress people visiting or driving by; the whole resort community would help do that.

This also offers intriguing possibilities for how these McMansions might be reused. It may not be worth it for another developer to come in and finish off these homes. Could the materials be repurposed? Could the homes be completed but subdivided to create smaller units? Could this be some sort of weird theme park involving these homes (think Halloween where abandoned McMansions become haunted houses)?

Bears stadium at Arlington Park? Just keep the taxpayers out of it

With the announcement that Arlington Park will be for sale, ideas are swirling about how the land could be used. I have heard a few times already the possibility of the Chicago Bears constructing a new stadium there. Here is one example:

The Loop from the North End of Soldier Field

Now it is urgently incumbent upon regional politicians and civic planners to begin a campaign to get a global-class Chicago Bears stadium built as a profitable symbol of the rebirth of the 326-acre site.

Fulfillment of such a bold and visioned plan would bring about a marriage of an NFL team and a suburb that was first discussed between “Papa Bear” George Halas and then-AP empress Marje Everett in 1968…

The question of “How?” can only be answered if there is an enormously creative and concerted joint effort put forth by such potential game changers as Bears chairman George McCaskey, Arlington Heights Mayor Tom Hayes and Gov. J.B. Pritzker…

Said Mayor Butts: “From my experience — and I’m talking about my suburb, which is 52 percent Hispanic, 47 percent Black and 1 percent ‘other’ — if you have an inspired plan, proper financing that does not put the host municipality at risk and a resolute ‘will-get-done’ attitude, toss in hard work and you can make a great thing happen.”

On one hand, this is a unique opportunity. It is rare for parcels of land this large to open up in suburbs developed decades ago. Filling a large parcel can be difficult; what can add to the existing community without threatening the current character? This particular location provides easy access to highways, easing travel for thousands of fans. The surrounding area is already used to sporting events on the sites. A suburb could become home to a major sports stadium.

On the other hand, the “creative and concerted joint effort” required to pull this off could become an albatross to taxpayers who often fund large stadiums for wealthy team owners. This is a tax break of massive proportions for a feature economists argue does not necessarily bring added economic benefits to a community. The stadium may provide status to a suburb but this does not always translate into financial gains. And Illinois has a history of this already: just see the state deal where taxes are still funding the White Sox stadium.

How to balance these competing perspectives? Many suburbs would jump at the opportunity as growth is good, having a pro sports teams is an important status symbol, and hearing the Bears are playing in Arlington Heights could be part of a branding strategy. But, I would recommend leaving the taxpayers out of this: they will likely not benefit economically from a new stadium.

The lost opportunity to transform a city for the better, Christchurch edition

The 2011 earthquake that hit Christchurch, New Zealand offered an opportunity for a new approach to city life. What ended up changing? One writer suggests not much.

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The Feb. 22, 2011, earthquake killed 185 people and had an unprecedented impact on the built environment of Christchurch, a city built by white settlers on drained swampland. More than 1,200 buildings inside the central four avenues were destroyed by the quake or by demolition crews in the years after. In the suburbs, a process called liquefaction was just as devastating. As the ground shook, water and sand squeezed up through the soil to the surface, leaving the soil to subside into the space the water had vacated. Houses slumped, and roads folded inward like the icing on a failing chocolate cake. In the hardest-hit eastern suburbs, the government eventually bought out and demolished about 6,500 houses, upending countless families.

One of the champions for this area of the city, which is demographically poorer and browner than the rest of Christchurch, was then-opposition MP Lianne Dalziel. She left Parliament in 2013 to contest the mayoralty, won, and is now in her third term. When I asked her about lessons to come from the rebuild, she immediately mentioned “Share an Idea,” an inclusive project run by the City Council in the months following the quake. “It was an opportunity for people to submit ideas about how they might reimagine their city,” she said. More than 10,000 people contributed over 100,000 ideas, which the council used to influence its draft central city plan. Share an Idea empowered the community, produced concrete recommendations for the future, and won international accolades.

In late 2011, the national government rejected that community-generated plan. Sidelining local politicians, the government came up with its own version, formulated behind closed doors in about 100 days. With much fanfare, the government announced a “Blueprint” for Christchurch that promised a brand-new city peppered with big-ticket items: a stadium, a library, a convention center, a giant indoor sports facility. The CEO of the government agency set up to oversee the rebuild said that “this new city will absolutely set an international benchmark for urban design, innovation, and livability.” The minister in charge, Gerry Brownlee, noted that “the plan and its implementation are being watched by the rest of the world.”…

A 2019 survey of 30,000 Christchurch residents found that just 29 percent of them thought that the city was better than it was before the quake. I lived in central Christchurch for about a decade, both before and after the quake, and I have to agree with the majority. Rebuilding this city was an opportunity to make something great; instead, 10 years on, we’re still talking about Christchurch’s potential. What lessons can other cities, rebuilding from disaster or redesigning in anticipation of change, learn from Christchurch?

Given how major cities operate today, this might not be a big surprise. Do city and civic leaders tend to listen to the people or do they go with decisions that enrich the interests of elites?

Sociologists have written about this. More broadly, the growth regimes/machines literature suggests that city decisions are made by a pro-growth coalition that can make money off development. The broader public has limited influence in big decisions.

More narrowly, studies like Crisis Cities show how communities react to large-scale crises. In the case of New York City after 9/11, much of the money and redevelopment effort went back into expensive property. In New Orleans, relatively little was done to help poorer residents and neighborhoods while more effort went into rebuilding the tourism industry.

This does not mean such change could not happen. But, it would be unusual. Without sustained effort from the larger community or unusual efforts from leaders to incorporate the community, redevelopment and cleanup will be aimed in a particular direction.

Asking in San Francisco why a McMansion is allowed but a fourplex is not

McMansions may not just be undesirable on their own. If a McMansion is built, another kind of dwelling is not. One proposal in San Francisco aims to address this:

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He will introduce an ordinance making it much harder to build giant homes — the ones increasingly dotting the hillsides above Glen Park that many San Franciscans deride as monster homes or McMansions, but which are perfectly legal to build.

He will also ask the city attorney to draft legislation making it legal for any corner lot in the city that’s currently slated for one home to allow up to four units. And, most significantly, the legislation will allow any parcel within a half mile of a major transit stop like the Glen Park BART Station to be converted into a fourplex — corner property or not. The extra units could be rented or sold.

Yes, in large swaths of San Francisco — this supposedly progressive bastion — it’s currently legal to build an enormous, over-the-top house for one family, but illegal to build a small apartment building of the same size for four families.

This question plagues many desirable neighborhoods in big cities and suburbs: should anything that disturbs the existing character and/or property values be allowed? If this is the driving question, a McMansion might be a threat because it is a different kind of home – derided by critics as too big, architecturally incoherent – compared to what is already there. At the same time, the McMansion is still a single-family home. If that single-family home was replaced by a multi-family unit, residents then express concerns about increasing densities. They might also have concerns about renters moving into what was a neighborhood of homeowners as many Americans assume renters are less committed to their community.

And, as the article notes, making changes like this often means neighborhood by neighborhood conversations to consider the implications. Will a change have different impacts in different communities? What might be some of the unintended consequences? What will neighborhoods look like in a few decades with changes?

San Francisco may have a particular need for solutions but so do many other locations. The answers might come slowly on a case-by-case basis.

Finding housing in former strip malls and big box stores in California

In a state with a need for cheaper housing, some in California are looking to commercial properties along main roads:

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Joe DiStefano sees boulevards like El Camino Real as more than just spots for takeout or an oil change. He sees a “perfect storm of opportunity.” Cofounder and CEO of UrbanFootprint, a software company that builds urban planning tools, DiStefano has done numerous studies on the housing potential hiding in California’s commercial strips. According to UrbanFootprint’s analysis of El Camino Real, this lone corridor could theoretically accommodate more than 300,000 new units if the road was upzoned to allow residential development and its parking lots and big-box stores became low-rise apartment complexes…

Converting underutilized retail and office space into apartments is not a novel idea, but it’s gaining fresh attention from California lawmakers, especially as pandemic-fueled e-commerce and remote work trends continue to empty brick-and-mortar stores and business parks across the state. In December, California State Senator Anna Caballero, who represents the Central and Salinas valleys and cities such as Merced, helped introduce Senate Bill 6, which would fast-track the creation of walkable infill development and make it easier to turn land zoned for commercial uses into housing. Another member of the state’s legislature, Assemblymember Richard Bloom, has a similar proposal to encourage commercial-to-residential conversions, Assembly Bill 115. (California has a bicameral legislature.) And Senator Anthony Portantino introduced AB15, which would incentivize turning vacant big box sites into workforce housing…

But more than 40% of commercial zones in California’s 50 largest metros prohibit residential development, according to a recent report from the Terner Center for Housing Innovation at Berkeley. “Residential Redevelopment of Commercially Zoned Land in California” highlights the growing potential of such rezoning proposals. “It’s a perfect infill option,” says David Garcia, a co-author and policy director at the Terner Center. While legislation like these proposed bills hasn’t been passed in other states, he believes they address a universal problem. “You’re really plugging in gaps left by shifts in the commercial marketplace, by Covid and the shift to e-commerce.”

There are three main types of projects ripe for this kind of reuse, Garcia says: commercial strips in more urban areas, often along existing transit lines; former big box retailers in more suburban areas; and vacant land in the exurban landscape that’s been reserved for future development. Researchers found there was actually more acreage of available commercial space per person in more suburban/outlier areas, an opportunity that, if paired with increased investment in transit, could quickly bring more density and valuable walkable development to fast-growing and diversifying suburban centers, some of which have already done a relatively good job of building new housing. “Instead of thinking about a bill like this as another state mandate cities need to adhere to, it should be looked at as a tool for doing the good planning they need to do anyways,” Garcia says. 

This might be hard sell before COVID-19 but the severe issues for retailers and businesses may make a lot of properties available.

Even with these issues, I wonder how many communities would quickly give up commercial properties to be rezoned for residential use. Many communities rely on commercial properties along major roads for sales tax revenue. If commercial property disappears from the local zoning map, how would a community make up those revenues?

Of course, providing possibly cheaper housing could be desirable to residents, even if it comes at the expense of commercial properties. And new residential units might even revive some local commercial activity.

If this is enabled at the state level, it would be interesting to see how quickly communities and developers would move. Vacant property is not desirable for any municipality. Would this move more quickly in certain kinds of communities compared to others?

One expert says roughly 25% of shopping malls will survive

Shopping malls were in trouble before COVID-19 but add that in and experts suggest many malls will need to shut down or transform:

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Of the roughly 1,100 malls left in America, Kniffen believes only 278 are viable in the post pandemic world where online shopping will reign even more supreme. These would be the best of the best malls — or “A” malls as experts call them — that are in densely populated areas and target higher income shoppers…

The pandemic has just sped up the day of reckoning for vast stretches of zombie retail real estate. America had a glut of retail space before COVID-19, with twice as many square feet dedicated to shopping as any other country in the world. Retail is oversupplied by six square feet per capita compared to Europe, according to the International Council of Shopping Centers for U.S. merchants, a New York-based retail trade group…

In the U.S., 20%-25% of retail spaces will become vacant in the next few years due to the pandemic, Crowe estimates. Half of the malls in America will disappear over time, said Najla Kayyem, senior vice president of marketing for Pacific Retail Capital Partners, a California-based retail investment and management company

In the end, the concept of a community gathering place known as a mall still makes sense, experts believe. But the days of malls simply being stuffed with pizza places, apparel stores and various kiosks are over. COVID-19 hasn’t killed the mall, rather accelerated its rebirth into something far more useful for the modern era.

Such changes could have wide-ranging effects:

  1. This could produce nostalgia for the era of thriving shopping malls. Imagine a lot more television shows and movies portraying life between the 1960s and 2000s featuring the shopping mall as something from a bygone era.
  2. If many malls need to close, what happens to all the debt involving these properties? Someone will be on the hook for this though perhaps some of the problems could be averted if the pace of closings is slower and some malls are reinvented.
  3. Where will people go to gather? While shopping malls were never public spaces, they did provide space for people to be around each other.
  4. This will likely affect different communities in different ways. Shopping malls in wealthier areas will likely have a better chance of survival – continuing to bring in revenue for communities – while malls in other communities will close and communities will struggle to fill the land.
  5. As is noted in the article, this presents a lot of redevelopment opportunities. Will there be a common approach across shopping malls that everyone tries to copy or will this look different from mall to mall?

Looking for buyers for thousands of properties in Black communities in and near Chicago

Even as new skyscrapers join the Chicago skyline, thousands of properties in the Chicago barely attract any interest:

Locations of Cook County property tax 'scavenger sale' properties
Chicago Tribune graphic

County Treasurer Maria Pappas is out with a new report that concludes the 81-year-old program isn’t working. Not enough people are bidding on the properties, she says, and so the parcels often remain eyesores, a deterrent to revitalizing the neighborhoods they blight. That especially hurts struggling Black city neighborhoods and south suburbs, Pappas notes.

“Nobody wants these properties because they are in areas that are losing population, have high crime and aren’t worth the property taxes you have to pay to own them,” said Pappas, who conducts the sales as directed in state law. “So people abandon them.”…

Land Bank officials strongly dispute that notion, saying they’ve done more to return properties to productive use in just a few years than private buyers — often hedge funds making speculative bids — have achieved over a much longer period of time.

They acknowledge changes to the system are needed, and plan to ask lawmakers to approve them. “If the treasurer would like to support the reform of this, we couldn’t be more happy to have her join us,” said County Commissioner Bridget Gainer, who set up the Land Bank in 2013.

Vacant properties are not desirable in any community since they are not generating the revenues they could, whether because taxes are not being paid or the land is not being used in a productive way. Additionally, they are aesthetically unappealing – being often viewed as signs of blight or neighborhood problems – and could attract unwanted activity. Whether it is suburbs trying to fill empty grocery stores or dead shopping malls or communities with fewer economic opportunities looking for redevelopment, vacant or abandoned land is distressing.

This particular ongoing issue in the Chicago area is highlighted even more clearly when land not very far away – perhaps just a few miles and sometimes in the same municipality – is very desirable and multiple actors would want to redevelop it. Even during COVID-19, land in the Loop attracts attention as developers and architects eye property and vie to be part of what is viewed as a desirable area and a good investment.

In the United States, the contrast between the availability of capital and development by location can be incredibly stark. In this case, it is connected to significant residential patterns by race where land and buildings in Black neighborhoods are less desirable. There is land to be redeveloped in Chicago and it can be had rather cheap…but, due to powerful social forces over time, no one has any interest in the cheap land and they would rather continue to fight over and compete in the lucrative areas.

Where shopping mall debt ends up

A story of several traders who shorted shopping mall debt provides insights into financial workings of shopping malls:

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Then, in October 2018, Sears declared bankruptcy, and they decided it was time. Here was the scheme: MP built a position against two slices—called “tranches” in Wall-Street speak—of mall debt with, they thought, a relatively low likelihood of being repaid: CMBX.6 BB and BBB-, which were filled with roughly $2 billion worth of debt, an outsized chunk of which was issued to 39 struggling shopping malls. They bought credit default swaps on the block of debt, which amount to insurance policies on the bonds. If the bonds went completely bust—similar to, say, your house burning down—they would be owed their entire value in cash. But even if the tranches decreased in value, MP’s insurance would be worth more and they could sell the swaps for a profit. In any case, it was an asymmetric bet: the downside risk was confined to what they’d have to pay to hold the insurance, but the potential payout was many multiples of that amount—theoretically in the billions…

Meanwhile, McKee was becoming known on Wall Street as “The Queen of Malls,” and other bearish hedge funds began asking her for advice on shorting CMBX.6. “All I did was talk about malls all day,” she said. This included portfolio managers working for the infamous billionaire activist investor Carl Icahn, who, by the end of 2019, had put on a $5 billion short position, arguably the largest by anyone on Wall Street. This went against conventional wisdom at the time, considering that the value of the mall debt was going up, but once word got out that Icahn had entered the ring, the trade was taken more seriously on Wall Street. “That made a lot of people stand up and say, ‘Hold on, we should look at this,’” McNamara said…

Between March and July, as businesses struggled to pay their rent, CMBS delinquencies, according to Trepp, increased by a staggering 492 percent, the value of the hotly contested CMBX.6 tranches were slashed in half, and the brick-and-mortar retail sector was on the verge of going belly-up. Large retailers like Gap stopped paying rent; Neiman Marcus, J.Crew, Brooks Brothers, Ann Taylor, Loft, Pier 1 Imports, GNC, and JCPenney (among many others) filed for bankruptcy; Victoria’s Secret was closing hundreds of stores and Lord & Taylor announced it was closing its doors for good and liquidating inventory; TJX and Macy’s recorded losses of $5 billion and $2.5 billion, respectively; foot traffic for shopping malls plummeted to basically zero; and, in April, clothing sales fell 79 percent, the largest drop on record. “The economy has declared war on your aunt’s wardrobe,” Scott Galloway, marketing professor at New York University, mused on his podcast Pivot. As for Crystal Mall, Simon Property Group, its landlord, defaulted on the mortgage and is planning on handing over the keys to their special servicer…

COVID-19 also revealed a dirty secret hidden in the crawlspace upon which many commercial mortgage-backed securities were built. A University of Texas at Austin study published in August claimed that banks knowingly inflated underwriting income for $650 billion worth of commercial real estate mortgages issued between 2013 and 2019, including by 5 percent or more for nearly a third of the roughly 40,000 loans. “A well-documented historical pattern is that fraud thrives in boom periods and is revealed in busts,” the university researchers wrote, adding that end investors were unaware of this hidden risk, a deception akin to buying a Ferrari secretly outfitted with a rusted-out Kia engine. It could be argued that CMBS had been a magic trick all along, with big banks one step ahead, luring investors to pick a card from a rigged deck. It took a global pandemic—an act of God—to reveal this financial sleight of hand.

Americans and financial institutions were bullish about single-family homes into the 2000s, until they were not and the housing market imploded. Americans liked shopping malls…and is this a repeat?

Since the story suggests those shorting shopping malls are in the minority, does this mean other investors truly believe shopping malls will successfully reinvent themselves and or redevelop enough to successfully pay their mortgages? Or, are a lot of people hoping that shopping malls make it through?

The default of shopping malls could have a broad effect, particularly on communities that will struggle to fill that space and recapture some of the tax revenue that shopping malls could bring in. More broadly, the difficulties retailers face could impact a lot of people in multiple ways.

Demolish a vacant mall anchor store, build new apartments

The construction of Fox Valley Mall in Aurora, Illinois was important for the suburb, particularly since it was in Aurora and not in Naperville. But, as shopping malls and suburbs change, the former site of Sears at the mall may soon be apartments:

Google Street View, November 2018

The vacant Sears store at the Fox Valley Mall could be razed early next year to make way for a three-building apartment development and kick off a new phase of life for the 45-year-old mall.

Aurora aldermen will vote next week on a request to rezone roughly 11 acres of the property along Route 59 side of the property to allow the buildings.

The buildings, each three stories tall, would have a total of 304 studio, one- and two-bedroom apartments…

A 2020 report for the city said that, including the closed Sears and Carson Pirie Scott department stores, 40% of the mall’s store space was vacant.

Adding residential units to shopping malls is a fairly common suggestion. With retailers in trouble, apartments fill the space more permanently, can address housing issues in communities, and could provide a ready population of potential customers for the nearby mall and other proprietors.

With the proposal working its way through local government, three things are worth watching regarding these apartments:

  1. How, if at all, will the apartments be connected to the mall? If they are completely separate buildings and are not marketed as being right next to the mall, then they could be like any new apartments. But, perhaps the mall is a draw for those who might want to be close to shopping, an indoor walking site, and food options.
  2. What kind of apartments will these be? Given their location, these will probably not be cheap apartments. In addition to being close to the mall, the apartments are near lots of other shopping and dining as well as potential employers, the location is just west of Naperville, and a busy Metra station is just to the north.
  3. How much of the mall will survive within five or ten years? The apartments could help revive the mall area or help hasten its demise.