Tag Archives: Rust Belt

In the consternation over Caterpillar moving from Illinois to Texas, a reminder that the company moved from Peoria to a Chicago suburb in 2017

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Caterpillar Inc. recently announced plans to move from Deerfield, Illinois to Texas. This prompted concerns about another big company (following the announced exit of Boeing’s headquarters) leaving the Chicago area and Illinois.

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While this fits one narrative of Chicago, the region, and Illinois losing residents and companies to places with growing populations and more conservative business climates, this is not the only move Caterpillar has made in recent years. The company started in 1910 in Peoria and stayed there for a long time before relocating to Deerfield in 2017. Here is how the Chicago Tribune described that move:

Caterpillar will take over the former headquarters of premium spirits maker Beam Suntory, which announced plans last year to move its 450 employees and global headquarters to Chicago’s Merchandise Mart, joining corporations including McDonald’s, Motorola Solutions, Kraft Heinz, Wilson Sporting Goods and Conagra Brands that have recently moved or made plans to relocate downtown. Beam Suntory’s move will be completed by the end of June.”

“Following a thorough site selection process, we chose this location because it is approximately a 20-minute drive to O’Hare airport and convenient to the city of Chicago via commuter train, achieving our goal to be more accessible to our global customers, dealers and employees,” Caterpillar CEO Jim Umpleby said in a news release Wednesday. “This site gives our employees many options to live in either an urban or suburban environment. We know we have to compete for the best talent to grow our company, and this location will appeal to our diverse, global team, today and in the future.”…

In 2011, Caterpillar’s then-CEO Doug Oberhelman talked of moving jobs out of Illinois because of the state’s tax and spending policies. But in 2015, the company said it would stay in Peoria and build a new corporate headquarters, reassuring employees worried about a move. That changed again in January, when the company said it was abandoning plans for the new downstate headquarters.

So is this a story about Chicagoland and Illinois losing important companies or a broader example of companies responding to global markets and leaving behind long roots? Caterpillar is a company started and based in a smaller Rust Belt city for decades and now will move to two of the biggest metropolitan areas in less than a decade. How long will it be in Irving, Texas before again seeking greener pastures and business advantages?

Why people do not flock to the American cities that keep showing up in the most affordable places to live

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I recently saw another list of the most and least affordable metropolitan areas in the United States with a key metric of how many families in the region could purchase a home at the median price. Here are the five most affordable places:

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Home prices and incomes vary widely, and there are oases of affordability, mainly in the Rust Belt and Midwest. The top five most affordable places among metro areas with population of 500,000 or more:

Lansing, Michigan: As a result of modest home prices, 90.6 percent of all new and existing homes sold in the fall months were affordable to families earning the area’s median income of $79,100. The median home price was $155,000 in the fourth quarter of 2021, the builders’ index says.

Scranton-Wilkes Barre-Hazleton, Pennsylvania: Wages here are below national levels, but so are home prices — the median sale price was $150,000 in the fourth quarter. As a result of rock-bottom prices, 88.5 percent of all new and existing homes sold in October, November and December of 2021 were affordable to families earning the area’s median income of $70,600.

Pittsburgh: This metro area has a median family income of $84,800 and a median home price of just $166,000. As a result, 88.4 percent of homes were affordable for typical earners.

Indianapolis. This metro area has a median family income of $81,600 and a median home price of $215,000. As a result, 87.6 percent of homes were affordable for typical earners.

Akron, Ohio: With a median family income of $83,300 and a median home price of $165,000, fully 86.5 percent of homes were in reach of median-income families in the state capital.

Two features quickly stand out: the homes in these regions really are cheap (particularly when compared to local earnings) and they are all in the Midwest/Rust Belt.

Still, I have seen some version of this list many times now and I am not sure what to make of them. Why aren’t people moving to these locations?

The most obvious answers to me: it is not necessarily easy to move and these cities are perceived to have a lack of opportunities (economic, cultural, housing, etc.). American geographic mobility as a whole is down but do people actually move just for cheaper housing? What this list does is highlights that median income families can access median level housing in these five places. Get a decent job and owning a house is possible.

There are other possible answers that get more complicated:

  1. People just do not think of the Midwest/Rust Belt when thinking of places to live. Lack of opportunities, the weather, the middle of the country, a Midwestern blah-ness, etc.
  2. It is not just about a lack of opportunity; these are places seen as on the decline. Even if they are cheaper, who wants to live in a place that has already seen its best days when “growth is good” is a key marker of communities?
  3. These communities are lacking incentive campaigns to try to attract new residents.
  4. These communities may not want too many people to move in because it could drive up prices and bring in outsiders. (Yet, growth is good and many declining communities would do a lot to become a destination again.)

In sum: some American metropolitan areas are much cheaper than others, they have common characteristics, and there are a number of compelling reasons why people do not move to the places with cheaper housing.

The boom and bust RV cycles of Elkhart

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The latest rankings in the Emerging Housing Markets Index has Elkhart, Indiana at the top of the list:

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Small U.S. cities dominated The Wall Street Journal/Realtor.com Emerging Housing Markets Index in the third quarter, as high housing costs and remote-work opportunities drive many home buyers to seek out more living and outdoor space…

Elkhart, Ind., which bills itself as the RV capital of the world because its region is the country’s leading manufacturer of recreational vehicles, topped the housing index this quarter, followed by Rapid City, S.D., Topeka, Kan., Raleigh, N.C., and Jefferson City, Mo…

The recreational-vehicle industry is a major player in Elkhart’s economy. The Covid-19 pandemic spurred more RV demand, as households wanted to travel while keeping their distance from others. Wholesale RV shipments in the first eight months of 2021 rose 53.8% from the same period in 2020, according to the RV Industry Association…

The median home-sale price in Elkhart County rose 12.3% in August from a year earlier to $209,900, according to the Indiana Association of Realtors. There were 163 homes for sale that month, down from 220 a year earlier.

I am glad that Elkhart appears to be doing well at the moment. Having lived nearby for five years, the area has a lot to offer and economic development would be welcomed.

At the same time, it was not so long ago that Elkhart faced a difficult time. When the economy is not doing so well, such as in the late 2000s with a burst housing bubble, fewer people had money for RVs. Demand shrunk. Jobs disappeared. Before that, this area and South Bend were home to numerous manufacturers who went out of business or left. The homes have been cheaper here for a long time because few people want to move in.

It is good that this community in the Rust Belt at least has the opportunity to at times benefit from upticks in RV sales. Such industries and jobs could leave completely. But, having so many fates tied to one industry that can go up and down is trying in the long run. Numerous communities in the United States have looked to diversify their economic base – see the recent rush to add tech companies to their portfolios – even as they might have local economies based around a few companies or a few sectors. RVs may sell well one day and then conditions change and demand drops or new technology moves in. May Elkhart take some of this positive momentum and add to lineup of industries and services.

Chicago slowly losing population and a few suburban counties barely gaining people

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The population of Chicago has declined slightly in recent years. New figures suggest that the population in four surrounding counties have increased slightly.

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The study showed the Chicago region as a whole was estimated to have lost 4,279 people between 2010 and 2019, a 0.05% decrease. The region, with a population of nearly 8.5 million, includes Cook and the five collar counties plus Kendall County.

Over the same time period, DuPage County grew by 2,575 people, or 0.28%. Will County grew by 7,207, or 1.06%, and Kane County grew by 9,502 people, or 1.82%.

Kendall County saw the highest rate of increase of any Illinois county, growing by 6.65%, or 7,860 people…

Growth in Kane, DuPage, Kendall and Will is likely tied to people already in the region moving farther into the suburbs, he said, and to better job growth in the Chicago area than elsewhere in the state.

If one was just reading headlines, this sounds like a big contrast: Chicago is losing residents and suburban counties are gaining them.

The actual estimates present a more complicated story about recent years. Chicago has barely lost any residents. The suburban counties have barely gained any residents. The region as a whole is relatively stagnant regarding population. The state of Illinois has lost a lot of residents but not necessarily from the Chicago region.

Even though this is not a story of massive population loss in recent years in the Chicago region, stagnant populations are usually not regarded as positive. For American communities, growth is good. And populations are not stagnant or declining everywhere; people in Illinois and other locations with population issues can see that other parts of the country are booming. In particular, Sunbelt metropolitan areas are growing at rapid rates.

This is not a new position for the Chicago region. For decades, the city and suburbs have considered the effects of a decline in Chicago’s population (and a rebound for a while) and a growing metropolitan region. Yet, other places are growing faster. Chicagoland is not in the same category as some other Rust Belt metropolitan areas but it is not exactly the attractive location that some other places are.

Looking at which way Midwest suburban swing-state voters are leaning

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Here is an update on the landscape of suburban voters in Midwest swing states ahead of the 2020 presidential election:

https://www.politico.com/2016-election/results/map/president/ohio/

Trump’s chances for a second term rest heavily on being able to maintain the margins he won by in 2016, particularly in suburban areas. He plans to campaign outside Toledo on Monday, as liberal Supreme Court Justice Ruth Bader Ginsburg’s death stokes questions of whether the sudden court vacancy would energize more suburban voters who support abortion rights or social conservatives in small-town and rural areas who oppose them.

Republican lawmakers and strategists in Ohio say they are seeing research that shows a near-uniform drop in support from his 2016 totals across every suburban region of the state…

There is less debate in other states. Pennsylvania Republicans say across the longtime GOP stronghold of Chester County west of Philadelphia, for instance, Trump has slipped as far as he has in Ohio’s suburbs, though in more populous towns and in a state he carried by fewer than 45,000 votes…

A central question is whether Trump can, as his campaign predicts, spur even more support than in 2016 from rural voters in Pennsylvania, Michigan and Wisconsin.

Several quick thoughts:

  1. The Trump campaign has tried to appeal to suburban voters – see the rhetoric about Democrats wanting to “abolish” suburbs – yet also seems committed to trying to get as many votes as possible from more rural areas.
  2. These suburban locations in the Midwest are an interesting mix of prosperity and problems. They are located within Rust Belt states where changing economic conditions, particularly the loss of manufacturing jobs, have threatened what were once growing, prosperous states. On the other hand, many of these suburban voters are in relatively good position compared to others in their metropolitan region or their state.
  3. As Trump courts rural voters, population change in rural America is more complex than just saying the rural population is declining. See this 2019 research:
Figure 3
https://carsey.unh.edu/publication/rural-depopulation

Our research provides clear evidence of depopulation across a broad swatch of rural America. Depopulation seemingly is now built into the demographic fabric of some parts of rural America—a result of chronic outmigration among young adults of reproductive age, along with population aging and high mortality rates. Yet, depopulation is far from universal. Many rural regions continue to grow, often rapidly, including exurban areas just beyond the metropolitan suburban fringe, and high-amenity recreational and retirement areas. These counties are likely to hold their own demographically in the future. The situation is much different for the depopulating rural counties caught in a downward spiral of population loss.

Losing population in other Illinois cities

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Chicago gets a lot of attention for losing population but it is not the only Illinois city facing that issue:

RockfordCityWebsiteJune1120

Rockford, Illinois website – https://rockfordil.gov/

Decatur, in central Illinois about 40 miles east of Springfield, has lost 7.1% of its population since the 2010 census, according to the recently released 2019 population estimates. That drop is the third-largest percentage loss in the U.S. among cities with a population of 50,000 or more. Rockford comes in at No. 15 on that list. The northern Illinois city, the fifth-largest in the state with an estimated 145,609 residents, has lost 5% of its population during that nine-year period.

Rockford’s total population loss of 7,676 people over the last decade places it ninth nationwide among large cities, according to the U.S. Census Bureau, with Decatur (-5,385) at No. 15. Four of the five cities that have lost the most people since the last census are in the Midwest. Detroit has lost the most people, about 43,000, since 2010, followed by Baltimore, St. Louis, Cleveland and Toledo, Ohio…

“I think those cities are very susceptible to having populations hurt by the new service economy or the new postindustrial economy, and that’s because they have such a historical reliance, and a current reliance, on manufacturing and heavy-duty industry,” Wilson said. “And for those city economies that have not diversified, they really get hurt, they get pummeled. And what does that mean to get pummeled? People have a very difficult time living there and earning a living wage. They simply can’t make ends meet. And they become primed for thinking about leaving and trying to find something better.”…

“It’s going to create a further divide between the haves and the have-nots in places like Joliet, Aurora, Rockford,” Wilson said. “And people are going to want to leave.”

Three quick thoughts:

1. The population growth of the Sun Belt is a major force in American change in recent decades. Americans obsess over population growth and it is not in the Midwest so status and attention goes elsewhere.

2. This reminds me of Jennifer Egan’s book Look at Me where one of the main characters dreams of restoring Rockford to flourishing and growth. Yet, it is hard to imagine cities like Rockford or Decatur recapturing their past glory or entering a significant revival.

3. The narrative around population loss in Chicago often revolves around problems specific to Chicago. But, this article hints that it is a state-wide issue or a regional issue. If true, this would require a more coordinated effort across communities and groups that sometimes spend more time sniping at each other than working together (for example, feuds Illinois has with Indiana and Wisconsin rather than regional cooperation).

 

 

Palaces for the People, Part 2: place-based rather than people-based interventions

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I recently read Eric Klinenberg’s 2018 book Palaces for the People. For a few days, I am highlighting a few short passages from the book that make some interesting connections regarding physical places.

In a discussion of policing, crime, and spaces, Klinenberg highlights research showing resources put into improving places can improve social relations:

The Philadelphia studies suggest that place-based interventions are far more likely to succeed than people-based projects. “Tens of millions of vacant and abandoned properties exist in the United States,” write Branas and his team. Remediation programs “make structural improvements to the very context within which city residents are exposed on a daily basis.” They are simple, cheap, and easily reproducible, so they can be implemented on a larger scale. What’s more, they impose few demands on local residents, and the programs appear to pay for themselves. “Simple treatments of abandoned buildings and vacant lots returned conservative estimates of between $5.00 and $26.000 in net benefits to taxpayers and between $79.00 and $333.00 to society at large, for every dollar invested,” their paper in the American Journal of Public health reports. It’s not only more dangerous to leave the properties untended; it’s also more expensive. (70)

Imagine vacant properties in many American cities, particularly in the Rust Belt, transformed. Keeping up the property over time could help show local conditions will not be allowed to decline. Even as residents may come and go, the community is committed to the lot.

But, I wonder how much push back there would be from the public. A typical approach to struggling communities is to argue for more job and educational opportunities. If this works, it gives people options and skills they can then use anywhere over time. Such investments are viewed as showing residents that the community cares about their lives. Would putting resources into places be perceived in the same way?

Generally, infrastructure is pretty invisible in American life. Focusing on vacant properties, very noticeable to both people in the community as well as visitors, might help reverse that.

Conditions right for Pittsburgh to be a “house-flipping hotspot”

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Pittsburgh is home to a lot of profitable house flipping activity:

Today, old industrial cities such as Pittsburgh, Buffalo and Cleveland are among those offering the greatest returns. They have struggled to recover from the recession, but now are beginning to attract tech firms, such as Google-parent Alphabet Inc, Uber Technologies Inc, and Amazon.com Inc.

The influx of new workers is boosting demand for urban homes in areas that have some of the oldest housing stock in the nation and not much new construction, creating richer opportunities for flippers than in Las Vegas or Miami at the height of the housing boom more than a decade ago…

In Pittsburgh, home flippers made a gross profit of 162.7 percent on average during the second quarter of this year, while in Buffalo, the average gross return came in at 107.5 percent, according to ATTOM data. Nationally, the average house-flipper earned a 44.3 percent gross return on investment this year, compared with the 35.3 percent during the boom…

“Pittsburgh’s housing market was under-invested in for 40 or 50 years,” said Aaron Terrazas, senior economist at real estate listing firm Zillow. “The housing stock in the urban core of these cities requires substantial investments to update these older homes and bring them up to modern living standards.”

There are plenty of Rust Belt cities that would want in on this action. Do you think political and business leaders in places like Syracuse or Milwaukee or Lansing wouln’t salivate over the prospect?

But, it sounds like Pittsburgh could be a unique place. Certain conditions were in place:

  1. An influx of tech workers. Pittsburgh has a university and research base that not all Rust Belt cities can draw on. Everyone wants part of the tech industry but how many cities, particularly struggling ones, can attract significant numbers of tech employees?
  2. Relatively cheap homes. Many Rust Belt cities have this.
  3. An attractive urban core. In addition to jobs, a vibrant city or neighborhood scene could go a long way to attracting new workers and residents.
  4. While the article mentions concerns about residents being priced out of their own neighborhoods, I assume leaders in Pittsburgh are at least okay with the house flipping activity if not outright encouraging it. A “favorable business climate” could signal to developers and investors that the city wants redevelopment and is okay with seeking profits. This does not even account for the moves local leaders may have made to encourage the growth of the tech industry.

In other words, if the conditions change in Pittsburgh – such as there are fewer cheaper houses to make money on – it is not guaranteed that house flippers will simply move on to the next Rust Belt city with cheap housing.

Why are 62 acres so close to Chicago’s Loop even available?

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There has been a lot of talk about a new project on 62 acres on the Chicago River just south of the Loop. Before we get to what will go there, why was such a big piece of property empty near one of the major centers of the world?

The South Loop property was used as a rail yard, but has sat unused for decades.

The scraggly land was later owned by Antoin “Tony” Rezko, a former fundraiser for imprisoned Gov. Rod Blagojevich who himself served a prison sentence after a fraud and money laundering conviction. The site was sold 10 years ago to Luxembourg-based General Mediterranean Holding, a firm led by Iraqi-born and British-based businessman Nadhmi Auchi. He was convicted in a French corruption scandal in 2003.

Last May, Related completed a city-approved deal to take over as lead developer, with Auchi’s firm remaining a joint venture partner.

From the city’s perspective, Related’s involvement brought credibility to the long-idle site. Related Midwest is an affiliate of New York-based Related Cos., which is building 18 million square feet in the Hudson Yards mixed-used development in Manhattan.

One thing that is striking about Chicago and some other Rust Belt cities is the amount of available or empty property. In particular, Chicago’s South Side has a number of large parcels including this site along the Chicago River, land southwest of McCormick Place with some small developments here and there, land on the Robert Taylor Homes site with a few buildings here and there, and the former US Steel site (and subject to a number of proposals in recent years – see the latest here) plus numerous empty or vacant properties scattered throughout neighborhoods. Even while development booms in certain neighborhoods (and the city trumpets the work taking place in the Loop), others have significant chunks of empty land.

The why: these properties are often available in poorer or more industrial neighborhoods and the properties are often located in or close to areas with higher concentrations of black residents. In other words, these properties are not desirable, even at cheap prices (such as $1 properties in Chicago), and the desirability is connected to the status of the location and the status of places in the United States is closely related to race and class. This particular 62 acres is a great example of how uneven development works; those who want to build (leaders and developers/those in the real estate industry) usually do so in order to profit as much as possible. Now, this 62 acre site is more desirable (meaning profitable) because the South Loop has done well in recent years and there are other new developments nearby.

Chicago’s population decline masked by Mexican immigration

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Amid news that the Chicago region led the country in population loss during 2015 comes this reminder of how Chicago has bolstered its population in recent decades:

More than any other city, Chicago has depended on Mexican immigrants to balance the sluggish growth of its native-born population, said Rob Paral, a Chicago-based demographer who advises nonprofits and community groups. During the 1990s, immigration accounted for most of Chicago’s population growth. The number of Mexican immigrants rose by 117,000 in Chicago that decade, making up 105 percent of all growth, according to data gathered by Paral’s firm, Rob Paral and Associates.

After 2007, falling Mexican-born populations became a trend across the country’s major metropolitan areas. But most of those cities were able to make up for the loss with the growth of their native populations, Paral said. Chicago couldn’t.

Chicago is often held up as a shining example of a Rust Belt city that survived and thrived – but this may have had less to do with grand building projects or powerful mayors or a prominent international presence and more with continuing to be a center for immigration.