Still, the difference [here] is dramatic. It is largely attributable to illiquidity and negative equity in housing markets. And it represents a nice, big barrier between people and better job opportunities.I think the failure to come up with a comprehensive solution to the problem of negative equity will come to be considered one of the biggest policy errors of this crisis.
Desperate job seekers are stuck in bad mortgages. Thus, they can't move for work. I think there is a more general malaise. People seem less optimistic about what will happen on the other end of a relocation. However, I agree with Avent. There is a huge policy opportunity.
While in Youngstown last summer, I was part of a discussion concerning the luring home of expatriates. One idea floated was geographic arbitrage and helping talent deleverage mortgage debt. We didn't discuss the logistics (or how to fund such a venture). The gist is Greater Youngstown would help members of the diaspora who have negative equity problems in exchange for them living in one of the neighborhoods undergoing redevelopment.
More simply (and generically), shrinking cities would offer up housing stock as a beacon for talent. This strikes me as something HUD could underwrite. In Next American City, Phil Kidd describes how federal policy is failing Youngstown:
There’s 37 neighborhoods in Youngstown, and not enough time. Worse yet, the federal government provides more roadblocks than it does guidance and money. The federal government doesn’t have a vision for shrinking communities like Youngstown. In Phil’s words: “Whatever money Portland’s going after, it’s probably not the same kinda of money that Youngstown is going after…we’re looking to take 22,000 vacant lots in Youngstown and find a productive use for them. Portland’s probably thinking about, you know, how does light-rail work in the northeast neighborhoods into downtown?...that is language that Youngstown will never speak for maybe thirty years. Hopefully in thirty years we’ll be talking about it. It’s just a way different context.“This isn’t something that it’s like, ‘boy wouldn’t it be great if’...we don’t have that kind of time here! We don’t have that. If this stuff doesn’t get fixed, if we aren’t able to cut the chains here, then we’re gonna lose these neighborhoods, and all these communities. And…all this talk of rightsizing and how sexy that kind of thing is right now, it won’t mean shit—it will not mean shit—if we can’t cut the chains, and let us do our work.”
This is another case of policy addressing the geography of yesteryear. As far as HUD is concerned, globalization never happened. Shrinking cities fall through the cracks. Managing a growing population and the associated economic problems remains the default setting. Boomerang migration incubation is a jobs program, urban blight initiative, and housing solution all rolled into one.