The Pandemic and city formation

Capital flow is moving Australia’s way – strongly. What’s the bet that well-managed cities are the winner in the aftermath of Covid?

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As the impact of Covid-19 advances are the old theories still good? Is urban life still viable and desirable?  Much of the response to Covid-19 emphasised distancing, avoiding gatherings and public transport.  In mid-June, Sydney’s streets still had that eerie empty feel, but the roads were full.

The apparent epicentre of the pandemic, New York, and the super spreader in that city, its subway system, seemed to be sending a message: big cities are unsafe. The immediate response to Covid-19 was anti-urban.

Does this mean that the dominant trend of increasing global urbanisation has created a tipping point?  Are we heading into a new age of remoteness from others where the hustle and bustle of cities has become a health hazard?

I suspect Covid-19 is likely to fuel current city formation trends, not fundamentally change them.

In the late 1960s and 1970s (Castells, Harvey[1]) cities became more influenced by global trends.

In the past, city formation was often an expression of production within a national economy. The classic example being the terrace housing of the inner-city, built in the late 19^th and early 20^th century to house workers for adjoining manufacturing or distribution industries.

When those industries started to leave, from the 1970s onwards, and that housing gentrified, those houses became the abodes of tertiary workers in central city jobs.

The driving force of city formation was shifting from production to consumption choices in developed cities. Households sought inner city housing to consume the benefits of convenience and quaint historic environments, the metal workers moved out and the finance workers moved in.  Employers were increasing international enterprises.

Cities, at least in the developed world, started to develop to consume location not as a function of production nearby.

This seems to have become the dominant trend.  Authorities such as Glaeser and Florida[2] observed, evidenced and named the trends.  City were sorted in an international hierarchy, the best jobs and places where in superstar cities, New York, London, Tokyo, Shanghai, maybe Sydney.  Even with the emergence of digital technology in the late 1990s, the predicted decentralisation of cities, where you were prophesied to be working from a remote place linked by quality telecommunications never happened.

Cities ruled and the denser parts of those superstar cities led the metropolis, in terms of access to employment, real estate prices and places to be.

Urban clustering around a creative class dominates current ideas of city formation. Networking and developing ideas need a space, that was increasingly dense city places.

In a Covid-19 world urban, clustering sounds unhealthy.

However, I suggest that events like Covid-19 will ultimately accelerate these trends. And this is not because of how disease is transmitted but rather how cities and their governments respond and how capital ranks these places.

To borrow some popular terms, Covid-19 stress tests cities and is the ultimate mystery shopper.  What was tested was governance, certainty and security. In the basket of goods by which people judge a place, when the chips are down, these characteristics beat all others.

On an international comparison Australia did surprisingly well.  Our prime minister, who looked so feeble during the bush fires became the responsible middle manager and followed the experts and coordinated his people well.

This approach went very well for Australia.  The rest of the world did not fare so well: England, the USA and Brazil appeared to fold, and their failures were largely attributable to governance.

Urban clustering is a function of global capital that ranks places and then decides to land there.

Arguably, the next big test for global cities and places will go beyond how good the transport system or the beaches are but how safe that place is in the face of an emergency like Covid-19.

In this sense, Australia just earnt a triple AAA rating.

Immigration and population growth may decline because of a quarantine and policy in the short-term; however, the data is already clear that capital has noticed Australia and is flowing in.

Just as Australia and the world started to dip into recession, capital inflows in Australia rose 6%+ above the previous year’s trend.  Current Reserve Bank of Australia (RBA) data show a marked trend in monthly capital inflow (in $millions). Australia is a haven, see figure below.

Figure 1. Boost from foreign capital flowing into Australia as deposits data from the RBA, supplied by COREDATA RESEARCH, www.coredata.com.au

And I suspect May and June will show even greater inflows of capital.

This new inflow of capital is going to find its place, and that is into Australian banks, shares, businesses, farms but likely mostly our urban spaces.  The emphasis on the urban is going to become a function of the existing structure of Australia.

Our nation is one of the most urban in the world and when new money lands in this place it fits into this structure.  When liquidity drains into Australian it is most likely to end up in an urban place.

Covid-19, more than stress testing cities, also establishes their importance as general distributors of wealth and opportunity.

The post pandemic world is going to be hardest for young people, not just because they will disproportionately have to deal with the debts generated and the likely continuous crises but also because the rise of remoteness and distancing impacts young people more.

As established in my field, clients still rang me during lock-down.  I sensed that a key trend into the future will be that during crises, business and their clients will stick with the familiar.

Work anxiety is most stark for young people. The vulnerabilities of the young were brutally revealed during lock-down, at the end of a phone line or zoom meeting, they were dependent on their more established colleagues for their next project. There was no ability to peacock around the office, project shop, get noticed or network in the café around the corner.

Their jobs were going to be the first to go.  Young people need dense cities for social mobility and that is one reason why remoteness might be a good way to stop a pandemic but otherwise has very little going for it.  What this pandemic actually means for cities might also not be done yet!

Philip Bull is a Sydney-based planner currently working in development consulting, focussed on general statutory planning and specialising in infill and social housing. He has worked in the planning departments of Woollahra, Botany, South Sydney, Randwick, the City of Sydney and Waverley Councils.

Endnotes

Thank you to Andrew Inwood from COREDATA RESEARCH for highlighting this trend and supplying the data.

[1] See titles such as Castells 1978 The City, Class and Power and Harvey 1973 Social Justice and the City.

[2] See titles such as Florida 2017 The New Urban Crisis and Glaeser 2011 Triumph of the City for current theories of city formation.

Interestingly between these 2 sets of authors, the first identified as Marxist geographers, the second as urban economists or urbanists yet their work very much used the same institutional approach to analysing cities and continued the conclusions of the later.

Philip Bull is associate urban planning, Dickson Rothschild