Is Austin’s ‘economic segregation’ here to stay?

“Today you are going to find out that we are really not quite as good as we claim to be.” On that ominous note, Austin Board of Realtors CEO Paul Hilgers opened Tuesday’s luncheon hosted by the Real Estate Council of Austin.

Steven Pedigo, who is the director of research for the Creative Class Group, soon followed with news that Austin remains the most economically segregated city in the country, in a bleak illustration of what happens when the “poster child for the knowledge-based economy” lives up to the hype.

What happens, according to Pedigo, is that creating knowledge-based jobs also creates steep divides, and leads to a city of “winners and losers.” Nationally, the average service industry job pays $25,000 a year and the average “knowledge-based” job pays $97,000. In Austin, those working in the creative class have $59,000 to spend after paying for housing, while service class and working class Austinites only have $15,971 and $19,992, respectively.

And, though Austin likes to tout the 44,900 new creative class jobs created from 2012 to 2014, 82,000 service jobs were created over that same time period.

“The challenge in a place like Austin is this: We’ve been overly successful,” said Pedigo. “The creative class, or the knowledge-based class, decides where everyone else lives, because they have the economic (advantage).”

This being Austin, Pedigo tied the findings from the Martin Prosperity Institute’s Segregated City Report to the ongoing rewrite of the Land Development Code known as CodeNEXT. Pedigo, who was researcher on the report, offered up a few city planning solutions to what his colleague, Richard Florida, has deemed a “new urban crisis.”

In his presentation, Pedigo offered that one of the solutions to the battle over city land and subsequent pushing out of people to the suburbs is “density done right.” Noting that radical deregulation of development, like in Houston, was not the answer and that underserved neighborhoods couldn’t hold all new development, he said that looking to best practices in peer cities like Portland, Oregon, and Denver, Colorado, could be a good start.

“Land is a scarce resource, particularly land that has access … and is close to the urban core,” he said. Using the example of those peer cities, he advocated for “the idea of testing what works and what doesn’t work and developing a land-use code that lives as the economy grows and evolves.”

Another solution, he said, was to invest in urban infrastructure, moving away from a suburban growth model to “one that is supportive of an urban knowledge economy.” This would include increasing public transit, and development at a pedestrian scale.

Pedigo also suggested Austin build more affordable rental housing, citing a “desperate need” for more urban workforce housing for teachers, firefighters and service workers. He explained that current land-use policies often favor single-family home ownership, pushing others out of the city, to its detriment.

“One of the things that we found was places that have a higher percentage of renters actually had a more thriving knowledge-based economy,” he said. “It is a place that will allow an in-and-out flow of talent that tends to thrive. And it has to be affordable. … If you want to attract the best and the brightest, you have to have an array of housing.”

And, in a step away from development, Pedigo’s final suggestion was to invest in Austinites, working to carve paths to the creative community, upgrading service sector jobs and being careful not to ignore distressed areas.

The presentation was followed by a Q&A with former City Council Member Chris Riley, who focused on how Austin’s growing disparity could be stemmed. He asked whether affordability and decreased economic segregation could be obtained by halting demolitions in places like East Austin for the time being. Pedigo seemed adamant that was not the solution, and instead urged developers and neighborhood advocates to find a way forward through shared community values.

“You don’t want to be San Francisco,” he said. “You don’t want to become a place that, in a sense, is hostile to development because, frankly, that will cut off supply. You exacerbate the issue and make housing more of a challenge.”

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