Does a thriving tech sector really benefit a city – or does it just increase inequality?

500m around Silicon Roundabout. Is this as far as its benefits stretch? Image: Google Maps.

The tech sector has been making its presence felt in many larger cities for a number of years now, and in an uncertain era is proving to be one of the dynamos behind the “next economy”. That’s a good thing right? More jobs, more money, smarter cities?

Well, yes – but who exactly is it a good thing for?

Some of the cities that profess to be the smartest, most data driven, tech paradises – London and San Francisco come to mind – have both a flourishing tech sector and high levels of inequality. How smart are these cities, really, if they are teeming grounds of unfairness?

Research shows that, left to its own devices, the tech industry can be quiet self contained, producing an insular organism with few spillover benefits for the wider city. Positive externalities from tech clusters can be highly localised: spending by firms tends to occur in a particular zone, sometimes in a radius as small as 500m of their base. (This of course differs with location.)

Nevertheless there is a global trend of tech growth leading to one part of the city benefitting disproportionately, creating gentrified ghettoes and social tension of the sort witnessed in San Francisco. Tech growth in the Bay Area has driven property prices to levels far out of kilter with the average local salary, pricing out smaller firms, and costing the city infrastructure funding due to tax exemptions and privately run transport services.

This need not be the case. Tech is not an untameable force of nature. Its impact on a city and who gets to share in its potential benefits are grounded in the choices we make as a society. The question is, as as a tech industry grows, what are the best policy decisions to enhance opportunities on offer to the greatest number of people?

Experience shows that, if there is proactive leadership and public decision making about who should feel the benefits of tech growth, then it can be balanced across a city.

Take Chicago, where mayor Rahm Emmanuel’s office has formulated “The City Technology Plan”. It provides long-term strategies to use the burgeoning tech sector to enhance social as well as economic opportunity for Chicagoans. The main strategies include building a next generation digital infrastructure; fostering tech education through 2smart communities”; and providing for efficient and open government, and civic innovation.

The primary goal of the plan is to provide social and economic opportunities, with resident engagement, access, and skills – as well as job creation – among the top objectives.  Where there is effective leadership, city-level planning can be instrumental in ensuring that the spatial clustering characteristic of tech sector growth leads to positive spill over effects for the whole city.

But it won’t just happen organically; there needs to be planning and engagement if these mutual benefits are to be reaped. City and industry leaders alike need to collaborate and make decisions as to the level and type of interaction between tech growth and the wider city. As the Royal Town Planning Institute has argued, an important function of contemporary planning is recognising and understanding current economic factors and growth trends so that strategic decisions surrounding development add value to the local area. By understanding the needs of a community, planners can assist with achieving successful outcomes by working closely with the private sector, leaders and neighbouring authorities

In The Death and Life of American Cities Jane Jacobs promotes

the need of cities for a most intricate and code grained diversity of uses that give each other constant mutual support, both economically and socially... The science of city planning and the art of city design, in real life for real cities, must become the science and art of catalysing and nourishing these close-grained working relationships.

This may mean the creation of new roles at the city level: employing a tech lead in the mayor’s office as has been done in New York, Dublin, and London. However, if this is the route taken, the remit of the city tech lead needs to be wider than just inviting tech companies to locate in the city.

Ideally the tech lead would liaise with city planners who can articulate the issues being faced by the city – such as housing affordability, infrastructure pressures, and skills shortages. Dialogue with industry leaders about their plans may then reveal how the growth of tech could feed into a plan for addressing these issues.

Industry too should to take account of the affect it has on, and what it owes, the city in which it sets up. After all, it is often planned public investments in infrastructure that makes a city attractive to firms and their aspirational employees in the first place. And it’s this that continues to facilitate growth through the creation of what the Brookings Institute’s Bruce Katz has christened “Innovation Districts”:

…mash ups of entrepreneurs and educational institutions, start-ups and schools, mixed-use development and medical innovations, bike-sharing and bankable investments – all connected by transit, powered by clean energy, wired for digital technology, and fuelled by caffeine.

Whether or not it is acknowledged to the extent it is in places like Chicago, many cities have a relationship with the tech sector. The more this relationship is formalised, the more likely it is that conscious decisions as to how each can mutually support the other’s goals will be made.

One of the RTPI’s current work streams focuses on the relationship between cities and the tech sector. The project will combine case studies and evidence drawn from interviews and round tables with industry leaders, members of the academic communities, and city planners. Taken together, these will articulate the role planning has to play in creating the kind of places that attract tech – and planning's role in ensuring that the economic growth that emanates from tech clusters benefits the wider metropolitan area.

The huge potential for mutual economic and social support that exists between a city and the tech sector should be nurtured into a collaborative relationship that has as its objectives the provision of public goods – as well as economic growth.

Joe Kilroy is a policy offer at the Royal Town Planning Institute. You can find him on Twiter here.

To find out more about the RTPI’s tech project click here.

 
 
 
 

“Without rent control we can’t hope to solve London’s housing crisis”

You BET! Oh GOD. Image: Getty.

Today, the mayor of London called for new powers to introduce rent controls in London. With ever increasing rents swallowing more of people’s income and driving poverty, the free market has clearly failed to provide affordable homes for Londoners. 

Created in 1988, the modern private rented sector was designed primarily to attract investment, with the balance of power weighted almost entirely in landlords’ favour. As social housing stock has been eroded, with more than 1 million fewer social rented homes today compared to 1980, and as the financialisation of homes has driven up house prices, more and more people are getting trapped private renting. In 1990 just 11 per cent of households in London rented privately, but by 2017 this figure had grown to 27 per cent; it is also home to an increasing number of families and older people. 

When I first moved to London, I spent years spending well over 50 per cent of my income on rent. Even without any dependent to support, after essentials my disposable income was vanishingly small. London has the highest rent to income ratio of any region, and the highest proportion of households spending over a third of their income on rent. High rents limit people’s lives, and in London this has become a major driver of poverty and inequality. In the three years leading up to 2015-16, 960,000 private renters were living in poverty, and over half of children growing up in private rented housing are living in poverty.

So carefully designed rent controls therefore have the potential to reduce poverty and may also contribute over time to the reduction of the housing benefit bill (although any housing bill reductions have to come after an expansion of the system, which has been subject to brutal cuts over the last decade). Rent controls may also support London’s employers, two-thirds of whom are struggling to recruit entry-level staff because of the shortage of affordable homes. 

It’s obvious that London rents are far too high, and now an increasing number of voices are calling for rent controls as part of the solution: 68 per cent of Londoners are in favour, and a growing renters’ movement has emerged. Groups like the London Renters Union have already secured a massive victory in the outlawing of section 21 ‘no fault’ evictions. But without rent control, landlords can still unfairly get rid of tenants by jacking up rents.


At the New Economics Foundation we’ve been working with the Mayor of London and the Greater London Authority to research what kind of rent control would work in London. Rent controls are often polarising in the UK but are commonplace elsewhere. New York controls rents on many properties, and Berlin has just introduced a five year “rental lid”, with the mayor citing a desire to not become “like London” as a motivation for the policy. 

A rent control that helps to solve London’s housing crisis would need to meet several criteria. Since rents have risen three times faster than average wages since 2010, rent control should initially brings rents down. Our research found that a 1 per cent reduction in rents for four years could lead to 20 per cent cheaper rents compared to where they would be otherwise. London also needs a rent control both within and between tenancies because otherwise landlords can just reset rents when tenancies end.

Without rent control we can’t hope to solve London’s housing crisis – but it’s not without risk. Decreases in landlord profits could encourage current landlords to exit the sector and discourage new ones from entering it. And a sharp reduction in the supply of privately rented homes would severely reduce housing options for Londoners, whilst reducing incentives for landlords to maintain and improve their properties.

Rent controls should be introduced in a stepped way to minimise risks for tenants. And we need more information on landlords, rents, and their business models in order to design a rent control which avoids unintended consequences.

Rent controls are also not a silver bullet. They need to be part of a package of solutions to London’s housing affordability crisis, including a large scale increase in social housebuilding and an improvement in housing benefit. However, private renting will be part of London’s housing system for some time to come, and the scale of the affordability crisis in London means that the question of rent controls is no longer “if”, but increasingly “how”. 

Joe Beswick is head of housing & land at the New Economics Foundation.