Podcast podcast
Oct 04 2023

Steven Malanga joins Brian C. Anderson to discuss urban retail flight and the benefits of gentrification.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on the show today is my colleague Steven Malanga. He’s City Journal’s senior editor and a senior fellow at the Manhattan Institute. He writes about urban economies, business communities, public policy, and much more. His work has been featured in The Wall Street Journal, Crain’s, New York Times, New York Post, in addition, of course, to CJ.

Today we’re going to be discussing his recent City Journal work on urban retail flight and other matters, which has been generating a lot of attention. So Steve, as always, thanks for coming on 10 Blocks.

Steven Malanga: Oh yeah, thanks for having me.

Brian Anderson: So, New York City has long been considered one of the world’s greatest places for shopping. Indeed, tourists come here to shop. Yet many of its local communities and neighborhoods have lacked basic amenities like supermarkets or drug stores. During the ‘70s and ‘80s, crime and disorder drove thousands of businesses from the city, that left residents of many of these places with no immediate access to basic retailing. Harlem, for instance, didn’t have a single large-chain supermarket for more than two decades, so this created what some people have called “retail deserts” for local residents. But then that changed a lot, right? In the ‘90s and 2000s, a lot of these “retail deserts” were kind of eliminated.

Steven Malanga: Yeah, essentially what happened was that you had, first of all, the decline in crime and a reestablishment of social order in many neighborhood communities. And again, when people talk about New York as a retailing mecca, they’re typically talking about Madison Avenue or Fifth Avenue. Now, what we’re talking about, for instance, is the other boroughs. We’re talking about communities like Jamaica in Queens, Astoria in Queens, Bushwick in Brooklyn, and many of these had seen a flight of retailers in some cases during the riots and arson sprees, if you will, of the ‘70s. The storefronts had just been burned out. Whole areas of Bushwick or the South Bronx have been burned out. Howard Cosell on the World Series broadcast famously in the ‘70s, looking out into the distance and seeing fires and saying, “The South Bronx is burning.” That really left a lot of communities without basic services.

And one survey, a poll of consumers that we did in the late 1980s when I was at Crain’s New York Business, found that more than half of shoppers in the city were leaving the city at least once a month to shop at stores that weren’t available in the city. And there were estimates of essentially billions of dollars of personal income of shoppers in the city leaving the city to shop because people couldn’t find these stores for a variety of reasons, including bad zoning regulations and other kind of red tape paperwork, but also simply because many of these neighborhoods were not hospitable, if you will. But with the reestablishment of social order in neighborhoods, the retailers followed and there was a tremendous, tremendous burst of retail activity in the city.

And one of the best ways of looking at that is the city added about like 130,000 retail jobs over a 20-year period from the early ‘90s to 2010 to 2015 really, the peak was about 2015. I mean, that’s a tremendous expansion, an expansion of more than 30 percent in the job market alone, in the opportunity market for people to work. And that’s expressed in thousands and thousands of stores offering merchandise and competing against one another. So offering people not just the selection, but more competitive prices. That is with the reestablishment of order and the sharp decline in crime in New York City. Again, violent crime in New York City declined more than 80 percent, more than 80 percent from the early ‘90s through to the mid 2000s.

Brian Anderson: This is really one of the most remarkable policy-driven shifts ever recorded, I would say. And it brought enormous benefits, obviously, to the city and to its residents, especially in some of these neighborhoods that had previously been underserved. Unfortunately, New York is now experiencing, again, as you’ve written, a period of retail contraction, I guess you could call it. A recent census shows that the city has lost nearly 700 outlets run by national chains since early 2020. And a particularly troubling trend you note is the decline of drugstores, city drugstores whose numbers have shrunk by more than 100 since the beginning of the pandemic.

Now, some of this is related to the Covid shutdowns, some population shifts that have gone on, and then the George Floyd-era unrest that occurred. But if we look across the country, many cities have regained and surpassed their pre-pandemic retail employment numbers. So what is really behind this continuing urban retail flight over the last few years in the city, and what can be done to turn it around?

Steven Malanga: Well, again, it’s a double dose. First of all, as you say, pandemic lockdowns, which made the city unprofitable for many of these places, and many of them just folded up and disappeared or retailers had to downsize. And it was more extreme in New York than in many other places, and that’s one of the reasons why we saw this devastation during the pandemic of the economic fabric of a lot of communities. I mean, there were people like, for instance, the president of Ark Restaurants, Michael Weinstein, a very, very famous New York City restaurant group, whose restaurants were basically essentially closed for long periods in New York City. Meanwhile, his restaurants in Florida were operating, and he put all his emphasis down in Florida and he says, “I can’t do business in New York.” So that kind of extreme Covid lockdowns had an economic cost.

Just as the pandemic is ending however, we have this new kind of phenomenon based on the social disorder of rising retail theft, much of it organized the nature, or it’s now called organized retail crime. These are kind of, even the government recognizes this phenomenon. And around the country, organized retail crime is more than doubled in five years. You have retailers, big retailers, Target, Best Buy, Walmart, who have to report their financials because they’re publicly held companies saying, “Organized retail crime is going to cost us $500 million this year, nationwide,” things like that.

They are closing stores in some places in response to this, and particularly in big cities, New York is not the only city. Chicago, certainly Portland, Seattle, San Francisco, Boston, and we’ve seen this in New York City and those numbers that you quoted, nearly 700, it’s a result of this double whammy, the head of drugstores, the CEO of drugstores at Rite Aid, which bought up Duane Reade a while ago, which is a very well-known New York City drugstore chain, essentially said at a meeting with financial analysts, there’s no way to control retail crime in New York City. And so it’s gotten to the point where it’s a big loss. So we see all these places closing, and what’s starting to emerge is a repeat of the, so-called retail deserts, or in the case of supermarkets, food deserts, I talked about more than a hundred drug stores closing.

Nicole Gelinas wrote a piece about this in the area of Times Square where she lives, two of the three chain drugstores have closed, so we’ve cut by two thirds the availability of the competition in that area. There are supermarkets too, 10 key supermarkets. There are small supermarkets around the city, 10 of them have closed. In some communities in Queens, people are saying, “Since those supermarkets closed, we’re now without a supermarket in our community.” So we’re seeing the return of what’s called “food deserts” or “retail deserts.” General merchandise stores too. The dollar stores, the low-cost stores, which serve a lot of urban communities with good prices. There’s been like a dozen of those that have closed in the city.

So we are going backwards in time, and that’s reflected in the job numbers. We are still tens of thousands of jobs, retail jobs below the pre-pandemic levels, and again, you mentioned cities that are recovering, Dallas, Austin, Raleigh, North Carolina, Charlotte, places like that, Tennessee, Memphis, these places have all recovered completely their retail jobs and are moving forward. But these are places that number one, had fewer lockdowns. The lockdowns lasted for shorter periods of time. They’ve also had less retail crime, and part of that is a function of government policy because here in New York, we have loosened the rules against prosecuting people for retail crime. We’ve put people back on the street through bail reforms so that repeat offenders don’t really pay a high price, and one security expert has said in places like New York City, retail crime has become a low-risk, high-reward crime, and the fruits of that we’re now seeing.

Brian Anderson: Yeah, it’s not a good sign at all, and it really underscores the need for a return to sensible policing policies, public-order policies, so retail can function properly. So it’s not a great trend, obviously. You wrote an essay for our summer issue about another kind of urban development, which involves anti-gentrification activists and their efforts to stop development in cities across the country. I guess these two things could in fact work in tandem. The essay was called “Anti-Gentrifiers Gone Wild,” and that really captures the spirit of what’s going on because these activists are claiming that gentrification, which you describe as quite simply the transformation of neighborhoods as higher income residents move in, they’re contending that this displaces low-income and minority residents who’ve built their lives in these areas, so it’s fundamentally unjust and racist.

But you write that this kind of development actually benefits lower-income communities and is in fact essential to other developments, like bringing down nationwide home prices, which have more than doubled over the past decade. So maybe just sketch out why you think gentrification is actually a good thing, and how does it benefit both newcomers and established residents?

Steven Malanga: So I mentioned a little while ago Bushwick in Brooklyn, and Bushwick used to have a very thriving commercial street with lots of really good local stores, and then there were the riots and arson and looting in the ‘70s, and the population collapsed there, went from about 130,000 to about 90,000. There were all burnt-out streets, and this situation persisted for decades. Then what happened is when crime started going down in the ‘90s, developers looked around for places to build to start investing again in New York City. And they saw Bushwick with all these empty lots and abandoned buildings and a population that was well below what it had been. And they started buying and building, and you got young people, especially people who were, what we would call kind of urban explorers, willing to go out now and live in this neighborhood, which for years, very, very few people wanted to essentially buy into.

It was a place where people who were trapped because they were economically unable to move and very few other kinds of people live. This brought an explosion of activity, and people started coming in, and stores started opening, and restaurants started opening, and people from Manhattan actually started going out to Bushwick for these kind of edgy new restaurants. In the meantime, what happened was some of the neighborhood community activists started essentially demonstrating against this new activity because they said the neighborhood was changing and people were going to be pushed out of the neighborhood. Now, nobody was being pushed out because what happens in poor neighborhoods when they decline like this and they become poor, is they suffer from a lack of development. So Bushwick was clearly a place that there was a lot of capacity. There were once been 130,000 people. They had lost almost 40,000 people, so nobody was being pushed out.

What was happening, of course, was that the neighborhood was reviving, and you were getting all these new stores and all this new opportunity, new jobs. And studies have consistently shown, and not just studies done, academic studies over the years have shown that this kind of renewal, this kind of, which has been labeled gentrification, because typically when people start coming in, it isn’t just other low-income people that come in. When a place revives by almost definition, you get a broader variety of people wanting to live there. Studies have consistently shown that these revivals bring tremendous benefits to the neighborhood, and very, very few people get displaced because by definition, places that are underdeveloped have lots of room to develop. That’s the reality of gentrification.

What’s happened in America, and it happened in Bushwick, and it’s happening in many, many cities of America now, is that community activists and community groups have begun to protest against any kind of redevelopment that essentially brings in new people because they claim that the community is going to be forced out. And there’s this now strange mentality which essentially says somehow that these communities should get better by never changing, which will never happen. Right? By very nature.

Brian Anderson: You described some of the very striking ways gentrification is now being noticed. Things like coffee shops or park refurbishment or improvement, right?

Steven Malanga: Right. Or just new restaurants. That’s a big one. I mean, restaurants are considered now in many low-income areas to be signs of gentrification. To the extent that any restaurant that opens up in a new area that’s not designated “to serve the community”, whatever that means, I mean, I don’t know, it’s like a restaurant with maybe something that hasn’t been in that community maybe a new kind of cuisine or something, is being branded as a sign of gentrification. And so people are boycotting restaurants. They’re attacking restaurant critics who start giving good reviews to restaurants in areas that didn’t previously have these restaurants.

And there’s this whole idea that you can somehow stop progress, stop rebuilding, but continue progress. It’s a complete contradiction to the point where even in cases where you have, let’s say, projects, affordable housing projects where there’s a cap on the rent that people are going to be charged, you have activists essentially in some areas protesting against that because just by the virtue of the fact that it’s new, it’s going to change the nature of the community.

And one of the ways this is being expressed is in many cities, there’s this lobbying for basically new kinds of what I would call quasi-historical districts. Historical districts are traditionally places where there’s actually some kind of, let’s say historic architecture, let’s say Greenwich Village, New York, and they get a designation, which means you can’t change too much without approval. More and more, you’re seeing around the country people lobbying to have their neighborhoods called basically conservation districts or historic districts. It’s just a way of stopping progress. It’s just a way of freezing progress.

And the problem is this is like a fundamental issue with society in general, if you’re not going forward, you’re not standing still, you’re going backwards. And that is exactly what’s happening now. And I think there’s a tremendous political undertone to this because many of the advocates who are trying to stop progress, what they are really trying to do is stop change, because change means that eventually maybe the politics of the neighborhood changes too. Maybe they lose power because new people are coming in, doesn’t necessarily mean the new people are richer or better, but they might just be different.

And so a lot of the underlying, I think, message here is that there are a lot of people who are trying to stop urban development because they don’t want change because they have power in their neighborhoods. And it’s a very, very, at a time when we have home prices that are too high, and a shortage of housing because of regulations that have essentially made building harder and harder, this is the exact opposite of what we should be doing. And if this goes on for too long, and if political leaders accede to it, what’s essentially going to happen is it’s only going to make worse what’s already a housing shortage and high housing prices are going to go even higher.

Brian Anderson: Yeah. Well, thank you, Steve. These two things kind of do work together if you are losing retail and preventing any kind of development—

Steven Malanga: That’ll prevent gentrification.

Brian Anderson: It will really, yes, it’ll prevent gentrification, but at what cost, it’s really incredibly misguided. Steven Malanga, thanks very much. Don’t forget to check out Steve’s work on the City Journal website. There’s a mountain of it there. That’s www.city-journal.org. We’ll link to his author page in the description, we’ve been talking about two of his recent pieces, “The Return of Urban Retail Deserts,” and his essay in our summer issue, “Anti-Gentrifiers Gone Wild.” You can also find City Journal on Twitter @CityJournal and on Instagram @cityjournal_mi. And as always, if you like what you’ve heard on the podcast, give us a five-star rating on iTunes. Steven Malanga, always great to have you on. Thanks very much.

Steven Malanga: Yeah, thank you.

Photo: ablokhin/iStock

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