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Rotman Insights Hub | University of Toronto - Rotman School of Management

In post-pandemic America, the new urban crisis has spread beyond superstar cities

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Richard Florida

San Francisco is often cited as an extreme example of wealth inequality and unaffordable housing. Walking down the street, you’re just as likely to run into a millionaire (or billionaire) technologist as a homeless veteran. 

In 2017, Richard Florida, a Rotman School of Management professor of economic analysis and policy, dubbed the set of issues facing cities like San Francisco and New York “the new urban crisis.” Six years later, Florida says the urban crisis — marked by economic inequality, unaffordable housing and economically segregated neighborhoods — has expanded across America.

“Post-pandemic, that crisis has spread rapidly to up-and-coming cities like Austin, Miami and Nashville,” Florida says.

According to a recent paper co-authored by Florida and Todd Gabe, a professor of economics at the University of Maine, cities experiencing the new urban crisis were also slower to recover from the economic shock of the early pandemic.

“Cities that were in the throes of a worse new urban crisis were less able to recover from the negative economic shocks related to COVID-19,” Florida says.

The more a city was divided economically (income inequality) and geographically (neighborhoods segregated by income and occupation), the slower the city recovered.

Interestingly, housing unaffordability did not cause the same effect. The authors attribute this to the availability of government programs during the pandemic, such as rent relief and mortgage forbearance. Florida also suspects that timing played a role.

“The most unaffordable places tend to be the largest and densest,” he says. “They were hit really hard at the beginning of the pandemic and then began to recover somewhat.”

Though the causes of the association between the new urban crisis and economic recovery during the pandemic are less well understood, Florida has a strong intuition. As high-paying jobs migrated into the digital realm, professionals vacated the corporate hubs at the center of big cities like New York and Chicago.

“There were lots of young people living in the superstar cities and tech hubs that were now forming families and having children and looking for more space,” he says.

While middle- and high-income residents fled urban centers in 2020, low-income residents often lacked the capital to leave. In addition, COVID restrictions might have prevented them from travelling from their economically segregated neighborhood to work in a more affluent part of the city. Even if they could leave, many lost jobs as urban centers lost the high earners that patronize service industries.

“The biggest impact was not on where people live, it was on where they work,” Florida says. “Central business districts are not coming back the way they were.”

Florida also points out that corporate strategy may have exacerbated this trend. Even before the pandemic, some of the most successful companies in America seemed to be shirking notions of corporate civic responsibility in pursuit of a more exploitative approach, he says. For example, Amazon set off a bidding war for its new corporate headquarters in 2017, and cities scrambled to offer subsidies to the corporation in the hope of an economic boost. Ultimately, the company secured more than US$2 billion in local and state subsidies for its new headquarters in New York and Virginia.

As the pandemic winds down, this same profit-over-people strategy is driving decision making in cities. Now that remote work has been normalized, businesses are eager to divest local holdings.

“Business has seen this as an excuse to cut back on their offices and cut back on their commitment to their communities,” he says. “Companies have less obligation to their communities, even their hometowns, than ever before.”

For now, it’s hard to say which of these factors had the greatest impact on economic recovery. But as more data comes out, Florida hopes that he and other researchers can remodel and update the concept of the new urban crisis for a post-pandemic world. 

“It’s going to take more time to sort it out. Some of these effects don’t show up immediately in statistical indicators — they show up in more descriptive indicators and then, over time, they’ll show up in the statistics.”

Two things seem clear from anecdotal evidence. The first is that the pandemic has deepened the inequalities driving the new urban crisis. The second, is that those inequalities have spread.

“The pandemic allowed people who were living in these major centers not only to go to the suburbs of those centers, but to disperse to other parts of the country,” he says. “They put enormous pressure on local housing markets and fundamentally changed their character. Those are the lasting impacts of the pandemic.”


Richard Florida is a professor of economic analysis and policy at the Rotman School of Management and distinguished scholar-in-residence at the School of Cities, University of Toronto.