- Deseret News - Tuesday, August 5, 2014

The recession isn’t lingering everywhere. Some cities have shaken it off and are back or better than they ever were in the pre-recession salad days.

New Orleans, La., and Louisville, Ky., have climbing home values, and poverty rates in El Paso and Brownsville, Texas, have dropped, according to a report released last week by personal-finance social network WalletHub that analyzes the largest U.S. cities recovering from the Great Recession of 2008.

The most recession-improved city was Laredo, Texas, which came in first in the economic environment category, and at the bottom was San Bernardino, California, which ranked poorly for economic opportunities and earnings.

There are lessons to be learned from the cities at the top of the list, says WalletHub CEO Odysseas Papadimitriou, who notes that recovery has been much kinder to some cities than others. “The most surprising thing to see was the differences between cities,” he says. “Some cities almost look like they are in different countries.”

Bouncing back

Six years after the crash, cities that still struggle the most are those hit hardest by the housing bubble, in places like California, Arizona and Florida.

WalletHub used 18 metrics for its analysis — including inflow of college-educated workers, business growth and unemployment rates — but the housing market still seems to dominate recovery. “In the ability to recover, the housing bubble is a big factor,” says Papadimitriou.

Bigger cities fare better, too. “Miami, for example, has travel tourism, it’s appealing, it’s a destination,” he says, so it has recovered quickly, while some of its neighbors, like Cape Coral, Fla., languish at the bottom of the list.

Bigger cities that are relatively sheltered from the housing crisis are faring well: Median income in Denver has gone up 12 percent, and home prices have completely recovered from the housing crash. Home prices in Dallas have gone up a whopping 17 percent since the bubble burst.

What can we learn from Texas?

Texas dominates the list with six of the top 10 recession-recovered cities, including Laredo at No. 1, Irving at No. 2, and Dallas and Corpus Christi at 5 and 6. What does the Lone Star State know that other states don’t?

“We’re both smart and we’re lucky,” says Jim Gaines, research economist at the Real Estate Center at Texas A&M University. He notes that Texas largely missed the housing bubble in part thanks to good fortune, like the spacious state’s surplus of open land, but also thanks to policies that states like Arizona and California didn’t have.

A borrower in Texas can take out a home-equity loan, but the total amount of debt on a home cannot exceed 80 percent of its appraised value. This helped prevent Texans from getting second and third loans, as some homeowners did in other places, says Mr. Gaines. “That was a biggie; at the time it was real debatable but it turned out to be a good thing,” he says. “Exotic financing and predatory loans weren’t as prevalent.”

Experts also point to Texas’ liberal land-use policies that kept new housing plentiful and relatively cheap, while zoning policies that restrict development in places like California kept housing at a shortage and drove prices to ever more dizzying heights. Post-recession research has shown that areas with restrictive zoning policies had some of the steepest housing prices during the bubble.

Mr. Gaines points to one more factor that’s not always considered: “We have cheap labor,” he says, referring to immigrant workers — sometimes illegal — that are plentiful in Texas. “A lot of those guys may not know how to speak English, but they know how to build a house.”

Smarts and luck

Texas has also created tax incentives to attract jobs, but tax incentives alone are not enough, says Jayce L. Farmer, assistant professor of political science at Texas State University, and other cities looking to boost employment in the post-recession funk should consider those. “Businesses are seeking locations that attract and retain a well-educated workforce,” he says.

“Over the last 30 years we have seen a diverging pattern in the location patterns of college graduates towards cities that are rich in amenities such as entertainment, museums,” says Mr. Farmer.

Terence Spielman told Area Development Online that quality-of-life factors — such as affordable housing, schools and universities and access to culture and recreation — was what made PayPal select Austin, Texas, for its headquarters.

It’s also smart for cities to play to their strengths. Relatively obscure Ogden, Utah, an hour outside of Salt Lake City, was able to attract Arner Sports — maker of Rossignol and Salomon skis — to move there because the area is an outdoor mecca, with skiing, mountain biking and kayaking all minutes from Arner’s offices.

Laura Reese, a professor of political science at Michigan State University, is not a fan of economic development incentives, especially for specific companies. “Giving away your local tax base to attract or retain a firm gives away the money needed for the truly important things, like schools and public safety,” she says.

Her research shows that incentives aren’t important to recovery. Culture and recreation matter, but cities shouldn’t “set up entertainment districts for tourists.”

“Paying attention to the needs of families is just as or more important than worrying about the creative class,” she says. “You don’t need to be a cool city — you just need to be a solid, well-run one.”

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