Don’t Blame Richard Florida for Out of Control Land Rents

Angie Schmitt delivers some long overdue pushback to the legions of Richard Florida haters.

It’s become fashionable in recent years for pundits to imagine they’re discrediting Florida’s prescriptions for attracting well-educated and cosmopolitan residents by noting that many of the places Florida considers successful also have high levels of income inequality and poverty. But as Angie points out, the study that’s kicked off the latest round of Florida-bashing shows that talent agglomeration does in fact result in broad-based income gains. They’re just being cancelled out by increased housing costs:

Florida himself brought it up in a column for Atlantic Cities, how one study had shown that “talent agglomeration” in cities did lift income levels broadly. However the study showed that the income gains in these trendy metros were eaten up by increased housing prices.

It’s an important finding, and to give credit where credit is due, Mr. Creative Class himself was the first one to bring it to anyone’s attention. Since then, a parade of writers have basically been calling him a fraud who’s ruining America [...]

First of all, Richard Florida never styled himself as a poverty researcher, nor claimed his theories were the antidote to urban poverty. Talent agglomeration, trying to attract certain people to your city, was an economic development strategy, nothing more, nothing less. Prior to this whole idea catching on, urban economic development strategies mostly consisted of offering big tax incentives to corporations or building stadiums and convention centers, all of which was of extremely dubious benefit to the poor, and were also not necessarily sold as a way to help the poor, per say.

Talent agglomeration works to boost incomes across the board. Its wealth creation effects do not seem to be in doubt. The problem is that too much of that wealth creation is being captured as land rents by incumbent landowners.

That’s not evidence that Richard Florida’s ideas produce inequality and poverty. It’s evidence that most big cities have horrible land use and tax policies. The problem is that in too many cities, once Florida’s prescriptions have started to succeed in growing the economy, the first wave of Creative Classers move to choke off population and housing growth in their neighborhoods, creating a nice land rent windfall for themselves.

A city that followed Richard Florida’s prescriptions, but also kept land rents in check with a land value tax, and allowed new housing construction to keep pace with housing demand would be a city with higher-than-average wages and a lower-than-average cost of living for the poor and middle class.

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