Huge Gap in How Metro Areas Cope with Recession

The recession has taken a toll on almost every area of the country.  But some of the hardest hit have been urban areas. Take Atlanta, which lost 8.4 percent of its jobs – more than 218,000 – between 2007 and 2009. Or the Stockton and Modesto, Calif., regions, both of which saw home prices drop more than 55 percent between 2006 and 2009.

But for each one of those, there's a metro area like Austin, Texas, which actually saw employment grow by 3 percent and home prices rise by 9 percent over those same periods.  In fact, of the nation's 100 largest urban areas, 29 have seen relatively minor changes in jobs and home prices, compared to another 29 that have seen significant drops in both housing and jobs. The remainder is almost evenly divided between those that have taken a hit in one area but not the other, according to a new analysis on "double trouble" areas from the Urban Institute, a Washington think tank. 

The study offered no clear solutions, but state and local officials have praised some federal aid programs, while others, such as a mortgage modification plan, have reached relatively few people.

Chris Hoene, director of the Center for Research and Innovation at the National League of Cities, divides hurting metro regions into those that are experiencing boom-and-bust cycles, like parts of Florida and the Southwest, and those that are chronically distressed, such as Detroit and Allentown, Pa.

"The difference from a policy perspective is you can't really construct national-level policies that can get at what both groups are experiencing," he said.

Hoene has identified some common features among the worst-hit areas and others among those weathering the storm well. The worst, he said, lack a diversified labor market. Detroit and Youngstown, Ohio, for instance, depended on the auto and steel industries, while Bradenton and other parts of Florida had flourished on a construction industry that is now languishing. If people do find work, their troubles may be exacerbated by longer commutes. High gas prices may have popped the housing bubble, he said, often leaving the exurbs in worse shape than the city cores.

Communities that try to manage growth, meanwhile, generally have fared better overall, Hoene said. At least half of the stronger group also has a large government presence: universities, military facilities or state capitals. Others, like Texas and Nebraska, are driven by oil and gas, which remain powerful economic forces. These are not exactly conditions that can be air-dropped anywhere.

Robert Lerman, a fellow at the Urban Institute and co-author of the "double trouble" study, said that responses can be tailored to areas facing job loss, housing woes or both. Low home prices, he said, could be an opportunity in many areas where rents are rising.

"In a sense, the decline in home prices offers an opportunity for people to buy," he said, noting that lenders would need to shake off the crisis and extend credit. He has proposed that the government offer a voucher program for low-income homebuyers similar to what it now offers to subsidize rents.

The experts assembled at the Urban Institute Tuesday agreed that the problems would not be solved easily. Jeff Finkle, president and CEO of the International Economic Development Council, said that these areas were already experiencing a simultaneous double-dip depression: a mortgage crisis and a huge decline in manufacturing jobs. "We've not had these two strains come together the way they did in this recession." And Finkle said that fixing jobs should come before fixing housing. "That is what keeps me up at night," he said.