1. Built environment
March 13, 2020

Here’s how cities can protect creative industries from gentification

By Shain Shapiro

The way cultural infrastructure is built in our towns and cities leads to an inherent contradiction. Often, the more successful creative and cultural entrepreneurship – and the people that fuel it – is in a city, the more it exacerbates inequality and fuels gentrification. 

As Richard Florida notes in his article assessing the redistribution of the creative class, creative-led jobs in US metros have grown 72.5 per cent since 2005, compared to a growth of the overall workforce increasing by 13.6 per cent. This equates to an additional 11 million workers. And while some cities have expanded their creative classes more than others, most United States metropolitan areas have seen an expansion of their creative class and with it, an increase in house prices, rent and amenities. Cities are becoming more unequal

In the UK, the story is similar. The creative industries in the UK are now worth £101bn, which makes it Britain’s second largest sector, behind only banking. This equates to 5.5 per cent of the economy, and its growth current is double that of the rest of the economy, or even more depending on the impact of Coronavirus

But at the same time, music venues and nightclubs remain threatened. Some 130 Libraries closed in 2018 alone. Music programmes are in dire straits according to the UK Musicians Union. Britain’s high streets are also in crisis with shops sitting empty, despite a desire to use them for creative community benefit in many places. And like in the US, cities are less equal now than they were a decade ago. 

Despite the way the creative sectors have grown far faster than the rest of the economy in both the US and the UK, we face a crisis across our cultural infrastructure, which facilitates inequality. The places and spaces we need to create – and the land use, zoning and regulatory policies to support them – is not keeping up with the opportunities the creative class presents, which means the rise of it is paired with a dearth of those that benefit from it. 

As we’ve seen, the more creative a place, the more expensive it is. The more expensive, the less places one has to incubate content, despite contents’ success being the reason a place becomes known as creative. While many creators do create at home, many creative sectors still require space outside of one’s bedroom to create, whether it is via WeWork (with prices starting at $550 or £450 per month to hot desk, on average) or a recording studio. Even when cultural infrastructure is prioritised in mixed-use developments, it is often the sort of infrastructure you can see, rather than the sort of back office spaces that are necessary to the creative industries, despite being rarely seen by the public. 

In addition, concert halls, opera houses and ballet halls remain fixtures in most city centres. A glistening, new music venue is far more newsworthy than an affordable set of recording studios and rehearsal spaces. As such, we ignore the causality between the two. And with it, inequality grows, despite creative class related jobs and so-called opportunities increasing. 

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For example, in the UK about 300 professional recording studios exist, with 200 in London. This is half of what existed a decade ago, according to the University of Nottingham. Sources of data related to back-of-house uses, like rehearsal spaces, are few and far between. In London, only 27 per cent of dance studios are fitted out for dance. New York City is addressing the issue by providing hundreds of hours of free rehearsal space, recognising such space is in short supply. 

Each of the creative class sectors is different, and as such, requires individual approaches. And planning departments are letting them down. For example, there is no mechanism to allocate future tax revenue to fund grassroots projects by calculating their predicted value to their communities. 

Take the UK for example. There is a Tax Increment Finance (TIF) structure that assumes that, for core infrastructure, such as roadways, transport and cycle lanes every £1 spent brings in £10 of economic benefit over two decades. So the expected property taxes that such land use would be subject to is unlocked as a loan, secured by the projected economic benefit the use will bring. London Underground upgrades, London’s Crossrail train system and road improvements all benefit from TIF financing, as do large, mixed-use housing-led projects. But cultural infrastructure is negotiated later in the community use provisions of development, a process governed by what’s called Section 106 obligations. There is no predictive modelling applied to grassroots cultural infrastructure, so it is not considered suitable for TIF funding, outside of large scale arenas or stadiums. 

We tried to put some financial meat on the bones of why investing in grassroots cultural infrastructure through a TIF-style model could work. So for a report commissioned by the insurance firm Legal & General, we attempted to calculate this. We took a venue in North London that holds 250 people and hosts live music, art and culture events 7 days per week. We had hard numbers related to people through the doors, drink purchases, merch, tax, salaries and liquor duty. We estimated its event programme’s impact on people eating out nearby, using public transit, minicabs and other infrastructure. 

And we found that the venue’s direct economic impact is £1.6m per year. Of that, £9,000 is paid per year in property tax. If a municipality took a 25 year approach to such a venue, that’s £225,000 in total property tax. 

Even taking into account an allocation for street cleaning, garbage pick-up and policing, a small TIF-style loan for a portion of that future value could have provided the premises with more start-up capital to accelerate its growth. This could be done for a recording studio, a dance company, or any business serving the creative class, and prioritised on the grassroots level, rather than large infrastructure projects. 

With it could come community amenity provisions similar to that a housing developer requires. This could include hiring locally, sourcing locally or contributing to a community infrastructure project such as a local garden, beautification or block party. Or it could be attached to environmental requirements, including adoption of green energy or commitment to sustainable development. If multiple businesses participated, networks could be developed to share best practices or develop stronger local ties. Resources could be pooled into renewable energy, or investing in local talent as a cooperative. 

Furthermore, if affordability is an issue, as it will be if the city is successful, commercial (or even housing) rents can be controlled to align with inflation so long as TIF funding is repaid with interest (i.e profit), either to the developer, municipality or both. 

But first we need a workable equation that outlines, and defends, the prospective value of these creative class businesses. And with the sectors growing at the rate they are on both sides of the pond, such an argument is possible. If we have a sector growing at twice the rate of the rest of the economy and that is one of the main reasons people choose to live where they live, it must be further prioritised in land use – and value – planning. But instead, cultural infrastructure is either delivered due to personal preference or planning approval requirement. We can do better than this. 

In the US, there are further models that can be explored. In Austin, the redevelopment of the Austin Convention Centre includes an ordinance to increase the tax on hotel stays from 15 per cent to 17 per cent and allocating 15 per cent of the additional 2 per cent tax to support the city’s live music industry. Austin is, along with Nashville, America’s living lab of music meets gentrification. Both cities attracted ancillary sectors (tech with Austin, healthcare with Nashville) due in part to their promotion of each being a vibrant, music-filled city. 

Both cities have struggled to support the communities that supported this growth, because they are increasingly expensive. A salary of $55,000 means one can live comfortably in Austin. This jumps to $70,150 for Nashville. Each fill hotel rooms, attract conferences and drive tourism in part to their extensive music-related marketing and music scene. Austin’s experiment, expected to bring in over $3m per year, could be implemented elsewhere. But this money will be allocated in this instance to musicians, not infrastructure. 

Austin and Nashville are examples of the power of music, and the creative class in general, to drive growth. But both cities suffer from inequity in their creative ecosystems, which become worse the more each place is seen to succeed and remain cool, creative and hip. This is what happened in Brooklyn and Shoreditch, and solutions are not being implemented to ensure that those who remake places can stay in them once they change.

In both the US and the UK, now is the time to review planning, zoning and city ordinances so all of the cities whose creative classes are growing remain creative. In the UK, the implementation of the Agent of Change principle helps, but its implementation on the ground is yet to be tested. In the US, the prospective financing and investment theoretically made through Opportunity Zones could focus on creative infrastructure, but there’s no guidelines to prioritise culture, or compel investors to consider it intentionally. 

The creative class will continue to grow. The music industry alone is expected to double and be worth $80bn by 2050, according to Goldman Sachs. I have yet to encounter a city that does not want a thriving music and cultural scene, festivals and “music city” branding that means something. It attracts investors, shoots them up “best places to live” indexes and is worth bragging about. 

This requires recognition that with the development of creative jobs must come an increase in infrastructure financing, incentives and programs to not only support them to come, but keep them when they are there. If not, we’ll fuel more inequity through cultural development. And that would be a shame. 

Shain Shapiro is the founder and CEO of Sound Diplomacy.  

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