What the New Urban Anchors Owe Their Cities

As some of the main drivers and primary beneficiaries of the recent urban revival, anchor institutions are often the largest employers in their communities. While typical examples of “anchor institutions” include large universities, hospitals, and medical centers—so-called “meds and eds”—that quite literally anchor urban centers, other powerful anchors, including successful high-tech companies and real estate developers, have the capacity and resources to wield enormous influence on today’s cities.

However, the last decade has given rise to a troubling pattern of “winner-take-all urbanism” in which a select group of large, dense cities and an even smaller number of neighborhoods reap the spoils of innovation and economic growth. Anchors benefit enormously from this recent urban revival. And as a result, they must commit themselves to generating more inclusive prosperity.

To solve our modern urban crisis, we need a broader, more encompassing strategy of inclusive prosperity that allows all residents and neighborhoods to benefit from urban revival. In a new study with Steven Pedigo, my colleague from the NYUSPS Urban Lab at the Schack Institute of Real Estate, we outline the role that anchors can and must play in creating inclusive prosperity in our urban centers.

As the federal government retreats from urban development and turns its priorities away from cities, the onus of inclusive development has transferred to urban areas. With gaping cutbacks in federal spending for housing assistance, affordable housing, job training, healthcare services, education, the environment, and more, local governments, non-profit organizations, and philanthropic foundations are having to step in to fill these gaps. Anchors could be doing more to help out as well.

One class of particularly potent anchors is the tech companies that have returned en masse to downtown urban areas. Today, five of the ten most valuable companies in the Fortune 500—Apple, Amazon, Google, Microsoft, and Facebook—are high-tech corporations. At least two of them, Amazon and Google, are a massive presence in the urban core.

Amazon is the largest private tenant in downtown Seattle. Its campus spans more than 8.5 million square feet and employs more than 25,000 workers, most of whom are highly paid engineers, managers, and programmers. Soon, Amazon will open a second headquarters, for which dozens of metros across the US and Canada are competing, and which will have a considerable effect on the shape and content of much of future economic development practice and policy.

While Google maintains its large suburban office complex—the so-called “Googleplex” in suburban Silicon Valley—it also has a major presence in New York City, where it houses more than 3,000 employees in its renovated Port Authority building in Chelsea. The company has also proposed an estimated 870,000 square-foot tech complex in central London, designed by young “starchitect” Bjarke Ingels, which will house another 4,000 employees. Google has also recently started negotiations with the city of San Jose to acquire city-owned land around the city’s downtown Diridon Station, which would include six to eight million square feet of office and retail space and house some 20,000 employees.

Real estate companies are another large-scale anchors with enormous influence in cities. To take advantage of the urban revival, many real estate developers are bypassing single developments and instead building entire neighborhoods or districts like Hudson Yards in New York City, or Boston’s Seaport Innovation District. While these developments have the potential to foster diversity and community engagement, they also have the potential to become isolated pockets of wealth, alienating nearby residents and amplifying inequality in surrounding neighborhoods.

Indeed, the ongoing urban revival has spurred an increasingly potent backlash that pins the blame for rising housing prices and growing inequality on high-tech companies and real estate developers. In the midst of this backlash, a growing number of cities have turned to affordable housing and inclusionary zoning as a way to make communities more accessible for low and moderate-income families. But, solving today’s urban crisis requires a strategy that goes beyond these measures. It must also include jobs, innovation, and broadly shared economic growth. Our study identifies four key pillars that anchors can and must adopt in the quest for inclusive urban prosperity.

Require affordable housing

Anchors can help bridge this gap between poor and affluent residents by providing affordable housing, including workforce housing that allows low-paid service and blue-collar workers to live near their jobs. Already, universities like NYU and Stanford offer assisted housing to their faculty in the form of mortgage assistance and rental supplements, or simply by constructing it themselves.

Real estate developers and high-tech companies can follow this example by incorporating affordable and workforce housing into their urban projects. In Seattle, for instance, Amazon designates47,000 square feet of office space to house more than 200 members of the city’s homeless population each night. Even with initiatives like these in place, leading tech companies have the resources and capabilities to do much more.

Make good, family-supporting service jobs the centerpiece of development

Today, around 45 percent of the American workforce is employed in low-wage, low-skill fields like food service, home healthcare, and office work. Anchors can play a major role in transforming these jobs into sustainable, family-supporting careers. Research from Zeynep Ton of MIT’s Sloan School of Management provides detailed evidence of how successful retail and hospitality companies like Zara or Whole Foods profit from a “good jobs strategy” that invests in lower-skill workers. By offering higher wages to employees, companies can improve their service, productivity, and profit while reducing costly turnover and cultivating higher levels of engagement and innovation. The result is a huge win for cities, which reap the benefits of improved economic efficiency.

Focus on inclusive strategies for innovation, entrepreneurship, and creativity

While innovation is often associated with entrepreneurs, engineers, or computer scientists, it increasingly stems from local creativity. With just 40 percent of the creative class having earned a college degree, many of America’s greatest innovators come from humble beginnings. By working with disadvantaged communities to bolster innovation and entrepreneurship, anchors can spur broader community benefits that serve all residents. Already, inclusive innovation strategies in cities like Pittsburgh and Washington D.C.provide low-income residents with technical skills, job training programs, and entrepreneurial savvy.

Real estate developers in particular can engage community residents by including creative incubators and “maker spaces” in their designs, helping residents to commercialize their creativity. At the same time, universities can incorporate community groups and neighborhood residents into their existing entrepreneurial, social, and civic innovation programs. Tech companies, too, can use their vast resources to expand their community-oriented innovation and entrepreneurship efforts.

Design and build inclusive public spaces

Public space is both a distinctive feature of cities and a space where a diverse mix of people come together. However, even well-intentioned public spaces can exacerbate existing urban divides. As a former industrial site in the middle of Manhattan, New York’s High Line Park was all but destined to attract high-end development. While originally designed as a neighborhood amenity, the High Line has struggled to serve the local residents for whom it was built.

In recent years, the High Line’s founders have identified the need to incorporate community benefits into their broader development strategies. By establishing mentorship programs and engaging local businesses—including hospitality and retail—to employ neighborhood residents, the High Line has gradually transformed into a more inclusive public space. In the same way, high-tech companies and special improvement districts can repurpose their existing public spaces to cater to local residents.

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For too long, economic development and equity have been seen as disconnected issues. Inclusive prosperity seeks to shift urban economic development strategy away from one that views equity and growth as mutually exclusive toward one that recognizes the central role of equity in economic progress.

Cities and communities have much to gain from inclusive prosperity, but so do leading tech companies. A growing number of tech companies from Uber and Airbnb to Google, Facebook and Amazon are increasingly seen as contributing to the New Urban Crisis, driving up housing prices, making urban inequality worse, and more. As their brands come under growing criticism, it is in the interest of these companies to be better urban citizens.

By embracing inclusive prosperity, tech companies and urban anchors across the board can address the burgeoning backlash from local communities and bolster their own tarnished brands by becoming real partners in building more inclusive and equitable communities.