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Univer-cities: Affordable San Franciscos?

High-priced big cities may be an opportunity for college towns—and colleges.
University Business, November 2014

In the business world, products sometimes price themselves out of the market and provide an opening for competitors.

Because of strong demand for what they offer, universities have long been able to raise tuitions without triggering this effect. But today we have controversy about the burden of student loans (a movie expose, “Ivory Tower,” opened in June). And there is emerging low-cost competition from online education (“Earn a Master’s Degree Without Showing Up to Class,” promises an ad for New York University). These changes are bound to hurt the finances of some universities and the economies of some college towns.

But there is also great potential opportunity in the overpricing phenomenon for college towns and for the schools themselves.

”If You Have to Ask the Price…”

Well-publicized glamour towns like New York, San Francisco, Miami, and Chicago have in recent years been attracting the educated and affluent—from young people to empty-nesters and retirees both from our own and other countries.

For some the attraction is lots of high-paying jobs in glamour industries. For others it’s activity, entertainment, culture, nightlife, or a youthful or more intellectual vibe.

Such demand naturally makes prices for residence and business property and local taxes go up. But when prices get too high, there can result extreme and chronic unaffordability even for those with good incomes. Some cities are simply pricing themselves out of a big market.

The poster children here are New York and San Francisco. These are the places you find the nation’s most expensive “if-you-have-to-ask-the-price-you-can’t-afford-it” urban housing. Gotham’s staggeringly high housing prices have sent some New Yorkers to live in the city’s “sixth borough”: Philadelphia.

While high real estate prices are a product of the success of a local economy, they can also threaten it. Businesses are reluctant to locate in areas that require giving employees bigger paychecks just so they can afford a home, and even executives can resist moving to such areas.

Univer-Cities Could Compete

Cities located near pricey glamour capitals can offer less expensive urban housing at the cost of longer commutes—as, for example, former auto manufacturing hub Kenosha, Wisconsin, now does for Chicago. But they don’t always offer the sophistication upscale urbanites seek.

With further development and marketing, college towns outside of costly metro areas could grow to become good substitutes for popular but overpriced big cities. But they will have to diversify and transition from the academic ghettos many of them are to more diverse places I call Univer-Cities.

More than other places, college towns already offer what urban migrants want if on a smaller sale. With more non-academic jobs, Univer-Cities could scale up and be more competitive for these economically beneficial populations the New Yorks and San Franciscos are pricing out.

Why couldn’t a bigger Davis, California, become an affordable San Francisco or an enhanced Ithaca, New York, an affordable New York City?

Davis, with a university of 32,000 students, has been rated the nation’s second most educated city and has been a pioneer in facilitating bicycle transportation and recreation. Ithaca, with Cornell University and Ithaca College, has appeared on numerous Best Cities lists and has more restaurants per capita than the Big Apple.

Currently college towns can have affordability problems. Universities’ tax-exempt property pushes up taxes for residents, a captive student market drives up rents, and anti-growth politics can impair new construction. Growth and diversification into a Univer-City can reduce these difficulties.

Ties to the Workplace

With developing changes in higher education, single-purpose college towns will do well to grow and diversify economically. This has not always been a priority in these places, given the apparently permanently secure economies they have heretofore enjoyed.

But larger and more diversified economies could help college town tax bases and relieve pressure on schools from local officials concerned about the tax exemption of universities’ immensely valuable real estate. They could also strengthen ties between the classroom and the workplace. That’s something many are calling for as the value of degrees for employment is being increasingly questioned, threatening the future market for what colleges produce.

University leaders have not always gotten intensely involved in promoting their towns’ non-academic growth. In the interest of both the school and the community, there may now be more reason than ever that that should change.

Formerly with the College of Human Ecology at Cornell University, John L. Gann, Jr., (citykid@uwalumni.com), President of Chicago-area-based Gann Associates, consults, trains, and writes on marketing places for economic growth. He is author of The Third Lifetime Place: A New Economic Opportunity for College Towns. For more articles on college town economic development, see salesjobsandtaxes.com/tlpart1.html.

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