Houston: The Next Great American Global City

Presentation by Joel Kotkin, Chapman University, to Harris County International

Trade and Transportation Conference October 23, 2014

What Makes a Global City?

1. Efficiency and connectivity is critical factor2. Rapid Economic Growth3. Being a “necessary city”

4. Role of Diversity and Migration5. Houston/Harris County Prospects

Why Houston Grows

• Dominant City on the Third Coast• The World Capital of Energy Industry• Rapid Economic and Population Growth• Expanding Ethnic Diversity --- and better

results for minorities• A Flexible economic and planning model• Challenges Ahead

San Francisco, Calif.

Detroit, Michigan

New York City, New York

Los Angeles, California

Seattle, Washington

Laredo, Texas

New Orleans, Louisiana

Chicago, Illinois

Savannah, Georgia

Houston/Galveston, Texas

-3%

37%

68%

81%

89%

111%

149%

165%

208%

237%

Growth in Total Trade, 2000-2013

U.S. Census Bureau, Foreign Trade Division

2005 2006 2007 2008 2009 20100

5000000000

10000000000

15000000000

20000000000

25000000000

30000000000

35000000000

CAFTA (Central Am.), 4.1

South America, 18.2

Africa, 6.2

European Union, 14

NAFTA (North Am.), 29.2

Asia, 26.2

Third Coast Exports by Destination

2005 2006 2007 2008 2009 20100%

20%

40%

60%

80%

100%

120%

140%

160%

180%

CAFTA; 163.7%

South America; 167.3%

Africa; 104.1%

European Union; 72.2%

NAFTA; 66.6%

Asia; 111.4%

Third Coast Exports by Percent GrowthG

row

th S

ince

200

5

What Makes a Necessary City?

1. An Island of efficiency in a regional economy2. Domination of a key industry sector

3. Close Human and Transport Links to the rest of the world

Examples of Necessary Cities

1. New York and London --- finance and media2. Los Angeles ---entertainment

3. San Francisco Bay Area --- technology 4. Houston --- energy

5. Singapore and Hong Kong --- Asian finance and business services

Shale Oil and Gas- Not Just the Bakken

Seattle

Riverside

Miami

Detroit

Phoenix

Washington

Boston

Atlanta

San Francisco

Philadelphia

Chicago

Los Angeles

New York

Dallas

Houston

11,491

11,974

14,538

14,730

16,129

19,041

19,147

27,628

27,783

30,071

41,444

54,913

59,438

67,097

241,792

Energy Employment, 2013

EMSI 2014.1

DetroitBoston

San FranciscoPhiladelphia

ChicagoLos Angeles

New YorkPhoenix

WashingtonAtlantaMiamiDallas

SeattleRiversideHouston

-31.2%

-23.6%

-22.1%

-21.3%

-21.2%

-17.8%

-17.0%

-14.2%

-14.1%

-13.8%

-11.5%

-6.1%

-5.0%

3.5%

15.5%

Job Growth in High-Value Blue Collar In-dustries, 2001-2013

Detroit

Houston

Seattle

Miami

Atlanta

Phoenix

Riverside

Dallas

San Francisco

Chicago

Boston

Los Angeles

New York

Philadelphia

Washington

25.0%

17.6%

10.4%

6.2%

5.4%

4.8%

3.0%

2.9%

1.9%

0.8%

-0.6%

-2.1%

-3.3%

-4.2%

-13.3%

Manufacturing Job Growth, 2010-2014

Detroit

Chicago

Miami

Los Angeles

New York

Philadelphia

Atlanta

Boston

San Francisco

Phoenix

Dallas

Riverside

Washington

Seattle

Houston

-12.8%

-9.1%

-7.3%

-6.3%

-4.8%

-4.1%

-2.6%

-1.5%

4.7%

4.8%

8.3%

14.4%

16.4%

18.9%

24.1%

STEM Employment Growth, 2001-2013

EMSI 2014.1

Las VegasAustin

HoustonRaleigh, NC

OrlandoJacksonville, FL

Memphis, TNSan Antonio

MiamiCharlotte

DallasPortland

RiversidePhoenix

WashingtonDenver

9.1%

8.0%

6.0%

6.0%

5.9%

5.4%

5.0%

4.1%

3.6%

2.6%

2.4%

2.4%

1.8%

1.4%

1.2%

0.3%

Fastest Growing Regions for the Full-time Self-employed, 2008-2014

HoustonPhiladelphiaWashington

New YorkLos Angeles

BostonMiamiSeattleDallas

ChicagoSan Francisco

RiversidePhoenixDetroitAtlanta

53%48%

46%46%46%

43%38%38%

37%36%

35%35%

31%23%

22%

Per Capita Personal Income Growth, 2000-2012

(Current Dollars)

U.S. Bureau of Economic Analysis

Houston-The Woodlands-Sugar Land, TX

Detroit-Warren-Dearborn, MI

Dallas-Fort Worth-Arlington, TX

Atlanta-Sandy Springs-Roswell, GA

Riverside-San Bernardino-Ontario, CA

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

Phoenix-Mesa-Scottsdale, AZ

Chicago-Naperville-Elgin, IL-IN-WI

New York-Newark-Jersey City, NY-NJ-PA

Seattle-Tacoma-Bellevue, WA

Boston-Cambridge-Newton, MA-NH

Washington-Arlington-Alexandria, DC-VA-MD-WV

Los Angeles-Long Beach-Anaheim, CA

San Francisco-Oakland-Hayward, CA

Miami-Fort Lauderdale-West Palm Beach, FL

13.3%

14.8%

15.2%

16.2%

16.2%

16.2%

16.4%

17.4%

17.9%

18.2%

18.5%

18.5%

18.8%

20.7%

26.5%

Share of Income from Interest, Diviends, and Rent, 2012

Bureau of Economic Analysis

What is a City For?

“a city comes into being for the sake of life, but exists for the sake of living well” Aristotle

Why People Move to Greater Houston.

*economic growth*housing affordability*opportunities for minorities

1950

1960

1970

1980

1985

1990

1995

2000

2005

2010

0

1

2

3

4

5

6

7

8

9

10

HoustonOther Liberal MarketsMore Restrictive Markets: Not CaliforniaMore Restrictive Markets: California

Med

ian

Mul

tipl

e

1950 – 1970: From Census Bureau1980-2009: From Harvard University

2010: From DemographiaAnnual Data Begins at 1980

Housing Affordability 1950-2013MAJOR US METROPOLITAN AREAS: MEDIAN MULTIPLE

Median Multiple: Median House Price divided by Median Household Income

Detroit

Atlanta

Dallas-Fort Worth

Houston

Chicago

Phoenix

Philadelphia

Washington

Riverside-San Bernardino

Miami, FL

Seattle

Boston

New York

Los Angeles

San Francisco

0.0 3.0 6.0 9.0 12.0 15.0 18.0

Restrictive RegulationLiberal Regulation

Largest Metropolitan Areas: AffordabilityHOUSE PRICE TO INCOME RATIO (MEDIAN MULTIPLE): 2013

From:Demographia International Housing Affordability Survey

Post WW2 Maximum Standard

Riverside

New York

Los Angeles

Miami

Phoenix

Boston

San Francisco

Philadelphia

Washington

Chicago

Seattle

Atlanta

Detroit

Dallas

Houston

$42,481

$43,284

$47,952

$49,897

$51,908

$54,177

$54,510

$54,613

$56,270

$60,727

$61,224

$62,743

$64,579

$65,040

$73,418

Average Annual Earnings Per Job, Adjusted for Cost of Living, 2014

Regions are metropolitan areas.Wage data: EMSI 2014.2, includes estimates of the full time self employedCost of living data: C2ER, 2013 Analysis by Mark Schill, Praxis Strategy Group

New York, NY-NJ-PA

Chicago, IL-IN-WI

Los Angeles, CA

Detroit, MI

Philadelphia, PA-NJ-DE-MD

San Jose, CA

Boston, MA-NH

Riverside-San Bernardino, CA

Miami, FL

Washington, DC-VA-MD-WV

San Francisco-Oakland, CA

Atlanta, GA

Seattle, WA

Houston, TX

Dallas-Fort Worth, TX

-400,000 -300,000 -200,000 -100,000 0 100,000 200,000

Largest Metropolitan Areas: Domestic MigrationNET: 2010-2013

Derived from ; Census Bureau

data

Detroit, MI

Chicago, IL-IN-WI

New York, NY-NJ-PA

Philadelphia, PA-NJ-DE-MD

Los Angeles, CA

Boston, MA-NH

San Francisco-Oakland, CA

Miami, FL

Seattle, WA

Washington, DC-VA-MD-WV

Atlanta, GA

Dallas-Fort Worth, TX

Houston, TX

Riverside-San Bernardino, CA

Phoenix, AZ

-5% 0% 5% 10% 15% 20% 25% 30% 35% 40%

Largest Metropolitan Areas: Growth2000-2013

Derived from ; Census Bureau

data

Detroit, MI

Chicago, IL-IN-WI

Philadelphia, PA-NJ-DE-MD

New York, NY-NJ-PA

Los Angeles, CA

Riverside-San Bernardino, CA

Boston, MA-NH

Miami, FL

Atlanta, GA

San Francisco-Oakland, CA

Washington, DC-VA-MD-WV

Dallas-Fort Worth, TX

Seattle, WA

Phoenix, AZ

Houston, TX

0% 1% 2% 3%

Largest Metropolitan Areas: Growth2012-2013

Derived from ; Census Bureau

data

Detroit, MI

Boston, MA-NH

Atlanta, GA

New York, NY-NJ-PA

Chicago, IL-IN-WI

Los Angeles, CA

Riverside-San Bernardino, CA

Miami, FL

Seattle, WA

San Francisco-Oakland, CA

Washington, DC-VA-MD-WV

Philadelphia, PA-NJ-DE-MD

Dallas-Fort Worth, TX

Phoenix, AZ

Houston, TX

0% 4% 8% 12% 16% 20%

Growth in Residents with BA+ Degrees2007-2012

Derived from ; Census Bureau

data

Chicago, IL-IN-WIPhiladelphia, PA-NJ-DE-MD

New York, NY-NJ-PASan Francisco-Oakland, CA

Washington, DC-VA-MD-WVAtlanta, GA

Boston, MA-NHPhoenix, AZ

Los Angeles, CADallas-Fort Worth, TX

Seattle, WAHouston, TXDetroit, MI

Miami, FLRiverside-San Bernardino, CA

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

Change in 20-29 Population

Derived fromCensus Bureau

data

Note: US 20-29Growth 4.0%

Age 20-29 Population Change: 2010-201315 LARGEST METROPOLITAN AREAS

Boston, MA-NHMiami, FL

San Francisco-Oakland, CANew York, NY-NJ-PA

Seattle, WAPhiladelphia, PA-NJ-DE-MD

Detroit, MILos Angeles, CA

Washington, DC-VA-MD-WVChicago, IL-IN-WI

Phoenix, AZAtlanta, GA

Riverside-San Bernardino, CADallas-Fort Worth, TX

Houston, TX

0% 5% 10% 15% 20% 25%

Derived from ; Census Bureau

Data

% of Population Aged Under 14 (2012)LARGEST METROPOLITAN AREAS

The miracle of toleration was to be found, “wherever the community of trade convened.”

The Cosmopolitan CityThe Cosmopolitan City

French historian Fernand Braudel on Venice, Antwerp, Amsterdam and

London in the early Modern Period

Largest Foreign Born PopulationsWORLD CITIES OVER 5 MILLION

Figure 32

1960 2010 2020 Projection0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Figure 33

White-Non-Hispanic Share of PopulationUS: 1960-2050

Source: Bureau of the Census

1970-1980 1980-1990 1990-2000 2000-20100%

10%

20%

30%

40%

50%

60%

70%

Total

Owner

Source: Myers & Pitkin

Foreign Born Share of New HouseholdsUS: 1970-2010

Figure 34

San Francisco (18.8%)

Chicago (15.2%)

Seattle (58.5%)

Atlanta (69.5%)

Riverside-San Bernardino (54.0%)

Dallas-Fort Worth (49.9%)

Miami (25.4%)

Washington (55.5%)

Houston (53.8%)

New York (15.7%)

0 200,000 400,000 600,000 800,000

Foreign Born Population: Fastest GrowingMAJOR METROPOLITAN AREAS: 2000-2012

Derived from ; Census Bureau

data

WashingtonHouston

BostonPhiladelphia

New YorkDallas

SeattleSan Francisco

ChicagoLos Angeles

MiamiDetroit

PhoenixAtlanta

Riverside

1.41.51.51.6

2.02.12.12.2

2.63.6

4.14.5

4.74.7

6.1

Change in Poverty RatePercentage Point Change, 2006-

2012

Houston Poverty Rate2000: 14.9%2012: 16.4%

Source: U.S. Census, U.S. Census American Community Survey

San Francisco

Chicago

Detroit

Philadelphia

Boston

New York

Seattle

Washington

Los Angeles

Atlanta

Dallas

Houston

Miami

Phoenix

Riverside

49%

50%

51%

51%

54%

57%

59%

61%

62%

64%

64%

65%

71%

73%

81%

Income Gap: Ratio of Black Median Household Income to White Medium Household Income,

2012

Source: U.S. Census American Community Survey

Boston

Philadelphia

New York

Atlanta

San Francisco

Washington

Dallas

Seattle

Houston

Chicago

Los Angeles

Detroit

Phoenix

Miami

Riverside

50%

52%

54%

59%

62%

62%

65%

67%

68%

68%

71%

72%

73%

81%

84%

Income Gap: Ratio of Hispanic Median Household Income to White Household

Income, 2012

Source: U.S. Census American Community Survey

Houston Chicago Phoenix Washington, DC

Philadelphia Atlanta Los Angeles San Francisco

New York Boston

53% 52%

47% 46%44% 44%

38% 37%

25% 25%

42%40%

34%

50%48% 48%

34%32% 32% 31%

Home Ownership Rate, 2012Hispanic/Latino Households African-american Households

Can Houston Keep its Momentum?

• Maintain Pro-Business Attitudes

• Integration of Immigrants• Improve education and skills

It all depends on her…

Education is the biggest challenge for Texas…making progress but more is

needed

Needed: A Return to Reality

• *Providing Road to Upward Mobility• *More Emphasis on Practical Skills

• *Less Ideology, and Feel-Good, more Discipline and Hard Work

MIDDLE CLASS OPTIMISM FOR NEXT GENERATION

SOURCE: Pew Social & Demographic Trends

Mobile Home or Other

Apartment

Attached or Townhouse

Detached

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Consumer Housing PreferencesNAR/SMART GROWTH AMERICA SURVEY: 2012

Overall Inner 3rd Middle 3rd Outer 3rd Exurban0%

10%

20%

30%

40%

50%

60%

12.9%

0.7% 6.5%

15.3%

29.9%26.1%

2.9%

13.4%

47.8%

39.2%

Average Excluding HoustonHouston

Largest Metropolitan Areas & Houston2000-2010 GROWTH RATE BY RING

Derived from ; Census Bureau

DataDetroit Excluded

due to overall loss

Chart$$$ Downtown Office Vacancy Rate: 2013:Q2

San Jose, CA

San Francisco-Oakland, CA

Boston, MA-NH

Detroit, MI

Philadelphia, PA-NJ-DE-MD

Riverside-San Bernardino, CA

Miami, FL

Chicago, IL-IN-WI

Los Angeles, CA

Seattle, WA

New York, NY-NJ-PA

Washington, DC-VA-MD-WV

Atlanta, GA

Dallas-Fort Worth, TX

Houston, TX

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Largest Metropolitan Areas: Building PermitsSINGLE FAMILY HOUSES” 2013

Derived from ; Census Bureau

data

2000 2005 2010 20150

5,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,000

Burdened With Student Debt, MillennialsAre More Able to Rent than Buy

1995199619971998199920002001'20022003200420052006200720082009201020112012201320142015

30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%

Homeownership Rate for 25 to 34 Year Olds

Total Renter HouseholdsSource: U.S. Census Bureau

Housing and the “Screwed” Generation

2012 20420

5

10

15

20

25

New York, NY-NJ-PA

Los Angeles, CA

Chicago, IL-IN-WI

Dallas-Fort Worth, TX

Houston, TX

Popu

latio

n in

Mill

ions

Figure 48

Top 5 Metropolitan Areas: Projection to 20422012-2042 POPULATION

Derived from ; US Conference of

Mayors data

What makes a great City?What makes a great City?

“an inventory of the possible”

Rene Descartes on Amsterdam in the 17th Century

Questions and CommentQuestions and Comment