Reimagining Cities-Disrupting the Urban Doom Loop
DOOM LOOPS AND VIRTUOUS SPIRALS Doom loops manifest when buildings in a WalkUP or DriveIN experience declining valuations, often due to resident and business out-migration. This results in the owner holding less equity in relation to debt. As equity decreases, there is less incentive and capacity to invest in the property. 26 The ripples of doom loops spread to neighboring properties, especially in WalkUPs, where appraisals drop, capitalization rates rise (indicating lower valuation), and eventually property taxes decline. This reduces the local government’s resources to maintain public services. With fewer public and maybe even less place management resources
for security and cleanliness, crime and trash increase, and create a negative, self reinforcing downward spiral. Once a WalkUP is caught in a doom loop, addressing one or two issues—even if moderately successful—will not be enough to reverse it. 27 A comprehensive strategy, with many components implemented over a minimum of three to five years is needed. 28 However, reversing a DriveIN doom loop may require only one or two initiatives, such as rehabilitating the regional mall or adding a new hotel. DriveINs have fewer components and social challenges (like crime and homelessness) that can contribute to a doom
INGREDIENTS OF DOOM LOOPS
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Out-migration of residents and businesses
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(Possible) increased tax rates or decreased spending to make up for lost revenue
Lower implied real estate values
Increased Disinvestment
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Credit tightens/ becomes more expensive
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Banks & lenders incur losses
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Source: Places Platform, LLC; Cushman & Wakefield Research
26 Gupta, Arpit, Candy Martinez and Stijn Van Nieuwerburgh. “Converting Brown Offices to Green Apartments.” National Bureau of Economic Research. 2023. (3) ; Loh, Tracy Hadden and Hannah Love. “Breaking the ‘urban doom loop:’ the future of downtowns is shared prosperity.” Brookings. 2023. 27 JIang, Erica Xuewei, Gregor Matvos, Tomasz Pickorski and Amit Seru. “Monetary Tightening, Commercial Real Estate Distress, and US Bank Fragility.” National Bureau of Economic Research. 2023. (6) 28 Nieuwerburgh, Stjin Van. (34)
Reimagining Cities: Disrupting the Urban Doom Loop 19
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