Reimagining Cities-Disrupting the Urban Doom Loop

WALKUP FISCAL REVENUE CONTRIBUTION TOCITY BUDGETS Similar to the GDP analysis, we used detailed budget reporting from the 15 cities to explore trends in fiscal revenue performance from a property tax (and in the case of three cities—New York, Philadelphia and Washington, DC—income tax) perspective on the city budget. Since every city orients its finances differently—with some more reliant on property taxes than others—we created a Fiscal Revenue Index at the city and WalkUP level. This index is relative to each city’s tax revenues, meaning that the index for each city (total) is 100. This enables WalkUPs to be compared against their city as a whole, and it normalizes the number to allow for cross-city comparisons. If a WalkUP has a value over 100, it means that it generates more revenue per square foot (RevPSF) than the city, and vice versa. We focused on the WalkUP RevPSF of real estate to make these comparisons. We found that, in 2019, WalkUPs tended to outperform the city as a whole by RevPSF (values over 100). This was true for Downtown and Downtown Adjacent WalkUPs in all 15 cities, and it was true in 13 of the 15 cities for Urban Commercial and Urban University WalkUPs. 71 Across the board, Downtowns fiscally outperformed their cities as a whole by 17% (an index of 117); Downtown Adjacent by 14.7%; Urban Commercial by 15%; and Urban University by 12.6%. This is especially notable in places like Austin and Raleigh where the RevPSF of Downtown is about 60% and 70%, respectively greater than the RevPSF of the city as a whole. It is important to note that this overperformance has logically deteriorated over the past few years largely due to declining office valuations. From 2019 to 2023, the RevPSF of WalkUPS has diminished with few exceptions. This intuitively makes sense because property taxes are linked to property values and, as valuations decreased, 72 especially office, so did RevPSF. Further, WalkUPs are more reliant on CRE products for tax revenue as compared to the rest of the city, which has a greater composition of for-sale housing whose valuation has been increasing from 2019 to 2023 due to the housing shortage. 73 This causes the CRE heavy WalkUPs to witness declining RevPSF over a period where the rest of the city tended to increase RevPSF on the wave of a hot for-sale housing market. This is not mutually exclusive from our earlier observation that, despite this deterioration, WalkUPs still produce a disproportionally strong revenue bang for the square foot buck. The story of office underperformance reappears in this fiscal narrative. The correlation between Work exposure and RevPSF growth was negative. The downward slope indicates that WalkUPs that were more heavily indexed to Work product tended to have worse aggregate RevPSF performance, echoing trends we’ve noted in rents, valuations and PPSF. Counter to this, we see an opposite trend for WalkUPs with a larger residential share. Overall fiscal performance (RevPSF growth) increased as the share of Live product increased. This is because, as we’ve indicated, multifamily and for-sale housing fundamentals have tended to be positive during 2019 to 2023 while office has been declining and retail has been mixed-to declining.

71 Urban commercial WalkUPs underperformed their cities in Chicago and San Francisco while urban university WalkUps underperformed their cities in Austin and Denver. 72 We acknowledge cities’ methods of assessing property valuations varies. In our study, we are simply looking at the revenue—actual data from city budgets—and square footage with no underlying assumption about assessed values specifically. However, we acknowledge that assessed values lag real-time

private market valuations, meaning that further downward pressure on RevPSF is likely. 73 Freemark, Yonah. “What Is a Housing Shortage?.” Housing Policy Debate (2024). (1-11)

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