Change and Growth is Not Always an Indicator of Resilience

It seems counterintuitive, but fast-growing regions are not always the most resilient places when hitting a bump in the road. While boomtowns are certainly adding revenue to the government coffers and jobs for the residents, booms also create conditions that are not always conducive to resiliency, as the Resilience Capacity Index reveals.

The RCI compares metro areas on their capacity for resilience in the face of rapid change or other “shocks.” It looks to three sets of indicators to determine a metro area’s resilience: regional economic capacity; socio-demographic capacity; and community connectivity.

Compare the Washington, DC., metro areas, which ranks 10th overall on resilience capacity, with Las Vegas, which ranks 298th out of 361 metro areas. It’s clear that while Las Vegas might fare decently on economic capacity, its other two characteristics–socio-demographics and community connectivity– are bringing the overall score down.

click here to see chartResilience Capacity of Washington, DC, and Las Vegas

Slower-growing regions, in contrast, often have more capacity to withstand shocks because they are more stable, they’re often more affordable (as a result of slower growth), have higher rates of homeownership, and greater income equality. They also tend to have stronger civic organizations and connected residents, and the business climate is diversified, stable, and has good access to capital. These characteristics are often a direct result of a more mature and more rooted community.

Boomtowns, like those in Nevada or Arizona over the last several years, grow  exponentially over a short span, with people flocking to those communities for jobs and a new life. As a result of this flux, there are typically fewer homeowners and more renters as the new arrivals settle in. (The latest boom came with a twist, however. Mortgages were extremely easy to get, and so more people bought homes, fueling what would become the downfall of these boomtowns.)

A booming economy often draws people who are looking to get a foothold in a new economy. They may have drained their bank accounts after months of unemployment or they are young and just starting out, and willing to take a chance in a new place. Many of the new-economy jobs may not offer health insurance right away, if at all. Both income and health insurance are indicators of economic stability in the RCI. Not only are they less financially stable, but the newcomers have yet to put down roots and join in or form the civic organizations of the community, another indicator of resilience.

This is not to imply that newcomers are a drain on a community. They also inject fresh ideas and bring new skills to bear. They are also themselves likely to be quite resilient—they’ve packed up and moved to a new locale, after all. And given they’ve made a conscious choice to locate to this specific community, they may well prove to be enthusiastic citizens.  It’s simply that in the early days, it takes time to put down roots and form relationships, so the capacity of newcomers is dormant and as yet untapped. It takes solid leadership to tap it, which is the key factor not included in the index.

Consider Las Vegas, whose population shot up 16.5% between 2000 and 2005-09 (the latter is an average between January 2005 and December 2009).  Washington, DC, in contrast, grew only 2.8%. The sudden burst in population, driven by a building boom, lends a sense of impermanence to the community, which shows in Las Vegas’ score on community connectivity. Its score on the latter is near the bottom, at 337 out of 361. Likewise, the metro area’s socio-demographic ranking is fairly poor as well, at 186 out of 361. The socio-demographic factors that make a community more resilient include the poverty rate, the level of education among residents, the share with health insurance, and the share of the population without  a disability.

In contrast, Washington DC ranks 30th on community connectivity, and 10th on socio-demographic characteristics. It scores 89 on economic capacity.

The foreclosure crisis is a good example of a shock to a local economy, and the resiliency rankings reflect an area’s ability to bounce back. True to form, based on is higher capacity for resilience, Washington, D.C., has bounced back more quickly from the housing crisis. It has seen existing home and condo prices rebound slightly in May 2011, up about 2% from May 2010. Meanwhile, Las Vegas has seen a 13% decline in housing prices over the last year, driven by a high foreclosure rate.

As an indicator of just how intransigent the housing crisis is in Las Vegas compared with Washington,  CoreLogic reports that Las Vegas leads the nation in the share of homeowners “underwater.” Fully two-thirds of homeowners owe more on their mortgage than their house is worth. In contrast, in Washington, DC, only 14% of homeowners are underwater.

The foreclosure crisis is but one shock that a metro area may one day face. Hurricanes, a relocation of the major industry in a “company town,” or an influx of new residents can all tax a metro area’s capacity. The RCI can help local planners locate their strengths and weaknesses, and devise strategies to build on those strengths and improve the weaknesses.

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