The View from America’s Urban Institute

Mary W. Rowe Sarah’s with us from Washington, and Mark is with us from across the street. We’re going to start, a little bit, to have a conversation about the American context. You’ve just had a good picture of it by that session that preceded us. Sarah’s had a long and distinct … I was going to say, I’m not supposed to say long … but you have, I have too … You’ve had a long career and doing a whole bunch of things. And she runs the American Urban Institute, So she and I are … It’s a bit of a stretch for me to suggest we’re peers because she’s, well, America’s ten times the size and her budget is at least ten times the size of CUI’s. But we have met and talked and agreed that so much of what we deal with is very similar. And the mayor is squeezing us into his schedule in between going hither and yon. You had a big announcement yesterday, kind of a good news day for Ottawa yesterday.

Mark Sutcliffe It was a good news day.

Mary W. Rowe It was a good news day.

Mark Sutcliffe And can I just say, I’m always self-conscious as as a lifelong Ottawa resident and the mayor, when people arrive in our city and it’s right after … they arrive here from the US and it’s right after the first snowfall, and then they think that, you know, it’s snowy and this your first time in Ottawa, Sarah, so you’re going to think there’s snow on the ground all year round, But it’s a beautiful city in the winter and it’s an amazing city in the spring and summer and fall as well. So glad to welcome you here for the first time.

Sarah Rosen Wartell Great to be here. And amazing first panel you just had

Mary W. Rowe Yeah, well, we’re interested to hear your perspective.

Sarah Rosen Wartell There is … all the same great ideas. So anyway, Canada has impressed or Ottawa has impressed so far.

Mark Sutcliffe It’s good to hear.

Mary W. Rowe So let’s start if we can, I mean, obviously it’s the topic of the day. You know how immersed Canada is in American media. We follow you more than you follow yourselves sometimes. You know, there’s been a few, there’s been a few news bites come out of there the last month. Tell us how this is affecting your particular perspective and what you’re trying to do at the Urban Institute. And what do you think … Just give us a picture.

Sarah Rosen Wartell I would be lying if I said that this election was one of was not the most unusual and in many ways disruptive, I think intentionally disruptive, in my lifetime. The president elect in many ways has, through his nominations, through his tweeting policy pronouncements and during the course of the campaign, signalled that what he is coming to Washington to do is to disrupt, to change the way things work. And I thought Frances’s comments, besides, I’m a houser. So when anyone says that housing is the key to everything else, I am cheering from the sidelines. I do think it was the key to getting us out of the Great Recession was getting the housing market right. And it will be the key to many of our economic ailments again, if we can right that set of supply challenges we have. But that panel suggested we have many of the exact same challenges here, but no one knows whether, how we’re going to go about tackling them in this next period. We know a few grand strokes around immigration and around tariffs and some other things. So it is … There’s more uncertainty. There’s more uncertainty for us as an organization. There’s more uncertainty. But I will say, and I think this is where we have something in common, we’ve always been the Urban Institute, although we study rural places, we are about place, people in place, particularly the people for whom the economy works least well. And there is so much work to do across places to share best practices from one another, to learn at our state and local level. And so we all are going to have to be very nimble and work to inform the debates around the national level. But we also know that probably more and more of our work will go down to the local level to provide tools, to provide insight, to help people learn from one another. And I expect that’s probably the same in your mission, too.

Mary W. Rowe I mean, last year on this stage, we were across the street at a different venue. And I don’t know if you were here when this happened, but for this particular session … But Bruce Katz was here and he was very enthusiastic about the Biden administration’s investments in infrastructure and in the IRA and CHIPS and various things. And I think a lot of Canadians had sort of American envy that there was a lot of ambition being placed by the Biden administration on these investments -transportation, housing … Any sense of what the legacy of those investments will be? And regardless of who’s in the White House next or …

Sarah Rosen Wartell So I think this was in the history of economic policy, which is something probably a very small number of people, but I’m among them, really think and care about. I think the Biden administration represented – this will be in some ways his legacy, although at the moment that’s not looking very strong. But these investments actually were not only, I think, going to be transformative for key parts of the US economy. They’re transformative for how we think about the role of the federal government policy around infrastructure for a long time in the economics space. There was a belief that so-called industrial policy was disfavored, that governments didn’t do a good job of picking winners and losers, and that you end up with sort of a Russian-style planned economy that no one thought was desirable. And that was true even on the left. And what we learned over the last ten years as our infrastructure deteriorated, as our competitiveness and key aspects deteriorated and then the pandemic, how our sort of integrated world had left us incredibly vulnerable. Our key allies and some of our countries that we partnered with were not allies. We learned then, when Russia invaded Ukraine and its impact on the oil industry, that was even more stark. But the supply side challenges during the pandemic were huge. And so people … It created energy and momentum to think about what are industries that are infrastructure, that are necessary – broadband, roads and bridges, but also housing is infrastructure, the 21st century, water and sewer lines, all of that. And there was a momentum that was created where for the first time in really decades in the United States, we made major investments through the private sector, through tax, but also direct investments. And I think that legacy is going to stay with us. I don’t think … In some ways it’s more Trumpy than  Trump had been in his first term. And I imagine we will maybe see more of that through the tax code, not necessarily with the priorities I might have, but I think that we will look back at history and see this as a major change in how we approach economic politics.

Mary W. Rowe In the first place. So this … we’re in the midst of this transition as well. And both of you live in a capital city and have a particular dynamics to the capital city. You bump elbows with the federal government all the time. What’s your sense of the challenge, in the case of your purview in Ottawa, but also  the national capital region, you abut a province? I don’t know  if…  actually we do have an anecdote about Sarah. Sarah had a hotel booking that was made and she wrote me and said, “well, why am I staying in Quebec?” I said, Well, actually, it’s right across the river, you know, I mean, this is a unique position here that we have. So what’s your sense in terms of, you just had a big provincial announcement, which is fantastic. I know you talk to these folks all the time. Tell us about the jurisdictional challenge you face in Ottawa.

Mark Sutcliffe Ottawa faces unique challenges. So I guess I would I would say first that that all cities right now, I think are facing challenges and you know that. And that’s why I think the work that both of you and your organizations are doing is so valuable because I think, more than ever before, the challenges that we are facing as a society are being felt at the municipal level. And more than ever before, municipal governments don’t have the resources to tackle those challenges. So we are constantly going to other levels of government and saying, will you help us on housing, on homelessness, on mental health issues, on substance use disorder, on downtown revitalization, on public safety, on public health, you know, all of the challenges on public transit, all of the challenges that we face. You know, we can’t tackle them alone with the resources we have at the municipal level, which, you know, and cities are on the front lines of all the big issues that we’re tackling as a society. So you know, I have a good relationship with the provincial government. I have a good relationship with the federal government. Yesterday, we had, as you mentioned, we had announcement from the provincial government of $20 million in funding to support downtown revitalization, economic development, public space enhancements, public safety improvements, all focused on the downtown and the Byward market, which are vitally, vitally important for the future of our city and are going through, like many cities, a difficult period after the pandemic. But to answer your question, you know, Ottawa is unique in so many ways because we’re the national capital. We’re on the border between Ontario and Quebec. There’s, you know, for some of the things that we try to tackle, there’s five governments involved. There’s the city of Ottawa, the city of Gatineau, the province of Quebec, the province of Ontario, and the federal government.

Mary W. Rowe Yeah, you’re busy.

Mark Sutcliffe And there’s different federal government departments and there’s the National Capital Commission. And so it’s constantly managing those relationships. But we’re, you know, because we’re the national capital, we’ve had a slower return to the office than other communities, downtowns – that’s affected our public transit system, made it harder for us to to grow and improve public transit because we’re the second largest city in Ontario. But we’re far from Queen’s Park. Sometimes it’s harder to get the attention of provincial government officials [although you did pretty well …] That’s improved in the last couple of years.

Mary W. Rowe So can I stop you there? And just … Because I want to pick up with Sarah, this notion of what’s happening to downtowns, what’s particularly happening to capital downtowns, and the phenomenon of work from home. Talk to us about how the American cities are coming to terms with this. And then MarK’s going to be able to reflect.

Sarah Rosen Wartell Well, it sounds in some ways similar, but you came and joined us for a discussion we had in Washington recently. And my overarching takeaway from this is that we have to not think about how do we go back to 2019 when a lot of downtown commercial real estate markets were relatively healthy and people thought you went to the office and then you went to a bar afterwards with your friends and then you went back to wherever you lived. I’m old enough to have seen 2 or 3 rounds of the death of an American city and its rebirth. And what we have to be doing now is think about what do we want the cities of the future to be and how will people want to live in them. We don’t go to work to do the things we used to do. We … there’s no point in going to the office if you’re an office worker and looking at your zoom box and talking to people on a computer screen, the things you can do in the office today and much more, involve interaction. So our spaces may need to change in offices. In D.C. at 5:00, coming into the city is the worst traffic jam of the day.

Mary W. Rowe Coming in.

Sarah Rosen Wartell Coming in. Because people who may be working either in offices around the city or who are working from home in different ways are coming in to enjoy being together in arts and entertainment and sports and green space. And so the way we’re going to use our land mass, our older office buildings that some small fraction of which may be can be converted to housing, those spaces need to be reimagined. And I think the most interesting cities and the mayor of L.A. has been doing good thinking about this, but so have a lot of cities, are those who are starting to think about what do we want our city to be? Can we make it a more inclusive place? Can we avoid some of the challenges of gentrification and displacement that the last round of cities had? And I think every city is going to have different assets and different comparative advantages, and they really can’t just follow someone else. They need to make the plan that’s going to work for Ottawa.

Mark Sutcliffe I agree. And I think we need to reimagine what the future of downtown is, whether we’re, you know … I hope that we can have more people living downtown if there are going to be fewer people working downtown. That would be amazing. I hope that we can have more attractions downtown. The federal government presence has, you know, most of downtown Ottawa is federal government office buildings. Even some of the major attractions that we have in our city, apart from this one, are just outside the downtown core or on the edge of the downtown core, like the National Gallery of Canada, the Canadian Museum of Nature, the War Museum. Most of the core is just office buildings, so maybe that can change over time. I guess what I would argue, though, is that if it is going to change over time, we need the help of the federal government. We need their support as the major employer.

Mary W. Rowe I was going to ask you, I mean, in your particular case, you have – there your tenant, the federal government is your tenant for life, really. So you have a very unique position. And I wonder about in D.C., I mean, what does it feel like when the federal government is so present in your city?

Sarah Rosen Wartell Well, for the last three years, they haven’t been present. Even the federal agencies that had a policy of coming to work didn’t. My husband would go into the office all dressed up in a suit, and he would see that … He would see the security guard on the way, and that was his only other interaction and stopped doing it at some point. So the … I think now, again, President Trump has said that he’s going to get every single worker back in the office five days a week. We’ll see. But I do think that cities like D.C., the mayor has been thinking a lot about this. And one of the things they did in the short term was to try to figure out how they can activate the ground floors of a lot of those buildings, federal buildings and non federal buildings, inviting arts institutions into those spaces to do pop ups and to do other kinds of things, trying to engage the restaurant industry. Tourism did come back for us. And so how do you find activities that are kind of a new set of things that then activate those spaces at different times? And there’s a lot of desire for … young people don’t want cars, is my experience. And so they’re looking to live in places that are walkable. And so there has been a lot of focus on medium density building downtown to try to create the better mix of housing and office.

Mary W. Rowe And tourism has rebounded here, too. [It has]. Same thing.

Mark Sutcliffe It’s been a good year for tourism in Ottawa where, you know, there’s still room for growth. And we’re working very hard to attract more people to the city. And so, I like those ideas. I think the challenge is the federal government owns a lot of those buildings in Ottawa.

Mary W. Rowe Same as in DC, they own …

Sarah Rosen Wartell GSA, yes, the government owns most of them, most of them. But … and we may have less pure density of federal. In other words, we have more mixed commercial office around our downtown, which allows us to activate using nonfederal resources.

Mark Sutcliffe So we need the federal government to work with us on this. We can’t make those decisions on our own.

Mary W. Rowe They’re hear, there’s many of them here, they’re listening to you.

Mark Sutcliffe And I ook forward to partnering with them. I, you know, I think the federal government has a responsibility as the major employer in Ottawa and as – because we are the nation’s capital, to make sure that we have a plan for downtown Ottawa that everybody’s bought into and everybody’s going to work together to execute on. I think there can be a great future for downtown Ottawa and we have a lot of things going for us, but we need to come up with that plan and we need everybody to agree to it.

Mary W. Rowe So let’s talk for a minute about that thrilling, thrilling topic of jurisdiction. I know that there are three people in the room that are going to really be glad I asked this question. Sarah, in the United States, you have a strong mayor system.

Sarah Rosen Wartell Most cities, not all.

Mary W. Rowe Not all. Lots of Canadians, as I said, the three of them are in this room, have been advocating that what would … would Mark’s job be different if we had a strong mayor? What is your take on that in terms of … As we look at whatever the future is and whatever the future federalism is on both sides of the border? Is the strong mayor path the good one?

Sarah Rosen Wartell So I don’t … I’m going to answer a different question. [That’s fine.] I think I have something more interesting to say on the other … which is I’m going to bring my housing lens back to this. The challenge we have in housing is that the closer you get to local populations, the harder it is to make the right choice.

Mary W. Rowe Right.

Sarah Rosen Wartell Because so much of the – when you have incumbent landowners, they don’t want to see sharing, you know, they don’t want their property, perceived property values to go down if there’s more density or whatnot. And so in the United States, we are wrestling with this idea of how do you take … How do you create incentives for the right action to be taken in zoning and land use and location of amenities and the like, where you don’t necessarily have to take the authority away? I learned a lot from Canada about this last night at dinner. But if they don’t produce the amount of housing stock through their existing processes that we need, then the state says, okay, you’re basically … everything can be built as of right and any developer who proposed them. So you better find a way to get to the housing demand we need. That’s a case where I’m generally … we have seen in those states a lot of places where progressive cities have had preemption at the state level of policies that don’t allow them to pursue their approach to immigration, their approach to policing or whatever, where they’re essentially stopped from doing it. But in this case, I think essentially using the state’s authority to preempt makes it easier for locals to then make a decision. That’s not even money, although money helps. But the ability to say you you have to achieve some goals and without it, you either don’t get some money or without it, you don’t have your local authority. Whether a strong mayor versus a strong council city manager model makes better sense, it’s really cultural in different parts of the states.

Mary W. Rowe I mean, again, there are many federal civil servants in the audience here, some of whom are big advocates for what we call conditionality, that if we attach these things – otherwise, how do you overcome NIMBY, basically? What’s your take on that?

Mark Sutcliffe Depends on what the conditions are, I guess, because I think that, yeah, I think we do need to tackle the challenge of being able to build more housing without the people closest to where the change is happening. Being able to effectively veto it politically. So we do need to do that. But what we’re seeing more and more is every dollar of investment we get from other levels of government comes with conditions attached to it, makes it harder for us to do. You know, local decision making on the ground makes it … doesn’t help solve the broader issue we have of not having a sustainable financial model. So there’s a lot of leverage applied and in some cases there’s sometimes not a full understanding of the challenges we’re facing or what the impact of those conditions might be on our ability to achieve, you know, we all want the same outcomes. We want to build more homes. We want to build more affordable homes. So nobody’s working against that. But when, you know, for example, the federal government imposed a condition on infrastructure funding, that we freeze development charges, you know, that that is giving with one hand and taking away with the other. So there’s no net benefit to us of accepting that condition because development charges, although some people think they are big savings accounts that cities just build up and have, you know, these vast reserves that they can … that we’re just sitting on. Development charges are what pay for the infrastructure that builds new neighborhoods and new communities. They’re not, you know, savings accounts that we can draw on for other purposes. They’re targeted revenues. So if we don’t have that money, then we’ve got to come up with it from somewhere else. So getting help from the federal government, but having a condition that we have to freeze development charges isn’t helpful.

Mary W. Rowe Yeah. So I just want to understand this notion about how we have to get help, you know, you’re in a constant supplicant position. I mean, how do you navigate that in the US?

Sarah Rosen Wartell Well, the United States has just gone through a period in which the so-called help flooded.

Mary W. Rowe Right?

Sarah Rosen Wartell I mean, in a funny way, the challenges that were faced at the local level were overwhelming. But there were resources available for … because of the pandemic and some of the early responses. Now we’re dealing with a different problem, which is that those funds start to evaporate and we are facing huge fiscal issues at the federal level, a lot of state and local economies … I thought the description of the K-shaped economy or the uneven economy and even United States describes our politics, right? I mean, our politics have become completely polarized by class and economic opportunity. And who’d have thought that the Democratic Party was no longer the party of the working families … That it’s become a multiracial coalition of working families aligned increasingly with the Republicans. So I think that those politics are going to create a real constraint on help coming from Washington for the foreseeable future. And local economies are going to have to figure out how they can do more of this with their own resources. We are very heavily dependent on property taxes, especially for education. And we are very jurisdiction specific, which also means it creates huge inequities and cities spin off in order to be able to use their money for their own kids, which means not those kids who may look different or have different opportunities than your own. So I think we’re going to see more of that if I have to be slightly dystopian in the short term before I see some real resolutions, that there’s going to have to be a willingness to raise resources at the local level where it’s hardest to do.

Mary W. Rowe I mean, we look again back to – Canadians have American envy. You have a more complex, layered housing approach. You have many, many, many players. So as a “Houser”, just from your years of experience with this, if you were to pull 2 or 3 key things that you think Canada should import from you in terms of housing policy, what would they be?

Sarah Rosen Wartell So we have had and I think still do have a very enviable housing finance system. It’s a mix of sort of government sponsorship through the GSEs. I know we don’t have exactly the same thing as your Canadian mortgage. I don’t get the initials right … [Mary: CMHC] TThank you. But most of those functions exist in a very robust way. We have great access to private capital because there’s a sort of government backstop, and then additional risk is taken by the federal government in the form of FHA. and GICs. That mechanism has been countercyclical and in the last 25 years it has stabilized the US housing market, and when there were times of real potential risk of collapse. I was looking at a number recently though, that today about less than 40% of Americans are homeowners by the age of 30. 20 years ago, that was 50%. And 40 years ago that was 60%. I think the number I saw was 40 some percent of kids aged 19 through 30 lived still with their parents, which is why we’re going to eventually get people to want to invest in the housing market because they want to get the kids out of their basement. I think that the challenge we have is a supply challenge. It is affordability, absolutely. And interest rates. But also, I think we have to deal with the affordability of housing and the supply of housing in order to lower interest rates too. Whoever said before that we’re not going to see our … Whatever the national bank sets, we’re not going to see our effective mortgage interest rates be much below 4% any time soon, maybe in the United States I think that’s five. So I think we have a lot of the infrastructure. I think our housing finance system is remarkably strong. But I think our multi layers of government is not something to envy. I do think you need more standardization of practices and freedom to build in ways that are environmentally sensitive, inclusive, don’t displace neighborhoods. But those processes right now … I’m talking about not enviable things, but things that we … all of those processes have been layered on approvals in such a way that, you know, a reasonable, affordable housing project takes 14 years to build. And so often it is …  It would be better not to have 42 layers of financing in each affordable housing project, but to have two. And we’ve got to find ways to streamline all of those sort of processes. But I do think that we have a very robust homebuilding industry that relies, by the way, on labour, that some portion of which is undocumented. Some would argue about 25% of our labour markets are undocumented. And the coming immigration policy debates could potentially increase the cost of housing production further. Increasing the cost of softwood lumber that we import from Canada probably also won’t help the cost of housing production. Although the US softwood lumber industry has boomed in the intervening. So it’s not as big an effect as it was 7 or 8 years ago. And then I also think we are talking about taking out of conservatorship Fannie Mae and Freddie Mac, and that could further be disruptive and increase housing costs. So the president is not … or President elect has a very strong interest in maintaining his popular support. And it’s … If I have any word of hope and I don’t know about the tariff policy and other things, I think the combination of these three, I’m rambling here, but the combination of these three policy areas could be very disruptive to his support if housing costs continue to skyrocket. So I think there is going to be some mitigating forces.

Mary W. Rowe We do whare that house that the housing sector is a big job creator, too. It’s an employment creator, as you suggested. It employs a range of skills or range of worker and somebody in the early session, I think it was Paul during the mental health session first thing this morning, we had one on mental health, said we have mobilized after a war, we’ve mobilized. We mobilized during Covid. Do you see a mobilization? Is housing the mobilizer do you think. What do you think, Mark?

Mark Sutcliffe I think it’s a mobilizer. Yeah. I think there is a consensus that it has to be our greatest priority right now. Again, you know, we all want the same thing, but the question is, can we work together to eliminate the barriers that are stopping it from happening? And, you know, I think there is, right now in Canada, a perception that cities are one of the big obstacles. You know, there is criticism of cities, municipal government. Yeah, municipal governments are an obstacle when you know, the number of housing units that we’ve approved at the city is much, much greater than the number of houses, housing units that are being built. So there are, you know, thousands and thousands of homes that have been approved by the municipal government in Ottawa that are not being built yet by developers because of reasons like interest rates and market conditions and so on. And so there’s this perception that we’re, you know, [Mary: you’re the problem]. Yeah. And we can we can do better and we want to do better. We want to streamline processes, eliminate red tape and reduce approval times and, you know, do some things that that remove that tendency for there to be resistance at the micro local level for every new development. We want to do that and we will do that. But we are approving a lot more units than are actually being built and there are reasons why builders aren’t building.

Mary W. Rowe So ainthe moment that we’ve got, I think let’s discharge this panel with what we think the priority could be to unblock that logjam, because I’m worried that we can get caught up in how bad the problem is. So is there a sense from you, a key thing that we should focus on?

Sarah Rosen Wartell Well, I think this idea of speeding production. In United States, I would not describe the problem as plenty approved, but the economics don’t work. I’m seeing capital market flows into housing. I see Wall Street putting together, not just housing funds, but affordable housing funds, leveraging public government. People are racing into the housing sector. But the … you get a deal together and then you see the units 6 or 7 years later, even in a streamline. So for me, I would focus on speed. I would focus on preapprove plans. I was at a Harvard Business School event and one of the students presented an idea which was to use AI to review building plans against codes and then to essentially not just spit back, “here’s the reasons you’re denied”, but “here are plans that would be could be ways your plan could be revised that would meet our codes” and try to do use technology to really focus on accelerating. Everybody has been talking about improving the building technology itself, how we build, I have not seen great breakthroughs on that, but I think we have to build more cheaply. We just have to make it faster. We have to make it smarter and we have to try to find ways to kind of pre-approve processes that can be replicated over and over again, that are done in inclusive ways, that are done in environmentally sensitive ways, so that we just build a whole lot faster.

Mary W. Rowe 30 seconds to you …

Mark Sutcliffe I agree. I mean, I think, you know, we have to find ways to make things happen faster. But we also have to address the fact that builders aren’t building. And I think mass production is one of the ways. I’ve met with companies in Ottawa that are looking at ways of of using A.I. in the building process to make, you know, to mass produce homes and make the most efficient use of supplies as possible. So yeah, I think technology plays a big role. But there’s a lot of finger pointing going on right now because I think one of the one of the big …. Everybody feels the pressure of the fact that not enough homes and not enough affordable homes are being built. And in a situation where that pressure is being applied, there’s – the first job of many people is to make sure that it’s more someone else’s fault than their own.

Mary W. Rowe We’ve got to stop that. On that note, let’s stop that.

Mark Sutcliffe Exactly. Let’s stop that. Now, let’s just all work together to find the solutions that are going to move it forward other than just make sure I’m second or third in line for the blame.

Mary W. Rowe Yeah. Yeah. No more of that. Blame Canada. There was a great television show called Blame Canada. Listen, would you join me in thanking both Sarah and the mayor for being with us And Sarah is a busy person running a big, big outfit, solving all the urban problems in the United States. She’s with us all day. So thank you for being with us, and I hope you’ll get a chance to be with her. The mayor is also a busy person. He’s got to go and go to the next gig, wherever it is you’re off to. Thank you for scheduling this into your …

Mark Sutcliffe My pleasure. Great to see you, Mary.

Mary W. Rowe Nice to see you again..

Mark Sutcliffe Nice to meet you, Sarah.