Tale of Two Cities

0:01Sierra Juarez:NPR.

0:06Sierra Juarez:In a lot of ways, the economy of Syracuse, New York is your classic Rust Belt story. A city that was once a thriving hub of manufacturing. But the past few decades has seen employers leave, population decline, and growing poverty.

0:20Stacey Vanek Smith:But in 2022, something happened that many think could reverse those decades of decline. Micron, a huge manufacturer of semiconductor chips, announced plans to build one of the country's largest memory chip plants just outside the city. Micron estimates that it will invest up to$100 billion. Just massive, massive impact. And you're doing this in a community that has not meaningfully grown in the past 60 years. Ben Sayo is a longtime Syracuse resident and president of the Center State Corporation for Economic Opportunity, which is an organization that helped land the Micron deal. How does it feel to see this project underway?

1:00It feels fantastic. It's also scary as hell, to be honest. We're no longer a Rust Belt community. We're a new growth community. And we're beginning to deal with all of the positive and negative implications that come along with being in a new growth space.

1:14Sierra Juarez:And the project has especially big implications for the region's housing market. Over the last three years, average home prices in Syracuse have increased about 30 percent. And some real estate experts predict even bigger price increases are on the way. This is The Indicator from Planet Money. I'm Adrian Ma.

1:30Stacey Vanek Smith:And I'm Darian Woods. Today on the show, does economic growth have to come with economic disruption in the housing market? We look at two places that both landed a microchip plant and explain why prices are rising in one while falling in the other.

1:53Sierra Juarez:This message comes from Edward Jones, where they believe rich is about taking care of what gives your life meaning. That's why your financial advisor personalizes your plan to help you preserve your progress and create something that lasts. Let's find your rich. Edward Jones, member SIPC. Support for NPR and the following message come from Washington Wise. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise. This message comes from NPR sponsor Carvana.

2:34Sierra Juarez:Carvana believes selling your car should be easy. Get a real offer down to the penny picked up from your driveway. You may keep waiting for a catch. There isn't one. Sell today at Carvana.com. Pickup fees may apply. Home prices in Syracuse already saw a bump during the pandemic with people moving there from bigger cities and all. But the Micron announcement helped drive home prices even higher. It's really fun from a seller's side. It's a pain from a buyer's side. Chip Hodgkins has been a real estate agent here for 26 years. We have never seen houses this high ever. And yet it's the lowest they will ever be.

3:13Sierra Juarez:We will never see them this low ever again.

3:16Stacey Vanek Smith:And sure, you might expect a real estate agent to say something like that. But consider the numbers. Over the next decade, Micron estimates that the plant will create 50 ,000 jobs, including those working in construction, at the plant itself, or for Micron's contractors and suppliers. And that number doesn't even include their families or the people who will be working at businesses serving this influx of people.

3:39Sierra Juarez:The restaurants, the karate studios, the dance studios, the schools. We need like 20 new gas stations in Syracuse. And those workers have to live somewhere too. In anticipation of this, Chip says there's been a flurry of investors coming to town scooping up properties, and that's helped drive up prices. But he thinks this is only the start. We're forecasting that houses will double in price probably in the next four years, five years. The only thing that's going to cause that to not happen is an unbelievable growth of new construction, new houses. And so why don't they just build more new houses in Syracuse?

4:21Stacey Vanek Smith:Before we get into that, let's consider what happens when a different city lands its own chip plant. In 2021, the Korean electronics company Samsung announced plans to build a new semiconductor chip plant just outside of Austin, Texas. But unlike Syracuse, where prices have shot up on housing, prices in the Austin region have come down.

4:42Sierra Juarez:Leslie Estes is a local real estate agent in Austin. And she says that's because Austin saw a boom in construction for homes and apartments, driven in part by an influx of pandemic pilgrims from places like San Francisco and New York. But later, as COVID receded, a lot of those people left, leaving a lot of for-sale properties on the market. Even people that have been in the industry 30 years, it's more inventory than a lot of them have seen.

5:09Stacey Vanek Smith:So what enabled this construction boom in the first place? For one thing, Leslie says, the area is builder-friendly. It is relatively easy to acquire the land, get permits, do things like that.

5:22Sierra Juarez:We've got very large builders that are nationally known and then a couple that are targeting first-time homebuyers. There's also been a years-long effort to rezone areas for increased density and initiatives to encourage home construction. In this environment, homebuilders frequently do what's called building on spec. So instead of waiting for a customer to come to them and say, please build me a house, they'll just go ahead and build one or build a whole neighborhood. with the expectation that the customers will eventually be there. A lot of the builders are going ahead with the floor plans and putting the house up.

5:58Sierra Juarez:It's on the market from the time that they break ground. And so a buyer can go and decide to purchase that home at any given point.

6:09Stacey Vanek Smith:The attitude in Texas is basically, if builders build it, buyers will come. And it's worth mentioning that this is something you're more likely to find in southern sunbelt states in general. Looser regulations, faster building.

6:22Sierra Juarez:And so returning to New York State, why can't Syracuse do something like this? Well, for a lot of reasons. It's a stoop, right? It's not one thing. It's kind of all things that are coming together. Adam Fumarola is a professor of real estate practice at Syracuse University and a partner in a local real estate development firm. For one thing, he says, there are a lot of regulatory hurdles for builders to jump through, especially in Onondaga County where the Micron plant will be located? Of the land in Onondaga County, reports have demonstrated that 74 % of that land is zoned single-family residents.

6:5874%, right? The bulk of it is not zoned multifamily residents. And we need it all. We need multifamily housing. We need senior housing. We need condos. We need townhomes. We need it all, right? But if the majority of the zoning is limited to single-family homes, now you're going to have to figure out how to work through the regulatory regime, which is complicated and time-consuming and costly.

7:26Stacey Vanek Smith:Costly for the builders, of course. In addition to the local patchwork of housing rules, New York State has environmental regulations and wage regulations, which add to the cost of building. And regardless of how you feel about those, Adams says this all makes Syracuse a less attractive place for builders. It's also why very little gets built on spec here. With all the costs and regulations, he says, build it and they will come is a much riskier business strategy. Who hates risk? Developers and maybe more so lenders. And lending institutions are the backbone, right, to some degree of getting projects, particularly large scale projects built.

8:08Sierra Juarez:For all the obstacles, Adams says there are efforts to try and address them. So, for instance, while nimbyism is still a thing, some municipalities in the county are warming up to the idea of rezoning for density.

8:21Stacey Vanek Smith:On other regulatory burdens, the state recently passed a provision intended to streamline the permitting process for multifamily housing.

8:28Sierra Juarez:And finally, on the need for lending, the state's created a fund to offer low-interest loans to builders. The question is, will all these changes happen quickly enough to bring more homes to market and keep prices from spiraling out of control? Are we ready today? If Micron flipped a switch and said, we got, hey, 50 ,000 new people are here, no. But truthfully, that's not how these things work, right? They work in an incremental phased fashion. And so we'll get there.

8:57Stacey Vanek Smith:So things might be uncomfortable for a while. But Adam says, ultimately, he is optimistic about the city's future.

9:04Sierra Juarez:And perhaps one day, we might even be calling Syracuse a classic story of Rust Belt revival.

9:10Stacey Vanek Smith:Syracuse, and also Austin, are investing in one of the most thriving industries today. How this will play out for them could offer lessons for the rest of the country. This episode was produced by Emma Ferrara with engineering by Robert Rodriguez, who's fact-checked by Sierra Juarez. Kate and Cannon edits the show, and The Indicator is a production of NPR.

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