Gilded Age

The Economist

February 26, 2009

HE lawns are green and well-tended. The swimming pools are filled with water, not mosquitoes. Steve Cushman, head of the local chamber of commerce, counts just 27 empty storefronts out of 410 along the city’s main shopping street—a rate that many cities in California would envy. In the past year Santa Barbara County has seen a slight increase in employment. The secret to its health? Hostility to development and lack of youth.

Nowhere in California is immune to recession, but the oldest areas are proving most resistant. Of the ten counties with the lowest unemployment rates, nine, including Santa Barbara, contain an above-average proportion of people aged 65 or older. Youthful Los Angeles has shed almost a quarter-of-a-million jobs in the past year. Slightly older San Diego has lost a few thousand, while considerably older San Francisco has lost none. A map of the state’s retirees (see above) could almost double as a map of economic resilience.

California’s youngest regions are in its hot interior. In the middle years of this decade hundreds of thousands of families moved there in search of big, affordable houses. Unfortunately, many took on big, unaffordable mortgages to do it. Last month one in every 87 households in youthful, formerly fast-growing San Bernardino County received a foreclosure filing, according to California-based RealtyTrac. The housing crash has led such areas into an economic tailspin.

Santa Barbara has watched all this from the sidelines. In this slow-growth stronghold, anything other than a glacial pace of development is anathema. Mr Cushman says that only one block of flats for rent has been built in the region in the past 30 years. And some want to curtail growth further. Later this year the city will decide whether to reduce the maximum height of downtown buildings from 60ft to 40ft (18 metres to 12 metres). “We like Santa Barbara the way it is,” says Marty Blum, the mayor.

This stuffy attitude has saved the city, together with others along the Pacific coast. Last month Santa Barbara County’s foreclosure rate was just one in 298, well below the state average. Nor did the city build huge office parks which might now be vacant. As for industry, there was never much in the first place, “so there’s just not much to lose,” says Bill Watkins, an economist at the local branch of the University of California.

The diciest part of Santa Barbara’s economy is the tourism business. Hotel receipts have dipped slightly this fiscal year as day-trippers from Los Angeles fasten their wallets. But much of the local economy is recession-proof. As well as the university, Santa Barbara has a large community college. It also has Cottage Hospital, which is being rebuilt—a job that will eventually employ up to 500 workers.

Health care is the only private-sector industry in California that accounted for job growth in 2008. Here, too, places benefit from having a fairly old population. The median age of people admitted to Santa Barbara’s Cottage Hospital is 55—eight years older than UCLA Hospital in Los Angeles. Although hospitals complain it is too stingy, few sources of revenue are more stable than Medicare, which paid for 44% of Santa Barbara’s patients in 2008.

In the past ten years, obedient to the findings of urban sociologists, American cities have tripped over themselves vying for young, creative people. They have revitalised downtowns and sponsored gay-pride parades. They might have been better off building retirement homes.

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