On day one of a grad-school class I took about real-estate development, the instructor asked us to play a word-association game. "Shout out the first thing that comes to mind when you hear 'developer'." Among the list of words that he began furiously scribbling on the white board as they were shouted were some unsurprising choices: Greedy. Arrogant. Corrupt. Profit. Money. Power. Gentrification.

We were all well acquainted with the cultural trope: developers are money-grubbers who make a profit at the expense of the community, and local governments should, if anything, seek to rein in that profit motive, or redirect it to the public good by making them give something back.

For countless older cities, though, especially mid-sized ones in the Rust Belt and Northeast, the problem they face isn't how to get developers to do something beneficial for the public, but how to get developers to do anything at all. The conversation I described took place in a city with a strong economy and a growing population. In places still suffering the hangover of decline, population loss, and widespread neglect and abandonment of properties, the reality is very different.

Here's a startling fact I've learned about new development in many struggling older cities. I had to be told this several times, by several credible sources, before I really believed it, because it just didn't seem possible:

There are whole cities where every single private development project receives some sort of tax abatement or incentive.

All of them. Nothing is viable without it.

And these places aren't desolate slums. They're often cities that have made a notable resurgence from a period of past decline. They're often cities renowned for great "bones," walkable downtowns, gorgeous historic architecture. They're places that really could make a dazzling comeback. But the rents that people can afford to pay aren't enough to make building new homes a profitable endeavor, when you consider the expense of doing so—and a big part of that expense is property taxes.

And so developers negotiate for tax breaks to induce them to skip the suburbs and give the city a chance. Is this corporate welfare run amok? Not really. To no small extent, it's an object lesson in how something surprising—the property tax system—contributes to locking places into decline.

The Catch-22 of Low Demand and High Taxes

Many older cities have been through the same vicious cycle. Suburbanization leads to population loss. At the same time, the city's infrastructure is aging and requires more maintenance than it once did. Hit with the double whammy of falling revenues and rising expenses, the city does the only thing it can: raise property taxes.

The higher taxes act as a disincentive for people to live in the city or open business there, resulting in a further population drain. Joshua Vincent’s piece on land taxation in Pennsylvania examines relative tax rates in Erie County, Pennsylvania, finding that property owners in the city of Erie proper pay close to double the taxes that those in many of Erie's suburbs pay.