Much has been written recently about the decline in population in rural areas of the United States. About 83 percent of U.S. residents now live in metropolitan areas, and this trend is expected to continue to increase into the future. By 2030, about 14 percent of the U.S. population will live in rural areas, and by 2050 the rural population will be down to only 11 percent, according to the United Nations Department of Economic and Social Affairs.1 Some of this decline is due to nonmetropolitan areas becoming newly urbanized by increasing their populations above 50,000 people. Such was the case in 2010 when the census identified 36 newly urbanized areas. (See Figure 1.)
Is all lost for small-town America? Should we all just pack up and move to the city? Not only is population decline itself negatively affecting many small towns, but associated issues exacerbate the impact. With population decline comes decreased tax revenue and often less money from state and federal sources, especially in times of budget cuts and a shifting global economy. If the population of nonmetropolitan areas continues to decline and urban areas continue to gain population, how will small towns compete for jobs and residents in the future? Certainly, reversing negative population trends is one of the keys to continued economic growth, but it can be an overwhelming task. One possible strategy: Focus on increasing population density in small towns.
Why density? As people and talent are attracted to the economic opportunities, accessibility to work and entertainment, and other lifestyle factors offered by many urban areas, smaller towns may benefit by incorporating some of these same factors into their community and economic development strategies. Even some suburbs are starting to incorporate higher densities and more urban principles into their designs. As Steve Yoder wrote in The Fiscal Times regarding the growth of Bellevue, Wash., “Not long ago, density, walkability and access to public transit were more associated with cities than suburbs. But as more people flock to the cities, and many outer suburbs struggle, some suburbs have found a formula that’s helped them grow as fast as their urban siblings—create a downtown core that lets them combine the city’s culture, street life and walkability with their own lower crime rates and good public services.” Creating a higher population density in a small town can help create a stronger and more competitive downtown core.
Increased density has also been linked to increased productivity. The Federal Reserve Bank of New York’s 2010 report, “Productivity and the Density of Human Capital,” (PDF) reviewed 363 metropolitan areas in the U.S. from 2001 to 2005 to better understand how density affects an area’s productivity. Although this report reviewed metropolitan areas, many of the findings may be applicable to small towns, especially those with higher-than-average densities. The New York Fed found that if a metropolitan area doubled its population density, its human capital increased, leading to an average 2 to 4 percent increase in productivity. Depending on whether an area had low or high human capital, the gains in productivity were lower or higher than the net average. The sectors most dramatically affected by increases in density were more knowledge-based, relying on an educated workforce where sharing ideas is important to productivity. Sectors with the highest productivity gains were professional services, arts and entertainment, information, and finance. Although the study used metropolitan areas as the sample, it demonstrates that increasing density can lead to positive economic gains.
Infrastructure and other resource costs are also important reasons that small towns might benefit from increasing density. As a community expands outward, more infrastructure has to be put in place and maintained over the long term (e.g., roads, water, sewer, electricity, broadband, etc.). If budget issues continue to impact states and cities, the ability to fund new infrastructure projects could be a roadblock to growing a community. Choosing to focus on increasing density in an area where infrastructure already exists may be quicker, easier and more cost-effective, especially considering the limited resources available to many communities. Additionally, when trying to maintain and manage resources more diligently, focusing funds or projects in a particular area of high density should create more impact than in an area where less people or businesses may benefit.
How realistic is it that a small town could have a small population but a higher-than-average population density? Where are these types of small towns located? To better understand the number and geographic distribution of small towns in a state, let’s look at Missouri as an example.
There are multiple definitions of “rural,” “urban” and “small town.” Using the Census Bureau’s definition of urban clusters, the USDA’s Economic Research Service defines rural as any place with a population of fewer than 2,500 and a density of less than 500 people per square mile. According to the North Carolina Rural Economic Development Center, small towns are generally defined as having populations of less than 10,000 people. Using these definitions to best identify the true “small towns” in Missouri, towns with less than 2,500 people and/or less than 500 people per square mile were excluded because they are considered rural; places with more than 10,000 people were also excluded. The map of Missouri shows that there is a fairly even geographic distribution of small towns with high densities across the state. The exception is a cluster of small towns with population densities of more than 1,200 people per square mile located in and around St. Louis County. The results can be seen in Figure 2.
What other impact does density have on small towns across the United States? Budget Travel conducts an annual poll, inviting readers to vote on nominations for “America’s Coolest Small Towns.” In 2013, almost 100,000 people nominated and voted on 924 small towns. (See Table 1 below.) All but three of these towns had a population density above 500 people per square mile; 12 had population densities above 500 and six had populations of approximately 1,000. Many people choose to visit, live, work and retire in these popular and vibrant small towns with higher population densities. Increasing density may help a small town create a sense of place and quality of life that people desire. Even high-density small towns can retain their charm, as voters believe many of the towns on Budget Travel’s list have done.
|Town||State||Population Density (per sq. mile)|
|Bay St. Louis||MS||630|
|Average density: 1,325|
As the world continues to become more urbanized, it’s important that small towns keep up with these changes. Increasing a small town’s density to reflect some of the positives of a more urbanized lifestyle may be important to its future success. For many towns, population decline will continue to be a problem. But if increasing density in the core of the town becomes a priority of the community’s growth plan, the town may be able to decrease some of these negative effects of population loss by building up what already exists. Population density is not just an urban measurement; it is also important to the growth of many small towns. Density can help create a stronger and more accessible downtown core, increase economic productivity, lower infrastructure costs and help create a lifestyle that many people believe only urban areas can provide.
Here are a few strategies towns can implement to improve density:
Keep up with what’s new and noteworthy at the St. Louis Fed. Sign up now to have this free monthly e-newsletter emailed to you.
Fed in Print: An index of the economic research conducted by the Fed.
FedCommunities.org is a portal to community development resources from all 12 Federal Reserve Banks and the Federal Reserve Board of Governors.