Almost, to a person, the political elite in Trenton will tell you that investment in business is the top priority. I’ve had this debate countless times and you can see it in the political rhetoric of our candidates. However, when pushed by the logic of residential development, they’ll eventually say, “well it’s really a chicken and egg” problem.

What they’re saying is “I really don’t know”. It’s a bit daft to call something like this chicken and egg in the first place. If you believe in creationism then the chicken came first. If you believe in evolution, then the egg did. Either way there is a correct answer. Just like there is for business vs. residential.

Politicians are so conditioned to tell you Trenton needs jobs that they’re blind to the economics of the situation. I’m going to attempt, without the support, of hard economic analysis to convince you that residential development comes before business.

First let’s frame the problem.

All business aren’t the same. They fall in to two big buckets: retail and commercial.

Retail obviously includes shops and grocers, but it also includes restaurants, law offices and doctors. These businesses supply goods and services to the local population. The more and better selection of retail business we have, the better our quality of life. However, retail businesses won’t go anywhere near a city without disposable income to spend.

Commercial businesses make products or deliver services that can be exported out of the region. Trenton used to have lots of this and now I’m hard pressed to come up with current examples. Manufacturers, big banks and machine part businesses count as commercial. Cities need commercial businesses in order to create wealth and jobs. Commercial business won’t locate in cities without an educated workforce, nice homes for its executives and amenities (i.e. retail) for the workers.

Residential investments includes home improvements, new developments both rental and for sale and of course the purchase of a house. Residential development depends on retail to some extent but in general homeowners will buy for many reasons other than proximity to shopping. In a region like Central Jersey, close proximity to a job is entirely unimportant.

First consider the decision making process for each type of investment.

Renters take very little risk when they move to Trenton. If they don’t like it they can leave. As long as landlords can keep their costs low (read low taxes) they can attract bargain hunting renters to Trenton.

Homeowners take a bit more risk but also are more prone to make uneconomic decisions. A quick survey of 30 or so new Trenton homeowners found driving reasons like: being close to a black church, being near a gay community, affinity for urban living and availability of interesting architecture. Homebuyers all take a risk, but their home is a somewhat fungible commodity and can be sold in a well organized market.

Of course both renters and homeowners value retail amenities. The availability of retail amenities both makes the real estate more expensive and attracts new residents.

However, retailers make much more sound business decisions on where to locate (as do their banks). It would be a questionable decision for an upscale retail shop to open in Trenton. The few residents with disposable income are spread throughout the city and can easily shop in nearby towns. A new movie theater, hotel or restaurant will never bet that residents will follow them in to Trenton. Rather they’ll happily open a new store in Hamilton or Ewing and hope to attract some Trenton residents.

Commercial businesses are even more careful. Typically they look for an educated workforce (which Trenton doesn’t have), a favorable business climate (Trentononians helped to drive away several large industries) and a great site with (we’ve got some brownfields). We really don’t have much going for us and this shows in our anemic economy. Commercial businesses are more likely to locate in a city with a variety of housing stock, retail amenties and low crime. I recall attempting to convince my former company which was then in Plainsboro and considering a move, to look at Trenton. I got laughed at.

Because residential investors are not making purely economic decisions, they are the most likely to invest in Trenton.

New residential development will beget new retail. In addition new residents, especially high wealth residents, are most likely to form and invest in new commercial business.

Residential development, especially high income development, lays the foundation for everything. And, because residents don’t worry about risk so much they’re easier to attract.

However all residents aren’t created equal. We need new residents who don’t consume expensive city services like schools, social services and jail cells. Empty nesters, gay couples and young professional are the typical target segment a city attempts to attract.

These market segments demand specific types of homes. They aren’t looking for large detached single family homes. Rather they want smaller homes with less upkeep or a more exotic home that reflects a certain lifestyle.

Trenton has relatively little housing that will appeal to these market segments. Hiltonia, Glen Afton, Cadwalder Heights, Berkely Sq and Mill Hill would appeal to this market but represent a relatively small portion of Trenton’s housing stock. They couldn’t possibly absorb the 20,000 or so new high income residents we need to make Trenton attractive to new retail. Also, we couldn’t possibly expect a large commercial enterprise to locate in Trenton if its mid-managers couldn’t find a place to live.

In order to create the chicken (economic development) we need to lay the egg (residential investment).

As politicians craft their economic plans and voters review them. Look for stimulating upscale residential development at the top of the list. If you don’t see it run the other way, the politician has another agenda besides fixing Trenton.