Why Gentrification?

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The mostly commonly chosen means, or at least attempted means, of revitalizing central cities that have fallen on hard times is gentrification.  Gentrification is the process of replacing the poor population of a neighborhood with the affluent and reorienting the district along upscale lines.  This has seen enormous success in large swaths of New York and Chicago, but even traditionally struggling cities like Cleveland have seen pockets of this type of development downtown.

What makes gentrification so attractive as a redevelopment strategy? There are many reasons.

The first and most easily understandable is that is works, at least in a given geographic area. There’s a proven track record and model for redeveloping cities on an upscale basis. It may do very little for the rest of the city, but it does work for those who live, work, and, perhaps most importantly, invest in them.

But perhaps the best question is: are there any other success models? It’s hard to point to many other successful models for redeveloping urban cores. The only alternative, and one that cities generally pursue in parallel, is attracting immigrants who seek out and revitalize out of fashion districts, often in outlying precincts of the city or the inner ring suburbs. Where there are successful working class districts in cities today, most of them are older neighborhoods that have hung on, not new ones birthed out of decline.

In a modern America where income equality and class divisions are a huge problem, it’s definitely mission critical for America to restart the middle class jobs engine and renew our metro regions as engines of upward mobility. But that’s easy to say and hard to do, at least from an inner city perspective.

The manufacturing jobs that previously supported a middle and comfortable working class lifestyle are gone and likely are not coming back. Public sector employment, traditionally another way to a middle class life in the city, is under extreme pressure due to fiscal mismanagement. Key services like the public schools remain intractably broken in most places. Segregation remains entrenched. What is the basis on which a middle or working class life will be re-established in the city? It isn’t clear.  Untold billions pumped into various Great Society type programs accomplished little that was sustainable. Indeed, many programs like urban renewal, yesterday’s urban planning conventional wisdom, turned out to be disasters for cities. Community organizing may have launched the career of President Obama, but it’s not clear how it has helped Chicago’s marginalized communities.  Given the paucity of models other than gentrification, it’s easy to see the attraction.

Other reasons also drive cities toward gentrification. Clearly with a fiscal crisis, attracting more high income taxpayers (even where local taxes are predominantly on property) is clearly attractive. And the existing affluent residents need to have some assurance that they are being taken seriously by the city and aren’t just being used as ATM machines for redistribution.

The change in the macro-economy that led to the income gap, including national policies that favor finance and technology rather than traditional manufacturing and energy type sectors, plays a huge role as well. These elite industries require a highly educated, highly skilled workforce and they are subject to clustering economics. Theories like “Creative Class” that describe this phenomenon suggest that this is a fickle group of people who seek out a gentrified neighborhood consisting largely of people like themselves. This has been glommed onto by the elite themselves – the various politicians, the wealthy, business executives, cultural leaders, academics and others. They hold power in cities  and use this to justify further investment in gentrification related programs – that is, their own class interest – although these programs do little for anyone who is not elite.

Lastly, changes in the composition of local elites favor the publicly subsidized luxury real estate projects aimed at gentrification. In previous generations the CEOs of local operating businesses like banks and utilities were major power players. These tended to be fragmented industries and predominantly local in focus, so the overall civic health – in everything from education to infrastructure – was critical to the health of their core business. The interests of the community and CEOs were aligned.

Today, most large-scale, and even many smaller, businesses have been nationalized or globalized, and the local power players are increasingly people like lawyers, real estate developers, and construction magnates who make money by the hour or project. The shift from locally focused operating businesses to national or global operating businesses, with remaining locally owned and focused businesses tending to be of the transactional type, produced a local elite who prefers doing deals than building broad community success. Unsurprisingly, they’ve doubled down on high end luxury developments, often subsidized by the government. 

Lastly, once the ball gets rolling on gentrification, market forces can sustain it provided that the overall policy set remains favorable to elite type development. And having a lot of high end, swanky type development generates buzz for a city, something more prosaic, and more broadly based, working class success never does.

Given the lack of proven alternative models and the alignment of multiple incentives behind it, there’s no surprise gentrification is the almost universal aspirational choice for cities in redevelopment.  But the gentrification model in most places is simply too narrow to move the needle or produce any benefits down the economic ladder. It is imperative that urban thinkers and leaders try harder to find models that provide more inclusive and broadly-based and socially sustainable benefits.

Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile.

Photo by Dom Dada.



















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It the redevelopment

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Excellent point

"Works, but too small in scale."
As someone who lives in a rapidly gentrifying area (as one of purchasers of new and more expensive housing), I thought your article was spot on.

Dave Barnes
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I sincerely doubt that

I sincerely doubt that gentrification is the "aspiration" of most cities. Gentrification isn't something you specifically seek, it's the natural consequence of increased demand for an area that had previously been relatively depressed.

If you don't want gentrification to occur your only real option is to prevent an area from getting nicer: deny development permits and new restaurants, don't modernize or repair obsolete roads, limit transit service, etc. Obviously this is a horrible option, so the alternative, narrow and underfunded as it may be, is to provide some amount of income-restricted affordable housing such that fewer people end up being displaced, and providing enough new housing so fewer people end up being bought out of their existing residences. This is never a complete solution, but it's much better than trying to limit supply, which just leads to existing buildings being gutted to transform them into upscale apartments and condos.

Natural free-market renewal versus planning and pork

This is an important point. I think Aaron Renn's point is correct, that POLITICIANS and bureaucrats and property owners do "aspire" to gentrification in their own cities, and many activists of certain kinds also act as useful idiots for this.

Yes, gentrification does occur naturally if it is allowed to, and this is a different phenomenon to the pork-driven variety. Possibly one of the reasons that some cities in the UK, like Liverpool and Glasgow, seem to never rebound economically, is that they still have strict "heritage" preservations and numerous anti-growth and anti-renewal regulations. This somehow results in a combination of economic stagnation, high unemployment, loss of businesses and aspirational citizens, AND unaffordable housing of low quality and small size, AND rents for "prime" commercial space absurdly high, closer to NYC than to Detroit or Houston.

You are correct that ".....trying to limit supply.... just leads to existing buildings being gutted to transform them into upscale apartments and condos....." - and the price of these will be utterly "exclusionary". In cities with elastic supply at the fringe, the cost of land is kept so low everywhere, that CBD condos are even more affordable relative to a growth-containment city, than McMansions are.

The central point is that even anti-suburb planning cannot kill the suburbs; it DOES kill the whole economy. Policies that inflate the price of fringe land, inflate the price of land everywhere in a city. Urban land rent curves always slope up from fringe to centre.

Ironically, this means a CBD condo in Houston or Atlanta is a fraction of the price of one in LA or SF; in fact, even more relatively affordable than a fringe McMansion, because the cost of land "multiplies" from the fringe to the centre. Work it out on paper if you don't "get it", drawing a few graph lines for the cost of land, the cost of structures, and the combined cost; and see what happens when the cost of land is bumped up tenfold or more.

Furthermore, the "transport cost" curve which slopes the other way, is capitalised into location advantage anyway. See what happens to "housing plus transport" costs at all locations when you push the price of land up. The affordability of all options is drastically reduced, and choice of location is lessened, with the more efficient locations being the first to become absolutely unaffordable.

The affordable cities provide a choice of $140,000 fringe McMansion, $100,000 mature-suburb home, and $100,000 CBD Condo. The distorted market cities provide a "choice" of $450,000 fringe McMansion, $700,000 mature-suburb home, and $1,000,000 CBD Condo. Way to GO, "planners".....!!!!!!

Of course a small minority of cities are "global" cities or "superstar" cities with primary income sources that are capable of sustaining inflated land rents; these cities, such as NYC, London, Hong Kong, Vancouver and Seattle, are of course "selected" by the advocates of "smart growth" as shining examples of what "good planning" can do - which is about as rational as the cargo-cult mania in primitive tribes in the 1940's. "T.O.D." type planning has as much to do with these cities success, as the construction of airstrips has to do with western civilisation being wealthy.

For every "success story" city with growth-containment policies and "T.O.D." planning, there will be a dozen others whose economies are strangled and stagnating BECAUSE OF these policies. Even in Oregon, the city of Bend is becoming an object-lesson parallel to Liverpool and Glasgow. Imagine Pittsburgh, Cleveland and Buffalo adopting UK "Town and Country Planning Act" policies in an endeavour to rejuvenate their economies; how rational would this be in the light of the evidence?

Jane Jacobs observed that grassroots creativity flourished in the low-cost unrenewed "interstices" in between the glitzy new developments in Manhattan in her time. The problem with growth containment planning, is that it renders even these interstices unaffordable, let alone the "renewal" that does take place.

Ironically, the best thing politicians and bureaucrats CAN do, is not "plan" and pork-barrel gentrification and renewal into existence, but just GET OUT OF THE FREAKIN' WAY.....!!!!!

You bring up an interesting

You bring up an interesting idea on the issue of fringe-to-center costs, and how the higher the fringe cost is, the higher the center. I'll have to think more about the consequences of that.

While I think it's very possible that you're correct on that point, this does nothing to argue AGAINST T.O.D. or similar policy. It's true that T.O.D. is often instituted in conjunction with growth/sprawl-management, but it doesn't have to be. Providing more housing (or, more accurately, the zoning for it) in the core rather than arbitrarily limiting it can hold prices down, something we're actually starting to see now in Seattle with the boom in apartment-building.

There's also the issue of the hidden costs of sprawl. Sure, maybe the housing is cheap, and maybe transportation costs aren't too bad either, but what about the government's responsibilities? Infrastructure costs continue to grow; new, wider rings of highways are needed as you keep moving further out; liabilities increase. I would suggest, as a possibility, that somewhere like Houston may only appear successful right now because it continues to grow quickly in population, as fees and taxes from new residents feed the existing liabilities, but not the new ones that those developments produce. I'm not sure Atlanta is a great example, since, sure, it may be fairly cheap, but it's also just about the worst driving conditions in the country.

Addendum: I guess to put it more simply and in better alignment with my previous statement, you're making exactly the same point as me, which is that we need to provide more housing. Whether we limit it at the edges or in the center, or anywhere in between, have differing impacts--the one impact that is assured regardless of where that limitation occurs is that costs will increase. However, many people are very flexible about where they're willing to live. If planners (but really, mayors and city councils) were willing to zone generously enough to accommodate all the growth in the center that they're limiting at the edges, there wouldn't be a problem. But they don't do that unfortunately, so we end up with higher costs all around. It's not an intractable problem though, nor one that requires us to throw out all concern for the environmental, health, and economic costs of becoming an ever-more-dispersed population.

Econ realities 101 for planners

As a general rule, all cities will experience negative unintended consequences of the kind I describe, by inflating the cost of all land with growth containment. A very small number of cities may appear to thrive because of a combination of lucky previous inheritance (Seattle has Boeing and Microsoft, for example - NYC has Wall Street; London is like the globe's finance capital as well as seat of govt in the UK) and a certain amenity and exclusionary effect, making the entire city "exclusionary" by "pricing out" the less creative and less educated.

It is ironic that the same people who celebrate these cities, generally condemn "exclusionary" policies at the level of the suburb. The paper "Superstar Cities" by Gyourko, Mayer and Sinai is very instructive. It is not an option for all cities, to become a "Superstar city" just by copying the urban planning. This is like expecting to become George Clooney just by using the same cosmetics.

The point cannot be repeated too often; that if you emulate the kind of policies the UK's cities have been following for decades, there is a far higher chance you will turn your local economy into Liverpool rather than London. Portland may do OK, but what has mandatory growth boundaries done for the city of Bend?

It is ironic that some of the highest-income cities of all, require the greatest trade-off of living space for people to be able to exist there at all. Sure apartments might be booming in Seattle now; do you really want to move Seattle closer and closer to Hong Kong as a model?That is, you have to be a millionaire to afford a half decent apartment there. Cities where almost everyone can afford a separate family home will continue to be relevant to by far the most people and their employers.

The "cost of infrastructure" argument is pointless. The inflated cost of housing under strict growth containment planning is an order of magnitude greater than the alleged higher cost of infrastructure for continued urban spread. In any case there is no proven correlation between fiscal sustainability and urban density. There are just as many fiscally distressed high density cities in the first world as low density ones - and the causes are usually not a lot to do with the density. The cost of acquisition of land, access and disruption are much higher in higher density.

It is possible to pursue a model of low density living that is "sustainable". There are most certainly "environmental, health, and economic costs" to forced high density. The UK's cities are testament to this. The correct approach would be to price the variables you want to change (energy consumption) and let the participants in the market change their behaviour in the most efficient ways. Anthony Downs put it well: trying to change resource consumption by mandating urban form is like trying to adjust the position of a picture on a living room wall by shifting the wall rather than the picture.

There is also not a lot of point providing a whole lot of high density centrally located accommodation if your local economy is not based on high density centrally located employment - and it is wrong to expect most urban economies to be like this. High density centrally located employment is almost all to do with economic rent and wealth transfers in the economy - actual wealth creation requires utilisation of resources, which requires space. The most ignorant advocates of certain kinds of planning, also seem to have an insupportable belief that an entire economy can consist of people working in offices, writing reports for each other, selling each other financial instruments, selling each other imported consumer goods in CBD retail, cutting each others hair and making each other coffee. The US economy is actually what it is because of cities like Houston, not because of Manhattan. Nigeria needs Houstons, not Portlands or Liverpools.