How Urban Agriculture Has Become
A "Highest Best Use"
In Some Parts Of Philadelphia

Edward J. Dodson

[An unpublished essay written in June 2001]


Here in the Philadelphia region considerable public attention is finally focused on the enormous amount of land parceled out to a relatively small number of higher income households whose parents a generation ago participated in the building of what are now called "inner ring suburbs." Large lot zoning in the suburbs remains the norm, if under attack by the adoption of "smart growth" regulations at the state level. In the meantime, the daily loss of time and resources consumed as people commute from home to wherever and back continues to escalate. Roads and highways are jammed with automobile traffic going in all directions from early in the morning until late at night. This situation is filled with irony.

Statistics tell us that personal wealth in the United States is highly concentrated. That is clearly true. At the same time, the number of households with incomes high enough and liquid assets sufficient to purchase a home selling for $300,000 or more is also huge by historical standards. Millions of people are living their dream, owning an asset that is a visible demonstration of their financial success as well as being a wealth-building asset. Constructing such a house in most established neighborhoods would be considered by financial institutions as an "over-improvement," the cost to construct not always reflected in the market value of the property if resold. Of course, every metropolitan area has older neighborhoods that have remained enclaves for the very well-to-do, although large landed estates are increasingly acquired by developers who subdivide excess acreage into building lots. Today there are very few privately-owned riding stables within eyesight of downtown skyscrapers. In places where the well-to-do are interested in living, land prices are too high for owning large estates except for a very few. Across town, however, land seems to have almost no value at all. Only those who have no choice will live in "neighborhoods" where there are few or no stores, poorly maintained and serviced public places, high unemployment, and daily crimes committed mostly by young people who have nothing better to do.

The first stage of out-migration from cities occurred after the Second World War at a time of dramatic change in the nation's population demographics. War created a full employment society and a great migration of rural poor to the cities like Philadelphia to work in the wartime industries. Despite inflation, working people saved at a level never before experienced. Banks were flush with assets to lend, and the postwar boom in new family formations created an enormous potential demand for housing not yet available. The U.S. Congress responded with legislation that made it possible for people to obtain long-term mortgage financing from the banks, repayment guaranteed by the Federal Housing Administration under a special insurance policy paid for by the homeowner. The cities were already overcrowded, so developers started building in the adjacent communities - where land was inexpensive and regulations few. Federal funding of new highway construction added additional fuel to the fire, and soon new housing subdivisions arose wherever these highways intersected. Two-lane roads were expanded into four lane divided highways. In the process, building and maintaining roads became a major component of local, state and federal expenditures. Road building became, in fact, a major economic activity and source of employment.

Fast forward to 2001. The oldest cities in the United States (with the exception of New York City, the point of entry for many immigrants every year) have much lower populations than they had at their peak in the late 1950s. Manufacturing companies have closed down or moved elsewhere in search of less expensive land on which to construct modern facilities. They were also attracted to regions where workers were not unionized and local government imposed fewer taxes on profits. The buildings they left behind, if still standing, are likely to be vacant, vandalized and partially burned out by arson. Nothing new has been constructed, in many cases, because the land was left poisoned by toxic chemicals, and the clean-up costs are so large that a profitable enterprise is not possible without huge public subsidies. The companies responsible for the poisons may or may not have been in violation of laws in effect at the time. Many no longer exist and their owners are no longer living. There is no one to bring to court from whom damages might be obtained. Taxing the remaining residents and businesses to clean-up the problems only contributes to the exodus. Cities such as Philadelphia seem to be trapped in a cycle of decline, and they cannot divest themselves of land area that has not only lost most of its market value but which the city finds impossible to administer.

As businesses departed, those who could do so left in search of employment. Housing that was already at the end of its normal life cycle was turned over to investors who divided homes into small apartments to maximize rental cash flow while making minimum repairs, or was sold to households with lower incomes who could not keep up with the replacement of deteriorating roofs, heaters, plumbing and other essential systems. The Federal government in collaboration with local civic leaders hastened the process of abandonment by massive demolitions under the guise of "urban renewal." People who could not afford to leave were moved to high rise apartment buildings constructed in parts of the city where there was the least organized resistance and political influence. People were provided with housing but they no longer were part of a community. There were few shops or stores or employment opportunities. The interaction and interdependence that make for community were destroyed.

Beginning in the 1970s a modest rebirth of some city neighborhoods began. A sizeable minority of the new generation of mostly college-educated professionals, earning higher incomes and disenchanted with the suburban lifestyle chosen by their parents returned to the cities as "urban pioneers." They worked for the financial service companies, insurance and law firms, they opened shops and restaurants, and they brought consumer spending to the central city and surrounding neighborhoods. Stately old town homes were readily available and remained affordable for some years as land prices took awhile to climb upward. This period provided a window of opportunity for people to acquire good housing at a relatively affordable price. Developers responded by constructing new condominium buildings and new town homes where blocks had once been dominated by vacant lots and building shells. Some builders entered the competition for purchasing older homes that could be substantially renovated and sold to the new arrivals. On the plus side, crumbling buildings in historic neighborhoods, damaged by decades or even centuries of haphazard changes and neglect were brought back to their original beauty. Thus began the process that has come to be known as "gentrification." Properties long occupied by low-income tenants were renovated and sold to owner-occupants who could afford to maintain them - and pay rising property taxes. Lower income renters were forced to find apartments in less expensive areas of the city, and many older owners sold out and moved on in search of less expensive housing. They went to neighborhoods less likely to become gentrified but which were already suffering from overcrowding and a housing stock in even worse condition. There the poor have aged in place, with few options and still few opportunities to improve their economic condition. Some of their children rose above their circumstances, doors opened for them, and they departed.

Into some of the declining neighborhoods came new arrivals - Hispanics from Puerto Rico and other parts of Latin America, and Asians. Their arrival was not altogether welcomed by existing residents. The ideal of the melting pot has not really materialized in this country. Someone described what we have built as more of a salad bowl. We increasingly work with one another and even live in the same neighborhoods but our social interaction with people of other races and ethnic backgrounds is minimal. Nevertheless, despite the not infrequent conflict - even violence - the arrival of immigrants slowed the hemorrhaging in neighborhoods still clinging to survival. For Philadelphia, the number of new arrivals has not been large enough to offset the decline in population. As elderly residents died or were forced by health concerns to leave, the homes they left behind have too often remained vacant. In thousands of instances, there was no resale or rental market because no one wanted to live there. Since the 1960s, block after block of vacant properties have been leveled and the land cleared.

In many urban neighborhoods, vacant lots have been used for illegal dumping because there is little or no governmental response. For police there are more pressing problems. Resident complaints are registered and filed away because government just does not have the resources for prevention. Some neighborhoods groups have had success in getting control of vacant lots and turning them into community gardens or monitored playgrounds. The perpetrators simply move on to more fertile ground, so to speak.

In recent years, some enterprising people have realized that if they can gain legal title to the numerous small lots that once contained attached houses, warehouses or factories, and assemble them into one larger parcel, the land might be profitably developed - for agriculture.

Without broadly available employment, many residential neighborhoods will not become viable communities for decades to come. The downtown business districts do not provide enough jobs to support all of the people who need employment. And, the reality is that a large percentage of the jobs that do exist are held by people who live in the suburbs. For a long time nothing was being done with newly-vacant land. Slowly, however, some enterprising individuals realized that proximity to the vital parts of the city and even nearly suburbs offered a financially viable opportunity to raise cash crops for sale to restaurants and area grocery stores or to establish a nursery for trees, shrubbery and (in specially-constructed buildings) decorative plants for the city's homes and office buildings. Agriculture and horticulture began to provide employment for people in the city who never thought of where they lived as a part of nature.

Clearly, under the circumstances, bringing this land into agricultural production is highest and best use in the market. What would happen to this industry if cities decided tomorrow to begin collecting the annual rental value of land via the property tax, while exempting property improvements from taxation? We are certain to see the downtown and adjacent neighborhoods - where land values are the highest -- experience a boom in new construction and property renovation. Owners of vacant but valuable land parcels will experience higher carrying costs, and many owners will either develop the land they hold or sell it to someone who will construct a building, create employment and generate economic activity.

Exempting property improvements from taxation while simultaneously raising the effective rate of taxation on land recognizes the contribution the community makes in all of the infrastructure and amenities that gives land value. Creating an environment that rewards commerce will attract new businesses and new residents, who will compete for the best locations throughout the city. The annual rental value of locations, generally, will increase in response to these market forces. If the city effectively tracks this activity and adjusts its annual tax rate on land to match these increases, land prices will over time begin to fall (and in the short term remain relatively stable). Exactly what will occur depends on what economists refer to as "pent-up demand" for locations that is not being met because the supply of land available for purchase or lease is too low (because of speculation), and land prices are as a result too high to warrant development. Taxing the annual rental value of land parcels has the remarkable advantages of stimulating the supply-side of the land market, rewarding investment by individuals and businesses and providing the city with a source of public revenue that will increase as investment expands into adjacent and then more distant parts of the city.

This brings us back to the current situation, where urban agriculture is taking hold in otherwise desolate parts of Philadelphia. When rising land values yield rising revenue for investment in public goods, most urban agriculture will be replaced by the construction of homes, apartments, stores, office buildings and other uses. The citizens of Philadelphia could decide to set aside some of the city's land area for agriculture, of course. Zoning is one of the ways a community affects the market to achieve results the market would not necessarily achieve left alone.

We are a long way from having to make those very difficult decisions. Exempting property improvements from taxation in favor of taxing land values is an essential shift in public policy to get the dominoes falling in the right direction.