Is Gentrification A Threat?

Edward J. Dodson

[Reprinted from GroundSwell, September-October 2005]

It is no secret that beginning in the late 1960s many of the oldest industrial centers in the United States suffered from the departure of businesses and the relatively well-compensated workers they employed. As economies moved into heavier concentrations of the "FIRE" sector (i.e., finance, insurance and real estate), high technology, health care and other service businesses, the cities increasingly lost out to surrounding suburban development.

The central cities did not fold up and return to agriculture, although urban agriculture has arisen as an "interim use" of land in city neighborhoods eroded by depopulation, abandonment of buildings and decaying of infrastructure. Downtowns continued to maintain some degree of vitality, and some neighborhoods remained as enclaves of stability surrounded by decline.

Slowly and assisted by billions of dollars raised by taxation and borrowing, city leaders structured public/private partnerships to construct and fill new downtown office towers. Encouraged by long-term tax abatements, developers such as James Rouse brought suburban-style retail shopping to the cities, and historic neighborhoods became anchors for an invigorated - and higher income - residential core. Urban universities began to recognize the need to become involved in the health of their surrounding community rather than build a protective wall around their perimeter. Tools such as inclusionary zoning were increasingly utilized to create, new "mixed income" housing opportunities for racially diverse populations.

Fast forward to mid-2005. One of the most dynamic city mayors of the era of revitalization, John Norquist, former mayor of the City of Milwaukee, Wisconsin, now heads the Congress of the New Urbanism. In a recent article*, he talks about the constructive side of "gentrification" (i.e., the gradual displacement of lower income households from neighborhoods as affordable rental housing is renovated and converted to single-family dwellings for homeownership, followed by the appearance higher priced restaurants, retail stores, high-rise apartment and condominiums). As John Norquist. Observes, "…so late 20th century urban policy focused on strategies to attract people and capital back to cities. When signs of revitalization appeared in the strongest of the big cities -- New York, Chicago, San Francisco -- the policy focus adjusted to include concern for a new problem, displacement of the urban poor by the affluent."

Despite sincere efforts made to achieve some sort of balance between the need for investment dollars, for households who could pay taxes and would spend money on local goods and services, and creating opportunity for those of lesser means, gentrification has continued to push many people out of the way. Norquist suggests that, on balance, gentrification is better than the previous trend. "People, particularly middle-class and affluent whites, were fleeing the city to the suburbs. Rents and sale prices declined or stagnated, and when rents decline, investment shifts to other places. This was doubly bad for the poor." Saying that "investment shifts to other places" is a polite way to describe the practice of putting as many people as possible into a dwelling while allocating little or nothing to maintenance, while taking advantage of depreciation and tax law at the expense of community.

Norquist has on a number of occasions made statements in support of taxing land values more heavily and lifting the burden of taxation from property improvements. Yet, in this recent commentary, he reveals a poor understanding of the connection between how government raises its revenue and the market prices for all types of goods, particularly housing. He states: "People, no doubt, would love to pay low rent and experience neighborhood economic prosperity at the same time, but this is difficult unless others -- other taxpayers? -- subsidize rising rent payments." What he does not understand is that when location rental values are captured for public use via taxation, the pressure on land prices is downward - as owners of land compete with one another for buyers. Even with government continuing to follow the revenue policies that contributed to decline, Norquist views the trend in cities with optimism:

"One hopeful characteristic of successful urban redevelopment is that, by its nature, it often includes a wider variety of housing types at a wider spread of price points than sprawl. Less pricey units can be placed in the same building or on the same block with expensive dwellings. For example, people with impressive views pay more than those in units facing the alley. Unlike sprawl, urban infill and rehabilitation at least offer the possibility of people of various incomes living in close proximity."

"If allowed to decide for themselves, low-income people might choose to divert some of their scarce income to paying higher rents and thus take advantage of the benefits of living in improving neighborhoods. In fact, research by Lance Freeman, Columbia University Professor of Urban Planning, found that low-income residents were no more likely to move from gentrifying neighborhoods than those not experiencing gentrification. He found that many people valued other benefits more than low rents such as lower crime and restored amenities like shopping or better access to jobs."

Access to decent, affordable housing is an important need for many people, but so is the opportunity to earn higher incomes "if ending poverty is the goal" of government policies.

Norquist is highly critical of the Reagan-to-Bush moves to effect a tax shift away from those with the highest marginal incomes onto the backs of those who labor for wages. He also sees as a related cause of societal disharmony the "globalization of the manufacturing sector."

Returning to the issue of gentrification in our cities, Norquist looks at places such as San Francisco as anomalies. Most other cities are experiencing only mild gentrification, so that this "should logically be among the lowest priorities." Better to focus on stemming sprawl development, even if the result is to add to gentrification. "The poor have more opportunity in metro areas with compact and economically healthy urban cores," concludes Norquist. This certainly makes sense. The irony, of course, is that the very same public policies could be implemented to curb sprawl without causing housing to become unaffordable in the cities for working-class families.

Mr. Norquist is in a particularly unique position to influence the decisions of many civic leaders around the country. In the past, he demonstrated some understanding of the virtues of the Georgist approach to raising revenue for public goods and services. He apparently is in need of a much more thorough education in the functioning of land markets and the wrong-headed approach still being taken with regard to taxing policies. If he wants investment in commerce, in employment and in new buildings, the policy response is to stop taxing commerce, stop taxing wages and stop taxing property improvements.


* "Is Gentrification Really A Threat?" An Op-Ed column, PLANETIZEN, 6 June 2005. (http://www.planetizen.com/oped/item.php?id=150)