How to make the city open to the poor

The urban issue of the decade has so far been the poor. The return of wealthier, whiter people to cities has been a boon to city halls and blighted, depressed neighborhoods, but has also resulted in poorer, browner people being priced out of their homes and stores. Moreover, this has coincided with the Great Recession and its jobless “recovery” and decline in social mobility.

Just as conservatives jumped at the opportunity to paint Detroit’s decline and bankruptcy as a failure of the city’s progressive politics, progressives have jumped to paint gentrification and urban economic inequality as a failure of neo-liberalism and its more right-looking view of the relationship between the state and the economy. And just like Detroit, the stagnation and decline experienced by millions of Americans living in cities is the end result of decades of misguided urban planning strategies.

The first thing to understand is that by themselves, neither economic inequality nor gentrification are inherently bad things. In the first case, economic inequality can also be a sign of a growing economy when it means that new wealth is being created. Wealth is not created by either a mysterious, magical process or by capitalists stealing from workers, it’s created by entrepreneurs finding new ways of doing things or seeing something that’s already being done, but not enough.

For example, Boston has two famous cannoli places — Mike’s Pastry and Modern Pastry, both on Hanover Street in the North End –but neither of them makes gluten-free cannoli. Gluten-free foods are popular now, both because of a greater awareness of gluten allergies and because some people will believe any sort of pseudoscience if it’s sold to them by people who wear Birkenstocks and talk about social justice a lot while listening to recorded whale songs. Anyways, if I were to make and sell gluten-free cannoli I would be creating new wealth by imagining something that didn’t exist, but should. I would undoubtedly become fantastically wealthy, thus increasing economic inequality, but it would result from the process of creation and not because I took existing wealth.

Similarly, even your basic gentrification of gays and artists moving into poor neighborhoods and taking them over, rennovating apartments and establishing artisan bakeries, craft breweries and artists’ collectives, attracting even richer people who price out the poor and then the artists and gays, isn’t neccesarrily bad. It’s the nature of neighborhoods to change with fashions. The whole history of the development of New York City is practically the history of wealthy people moving away from Lower Manhattan. A number of London areas have been through multiple cycles of it.

Instead, the problems of gentrification in America should teach us to look closely at the larger picture. Everyone wants to live in a neighborhood that appeals to their specific needs and desires, among which are accessibility, convenience, affordability and proximity to attractions or services. They vary over time and between social classes and races. In general, however, people are attracted to living, vibrant neighborhoods no matter what their status is. In the 20th and 21st centuries, these have tended to be neighborhoods that are older, denser, walkable and well-set for transit, like Greenwich Village and the North End. But all too many districts in American cities lack even the basic building blocks for life, a consequence of planning dogmas and paradigms.

The consequences, both intended and unintended, of numerous state and federal practices and laws, combined with those same city planning dogmas, have had the effect of closing the city to the poor almost as completely as the suburban requirements of a car and a house.

The effect of parking requirements on rents is well-known, now, but shouldn’t be forgotten. Minimum lot sizes, floor area ratios and setbacks also substantially reduce the amount of livable area, inflating prices. Larger roads also reduce buildable areas, inclease infrastructure costs and encourage the waste of land for “green space.” But zoning spaces for exclusive residential or commercial uses  is basically a suppresive tax on the poor. Once a year in the United States everyone gets upset and cable news pundits have something to do in the summer when a seven year-old is arrested for selling lemonade by the side of the road without a permit. But this sort of humiliation is precisely the sort of thing poor entrepreneurs must endure because they can’t start many businesses out of their own homes. They have to put together a good deal of collateral, get a loan from a bank under far more scrutiny than if they wanted a mortgage, find a commercial space for rent with the right number of parking spaces, they may have to buy or rent commercial-grade equipment — in short, they need to get a lot of capital together and will probably still have to keep their old job to keep up with the rent. For a middle class person, they still need the same amount of capital, but they already have access to it. They have savings, they have collateral.

“Affordable housing near retail services, home businesses unhindered by excessive regulation—these are the blessings, not cancers, of a city in which the people determine the use of their property,” wrote James Saltzman in an article on zoning in Houston for The Freeman in 1994, upon which I have drawn extensively.

It is no surprise that the most expensive neighborhoods in the East Coast are usually those that had the least amount of regulation in their initial development. They also had a far more distributed ownership — lots were developed seperately instead of by one company all at once. While that sort of thing is more likely as wealth increases, federal regulation in the United States has made it almost inevitable.

Until recently, small real estate developments had do be done out of pocket. Shares could not be sold in them the way they could for large real estate projects. Fundrise and some modifications to federal regulations have charged that, but the massive federal involvement in the mortgage market still has major consequences. In two recent posts, Charlie Gardner at The Old Urbanist has used Brownsville, TX and Matamoros across the river in Mexico to explore the urbanism present. He writes, “Although one might expect this lack of financing to impair individual property ownership, a surprising 80 percent of Mexicans own their own homes. This compares to a rate of only 65 percent in the United States, where 70 percent of homes are encumbered with mortgages and only 1 in 10 buyers pays in cash (at least, until the recent surge in buying by institutional investors). As I pointed out in a previous post, the homeownership rate in the US has actually been more or less stagnant since the mid-1960s in spite of extraordinary efforts to expand the availability of credit.”

A generous tax deduction on mortgage interest, costing the federal government $130 billion a year, exacerbates the problem.

Residents of neighborhoods that historically suffered from race-based redlining and blockbusting also struggle to gain access to capital, resulting in a negative feedback loop where disinvestment results in more disinvestment.

Current members of the middle classes must understand that getting rid of these regulations that keep the poor poor is not only in the interest of the poor, it’s in their interest as well. When the poor get rich, the rich don’t stop being rich. No one’s interests are threatened, indeed increases in wealth will result in lower taxes, better schools, better neighborhoods, less crime and the increase in businesses and innovation will make goods and services cheaper. Economic development is a good thing.

 

 

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