The Future of the American City: Part Two

Posted in: Government

This is the second in a series of essays about a new approach to community well-being.

In my last essay, I used the Walking School Bus in Olnevyville, a low-income neighborhood on the west side of Providence, RI, to illustrate the current approach to community well-being. The Walking School Bus provides a modest stipend for local adults to accompany children through the neighborhood as they walk to and from school every morning and afternoon, sparing the children from walking unescorted through some rough parts of town. It is funded by the Rhode Island Department of Health, which received a grant from the Centers for Disease Control in Atlanta. DOH in turn funds One Neighborhood Builders, a community development corporation in Olneyville with a long record of community-building in the neighborhood.

The bus is a perfect example of what Bruce Katz and Jeremy Nowak recently called, “the New Localism.” In this model, the needs of the community are solicited and promoted by a diverse network of private organizations that channel their expertise into concrete programs for the benefit of the residents, and who leverage their philanthropic, academic, and municipal connections to bring services and funding, as well as private capital, into the neighborhood. It is a collaborative, non-confrontational model that envisions community well-being as the end result of a congenial partnership among residents, non-profit providers, the public sector, and private capital.

In forward-looking cities, initiatives like the Walking School Bus are exceedingly popular and represent what is currently the best thinking in community well-being. They help ensure that the views of the community are faithfully solicited by local organizations, who endeavor to act from the bottom up rather than the top down. These organizations can bring much-needed resources into a distressed neighborhood. And in doing so, they assemble a small army of allies drawn from the non-profit, public, private, and academic sectors. Here as elsewhere, many hands make light work, and we should welcome the diverse expertise brought to bear on issues that touch multiple aspects of community life. In short, there is much about the congenial partnership that we should welcome.

But the partnership will not save the American city.

The congenial partnership suffers from two related limitations. The first is the perennial “give-vs-teach” dilemma. The Walking School Bus brings no new expertise into the neighborhood and provides residents with no skills that can be leveraged to ameliorate or solve the neighborhood conditions that made the bus necessary in the first place. In addition, the initiative depends entirely on funding decisions by agencies and actors who, to one degree or another, are physically, psychologically, and morally distant from Olneyville, leaving the neighborhood entirely at the mercy of its funders. As a rule, initiatives like the bus give, but do not teach.

Second, these initiatives do nothing to protect a neighborhood from the market and political forces that in the present climate combine to destroy low-income communities by displacing people of limited means. In fact, one unintended but perverse consequence of these initiatives is that the very changes making the neighborhood a better place to live are the same changes making them irresistible to capital.

Fortunately, both of these limitations can be solved, and in fact, there is a single solution that can address both conditions. In the remainder of this essay, I begin the discussion of displacement, which I finish in the essay that follows. In the fourth and last essay, I take up the “give-vs-teach” problem and describe the solution—a new approach to community well-being.

To begin with, I do not view gentrification as the problem. In my judgment, the ultimate goal should be to create a city with abundant opportunity for routine social and professional interactions among an economically, racially, ethnically, and culturally diverse mix of people. At least since the early 1960s when the sociologist Jane Jacobs penned The Death and Life of the Great American City, we have recognized this as the secret sauce that produces not only the economic growth and innovation for which successful cities are renowned, but also a tolerant, accepting society. This requires that a diverse mix of people in a city live, work, worship, and play in close proximity to each other. They cannot live in segregated islands, physically and culturally separated from each other. To the extent gentrification increases the opportunity for this mixing to take place, I consider it a very good thing.

On the other hand, to the extent we see not gentrification but displacement, we have a problem. Displacement occurs when capital, seeking maximum returns (as it always will), flows to distressed areas and raises costs for residents. Again, I stress that bringing capital to a distressed area is to be encouraged, whether in the form of investments in infrastructure, improvements in land or housing, creation of new businesses, etc. In my judgment, if that capital provides a benefit to a resident of a distressed neighborhood, it is a very good thing; capital per se is not the enemy.

But when the influx of capital raises the cost of a resident’s most important outlays—that is, the expenses she is least able to defer or eliminate—like property taxes for homeowners, rents for tenants, and the cost of food, health care, transportation, and insurance for everyone, it becomes increasingly difficult for people of modest means to remain in their neighborhood, especially those who live on a fixed income. Here then is the great irony for the residents of a changing neighborhood: just as their neighborhood improves—by an influx of outside capital that is itself summoned as a result of their own patient efforts and hard work—their homes, apartments, and indeed their whole neighborhood become unaffordable and they must leave, decamping to other distressed areas.

Unfortunately, in the 21st century, it appears that in many cities, gentrification is indeed leading to displacement. Cities across the country are becoming increasingly unaffordable, and the working poor are being driven out, moving to the suburbs. Between 2000 and 2013, almost every major metropolitan area in the country saw poverty rates soar in the suburbs. In Sun Belt cities like Austin and Las Vegas, the number of people living below the poverty line in the suburbs more than doubled; in Midwest industrial cities like Chicago and Detroit, the number climbed by over 80%. Even in thriving regional markets like Washington, DC, and Seattle, the total number of poor people in the suburbs increased by more than 60%.

As the working poor move to the suburbs, the cities they leave behind increasingly cleave into unaffordable enclaves set alongside pockets of intensely concentrated, hyper-segregated distress. Since 2000, most of the large metropolitan areas in the country have seen a steep increase in the number of census tracts with a poverty rate of over 40%. By 2014, despite the economic rebound, 14 million people lived in these extremely poor neighborhoods, twice as many as in 2000. In such neighborhoods, almost everything that matters to a person’s future—from levels of crime and disorder to the performance of the schools; from the housing stock to the opportunities for social mobility; from physical and mental health outcomes to the prevalence of severe financial insecurity—tends to be worse. And the longer a person lives there, the worse it gets for her.

Displacement is hardly a new problem, and cities have developed a host of policy solutions designed to address the issue, the most prominent of which are rent stabilization and inclusionary zoning. Though the particulars vary from place to place, rent stabilization imposes limits on the annual increase that landlords can charge in rent. As long as a resident remains in the apartment, her rent can only be raised by a fixed amount every year, regardless of what the market would otherwise bear. The rent cannot rise substantially or revert to a market rate until the tenant moves out, at which point the landlord can demand a higher rate from the new incoming tenant.

While rent stabilization is aimed at the existing rental stock, inclusionary zoning targets new construction. Again, the particulars vary widely from place to place, but typically inclusionary zoning requires that builders set aside a fixed number of new units in each development as affordable housing—say, 10% of the units—which must remain affordable (through rent stabilization or comparable requirements) for a set number of years. In exchange for building affordable units, the developer typically receives some other benefit, like a density bonus, which allows it to build more units than would otherwise be permitted. The hope is that inclusionary zoning creates a mix of market and affordable housing that relieves a housing crisis while contributing to a diverse, thriving city.

But these strategies, like the congenial partnership they are meant to complement, will not do the trick. They can work for a time or provide a benefit to some residents, but ultimately, they will not solve the problem of displacement. Rent stabilization, by capping what a landlord can charge, creates a powerful incentive for landlords to limit their expenses, which they can do in myriad ways, from deferring maintenance on existing units to taking units off the market entirely. It also discourages the construction of new apartments. This means that while tenants in a rent stabilized unit might receive a benefit, the total supply of apartments in the jurisdiction may decline and prices may rise—that, at least, was the finding of a recent study by Stanford economists who studied rent stabilization in San Francisco. Rent stabilization, therefore, can be counter-productive in the long run.

Inclusionary zoning is likewise limited. In some areas, like suburban Boston, compliance is voluntary, which has led to less than robust participation. A study by the Furman Center at NYU, for instance, found that more than 40% of the jurisdictions in the region that had inclusionary zoning on the books had produced zero affordable units. And even when compliance is mandatory, developers can typically buy their way out of it. In late 2017, for instance, developers paid just less than $1 million to the city of East Providence to relieve it of the obligation to build any affordable units in a development of 228 apartments going up on the city’s waterfront. And even if developers build the units, they are typically affordable only for a limited period, after which they revert to market rates, which means the benefit is short-lived.

When all is said and done, measures like rent stabilization and inclusionary restrict the free flow of capital by preventing it from going to its most profitable use. Ultimately, this creates enormous economic pressure on the part of developers and land owners to evade or avoid the restriction in order to maximize their return on capital. When markets and politicians accede to this pressure, it defeats the intended effect of the measure.

So far as I can see, there is only one workable, long-term solution to this puzzle: At least some of the land in a distressed community must be de-commodified. The bundle of rights typically held by a property owner must be divided. The land must be owned, and therefore controlled, by the community, which holds it in trust for the welfare and future benefit of the community itself, while the structure—whether it be a house or a business—is owned by those who live or work there. It is the concept of shared equity, and the subject of my next essay.