by Tom Wetzel
Patterns of capital flows have a visible effect on working class communities in the United States. Some communities see closed plants, abandoned stores, boarded-up dwellings, scarce jobs. Such are signs of disinvestment. Capital has moved to some other site in the global production line.
In other times and places an inflow of investment fuels gentrification. Upscale condos are erected, houses are rehabbed. Candle-lit restaurants and vintage furniture emporia displace bodegas and used appliance stores. Rents rise as landlords realize they can attract professionals and business people as tenants. An area of “valuable city real estate” is being cleansed of its working class residents.
Both phases in this process fuel conflict. Squatters occupy vacant buildings. Tenants threaten a rent strike in response to deferred maintenance. Tenant activists push for rent control ordinances in response to rising rents. Anti-gentrification activists jam planning commission hearings to stop upscale condo projects. At the extreme edge, some resort to the torching of condos under construction.
We can regard all of these as expressions of class struggle over the built environment.
Both gentrification and disinvestment are processes made up of the activities of certain kinds of social agents or institutions. Landlords, developers, and banks all play key roles.(1)
Buildings represent a major investment. For this reason, they are not replaced for many years after they are built. An older area in an American city may have been converted from agricultural land to urban uses in the 19th century or early 20th century. As the lots in a newly subdivided area get built upon, builders and subdividers move outward into more outlying areas in search of new building sites.
A building is like a piece of machinery or a motor vehicle — it depreciates in value over time. The roof may need to be replaced after years of beating back the rain. The building style may go out of fashion. Technological changes such as new standards in electrical or plumbing systems may erode the value of a building.
Some neighborhoods continue to retain their ability to attract professional and business people to live there. Landlords in such areas will have an incentive to upgrade their buildings because they can command rents high enough to generate a good return on that investment.
The housing market tends to sort the population by income into different areas. Racism may add another type of sorting. If an area is increasingly filled by lower income residents, landlords have an incentive to not maintain their properties. If they were to invest in upgrades, they'd need to charge a higher rent to make this a profitable investment. People who could pay the higher rents may not be willing to live in that neighborhood. So landlords simply “milk” the decaying buildings for rents. By putting off repairs, they can save money to buy other buildings elsewhere.
The process of inner-city disinvestment was particularly prolonged in the USA after World War II. Rising real wages, Federal Housing Administration loan policies, the homeowner interest deduction on income taxes, corporate decisions to relocate plants to outlying areas, massive freeway construction, white flight — all these things contributed to the outflow of investment into suburbanization and lack of investment in older city areas.
As the urban area grows, the terrain now occupied by deteriorated buildings and a low-income population may be close to areas of concentrated economic activity such as a downtown. Closeness to downtown jobs and interesting older architecture may give the area the potential to attract higher income residents or more well-endowed businesses.
A gap thus emerges between the rents that an area of deteriorated buildings and low-income residents can generate and the potential rents that the area could generate if it were rebuilt or renovated to its “highest and best use.” Neil Smith coined the phrase “rent gap” to refer to this phenomenon.(2) When this rent gap becomes large enough, the area may be ripe for a new round of investment. Speculators may begin to buy properties in anticipation of increased market values of properties.
To make investment in new construction and rehab profitable, developers must be able to attract residents who can pay higher rents such as professionals and managers (the urban “gentry”). Once this process gets underway, “landlords will have an incentive to evict low-income residents in favor of more affluent tenants who can afford higher rents.”(3) During this phase landlords may want to drive out the lower-income tenants. To do this they may avoid repairs, let the roof leak, and so on.
Banks and other financial institutions turn on the faucet for mortgage and construction loans. Construction of condos and office buildings raise real estate values as other landowners realize that more upscale uses of the land are now possible.
Gentrification in the Bay Area illustrates how investment decisions by industrial employers can also have an impact on residential areas within commuting distance of job sites. Since the 1970s the high-tech sectors — microchips, Internet equipment, software and so on — have come to dominate the regional economy. For years the industry has pursued a strategy of locating most of its manufacturing facilities outside the Bay Area. For example, in the mid-’80s Atari moved its video game manufacturing plant to Malaysia in response to an effort by workers to unionize the plant.
This has created a skewed job structure, with a high proportion of high-salaried jobs — in “business development,” marketing, design and engineering, and so on. At the same time, closures of food processing plants and decline of maritime shipping and ship maintenance led to a loss of better-paying, unionized jobs. For example, in 1990 the Best Foods mayonnaise plant in San Francisco was closed; the operation moved to Guatemala.
Meanwhile, housing construction in Silicon Valley fell far behind the surging employment rolls. The shortage fueled gentrification of working class areas (with particular impact on communities of color) from East Palo Alto to Oakland to the eastside of San Francisco.
These changes illustrate the link between corporate globalization and gentrification.
San Francisco’s Mission District was on the front line of this process in the late ‘90s. The Mission District had gone through a period of prolonged disinvestment during the post-World War II boom years. The construction of the BART subway under the main commercial street of the neighborhood, Mission Street, had accelerated business flight in the ’60s. The disinvestment led to an urban renewal proposal which would have bulldozed the center of the neighborhood. This was successfully fought off, through massive community organizing, with the support of the unions.
By the 1980s neighborhoods to the west and east of the Mission were heavily gentrified. The neighborhood had become the heart of the Latino community in San Francisco. The concentration of many low-income people of color, together with media stories about the crime and gang activities that often afflict low-income areas, had discouraged white professional people moving into the neighborhood. Apartments were still relatively cheap.
Yet the area is centrally located, with easy access to the 46 million square feet of office space in downtown San Francisco. Freeway ramps lead to high tech job areas to the south of San Francisco. A “rent gap” thus existed between the current rental stream generated by the existing population and potential rents or real estate prices this inner-city real estate might generate if it could be redeveloped for the Bay Area’s burgeoning population of professionals and managers.
Several types of social agent pioneered the gentrification process in the Mission District. In the mid-’90s anti-union contractors of the Residential Builders Association began buying cheap land in an old factory district in the northeast Mission to build loft condos.
By 2000 they were selling at a half million dollars a pop. A real estate agent told me that such condos would typically be bought by a young couple, each making $90,000 a year.
The state Ellis Act, passed in 1996, permitted landlords to “go out of business” and empty their buildings of tenants. In the late ’90s a speculator could buy a fourplex in the Mission for $500,000, invoke the Ellis Act to empty it, and then sell the units for $250,000 each as a tenancy-in-common.
Ellis Act evictions in the Mission District mushroomed from 14 in 1995 to over 660 in 2000. About a third of the Ellis Act evictees in the city were elderly people.
The Mission Anti-Displacement Coalition (MAC) was formed in April, 2000, to fight the displacement of the Latino working class community. A series of defensive struggles unfolded in which gentrifying office or condo projects were resisted, through protests at city planning commission meetings, mass marches, initiative campaigns, illegal occupations of buildings, postering and agit-prop of all kinds.
This led to MAC’s campaign to popularize urban planning concepts, and demand community participation in a replan of the neighborhood — counterposing a “People’s Plan” to the developers’ plans. Demands for affordable housing and defense of blue-collar industrial jobs (threatened by the cannibalizing of industrial areas(4) for offices and condos) have been priorities of the MAC effort.
However, 84 percent of the households in the Mission are renters. Without ownership of the land, the community remains at the mercy of landlords and developers.
Despite the post-2000 dot-com crash and recession, rents in San Francisco are still very high. A union janitor in San Francisco making $15 an hour can’t afford to pay $1,300 a month for a one-bedroom apartment in the Mission.
As each rent-controlled apartment becomes vacant, the rent rises to whatever the market will bear. State law prevents the city from requiring that a controlled rent be carried over to the next tenant.
Over time, the market-driven displacement of the working class from San Francisco will affect the political character of the city. Unions and renters will face a less friendly political climate in a city made up of lawyers, bosses, software engineers and the like.
The housing crisis in American cities is a sign of market failure. But market-driven investment in the built environment also undermines the liveability and environmental sustainability of urban regions.
Agents of capitalist development have had a relatively free hand in crafting the contours of urban
areas in the USA, with severe ecological consequences. The USA generates about one-fourth of the
world's air pollution and green house gases even though it has less than five percent of the
world's population. The heavy reliance of Americans on the private automobile is at the heart of
this. According to one survey, residents of American cities consume:
This dependence on the private automobile is rooted in the physical layout of American metropolitan areas. For more than half a century the practices of developers in the USA have been based on the assumption that people would get to farflung suburban single-family houses, shopping centers, and office and industrial parks by driving cars. This wouldn't have been possible without systematic underpricing of the car.
The cost of maintaining the streets and traffic lights, the effects of noise and emissions on the health of the community or the global climate system, and other social costs aren't reflected in the price of the gas. (Lights at an intersection can consume as much electricity as a house.)
The market transaction at the local gas pump is just between the motorist and the purveyor of gas — social impacts on others are hidden from view. There aren’t signs on the gas pumps saying “The refinery where this gas was produced generated a lot of cancer in nearby neighborhoods.”
Huge expenditures in streets, freeways, extensions of utility grids and free parking have subsidized a dispersed, auto-dependent land-use pattern.
Prior to 1920, investment flows into the built environment were tightly linked to investment in streetcar lines. Much of the capital for transit systems derived from real estate profits. Beginning in the ‘20s, the development industry was able to rely upon mass auto ownership to shift the costs of providing transportation services to motorists and homeowners, through personal car ownership, user fees and property taxes.
With an increasingly motorized population, developers of retail centers and major retail chains used huge caches of parking and easy auto access as a competitive wedge, undermining neighborhood-oriented retail.
Over time these patterns changed the way of life. It became increasingly difficult for Americans to not rely on driving to glue together the fragments of their lives. The developers' investment practices had built an environment that made not having a car a real liability.
One result is that usage of public transit plummeted. The number of rides Americans take on public transit has dropped to low levels compared to cities in Europe or Asia. For example, 50 annual rides per person in Los Angeles County or the East Bay versus 250 in London.
Since the 1970s the social costs from auto-dependency have become harder to ignore. Motor vehicles are a major contributor to the green house gases that are changing the global climate. Democratic mixing and mingling of people in public space shrivels as people get from place to place in individualized metal pods. A form of transportation apartheid segregates the working poor into underfunded bus systems.
New Urbanism has emerged as one response, promoted as the “Smart Growth” strategy by mainstream, middle-class environmentalist organizations. New Urbanism aims to change the built environment of American urban areas over time by creating a new regulatory regime for development. New Urbanists propose an increase in density in both new suburbs and older areas while discouraging low-density outward expansion into open land around existing conurbations.
Policies pursued in Portland, Oregon since the 1970s are a model cited by New Urbanists. Portland created a regional Ÿber-government called “Metro” that sets housing targets for the various jurisdictions, encouraging areas to become denser through multi-unit housing construction. An urban growth boundary channels investment into the existing urban area.
The architects and urban planners who crafted the New Urbanism advocate a variety of tactics. “Mixed use” is one idea — compacting dwellings in close proximity to (for example, on top of) stores and services so that residents can do many of their errands by walking. “Transit-oriented development” would compact apartments and services in mixed-use developments around stations on high-quality transit systems, such as busways, subways, or light rail lines. The stores or services near the stations encourage people to accomplish some errands on the way to or from transit trips. Focusing the land uses around the transit stop helps to make public transit more integral to the way of life.
New Urbanists can point to studies suggesting that a strategy of making American urban areas denser will tend to reduce ownership and usage of autos. Such studies show that the amount of driving or the number of households not owning cars tends to vary mainly with population density, and to a lesser extent with income. Denser areas typically have frequent public transit, stores within walking distance of apartments, and more people who don’t own cars.(6)
The Suburban Dream of the isolated house was a product of the gender caste system of the late 19th century. In 1890 only five percent of married women worked outside the home for wages.(7) A vision of suburbia as “havens in a heartless world” (for men who could afford it) was built on the unpaid labor of women. In the ‘20s the corporate elite pushed home ownership for skilled male workers as a political strategy to make them less likely to strike. Labor radicals in that era feared that a mortgage would be a ball and chain, tying workers to the system.
The isolated suburban house, with no services or stores within walking distance, no longer fits well with the changes in American family patterns over the past several decades, such as the high divorce rate. Today women must work outside the home, and they want a more varied public life. In an urban environment now built around the car, the big increase in women working for wages since the ‘60s has driven increases in traffic density.
Changes in American life thus give a certain salience to the New Urbanist proposals. In preference surveys where people are shown slides of streetcar-era urban neighborhoods of tidy, compact housing and pedestrian-oriented Main Street shopping districts, and are also shown slides of contemporary suburban environments of malls and houses fronting multi-car garage doors and large lawns, majorities prefer the older pattern or its New Urbanist clone.(8) Hundreds of groups around the country now advocate New Urbanist solutions to make their cities more liveable.
There is a problem here: Who will have access to the newly constructed housing? And isn't a policy that promotes private, for-profit investment in urban working class neighborhoods a strategy for gentrification?
Defenders of New Urbanism refer to the sort of “inclusionary” zoning used in Portland.(9) This refers to tax breaks and zoning changes to encourage multi-unit rental housing as well as requirements for a certain percentage of “affordable” units — typically 10 to 15 percent.
However, developers are likely to chose areas to invest where people making higher incomes want to live. This will enable them to charge higher rents or sell high-profit condos. Either developers will pass over decaying inner-city areas or, if there is potential for gentrification, tokenistic inclusionary zoning will not prevent market-driven displacement.
The working class is a large majority — close to 70 percent — of the American population. But capitalist developers build little housing affordable to most working class households, especially in large metropolitan areas. From the early ‘70s to 1998 the real wages of “non-supervisory and production employees” fell 13 percent and have fallen again since 2001. Meanwhile, development costs for housing have continued to rise. While workers wages have fallent, the numbers of managers has grown from 12 percent in the late ‘80s to 15 percent. The incomes of many managers and top professionals has risen during the last three decades. This segment of the population has the wherewithall to outbid working class people for housing, and this is the main constituency for new construction.
In this economic context, it isn’t possible to develop new housing or provide secure, resident-controlled housing to most working class people without subsidies. But the advoctes for the New Urbanist/Smart Growth program often oppose subsidies. This is made clear by Hank Dittmar in his introduction to the recent anthology, The New Transit Town:
Transit-oriented development can realize its full potential only if it is a new paradigm of development rather than a series of marginal improvements. TOD cannot be and should not be a utopian vision: It must operate within the constraints of the market and realistic expectations of behavior and lifestyle patterns.(10)
But a market-based aproach can’t solve the affordable housing crisis or create an ecologically sustainable city. That’s because housing crises and ecologically destructive auto-domination of the layout of American metropolitan areas are caused by the market-governed capitalist economy.
Lacking any program for democratization of land use, and no way of ensuring access of all income levels to affordable housing and urban amenities, the New Urbanist vision is in danger of being merely a facade, a set of vague slogans to legitimize the agendas of capitalist developers.
“Transit-oriented gentrification” is the label that the Urban Habitat Program has applied to some developments in working class neighborhoods around BART stations. BART and the local redevelopment agency in Richmond crafted a $60 million project to build 200 townhouses around small shops on a 16-acre site next to the BART station. “The project should benefit the common working class and people of color of my community,” asserted Joe L. Wallace, a local activist. “However, right now the project is more of a gentrification threat because it is being tailored to the middle and upper income classes.”(11)
On the other hand, there are no guarantees that new investment in “transit villages” will magically appear in decaying inner-city areas just because rail or busway stops are installed or planning policies are updated. The barriers to profitable re-investment may prevent this.
The problem is illustrated by the Blue Line — a Los Angeles MTA light rail line built through Watts and Compton. The facility, opened in 1990, has attracted very high patronage by working class people of color who live in surrounding areas. In 1993 the city of Los Angeles adopted a land use and transportation policy that contains many of the New Urbanist proposals.(12)
But in a dozen years of operation virtually nil new housing or transit-oriented development has occurred in neighborhoods around most Blue Line stations. A decayed physical environment, toxic wastes from defunct industrial plants, obsolete zoning, a large low-income population, and perceptions of high crime are among the factors that deter for-profit developers. Non-profit community developers in the area point to the lack of subsidies for community-based development such as affordable housing or neighborhood services.(13)
On the other hand, at the north end of the Blue Line, the Staples Center/Convention Center complex has driven a gentrifying influx of investment. An anti-gentrification struggle has emerged, with the Figueroa Corridor Coalition for Economic Justice fighting the displacement of low-income tenants.
Like their right-wing “free market” opponents, New Urbanists do not challenge capitalist control of investment in the built environment.(14) What is needed is a more bottom-up, grassroots approach that increases community participation and control over land use. Democratic control over land and investment is needed to facilitate revitalization of decayed areas and to prevent displacement of low-income residents.
Rebuilding American urban areas to make them more pedestrian- and transit-oriented, to reduce the USA's slurping of fossil fuels, is a desirable goal.
Community-controlled, member-based housing development organizations — such as democratically controlled community land trusts (CLTs) — could be used in conjunction with enhanced as part of a strategy for pursuing these aims.
“The opposite of gentrification,” says Peter Marcuse, “should not be decay and abandonment but the democratization of housing.:”(15) Democratization should mean two things:
The community land trust (CLT) model, if applied in a genuinely democratic way, could be a way to work at this. A community land trust owns land and develops housing on that land. Typically the dwellings are sold to the residents, as houses, condos, housing cooperatives. But the community ownership of the land is used to restrict the resale price of the dwellings. This acts as a block against speculative market pressures, and prevents people with higher incomes from outbidding working class people for the housing.
Grassroots groups can demand that cities, redevelopment agencies or transit agencies provide funding and land to enable CLTs to develop mixed-use affordable housing around stations or bus transfer points. A program linking transit improvements to affordable housing and community control over economic development could be part of a program supported by transit rider groups, tenant activists and labor groups.
Re-orienting the patterns of land use to minimize dependency on the automobile requires changes in the layout of cities, the relationship of housing to services such as child care and groceries, and changes in the policies that govern building. For example, Los Angeles currently has an off-street parking requirement of more than 2 parking spaces for each new dwelling unit. This policy was enacted in 1960, at the height of the post-World War 2 auto-based suburbanization.
Developers are dependent on banks for financing, and banks want lots of parking. That’s because a larger cache of parking increases the market value of the dwellings, and makes it easier for banks to unload dwellings that are foreclosed. The parking increases the costs of building the housing, and thus contributes to housing unaffordability.
Since 1946 Los Angeles has also required off-street parking for office and retail development as well. Retail firms and developers of malls and retail centers use free parking as a competitive weapon.
Moving away from auto-dependency also presupposes investment in public transit. High-quality, low-fare public transit is a social good that can provide access to all that a city has to offer — jobs, housing, entertainment, medical offices and so on. A point to cheap fares is to ensure that everyone has equal access no matter how low their income is.
Advocates of “free market” ideology, on the other hand, propose privatization and competing services for public transit. This program has been disastrous when carried out in Great Britain and Santiago, Chile.(16) Competing services degrade accessibility because of the lack of seamless connectivity between all the operators. Private competition leads operators to creaming off a more affluent clientel, leaving areas and groups underserved.
Flexibility and ease of access for transit riders requires a network that is a single, comprehensive system of reliable, frequent services, with low fares and free transfers. A bewildering array of private operators who may go out of business next week creates barriers to travel flexibility and access for riders. This is why public transit was historically regarded as a “natural monopoly.” In practice the main aim of transit privatization in the USA has been to drive down the wages of transit workers.
These considerations lead some to defend statist central planning.(17) But this also has its problems: it subordinates the transit workforce to an authoritarian hierarchy, leads to management empire-building, and disempowers low-income bus riders who get overcrowded and inadequate services at high fares.
However, there is a third model for public transit based on direct negotiation between workers and riders. This would presuppose the creation of an organization through which the transit workers would manage the transit system.(18) Many of the decisions in the day-to-day management of a transit system mainly impact the workers. The principle of self-management says people are to have control over the decisions that impact them. Self-management of the transit system avoids a bloated managerial bureaucracy.
But many of the decisions about the operation of the transit system directly impact the riders — cleanliness and safety, reliability and frequency of service, fares. These issues could be negotiated between a democratic body elected by the residents and the organization of the workers managing the system.
At present, however, the riders are only a minority of the residents, and in most American cities the transit systems are used mainly by low-income working class people. This means that democratic organizations rooted in these working class communities need to be active around these issues, and provide a voice for those who are likely to be overlooked by a government largely influenced by business interests.
1. My rather schematic account here draws a lot on Neil Smith, The New Urban Frontier: Gentrification and the Revanchist City, 1996.
2. ibid.
3. Todd Harvey et al, “Gentrification and West Oakland: Causes, Effects, and Best Practices,” 1999 (http://comm-org.utoledo.edu/papers2000/gentrify/
chapter2.htm).
4. MAC, “The Hidden Costs of the New Economy: A Study of the Northeast Mission Industrial Zone,” October 2000 (http://www.medasf.org/reports/NEMIZ_Report.pdf).
5. Peter Newman and Jeffrey Kenworthy, Cities and Automobile Dependence: An International Sourcebook, 1989.
6. John Holtzclaw et al, “Location Efficiency: Neighborhood and Socio-Economic Characteristics Determine Auto Ownership and Use — Studies in Chicago, Los Angeles, and San Francisco,” Transportation Planning and Technology, March, 2002; also John Holtzclaw, “Using Residential Patterns and Transit to Decrease Auto Dependence and Costs,” 1994; and “Smart Growth — As Seen From the Air: Convenient Neighborhood, Skip the Car,” 2000.
7. Dolores Hayden, The Grand Domestic Revolution, p. 13.
8. See Reid Ewing, “Is Los Angeles Style Sprawl Desirable?”, APA Journal, Winter 1997.
9. Arthur C. Nelson et al., “The Link Between Growth Management and Housing Affordability: The Academic Evidence”, The Brookings Institution Center on Urban and Metropolitan Policy, February 2002.
10. Hank Dittmar and Gloria Ohland, eds., The New Transit Town, 2004, p. 9
11. Quoted in “There Goes the Neighborhood: A Regional Analysis of Gentrification and Community Stability in the San Francisco Bay Area,” Urban Habitat Program, 1999. A massive project promoted by the Daly City redevelopment agency near the Daly City BART station is subjected to critique in “Smart Growth: Smart of Not?: Debunking the Myths of Sustainable Growth” by Neighbors for Responsible Development (http://home.earthlink.net/~tomroop/index.html). Neither of these projects exhibit the architectural or urban planning features that would make New Urbanists happy. But architectural or zoning rules do not prevent gentrification or disinvestment.
12. “Land Use/Transportation Policy,” adopted by the Los Angeles city council, November 2, 1993. Council File No. 93-0478.
13. Anastasia Loukaitou-Sideris and Tridib Banerjee, “The Blue Line Blues: Why the Vision of Transit Village May Not Materialize Despite Impressive Growth in Ridership,” University of California Transportation Center Report #425; also “Transit-Oriented Development in the Inner City: A Delphi Study,” Journal of Public Transportation, 2000.
14. For another left critique of New Urbanism, see Bill Resnick, “Reconstructing Cities, Restoring the Environment: New Urbanism versus Mobile/Agile Capital” in Not for Sale: In Defense of Public Goods, Anatole Anton, Milton Fisk, Nancy Holmstrom, editors.
15. Peter Marcuse, “In Defense of Gentrification,” Newsday, Dec. 2, 1991.
16. Paul Mees, A Very Public Solution: Transport in the Dispersed City.
17. ibid
18. An historical example would be the United Public Service Collective which ran the subway, streetcar and bus lines of Barcelona during the two and a half years of the Spanish Civil War.
The Limits of New Urbanism
Notes