New York Times architecture critic Michael Kimmelman noted the 100th birthday of Jane Jacobs yesterday by lamenting what's become of her beloved Greenwich Village.
A native Villager, I celebrate Jacobs's 100th and the neighborhood we once shared, which I still love but like much of NY has evaporated.— Michael Kimmelman (@kimmelman) May 5, 2016
I'm a native Villager myself, and as such I know exactly what Kimmelman is talking about. The eclectic, diverse middle-class neighborhood I grew up in has been gentrified away, leaving only a handful of NYU students in university housing as a monument to what I remember.
But a crucial thing to understand is that the erasure of the Village of the past happened not despite Jacobs's well-documented calls to preserve it, but in part because of them.
Supply and demand in the Village
Many American urban neighborhoods were effectively destroyed in the 1950s, '60s, and '70s by the construction of urban freeways and other misguided "urban renewal" schemes. Jacobs and her allies kept those kinds of changes out of the Village and preserved it as a highly desirable urban community.
But in the name of preserving that community, they also radically constrained what private landowners and property developers were allowed to do by right in terms of building new buildings.
So now we had a nice place to live in the context of a country with a growing population, and development restrictions that made it hard to add new houses to the neighborhood. Then over the course of the 1990s, the level of violent crime in New York City plummeted, which drastically increased the overall desirability of city living. With demand surging and supply constrained, prices skyrocketed.
Families (like mine) that invested in real estate in the area in the early '80s made out like bandits. But the fundamental economics of the neighborhood shifted. Rental buildings were converted to condos. Middle-class accidental millionaires sold property, reaped their windfall, and moved south to retire. The retail mix changed to fit the new population. It's still a great urban community, but it's a much more exclusive one. And it's different.
The economics of gentrification
This particular case is salient to me because I lived there, and it's noteworthy to the world because Jacobs was involved.
But research from Veronica Guerrieri, Daniel Hartley, and Erik Hurst shows that it reflects a more general economics of gentrification.
Price increases tend to concentrate in specific neighborhoods rather than spreading across a city as a whole. Guerrieri, Hartley, and Hurst model this as a question of spillovers. More and less affluent people place systematically different values on different kinds of retail opportunities. So affluent young people might be drawn to proximity to a Whole Foods and an array of independent coffee shops and yoga studios, while working-class families might prefer a cheaper supermarket and proximity to some home-based day care providers. When affluent people start moving to a neighborhood, the retail mix shifts in favor of things affluent people like, which draws more affluent people to that specific neighborhood but not necessarily to other places in the city.
But whether this is good or bad for older residents of the city depends on other factors. Janna Matlack and Jacob L. Vigdor examined market data from 1970 to 2000 and found that the net economic impact of gentrification varies according to local housing conditions.
"In tight housing markets," they write, "the poor do worse when the rich get richer," whereas in slack markets, "some evidence suggests that increases in others' income, holding own income constant, may be beneficial."
When houses are plentiful, in other words, gentrification can be win-win — increases in other people's incomes create new opportunities for the poor. But when houses are scarce, increases in other people's incomes merely exacerbate scarcity and leave the poor worse off than ever.
Neighborhoods need to change faster
So what creates a "slack" housing market where gentrification can be a win-win? Data from the real estate website Trulia shows it can basically happen one of two ways.
Markets like Detroit, Cleveland, or Rochester are cheap essentially because they are economically depressed. There are plenty of empty houses, so if affluent newcomers show up and fix up some of them, it doesn't generate any real scarcity.
Tight markets like New York and the Bay Area can't replicate that approach to affordability. But they could learn a lesson from the other kind of slack housing market — Sunbelt markets like Raleigh and Atlanta where new houses are being built at a very rapid clip.
Those fast-growing metros are mostly adding houses by spreading their geographical footprint deeper into the suburbs. That's not necessarily an appealing option for cities whose sprawl is limited by oceans or already gargantuan commuting times. But fortunately, technology exists that allows house builders to pack large quantities of dwellings into limited land. Rather than detached houses each perched in their own yard, rowhouses or townhouses can be built.
Where land is even scarcer, American builders have the capacity to erect apartment buildings — some of them two dozen stories high or more — whose floors are connected by elevators. The big problem is that in the most expensive metropolitan areas it is illegal to deploy these technologies on large swaths of land. Zoning codes and historic preservation rules generally prevent even the priciest neighborhoods from becoming denser.
Relaxing these zoning rules would transform gentrification of neighborhoods in generally affluent cities into a win-win that benefits the poor. But it would mean accelerating the pace at which gentrification reshapes the built environment of those neighborhoods. Those worried about gentrification, in other words, likely need to choose what it is they are primarily worried about — the aesthetic or economic dimensions of the issue — and recognize that addressing one will likely exacerbate the other.