Political Privilege and Class War in the Urban Housing Market

Gentrification is the process of renovating and improving a house or district so that it conforms to middle-class taste. It is the result of powerful economic forces. Those who misunderstand the nature of the economic forces at play, risk misdirecting those forces in ways that exasperate city-wide displacement. Before discussing solutions, it is important to accept that gentrification is one symptom of a larger problem.

Anti-capitalists often portrays gentrification as class war, painting the archetypal greedy developer as the culprit:

Gentrification has always been a top-down affair, not a spontaneous hipster influx, orchestrated by the real estate developers and investors who pull the strings of city policy, with individual home-buyers deployed in mopping up operations.

Is gentrification a class war? In a way, yes. But the typical class analysis mistakes the symptom for the cause, and ends up pointing the finger at the wrong rich people. There is no grand conspiracy concocted by real estate developers, though its not surprising it seems that way.

The affluent residents of Lincoln Park like their neighborhood the way it is and have the political clout to keep it that way.

Real estate developers would be happy to build in already expensive neighborhoods where demand is stable and predictable. They don’t because they are typically not allowed to. Take Chicago’s Lincoln Park for example. Daniel Hertz points out that the number of housing units there actually decreased 4.1% since 2000 and the neighborhood hasn’t allowed a single unit of affordable housing to be developed in 35 years. The affluent residents of Lincoln Park like their neighborhood the way it is and have the political clout to keep it that way.

Given that development projects are blocked in upper class neighborhoods, developers seek out alternatives. Here’s where “pulling the strings” is a viable strategy for developers. Politicians are far more willing to upzone working class neighborhoods. These communities are far less influential and have far fewer resources with which to fight back. The end result is that rich, entitled, white areas get down-zoned, while less-affluent, disempowered, minority areas are up-zoned. Politicians appease politically influential neighborhoods through limited growth, and then appease developers who see less influential neighborhoods as the only viable place for new construction.

Too often, the knee-jerk response is to fight development in these gentrifying neighborhoods. The consequences of this are two-fold. First, economics 101 tells us that capping supply will only cause prices to rise. Instead of newcomers filling newly-constructed units, they will quickly flood the existing stock of housing, quickening gentrification. Second, thwarting development shuts the release valve that alleviates housing price pressures that caused gentrification in the first place. Since not building is not an option, politicians would prefer to funnel new construction into disadvantaged neighborhoods instead of letting it happen where there is market demand. Development suppressed, gentrification swiftly captures the neighborhood and moves on to the next neighborhood in its path.

When considering gentrification, we must accept the fact that rich people don’t just vaporize by prohibiting the creation of housing for them. If housing desires cannot be met in upscale neighborhoods, the wealthy can and will outbid less affluent people elsewhere. With that in mind, there are only 2 solutions to stem the tide of gentrification. The first solution is widespread liberalization of zoning. This is particularly needed in already desirable locations where incumbent residents have effectively depopulated their neighborhoods over several decades. The only other solution is to eradicate rich people altogether. This, I hope, is not what people have in mind when they declare class war.

Whether you are a class warrior or Market Urbanist, here are some tips to more effectively fight gentrification:

• The battlefield is not in the gentrifying neighborhoods. It is in the more wealthy neighborhoods where empowered residents fight to keep new people out.
• The enemy is not the gentrifiers or developers trying to serve them. It is the rich people who use their influence to thwart development in their neighborhoods. The more they fight to depopulate desirable neighborhoods, the more people are left seeking alternative neighborhoods.
• The mechanism of gentrification is not development. It is zoning, and other regulations that thwart development in currently desirable areas.
• The solution is not to fight development in currently gentrifying areas. It’s to call for radical liberalization of zoning in already wealthy areas, and to stand up to neighborhood groups who try to abuse zoning to prevent that.
• The reason people gentrify is not to disrupt ethnic or economically-challenged neighborhoods. It is likely because they have been priced out of the neighborhood they desire.

Republished from Market Urbanism.