On being priced out of downtown Detroit

Okay, on to the funner stuff. Attempting to keep this organized:

1. Jim’s post: I don’t actually really disagree with anything here. My objection to his previous post was mostly about this line:

What a superstar metro doesn’t mean is strong population growth and demand for housing outstripping supply.

Maybe I misunderstood, or maybe he changed his emphasis, but whatever the reason, the latest post makes clear that both supply restrictions and increasing demand are playing a role in exacerbating housing prices. I think that’s exactly right.

2. Aaron’s post: Responding to an article about rising home prices and displacement in downtown Detroit, Aaron basically picks out three dynamics that are important. The first is short-term:

Now, what about supply? Is the city of Detroit telling people they can’t build downtown?… What we would appear to have here instead is a lag issue. Real estate development isn’t like ramping production up or down in a factory. It takes time to do.

Right. Given that it can take a year or two for projects to be conceived, engineered, financed, and built, it’s pretty common for areas where demand increases very quickly to suffer a temporary shortage of supply as a result of this kind of lag. It makes sense that this would be the case in downtown Detroit.

Dan Gilbert imagines all the light-skinned people who will use his new toys.

The second problem is longer-term, but quite specific to places like downtown Detroit where there have been very few residential buildings at all, prior to the increase in demand:

Additionally, with higher income demand in the market, new units are going to be built to serve that market, not lower income people. If you own land and have a market that gives you the choice of either building a higher profit building or a lower profit building, which one will you choose?

I would actually make this even stronger. Given construction costs, very few new homes are built for low-income people without some sort of subsidy: it’s just not profitable to do. This is why even people like Ed Glaeser, a free market-oriented economist and champion of increasing housing supply to lower prices, say that housing subsidies will be needed no matter what we do: at the moment, the cost of building new housing requires sales prices that are too high for low-income people to afford.

In established low-income residential neighborhoods that experience gentrification, this can be less of an issue. If building new homes is difficult, then landlords of older buildings can make a lot of money by renovating their apartments and renting them at much higher prices to the wealthy newcomers, displacing the existing residents. But if building is easy, then lots of the newcomers will move to fancier, newly built homes, and the old landlords won’t face nearly the incentive to renovate and raise rents. In that case, the older, more affordable housing stock can be preserved.

But if there is no older, more affordable housing stock – as in places like downtown Detroit – then the only housing is the new, expensive stuff, and you’ll get a pretty economically homogeneous neighborhood no matter how much you build. (At least, that is, until that new housing stock becomes old enough to lose value.)

The last problem is the peculiar geography of demand.

Which brings us back to the juxtaposition of high demand in Downtown/Midtown Detroit vs. the low or no demand in most of the rest of the city. Why wouldn’t the people who can’t afford downtown rents just move into one of those areas?

The answer is obvious: they want to live downtown specifically.

This, I think, is the thorniest and most interesting issue: it’s obviously the case that in a place like Detroit – to a much greater extent even than Chicago – there is a “supply problem” only in very geographically limited areas. And that geography, as Aaron, Jim, and Pete Saunders have pointed out, is defined by where the people driving demand actually want to live: in this case, downtown, Midtown, and almost nowhere else.

Where I think Aaron and Pete are wrong, though, is in glossing over the reasons that demand is shaped this way. Their focus, as I understand it, is on status and yuppie comfort: where the hip neighborhoods, the hip bars, and so on, are. And, correctly, they argue that no one is entitled to live in the hippest part of a city.

But although status certainly plays a large role in determining where people want to live, you’re missing a lot if that’s all you’re thinking about. I would divide the reasons that people limit their housing searches to downtown and Midtown Detroit – or the North Side in Chicago, or (fill in the blank) in your city – into basically two categories:

1. Economic factors. This is economics broadly construed, and basically covers all of the concrete advantages or disadvantages to a particular place: not just access to jobs, but the quality of the local schools; access to amenities, from essentials like grocery stores to luxuries like cafes; the likelihood that you will be a victim of serious crime; and so on.

2. Social factors. This includes both conscious and semi-conscious concerns about status – I want to live in Lincoln Park, because the kind of person I want to be would live in Lincoln Park – but also the more invisible issues of social networks, or the extent to which you are aware of different neighborhoods. What my professors would call a “choice set” – what is the menu of options you’re consciously choosing from?

I guess my argument is that Aaron and Pete are focused on a subset of Category 2, but that in fact there’s a lot more going on.

More than that, I would suggest that, to a large extent, social factors are mostly secondary: that is, when you consider where to live, you first narrow down the options with economic factors – where can I get to my job, send my kid to okay schools, and not be afraid to walk home at night – and then you make your final choice using social factors.

In other words, you don’t need to use some status argument to explain why middle-class gentrifiers in Detroit refuse to move to most neighborhoods in that city: you just need to know that most of Detroit has terrible public transit (and therefore terrible access to jobs for people who don’t want to drive every day), high crime, and few essential amenities like grocery stores. Avoiding those sorts of disadvantages is a pretty obvious move.

Now, that said, I think Pete’s important insight is that sometimes, social factors are so powerful that they override economic factors, and neighborhoods that meet the basic economic qualifications are eliminated from consideration anyway. One of the main ways that happens is racist heuristics: black neighborhoods, no matter what their attractions, are just not in the “choice set” for white people (and, depending on the city, for Asian-American or Hispanic people, too). Thus Pete’s (and my) frustration that the middle-class black neighborhoods in Detroit, or places like Chatham or South Shore in Chicago, get no attention from the non-black middle class, while it flocks to working-class white or Latino neighborhoods.

Chatham: It’s pretty.

There’s some evidence that that’s partly because of ignorance – white folks in Chicago literally are not aware that Chatham or South Shore exist as relatively pleasant, attractive neighborhoods. There’s also a good amount of evidence that white people, and other non-blacks, just aren’t very comfortable with the idea of living in a majority-black neighborhood. My suspicion is that the latter factor is pretty powerful, which makes me pretty pessimistic about the prospects for large-scale integration in the next decade or two. But I could be wrong.

Evanston, IL, used to allow apartment buildings like this, which allowed people of moderate incomes to live in an affluent suburb with great access to jobs, other amenities, and good schools. But since the 1970s, that hasn’t been the case, and Evanston’s population hasn’t grown since.

But I also think that this whole conversation, by focusing on the choices of financially comfortable people choosing whether to live in downtown Detroit or some other comfortable neighborhood, is missing what the housing supply argument is really about: people who are currently stuck in neighborhoods that would fail any middle-class household’s economic test, and who can’t afford to move to one that would pass. Those are the people who suffer the most under our current housing system, and who would stand to gain the most if supply restrictions were lifted.

There’s a lot more to say about this; it’ll come next week.

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15 thoughts on “On being priced out of downtown Detroit

  1. I would actually argue that social factors play a larger part in determining where people live, both for “yuppies” and for people who are “stuck in bad neighborhoods.” First, I would argue that social factors prevent whites from moving to many heavily Latino or Asian neighborhoods as well as middle-class black neighborhoods with a reasonable quality of life. It is worth noting that Wicker Park and Logan Square (which were already integrated) gentrified earlier and more quickly than Pilsen is gentrifying now. And even today, neighborhoods such as McKinley Park or Belmont-Cragin aren’t seeing an influx of middle-class whites, even though they arguably have a better quality of life than other neighborhoods that have gentrified. I would argue that the perception of “hipness” is actually an important factor for many millennials (obviously schools are more important for families with kids, who often choose the suburbs instead). In addition, the proximity of a neighborhood to other wealthy neighborhoods and a consequent belief that it will improve is also important factor in determining whether millennials will move there. This is why gentrification has often proceeded in “waves” from the city center instead of happening equally in all non-black neighborhoods.

    Second, I would argue that social factors also prevent minorities from moving into “better” predominantly white or wealthy neighborhoods. Because of a history of racial tensions, they might feel out-of-place at best and unwelcome at worst in such neighborhoods. Social factors are probably less of an issue for middle-class blacks (who have consistently moved into predominantly white neighborhoods for the past 60 years) and more of an issue for low-income blacks and other immigrant groups. For example, I remember reading an article (I forget where) where former public housing residents with vouchers were hesitant to move to River North or other “opportunity areas.” Also, for middle-class minorities, an important economic factor – homeownership – also stands in the way of moving. That’s why I’m hesitant to use zoning reform as the only tool for economic/racial integration (although I’m definitely in favor of it). In a worst-case scenario, social factors would still prevent large-scale migration of people from “bad” neighborhoods to “better” neighborhoods, and in a best-scenario, the “bad” neighborhoods would depopulate and black homeowners would lose a lot of wealth.

  2. From maps I’ve seen, it appears the neighborhoods in inner half of Detroit experienced the most severe decline to the point with anyone with options would avoid them. Any remaining middle-class black neighborhoods would be in the outer part of Detroit, and of recent construction and lower density. In many ways not that different from the suburbs but with all the added negatives of being in Detroit. Seems like an interesting example of a city that has housing markets completely disconnected from each other

    I’m not that familiar with Chicago’s geography, but my assumption is that white gentrifier-types look to be near the Lincoln Square to Logan Park area. Amnetities (bars, events, cool stores) and people they might know (or want to know) are there. A neighborhood with high quality of life in the South Side would be relatively ignored. The very high violent crime in Chicago’s black neighborhoods is an added disincentive, so people associate all black neighborhoods with violent criem.

  3. Of course, if gentrifiers did discover middle-class black neighborhoods, they’d raise the real estate costs of those living there. The current residents might be better off if transplants avoided their neighborhood.

    • I would argue that violent crime and walkability are large factors in determining where Millenials live, but they do not explain everything. South Shore and Chatham in Chicago have a walk score of 75, which only 5 points lower than Avondale and 5 points lower than Bridgeport. Furthermore, there are a few neighborhoods such as the South Loop that were virtually uninhabited and definitely unwalkable at one point, but they still gentrified and became walkable. I would argue that many inner-city Detroit neighborhoods, particularly on the East side, are in the same place, because they are >75% empty lots and could be transformed by infill development. Similarly, violent crime is not a fixed neighborhood characteristic, and it would go down with an influx of new residents to these neighborhoods. (Of course, getting a critical mass of residents to do this is the tricky part.)

      On a side note, I think that keeping downtown Detroit affordable would not be very effective in giving currently poor residents the opportunity to live a neighborhood that provides a good quality of life. Downtown Detroit and Midtown only consist of a few square miles, so it is not feasible to move 700,000 people there. In order to enable more people to live in decent neighborhoods there needs to be more decent neighborhoods in the first place.

      • Yeah, I’d be curious to read more about the timing of gentrification and crime declines – in what order? There’s a common misperception, for example, that public schools have to improve before the middle class will move into a neighborhood, but in almost every case it’s exactly the opposite: the middle class moves in, eventually sends their kids to the local school, and then its test scores go up.

      • That’s a good question, and I’m not completely sure. Based on some observations from crime.chicagotribune.com, it appears that neighborhoods have large crime decreases even in the early stages of gentrification. For example, Pilsen and Douglas have had larger-than-average crime decreases for the past few years. Also, if you look at the crime map in Woodlawn you can see a sharp contrast in the crime rates east of Cottage Grove Avenue (which has been attracting middle-class residents) and west. However, I don’t have a rigorous statistical analysis on this question.

  4. James,

    I think transportation/walkability is a huge factor that cannot be ignored in these “why don’t hipsters move to the south side” discussions. I am the cliche northsider who doesn’t know anything about Chatham and my knowledge of South Shore starts and ends at the cultural center (in my/our defense, both those neighborhoods are about as far from my Edgewater doorstep as Deerfield or Highland Park or Mt. Prospect), but for a while we were thinking of moving to Pullman, drawn by the affordable well-kept rowhouses (a type of housing that I really miss from the east coast) and the community feeling. But there is very little retail in Pullman proper, the Roseland commercial strip on South Michigan Avenue is nice but limited and also a little bit of a walk from Pullman (pretty much a full mile), and transit access is limited to slow circulator-type buses and Metra commuter rail which runs infrequently during limited hours and only to downtown. Realistically, we would have had to own at least one car, something which just isn’t necessary in the far north side neighborhoods we have lived in. And we still would have had to deal with a much longer commute than we’re used to, driving to get groceries instead of walking a block, etc. I grew up with that car-centric lifestyle and found it very isolating and that is just not how I want to live (not to mention that after you factor in the costs of car ownership, these more-affordable neighborhoods suddenly don’t look quite so affordable).

    Of course that is not to minimize social factors, or the well-documented racially-motivated disinclination of white people to move to majority-black neighborhoods regardless of amenities. Only to point out that, in Chicago specifically, where black neighborhoods have long suffered from disinvestment and poor transit, it is hard to know what portion of the low demand for neighborhoods like South Shore is due to racism and what portion is due to a preference for walkability and good transit. I don’t think most white gentrifiers feeling priced out of Wicker Park or Logan Square see majority-white neighborhoods like Edison Park or Sauganash or Norwood Park as reasonable alternatives any more than they do Chatham or South Shore.

    • Eli,

      If you were to move to the south side, in many ways you could do just as well in the suburbs. Compare the walkscore of Pullman to Flossmore Station:

      http://www.walkscore.com/score/flossmore-station

      http://www.walkscore.com/IL/Chicago/Pullman

      Both are serviced by the Metra Electric, so if you worked downtown your commute would be only a little longer and more expensive in Flossmore. Parking would probably be cheaper and easier.

      So I am inclined to agree with your general assessment that the younger car free generation will find Washington Heights not any more appealing than Elmwood Park. Sadly I don’t think the Red Line extension will do much to ameliorate this situation.

  5. Not knowing Chicago, I can only talk about the kinds of neighborhoods that New York has. And in New York, there are no black middle-class neighborhoods in the inner half to two thirds of the city. Harlem and Bed-Stuy are working-class. There’s plenty of black middle class in the North Bronx and Eastern Queens, but these neighborhoods are often at the outer end of the subway (Wakefield) or even beyond the subway range (Cambria Heights).

    • There’s also Canarsie, but it’s another edge of the subway neighborhood. For black Eastern Queens, there’s not much advantage in access to city amenities than western Long Island, though it’s more walkable.

      The gentrification pattern seems to based more on proximity to Manhattan and other hip neighborhoods than just race. Black Bed-Stuy and to a less extent Crown Heights gets overflow from those who can’t afford the better Brownstone Brooklyn areas. Hispanic Bushwick attracts those priced out of Williamsburg. Southern Brooklyn neighborhoods (mostly white) such as Bath Beach or Sheepshead Bay are better in a quality of life perspective and are definitely walkable, but it’s a trek to Manhattan or any “hip” area. Mostly white Ridgewood is less popular than Bushwick mainly just from distance. The South Bronx has fast access to Manhattan, though not to as much neighborhoods hip to young people, but has avoided gentrification. Perhaps unappealing housing stock, very high poverty rate plus a massive concentration of housing projects ward off gentrifiers.

      Any locals of the neighborhoods gentrifiers are avoiding are probably very thankful they are, it’ll make prices go and cause neighborhood changes that wouldn’t be of interest. Perhaps the dynamics of Chicago are rather different, but from the perspective of those currently living in black middle class neighborhoods, I’m not sure why it would be a benefit for others to consider moving in to black middle class neighborhoods.

      • Yeah. See my comments re: Garfield Park. Maybe geography will trump everything in the end. I dunno. (Although it’s worth noting that although there are incipient signs of gentrification in GP, it’s already much, much further along to the south in Pilsen and Bridgeport, which are decently close to downtown but further from the desirable North Side neighborhoods. I would guess the salient facts there are racial – Pilsen is Mexican, Bridgeport is Irish/Italian/Mexican/Chinese, but neither have many black people – and crime/existing retail, which is decent-to-excellent in Bridgeport and Pilsen, and pretty bad in Garfield Park.)

    • Yeah, Chicago doesn’t really, either. South Shore, Grand Crossing, Chatham, Calumet Heights, Roseland: the black neighborhoods with major middle class sections are all at least 7-8 miles from downtown, and although they mostly have train access (Metra Electric in South Shore; Red Line for most of the others), it’s either at terrible frequencies (ME) or in a highway far from the major areas of activity (Red Line).

      The sort-of exception is greater Bronzeville, which has been gentrifying in fits and starts with a mix of black, white, and Asian (especially north of 35th) people for over a decade. The places with the most white population growth are probably North Kenwood, which abuts long-integrated South Kenwood, and Woodlawn just south of the University of Chicago.

      One thing I and a number of other people I’ve talked to have noticed, though, is that the very beginnings of gentrification are creeping into East Garfield Park, a very poor neighborhood that’s historically had one of the city’s highest crime rates, but which now has a notable population of white (and non-white) artists, musicians, and performance spaces. In high school, the idea that I or anyone I knew would go to a show on a Friday night in Garfield Park was ridiculous; but now it happens often enough. You wouldn’t know it walking around the neighborhood yet, though, which still has a ton of vacant lots.

      Anyway, it’s interesting because Garfield Park fits one criteria for gentrification – it’s near gentrifying Humboldt Park and the West Loop, and has excellent public transit access to the rest of the city – but not so much with most of the others we’ve been talking about. I’m very curious about what’s going to happen there the next ten years or so.

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