Chicago’s Growing Income Donut

Oh, the backlog of things I want to write! To work:

Other than “oy,” one of the most common reactions I got to the “vanishing middle class” maps I made several months ago was that focusing on the city proper necessarily missed the very important shifts occurring in the suburbs, where something like two-thirds of the people in the Chicago region live. In fact, it missed what was maybe one of the more important stories about the changing economic geography of the region over the last 40 years, which is a shift in the balance of economic power between the city and suburbs.

That’s true, so I’ve finally made equivalent maps for the entire Chicago metro area. (The researchers who provided my original data, Sean Riordan and Kendra Bischoff, made their own maps a little bit ago, and Whet Moser made some valuable graphs from their data. I’m going to use my own maps, though, from Brown’s Longitudinal Tract Database, so I can show the data in a way that’s most consistent with how I did the previous post.)

Here they are:

1970

1980

1990

2000

2010

IncGIF

I think, on the one hand, that these regional maps show something very much like what Aaron Renn has described as a “new donut” pattern of urban wealth: a rich center, a ring of disinvestment, and then another outer ring of wealth in the outer suburbs. Importantly, though, I think these show that there’s nothing really “new” about this pattern – instead, the rings have existed since at least 1970, and have simply been moving further and further out from the center of the city.

Even in the first map, there’s a kernel of wealth around the Gold Coast, surrounded by extreme disinvestment, surrounded by middle-class neighborhoods, surrounded by relatively wealthy ones. In each succeeding decade, the general pattern is for the kernel of wealth to gentrify a bit of the surrounding disinvested neighborhoods; for middle-class areas adjacent to disinvestment to decline into disinvestment; for relatively wealthy areas adjacent to the middle-class ring to slip down a bit; and for some parts of the periphery to become more wealthy.

It’s a pattern that, if you’ve read Neil Smith on the rent gap theory of gentrification, makes a lot of sense. The idea is that waves of investment, disinvestment, and reinvestment in urban neighborhoods are driven by the semi-permanent nature of buildings themselves. In the beginning, say, someone builds a three-flat in a neighborhood near downtown. When it’s brand-new, it’s a highly desirable place to live, but over time, things deteriorate a bit, and newer construction further out steals away the high-income residents who can afford housing with better technology and more up-to-date styles. Importantly, the aging three-flat is not torn down or significantly renovated, because the difference between what the owner can actually charge, and what they could charge if it were a brand-new building, is smaller than the cost of demolishing the property and actually constructing a new property (or a gut rehab).

(That is: If you earn $10,000 from a building you own, and could make $15,000 if you rebuilt/rehabbed it, but rebuilding/rehabbing costs $10,000, you won’t do it. Because, you know, you’d lose money.)

As it ages, the building itself becomes less and less desirable, and so the people living there become poorer and poorer; if the surrounding buildings were all built around the same time, then something similar is probably happening in the neighborhood at large. But at some point, the calculation changes: the building becomes so low-rent that the extra income an owner could get if it were brand new is more than the cost of replacing it. (It might also be the case, of course, that the building’s rent hasn’t fallen that much more, but the value of a new/rehabbed building has increased a lot – if, say, the three-flat is in a neighborhood near other neighborhoods that have seen an increase in amenities and jobs.) At that point, since it’s profitable to do so, the owner will do a major rehab or reconstruction, and gentrification begins.

(That is: If, from the previous example, the $10,000 you’re earning dwindles to $4,000, all of a sudden rebuilding/rehabbing becomes profitable. Alternatively, if you’re still making $10,000, but a rebuilt/rehabbed building would give you $25,000 – again, rebuilding/rehabbing becomes profitable.)

For example: these townhomes in Logan Square. Credit: YoChicago
For example: these townhomes in Logan Square. Credit: YoChicago

As I said, to a large extent, I think this describes what’s going on here. But anyone familiar with Chicago’s racial geography will have already noted that there’s something else, too. (If you’re not: basically all of the deep-red areas are segregated black neighborhoods. A few are predominantly Latino.) Namely, black neighborhoods seem both to suffer much faster disinvestment than you see elsewhere, and to be less able to reach the reinvestment part of the cycle. Neither of those things are news – there have been several reports about how “black neighborhoods don’t gentrify” already this year – but I think it’s particularly striking in this context. It’s not just that black neighborhoods don’t gentrify: it’s that anti-black racism is so strong that it overcomes, and arrests, the regional pattern of disinvestment and reinvestment.

Or consider the problem from a different perspective. Some people have described gentrification as a process of “racial arbitrage.” Arbitrage, more commonly, refers to someone profiting by taking advantage of the fact that the same good has different prices in different places. (For example, you might buy cheap cigarettes in Indiana and sell them at a markup in Illinois, where taxes make cigarettes much more expensive.) In this view, some disinvested neighborhoods aren’t just cheap because their housing has deteriorated; they’re cheap because most of the people who live there are non-white, which makes white people not want to live there. Since white people make up a large number of buyers in the housing market, that means demand crashes, and so do prices.

But that also means that if you’re one of the few white people who doesn’t care about living around people of color, you can save a bunch of money by moving to a non-white neighborhood of roughly equal “quality” (whatever that means for you). Each additional white person who does so, however, makes the neighborhood that much whiter – and as a result, that much more comfortable for the majority of white people. At some point, the neighborhood is white enough that most white people are willing to live there, which brings up both actual and “potential” housing prices, inviting a wave of reinvestment and more gentrification.

It appears, though, that anti-black racism is so strong that there are virtually no white (or other non-black) people willing to move into black neighborhoods, even if it means saving a lot of money. In other words, regardless of whether you think this is good or bad, racial arbitrage doesn’t work in black neighborhoods. Even in places – northern Bronzeville, say – where proximity to jobs and transportation would make you think that it would be an attractive option, there is vanishingly little evidence for it. As a result, potential rents depend entirely on the purchasing power of a disproportionately poor quarter of the population, and stay relatively low.

As Pete Saunders has pointed out, many black South Side neighborhoods (like Chatham, pictured here) have a lot in common with working-class North Side communities.
Chatham demonstrates racial arbitrage fairly well: these bungalows would cost a good deal more in a similarly far-flung non-black neighborhood. Credit: YoChicago

These two concepts – the rent gap theory and the racial arbitrage theory – are both, I think, really helpful in understanding how Chicagoland’s economic geography has changed over the last 40 years, and how it’s likely to change in the future. The foundation is a tendency for an expanding donut-shaped ring of rich and poor neighborhoods as a result of cycles of investment and disinvestment in housing. On top of that – no less powerfully – are the consequences of racism, which have a number of effects. First, they accelerate disinvestment as white people and their resources flee non-whites, and as new non-white residents are discriminated against in the provision of retail outlets, public safety, functional schools, and so on. Second, they open up the possibility of racial arbitrage: that is, another way for “potential rents” to rise and attract reinvestment and gentrification. Third, for black neighborhoods in particular, they can freeze an area in the disinvestment phase by acting as a sort of ceiling on potential rents.

Finally, of course, zoning laws can act as an accelerant on the reinvestment/gentrification phase by effectively capping population in neighborhoods where lots of people would like to live, forcing some of those people to move to adjacent communities, and raising actual and potential rents there.

There’s obviously quite a bit more to say about all this; hopefully I’ll find the time to do so soon, and hopefully I’ll also hear from other people who have thought of things I haven’t. But, as I’ve said before, neighborhood change is easy to experience – and is too often talked about – as a kind of capricious, unpredictable thing. In reality, it appears that it’s heavily influenced by certain patterns and rules. To the extent that we’re unhappy with what neighborhood change looks like, understanding those rules, so that we can change them, seems important.

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28 thoughts on “Chicago’s Growing Income Donut

  1. Also, if part of the flight had to do with bad city schools or misgovernence resulting in a poor services : tax deal, you’d expect a stark contrast near the city limits. You don’t see that in your maps. You don’t really see a ring of very rich first-ring suburbs — as in, the most desirable places as close as you get to the city without being in the city. NYC has some of that, Boston a lot.

    1. That’s an interesting point, though I’m not sure I agree: I think you do see some sharp divides, especially on the West Side and the north lakefront.

      You do, though, see a few *wealthier* areas nestled up against city limits, but on the city side, both on the far northwest and southwest sides. Those, I assume, are because of the city’s residence requirements for teachers, cops, firefighters, and so on.

      The lack of wealthy first-ring suburbs is interesting. I hadn’t quite realized how unique Evanston and Oak Park were in that way. But it’s interesting that that lack goes all the way back to 1970, at which point the only wealthy inner-ring suburbs were on the northern border.

  2. Interesting points, I think you’re approaching a Unified Theory of Chicago. I’d be interested to look at the border conditions of Chicago’s black quadrants, especially when there’s no hard physical boundary like an expressway or rail berm. For example, the area around the United Center going west to Western is such a fringe area, or Tri-Taylor. There has been a trickle of new construction in this area but it’s slow going, despite a scattering of gorgeous old rowhouses and 3-flats.

    I do think the physical reality of black neighborhoods is different from non-black neighborhoods in ways that affect their desirability with a direct link to racism. Many of those areas had their commercial districts wiped out by riots, arson, or the ongoing racist policies of the legacy white business owners. Beryl Satter touches on this in her excellent book. It is the reason I didn’t consider living in Tri-Taylor or Bronzeville, and probably factors into other groups’ decisions not to colonize these areas, such as recent Latino immigrants.

    1. Yeah, I think I may dedicate some future posts to looking at borders like the ones you’re talking about – the West Loop, northern Bronzeville, the areas around Hyde Park.

      There definitely is an issue with urban fabric, not just in an aesthetic way – which does matter, I think – but also in that places that have a lot of empty lots, or that have been urban renewalized, lack that sort of cheap, small spaces that immigrants can use to set up their own businesses, or that early gentrifiers can use for the same. Unfortunately (from my perspective), that’s particularly an issue in the areas that would most make sense for reinvestment – northern Bronzeville and the West Loop. Many other black neighborhoods further out – South Shore, Chatham, etc. – are actually quite intact, and have a surplus of attractive storefronts and prewar apartments and small-ish houses. But they’re too far away from centers of jobs and amenities to attract reinvestment – or in the terms of this post, their potential rent just isn’t that great, especially given the race issue.

  3. Given that these are household incomes, would the difference in marriage rates (meaning a household is more likely to have two earners) also be a factor?

    1. I’m not sure, because the issue isn’t just marriage rates: it’s cohabitation of multiple income-earning adults. So if a single parent is living with their unmarried partner, that’s still two incomes; if they’re living with a parent, that’s two incomes; if they’re living with a non-family roommate, ditto. On the other hand, in places like Lincoln Park, Lakeview, etc., there actually tend to be more singles living alone without kids. So yeah, that’s something to think about, but I don’t think it’s clear which way it would tip the scale.

  4. A Chicago based author (from UIC) wrote about book about this. He studied the history of much older cities and concluded that its a pattern that seems to always happen in cities: concentric circles. In some cities it’s faster or slower and certainly Chicago could do more to keep its middle class, but it’s helpful to see how cities develop as a guide.

    http://www.amazon.com/Sprawl-Compact-History-Robert-Bruegmann/dp/0226076911/ref=sr_1_1?ie=UTF8&qid=1418050155&sr=8-1&keywords=sprawl

  5. One of the reasons gays have been on the forefront of gentrification is they don’t have to worry about schools. It’s not so much that most whites don’t want to live around blacks. They just don’t want their kids going to schools with blacks, in particular poor blacks.

    In the South this reality is tacitly acknowledged to the point that black leaders often will allow a few schools to be the “white” school. This avoids the complete dissipation of the tax base.

    This isn’t confined to whites either. You will notice around the country that Hispanics & Asians often avoid black dominated areas.

    1. A lot of whites in gentrifying Chicago neighborhoods and even already wealthy neighborhoods. There are plenty of young, childless adults that could move to black Chicago neighborhoods.

    2. I think that’s a good point about schools – early gentrifiers are generally childless (gay or otherwise), and sort of set the stage amenity-wise for people who do have children, who then, sometimes, organize themselves to change the demographics of the local schools.

      I don’t agree, though, that there isn’t also a very strong component that’s purely residential. There are lots and lots of studies demonstrating that whites don’t want to live around black people, separate from the schools issue, and at an anecdotal level in Chicago, it’s also the case that Bronzeville, Garfield Park, etc., have so far not seen an influx of even childless non-blacks, unlike Pilsen, Bridgeport, and other south/west neighborhoods a similar distance from downtown.

    3. You will notice around the country that Hispanics & Asians often avoid black dominated areas.

      Actually, coming from New York, what I notice is very high levels of black/Hispanic integration. If Hispanics avoid black areas, how come Harlem and the South Bronx ended up majority-Hispanic? With Asians it’s different… but not as different as some white New Yorkers believe. With all the spillover from Flushing, there’s some Asian/black integration in Queens. (The city’s also unique in having practically no white/Asian integration; that exists in the suburbs in droves, but not in the city.)

      1. Yeah. I think that may be a Northeast thing? A New York/Boston thing? I should know that. I wonder if there’s a difference between, say, how Dominicans and Mexicans react to black areas. The rule in the Midwest is that Hispanic and black neighborhoods are separate; I think that’s also the case in the southwest, but maybe I’m wrong?

      2. Philadelphia has a number of neighborhoods and suburbs with Black/Asian integration eg. parts of South Philly, the eastern part of Upper Darby, Olney, and large swaths of the Northeast. The latter two also have large Latino populations. However, I believe the way most of these came about was both groups moving into the neighborhood at roughly the same time, rather than from Asians moving into historically Black neighborhoods. With the exception of south philly, these were all 80-95% white neighborhoods in 1980.

      3. We tend to think of Hispanics as a monolith. They are not. NYC Hispanic population is dominated by Dominicans Puerto Ricans and increasingly Mexicans. Dominicans on average have significant African ancestry and Puerto Rico has a decent size Black population as well. If you were to break down Hispanics residents of NYC by national origin, I suspect you’ll find that Puerto Ricans/Dominicans are the Hispanic groups that are more likely to live in integrated neighborhoods with Blacks and South & Central Americans (excluding Black Hondurans) are least likely.

        I know from personal experience that Colombians and Ecuadorans tend to live in areas of Queens where there are few Blacks.

  6. The impression I get from the maps is that Chicago had no well off urban, or rather center city neighborhoods historically. Most of the better off parts of the city in 1970 was in the outer, in the more suburban parts. All the current well off neighborhoods weren’t traditionally affluent. It would be helpful to see earlier map from say 1950 or even 1930.

    1. I don’t think that’s *quite* right – Chicago has had wealthy inner-city districts, but they were much, much smaller than in, say, NYC. (Though isn’t it New York that’s more of an outlier on that count?) The Gold Coast, I think, has pretty much always been a wealthy enclave; the 1929 book “The Gold Coast and the Slum” was about the proximity of extremely poor Little Hell (which would later become Cabrini-Green) to the wealthy neighborhood less than a mile to the east. And by the 1950s and 60s, Old Town – just to the northwest of the Gold Coast – had begun the bohemian-enclave-on-the-edge-of-the-wealthy-city pattern. The areas of Lincoln Park right along the lakefront have also been wealthy since the early postwar period, I think.

      But I think it is true that the balance of economic power moved to the city’s fringes, and really the North Shore suburbs, much more dramatically than (is my impression that) it moved to the equivalent areas in New York.

      I’d love to get pre-1970 info on this. Unfortunately, I think the only practical unit of analysis I could do that for would be Community Areas, which are way too big to be very helpful. (For example, the Gold Coast and Little Hell/Cabrini-Green are in the same CA.)

  7. I think I’ve seen some speculation on a role played by the Latino population, particularly immigrants, as a sort of lubricant for lack of a better word in transitioning neighborhoods. Essentially, whites won’t move to predominantly black neighborhoods, but Latinos might, at least around the edges. Then as the neighborhood becomes more heavily Latino, and importantly less black, whites start to trickle in. Rinse and repeat. Is this a bit of pop-myth or do you see support for this in Chicago demographic changes? For example, Latinos being priced out of Pilsen and West Town may start to spill into East Garfield Park, setting the stage for whites to move there 10-ish years from now.

    1. Given both studies on whites’ residential preferences and anecdotal life experience, that would seem to make sense. Except, that is, that in Chicago, at least, there actually *aren’t* a ton of example of Latinos moving into black neighborhoods. Maybe the border between North Lawndale and Little Village, and maybe West Humboldt Park. But otherwise, I’m not really sure how much that happens.

  8. In the case of north Bronzeville you also have to take into account the effect of removing a high concentration of CHA high-rise buildings fairly recently (particularly recently if we factor in the real estate collapse). As a white person who does live in this neighborhood for precisely the reasons you outline in the post, I am seeing more white people now than when I moved in 9 years ago. Still very few, to be sure. But I don’t know that history is a sufficient guide to analyze a beautiful upper middle-class neighborhood close to the Loop and the lake, after the lifting of racial covenants, after the development of the South Loop as a new neighborhood, and after the removal of the CHA high rises, in the early 21st century. Without in any way denying the racist history of Chicago, it could be that we have a combination of factors present now that do not have a clear precedent in any earlier time. Just as the question of schools changes the equation depending on whether the family considering the neighborhood has school aged children or not (my non-white spouse and I have adult children), the presence or absence – or recent removal – of the CHA high rises completely changes the equation. We have come to love living in Bronzeville, but I’m sure we would not be there if the CHA structures along State Street and Cottage Grove were still standing.

    1. It does, that’s true. And there has been some growth in the white/non-black population in Bronzeville, as well as North Kenwood, albeit from a very low base. I’ll look more closely at that in a later post. Thanks!

  9. Have you heard the hypothesis that goes somewhat like this?:
    Gentrification correlates with walkable, urban locations. It happens to be that the most walkable locations are often also the places originally sought by poor immigrant families – so they can walk to stores,etc. In Chicago, at least, blacks may have traditionally been poor, but didn’t seek out locations where they could do their grocery shopping by foot – most probably drove. (plus throw in urban renewal, which made matters worse) Thus, blacks tend to be in the less walkable areas, while immigrants in the more walkable areas.
    Therefore, the hypothesis posits it’s less about “racism” than it is about the walkability of the neighborhoods, and which minorities seek the walkable locations…

    I think there is some aversion by whites to live in black neighborhoods, but I don’t think it’s the whole picture, so I’m sympathetic to the above hypothesis. After college, I moved to Bronzeville. Around that time, many other young whites did as well. But all of us eventually left, whereas, my friends who gentrified Wicker Park, Ukranian Village or Humboldt Park stayed. It wasn’t about race. It wasn’t proximity to downtown. It wasn’t about crime – back then, I saw more crime in Bucktown than I did in Bronzeville. It was about quality of the urban experience. Wicker Park has it, but Bronzeville doesn’t….

    1. I’m not sure. There’s plenty of empirical evidence that race really is a major deterrent, but I think you’re right that there are problems with the urban fabric in places like Bronzeville that make reinvestment difficult.

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