Although the vast majority of my writing energy goes into City Observatory now, I’m going to make an effort to update this space with the work I publish over there, since almost all of it continues themes that I had been covering at this blog. (There will also periodically be new just-for-City-Notes content, as with the post on the CTA’s bus improvements this week.)
Anyway, in a one-time effort to catch up, here’s some of what you’ve missed if you haven’t been reading C.O.:
1. The origins of the urban housing crisis. A three-part series on a chapter of William Fischel’s Zoning Rules!, which tries to explain how a revolution in land use law in the 1970s led us to the current regime of zoning laws and sky-high prices. I begin with a parable (because everyone learns better with parables), and then a more direct look at Fischel’s ideas about the 1970s, and finally a more critical examination of what he proposes to do about it.
…perhaps one of the most interesting and important arguments in the book is that our current crisis of high housing prices has its roots in the land use revolution of the 1970s.
Prior to that decade, Fischel writes, zoning had certainly been effective in creating exclusionary communities—since the 1920s, many critics (and some proponents) had argued that that was the whole point. It did so by creating legal districts where only high-cost housing could be built. But these exclusionary communities existed at the scale of the neighborhood or the suburb: other municipalities in the same metropolitan area acted as a kind of housing development safety valve, accepting higher-density development and keeping the regional housing market more or less in balance.
But in the decades after World War Two, something changed. Suburbs that had been pro-growth amended their zoning laws to shut the door on higher-density housing—and sometimes any housing at all. As a result, exclusionary zoning was transformed from something that constrained development in individual communities to something that could operate on the level of an entire metropolitan area.
The results have completely changed the economic geography of American cities. Before the zoning revolution of the 70s, the highest-cost metropolitan areas had home prices that were about twice the national average; by 2000, that gap had doubled to four times greater than the national average.
2. What filtering can and can’t do. Most housing occupied by low-income people is actually priced by the market, despite the near-universal use of the words “affordable housing” to mean homes with special low-income government subsidies. But there’s a great deal of vagueness about exactly how housing built for middle- or upper-income people becomes “naturally occurring” (a terrible yet common phrase) affordable housing. I look at a new-ish study that gives some of the best details yet on the process. Verdict: We need more (specially subsidized) affordable housing, but we also need filtering to start working again in big, expensive metro areas.
But “affordable housing” also suffers from an ill-defined relationship to the market. Typically, the phrase “affordable housing” means “below market rate,” as in a home that receives some sort of subsidy, private or public, to be cheaper than what the owner could otherwise charge. (Of course, even this distinction—subsidized versus unsubsidized—is problematic, or just plain incorrect, given the massive subsidies to middle- and upper-income homeowners through mechanisms like the mortgage interest tax deduction.) But in most of the country, the vast majority of homes that are actually “affordable” to lower-income people are sold or rented at market rate. They just happen to have some characteristics—size, appearance, or location in a less-desired neighborhood—that make their market prices relatively low.
But very little private housing in the United States was originally built for low-income people. Instead, homes built for the middle or even upper classes gradually became cheaper as they aged, as people with high purchasing power moved into trendier, more modern homes in “better” neighborhoods. As higher income households move on, the now somewhat older homes or apartments they formerly occupied are sold or rented to people with more modest incomes.
This process is called “filtering.” While the evidence that filtering is a real phenomenon has been around for a long time—the core of nearly every American city contains neighborhoods with once-luxurious homes now occupied by people of modest incomes—the first study to provide a rigorous measure of how it happens was published only in 2013. In it, Stuart Rosenthal of Syracuse University uses nearly 40 years of data from the American Housing Survey to figure out the average pace of filtering across the country, and what makes housing filter more quickly in some places than others.
Rosenthal uses the AHS to compare the incomes of people living in the same units of housing over time. He estimates that nationwide, housing “filters” by roughly 1.9 percent a year—meaning that a 50-year-old home is typically occupied by someone whose income is about 60 percent lower than that home’s first occupant. (All of these numbers are adjusted for inflation.) You might think of this process as something like “reverse displacement.”
3. What’s really going on in gentrifying neighborhoods? A look at new research on how demographic change actually happens in gentrifying areas, which confirms most previous research, which says: it’s about who’s moving in, not who’s moving out. Despite some high-profile cases, it turns out that existing residents of communities where average income is rapidly increasing are not much (or, in some cases, at all) more likely to leave the neighborhood than if average income weren’t increasing. Which doesn’t mean that the end result might not still be exclusionary—it just means we ought to be directing out attention in somewhat different places.
A new study from the Federal Reserve Bank of Philadelphia challenges this narrative. The authors (Lei Ding and Eileen Divringi of the Fed, and Jackelyn Hwang of Princeton, who has written other notable studies on gentrification) tracked movement in and out of urban neighborhoods in Philadelphia from 2002 to 2014, and look at the effect of rising rents and incomes on existing residents. From our perspective, there are three big takeaways.
First, demographic change in gentrifying neighborhoods doesn’t happen the way most people think it does. Ding et al find that in gentrifying neighborhoods, existing residents are just 0.4 percentage points more likely to move out in a given year than they would be in a non-gentrifying neighborhood. (As a baseline, just over 10 percent of all residents moved in a given year.) Even in those neighborhoods with the most rapid increases in rents and income, existing residents are just 3.6 percentage points more likely to move. Moreover, because the authors are interested in involuntary displacement, presumably for economic reasons, they look at whether people who leave gentrifying neighborhoods are more likely to move to poorer communities. In most cases, the answer seems to be no.
So what explains the changing income and ethnic backgrounds of residents in these communities? In short, it’s not who’s moving out; it’s who’s moving in. People who would have left anyway are replaced by a whiter, more affluent group of people; most neighborhoods have turnover rates high enough that this dynamic alone can change the makeup of a neighborhood’s residents quite quickly. To quote the study: “Overall, the results are more consistent with the notion that changes in the characteristics of inmovers are a more important force in determining the demographic changes in gentrifying neighborhoods.”