Thursday, June 14, 2018

Gentrify or die

Or as I subtitle this post:  There is no alternative to gentrification. 

Many people feel very strongly that there is an inherent evil in gentrification.  They think that there is something inherently wrong in people with money spending it on real estate.  Nevermind the hypocrisy latent in the gentrification arguments, because today I want to present a different argument.  The truth this that Rust Belt cities have no choice but to gentrify.  If they don't they will die.

In the 1970s many big industrial cities saw their employment base deteriorate as factories began the process of shedding workers and closing doors, hitting the old big cities hardest.  These cities, in turn, did not make the best fiscal choices in hindsight.  Many of them chose to try and absorb the unemployment by increasing the number of city workers.  However, overall compensation was too generous - especially in terms of health benefits and pension obligations.  This bloated workforce began to saddle cities with insurmountable debt.  Increased workers saddled taxpayers with higher taxes.  However, the glut of workers were largely unproductive, resulting in city dwellers paying more and getting less.  So they starting leaving, carving the tax base up.  And why not, its a free country.

In the 70s New York was on the brink of receivership and contemplating shutting the subways down.  But then, something happened.  That something was computers.  In the 70s, Wall Street shut down on Wednesday to process all that paperwork.  With the rise of computers and spreadsheets, Wall Street could vastly expand business, staying open 24/7.  The increase in financial services brought new wealthy workers into the city looking to jump the competition and live in a close commute downtown.  These so called yuppies of the 80s started the process of turning around New York's real estate, bringing much needed property tax revenue to the city.

Today the process is so complete that it is hard for many people to believe that New York was once a Rust Belt dump.

In contrast with this is the city of Flint.  The city of Flint did not gentrify.  It did not attract a class of wealthy young people who wanted to live downtown.  Instead it squandered money chasing tourism.  And then, later, it basically died.  Flint's water crisis is but the final sad swansong for a city that was not able to gentrify.  It is really not much different than many small cities around Chicagoland such as Harvey that have seen their tax base dwindle and have not been able to recalibrate their finances.  Spending isn't cut and the old property tax payers are squeezed with higher assessments.  They flee and the city begins the death spiral to receivership.  Thus Harvey ends up owing the city of Chicago millions in water fees that it cannot possibly repay.  Sound familiar?  Rust Belt cities that lose too much of their tax base soon run into problems with basic city services like providing clean drinking water.

Detroit started to gentrify really only about ten years ago.  It wasn't in time to bring much needed property tax revenue to the city.  Without that the city, which like so many others had too many pensioners for the shrinking tax base, went into receivership.  Dishonest writers make meretricious arguments like the city is too big or had a "strange geography".  The answer is quite simple; an eroding tax based caused the city to raise rates on existing residents and businesses, which hastened their withdrawal.  It can happen anywhere, really.  Today, thanks to the influx of wealthy young people, hipsters, and gentrifiers, the city is increasing its property tax revenue enough that it can invest in some much needed building projects; like fixing the roads, the schools, and implementing 21st century policing.  Is it enough?  Is Detroit doing enough to encourage gentrification and new development?

Chicago began to gentrify much later than New York, but much sooner than Detroit.  Today it sits in a precarious middle.  Many poor neighborhoods in Chicago generate very little in property tax revenue.  Many 3 flats I've canvasses pay less than $4000 a year in property taxes.  New 100 unit condos on the northside pay that much a year per unit.  This influx of development for hipsters, gentrifiers, and wealthy elite are what keeps the lights on in this city.  As much as you and I might hate them for their loathsome tastes and attitudes, and as much as we might resent them for making much of the city completely unaffordable, they are also the reason that the city can run buses and trains all night and build new schools and pave the roads and send out police in squad cars that don't break down regularly.  These assholes are the reason Chicago hasn't already gone into default like so many other Rust Belt regulars.

So at the end of the day there is no alternative to gentrification.  What else is Chicago supposed to do to avoid going into receivership or failing at very basic city services like clean water?  Has anyone proposed a serious alternative?  Nope!