10.14: Suburban Disfunction, Capital Flight and Gentrification

Suburban Disfunction

Overcrowding in the suburbs has become a problem. Older suburbs, though rarely approaching the mega-density of the inner city core, often come to match (or exceed) the density in the rest of the city proper. “America’s Suburb”, the San Fernando Valley, occupies much of the northern half of Los Angeles. It was sparsely settled prior to World War II (one popular wartime song called it “Cow Country”), yet today, it has several neighborhoods with population densities in excess of 50,000 per square mile. The Los Angeles area highway network, once a model of efficiency, was quickly overburdened by unchecked suburbanization. US Highway 101 which stretches across the southern San Fernando Valley exceeded capacity in 1974, but suburbanization along US 101 continues today with commuters regularly driving on US 101 for 40 miles before even getting to the western edge of the San Fernando Valley. The intersection of US 101 and Interstate 405, in the southeastern corner of the San Fernando Valley consistently ranks as the most congested in the US, at over 350,000 cars per day.

Figure : Map of San Fernando Valley. Click on this map to see an interactive map of America's Suburb where population densities sometimes exceed 50,000 person per square mile in defiance of traditional concepts of suburbs.

Land developers stand to make fortunes from buying up large patches of agricultural or rural lands surrounding cities and turning them into suburban communities. Large land development companies tend to be very well-connected politically and politicians are very responsive to the campaign contributions from developers and unions representing building trades, so there is often minimal resistance to pro growth policies. As a result, poorly planned, sprawling suburbs regularly leapfrog outward from large cities. Occasionally, there’s a backlash from opponents who favor less development, or “smarter” development. These so-called “slow growth” coalitions advocate for in-filling laws to force developers to develop land adjacent to existing neighborhoods, thereby preventing checkerboard development. Checkerboard development is expensive because the road network, utility lines and public safety infrastructure must be extended over “empty” land to serve the remote residential developments. Taxpayers, most of whom don’t live in far-flung residential areas, eventually pay considerable external costs passed on by land developers and the residents of far-flung suburbs. Ironically, the burden for paying for exurban development falls partly on property owners in the inner city, diminishing the true value of housing there, and further stimulating growth in the suburbs.

Figure Palm Desert, CA - Checkerboard Development is clearly visible in this aerial photo. Several tracts are disconnected from the other parts of the suburb.

Capital Flight

Almost all neighborhoods suffer through a cycle of decay. Some of America's older suburbs are more than 100 years old now. As houses age, modern families often find the houses too small, in need of frequent maintenance, and out of style. People with enough money move away from these houses. Old houses often become rental properties and rental properties tend to suffer from disinvestment and poor maintenance. The government even encourages disinvestment, perhaps unintentionally, by providing lucrative tax breaks to rental property owners to compensate them for the depreciation of the value of their properties. Renters themselves often misuse the housing they occupy or fail to maintain properties they don’t own, especially if they plan to move soon. At some point, the value of rental properties fallsto the point that even the minimal costs associated with necessary maintenance and taxes exceed the rent collected. At this point, rental buildings are abandoned, frequently becoming the property of the local city government via tax foreclosure. Abandonment accelerates the collapse of value for neighboring buildings, creating a sort of death spiral of home values. The net result can be ruinous.

Figure : Bronx, NY - President Carter visits an abandoned section of New York City in the mid-1970s. Source: Wikimedia

The geographic movement of investor money called financial capital can explain the lifecycle of any neighborhood. Banks and those looking to make money from real estate move investment money to places where the return on investment is perceived to be the greatest and financial risk lowest. After World War II, banks, the real-estate community, governments, and individuals moved most of their investment capital from the inner city to suburbs. Homeowners who could move, and were permitted to do so, naturally followed because they too sought profitable returns on their biggest financial investment. Because supplies of investment money are limited, inner cities got little or no (re)investment capital, and as a result, very quickly became decrepit. Still, not every inner-city fell into disrepair. Some older neighborhoods benefitted from an influx of immigrants, who often lacked ample financial capital, nevertheless brought significant human capital or sweat equity into older neighborhoods. Geographer Mike Davis calls the thousands of immigrant homeowners in Los Angeles “anonymous heroes” because they are willing to invest sweat equity fixing up housing in older neighborhoods abandoned both by the banking system and former residents.

Figure Camden, NJ - Row Houses, once home to a thriving community sit mostly abandoned in 2009, a casualty of changing economics and poor government policy. Source: Wikimedia

Gentrification

Occasionally, a neighborhood in an inner-city region is radically redeveloped and renewed in a process known as gentrification. The term suggests that the “gentry” are moving to the city from elsewhere, but that suggestion is misleading. Rather, gentrification is a process that often begins with people of lower social status gradually improving a neighborhood through sweat equity until people from higher social status consider it a desirable location and begin moving there. Gentrification does not typically involve people exchanging homeownership in the suburbs for residence in an inner-city neighborhood. Instead, gentrification is often driven by people buying their first homes in the inner-city, or simply moving from somewhere else within the city to a gentrifying neighborhood.

Figure : Chicago, IL - Gentrified rowhouses line a street in the Pullman district of Chicago. Blocks away, neighbors await/fear gentrification.

There are many theories explaining the process of gentrification, which became noticeable in the United States in the early 1970s. Some theories point to the growth of high paying jobs in the CBD as the US economy shifted away from manufacturing toward high-tech and FIRE industries. Other theories suggest that changes in lifestyle and demographics drove gentrification. These theories suggest that baby boomers were prominent early gentrifiers, and they, unlike their parent’s generation, often delayed entry into marriage and parenthood. They also got divorced a lot. Therefore, baby boomers spent more years unmarried and enjoyed living closer to nightclubs and other “courting” hotspots, most of which were located downtown rather than in the suburbs.