10.15: Organic Model and Economic Model

The Organic Model

Sometimes it appears neighborhoods gentrify without significant assistance from the government or the banking industry. In this organic model, gentrification starts with a small group of bohemians, (artists, musicians, actors, etc.). Impoverished by their career choices, these “starving artists” seek cheap housing. Bohemians typically embrace cultural diversity, so they are often attracted to minority neighborhoods. Bohemians, like immigrants, also bring sweat equity to older neighborhoods because financial capital is often unavailable. Unlike immigrants or poor minorities, their lifestyle choices frequently make bohemians ill-suited, and often unwelcome, in traditional family-oriented suburbs. These facts tend to keep bohemians from considering buying a starter home in suburban neighborhoods. Instead, they chose to live in inner-city neighborhoods, where they become long-term residents with strong interests in community improvement and safety.

Figure : Philadelphia, PA - The triangle, often a symbol of gay pride or power was incorporated into an early cell phone store in Philadelphia's gay friendly, gentrified, Society Hill district

People in the LGBTIQ+ community (some of whom are also bohemian) often participate in the organic model as well. Though less likely to be poor than bohemians, LBGTIQ+ persons sometimes find the suburbs less than welcoming places to live. Gay men, for example, built safe enclaves in many large cities during the 1960s and 1970s where they could live in relative peace; largely free from both social scorn and violence directed at them by homophobes and law enforcement (see e.g., the Stonewall Riots). Alongside bohemians, who welcome diversity, the LBGTIQ+ community brings both sweat equity and long-term commitment to improving the quality of life in their neighborhoods. Alongside immigrants, poor people and bohemians, the LGBTIQ+ community helped build unusual neighborhoods, marked by eclectic mixtures of cultural amenities (restaurants, art galleries, theaters, e.g.) and a vibrant nightlife (discos, bars, live music, e.g.). Drawn by the excitement, entertainment and affordability of gentrifying neighborhoods, less bohemian singles and young couples (both straight and gay) move in too. Eventually, real estate speculators and city officials take notice and encourage further development.

Lees, Loretta.

"Gentrification and social mixing: towards an inclusive urban renaissance?" Urban Studies 45, no. 12 (2008): 2449- 2470.

Economic Model –The Rent Gap Theory

Geographer Neil Smith offered a more strictly economic explanation for gentrification that he called the Rent Gap Theory. Rather than crediting bohemians and shifting demographics, Smith argues that the logic of real estate investing is mostly responsible for gentrification. According to Smith’s argument, gentrification is sparked when the housing stock in urban neighborhoods deteriorates to a point where the realized value of housing (what it costs) falls so far below the potential value that investors find risk-reward ratio too attractive to ignore, and they move capital into decrepit neighborhoods in order to turn a profit.

Certainly, there are instances where both individual, corporate and even municipal investors have sought to profit from renovating derelict houses in degraded neighborhoods, but it seems unlikely that economic motives can explain all gentrification. Also, numerous gentrification projects led by corporate real estate concerns (with significant tax incentives from the government) have been failures. Despite careful economic calculations, cultivating a hip, desirable neighborhood requires an element of style that appears to elude some developers.

Figure Los Angeles, CA. LA's decrepit Bank District has been gentrified and is now the "Gallery District". Many single room occupancy dwellings and homeless people have been displaced, but this region of downtown is revitalized.

It’s very likely that multiple forces act simultaneously encouraging gentrification. The author of this text advances a theory that TV shows airing in the early 1970s were a contributing factorin creating demand for gentrified housing. Attractive, young, endearing characters on TV were often shown living in gentrified housing, which in turn encouraged TV viewers to mimic the urban housing choices made by popular TV characters, and in the process reject both boring suburban options or glass-and-steel high rise apartments.

Figure Downtown Los Angeles - A hipster coffee shop, a common marker of gentrification newly opened next to a Quinceañera dress shop downtown marking the frontier of gentrification, culture, and commerce.

Municipal governments, desperately seeking to rebuild crumbling tax bases, embraced gentrification wholeheartedly. During the 1960s and 70s, so many building owners abandoned decrepit rental properties that by the 1980s, many big-city governments had become the largest landowner in the city. Unscrupulous landlords were known to set fire to degraded buildings to collect insurance prior to abandoning them. Unable to collect any taxes from thousands of buildings, many cities faced serious fiscal challenges by the 1980s. New York City nearly went bankrupt in 1975, forcing severe cuts in public infrastructure projects, school funding and public safety, which in turn prompted more abandonment. Gentrification helped put a stop to the deterioration of many of America’s biggest cities.

To encourage urban redevelopment and gentrification, various levels of government created numerous incentive programs to get people to buy and renovate inner-city homes. Tax breaks were common, particularly for corporate investors. One inventive grassroots incentive used by several cities was to sell city-owned houses for one dollar. In return, buyers agreed to live in the house themselves for a period of several years. By forcing buyers to live in the house, homeowners were far more likely to repair and maintain the building. The idea was to offer low-income residents affordable housing and in return, the city could stem the tide of urban decay, and maybe, some modest tax boost over the long-run. In recent years, the program has made a comeback, especially in Rust Belt cities, this time sponsored in part by the federal government’s Department of Housing and Urban Development (HUD).