America has a lot of internal migration. She also has limits on housing supply. The upshot is that sometimes, high-wage internal migrants displace the locals. Lefties have gotten very upset about this in recent years, decrying “gentrification“. But that leaves us with a bit of a puzzle: if gentrification is so bad for natives, why do city governments whore themselves out to get Amazon offices? Won’t that bring yuppies? Isn’t that bad? Yet surely the governments aren’t stupid, and they represent the native residents who elect them. The natives must be getting something. A Puzzlement!
That is the question for today: suppose we only care about the interests of the natives: when do you want young white Berkeley graduates with apple laptops moving in, and when do you not?
Well, here’s one case where you want them: when you own your house. You aren’t exposed to the increase in housing costs because you own your housing, so you aren’t displaced. Yes, your property taxes go up a bit, but this effect is very small, and you can still afford to stay.
And you get all of gentrification’s benefits. Gentrification is great if you can afford it. I’m not going to argue why, because we can just look at revealed preferences. Homeowners are generally just as likely to stay in gentrifying neighborhoods than similar neighborhoods that don’t gentrify (some studies find they’re more likely). That’s a bigger deal than it might seem. If you’re a homeowner in a gentrifying neighborhood, you suddenly have a big asset you can sell by leaving. If people are no likelier to sell a valuable gentrified house than a valueless non-gentrified house, then people are getting their money’s worth out of that home value.
But let’s ignore homeowners. Most urban poor are renters anyway.
So about those renters. Sometimes, even renters need these yuppies around. Let’s look at revealed preferences again: poor areas with no gentrification tend to hemorrhage population. Why? Well, at the neighborhood level it’s mostly about crime. But the municipal level is where things get real scary. Look at the fastest depopulating cities in the US. They tend to come in three kinds:
- Poor urban cores of otherwise functional metro areas, mostly black and with high crime [Baltimore, Detroit, Shreveport, Baton Rouge, St. Louis, Flint, Gary]
- Company towns where the plant (or mine) has shut down [Rockford IL, Charleston WV, Decatur IL, Jacksonville NC]
- Ohio
So we can see that when a place sufficiently fails to gentrify, it becomes uninhabitable, and everyone leaves. There’s a threshold where a city is simply too poor, uneducated, lacking in transit connection, and black, and it collapses.
(By the way, there’s actual serious data backing up these patterns. I just think seeing extremes is more fun)
Now, I mention race rather than just income. I know that’s a bit odd, but apparently it’s what matters? What seems to repel newcomers are perceptions of social disorder. These are much higher for poor black neighborhoods than similarly poor but less black ones, probably from a mix of racism and actual differences in crime rates.
The upshot is, when there aren’t enough yuppies, you get more crime, no jobs, and no tax base. Then tax rates have to rise to balance the collapsing property values, and eventually almost everyone leaves.
There’s a spiral. Neighborhoods that don’t gentrify shrink, and the remainers are generally poorer and less educated than the leavers. That itself discourages gentrification, and you reach a demographic threshold where the neighborhood or city pretty much dies.
So you need a certain number of yuppies just to keep the lights on.
But you don’t want too many. When do you have too many? You have too many yuppies when the natives are all being gentrified out. This happens more rarely than most people think. For one thing, neighborhood decline is much more common than gentrification. For another, gentrification mostly happens from the natural churn of people into and out of neighborhoods, not displacement of individuals: more newcomers are rich whites, fewer are poor and black, but natives aren’t leaving at especially high rates. You do get displacement when gentrification really gets going. The hallmark of things getting bad is when a bunch of people are homeless, which tends to happen in places with rapidly increasing home values.
Now, there’s some evidence that displacement is good in the long term, because when people are forced to move they tend to move somewhere with good opportunities. So, for example, it’s great for your kids’ careers if your house is destroyed by a fucking volcano. It’s also true that children tend to have better educational and career outcomes if their neighborhoods gentrify (somewhat hard to identify causation). But in places like San Francisco or San Jose where pretty much the entire original population has to move out, idk that just seems bad to me.
So there are two bad equilibria. In one, a city fails to gentrify, the city goes to shit, and everyone leaves. In the other, the city gets too nice, and no one can afford to live there anymore.
Now, are these two bad equilibria morally different?
Some people think that urban decay is not the same sort of moral problem as displacement. In one case, you’re forced to leave a place because you can’t afford it. In the other, you voluntarily choose to leave because it sucks. Maybe the first is worse? But… Eh. From the poor person’s point of view, these issues are the same, and the result is the same. Staying in place became untenable, so they moved somewhere else.
The real difference is from the point of view of the gentrifying yuppies (who comprise like 98% of the discourse). When poor people leave Williamsburg or the Mission to find somewhere cheaper, yuppies feel bad because the housing costs are their fault. When poor people leave Jackson or St. Louis to find somewhere safer, the yuppies don’t even know it’s happening.
Of course, another reason that nice New Yorker reading gentrifiers tend to underestimate the costs of urban decay is that they have a rather rose-tinted view of poor neighborhoods. They see gentrification as pushing out renters from their deep ties to tight-knit communities. In reality, low income renters, just like all renters, are usually pretty loosely connected to their neighborhoods. They move around often, and tend to gravitate to places with more economic opportunity, just like high income renters. The only difference is they don’t have as much money.
I personally think it a little odd that this romantic view of low-income neighborhoods has caught on among their yuppie replacers. These are people who grew up in idk Fairfax and then went to college in maybe Boston, now live in let’s say Seattle and fly home perhaps twice a year. Yet they see ties to the local community as a deep, inviolable bond. Really? Perhaps there is some white psychodrama going on here.
But perhaps not. Should it really surprise us that gentrifiers tend to see historically low-income neighborhoods as quaint, charming places where a person would want to live? These are people who live in the poor neighborhoods so nice they stopped being poor. Should we be surprised that such people would overestimate community ties in poor neighborhoods? The only people they know from the older, poorer version of their neighborhood are the ones who stayed.
But I digress.
To a serious policymaker, your goal is to steer your city between the Scylla of depopulation and the Charybdis of displacement. This is hard. Natives probably get fucked by gentrification in New York, San Jose, and Seattle. They get fucked by urban decay in Baltimore, Chicago, and much of the Midwest.
The perfect balance is found in cities like New Haven, Hartford, Bridgeport, and Providence. Their populations are stable after nosedives during the crime waves of the ’70s and ‘the ’90s. Yet, rents remain pretty low. Locked-in institutions like Yale, Brown and state governments keep enough money and business within city limits, while the fact that they are shitholes keeps true gentrification away.
There’s unfortunately only so much cities can do via the Elm City Method. You can’t just pop-out an Ivy League University or a State Government overnight, nor is it easy to turn your own city into a shithole (well…). But cities do have tools to attract the goldilocks number of yuppies: tax and regulatory codes. In SF, doing anything at all is a high-budget nightmare. It’s easier to do pretty much anything in Madison and Pittsburgh, because those cities are not as cool, and they want your business.
Now, what does this mean for you, dear reader? What can you do? Perhaps this information can help you lead an ethical life. But that’s not the takeaway I intend. I would never recommend making any decision based on ethics. But I will consider my duty done today if I have helped some yuppie Chicagoans feel smug. If you live in Chicago, you needn’t worry about displacing people. You can buy all the lattes you want (’tis the season). Your mere presence is a boon to the city. Now go eat your awful pizza.
[Of course, all of the above tensions would disappear if we just let people build homes.]
Indefensible Expectations 