The Missing Element of Gentrification

One of the things technobrat pundits love to discuss–because it directly affects them–is the high cost of housing in urban areas. One cause that goes missing is income inequality (boldface added):

Much of technobratacy echoes Sarah Palin as to the solution to this problem: build, baby, build! It’s worth noting that the number of rental and owned units has increased from 2005-2012. But what the above figure tells us is that prices are also rising because there are people who afford to pay these prices. That is, this is also driven by income inequality: to charge $3,000/month for a one-bedroom apartment in Ward 2 means someone can afford to pay that amount. While this is driven by the one percent (and the 0.1 and 0.001 percents), it’s also driven by the top tenth as well. If you want to lower prices, a great way to do that is tax incomes at the upper levels: increase the marginal income tax rate, remove the Social Security tax cap, and treat dividends as regular income. If you lower after tax incomes–that is reduce inequality–that will lower prices, especially at the high end.

Matt Bruening, in discussing gentrification, makes a similar point (boldface mine):

Gentrification, understood as the displacement of poorer residents by richer residents, is only possible because of economic stratification. This is true by definition: without stratification, any displacement would not be done against poorer residents by richer residents because there wouldn’t be such things as poorer and richer residents, just residents.

But the point here is more than mere tautology. Gentrification is driven by the fact that richer would-be residents are able to outbid incumbent residents for the housing units. With less or no economic stratification, a concerted effort to displace incumbent residents would fail because those residents would be able to match the bids of the would-be displacers.

Background economic stratification is the initial necessary condition of all gentrification. Naturally, then, one way of preventing gentrification is to reduce economic stratification. Making incumbent residents and would-be displacers more equal in income and wealth makes gentrification harder to pull off. For some reason, this potential solution is rarely mentioned in gentrification discussions.

A mystery, that is.

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2 Responses to The Missing Element of Gentrification

  1. dr2chase says:

    We could do both… Boston area, if we don’t get higher density closer in, and/or higher density around commuter rail stations (that badly need better service, but better service needs more riders), reduced inequality is just going to lead to sprawly fungus-like development and more and more driving and traffic jams (and perhaps, maybe, more carpooling? Misery loves company?)

    Housing shortages also put us in a place where it is not necessarily the guy with the deepest pockets; sometimes it is the guy who is most reckless about taking on debt. This was the lesson of the old S&L crash — if everyone around you is breaking rules and you’re not, you’ll end up uncompetitive and lose. If it becomes the norm to be take on risky onerous loans, prudent borrowers will end up outbid.

    The tiny density increases I see in our town are not sufficient to blunt demand; when an N$ house is torn down and replaced with two units, each of them sells for more than N$. Housing supply goes up, but the supply of “affordable” (to use the term extremely loosely) housing goes down.

  2. One would think this is obvious.

    Also, I think the problem with housing is the other side of the coin of the problem with jobs.
    It’s the same problem. The effect of which is poor results, & shoddy outcomes.
    We’ve become a nation of victims of Comcasts & Blackstones.

    And what those who are in the upper middle class don’t yet realize is that they are really in the same boat with the working class & poor. They’re on a higher deck, and are unwilling to mix with those on the lower deck, so they don’t realize yet that the whole boat is sinking.

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