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The Answer To Gentrification: More Density?

2012 March 15
by Ian Fishburn

In case you missed it, a Seattle woman married a building last month.  The union was between Ms. Babylonia Aivaz and a 107-year-old warehouse on Capitol Hill at the corner of 10th and Union.  Her desire to save the building (it has since been demolished) and stop gentrification prompted the event. I sympathize with the sentiment. Preservation is extremely important, not only for the character of the neighborhood but also for the people living in it. But is saving every building, especially the abandoned, the best way to fight gentrification?

In order to combat gentrification, it helps to try and understand the source. We all know what it is, but where does it come from?  Who is to blame for this process that is taking place in many cities across the country? The answer is elusive. I’m not sure anyone has a definitive remedy. There are many factors that come into play. Things like neighborhood location, amenities and character are all a part of the equation, but there is something more to it. There’s a coolness factor that takes hold. You know, first the artists move in and then… So if we can’t pinpoint the cause how can it be fought?

Cities and people have tried several ways to combat this force with varying degrees of success. Rent control has been used in many places, but the unintended consequences can have long-term dire effects. Building affordable housing is another approach, but does it make sense to use expensive new construction for this use? It’s unsupported without subsidies. The seminal urban planning author Jane Jacobs advocated for the preservation of old buildings because they are cheaper and can be supported with lower rents. Although, the old buildings were new buildings at one time, so how do you increase the supply of old buildings without building new ones?

If implemented correctly, maybe there is a market solution. Preservation is key. There is a neighborhood aesthetic and certain buildings that should never go away. But, when a neighborhood becomes desirable, without a rise in the number of units rents will escalate. It’s simple economics: supply and demand. To drive down the ascending cost of rent, density must be increased. Whether through new construction, renovation or adaptive reuse, more units must be built.  After all, living in dense, compact communities is one of the best things we can do for our planet. They lower dependence on driving, increase access to public transportation and have more efficient buildings and use of infrastructure. This is what makes New York the nation’s low-carbon leader. So maybe, Ms. Aivaz should be advocating that new buildings have more density to reduce development pressure on the functioning, existing old buildings.

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Ian Fishburn, LEED AP, is currently working on a master’s degree at UW´s College of the Built Environment. He is passionate about real estate with a focus on creative, sustainable urban development, and has worked for the past decade in development, construction and design. 

 

17 Responses leave one →
  1. Dr. Density permalink
    March 16, 2012

    This is very thoughtfully written. Ian is absolutrly right about residential supply and demand issues when it comes to affordability. Preservation is absolutely a priority for higher quality historic and great chrater giving buildings that bring authenticity to a neighborhood. But that determination is very subjective.
    As some modernist buildings turn 50 there will be efforts to preserve them. The Ballard Denny’s was one of those that some folks wanted to preserve at all costs. But it wasn’t one I would preserve. Even if it’s new replacement isn’t likely to be an award winner. But that new project will give hundreds of people housing in a walkable, transit rich neighborhood.
    The debate is and should be rigourous. Ed Glaezer’s “Triumph of The City” covers this subject very thoroughly.

  2. Matt the Engineer permalink
    March 16, 2012

    Great article. Andrew Smith recently wrote a piece about preservation for the sake of density. Of course, you have to have old dense buildings to start with…

  3. ilprincipe permalink
    March 16, 2012

    The only city that has gotten a handle on gentrification is Vienna. There too rents are rising and newcomers can’t settle unless they have the requisite cash. What has preserved the city for oldtimers however is:
    – Rent control, a maximum rent of 4.73 euros per sq meter (tax and ancillaries excluded). New construction is exempt from this rule.
    – Public utility housing enterprises. 220,000 publicly owned apartments serve 500,000 renters.
    – Publicly subsidized reconstruction. 200m euros were spent in 2008. Anyone who takes the money agrees to a 15 year rent freeze.

    • Matt the Engineer permalink
      March 20, 2012

      They must have really strong historic preservation laws as well. If you can only get a fraction of market rate on your old building, you’d quickly be tempted to tear it down and build something new.

  4. Michael permalink
    March 16, 2012

    Real estate is segmented and local; it is not a commodity. Unlike pork bellies or barrels of oil, not all real estate supply attracts all real estate demand. The supply & demand model of real estate that Glaeser is popularizing is an oversimplification of how these markets actually work.

    *Class A businesses don’t lease Class B office space.
    *Big families don’t live in little apartments.
    *Gas stations want intersection corners, not alleys.
    *Poor people can’t afford expensive buildings, no matter how dense they are.

  5. Bill Bradburd permalink
    March 17, 2012

    As Michael above points out, not only is this a naive view of real estate, but it a pretty narrow view of gentrification, its causes and cures.

    Perhaps while out at the UW he could look into the work of Dr Lynne Manzo. Hopefully he’ll come away with a broader understanding of the neo-liberal “just build more stuff” greenwashing of density and its impact on extant communities. He’ll probably also find more ways to combat gentrification than just blindly advocating for more units of housing.

  6. dan bertolet permalink*
    March 17, 2012

    Michael or Bill, what is your solution for the problem of gentrification in growing, high-demand urban neighborhoods?

    • james in the CD permalink
      March 19, 2012

      In order to first propose a solution for gentrification – you have to prove that it is a problem; gentrification hardly seems relevant to the author’s discussion of density. From a reading of this article is hard to believe the author even had a grasp on the concept of gentrification.

      This post should hardly should be taken seriously – all logic is invalid and why did the author throw in references to NYC and Jane Jacobs as they do not help better establish any sort of argument – but rather they seem like they were thrown into the discussion to establish some sort of authority – hey look I know about Jane Jacobs and I have been to NYC – I am smart… this is the work of a grad student these days?

    • kgdlg permalink
      March 19, 2012

      As Dan knows, this argument (more density = more affordability) really incenses me. I echo Michael’s comments about how specialized real estate is, especially here, and especially in “high demand” neighborhoods like Capitol Hill or Ballard. When we are talking about new density in Seattle, right now we are mostly talking about new construction, not condo conversions or rehabs of old buildings. And even in this market, it is still very expensive to build and to buy land in places like Cap Hill. This means that these buildings will not be “affordable” to anyone under 50% of area median income (the usual cut-off when talking about the truly “low-income” and where the real need is, especially for family housing). Just look at the rent structures on any of the new product on the Hill (Packard, Chloe, Broadway Bldg, Joule) – studios start at over a $1000/month. (A 50% AMI studio on the other hand would max out at about $770/month.) And, by the way, families don’t live in studios, but that is another post for another topic…

      So let’s just agree that this product will not be affordable, ever. Even if there is an over-supply someday soon of these new units, prices may come down in the interim, but but they will eventually go back up when the building-boom stops for a while. (Real estate always moves in these boom and bust cycles.) These buildings would not be built if not for the pension funds, insurance companies and REITS that are investing in them. They are an investment class that guarantees returns from a certain level of high rents. That is why they choose places like the Hill to build, because they know with good certainly that they can get the rents they are planning on.

      So people might argue that with all this new expensive product the old buildings will become more “affordable” right? All you have to do is look at Capitol Hill to see that this is not true, either. While older brick buildings are indeed cheaper than new product, average rental prices in these units have been steadily creeping up over time, approaching that $1000/month mark as well.

      When the neighborhood becomes more desirable via new development that caters to the high income, older rental product becomes more desirable too. And low-income renters are simply pushed to less-hot rental markets, which usually have fewer amenities (parks, grocery stores, transit access). And that is gentrification in a nutshell.

      To answer Dan’s question of how to solve this vexing dilemma, I believe that the only way is through creative subsidy programs and policy. I would like to see local Housing Authorities target TOD stations for the placement of project-based Section 8 vouchers. I believe this is one of the only ways to create housing affordable to the truly poor and low-income in these locations (those making less than 30% AMI). For workforce housing between 30-60% AMI for the working poor and low-income, there should be policy priority at both the City Office of Housing and Tax Credit funding levels to prioritize development around transit. (Right now there is not). And for units above 60% AMI the City should continue to look at ways to incentivize private developers to “set-aside” units at these levels, either through incentive or inclusionary zoning. These are a few strategies, if implemented together, could help impact the affordability of neighborhoods that are developing fabulous amenities like Light Rail while becoming less affordable to the average Seattlelite.

      • Matt the Engineer permalink
        March 20, 2012

        “While older brick buildings are indeed cheaper than new product, average rental prices in these units have been steadily creeping up over time” You must see this is evidence contrary to your argument. Capital Hill has strong zoning laws capping growth, yet demand for urban housing continues to rise. Rising demand with a nearly fixed supply equals higher prices.

        How do you drop rents in Cap Hill? Upzone some of the single family zones and add supply to the market.

  7. Michael permalink
    March 18, 2012

    Dan, it’s a very hard question you ask and I don’t think we’ve seen any examples of solutions in America, yet. One way I always thought was possible, if we had more coordination between government and non-profit developers, is pre-empting expected demand through the construction of affordable units. Government investment (light rail, schools, parks, etc.) drives a lot of demand for property and so it would be possible to buy up land before the speculators and turn it over to affordable housing developers. This limits the tax revenue and “economic development” potential of the land but it provides suburban prices for city living.

    Another way is to slow the movement of capital into neighborhoods. A luxury tax that was redistributed back into the neighborhood by subsidizing low-end units would retard the high-end of the market that can be so disruptive.

  8. Chris permalink
    March 18, 2012

    Ian begins with a comment: “We all know what [gentrification] it is, but where does it come from?” I would in fact argue that we do not have an agreed upon definition of gentrification, and therefore cannot have a reasoned debate about whether and when its actually bad. It a perjorative term, so its usage in any circumstance indicates dissatisfaction with new development.

    For example, is the redevelopment of the Sisley blocks gentrification, if the vast majority of the surrounding residents are middle class/wealthy white people? Is the redevelopment of a vacant lot in a poorer neighborhood gentrification? What if that development is an Artspace project for people earning <30% AMI, but it changes racial composition of the neighborhood? I could go on, but its very difficult term to discuss without more agreement on what it is.

  9. March 19, 2012

    Density does not equal affordability and in fact can excacerbate the displacement pressures that gentrificaiton can cause. Simple supply side solutions are oversimplified for the reasons Michael lays out above. Demand is not just driven by supply. The amenities that come with new supply are strong drivers of demand (new parks, new transit, libraries, etc…)

    However, folks like Babylonia whose intentions seem well placed view the gentrification issue with an equally oversimplified view of market dynamics as the “build baby build” choir. Dilapidated buildings may be affordable but they can have lots of negative impacts on society and the families that dwell in them. For example, no one deserves unhealthy living conditions and no region should be forced to sprawl because preservations of buildings are prioritized over preservation of green fields.

    One solution:
    Density (with low construction costs, quick permitting, and cheap equity) + public subsidy (levy and/or MFTE) + value capture (TIF and or inclusionary zoning) = affordable new development.

  10. Nate permalink
    March 19, 2012

    To further infuriate James in the CD:

    “The roof is on fire. What’s your solution?”
    -Blue Scholars

  11. Nate permalink
    March 19, 2012

    Mine, by the way, is this: abolish property tax. Why? Most of Seattle is single family housing. If the property tax doesn’t go up on the fixed-income little old lady who paid off her cottage decades ago (how’s this for oversimplification), her ability to afford her neighborhood doesn’t change. Sure, fancy cheese might crowd out the Lucerne ™ in the dairy aisle, but complaints about that sort of thing are a proxy. The real challenge is when neighborhoods become hot, newcomers often displace existing residents. Building enough new room for the newcomers is absolutely a part of the solution, despite Lesser Seattle’s efforts to convince us “if you don’t build it, they won’t come.”

    • kgdlg permalink
      March 19, 2012

      There are prop tax exemptions for little old ladies. And low-income housing development. I don’t think prop tax is the driver of gentrification. Sure, there are some middle-income owners that get squeezed by it, but taxes in Seattle are actually comparatively very low. And what would be the magical revenue stream to replace the loss of prop tax? State income tax?

  12. Cameron permalink
    March 20, 2012

    Wow, very interesting thread of comments.

    I think that one of the most feared consequences of gentrification (the purely economic definition) is that “if I get priced out of my current housing situation, where else can I go?” I think the lack of regional affordable housing is the culprit in this situation, something that I think that is not only much more immediately approachable than the challenge of “build ‘as-market rate-as-possible’ affordable housing in an area with existing high rents and land values.”

    The solution to gentrification (aka “I can’t afford a reasonable commute and quality of life if I’m pushed out of my current home)? Completely change the degree to which we build. Land values and existing dense structures in Capitol Hill are over and underwhelming respectively as a result of a lack of new construction over the years. Do you really think we’d have a regional affordable housing crisis on the scale that exists if new, denser buildings were built as soon as economically viable? Yes, maybe folks would still get priced out of Capitol Hill, but then maybe they’d still be able to afford a comparable home somewhere vaguely nearby and not in Black Diamond.

    Land values have risen and will continue to rise, and don’t necessarily have to affect the affordability of a region. I point the blame at the lack of dense construction back when land values were actually reasonable.

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