How Can the Rent Be Too High If Someone is Willing to Pay It?

An article in the New York Times realestate section last week once again sparked the debate on "affordable housing". The article details how residents are being forced out of formerly less expensive Brooklyn neighborhoods due to rising rents. Which has led to anger from certain interest groups about the lack of "affordable housing".

The reason that I put quotations around "affordable housing" is that the term in and of itself is a misnomer. The term is meant to suggest that the housing is not affordable when it obviously is affordable because someone is renting it at that rate.

Only the absurdist logic of the world's Jimmy McMillans would say that those running a city are doing a poor job because the economy is thriving. Rent is high because people want to live there. When there is a product that is better than other similar products it becomes more expensive as demand rises. It is the same with cities. Because New York is a fantastic place to live property values increase leading to an increase in rent. New York stays a fantastic place to live because property values go up which creates a higher tax base thus allowing the city to provide better services and increased public safety. The result of lower property values and therefore lower rent is bankruptcy.

The other argument I hear is that rising rents force out the artists that provide the culture that makes a city great. This is a vestigial argument that originates more in that early 90s musical about the guy who was trying to better the neighborhood and bunch of self indulgent assholes who refused to pay their rent. Who are today's artists and musicians? More and more they are kids whose parents did well enough to send them to art school and pay for their music lessons. I know a little something about this. Rents in places like Williamsburg have gone up because trust fund kids wanted to move there because that's where all the hip culture is.

Many people think it is a good idea to set aside a certain percentage of units per building for low and middle income residents. My question is why would people who cannot afford the market rents choose to live in an area where they will face the higher consumer prices that go along with higher rents. It makes no sense from a logical perspective.

 In the 20th century the blame for urban decay was placed on those who were well fleeing from the cities to the suburbs. Now that the suburban century is over the grand children and even the children of those who fled the cities in the post World War II economic boom are returning to and improving the cities. In the end the people that were vilified in certain circles for urban decay are now being vilified in the same circle for urban renewal.

Had those who fled the cities in last century not been seduced by the suburban syren song this wouldn't even be a discussion. It is a simple fact of life that as property values increase wealth increases and people as a whole do better. I mean everyone does better. At least as long as they don't make foolish mistakes and take on responsibilities they cannot afford.

Why The Fuck Didn't Detroit Gentrify?

Lets take a little time to discuss what went wrong with Detroit and the lessons Detroit can teach the rest of the country. In the simplest terms the city of Detroit failed to adjust to a post industrial America. While other cities became hubs for culture and entertainment Detroit continued to believe that its future viability was grounded in manufacturing jobs.

When the city's eventual downfall began is debatable I will say however that the city's fate was sealed with the construction of the Poletown plant. The city removed over 4,000 residents who not only worked within the city limits but lived there as well and replaced them with people who would come in to work and leave at the end of the day.

A city's economic well being comes from having money spent within it's borders. The jobs created by the Poletown plant did nothing but remove citizens from the city who were spending money within it's limits.

Lets play an alternate history game where the city of Detroit does not side with General Motors and the Poletown plant is never built.  As the nation comes out of the 1980's the Clinton era economic boom hits if at this point in history Detroit begins construction on Comerica Park and Ford Field at the same time as well as the Greektown casinos the city would still be financially strong today.

In the 90s there was burgeoning music scene in Michigan which could have been capitalized on by the city of Detroit if there had been a push to open live music venues around the stadiums by offering huge tax breaks to club owners. This entertainment district would have attracted recent college graduates who to the area creating a need for new multifamily housing units that would have rented for much more than the units that were there. Bringing in recent college graduates would have created a need for restaurants, coffee shops and clothing boutiques all of which would have created a permanent tax base to fund the city.

Now lets turn our attention to Poletown. If the Poletown neighborhood still existed in the late 90s something very interesting would have started happening there. A neighborhood with a rich ethnic heritage is always attractive to hipsters, for lack of a better word. The strong Polish neighborhood would have been slowly taken over by a hipster population thus increasing the value of the neighborhood. Today this neighborhood would be more like Williamsburg Brooklyn than anyplace else. Which would see increased property values that would be taxed again funding the city.

By not opening the Poletown plant the city would have began to cut it's ties to the auto industry in the 80s thereby diversifying the region's economy.  Also by breaking ties to the auto industry it would have been easier to expand the "People Mover" into being the type of public transportation that is important to large metropolitan areas. This would allow more people within the city limits to be able to partake in the entertainment in the Greektown/Stadium district without having to drive. Which would make the neighborhoods further away from the entertainment district more valuable which would lead to a larger tax base.

Had the city of Detroit made moves such as this not only would Detroit have a thriving economy but the State of Michigan would as well. With a major city designed to cater to the needs of recent college graduates sitting in Southeast Michigan there would be the mass exodus of the alumni of the five relatively large Universities in the state. Instead the graduates of the Universities move away taking with them any hopes of a rebuilt economy.

To put all of this another way Detroit went bankrupt when it failed to gentrify. Gentrification is what keeps cities viable. It increases property values which are taxed and used to fund city services. It creates well paying service jobs because the new residents would rather eat at expensive restaurants than fast food. In every way it is good for the city.

 Now you may say this is all in hindsight however over the course of two days in 1998 I made this exact argument in a Property Class at Detroit College of Law. At that time I told the professor who supported manufacturing jobs over entertainment that it would lead to the city's collapse.