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Monday, June 16, 2008

The Ambiguity of Gentrification

 

There was an interesting story in Friday's NY Times concerning gentrification in Harlem.  The whole article was worth reading, but I was struck by this passage:   

While welcoming safer, cleaner streets, longtime residents have found themselves juggling conflicting emotions. And those who enjoyed a measure of stability in the old Harlem now long for the past — not necessarily because it was better but because it was what they knew.

“The majority of the stores, the 99-cent stores, they’re gone,” said Gwen Walker, 55, a longtime resident of the General Grant Houses in West Harlem, giving one view. “The Laundromat on the corner is gone. The bodegas are gone. There’s large delis now. What had been two for $1 is now one for $3. My neighbor is a beer drinker, and he drinks inexpensive beer, Old English or Colt 45 or Coors — you can’t even buy that in the stores. The stores have imported beers from Germany. The foods being sold — feta cheese instead of sharp Cheddar cheese. That’s a whole other world.”

Gentrification, it turns out, can have an odd psychological effect on those it occurs around. No one — almost no one — is wishing for a return of row upon row of boarded-up buildings or the summer mornings when lifeless bodies turned up in vestibules, or the evenings when every block seemed to have its own band of drug dealers and subordinate crackheads.  But residents say they do miss having a neighborhood with familiar faces to greet, familiar foods to eat, and no fear of being forced out of their homes.

    In one of my current writing projects, Land Virtues, I discuss some of the problems with the Demsetzian conception of land-ownership.  In Demsetz's words:  "[i]f a single person owns land, he will attempt to maximize its present value by taking into account alternative future time streams of benefits and costs and selecting the one which he believes will maximize the present value of his privately-owned land rights."

        One of the problems with this view of the dynamics of land-ownership is that, for most owners, land is not merely an investment.  Consider the largest group of landowners in the United States: homeowners.  Homeownership certainly is an investment, and homeowners are acutely interested in the performance of this investment.  But the home is also the means by which owners obtain a number of nonfungible (and often social) goods that homeownership makes available to them.  When the value of a home increases in ways that diverge from the home's ability to generate these nonfungible goods, homeowner behavior becomes particularly hard to interpret without departing from the Demsetzian framework.   One place we see this happen over and over again is in the gentrifying neighborhood.

Where property values increase for reasons that may undermine the ability of a property to provide its long-term owners with the communal goods that come from owning a home in a particular neighborhood, an approach that narrowly focuses on land values will predictably fail to grasp the complexity of the situation. 

Besides gentrification's obvious impact on low-income renters (e.g., the fear of being pushed out of their homes, which as referenced in NY Times story above), its controversial status derives in part from the fact that increased property values are typically accompanied by changes in neighborhood character (for better and for worse), by higher costs of living for longtime community residents (including homeowners, many of whom have low incomes), and by the fact that these higher costs may or may not be offset by improvements in the original residents’ perceived quality of life.  Many of these changes hit homeowners and renters alike, and the fact that owners (like renters) value at least some of the prior neighborhood traits for their own sake makes their relationship with land values far more complicated than the Demsetzian theory allows.

The New York Times article hits on several of these forces -- the cultural shift in the sorts of foods (and other products) being served and sold in local stores and restaurants.  These are the sorts of concrete dimensions of the day-to-day experience of a neighborhood that people aggregate under the rubric of neighborhood "character."  The Demsetzian theory, which predicts that owners will reflexively welcome (even seek out) increases in their land values, struggles to explain the ambivalence that many people, including owners, feel towards these sorts of shifts.   The elderly in particular are likely to value neighborhood stability over increases in the value of a home they may hope never to have to sell, and it is (I think) for this reason that the elderly are so prominently represented among holdouts in land assembly situations.

        Numerous social scientists studying gentrifying neighborhoods have commented on the ambiguous significance of increasing property values in this particular context, even for homeowners.  Whatever the ultimate merits of gentrification in any given instance, the methodology of the narrow investment conception of landownership, focused as it is on the bottom line, completely misses the complexity of this story.  Instead, it reduces the analysis of neighborhood transformation into a simple tallying of property values before and after.

Posted by Eduardo Penalver on June 16, 2008 at 04:00 PM | Permalink

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Comments

I don't think Eduardo is making this mistake but it should be kept clear, of course, that many of those who oppose gentrification in Harlem (my neighborhood!) won't see any increase in the value of their property since they nearly all do not own the property. If property value goes up it just makes them worse off since they will have to pay more in rent, the stores and restaurants they can afford won't be able to pay rent, etc. So, the gentrification situation is rather different in, say, Harlem, where most people who live there rent, as opposed to, say, South Philadelphia where quite a lot of the people who live there own their homes.

Posted by: Matt | Jun 16, 2008 9:24:57 PM

Hey, Dave -- Yes. You are right that this is the standard response - to broaden the concept of "value" to encompass, at its limit, anything a person might desire. As others (e.g., Korobkin and Ulen) have argued, however, this move significantly reduces the descriptive or positive value of the L&E project, which L&E scholars have touted as one of its principal selling points. Moreover, the move undermines the normative point that the Demsetzian theorist typically wants to make (the point that ultimately lies behind the Demsetz quote above), because the more the "value" being maximized is not the value recognized by the market (i.e., the more ideosyncratic the "value" that the owner seeks to maximize), the less we can rely on the private owner to act in ways that are optimal in any sense that is of interest to the rest of us.

Posted by: Eduardo Penalver | Jun 16, 2008 9:04:16 PM

The project sounds really interesting. I've downloaded the paper but haven't had a chance to read it yet. With that caveat in mind, I wonder whether your observation about resistance to gentrification could be rendered consistent with the Demsetz thesis if the understanding of "value" is changed. Demsetz and the law and ec school typically mean by "value" something like "the price a commodity can fetch on the open market". So one could raise examples that seem to frustrate the L&E assumption that actors always maximize value, like the holdout who refuses to sell her land for far more than FMV, or the collector who regards a personal heirloom as "priceless" (also, of course, the Ultimatum game).

The L&E riposte to this, then, is that in each of these cases, the actors aren't irrational but simply measuring value in non-monetary terms. The personal attachment to property may cause it to have a greater subjective value to its owner than anyone else is willing to pay. In light of this, perhaps the ambivalence towards gentrification seems less inconsistent with L&E. A yuppie loves gentrification because it's a win-win; they get higher property values as well as a Gelson's around the corner. But a longtime resident feels ambivalent because gentrification forces them to weigh the increased value of their property against, well, having a Gelson's around the corner. The longtime residents don't reject a value-maximization approach; they simply have a differently calibrated value calculus.

Posted by: Dave | Jun 16, 2008 8:43:46 PM

Ah yes, I see, having now skimmed the paper.

In addition to the "virtue ethics" tradition I would think the notion of the "common good" via Aquinas (and today in folks like Marcus Raskin) might prove a fertile complementary concept for capturing the public dimension for, as you say, "human flourishing is an unavoidably cooperative endeavor." Anyway, I do look forward to reading your paper.

Posted by: Patrick S. O'Donnell | Jun 16, 2008 7:54:40 PM

Thanks. I cite Logan and Molotch throughout, as you'll see.

Posted by: Eduardo Penalver | Jun 16, 2008 7:09:05 PM

Thanks for the link to your paper, which looks interesting, although I confess to a dispositional distaste for the "law and economics" genre on several counts, so I'm inclined to look with favor on any critiques thereof.

Just curious: have you read John Logan and Harvey Molotch's Urban Fortunes: The Political Economy of Place (1987). If not, I think you'd like it.

Posted by: Patrick S. O'Donnell | Jun 16, 2008 6:32:36 PM

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