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Friday, August 29, 2008

"The Way We Gentrify Now"

Edward Glaeser reviews Derek Hyra's "The New Urban Renewal: The Economic Transformation of Harlem and Bronzeville":

The Way We Gentrify Now: Derek Hyra's 'New Urban Renewal', by Edward Glaeser, Book Review, NY Sun: ...For decades, Republicans and Democrats with presidential aspirations have repeatedly made commitments to bring back troubled places, such as Detroit and upstate New York. Local leaders have long justified expensive projects, such as monorails and sports stadiums, with claims that they can bring economic vitality to depressed areas.

But ... it is rarely good policy. ... If firms are more productive in New York City or Silicon Valley, then why is it sensible to bribe companies to move ... to a less economically productive region of the country?

Not only do place-based policies fail to make the economy more productive, they may also fail to improve the lives of people who actually live in the impacted area — the putative beneficiaries of the policy initiative. ... In some cases, subsidizing an area can hurt the citizens in that area, raising the cost of living and pushing up rents.

Derek Hyra's "The New Urban Renewal: The Economic Transformation of Harlem and Bronzeville" examines two neighborhoods, New York's Harlem and Chicago's Bronzeville, where increasing prosperity harmed at least some of the long-standing residents. ...

As these cities have done well, demand for space has exploded. We see rising demand in the skyrocketing price of space... Upwardly mobile urbanites, priced out of more expensive areas, have become urban pioneers "gentrifying" areas that used to be poor. But just as the real pioneers weren't always such a blessing for the American Indians on the frontier, gentrifiers aren't always a boon for the established residents of an area.

Mr. Hyra reminds us that the changes in Harlem and Bronzeville don't simply represent the free market at work. Both ... received federal subsidies as "Empowerment Zones," which were meant to encourage economic activity in small geographic areas. These zones are classic place-based policies that offer tax breaks to firms that relocate to or remain in particular places. Chicago has also torn down great swaths of public housing, displacing thousands, and turned the land over for private development. New York ... has also seen displacement as some projects have been privatized.

Mr. Hyra's main thesis is that many people in Harlem and Bronzeville have been hurt by the transformation of these neighborhoods. ...

The best statistical research on Empowerment Zones, done by Patrick Kline at Yale, delivers a ... mixed message: Employment in the affected areas increases, but wages do not, and rents rise significantly. Those renters who were already employed before the zone took effect lose out because their costs of living rise but their income does not.

Of course, the fact that some people lose from gentrification doesn't mean that ... property markets should somehow be frozen. It is unfortunate that not everyone wins from economic change, but the right way to address poverty is to bolster the social safety net everywhere, not to stop cities from becoming richer.

Mr. Hyra's chronicle of the costs of urban transformation has more policy bite when he turns to ... Chicago's destruction of public housing projects. Some Chicago projects ... had become synonymous with poverty and social distress. Tearing them down may have been the right decision, but we should weigh costs and benefits carefully. Not everyone benefits when public housing is destroyed. ...

Mr. Hyra's ... does not render a verdict on Empowerment Zones or public housing or gentrification. Instead, he ... reminds us that the growing prosperity of a place may leave many people behind. It is wise to keep this in mind when some politician starts lauding the place-making potential of a monorail.

    Posted by on Friday, August 29, 2008 at 12:33 AM in Economics | Permalink  TrackBack (0)  Comments (13)


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