The Urbanist Musings of Pete Saunders

Repost: What Happens When Demand Disappears?

View of Robert Taylor Homes in Chicago.  The public housing development was demolished between 2000-2005, and efforts to replace it with mixed-income housing have proceeded slowly.  Source:
(Note: Time pressures prevent me from adding new content today.  So, I’m resurrecting a not-so-oldie-but-goodie from this past June.  Here, I explain how the near absolute loss of demand in minority — more specifically, black — neighborhoods has had an impact on cities, and stifles growth and revitalization potential.  I’m coming back to this because I’m doing some research that explores the roots of this dynamic and what’s driven it, an examination of the cities where the phenomenon is strongest and weakest, and what lessons can be learned from it.  Consider this a primer for future posts.  -Pete)

Earlier this month, Chicago Mayor Rahm Emanuel nominated Eugene Jones to take over as CEO of the Chicago Housing Authority.  Jones, with considerable housing executive experience as the head of Toronto’s Community Housing Authority and significant roles in public housing authorities in Detroit, San Francisco, Indianapolis, Kansas City and New Orleans, replaces Michael Merchant, who took the same role in 2013.  Jones will be the CHA’s third CEO in the last four years and fourth in the last eight.  Each had been embroiled in mild scandals that precipitated their departures, but all had struggled to move forward the agency’s signature initiative — the Plan for Transformation. 

I wish Mr. Jones all the luck in the world.  He has a demonstrated record of delivering on affordable housing units in Toronto, overseeing the construction of more than 7,000 units there.  Unfortunately, for Mr. Jones and his predecessors, the problem is bigger than all of them — providing new housing in areas that are in dire need of it, but lack the demand to stimulate housing production.

This conundrum is far less understood, far less studied, and impacts far more cities and people than the gentrification impact that is endlessly debated in our coastal cities.  Whoever discovers a solution to this issue will unlock the key to real revitalization in our nation’s cities.

CHA’s Plan for Transformation was put in place in 2000 by Chicago Mayor Richard M. Daley with approval from the U.S. Department of Housing and Urban Development as an ambitious effort to remake public housing.  CHA saw first-hand the negative impacts that 70 years of concentrated public housing had on its residents and surrounding communities and pursued changes to alter the physical and social landscape.  More on the Plan from CHA itself:

“By the end of the Plan, 25,000 units of housing will be renovated or built new. The Plan for Transformation functions under a Moving To Work Agreement with HUD.
The Plan for Transformation goes far beyond the physical structure of public housing. It aims to build and strengthen communities by integrating public housing and its leaseholders into the larger social, economic and physical fabric of Chicago.
CHA, through various City of Chicago departments and non-profit partners, offers leaseholders a comprehensive array of supportive services that lead to self-sufficiency, such as job training, job placement, substance abuse treatment, education, summer programs, day care, and more. Mixed-income communities break down the social barriers that formerly segregated public housing residents from the larger city of Chicago. Where there were once isolated superblocks, the street grid is being recreated to seamlessly integrate the new developments into the surrounding neighborhoods.”

 On a practical level, the Plan revolved around three elements:

  • The demolition of concentrated public housing developments in Chicago, known widely for their “warehousing” of poverty.  They were almost exclusively located in impoverished neighborhoods on the city’s south and west sides.
  • The extension of housing choice vouchers and social services to former public housing residents, offering them the opportunity to rebuild their lives in new communities and with new life options.
  • The construction of new mixed-income housing developments that would lessen the segregation of public housing residents and serve as a catalyst for revitalization in the impoverished communities.
The Plan was supposed to be completed by 2010, but has received several extensions from HUD since.  The problem?  CHA has been successful in its demolition program and provision of vouchers and social services, but the construction of mixed-income housing, even with significant federal financing behind it, has largely been a non-starter.
In other words, without market-rate buyers and renters, new construction has stalled and has imperiled the futures of the former public housing residents who would move in as well.
Where the Plan for Transformation works is, naturally, where the housing demand is strongest.  CHA tore down it Cabrini-Green development, adjacent to the Loop and the Magnificent Mile, and replaced it with thousands of housing units that cross the income spectrum.  This past April, CHA announced it was ready to move forward with the next development phase of the former Cabrini-Green site.
Sadly, other former CHA development sites do not enjoy the market demand that makes the old Cabrini site successful.  Over the years, redevelopment of the former Robert Taylor Homes, Stateway Gardens and Ida B. Wells sites, all on the South Side, has proceeded at a glacial pace — mostly because the private developers are finding it nearly impossible to get the market buyers and renters necessary to make the new developments work.
And why is this?  All too often in American cities, when black people, of any income level, move into a neighborhood and achieve a critical mass, housing demand virtually collapses.  This is true of most areas where blacks concentrate but especially so when public housing is involved.  A couple days ago, Daniel Kay Hertz mentioned a study by DePaul University’s Institute of Housing Studies that examined post-Great Recession housing price recovery in Cook County.  I find this excerpt enlightening:

“The report illustrates the impact on two hypothetical families, both of whom buy a house in 2000. The first family buys their house for $320,000, the median value properties in West Town at the time. West Town includes Wicker Park and the gentrifying Logan Square neighborhood and had a median household income in 2011 of $64,664. The second family buys a home for $85,000, the median value of properties in 2000 in Auburn Gresham, a neighborhood on the city’s southwest side with a median household income of $33,663 as of 2011.

During the housing boom, both properties appreciated substantially. But when 2007 hit, the price of a home in Auburn Gresham plummeted while home values in West Town fell less dramatically. The recovery for the West Town house started in the second half of 2011, two years before any recovery in Auburn Gresham.
Assuming both families did not take on added mortgage debt, the house in Auburn Gresham today is worth $86,500, only $1,500 more than in 2000, before the rise, bust, and rise of the market, for a rate of return of zero. Any equity in the home was built solely by paying down the mortgage principal.

Meanwhile, the house in West Town has more than doubled in value (a 119 percent increase) and appreciated to nearly $700,000. On top of any principal paid down on the mortgage, the owners have built an additional $380,000 in home equity.

Of course, this example removes all the complexities and variables of home ownership that could have changed the circumstances for these two imaginary families. But it illustrates the main takeaway: some homeowners have had the chance to build equity and wealth during the last 14 years, while others are back in 2000 where they started (other than any principal they have paid down on the mortgage).”

As a former resident of Auburn-Gresham who often tried to explain where the neighborhood was to people from other parts of the city, I can say that its problem, and other communities like it, is one of demand.  A huge slice of the Chicago region’s homebuyers and renters neglect it, and that keeps its prices low.  Conversely, many more eyes are looking at Wicker Park and Bucktown, and prices rise as a result.

From a generational perspective, this kind of disparity has had a devastating impact.  From Daniel Kay Hertz again:

“This is more than a theoretical concern. Though we often talk about racial differences in affluence in terms of income, wealth might actually be a much bigger deal. Wealth is why some people have college funds, and others don’t; why some people can retire comfortably, and others can’t. It’s why an employment or medical crisis is a major problem for some people, and a total catastrophe for others. Wealth is what keeps people in the middle class through rough patches. In sum, wealth can be more determinative of your life chances, and those of your family, than income in any given year.

Since real estate makes up a massive proportion of household wealth – more than half for blacks, and about 40% for whites – it contributes massively to the racial wealth gap. As of 2013, the median white family held $134,000 in net assets, compared to $11,000 for the median black family. And as the Washington Postcovered earlier this year, looking at what you might call the Auburn-Gresham problem in the DC suburbs, the failure of homes in black neighborhoods to hold their value and appreciate is a major force for destabilization of entire neighborhoods, not just an economic scourge for individual black households.

What makes this comparison interesting, though, is that from the perspective of the most visible housing policy debates, it’s Wicker Park that has a housing crisis.” 

Daniel is right on this one.  Our cities are gaining the attention of urbanists who are earnestly developing policy responses to one problem, without much consideration for the other. I’m still searching for a solution to a much bigger problem.

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