The Way We Gentrify Now: Derek Hyra’s ‘New Urban Renewal’

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The New York Sun

Three years ago, visiting New Orleans after Hurricane Katrina, President Bush declared that “the great city of New Orleans will rise again.” This was not a new promise, however, but an old refrain. In 1960, President Kennedy went to West Virginia and said “we must encourage — through a program of federal loans and assistance, on a sound economic basis — the long-term industrial development which is the key to West Virginia’s future.” 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 while promising to make places prosperous may be good politics, it is rarely good policy. The job of government is to enrich and empower the lives of people, not to make sure that there is more economic activity in Appalachia or Detroit or the foothills of the Rockies. If firms are more productive in New York City or Silicon Valley, then why is it sensible to bribe companies to move somewhere else, 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. How much good did the hundreds of millions of dollars spent on rail systems in Detroit and Buffalo do for the disadvantaged children growing up in those cities? 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” (University of Chicago Press, 224 pages, $22.50) examines two neighborhoods, New York’s Harlem and Chicago’s Bronzeville, where increasing prosperity harmed at least some of the long-standing residents.

A dynamic private sector, not government largesse, has made New York and Chicago increasingly prosperous places over the last 15 years. The worldwide economy has increasingly rewarded being smart, and you become smart by being around other smart people. The density of New York and Chicago attracts knowledge-intensive industries that thrive because of the proximity to people and ideas that occurs in big cities.

As these cities have done well, demand for space has exploded. We see rising demand in the skyrocketing price of space in Manhattan and in the cranes that seem to be a permanent feature of Chicago’s Lake Shore Drive skyline. Booming demand has also increased the desire among middle-class people to move to formerly poor areas such as Harlem and Bronzeville: 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 Harlem and Bronzeville 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’s public housing reforms have been gentler, but Gotham 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. He starts the book by describing Lashanda, the owner of a Laundromat in Harlem. She is initially hopeful about the economic growth going on around her but, on the second page, we learn that Lashanda lost her business because her landlord wants to rehabilitate her space and raise the rents. The best statistical research on Empowerment Zones, done by Patrick Kline at Yale, delivers a similarly 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 New York should hope to go back to bleaker times or 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 Empowerment Zones and Chicago’s destruction of public housing projects. Some Chicago projects, such as the Robert Taylor Homes, 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. Empowerment Zones are even more problematic. They do increase employment, but at a high cost. Those funds could surely find better uses in Joel Klein’s hands, improving the education of the poorest New Yorkers.

While Mr. Hyra’s heart is with the displaced tenants, he is wise enough to refrain from mixing research with policy advocacy. He does not render a verdict on Empowerment Zones or public housing or gentrification. Instead, he gives us an interesting and nuanced picture of how urban change impacts people’s lives, and 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.

Mr. Glaeser is the Glimp Professor of Economics at Harvard, director of the Taubman Center for State and Local Government, and a senior fellow at the Manhattan Institute.

The New York Sun

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