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NYC: Death of a Once Great City

Deacon923 said:
Housing inflation and rentiers profiting off it has been a thing for a long time. A couple of random thoughts about it:
1. the specific issue of "gentrification" and pushing poor people out is badly overblown. Yes, it is happening in a very few neighborhoods in a very few successful cities, but it is emphatically NOT happening in the huge majority of American cities below the megalopolis class. Journalists and social crusaders are concentrated in the cities where it is happening and those voices are magnified far beyond the actual empirical data. Kind of like how a tiny minority of our workforce (coal miners or steel workers) has somehow come to dominate discussion of American industrial policy. https://www.washingtonpost.com/opinions/five-myths-about-gentrification/2016/06/03/b6c80e56-1ba5-11e6-8c7b-6931e66333e7_story.html?utm_term=.41443035ed41

2. For most people in most cities in America, the issue is not "gentrification" or pushing out the poors, it is the simple fact that wage growth has stagnated for 30 years while housing cost has continued to grow, and grow much more quickly after 2000. Winner = the rentier class. https://voxeu.org/article/home-prices-1870. The huge majority of cities do not need to institute draconian policies like rent control or low income quotas on new housing. They mainly need to find a way to get developers to build more housing, especially multifamily infill, to increase the overall supply. Not that this is necessarily an easy thing to do.

3. It certainly would help if Federal, state, and local governments taxed more of the outsize profits on real estate and redistributed it to help people afford their rent, or to provide affordable health care and education to take some other pressures off poor and middle class people. Instead, real estate profits are some of the most tax-favored investments you can make. This is another example of supply-side economics failing to trickle down.

NYC is a special city with a lot of truly unique, or near-unique, issues. That's what makes it interesting.
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1. Charlotte is therefore a megalopolis. See: Cherry, NoDa, Villa Heights, Belmont, Optimist Park neighborhoods
2. It's especially difficult when material and labor costs are sky high and rising. Worked on a deal recently where there was a rush to close because the steel was going to cost millions of dollars more if they waited a month.
3. Taxing real estate gains disproportionately prevents families from moving into a bigger house and creates a disincentive to sell, which not only dampens the market, but makes it tougher to get into in the first place. Corporate gains are already taxed on the commercial side.
 
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BiffTannen said:
1. Charlotte is therefore a megalopolis. See: Cherry, NoDa, Villa Heights, Belmont, Optimist Park neighborhoods
2. It's especially difficult when material and labor costs are sky high and rising. Worked on a deal recently where there was a rush to close because the steel was going to cost millions of dollars more if they waited a month.
3. Taxing real estate gains disproportionately prevents families from moving into a bigger house and creates a disincentive to sell, which not only dampens the market, but makes it tougher to get into in the first place. Corporate gains are already taxed on the commercial side.
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1. Sure, Charlotte is getting up towards that level, but the big difference is that Charlotte's outward growth is not yet geographically constrained like NYC (Manhattan esp.) or San Francisco. Still I bet a rigorous (i.e. non-anecdotal) examination of "gentrification" in Charlotte would find pretty low levels of actual displacement.
2. Thanks, Trump!
3. Right now real estate gains are disproportionately undertaxed. Most gains can be converted from ordinary income to capital gains rates very easily and the carried-interest loophole is still wide-open. Moreover, the combined rules of partnership taxation and the now nearly-nonexistent estate tax enable rentiers to suck out large sums tax-free through debt transactions and then leave the whole thing to their kids with a basis step-up and no meaningful estate taxation. All that doesn't even get into the issue of non-taxability of gains on primary residences and whatever value is left to the mortgage-interest deduction.
 
1. And it never will because it's not next to the ocean (or Charlotte Island as Juice Crew might call it). But close-in neighborhoods like Cherry have been almost completely gentrified (with a greatly expanded tax base, btw). And the pressure on Class B apartments from the value-add side is another issue that displaces the working poor.
2. Material prices and labor have been high for some time and increasing.
3. My comment was primarily on the residential side in the first place, which is the vast majority of real estate from a volume standpoint. Do what you want with the mortgage interest deduction, but taxing transfers disproportionately is bad business and actually hurts mobility.
 
DaDeacs said:
Do you really believe this? Or just playing devils advocate? Because suggesting that we completely abandon the reasons we are the wealthiest nation in the history seems really weird. What is your thought? Lottery system like college dorms? Mandatory requirements for each building/zip codes/areas to include people across all ages, genders, income levels? I mean property/land/whatever is the oldest source of wealth in the world, much less the US - thats a pretty drastic change.
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I do really believe this. There is no one-size-fits-all approach, but some tools include land banking, land trusts, rent control, low-equity cooperatives, public housing, rent subsidies, affordability ordinances on developments that receive public funds or zoning assistance, and other options.

And you are absolutely correct that property/land/whatever is the oldest source of wealth in US. It's also the largest driver of inequality. It's one of the biggest reasons -- if not the biggest -- black people have on average 6% the wealth of white people, or why Asians earn more income than white people but have on average about 60% of their wealth. Simply owning land that appreciates adds no value to society, yet is rewarded financially. So many people have accumulated unearned wealth through inheritance and passive ownership. It's actually fairly anti-capitalist in many ways because it is anti-meritocratic

And you're also absolutely correct that it is pretty drastic, that's easily the biggest hurdle facing any change. Ownership is so deeply ingrained in the American culture that calling for changes is "wild shit". But when you ask them why, they generally say some version of "that's how it's always been". Simply being drastic, however, is not a sufficient reason to oppose something. Do you think people could imagine the Civil Rights Act just over a hundred years before it happened, just prior to the Civil War? Of course not. Institutions change and big changes require some moral imagination.

923 is right about the main driver -- income inequality, and its cousin wealth inequality. But it all circles back to housing as a commodity. I disagree with his ideas points on gentrification and need to dig further into the research of the WaPo article author.

Full disclosure, I personally stand to benefit from the status quo, like most posting here, I imagine. I work in real estate -- albeit affordable housing, but you can make big money in affordable housing. I also bought my condo cheap and it will almost certainly increase in value by a good bit.

I personally find these debates insightful because when you drill down on the issues, you get to a critical understanding of why people believe what they do. At some level, it comes down to how you view human nature (naturally selfish vs. naturally collaborative) or what you value (overall economic prosperity vs. equality). I don't think anyone here is changing their mind, but I do think it is worthwhile to work backwards into the premises and assumptions upon which we build our cases.
 
Just a little interesting data: Governing.com has some maps on gentrification. Here are links to the Charlotte map and the NYC map.

http://www.governing.com/gov-data/charlotte-gentrification-maps-demographic-data.html Charlotte: of the tracts eligible to gentrify, 15.8% actually did. In other words, 84.2% of eligible tracts did not gentrify. "Eligible" means tracts at less than 40th percentile for average home value and educational attainment.
http://www.governing.com/gov-data/new-york-gentrification-maps-demographic-data.html NYC saw gentrification of nearly 30% of eligible tracts - almost double the Charlotte rate.

It is very important to note what these maps measure and what they don't. The definition of gentrification in these maps is a product of home values and educational attainment. It says nothing at all about actual displacement of poor people. Therefore, it is completely possible that every single poor person in one of these tracts stayed put, and the change was due to new residents moving into new construction. In reality it is undoubtedly a mix of new residents moving in and some old residents moving out. However some studies have shown that actual displacement in gentrifying areas is less than 2%.
 
923, how will building more housing make housing cheaper as long as housing is an investment people can own and borrow from and sit on until they can sell for a desired price?

It would have to be heavily regulated to have the desired impact and even then possibly wouldn’t work.
 
Deacon923 said:
Just a little interesting data: Governing.com has some maps on gentrification. Here are links to the Charlotte map and the NYC map.

http://www.governing.com/gov-data/charlotte-gentrification-maps-demographic-data.html Charlotte: of the tracts eligible to gentrify, 15.8% actually did. In other words, 84.2% of eligible tracts did not gentrify. "Eligible" means tracts at less than 40th percentile for average home value and educational attainment.
http://www.governing.com/gov-data/new-york-gentrification-maps-demographic-data.html NYC saw gentrification of nearly 30% of eligible tracts - almost double the Charlotte rate.

It is very important to note what these maps measure and what they don't. The definition of gentrification in these maps is a product of home values and educational attainment. It says nothing at all about actual displacement of poor people. Therefore, it is completely possible that every single poor person in one of these tracts stayed put, and the change was due to new residents moving into new construction. In reality it is undoubtedly a mix of new residents moving in and some old residents moving out. However some studies have shown that actual displacement in gentrifying areas is less than 2%.
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It also only shows data through the 2009-2013 ACS, which is an average across those years of sample Census data.
 
PhDeac said:
923, how will building more housing make housing cheaper as long as housing is an investment people can own and borrow from and sit on until they can sell for a desired price?

It would have to be heavily regulated to have the desired impact and even then possibly wouldn’t work.
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Because when supply keeps up with/exceeds demand, prices fall?

In the big metros like NYC, demand has been outstripping supply by huge amounts for a long time.

I do think that in certain cities, the problem is so extreme and the market forces driving up prices are so strong, some kind of governmental intervention is necessary. Or for that matter, just removing government obstacles to development (i.e. strict zoning and giving NIMBYs veto power over everything) would have a significant effect. San Francisco is the poster child for this. Have you ever been there? The whole city seems to be less than 3 stories tall. There is no way to house all the people that want to live in San Francisco when the zoning codes and NIMBY's refuse to allow any kind of density increase. San Fran's population density is 18,581/square mile, NYC's is 28,211. That's a massive difference. Still, San Francisco is the 8th most dense city in the US. http://www.governing.com/gov-data/population-density-land-area-cities-map.html. If more housing were built in the core of SF, even at market values, it would relieve some pressure on the commuting areas.
 
PhDeac said:
923, how will building more housing make housing cheaper as long as housing is an investment people can own and borrow from and sit on until they can sell for a desired price?

It would have to be heavily regulated to have the desired impact and even then possibly wouldn’t work.
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That is the problem with "YIMBYs" - they want a market based solution when the market itself is the problem. Building more housing will never be a solution without regulation that decomidifys that housing.
 
Exactly. I made this point earlier in the thread and I’ll repeat it. There’s not enough supply to keep up with worldwide demand for investment particularly in large cities that drive the world’s economy.

The best solution is to make small cities and towns more attractive with good public education and wage growth.
 
PhDeac said:
Exactly. I made this point earlier in the thread and I’ll repeat it. There’s not enough supply to keep up with worldwide demand for investment particularly in large cities that drive the world’s economy.

The best solution is to make small cities and towns more attractive with good public education and wage growth.
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Sure. As I said, these problems are intractable without government intervention in the largest cities. Smaller cities should not try to subsidize this and restrict that - they rarely get it right, and mostly end up giving away the farm to politically connected developers. They should concentrate on removing obstacles to incremental growth through infill development, invest in modest quality of life improvements instead of chasing subsidized white whale developments, and concentrate on quality public education and local entrepreneurship.

I am not really qualified to opine on how NYC can make its housing more affordable. It's just a whole different scale and a whole different history from basically anywhere else in the US. It is worth noting, however, that a lot of big government interventions in NYC (see Robert Moses, et. al.) ended up making things worse for poor people, not better. So it's best to proceed with humility especially when it comes to top-down solutions.
 
Deacon923 said:
Just a little interesting data: Governing.com has some maps on gentrification. Here are links to the Charlotte map and the NYC map.

http://www.governing.com/gov-data/charlotte-gentrification-maps-demographic-data.html Charlotte: of the tracts eligible to gentrify, 15.8% actually did. In other words, 84.2% of eligible tracts did not gentrify. "Eligible" means tracts at less than 40th percentile for average home value and educational attainment.
http://www.governing.com/gov-data/new-york-gentrification-maps-demographic-data.html NYC saw gentrification of nearly 30% of eligible tracts - almost double the Charlotte rate.

It is very important to note what these maps measure and what they don't. The definition of gentrification in these maps is a product of home values and educational attainment. It says nothing at all about actual displacement of poor people. Therefore, it is completely possible that every single poor person in one of these tracts stayed put, and the change was due to new residents moving into new construction. In reality it is undoubtedly a mix of new residents moving in and some old residents moving out. However some studies have shown that actual displacement in gentrifying areas is less than 2%.
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I'm not sure what comparing Charlotte to NYC proves. We know NYC is gentrifying and it's one of the biggest cities in the world.

WRT the map, look at what is actually gentrifying. It's the close-in neighborhoods that are desirable to new arrivals or those looking for starter homes. You can also identify where the light rail line was just extended to the northeast as a gentrified area, meaning displaced residents can use the shiny new public transportation, they'll just have to use it from farther away. There are also pockets within those non-eligible census tracts that have gotten totally redeveloped, such as the Cherry neighborhood. I would also say that the pace of gentrification is increasing here.

809.png
 
But Robert Moses intended to make things worse for poor people, so that's a bad example
 
JuiceCrewAllStar said:
But Robert Moses intended to make things worse for poor people, so that's a bad example
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So do a lot of politicians and businessmen and people in power.

NYC and SF the country would be much better if more of the midwage workers took their talents to smaller cities and towns and started businesses. Universal health care and other policies that increase mobility and lower risk would help solve some of the problems in this thread.

Too many people get wrapped up in the allure of big city life. Housing isn’t truly the commodity in these areas. The life is.
 
Why live in San Francisco when you could live in Modesto ?

Is that what you're saying ?
 
big cities are also the most efficient use of energy and other resources due to density and public transit
 
JuiceCrewAllStar said:
But Robert Moses intended to make things worse for poor people, so that's a bad example
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I think it points out the fact that when big city development/infrastructure decisions are led by rich old white men, poor people of color tend to get the shaft. That is often the case even when the rich old white men are Democrats or claim to want to make things better for poor people. Solutions to these problems need to actually take into account the needs, experiences, and expressed desires of poor people. I am sure you and I agree on that.
 
Sure. Yet they have other problems we are discussing here.
 
BiffTannen said:
I'm not sure what comparing Charlotte to NYC proves. We know NYC is gentrifying and it's one of the biggest cities in the world.

WRT the map, look at what is actually gentrifying. It's the close-in neighborhoods that are desirable to new arrivals or those looking for starter homes. You can also identify where the light rail line was just extended to the northeast as a gentrified area, meaning displaced residents can use the shiny new public transportation, they'll just have to use it from farther away. There are also pockets within those non-eligible census tracts that have gotten totally redeveloped, such as the Cherry neighborhood. I would also say that the pace of gentrification is increasing here.

809.png
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Wasn't really trying to compare them, just posting some resources that I thought others might find interesting. You know far more about development patterns in Charlotte than I do. My main point in posting that data is to point out that the common definition of "gentrifying" doesn't actually measure displacement, which is what most people mean when they use "gentrify" as a pejorative term.
 
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