Gentrification and the Laws of Supply and Demand

by Reihan Salam

The problem with gentrification in New York city, according to Stephen Smith, is that “the housing that the poor are losing to the rich is not being replaced.”

One could argue that this is not intrinsically problematic, as it could represent a broader demographic inversion in which U.S. cities come to resemble European cities in which the affluent live in the center while the less-affluent live on the periphery. The problem, however, is that the urban poor in New York benefit from the presence of an extensive public transportation network in the urban core. Low-wage workers residing in New York’s outer boroughs can access job opportunities relatively quickly without owning an automobile. Though New York’s low-cost inner suburbs offer more transit options than the inner suburbs of most U.S. cities, there is a steep drop-off in the quality of transit options as you leave the five boroughs, in part because density tends to decline the further you get from the urban core.

And this kind of economic diversity doesn’t just benefit the urban poor. High-wage workers also benefit from the complementary skill sets of low-wage workers, as it facilitates the outsourcing of time-intensive household production, which in turn allows high-wage workers to work longer hours. Traditionally, commuting in New York has followed a segmented pattern in which the highest-wage workers tend to reside in relatively close proximity to Manhattan’s main employment centers, thus allowing for short, which is to say less time-intensive, commutes. Low-wage workers resided in an intermediate zone that was well-served by public transit, in which commutes are somewhat longer but the cost of commuting is effectively lower due to lower wages. Beyond the city limits is a patchwork of inner suburbs populated by less-affluent workers and high-cost suburbs populated by high-wage workers, in which the quality of transit options varies considerably and many workers commute by automobile. The main advantage of automobile commuting is that the fixed cost of time is lower than it is for transit, as commuters can commute on their own schedule, leaving aside the (high) cost of congestion. 

Shifting low-wage workers from the zone that is well-served by public transit to the inner suburban zone that is somewhat less well-served by transit has a number of negative repercussions, the most obvious of which is that it raises the share of the family budget that must be devoted to commuting costs, either directly (the cost of owning and maintaining an automobile or of the more expensive transit options offered in suburbs) or indirectly (time is money, after all, and longer commutes mean less time for work, or for leisure). Money that is devoted to commuting can’t be devoted to, for example, accumulating savings, which can in turn be used to facilitate upward mobility in various ways. 

Stephen explains why this is relevant in the context of New York city’s gentrification wars:

According to data from the U.S. Census Bureau, the number of housing units in the five boroughs inched up an average of 0.5 percent annually between 2000 and 2010. That’s not even enough to keep pace with average U.S. population growth, which is about 1 percent per year. And of course, prices skyrocketed over the same time period. The median sales price for Manhattan condominiums was $681,299 in 2000, but shot up to more than $1 million by 2010 [PDF], and that was after the housing bust.

Nowhere is this gap between supply and demand more apparent than in the northern Brooklyn neighborhoods of Williamsburg, Greenpoint and Bushwick. These neighborhoods are more or less frozen in 1961, when the city’s zoning code restricted density and required parking in new construction. The vast majority of Williamsburg is zoned for row home-sized buildings. The city’s ubiquitous six-story tenement would be illegal to build in most of Williamsburg today, as would many of the neighborhood’s coveted loft buildings.

New construction sprinkled around the neighborhood stands out, but when you take into account the high ceilings, setbacks on upper floors and space that must be dedicated to parking according to the zoning code, the newest buildings almost never contain more living space than those built a century ago. [Emphasis added]

The end result has been seriously problematic for low-income and even middle-income households:

Zoned out of Williamsburg, Greenpoint and “East Williamsburg,” gentrifiers have now reached the more densely populated black and Hispanic sections of Bushwick proper.

Its poor and middle-class residents, who 20 years ago might have been able to afford apartments just a stop or two from Manhattan in Williamsburg, are now being displaced to neighborhoods like Canarsie, East New York and Jamaica, where they struggle with long commutes. It won’t be too long until they’re pushed so far from job centers in Manhattan that they leave the city entirely, contributing to the growing sense that New York is too expensive for ordinary people.

The cause of upzoning, i.e., allowing for more density in New York city’s core neighborhoods, is often characterized as an elitist project. Yet upzoning is actually a populist measure in that it preserves more affordable housing in the five boroughs by allowing new construction to absorb more of the surging demand from middle-income and high-income households.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.