gentrification and the economics of plunder

06 Mar 2015

These classes, according to the degree of enlightenment at which they have arrived, may propose to themselves two very different ends, when they thus attempt the attainment of their political rights; either they may wish to put an end to lawful plunder, or they may desire to take part in it.

In 1850, Frédéric Bastiat wrote his famous work, The Law. This book centered on his observation that legal frameworks, and the violence used to give them weight, were being used to pursue not simply the application of justice, but increasingly the pursuit of what he called “legal plunder” – the act of using coercion to redistribute property. This distinction is emblematic of a great divide between how people remedy our various societal ills, and the above quote succinctly summarizes this divide. There are those who see legal plunder as a problem in and of itself, and there are those who, for better or worse (and with a hefty dose of egomania), don’t like where society’s boat is going, and are simply hoping to get their hand on the tiller. It goes without saying that I fall in the former camp, and I’m writing this to explain my critical take on the discussion around gentrification in my city to date.

I have a friend who lives in San Francisco, who I occasionally keep abreast of the goings-on in Nashville, and she often casts an amused eye on our growing pains. For someone who lives in SF, our housing crisis seems downright quaint, by comparison. Larger cities have been undergoing this process for generations – San Francisco itself is undergoing another in a seemingly endless series of transformations. For a peek into the sort of future that awaits us (if we continue on our current path), please read this article. Read all of it. Understand how they got there – how each iteration of policymaking was another layer on the ball of wax. This phenomenon is not new, and I have yet to see a proposal for our city that hasn’t been tried a dozen times over in cities like SF, with dreadful results. (Seriously, ask anyone from San Francisco about Prop 13 sometime - there are plenty of people there with dumb opinions on it all too)

But before we get into the proposed solutions, what is the actual problem? What is gentrification?

Amidst all the debate in Nashville, I haven’t seen an article that defines it particularly clearly (at least, not on purpose). Because I couldn’t really even find a coherent summary of the actual problem, I asked, on twitter, a while back (with a clear agenda of some subsequent socratic questioning in mind). Among the myriad responses, you can see a lot of common ideas: “rich people kicking out poor people”, “white people kicking out black people”, “it’s simple progress”, “developers are evil”, and so on. These are glib answers from people with tongues half planted in cheek, but they do pretty accurately represent the depth to which we probe the issue (i.e. not very). Personally my favorite glib definition is “change I don’t approve of”. But I digress. For the purposes of this conversation let’s broadly identify two (of many) camps of people who can be affected by the various forces that coagulate under the term “gentrification”: there are lower/middle-class (often minority) people who are literally forced financially to relocate their home, and there are people who dislike changes to the “character” of their neighborhood. It’s the former that I am primarily interested in – often this category overlaps with the latter, but just as often, the latter are indirect beneficiaries of the gentrification they so revile.

Nashville’s media is, naturally, shining a light on the issue, albeit obliquely. A brief tour of some of the more recent pieces on the problem, focusing specifically on how they frame/define the problem and what they propose as a solution:

Steve Haruch, “High Rises vs. Honky Tonks”

The Problem: a heightened focus on growth has raised property values, which developers are capitalizing on, and Nashville is losing its soul
The Solution: ?? (I think Steve’s article was more just a sad lament than a prescription)

JR Lind, “Priced Out of Nashville”

The Problem: Nashville is desirable (“It City”) – people that came to Nashville for low cost of living can no longer afford to live here.
The Solution: Not rent control, possibly more affordable housing, mostly Nashville will become so expensive that it will lose its allure and the problem will solve itself. (I think JR had a swiftian proposal for a wall at one point, but I can’t find it.)

Abby White, “Everybody knows Nashville is hurting for affordable housing. What are we gonna do about it?”

The Problem: “rising property values also mean rising property taxes — and higher costs all around” (direct quote)
The Solution: Abby here covers a variety of recent suggestions: NOAH’s three-point plan: “preserve and produce affordable housing through recurring funding for the city’s Barnes Housing Trust Fund, inclusionary housing policies and creative uses of federal, state and local funds. Second, offer means such as home repair assistance, property tax relief for longtime residents and homeowner education to prevent people from losing their homes. Finally, create a structure of accountability for affordable housing needs.”

Bobby Allyn, “As high-dollar houses crowd onto tiny lots, teardown fever is sickening neighborhoods across Nashville”

The Problem: Old houses are getting torn down and replaced by newer, more expensive ones (roughly)
The Solution: affordable housing requirements for developers (via interviews with residents)

James Fraser and Amie Thurber, “Nashvillians should have the right to stay put”

The Problem: One third of households in Nashville do not earn enough to afford the market rate housing available in our city.
The Solution: Mostly the same as NOAH’s stated ideas above.

Lots of words, but very few new ideas. In general, the proposed solutions generally tend to revolve around a few core policy ideas: means-tested inclusionary zoning requirements that mandate lower rent for certain income brackets, and property tax “relief” for certain categories of residents (a brief moment of lucidity here). They are essentially legislative band-aids that ignore the root of the problem, and simply hope to carve out exceptions to remedy a short laundry-list of perceived ills. They’re laudable attempts, or at least they would be, were there not so little evidence that any other city has had any measure of significant success with them.

And yet, despite the aura of bewilderment pervading the discussion of the roots of gentrification, the actual, literal problem is right before us, and it’s tremendously simple and terribly direct: property taxes are forcing people out of homes they own, or rent. Property taxes raise the barrier to ownership, and disincentivize (or essentially prohibit) continued ownership. That’s it. But actually talking about this is oddly verboten – even discussion of property taxes as a problem at all are in the context of temporary, limited and selective “relief” for the taxation. It’s taken as a given that property taxes exist and must exist – a sacred thing; a veritable force of nature. But, they’re not, and they aren’t a fact of life – not any more than gentrification is, and they are two sides of the same coin. They are the cause of this phenomenon: the literal plunder of one party by another, acting collectively. There is no magic in this world, only the actions of human beings and their consequences. You cannot turn a blind eye to the source of the problem while simultaneously condemning it. If you believe that property taxes are as much a certainty as death, you are supporting the process of gentrification. If you believe that the moral way to administer human activity is by the action of elected representatives who direct this coercive plunder, you are the gentrifier.

So what to do? This is where you expect, I assume, that I will deliver my Grand Solution. I don’t have one. How could I? It’s quite a mess we’ve all made of things, really. The morally correct course of action is, of course, to do nothing (Literally, I mean: dismantle and/or ignore the system of coercive regulation). Barring that seeming impossibility, the opponent of gentrification should consider the next best thing: reducing the imposition of property taxes on the owners of valuable property. I realize the phrase “owners of valuable property” in your mind will conjure the developer fatcats in their infinite expanses of high-rises, but in this context I literally mean the people we are (supposedly) concerned about protecting: the lower-middle class, often minority, property owners and renters who are literally forced out of their homes.

Will there be negative externalities? Yes. Will there be unintended consequences? Yes. Will we have to figure out a better way to fund our daycares-slash-prison-camps schools? You bet. Will upper class accumulated capital find loopholes and exceptions to maximize their acquisition of land and squash any hope of easing the little guy’s tax burdens? Probably, yes. This is a horrible house of cards we’ve built and dismantling it without hurting people is difficult, if not impossible. It may be an awful and impossible problem to detangle, but you cannot blunder around pretending, wide-eyed, that no one knows what the source of the problem is. You know what the problem is. Fix it, or get out of the way. If we believe, as James Fraser and Amie Thurber claim to in their Tennessean op-ed, that people “should have the right to stay put”, then by all means give them the right: the right to own and retain property.