Research paper

8

Growth Machine

What’s happening in San Francisco is not an anomaly, but simply one of the most extreme examples of what’s happening in nearly every city in the United States. President Ronald Reagan cut taxes on the rich from around 70 percent to about 30 percent, and, along with cuts to spending on housing and transportation at the federal level, that’s forced cities to figure out how to fund themselves. As we saw in Detroit and New Orleans, that means cities are now trying to attract as many rich people as they can in order to feed their budgets for infrastructure, education, pensions, and everything else. And because cities must borrow heavily to do these things, they are beholden to ratings agencies such as Standard & Poor’s, which determine whether a city is financially healthy enough to take out loans or too risky an investment.

But gentrification today goes beyond an accounting trick. It’s become a theory of governance that places the needs of capital over people. One could argue that a poor city such as Detroit might need gentrification to fill its budget gaps. But what about San Francisco? The city doesn’t need to keep attracting rich people; it was not in economic crisis before the tech wave crashed on its shores. The city’s budget was already relatively balanced before the tech boom. Yet city administrators keep zoning for more condos and more high-rise office buildings and handing out tax breaks to companies; its mayor keeps courting the big tech players at conferences and in corporate boardrooms as if San Francisco were desperate for their money, even though the city is expected, at least by one estimate, to have a $10 billion budget surplus by 2017 . This is the city as growth machine.

By now, we’ve come to expect that economic growth, at all costs, governs most industries and businesses in America, from finance to oil to real estate. And we’ve seen what happens when those sectors are left with little to no regulation. But it is only in the last few decades that economic growth has become the driving force in the governing of cities, to the exclusion of every other metric of well-being. Mayors are now often elected on the idea that they will run cities like businesses. In Urban Fortunes , their foundational work on the economies of cities, urban theorists John Logan and Harvey Molotch argue that the people running American cities no longer care about affordability, a city’s ability to educate children, or the happiness and health of its residents; rather, they are only interested the amount of money a city is able to generate. This focus is not the result of a philosophical bug that’s somehow spread to the brains of city managers everywhere. People such as Richard Florida make the city-as-business philosophy seem appealing, but there’s something bigger going on. Logan and Molotch argue that the city-as-growth-machine is an inherent feature of late capitalism in the United States. Cities, more than being places for people to live, have become ways to produce, manage, attract, and extract capital.

Under capitalism, there’s an inherent tension between what Marxist academics call “use value” and “exchange value.” Use value means the value a place is given by being useful to people—because it houses them, because it gives them a sense of community, a place where they can work, a sense of identity. Exchange value is a place’s potential economic worth. In a society in which land can be bought and sold, every place has both a use value and an exchange value. The inherent problem with this setup is that the poorer you are, the more likely it is that places that provide you with use value don’t offer an increased exchange value for anyone else. Molotch and Logan point out that in the heyday of urban renewal —when highways and housing projects were forced on top of low-income neighborhoods, displacing tens of thousands—the main metric for deciding where these projects should go was not crime, education, or the health of its residents, but whether those areas could be used for more profitable things. Detroit destroyed an area of the city based on the fact that the area’s residents took more tax revenue in the form of government services than they produced in the form of property taxes. And while it’s not usually as explicitly stated as it was in Detroit, poverty and race are often the lines along which infrastructure decisions fall. There’s a reason new highways and new industry go in poor, often black and Hispanic neighborhoods: sections of cities with lower real estate values have less tax base to be destroyed. Pushing a highway through a rich neighborhood wouldn’t only cause more opposition, it would lose a city more money.

Gentrification can be subtler than ramming a highway through a neighborhood, but its effects and—in the logic of the growth machine—its intents are often similar: when a poor neighborhood is viewed as having more potential for profit, politicians and industry work hard to change how that neighborhood is used so as to increase its exchange value. Let’s take Leticia Rios’s house as an example. Its use value is that she can live there, raise a family, and build a community in San Francisco. Its exchange value is that it’s worth much more without her in it.

In urban planning circles, use and exchange value are not controversial terms. Conservative economists and planners call the process of exchange values trumping use values “highest and best use,” the idea being that amenities and residences that are most profitable will naturally find their way into the desirable neighborhoods. In market logic, housing poor people at the center of a city is not a “highest and best use” because it is not as profitable as housing rich people or a bank at the center of a city. Even rich gentrifiers embody both use and exchange values. But the richer you are, the less likely it is that the use values of the land you use and the exchange values of it will be in conflict. A rich person gets many of the same use values out of a city as a poor person might: a place to live, community, identity. But in an era in which proximity to a city center heightens exchange value, gentrifiers simply have a better leg to stand on. “ The crux of poor people’s urban problem is that their routines—indeed their very being—are often damaging to exchange values,” Molotch and Logan explain.

This is capitalism’s constant urban conundrum: what makes cities profitable is inherently at odds with the needs of the poor and middle classes (who are needed for a city to function), and centrally located land has inherent value if it can be made amenable to the rich. Gentrification may be a new expression of this conflict between land value and the needs of the poor, but it’s a problem as old as capitalism itself. Friedrich Engels essentially predicted gentrification in 1872:

The expansion of the big modern cities gives the land in certain sections of them, particularly in those which are centrally situated, an artificial and often enormously increasing value; the buildings erected in these areas depress this value, instead of increasing it, because they no longer correspond to the changed circumstances. They are pulled down and replaced by others. This takes place above all with centrally located workers’ houses, whose rents, even with the greatest overcrowding, can never, or only very slowly, increase above a certain maximum. They are pulled down and in their stead shops, warehouses, and public buildings are erected.… The result is that the workers are forced out of the center of the towns towards the outskirts.

In other words, Engels was saying, in a society in which land is privatized and can be made more and more profitable, the low-wage worker poses a dilemma for those who own and control land: even if jammed in overcrowded high-rises, poor people can only afford cheap apartments, and cheap apartments do not produce a lot of profit, or at least not as much as pricey ones do. Market logic dictates that the most profitable land (land near city centers, transportation lines, parks, etc.) goes to more profitable uses. Is there a conscious conspiracy to do this—to replace low-wage workers with higher-earning ones? It’s not necessarily as deliberate as that, and it doesn’t need to be in order for the system to have devastating impacts on the poor. Rather than the effect of individual or institutional actions, gentrification is a logical consequence of a system in which real estate is viewed as an unrestrained commodity. In cities that function as growth machines, where economic growth is prized above all else, the needs of the poor and middle class are eclipsed by the desire to inflate the value of land.

Late nineteenth-century theorist and activist Rosa Luxemburg hypothesized that under capitalist economies, cities would inevitably be used as ways to absorb capital—that in systems in which there is surplus money floating around (i.e., a society with rich people), cities become a mechanism, like luxury goods, to open the pockets of the rich. Luxemburg saw grand architecture, monuments, parks , and beautiful streetscapes as ways to attract the rich and beef up a city’s tax base. In that way, those features of cities were the first version of Richard Florida’s urban amenities. We’re still doing the same thing; we’ve just replaced statues and plazas with coffee shops, streetcars, and art galleries. They’re all just ways to boost the value of the land and to convince people with disposable incomes to come spend their money.

The problem with gentrification is it’s a more complex, less obvious form of capital attraction, destruction, and creation. While urban renewal, the suburbanization of cities, and other forms of capital creation are easy to spot (a highway built through a neighborhood is a relatively obvious event), gentrification is more discreet, dispersed, and hands-off. As Rebecca Solnit writes: “ Redevelopment is like an oil spill , with a single cause and a responsible party; gentrification is like air pollution, a lot of unlinked individuals make contributions whose effect is only cumulatively disastrous.” Just like air pollution, gentrification may come from disparate sources, but those sources are simply signs of a larger, underlying system. With air pollution, that system is an oil-based economy; with gentrification, it’s a real-estate-based economy.

The dispersed nature of gentrification could explain why gentrifiers seem unconscious of the desires that undergird their move to a neighborhood, the role they play in displacing people, or how to stop it. In my experience talking with gentrifiers, it’s not that they don’t care about what they’re doing; it’s that they don’t know what they’re doing. They see everything as an individual choice (“I moved here because it was affordable and there’s a good coffee shop”), not as a symptom of a process with definable causes. But this ignorance naturally benefits those who profit from gentrification. What would happen if gentrifiers saw themselves not as consumers but as active members in a community, or as actors in a larger system, able to fight against what enables their presence to be a harmful one?

While gentrification is an issue in nearly every industrialized nation these days, it is a crisis, displacing tens of thousands, only in countries without sufficient housing regulation. In other words, it comes down to policies and politics. You could draw a predictable inverse graph with the amount of displacement on the Y-axis and the strength of progressive housing policy on the X-axis. The United States would be first, with the most displacement and the least progressive policy; England and Canada, countries where land markets are more regulated but are going through crises thanks to recent conservative political wins, would be next; after that would come the capitalist countries with a socialist bent (Sweden and Germany, for example); and the most socialized countries, with the least displacement and the most progressive policy, would be last.

In nearly every other industrialized nation besides the United States, there is near-consensus that purely private land markets will not meet the needs of the poor, and so measures have been taken to ensure that at least some land remains off the market or subject to regulations that make it affordable. In Hong Kong, for example , which has economics that mirror those of other global cities such as San Francisco and New York, 60 percent of all new construction has been set aside for low-income people. In Sweden, local governments have much greater control over land use decisions. In Stockholm, virtually every piece of undeveloped land is owned by the municipal government. In Berlin, which is gentrifying relatively rapidly for a European city, legislators recently approved a law capping new tenants’ rent at a maximum of 10 percent above the area’s average rent, so landlords cannot inflate rent as soon as an apartment becomes vacant, and have little incentive to evict long-term tenants. Though the governments of Sweden, Hong Kong, and Germany are by no means anticapitalist, they have accepted a truth that few in the United States are willing to grapple with: unregulated capitalism cannot provide a complete solution to the housing question. There are only 6,000 units of public housing in all of San Francisco, a city of 864,000 in which thousands are being displaced each year. We lose 10,000 units of subsidized rental housing a year in this country.

Housing for the poor in the United States arises largely through happenstance, not through any kind of planning. It is never the priority for growth-obsessed city or state governments. Less-profitable land goes to the poor. If that land happens to be in inner cities, as it was in the 1970s, so be it. If it happens to be in the suburbs, as it increasingly is, then the poor must move there.

This freewheeling system of real estate capitalism means that centers for capital and centers for culture are always shifting. The poor, artists, and activists, who are never stably housed in this country, are constantly fleeing the wave of capital searching for its rate of highest return. Every “golden era” for culture and art in cities—for example, New York in the 1970s and San Francisco in the 1960s—was possible only because artists and activists were able to find cheap real estate in those cities. Put another way, the use value of New York and San Francisco for artists and activists in those years—that they had creative communities, were tolerant of “alternative” lifestyles, and had public transportation networks—just happened to line up with exchange values favorable to low- and middle-income residents. As soon as the exchange value of land in New York and San Francisco changed, the artists and activists were out. Under our current system, the exchange value of places is in constant flux, and so artists, activists, and other low-income people will always be pushed around. That’s why Sun Belt states such as Florida, where land is much cheaper, are currently seeing an influx of poor people, and why artists seem to be fleeing from New York to places such as Detroit and New Orleans (and then to the next “up-and-coming,” even cheaper places).

If land markets in the United States remain largely unregulated, or regulated in favor of higher and higher exchange values, then we can expect this process of displacement via heightened exchange value to continue ceaselessly. Capital will constantly find places with large enough rent gaps (where land is cheap and can be made more expensive) to gentrify, and the people who were able to live on that cheap land will be forced to move, settling (but only temporarily) in places with lower exchange values.

I often get asked why so many natives in New York see every new coffee shop, bike lane, or apartment building as a bad sign, why we’re so “anti-change.” As I was writing this book, New York mayor Bill de Blasio proposed a new streetcar line that would go right by my house, and my first thought was, “Well, guess I have to move.” Even if they don’t call it gentrification, and even if they don’t understand the economics underlying it, I think people have subconsciously learned the consequences of an unregulated land system: a coffee shop is not just a place to get a cup of coffee, and a new streetcar is not just transit. Both are signs that your neighborhood will all of a sudden be valuable real estate, and therefore you might not be able to live in it. People in other cities told me they felt something very similar. Anabelle Bolaños said she used to welcome every tree planting in the Mission, greet every street beautification project as a chance to make her neighborhood nicer. The Mission could use more trees, she used to think. “I used to be hella friendly,” she said. “Then I started to feel like I was taking the smallpox blankets.”

Of course poor neighborhoods should have trees and nice streets and public transportation. But under our current land use system, upgrading a neighborhood almost always signals displacement. Only if we institutionalize a system that keeps some land affordable to the poor, or at the minimum if we provide for people who cannot afford to rent when land gets expensive, will residents of cities in the United States become more stably housed. To a certain extent, the United States already does this: public housing is a way of keeping land affordable no matter what happens around it, and the Section 8 program is a way to subsidize rents for people who cannot afford what the market dictates they pay. But both of these programs are woefully underfunded and mismanaged. In most cities, waitlists for Section 8 vouchers are years long. Section 8 also doesn’t challenge the fundamental problem of rent increases. Rising rents mean Section 8 covers less and less of each city, and so the poor are pushed farther and farther out.

The same goes for public housing. New York is the only city in the United States with a significant public housing stock left, but even in New York there’s not enough of it, and the current stock is in such disrepair that the city now plans to lease parking lots and grasslands surrounding public housing to private developers to build a mix of market-rate and affordable housing (though none of the apartments will be as affordable as traditional “project”-style housing). Our approach to housing in this country is scattershot at best.

If we are serious about moving toward a saner housing future, the options in terms of federal policy are relatively clear: we can prevent land from becoming subject to market forces, either through government ownership of land (housing projects) or through heavy regulation (rent or land-price control), or we can prevent the ever-increasing value of land from displacing people (programs such as Section 8 vouchers would fall in this category of solution). Instead, we do almost nothing and hope the market works it out. Without major new regulations, we can expect what’s happening in San Francisco to continue in virtually all major US cities. In the same way that the suburbs were once inaccessible to the poor, in the near future American cities will become gilded jewel boxes, and the exodus of the poor to the suburbs will continue unchecked—that is, until the rent gaps in cities become too small to make gentrification profitable, and a new form of spatial filtering begins.