Rational Behavior in an Irrational World
Edward J. Dodson
GroundSwell, July-August 2005]
For much of my professional life, my colleagues and I worked to
design and implement initiatives to bring people back into cities.
Our efforts were described as "redevelopment" or "revitalization",
and with the expenditure of enormous sums from public and private
sources, we experienced a degree of success. One lesson learned over
several decades was the importance of forging public/private
partnerships and involving community residents. The relationship
between neighborhood revitalization and employment and economic
vitality in the central city is a synergistic one, as you know.
Today, the central districts of many cities have rebounded from
their lowest points of disinvestment and out-migration of the late
1970s. There are many reasons this has occurred, reasons beyond the
collective, structured efforts of everyone associated with
redevelopment efforts. Demographics plays an important role.
Attachment by individuals to historical landmarks and tradition
plays an important role. Changing land values and the expectation of
future changes play an important role.
We know the typical story of the urban pioneers, individuals who
move into neighborhoods where some of the housing stock was once
grand but has suffered from decades of deferred maintenance and even
abandonment. Others, including artists, looking for inexpensive
lodging and spaces to pursue their interests, are attracted to empty
industrial buildings. After a decade or so of such individual
efforts, public agencies begin to target these neighborhoods for
larger-scale revitalization. Investors willing to speculate on a
future accelerated pace of rising land values acquire and hold
properties, waiting for individuals or developers to offer them a
price yielding high gains. Eventually, some neighborhoods become "gentrified",
and long-time residents particularly lower-income renters are
forced by rising housing expenses to leave. If property assessments
are adjusted according to changing market values, many lower-income
homeowners also find themselves unable to absorb rising property
taxes. They are forced to sell; and, even though they experience a
considerable gain, they must find housing elsewhere. People of
modest means are more heavily dependent upon the supportive
structure of a close-knit community; so, moving to a new
neighborhood or town is often a traumatic circumstance. The
redevelopment community has made some attempts to soften these
problems but the scope is far greater than the resources employed.
The turnaround in many of the older U.S. cities has now reached
the stage where only the well-to-do will soon be able to afford
urban living. Few new or rehabilitated housing units are being
constructed that lower-income households can afford. Many of the
large residential homes once converted into apartments for four or
five families are being rehabilitated for single-family occupancy.
Where are our working poor going? A recent report issued by the U.S.
Bureau of the Census indicates that the nation's largest cities are
again losing population to the suburbs. Moderate-income households
and newly-arriving immigrants are looking to surburban areas for
employment and for affordable housing options. With the median price
of housing approaching $300,000 or more in cities such as San
Francisco, Boston, Chicago, Minneapolis or Washington, DC, leaving
the city is a rational choice.
According to the Bureau of the Census, nearly 70 cities with
populations over 100,000 have experienced population declines since
2000. In some instances, people are forced by financial
considerations to leave a region entirely. The distance one might
have to go to find affordable housing is more often than not likely
to be outside any reasonable commuting distance to work locations.
Public transit options often do not exist at all.
The entire New York City metropolitan area is one of the nation's
major exceptions to the above trend. The major reason is that New
York City's five boroughs are essentially cities within a city, each
with its own rate of growth, housing stock, bases of employment, and
great ethnic and cultural diversity. Manhattan, of course, has its
own attractions to those who can afford to pay upwards of $1 million
for a modest unit in a cooperative. Harlem is being rebuilt and
rehabilitated one building and one block at a time increasingly for
an ethnically-diverse population of professionals. Brooklyn is
experiencing what can only be described as an urban renaissance, and
the vast tracts of empty land that twenty-five years ago
characterized huge parts of the borough are blossoming with
mixed-use development. Across the Hudson River in New Jersey, cities
are rebounding in response to very similar demographic trends.
In the Philadelphia region, where I reside, we continue to
experience sprawling, but "negative" growth. The city is
still losing more people than it is attracting, although those
moving into the city tend to have higher incomes than those leaving.
The inner ring suburbs have an aged infrastructure, already high
property taxes, and housing prices too high for most families with
young children to afford. So, sprawling development continues, even
as established suburban communities organize to preserve what is
left of remaining open space. In some parts of Philadelphia, a high
percentage of residential properties are being purchased for
speculation by out-of-region investors, raising concerns among
existing residents over the arrival of transient renters. Another
important change is that the City of Philadelphia is now only one of
many regional centers of employment and commerce. City residents are
as likely to commute to jobs outside the city as suburban residents
are to come into the City to work. These days, gridlock on the
highways occurs in all directions at all times of the day.
At the end of January of 2005 I left my professional life behind
and joined the demographic group of retired persons. I have resided
in the New Jersey suburbs of Philadelphia for nearly twenty-five
years, commuting everyday into the City by commuter train. Back in
1983, when my wife and I purchased our first home together, we
bought a modest colonial-style home for $86,000. Interest rates were
around 13 percent then, but were soon on their way down. By 1987,
when we decided to look for a somewhat larger home on a quieter
street, the land market had returned to its upward climb, and we
were able to sell our property for $119,000, purchasing our second
property for $152,000 (essentially putting the entire gain into the
new acquisition). Today, we are both the beneficiaries and victims
of the upwardly spiraling land market. The current market value of
our property has climbed to nearly $400,000. However, our annual
property tax bill has also climbed to around $8,000. At the same
time, our household income is down dramatically. Retirement tends to
do that for most people. We may soon be looking to "downsize"
to a smaller property or relocate to an area where property taxes
are less burdensome.
Our situation is hardly unique. Here in New Jersey, owners of
primary residences led by a small army of retirees who have the time
and energy to petition state government have been pushing for a
state constitutional convention to force an amendment to the
constitution limiting property taxes. These are people who have
lived in the same neighborhoods and towns for decades and find
themselves being forced by rising property taxes to sell out and
move to somewhere they have no desire to be.
Virtually the lone Common Grounder here in southern New Jersey, I
have done what I can to ensure that if there is a constitutional
convention, that the case for restructuring of the property tax to
exempt property improvements from the tax base is heard. Now that I
am among the retired, perhaps my efforts will have greater effect.
Being rational in an irrational world often puts one in a space
occupied by only a few others; often there are no others.