Opinion: Breaking the Cycle of Neighborhood Disinvestment and Corporate Profiteering

By Richard Marcantonio---Oakland Conduit’s Development Map is striking, not only for the number of development projects that are going on right now in the city, but for where they are located. With few exceptions, the current development boom is laser-focused in the Downtown and lower Uptown neighborhoods. 

When development shifts into high gear in one corner of a city, but not elsewhere, we can be sure of two things. First, the development frenzy is driven by the search of capital for profits, not for the benefit of existing residents. And second, the excluded neighborhoods are in the process of further neglect so that, one day, they too may be equally profitable places for capital to invest.

There’s also an important story here about dramatic changes in the role of local government, not just in Oakland, but nationally. Today, local government is expected to operate as a business in order to promote the interest of business. The lesson is that residents and communities must retake and reorient local government, so that it can be wielded as an effective guide and restraint on untrammeled and highly disruptive capital flows.

In an eye-opening new book about gentrification in the U.S., How to Kill a City: Gentrification, Inequality, and the Fight for the Neighborhood (2017), journalist Peter Moskowitz lays out the economic theory that drives gentrification. The “rent gap” theory holds, essentially, that “the more disinvested a space becomes, the more profitable it is to gentrify.” The rent gap is calculated with two data points: the current market rent, and the rent that could be charged to new, more affluent residents. The larger the difference between current and potential rents—the rent gap—the more attractive a place becomes to capital investment.

That means that, of all the communities that need investment, a very specific subset is drawing the lion’s share of capital today. The “rent gap” is not large enough in many low-income communities to spur the inflow of capital. But others become magnets for capital, due to their potential for higher rents. Those places may be close to gentrified areas or to transit or employment hubs.

But that proximity does not tell the full picture: For the rent gap to be large enough, the current rents must also be depressed. And in this respect, virtually all low-income communities of color have this in common; they have been run down by years of neglect and disinvestment. That cycle of disinvestment is an integral part of the overall cycle of capital that, Moskowitz says, drives gentrification.

When the rent gap gets large enough and private capital begins to flow into disinvested neighborhoods, it generally harms low-income communities rather than benefitting them. The very residents and communities who suffered through the lean times of neglect become the first casualties of gentrification and displacement.  Between 1990 and 2010, Oakland and San Francisco lost 84,000 African-American residents.

The general history of disinvestment that primed today’s gentrification cycle in Oakland and across urban America should be well known. During the post-War era, both public subsidies (especially federal highway aid and favored tax status for homeowners) and private capital zeroed in on suburban development. This publicly subsidized white flight had its complement in the older cities as they were starved of investment and tax base.

That remained the case into the 1970s and early ‘80s, when a new dynamic appeared that is less widely appreciated: “neoliberal forms of government.” As Moskowitz tells it, as the federal government has repeatedly slashed funds for everything from public housing to neighborhood development, anti-poverty programs to public transit, cities have been left to fend for themselves. And that’s pushed many into “entrepreneurial” and neoliberal forms of government—encouraging the growth of businesses and industries that, in turn, encourage the attraction of high-income and upper-middle-income families into cities. … At the same time, cities have been forced into slashing the budgets of necessary but expensive parts of any good city: parks, transit, programs for the poor.

In short, the neoliberal agenda has remade government into a business with a single aim: maximizing economic growth through the free play of untrammeled markets.  As Jason Hackworth writes in The Neoliberal City: Governance, Ideology, and Development in American Urbanism (Cornell, 2006), “No longer are cities as able to establish regulatory barriers to capital; on the contrary, they are expected to lower such barriers.”

For today’s cities, serving vulnerable residents and communities is a flat-out unprofitable investment. As a result, whole segments of the population too vulnerable to hold their own in untrammeled markets are effectively deemed expendable. 

This story, then, encompasses dysfunction at two levels of government: At the federal level, the decades-long defunding of cities ripens into investment opportunities for capital, at the expense of vulnerable residents. Meanwhile, at the local level, the loss of federal funding forces cities to compete to attract and benefit businesses and investors.

With the Trump administration, and HUD Secretary Ben Carson, we have now entered a devastating new round of proposed federal cuts for housing, community development, rent subsidies, and other vital programs. The Trump budget outline includes a cut of $6.2 billion to two critical HUD programs, the Community Development Block Grant (CDBG) program and the HOME program, and a 13 percent overall cut both to HUD and to the Department of Transportation. These fresh cuts will leave tens of thousands of families out in the cold, while placing additional pressure on cities to attract corporate capital and wealthy residents.

People are beginning to mobilize across the country to resist the Trump threats, among them these new cuts to vital programs. One of those efforts is CarsonWatch, a national hub for resisting efforts to weaken critical housing and community development programs that benefit millions of families every day. CarsonWatch is committed to stopping President Trump, Secretary Carson and their Congressional allies from rolling back fair housing protections and undermining the housing security of millions of Americans. 

At the same time, we have our work cut out for us at the local level. As we come together to resist Trump and Carson, many are also keenly aware that the failure of government to protect and sustain every resident in every community, especially the most vulnerable ones, well predates the 2016 election. And we recognize that the decisions that most directly affect the housing security of families and the fair development of communities are made by local city councils, not by the Evictor-in-Chief in the White House.

To make those decisions fairly, local government must be reinvented as regulators of capital, rather than as it servants. Only then can they play their rightful role in ensuring responsible and even development across all geographies, and in making sure that investment meets the needs of low-income residents in vulnerable communities. That will not only yield fairness and shared prosperity, but will also put an end to the cycle of displacement. For, as Moskowitz concludes, “Truly equitable geographies would be largely un-gentrifiable ones.”

Richard Marcantonio is the Managing Attorney at Public Advocates.

Showing 1 reaction

  • Paul Merriwether
    commented 2017-04-21 11:23:01 -0700
    It’s time to get real!!!!

    1) Oakland is part of the capitalist society know as America. It has a responsibility to All of it’s residents & city employees to provide a safe environment with viable police , fire & civic protections. Responsibilities that include the day to day operation of the city and everything that includes worker benefits & long term retirement promises made. The city runs multiple police, fire & employee retirement programs with the age of retirement being so low. That means Oakland needs a huge tax base!!! More upscale units to provide more public services.

    2) No mention of crime in this op-ed, possibly because it is decreasing. Why is that happening? More police? Better policing? More local involvement of neighbors??? Yet betcha!!! Those gentrifer’s!!! Those individuals that were part of the White Flight are coming home to roost in Oakland. That benefits long term Oakland residents. No longer is Oakland the butt of the crime jokes in the Bay Area! No longer are our children being gun down daily in drive by’s. With them has come prosperity for many Oaklander’s. Even if they don’t realize it yet.

    3) Black families have lived in Oakland for more than 100 years, my family being one of them. Many were not renters … but home owners as we were. At one point Oakland’s Black population was over 60%. Adding in Hispanics & Asians, Whites were clearly the minority, yes due to White Flight.

    The author mentions the 1990’s, but not the fact Oakland offered homes in West Oakland (which was crime ridden) to the public for $5.00. Yes five dollars. They only had to agree to live there for 5 years and renovate the homes. Those homes now are worth more than $500,000.00!!! Who owned those homes in W.O.? Minorities!!! Who benefited MINORITIES!!!

    4) Peter Mosowitz, theory falls flat in terms of Oakland. The “rent gap” that was mentioned. When gov Brown set out to bring 10,000 residents to downtown Oakland there were virtually no rental units let alone ZERO homeownership units available. The risk factors to developers was 100%!!!
    Yet they built the units and the people did come and are continuing to come. All Oakland homeowners have benefited. The poor have also benefited from safer neighborhoods.

    Many people have been forced out of Oakland, is that a bad thing? Those on Sec 8, there were living in rat, roach infested units now live in newer safer attractive units. Still others were placed outside of Oakland in 3 bedroom, 2 bath homes. Homes with yards and real neighborhoods that are clean and safe. They’re experiencing what it’s like to be raised like “the beaver” (Live It to Beaver, TV program in 60’s).

    5) In closing … technology allows anyone with a cell phone, computer and access to the Internet the opportunity to build themselves and their families a wonderful life in America. It might not be here in the Bay Area because of the affordability factor, but that too is possible if they learn skills that provide them that type of income. However, all across America there are homes that look like Oakland’s homes that cost virtually nothing compared to Oakland’s homes or rents. Blacks, Hispanics, Asians & Whites have migrated from many places in this world willingly or unwillingly yet here we are. Oaklander’s that can not afford this area have the freedom to relocate!!!!

    Paul Merriwether