albeit more slowly than bullets

Matt Yglesias, with whom I largely agree on issues of urban planning, smart growth, and density, nevertheless elides something very important when he writes:

Some of this may reflect a misunderstanding. If Gudger is worried about taxes, then she’s presumably a homeowner worried about an increase in property values that would actually be pretty lucrative for her. But something like 57 percent of D.C. residents are renters, and it’s almost certainly more than that in poorer communities. And those renters are correct to think that improvements in neighborhood-level public services and amenities will in many cases be against their interests. That’s a very unhealthy political dynamic. Disagreement is a natural part of democracy, but disagreement about the desirability of things getting better is a symptom of a larger policy failure. After long decades of urban decline, cities that are once again growing need to think about creating housing abundance not just niche programs for the poorest of the poor. A better city that more people want to live in needs to sound like a good proposition—like it means more jobs and a broader tax base than can support more services—rather than an engine of displacement.

Here’s the thing – if you are a homeowner in a once-poor neighborhood that is now rapidly gentrifying, you probably have received a windfall. If you purchased a home in Shaw in a year beginning in “19,” you’ve probably seen a nominal return on investment in that time in the several-hundred-percent range. The complicating factor is that all that gain is in a single, (mostly) indivisible and highly illiquid asset and that, while your income likely did not increase by several-hundred-percent, your property tax bill sure did. So if you’re a working class probably-black person  who bought a house in DC for less than $100,000 in the 80s that’s now worth $500,000 thanks to drastically lower crime and Metro and Big Bear then in one sense you won the lottery, but the only way to collect your winnings is to leave your home and community. For a lot of people, that’s quite the catch.

And it’s not so obvious that there’s anything you can do about that. A cap on yearly property tax increases would only mitigate the problem while creating perverse incentives for policymakers. A shift from a property tax to a land tax wouldn’t change the fact that it is, in fact, the land that increased in value. Re-zoning for higher density is a good idea but will also, as Yglesias himself has noted, make the land even more valuable not solving the problem. Something like Chicago’s Tax Increment Financing keeps the benefits in the community but doesn’t change the dynamic. In the end, without some very direct, kludgy, and in many ways counter-productive interventions into the general system, when a neighborhood sees a large and rapid increase in desirability you’re probably going to scatter the incumbent residents whether they rent or own.  And while you have probably created a large net improvement in social welfare, there’s still a substantial and difficult-to-quantify cost in lost communality that’s hard to recoup.

The strangeness of the current situation is driven by what was, essentially, a one-two punch of political upheaval and a lead epidemic that made what are, fundamentally, very desirable neighborhoods temporarily very undesirable. When those factors largely dissipated and you toss in something like a shiny new subway we were always going to find ourselves in this odd situation. The good thing about it is that it will largely correct itself and the neighborhoods that “ought” to be expensive will be and vice-versa and then we can begin to re-establish community and more directly transfer resources from the rich inhabitants of gentrified neighborhoods and the exiles who weren’t lucky enough to have owned their home.

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