The vanishing urban middle class

America’s big cities are moving in the direction of third world demographics. A smallish upper class lives comfortably, even glamorously, accompanied by a much larger underclass, the more energetic of whom serve the upper class as waiters, housekeepers, taxi drivers, and other service occupations. The less energetic turn to welfare (not a feature of third world countries, to be sure) or crime (rampant in some third world countries like Brazil, less common in others, such as Egypt).

Needless to say, the Democratic Party, which controls all major American cities, thrives on this demographic trend. Two articles, pone from a leftist, the other from a conservative perspective, analyze the political; and economic forces powering the transformation of two cities.

Writing in City Journal, Aaron Renn discusses Chicago:

Mayor Rahm Emanuel has pumped hundreds of millions of dollars into initiatives benefiting the city’s elite, such as high-tech industry support, a $100 million “river walk” along the Chicago River, and “tax-increment financing” subsidies for major developments like a proposed basketball arena. And Emanuel has at least talked about boosting the fortunes of the poor by getting a handle on the city’s crime problem and improving education. Meanwhile, schools and mental-health clinics have closed in Chicago, and libraries have had their hours reduced, but Emanuel has so far done little talking or acting about the fate of Chicago’s middle class, which has declined remarkably over the last four decades, according to new research by University of Chicago graduate student Daniel Hertz. As the gray areas in Hertz’s map show, Chicago was mostly middle class in 1970. By 2012, Chicago’s middle class had radically shrunk, and the city was divided between upscale areas (green) and poor ones (red). Hertz has previously documented Chicago’s growing public-safety inequality gap and examined how Chicago’s upscale areas are experiencinggentrification in the public schools. (snip)

Much of America’s moneyed elite has already shifted its allegiance to the Left, especially in cities. Wealthy, educated urbanites hold generally liberal social values and can afford the higher taxes “blue” cities like Chicago impose—especially when those taxes help pay for the upscale amenities they desire. Even when the mayoral administration is less friendly, the urban elite tends to get its needs met. At the same time, the urban poor have remained loyal to the Democrats, no matter how little tangible improvement liberal policies make in their lives. And the various unions, community organizers, and activist groups that advocate for the poor profit handsomely from the moneys directed toward liberal antipoverty programs.

This is the Democratic Party’s new top-bottom coalition.

Of course Renn, and the second author to be discussed, Kim-Mai Cutler, both agree that larger global economic forces are driving this class reconfiguration. Globalization and the rise of the information economy have made highly paid manufacturing jobs a rarity in wealthy countries, while the rise of a global, scalable information economy and world financial markets has made the riches available to the educated, elite information workers much greater than in previous generations.

But the ways in which cities react to these forces makes a big difference.

Writing in Techcrunch, Kim-Mai Cutler offers over ten thousand data-packed words on the class conflict in San Francisco over the exorbitant price of housing and the efforts of some to resist, even demonize the expansion of high tech companies there. She does so from an apparently earnest, generally progressive viewpoint, but with a strong respect for data. As in Chicago, the inescapable reality is that political forces are captive to those who are hostile to development that would aid the middles classes.  For example:

 San Francisco has a roughly thirty-five percent homeownership rate. Then 172,000 units of the city’s 376,940 housing units are under rent control. (That’s about 75 percent of the city’s rental stock.)

Homeowners have a strong economic incentive to restrict supply because it supports price appreciation of their own homes. It’s understandable. Many of them have put the bulk of their net worth into their homes and they don’t want to lose that. So they engage in NIMBYism under the name of preservationism or environmentalism, even though denying in-fill development here creates pressures for sprawl elsewhere. They do this through hundreds of politically powerful neighborhood groups throughout San Francisco like the Telegraph Hill Dwellers.

Then the rent-controlled tenants care far more about eviction protections than increasing supply. That’s because their most vulnerable constituents are paying rents that are so far below market-rate, that only an ungodly amount of construction could possibly help them. Plus, that construction wouldn’t happen fast enough — especially for elderly tenants.

So we’re looking at as much as 80 percent of the city that isn’t naturally oriented to add to the housing stock.

For reasons of self-interest, housing supply is constricted by these voters and the politicians they elect. In many ways, the most interesting example is the Mission District, currently the hottest neighborhood in San Francisco, and also one of the most volatile, with a mixture of Hispanic poor people and newer tech-oriented residents who have driven real estate prices there sky-high, and who patronize the many trendy restaurants and bars in the neighborhood. Cutler is rather sympathetic toward the Hispanic residents being “displaced” (in the currently fashionable term):

San Francisco’s orientation towards growth control has 50 years of history behind it and more than 80 percent of the city’s housing stock is either owner-occupied or rent controlled. The city’s height limits, its rent control and its formidable permitting process are all products of tenant, environmental and preservationist movements that have arisen and fallen over decades.

Even back in 1967, thousands of Latino residents in the Mission — the heart of the gentrification battle today – organized and convinced the city’s Board of Supervisors to vote down an urban renewal program in the neighborhood. They saw what happened to the Fillmore — once the “Harlem of the West” — when the city’s re-development agency razed it, displacing tens of thousands of black residents and the businesses they had created after World War II.

To this day, there’s distrust and fear that the same thing will happen again, especially if it’s carried out by private developers. Advocacy group Causa Justa has been documenting this displacement through Census data, noting that the Mission has lost 1,400 Latino households while adding 2,900 white households between 1990 and 2011. In the same time period, Oakland lost 40 percent of its black residents.

Anti-tech sentiment during the first dot-com boom. (From FoundSF)

During the first tech boom, there was the Mission Anti-Displacement Coalition, which pushed for a moratorium on new market-rate housing and live-work lofts in the neighborhood. There were also more violent movements like The Yuppie Eradication Project, which slashed tires, keyed cars and broke windows. (snip)

You’ll also end up seeing demonstrations like this one at 16th and Mission, which protest a proposed 351-unit condominium development that replaces a Walgreens and a Burger King. It does not remove any existing housing or directly displace anyone.

A coalition of Mission-based non-profits and activists demonstrating against a proposed 351-unit condominium development at 16th and Mission. (From the Plaza16 Coalicion Facebook Page.)

At face value, this might not make sense. But there are a couple reasons that this happens. One is that gentrification raises the gap between market-rate rents and rent-controlled rents, strengthening the financial incentive for landlords to evict longtime tenants.

Two is that neighborhood organizations representing historically disenfranchised groups have used San Francisco’s byzantine planning process to win concessions from the city’s development elite for the last 30 to 40 years.

Unlike the wealthy waterfront NIMBYists, these communities are at risk of being displaced. If they don’t speak up for themselves, who will?

Elsewhere, without irony, Cutler mentions the fact that the Mission was originally an Irish working class neighborhood. You see Irish residents never receive the victimology status of being “displaced.” Being presumptive racists, they “fled” to the suburbs. But now that other newcomers are moving into the neighborhood, the Latinos who succeeded the Irish have some kind of claim to the place forever, one might infer.

Although she mentions Fillmore as “The Harlem of the West,” Cutler does not mention that the neighborhood was originally populated by Japanese-Americans who were actually “displaced” in a very tangible sense – forced out at gunpoint into relocation camps during World War II. By Democratic Governor Earl Warren and Democratic President FDR, incidentally.

Still, I give Cutler fairly high marks for a careful, and, given her sympathies, a pragmatic and mostly pretty fair assessment of the complexities of the urban landscape. If you have the time and interest, her article will help you understand what is going on in the capital of high technology.

Hat tip: Richard Baehr, Instapundit

America’s big cities are moving in the direction of third world demographics. A smallish upper class lives comfortably, even glamorously, accompanied by a much larger underclass, the more energetic of whom serve the upper class as waiters, housekeepers, taxi drivers, and other service occupations. The less energetic turn to welfare (not a feature of third world countries, to be sure) or crime (rampant in some third world countries like Brazil, less common in others, such as Egypt).

Needless to say, the Democratic Party, which controls all major American cities, thrives on this demographic trend. Two articles, pone from a leftist, the other from a conservative perspective, analyze the political; and economic forces powering the transformation of two cities.

Writing in City Journal, Aaron Renn discusses Chicago:

Mayor Rahm Emanuel has pumped hundreds of millions of dollars into initiatives benefiting the city’s elite, such as high-tech industry support, a $100 million “river walk” along the Chicago River, and “tax-increment financing” subsidies for major developments like a proposed basketball arena. And Emanuel has at least talked about boosting the fortunes of the poor by getting a handle on the city’s crime problem and improving education. Meanwhile, schools and mental-health clinics have closed in Chicago, and libraries have had their hours reduced, but Emanuel has so far done little talking or acting about the fate of Chicago’s middle class, which has declined remarkably over the last four decades, according to new research by University of Chicago graduate student Daniel Hertz. As the gray areas in Hertz’s map show, Chicago was mostly middle class in 1970. By 2012, Chicago’s middle class had radically shrunk, and the city was divided between upscale areas (green) and poor ones (red). Hertz has previously documented Chicago’s growing public-safety inequality gap and examined how Chicago’s upscale areas are experiencinggentrification in the public schools. (snip)

Much of America’s moneyed elite has already shifted its allegiance to the Left, especially in cities. Wealthy, educated urbanites hold generally liberal social values and can afford the higher taxes “blue” cities like Chicago impose—especially when those taxes help pay for the upscale amenities they desire. Even when the mayoral administration is less friendly, the urban elite tends to get its needs met. At the same time, the urban poor have remained loyal to the Democrats, no matter how little tangible improvement liberal policies make in their lives. And the various unions, community organizers, and activist groups that advocate for the poor profit handsomely from the moneys directed toward liberal antipoverty programs.

This is the Democratic Party’s new top-bottom coalition.

Of course Renn, and the second author to be discussed, Kim-Mai Cutler, both agree that larger global economic forces are driving this class reconfiguration. Globalization and the rise of the information economy have made highly paid manufacturing jobs a rarity in wealthy countries, while the rise of a global, scalable information economy and world financial markets has made the riches available to the educated, elite information workers much greater than in previous generations.

But the ways in which cities react to these forces makes a big difference.

Writing in Techcrunch, Kim-Mai Cutler offers over ten thousand data-packed words on the class conflict in San Francisco over the exorbitant price of housing and the efforts of some to resist, even demonize the expansion of high tech companies there. She does so from an apparently earnest, generally progressive viewpoint, but with a strong respect for data. As in Chicago, the inescapable reality is that political forces are captive to those who are hostile to development that would aid the middles classes.  For example:

 San Francisco has a roughly thirty-five percent homeownership rate. Then 172,000 units of the city’s 376,940 housing units are under rent control. (That’s about 75 percent of the city’s rental stock.)

Homeowners have a strong economic incentive to restrict supply because it supports price appreciation of their own homes. It’s understandable. Many of them have put the bulk of their net worth into their homes and they don’t want to lose that. So they engage in NIMBYism under the name of preservationism or environmentalism, even though denying in-fill development here creates pressures for sprawl elsewhere. They do this through hundreds of politically powerful neighborhood groups throughout San Francisco like the Telegraph Hill Dwellers.

Then the rent-controlled tenants care far more about eviction protections than increasing supply. That’s because their most vulnerable constituents are paying rents that are so far below market-rate, that only an ungodly amount of construction could possibly help them. Plus, that construction wouldn’t happen fast enough — especially for elderly tenants.

So we’re looking at as much as 80 percent of the city that isn’t naturally oriented to add to the housing stock.

For reasons of self-interest, housing supply is constricted by these voters and the politicians they elect. In many ways, the most interesting example is the Mission District, currently the hottest neighborhood in San Francisco, and also one of the most volatile, with a mixture of Hispanic poor people and newer tech-oriented residents who have driven real estate prices there sky-high, and who patronize the many trendy restaurants and bars in the neighborhood. Cutler is rather sympathetic toward the Hispanic residents being “displaced” (in the currently fashionable term):

San Francisco’s orientation towards growth control has 50 years of history behind it and more than 80 percent of the city’s housing stock is either owner-occupied or rent controlled. The city’s height limits, its rent control and its formidable permitting process are all products of tenant, environmental and preservationist movements that have arisen and fallen over decades.

Even back in 1967, thousands of Latino residents in the Mission — the heart of the gentrification battle today – organized and convinced the city’s Board of Supervisors to vote down an urban renewal program in the neighborhood. They saw what happened to the Fillmore — once the “Harlem of the West” — when the city’s re-development agency razed it, displacing tens of thousands of black residents and the businesses they had created after World War II.

To this day, there’s distrust and fear that the same thing will happen again, especially if it’s carried out by private developers. Advocacy group Causa Justa has been documenting this displacement through Census data, noting that the Mission has lost 1,400 Latino households while adding 2,900 white households between 1990 and 2011. In the same time period, Oakland lost 40 percent of its black residents.

Anti-tech sentiment during the first dot-com boom. (From FoundSF)

During the first tech boom, there was the Mission Anti-Displacement Coalition, which pushed for a moratorium on new market-rate housing and live-work lofts in the neighborhood. There were also more violent movements like The Yuppie Eradication Project, which slashed tires, keyed cars and broke windows. (snip)

You’ll also end up seeing demonstrations like this one at 16th and Mission, which protest a proposed 351-unit condominium development that replaces a Walgreens and a Burger King. It does not remove any existing housing or directly displace anyone.

A coalition of Mission-based non-profits and activists demonstrating against a proposed 351-unit condominium development at 16th and Mission. (From the Plaza16 Coalicion Facebook Page.)

At face value, this might not make sense. But there are a couple reasons that this happens. One is that gentrification raises the gap between market-rate rents and rent-controlled rents, strengthening the financial incentive for landlords to evict longtime tenants.

Two is that neighborhood organizations representing historically disenfranchised groups have used San Francisco’s byzantine planning process to win concessions from the city’s development elite for the last 30 to 40 years.

Unlike the wealthy waterfront NIMBYists, these communities are at risk of being displaced. If they don’t speak up for themselves, who will?

Elsewhere, without irony, Cutler mentions the fact that the Mission was originally an Irish working class neighborhood. You see Irish residents never receive the victimology status of being “displaced.” Being presumptive racists, they “fled” to the suburbs. But now that other newcomers are moving into the neighborhood, the Latinos who succeeded the Irish have some kind of claim to the place forever, one might infer.

Although she mentions Fillmore as “The Harlem of the West,” Cutler does not mention that the neighborhood was originally populated by Japanese-Americans who were actually “displaced” in a very tangible sense – forced out at gunpoint into relocation camps during World War II. By Democratic Governor Earl Warren and Democratic President FDR, incidentally.

Still, I give Cutler fairly high marks for a careful, and, given her sympathies, a pragmatic and mostly pretty fair assessment of the complexities of the urban landscape. If you have the time and interest, her article will help you understand what is going on in the capital of high technology.

Hat tip: Richard Baehr, Instapundit

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