Understanding suburban poverty demographics (a/k/a "the times, they are a changin'")

Levittown, Long Island photograph from the Tekula Family.

Historically, poverty has been (and is still centered) in center cities within metropolitan areas because outmigration of those better off financially left behind the people living in concentrated poverty, which became even more concentrated as income dynamics within the center city became less diverse.

Today the rise in poverty in the suburbs is not just a function of a greater diversity of destination choices on the part of immigrants, it's also a function in a significant exogeneous shock to the economic calculus of the U.S.

-- Suburbanization of poverty report, Brookings Institution

Suburban development ("sprawl" etc.) has long been a function of ideas about "the American Dream" of having your land, but fueled by mass production and cheap gasoline.

When gasoline is no longer cheap, and it won't be because of increased demand on the part of emerging economies such as China and India coupled with relatively tight supplies, a real estate development economy based on constructing new houses farther and farther away from primary activity centers no longer makes financial sense.

The farther out you are the more you are at risk, both because of increases in cost of gasoline, and the repricing of housing to take into account proximity to activity centers.

Instead of a house being a primary asset within a household's wealth portfolio, it's potentially a time bomb, if located in a place that is no longer desirable.

Yesterday's article in the Post about exurban school districts going to four day weeks, "In trimming school budgets, more officials turn to a four-day week," makes this point about the North Branch school district in the Minneapolis region. From the article:

North Branch is a city of about 10,000 people 50 minutes north of St. Paul and Minneapolis. The community was booming a decade ago, attracting families in search of good schools and affordable homes within commuting distance of the Twin Cities.

But the recession knocked North Branch onto its heels. Its downtown is forlorn, with vacant storefronts tucked between the taxidermist, coffee shop, barbershop and a thrift store. The dearth of commercial properties means homeowners shoulder a great deal of the tax burden. Last year, the county had one of the highest unemployment and home-foreclosure rates in the state. The drop in property values and taxes has had a profound effect on money for the schools.

Seven times in six years, the North Branch school board has asked voters to approve a local levy for schools. It’s failed each time, last year by a 2 to 1 margin.

The school board will try again Nov. 8, seeking a levy to raise $1.5 million annually for the next three years. The district is predicting a shortfall of $2.5 million next year, so the levy would only soften future cuts, not eliminate them. The average homeowner would pay $122 a year. Chances for passage appear slim.

“People here are angry,” said board member Randy Westby, who supports the levy even as he shares others’ economic worries. His three-bedroom home, purchased in 2004 for $500,000, is now worth $233,000. “I’m 61 years old,” said Westby, who owes the bank $400,000. “I’m not going to live long enough to see the market come back.”

People can be angry, but the real problem is making a series of choices depending on cheap oil and an ever escalating housing market.

Now that location valuation is a product of reduced dependence on cheap energy, more and more people and places are going to face this kind of predicament.