Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Tuesday, July 17, 2018

Why "gentrification" is visible now... the Diffusion of Innovations Curve of Everett Rogers

I haven't reached out for a review copy yet, but the new Island Press book by Alan Mallach, The Divided City: Poverty and Prosperity in Urban America, makes the point that there are three types of cities now:

(1) cities growing in population, especially of higher and middle income residents and probably losing lower income residents (DC, Seattle, Portland, Boston, New York City);

(2) cities that are shrinking, but still gaining higher income residents so some neighborhoods are experiencing "gentrification effects in the face of widespread poverty (Philadelphia, Baltimore, St. Louis);"

(3) cities that are shrinking and not gaining higher income residents (Cleveland).

He makes the ("obvious" -- not a cut) that there needs to be differentiated policies depending on the specific dynamics of the city and/or neighborhood you're addressing.

(At a conference a couple years ago we were talking after a session and "scoffing" at a complaint by a local housing leader in Baltimore that Baltimore was behind because they didn't have an inclusionary zoning policy, while the city has more than 50,000 vacant properties.  IZ isn't what they should be worrying about now.)

The problem is that the national and local discussion of in-migration, neighborhood change, and displacement isn't particularly nuanced, and the general approaches like "inclusionary zoning" are a distraction for cities that are still shrinking, but cities -- gateway cities he calls them -- like DC have to deal with affordability at the city-wide and neighborhood scale because of the increased demand for housing by higher income segments of the market, which crowds out everybody else.

Which I've written about for years, e.g., "Applying the super-gentrification thesis to San Francisco, Santa Monica, and other cities experiencing hyper-demand," 2014. Also see "The nature of high value ("strong") residential real estate markets" (2017) and the use of the term "capital deepening" by University of British Columbia Professor David Ley:
… calls the process of high income (a variable indicating a neighborhood in high demand) neighborhoods becoming even higher income, "capital deepening," which I think is a better term than "supergentrification." From the article:

"Because every time redevelopment occurs you get a substantial increase in the socio economic status of occupants … [market-rate] supply is only for high-income people. So, whenever redevelopment occurs, it means higher income people are occupying the space," says Dr. Ley. "Two things are happening: there is gentrification in the inner city, but then there's what I call 'capital deepening,' which is an area that is becoming richer."
Getting residents involved in development review earlier, is that a solution?  NotionsCapital calls our attention to this Governing Magazine article, "One Woman's Quest to Fight Gentrification by Asking Residents How," which makes the point that the entry of Trader Joe's spurs gentrification.

The article opines that the professor featured, has a revolutionary idea, to get residents involved in the early stages of "developments" rather than later stages.

Technically, that's what planning is supposed to do to begin with, set the stage based on various principles, to produce the kinds of outcomes we say we want.

I don't think her ideas, while important for other reasons, which I will mention in a follow up post, will have much impact on the influx of higher income residents and the increased desire to live in cities. From the article:
But sociologist Cat Goughnour, a native Oregonian and an advocate for affordable housing, thinks more should be done -- and not just in Portland.

“People are being forced out by economic pressure,” she says. “It really resonates with me that tearing people out of these multigenerational communities has an impact, and there is still very little being done about gentrification."

Goughnour founded the Radix Consulting Group, which is lobbying the city to change its process of urban planning to involve community members upfront, rather than asking for their input toward the end of a project's development. She is also in talks with Detroit and Minneapolis to similarly alter those cities' processes for urban design.
Redesigning a project already being developed to attract higher income segments won't change the project very much.  So many decisions have been made by that point that you can only have impact on the margins, especially when it comes to big issues like market rate versus affordable housing.

What's going on in gateway cities like Portland is much different than what is going on in Detroit, although yes, there is inward investment in some places there.  But besides that, the issue isn't so much planning, but the stage of the market.

Population in-migration to the city and the concept of innovation diffusion.  In discussing this with NotionsCapital, I mentioned Everett Rogers and his "innovation diffusion curve," from the book Diffusion of Innovation, which I was fortunate to come across in college, although not for a class.

His work, originally in agriculture extension, looked at how long it took innovations to "diffuse" and become "adopted" on a widespread basis.

With demand for "living in the city" on the part of high value segments of the housing market, what happened is that for 40 to 50 years--staring with the 1950s era "Brownstoners" in Brooklyn, artists, etc. (immigrant groups looking for cheap housing were a variant)--year by year, small numbers of people moved to the city because they preferred urban living over the suburbs, even as residential housing trends were dominated by suburbanization.

People in Brooklyn in the 1950s were the innovators. People like me in 1987 were later to the game, but still early enough to qualify as "early adopters."

The earlier generations (1950s-1970s) people like Brooklyn's Brownstoners showed that it was possible to live in the city despite the problems and the continuing decline in population.

One of the stabilization strategies was historic preservation, assisted by the passage of the National Historic Preservation Act in 1966.

-- Who Lives Downtown, Professor Eugenie Birch, Brookings Institution, 2005. The back to the city movement was originally focused on center locations, hence the Downtown focus of this report.

-- Get Urban: The Complete Guide to City Living, out of print book by Kyle Ezell. I heard him speak about the book in Cleveland in 2002. His point was that you didn't have to move to NYC to have an urban living environment, that small cities like Cincinnati, Omaha, Columbus, etc. have similar neighborhoods providing the same kind of experience.

The cool coffee shop, Central Perk, in the Friends tv show.

Trends shifting towards favoring the city.  But helped by tv shows like "Friends" and "Seinfeld" (as opposed to the "Brady Bunch" etc.) which showed city life as exciting, around 2000, but really more like 2003, many American cities started seeing a change in perception of the value of urban living.

It helped that in many cities, public safety began improving, murder and crime rates began dropping, etc.

Hitting critical mass, entering the late adopter phase. What I argue is that while we didn't realize this at the time, because it was simultaneous with other trends, this year-by-year in-migration, after 40-50 years, finally hit critical mass, and reached the point where it could achieve a self-replicating momentum ("Revitalization in stages: Anacostia," 2011).

Rogers would have argued that around 2000 "in-migration of population to the city" hit "critical mass," consolidating the innovator and early adopter stages, and began the shift to the late adopter stage, where more than double the number of people would likely be interested in moving to the city.

In specific places, this general trend was also accelerated by other more local conditions, making changes particularly visible and apparent, such as with new construction of multi-unit housing or the entry of suburban retail chains to urban settings.

For example, in DC new in-migration was abetted by the move of the professional basketball and hockey teams to a downtown arena from a suburban location, as of 1997, Marion Barry was no longer mayor (although later he became a Councilmember), which revived the confidence of real estate investors, plus foreign investors looking for safer places to invest than their own country, and the post-9/11 growth in government which drew younger people to the metropolitan area and the city.

In Seattle and San Francisco, growth occurred in response to the tech boom. Not sure what was going on in West Los Angeles County. In Boston, leveraging the intellectual capital of MIT, Harvard, and other institutions in biotech and IT, etc.

Safeway and apartment building at 5th and L Streets NW, Washington DCThis Safeway on the outskirts of Downtown DC opened in 2008, as part of a condominium-apartment complex with other ground floor retail.

Vertical mixed use building type.  The concept of vertical mixed use real estate development -- usually housing above ground floor retail; the mixing of retail and office was already extant; and there aren't many examples of mixing retail, office, and residential in a single building -- became associated with this renewal of interest in urban living.

Cities started gaining population, not losing it.  In 2000, DC's population was 580,000, steadily shrinking from a peak of 800,000+ in the 1950 Census.  Today the population is 693,000+, and next year it's likely to be 700,000.

Increase in demand paired with a minimal increase in housing supply = significant price appreciation.  With a much larger portion of the residential housing market interested in city living, given the relatively fixed supply of housing--most housing in major cities was built decades ago, when the US population was much smaller, so most cities aren't built with enough housing to meet current demand, especially single family housing, it has an extranormal impact on the housing market, and prices have risen precipitously, and more neighborhoods have been "reproduced" as attractive to these segments of the market.

More and new residents also bring newer types of retail. Plus with the new population and their being higher income, there is more demand for new retail and restaurants, especially more expensive options--carry outs being replaced by sit down restaurants.  Ethnic choices featuring Japanese, Thai, and Filipino cuisine, etc.

Multiunit housing, new residents, and new retail are very visible but "gentrification" isn't new.  It's the velocity of change that now is so visible, but was a phenomenon building over decades. And I argue that what people think they are seeing today as "the start of gentrification" is more like in-migration entering either the late adopter or early majority phases where it is highly visible.

It's too late (song by Carole King)...  Hence the concern about displacement and affordability. But to address the issue now, 15+ years into the process, is for the most part, too late.

West End/Foggy Bottom | Trader Joe'sDiffusion of Trader Joe's within DC as an example of post-gentrification, not pre-gentrification.  Trader Joe's is a perfect example of my point. People think the company is "leading gentrification," when in fact, it's joined a party that has been in progress for a long time.

Despite all our clamoring and arguments for why such stores should be in DC, the first store, in Foggy Bottom, opened in 2006, 3-6 years after population in-migration hit the tipping point--and in return for a more than $1 million incentive payment made by the Foggy Bottom Association!, not the city's economic development department!

This was six years after the Whole Foods Supermarket on P Street NW opened in the Dupont Circle/Logan Circle neighborhoods ("Fresh Fields confirms lease for P Street site," Washington Business Journal, 1999). And previous to that, Fresh Fields, the local chain acquired by Whole Foods in 1996, had opened stores in a couple neighborhoods in Upper Northwest.

(To some extent, Fresh Fields was ahead of the curve, even if Whole Foods and Trader Joe's weren't. From the WBJ article "P Street: A Fresh Start":
What does it take to get Fresh Fields to build a store in an up-and-coming but still dicey neighborhood in Northwest D.C.? ...

The 1400 block of P Street NW hardly seems like a "natural" for any retailer. Dark, abandoned buildings dominate the streetscape, and few cars or people passed by on a recent evening when K Street and Georgetown were bustling.

But just blocks from the Fresh Fields site, developers have been snapping up aging town homes and apartments, converting them into luxury condominiums. Seeing that, Dickson's group decided a Fresh Fields not only could prosper but spur additional commercial growth in the neighborhoodsca.)
While it's likely the stores have received special rent pricing and other considerations from their respective developers, the new stores haven't required extraordinary incentives from the city or similar organizations.

The second store, at 14th and U Streets, didn't open until 2014. The third store, opened on Capitol Hill in 2017, and the fourth store, in Union Market, in 2018. A fifth store is slated for Upper Georgetown on Wisconsin Avenue  ("JBG Smith Lands Trader Joe's To Anchor Glover Park Development, Bisnow), likely to open in late 2019.

These stores haven't made 14th and U, Capitol Hill, Union Market, or Upper Georgetown "gentrified." These are already high income areas where TJ's wants to sell product.

By contrast, a store opening in Deanwood ("Three-bedroom, two-bathroom house in DC's Deanwoodlists for $375,000," Washington Post) would be an augur of "gentrification." Also see "Why is it news that houses are worth more when located near perceived high quality stores?," 2016.

I guess my lesson from all this is two-fold.

1. More than 15 years ago, I came to the conclusion that without "visionary" master plans already in place, the velocity of development was too strong to be able to get control of the process and shape it for better outcomes.

So the lesson from this was to do planning before the onset of change, not after.  After the change process starts, you're always reactive.

With regard to individual projects, without master planning already in place, it's very difficult to change the trajectory of the developer (I can think of one process I was involved in that took 15 years, but that only came about because the earlier bad idea was discarded in the face of obvious changes in market opportunities--from a big gas station with a car wash to a 200+ unit apartment building with a grocery store on the ground floor and a streetcar station).

In response, I focused my energies on advocacy for better planning, identifying gaps in planning processes, coming up with great, but for the most part, ignored recommendations on how to do planning a lot better in the face of significant change, etc.

My joke is that I might not be a good planner but I am great at "gap analysis" and the replete and evident gaps in how DC does planning makes me an insightful planner.

For example, my testimonies and writings on changing the commercial property tax assessment methodology to support independent property owners and retailers date to 2005 ("Tax Policy Hurts D.C.'s Local Businesses," letter to the editor in the Washington Post, 2007), my writings on restructuring community benefits agreements have a similar timeline ("Community benefits agreements: revised (again)"), recommendations for artistic disciplines to "do their own planning" ("Arts, Culture Districts, and Revitalization," 2009) came out of earlier writings on cultural planning dating to 2003 ("Cultural resources planning in DC: In the land of the blind, the one-eyed man is king"), recentering neighborhood planning around ensuring high quality neighborhood schools ("Rethinking community planning around maintaining neighborhood civic assets and anchors," 2011), on Walmart (ANC4B Large Tract Review Report on Walmart, 5/2011, 2011), creation of metropolitan scaled mass transit organizations which integrate planning and operators ("The answer is: Create a single multi-state/regional multi-modal transit planning, management, and operations authority association," 2017), using infrastructure investments to leverage other complementary improvements ("Setting the stage for the Purple Line light rail line to be an overwhelming success: Part 2 | proposed parallel improvements across the transit network," 2017), etc.

2.  Now I believe that great plans are important, they need to be transformative, but they need to be paired with systems for implementation.

I think seeing the actions of the Portland Development Commission (now called Prosper Portland) at a conference in 2005 influenced me, plus reading an action plan for various State of Maryland "Community Revitalization Plans" and DC's adding action steps to plans.  Although, I was at some level somewhat hesitant maybe, because DC's community development corporations, which are a form of revitalization implementation, are so bad ("Falling up -- Accountability and DC Community Development Corporations," 2005).

I wrote about innovative delivery mechanisms and programs coming up with the concept of "action planning," in 2008 ("Social Marketing the Arlington (and Tower Hamlets and Baltimore) way") and then tried to bring about a similar kind of implementation in in the bicycle and pedestrian plan I wrote for the western district of Baltimore County in 2010 ("Best practice suburban bicycle planning using the action planning method").

Action Planning Steps

1. Design Method rather than Rational Planning
2. Social Marketing
3. Integrated Program Delivery System
4. Packaged through Branding & Identity Systems
5. Civic Engagement & Democracy at the foundation = citizen at the center

Not realizing these earlier influences, I outlined a six step process based on the series of articles I wrote about culture-based revitalization in 8 European cities for an EU project in Baltimore, in particular on Bilbao and Liverpool ("Why can't the "Bilbao Effect" be reproduced? | Bilbao as an example of Transformational Projects Action Planning"), after analyzing the processes in those cities which were particularly successful.

Best practice, large scale, revitalization planning framework
  1. A commitment to the development and production of a broad, comprehensive, visionary, and detailed revitalization plan/s (Bilbao, Hamburg, Liverpool);  [NOW I CALL THESE TRANSFORMATIONAL PROJECTS ACTION PLANS which can be an element of community master plans, a complete revitalization plan, or an approach to integrate into single project planning, to ensure all the opportunities for innovation are captured]
  2. the creation of innovative and successful implementation organizations, with representatives from the public sector and private firms, to carry out the program. Typically, the organizations have some distance from the local government so that the plan and program aren't subject to the vicissitudes of changing political administrations, parties and representatives (Bilbao, Hamburg, Liverpool, Helsinki);  
  3. strong accountability mechanisms that ensure that the critical distance provided by semi-independent implementation organizations isn't taken advantage of in terms of deleterious actions (for example Dublin's Temple Bar Cultural Trust was amazingly successful but over time became somewhat disconnected from local government and spent money somewhat injudiciously, even though they generated their own revenues--this came to a head during the economic downturn and the organization was widely criticized; in response the City Council decided to fold the TBCT and incorporate it into the city government structure, which may have negative ramifications for continued program effectiveness as its revenues get siphoned off and political priorities of elected officials shift elsewhere);
  4. funding to realize the plan, usually a combination of local, regional, state, and national sources, and in Europe, "structural adjustment" and other programmatic funding from the European Regional Development Fund and related programs is also available (Hamburg, as a city-state, has extra-normal access to funds beyond what may normally be available to the average city);
  5. integrated branding and marketing programs to support the realization of the plan (Hamburg, Vienna, Liverpool, Bilbao, Dublin);
  6. flexibility and a willingness to take advantage of serendipitous events and opportunities and integrate worthwhile new projects into the overall planning and implementation framework (examples include Bilbao's "acquisition" of a branch of the Guggenheim Museum and the creation of a light rail system to complement its new subway system, Liverpool City Council's agreement with a developer to create the Liverpool One mixed use retail, office, and residential development in parallel to the regeneration plan and the hosting of the Capital of Culture program in 2008, and how multifaceted arts centers were developed in otherwise vacated properties rented out cheaply by their owners in Dublin, Helsinki, and Marseille).I
But until recently, I don't think I've been direct enough about this second point, needing to have the implementation organizations in place to make what you want to happen actually happen.

IT'S NOT ENOUGH TO EXPECT THE MARKET TO DO THIS FOR YOU (a la neoliberalism). There still need to be public entities active in the field to shift development outcomes for the better.

I realized in talking with my Airbnb "landlord" in Hackney Wick, an artist, about these kinds of issues that my "Arts, Culture Districts, and Revitalization" piece (and others) need to be revised and republished to integrate this point, to specifically call for the creation of artist-specific community development corporations, etc., to bring about these kinds of policies into realizable projects.

I've written that in terms of arts spaces and artist housing (and in my comments on the draft DC Cultural Plan):

-- "BTMFBA: the best way to ward off artist or retail displacement is to buy the building," 2016
-- "When BTMFBA isn't enough: keeping civic assets public through cy pres review," 2016
-- "BTMFBA revisited: nonprofits and facilities planning and acquisition," 2016

and community housing and related development around transit infrastructure, especially the Purple Line light rail system in Suburban Maryland:

-- "To build the Purple Line, perhaps Montgomery and Prince George's Counties will have to create a "Transportation Renewal District" and Development Authority," 2015
-- "Purple line planning in suburban Maryland as an opportunity to integrate place and people focused initiatives into delivery of new transit systems," 2014
-- "Quick follow up to the Purple Line piece about creating a Transportation Renewal District and selling bonds to fund equitable development," 2014

Typically, traditional urban planning processes do not adequately integrate implementation. This is true for land use, and for transportation, other than the creation and maintenance of transit organizations.

The exception is revitalization planning, and like with Portland (or Salt Lake City, Baltimore and other places) the creation of revitalization corporations, like CDCs but often run by cities more directly, to bring plans into reality.  Their problem though is lack of money, complicated often by lack of demand--being too far ahread of market demand.

What to do now for the production of affordable housing.  DC has pumped lots of money into affordable housing production, but it's too late for the most part.  As an article, "Why more affordable housing in SC isn't getting built where it's needed most," in the Charleston Post & Courier said the other day:
For one thing, it's just as expensive to build affordable housing as it to build market-rate housing. The land costs are the same. Building codes are the same. Construction costs are the same.

To put it in the simplest terms: In a market-rate project, you can get a loan from a bank to build it if you can generate enough rent revenue to pay it off. You'll might even take a decent profit once you sell it off to an apartment company.

In an affordable housing project, your tenants will pay only a certain amount every month, and it's probably not going to be enough to cover the interest costs on a bank loan, much less the land, the construction and the property taxes.

To make it work, you've got to cut corners in a lot of different ways, and it's not like you can just hire a smaller construction crew or use inferior materials (there are laws against that). So what do you do?
DC is going to need to do some different things.

1.  Move away from focusing on producing a few affordable units in new buildings to building 100% affordable buildings.

2. The city is going to have to get over its opposition to infill development and allow the construction of bigger buildings.

Unfortunately, this opportunity is mostly being lost, because developers are cutting the size of projects from today's maximums to reduce opposition. But since these buildings are being developed as owner-occupied the likelihood of them ever being able to be redeveloped to be bigger is remote.

3.  The practice of "lopping off floors" of projects to placate opposition or "allowing" single use developments in multi-use areas (like the space above the Georgetown Safeway or the Georgia Avenue Walmart--that site had approved plans for retail + 440 apartments) is going to have to stop.

Not that it will be easy.

But there is a big opportunity cost both to affordability because of restrictions on inventory as well as a constriction of revenues to the city from property, income, and sales taxes not being expended by residents vaporized by the project becoming smaller.

4. There should be portfolio investment in current housing complexes to maintain their affordability and to ward off conversion to upper income housing.

5.  There needs to be a more active program of insertion of affordable housing developers--not a few units of inclusionary housing--into large scale new developments, where they build 100% affordable housing buildings in the midst of market-rate housing.

This is done in Helsinki and Hamburg. In Vienna, government planning shapes housing production much more closely than comparable processes in the US ("Housing in Vienna: Innovative, Social, Ecological," Exhibition catalog).

It would be a great opportunity to do this with the Armed Forces Retirement Home development ("15 Acres of Residences Off North Capitol: The Vision for the Armed Forces Retirement Home," UrbanTurf).

6.  Relatedly would be when institutional property is redeveloped, it could be for affordable housing.  The problem though is often these properties are not centrally located and the institutions tend to be desperate for cash, which is why they are selling/developing, so it's difficult for them to consider leaving money on the table by not developing market rate housing in favor of affordable housing.

Although Alexandria, Virginia has had some success with churches ("'A win-win': Using local church buildings to address the affordable-housing crisis, " Washington Post),  There are a couple of similar examples in DC, such as with Emory Beacon of Life Church on Georgia Avenue NW, or the Plymouth Congregational Church on North Capitol Avenue NE.  By contrast, many of the property sales by institutions in Brookland have been for market rate housing.

7.  ADU construction is going to have to be encouraged in traditional single family districts, which will add housing likely to be cheaper to rent than that in Class A+ new construction, and it will provide more residents capable of supporting neighborhood improvements.

It will be a marginal increase, but a lot cheaper to subsidize than for profit or nonprofit new construction, even at 25% of the likely cost ($200,000 or so for an 800 s.f. separate unit fully legal).

8.  Because DC is now what Alan Mallach would call a gateway city, programs to de-densify public housing are a mistake, which local activists are now challenging ("DC asks court to throw out $1 billion lawsuit" Washington Post"), instead the housing projects should be upgraded and intensified and improved.  Deliberately eliminating affordable housing is not a supportable public policy.

Note that I think the lawsuit is generally misguided but the point about de-densification of current projects is legitimate and should be addressed. But because the rest of the lawsuit is outlandish, this point will probably be lost.

Although my response to their general point would be:

"yep, that's why you have to have plans, strategies, implementation organizations, funding, and accountability mechanisms in place in advance of change, so you can be proactive, not reactive, both when change starts to happen and is visible, and as it catches momentum and speeds up."

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At 1:22 PM, Blogger Richard Layman said...

Crosscut (Seattle) article suggesting that the city could use land it owns for development of 100% affordable housing.

At 8:01 AM, Blogger Richard Layman said...

n London, Mayor Khan says that redevelopment plans involving demolition of existing social housing won't get city funding _unless_ residents vote in favor of the plan.

ALthough the Centre for London argues that residents are just one category of people affected and/or benefiting from a project and therefore others should weigh in too.

At 8:02 AM, Blogger Richard Layman said...

Fort Worth intensification projects involving public housing:

At 10:05 AM, Blogger Mari said...

"It's too late (song by Carole King)... Hence the concern about displacement and affordability. But to address the issue now, 15+ years into the process, is for the most part, too late."

The best point of this long post.

At 2:59 PM, Blogger Richard Layman said...

yes, brevity not my strong suit.

The TJ's section could have been a separate post. etc.

The last section too should have been a separate post.

But the diffusion curve is an important concept too. People need to understand how that works.


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