Is this the new gentrification rebellion?
I have been fretting about this for years: the middle class is shrinking in the U.S. Perhaps because I am so entrenched in real estate, I see the way the 1% is living up close. A story in this week’s TIME confirmed it (sub. req.): The gap between rich and poor has been widening in the U.S. since the 1970’s. From 2009 to 2012, smack in the middle of the recession, the top 1% of incomes in the U.S. rose by more than 30%.
The rest grew less than one-half of a percent during that time.
I don’t think this is good for our nation. Few corporations care about maintaining employees for the long term anymore, they would rather pander to shareholders and sell out. In their defense, costs of doing business have gone up so much thanks to government regulations, employers would rather have an enema than expand the workforce. Unless you are Google. Still, despite what the experts say, there is no reason why some CEO’s deserve the extreme salaries they pocket. Unless you are Mark Zuckerberg.
All of this is rather coming to a boiling point in San Francisco right now, which has essentially become a gated community for the well-to-do.
“Exploding wealth and limited space has led to an affordability crisis.”
San Francisco is now the poster child of the disconnect between Wall Street and Main Street. And guess who’s feeling the brunt? Realtors. You’d be hard-pressed to live in San Fran on less than $100,000, and that is skirting it. Rents are among the highest in the nation, averaging $3475 a month. Home prices are insane: $1,000,000 is just the beginning, and in some neighborhoods the average home price could be $10 to $12 million. That may be OK because the median household income there is $73,000 a year and that’s twice the U.S. average. In San Francisco, the richest earn 28 times as much as the poorest. That’s why it’s the number 1 city in the U.S. when it comes to the economic divide.
Ironically, the city is named after a saint who embraced a life of poverty.
Dallas had better pay attention.
San Fran once was the city on the forefront of everything counter-culture — Haight Ashbury, Hippies, and beat-niks before that. It is also a notoriously liberal city, having had the country’s first openly gay public official, Harvey Milk, as city supervisor in 1977. He was killed in 1978 by Dan White, a former city supervisor. San Francisco is uber liberal but uber restrictive when it comes to living policies and home building, and legislates healthy, green living heavily on it’s constituents. It was the first metropolis in the country to ban plastic shopping bags in 2007. We are looking at this now in Dallas. Last week when I was there, I had to pay 10 cents to the city or county for paper shopping bags at Pottery Barn.
All this money, high incomes, a real estate market on steroids, money flowing into the tax coffers from the wealthy corporations and taxpayers, has created resentment from the folks who are being shoved out. They are poor, yes, immigrants perhaps, but some are of a creative working class — teachers, artists, and musicians not pulling in the high Silicon Valley salaries. Landlords are evicting them in rent-controlled apartments to bring in the flusher tenants and raise rents:
Protest organizers said Ellis Act evictions are up 170 percent over the last 12 months, “no-fault” evictions are up 83 percent over the last three years, and rents are up 20 percent along tech bus routes.
Who’s getting blamed for this? Real estate agents. Because the city is about the only place where young employees can live, the high-tech Silicon Valley employers like Google, Facebook, LinkedIn etc. bus employees to work to the Peninsula where there is way less high density housing — just mansions set in the beautiful mountains. Palo Alto? Stanford owns just about everything.
So low supply, high demand, the poor are upset about being displaced and are protesting. They are angry that agents push for premiums on housing located near the stops. The City is busy trying to make everything fair. Last week, protesters mobbed a Google bus angry over a newly-approved $1 bus stop fee on the “Google” buses — the public buses cost these working folks $2. The bus stop charge was seen by many as throwing a bone to the dog.
In essence, San Fran is seeing something we all see: conflict over who gets to live where. Just because you can afford to buy it, does that mean you get it? Should we “allow” the wealthy to displace those with less, and will we actually legislate this someday?
Conflict happens in changing neighborhoods in every city: residents with roots, who have lived in a neighborhood for years — some in their grandparents’ house — resent change and re-gentrification. That’s hard for me to get: my grandparents’ house is in Aurora, Illinois, and there is no way I would want to live there.
Gentrification is for the most part positive — it increases real estate values, reduces crime, and the cash-strapped cities rake in more taxes. Who wants more money to repair potholes, raise your hand? Jobs are created — just look at what Phil Romano and West Dallas Investments are doing in Trinity Groves. And who screamed the loudest there? People who didn’t want to “displace” La Bajada. Though, when I checked DCAD on most of that area, most of the homes in that ‘hood were rental units.
It happened in my neighborhood fourteen years ago when we came in to build new homes. We were “taking away the look of the neighborhood” — the one story 1950’s ranches. Well, yeah, new construction has a way of doing that.
Still, it is getting a bit ridiculous in the Bay Area. Part of the problem there is there is just no more land — ocean on some sides, and 49 square foot San Francisco is locked in and surrounded by areas even richer than it’s cable-car streets. To the north is Marin County and the wine country; to the south is the Peninsula. We don’t have this problem in Texas, which is why our homes even at their highest will never be as pricey as Pacific Heights, Nancy Pelosi’s hood, or Sea Clift where, I admit, I would totally buy a home with my first $15 million.
Of course, we have Tom Hicks’ Crespi Estate, still the most expensive home for sale in the U.S.
San Francisco also shot itself in the foot by killing development, alienating builders, fighting tall dense buildings in the name of preservation. And I am the first one to hug on those historic Victorian homes. As the Berkeley economist quoted in TIME said, “by constraining the amount of new housing, San Francisco has essentially pushed up the price of housing.”
Austin is starting to shadow San Fran’s problems.
The share of Austin residents living in mixed-income neighborhoods has dropped sharply over the past 40 years, related research shows. Increasingly, the area’s residents are separating out into low- and high-income neighborhoods, and that growing segregation of incomes could be a key factor in limiting a child’s economic success.
The point of this story by Dan Zehr (premium content) is that mixed neighborhoods improve a low-income child’s chances of going up the income ladder if he lives among higher income people. This is troublesome because “among the 100 largest metro areas in the country, Austin had the ninth-highest level of income segregation in 2009, according to the latest data published by Stanford University sociology professor Sean Reardon and his research partners at US2010, a program that studies recent changes in American society.”
Dallas is number 5.
In Austin, children born to parents in the lowest fifth of national incomes had a 6.9 percent chance of moving to the top fifth by age 30, notably lower than other tech-savvy cities and lower than all but four Texas cities, according to the Equality of Opportunity project created by the Harvard and UC-Berkeley economists.
The solution is to keep neighborhoods as mixed as possible — culturally, economically. Promoting greater income integration “helps prevent the calcification of low-income neighborhoods into areas of high crime, poor schools and a lower likelihood of children finding their way out — the kinds of issues that drain public resources.”
But in the case of education, it also equalizes to mediocrity.
“When the poor live apart from the rich,” he said, “it means that the nature of their communities starts to differ along multiple dimensions.”
Yes, they become less safe and property values diminish. I’ll never forget the story I heard of an agent who had to sell an “impossible” property, in an LA war zone ‘hood. The neighborhood was fine until 5 pm through 8 a.m. in the morning: that’s when the neighborhood gangs took over. You showed the home during that time, he said, good chance you and the potential buyer would end up killed.
In Dallas, Austin and other major Texas cities, the separation of rich and poor neighborhoods has grown wider over the past three decades, even as the area has grown and evolved. Austin (9th), Dallas (5th), Houston (8th) and San Antonio (14th) all ranked among the most-segregated large metro areas in the country.
Immigration likely plays a role in that growing separation, said Steve Murdock, founding director of the Hobby Center for the Study of Texas at Rice University. The state’s large population of Hispanic immigrants tends to have lower incomes, and they tend to aggregate in common neighborhoods, Murdock said.
What do we do? We learn from the mistakes San Francisco has made and foster sensible planning and housing policies. Don’t make it impossible for someone to build here because you know what, they won’t.
Be grateful for our many and varied suburbs and quit looking down at them. Urban living is not for everyone, though I would like to see more affordable housing in downtown Dallas. Often the elitists are the snobbiest about suburban development —
“Ticky tacky homes, all look alike, couldn’t tell which one is your front door.”
I heard an editor once say, if I came home drunk, how would I know my house? They all look alike and ugly.
They look alike because they are cheaper to build that way — same paint, same brick, one supplier.
Yes, the affordable housing in places like Carrollton, Keller and other suburban outposts is not going to make the Most Beautiful beauty contest list, nor will Architectural Digest be knocking on their door. But these are solid homes for families -many of them immigrants — who cannot afford $500,000 to live in Lakewood.
Encourage development of smaller, affordable living spaces closer in. Families with school age children will continue to shun Dallas until they feel more secure about DISD. Land is getting way harder to find within the 635 Loop. Dallas homes are still way more affordable than most U.S. metropolitan real estate, but inventory is tightening as prices rise.
We need to pay attention, lest we become a San Francisco clone, where the middle class is now an endangered species.
This townhome home at 381 E. Greenbrier in Dallas leases for $3550. a month. You get 2454 square feet, two huge bedrooms, two and a half baths, bamboo floors, and a garage.
This one bedroom, one bath Clay Park Tower apartment off Van Ness leases for $3694 plus per month in San Fran.