Chapter 13 – How Neighborhoods Change

Chapter 13 – How Neighborhoods Change
• Physical Deterioration - Rate
is determined by quality of
initial construction &
subsequent maintenance (lead
to social change in
• With cycle of change, leads to
neighborhood Filtering –
Hoyt’s thesis that moves are
initiated by new dwelling
units for the wealthy.
Involves filtering of
households “up” the vacancy
chain, and subsequent filtering
of houses “down” the social
chain. Contrasts with
Neighborhood Life Cycles
1. Suburbanization
2. In-filling
3. Downgrading
4. Thinning Out
5. Renewal or
Rehabilitation and
Urbanization and the Housing Tenure Transformation
in the US
• Home ownership in US is
one of biggest influences
on the social and cultural
evolution of American
urban life.
• After WWII,
homeownership became
the dominant form of
tenure in the US (Thanks
to the GI bill) –
Homeownership rose from
20% in 1920s to 44% in
1940 to 60% in 1960 and
66% in 1980 and 68% in
1. Increasing affluence of common
people, plus innovations
allowed for economies of scale
in building activities (cookie
cutter homes versus custom
2. Recognition of homeownership
– social status, part of American
Dream of individual property
rights; achieving residential
segregation, which led to social
and political strategies; allowed
financial benefits through equity
gains. Encouraged social
mobility on housing “ladder”;
able to fulfill familistic
3. Economic and Political
Significance-Downpayment to
bank allowed pools of capital
for banks to lend for other uses
(industrial projects, other
mortgages, etc). Also consumer
consumption of furniture, lawn
care, and so on
-Homeownership led to a
regulatory economic
mechanism (key element in
Keynesian Economic
management). Interest rates on
mortgages used an a lever to
boost or slow the economy
Benefits of US Homeownership Continued
• Homeownership promoted
social and political stability –
Idea that the more people have a
“stake” in private property
market the less likely they are to
threaten economic and political
stability. Helps eliminate the
“alienated tenant” psychology.
“Locked into a mortgage!”
• Savings and Loans Institutions
evolved to perpetuate this cycle.
S&L Institutes gained special
privileges in terms of corporate
tax laws & taxation.
• Could deduct the interest on
mortgage from income and also
exemption of equity gains from
capital gains laws
Sharp decline in the
profitability of Rental Units –
Enforcement of rigorous
building standards and
housing codes eliminated
cheap rental units; slow rise of
income of tenants; rent control
legislation during WWII;
continued deterioration of
rental stock (Victorian
housing); taxation policies did
not encourage maintenance of
rental properties; decrease in
demand for rental properties
Jane Jacobs – Urban Wisdom
In Jane’s eyes, how should we begin to learn about cities?
Why is messiness and disorganization important to a city?
What do you think are the most important 20points of this documentary?
• What is your home’s walkability score?
Go to ( to find out!
Housing Markets
• Since 1980s and early 1990s
general decline in home ownership
• Legacy of stagflation beginning in
1970s (prices rose, but incomes
were stagnant).
• Housing prices rose faster than rate
of economic inflation due to
increased material costs and
finance costs. By 1983
homeowners had to use 20 % more
of their income towards their
• Led to a housing affordability
• Some people tried to take
advantage of the rise in home
values by becoming ‘house poor’.
“Getting into the Game”
Housing Markets
• By early 1980s, homeownership
rose to 36% of median income.
• 1980-1986 – Overall proportion
of U.S. households buying
homes decreased – 1st time
since Great Depression.
• New rental units rose from
196,000 in ’80 to 365,200 in
’85. – Beginning signs of
moving back to CBD, change in
family status, and DINKS.
• By 1990s, homeownership &
housing starts rebounded. Ratio
of housing prices to income
increased, but ratio of mortgage
payment to income decreased,
due to lower interest.
• Housing affordability improved, but
(Beginning of “Housing Serfs”)
• Rise in homeownership in lowest 20%
of income bracket, but gap between
Americans of European ancestry and
all other Americans narrowed slightly
• Subprime mortgages in low income
neighborhoods rose from 6.8% to
• Housing affordability among renters
also improved in 1990s.
• However, by 2001, poorest 20% of
renters (9.9 million) outnumbers lower
cost rentals by 2 million.
• Builders are choosing to build market
rent units or have paid off federally
subsidized mortgages.
• Continued demolition of existing
public housing from Urban Renewal
era without one-for-one replacement.
Housing Market Gatekeepers
• In Chapter 11, we talked
about “City Makers”.
After structures have been
built, we have “exchange
professionals” who
facilitate residential
• Realtors, mortgage
financiers, insurance
agents, appraisers,
landlords and so on.
• Called “Social
• Why?
• Real estate Agents – income
based on commission – want
high priced, high turn-over
property. Practice “Steering”
• Mortgage Finance ManagersChief alliance is to investors,
not to borrowers. Look for low
risk, stable return. Usually rent
to other married middle class
• “Redline” areas of the urban
that have minority groups,
female headed households, and
people with unconventional
Housing Market Gatekeepers
• Redlining become a selffulfilling prophecy of
neighborhood decline
• Series of laws enacted in the
late 1960s, 1970s and 1980s to
eradicate redlining, but still
• Insurance Agents – A potential
homebuyer must obtain
property insurance before a
lender will ensure a mortgage.
• Harder to obtain in central city
than suburbs – older wood
homes, wiring, theft and so on.
• Leads to higher insurance rates
for inner city homes.
• Gentrification – a physical,
economic, social and cultural
phenomenon that involves the
invasion of the middle class (or
higher) into central city
neighborhoods that were once
working class. Process replaces
or displaces many of the
original inhabitants.
• Involves rehabilitation of a
highly devolved housing stock.
Upgrading meets the standards
and lifestyles of new owners.
Houses in the area go through
significant price appreciation.
• Renters to Owners
• Found in World Cities and
Regional Nodal Centers