Real Estate Wealth Taxes as a Anti-Gentrification Tool

New Orleans   Recently I listened to an interview with a prominent local developer on WAMF in New Orleans as he was asked about gentrification.  He tried to walk the line between his self-interest and progressive values.  He was against displacement on one hand, but he opposed inclusionary zoning that would require developers to create affordable units in their properties.  He claimed it would sacrifice three units for every one that it created without mentioning that most of the three units built would be for high-end customers.  He opposed a tax on developments that would fund affordable housing or homeless programs.  He claimed the city and state had no money, so the real solution to gentrification had to be federal.

In some ways his argument was breathtaking in its chutzpah.  He was claiming to believe that gentrification was in some ways a pejorative term for a natural process, while opposing displacement, protecting his self-interest, and at the same time presenting himself as an advocate of a national remedy.  Unsaid was the fact that given our Developer-in-Chief president and the current situation in Congress and HUD, the chance of a federal remedy is much less than that odds Vegas would give a snowball in hell.

Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies, in a commentary in YesMagazine made a much stronger, more realistic case for local action, saying:

Municipalities should move with due haste to enact high-end real estate transfer taxes, requirements for the disclosure of beneficial ownership, and regulations aimed at the disruptive impact absentee-owner-investors are having on our cities.

Collins doesn’t claim this will stop gentrification but makes the case that it will discourage “rapacious global capital” from exacerbating displacement and artificially increasing ownership and rental prices by discouraging the kind of offshore wealth capital “parking” that has been so destructive in Vancouver and London.  As an example, he cites the situation in San Francisco, another favor of “ultra-high net worth individuals” with over $30 million in assets, where voters passed a high-end real estate transfer tax on residential and commercial properties with $5 million price tags and higher.  According to Collins, the tax…

“…the tax expected to generate $44 million a year, which has been allocated to fund free tuition for residents at San Francisco Community College and help pay for the city’s tree maintenance program.”

That’s not the same as building affordable housing, but it’s moving in the right direction.  Furthermore, there’s no reason it could not leverage other funds to construct affordable housing or provide city-based rent subsidies.

We can’t wait for Washington.  We have to act now, and whether a real estate tax on $5 million or $1 million or whatever, if such a tax builds local equity by creating affordable housing or other programs that fight displacement, it’s worth a fight.

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Is Gentrification Inevitable?

New Orleans    Being on the wrong side of the tracks as I tried to beat the train to get to my office in time for a live radio show, I ended up driving from street to street to beat the traffic lined up to enter a road that traversed the tracks.  Weaving in and out of the blocks through this area I know well as a lower income, working neighborhood of the city, I was surprised, as my chance to finally enter the stream of cars came up, to find myself sitting in front of two brand new houses being constructed as in-fill in vacant lots in this area.

It was like seeing a giant flashing set of neon signs on a billboard shouting GENTRIFICATION ALERT!  Is it already too late?  Is there no way to stop it?  Could this neighborhood still be “saved,” so that families would not be displaced as pressure increased?  Talking to neighborhood organizers, they were skeptical.  I was disheartened, but I understood.  New Orleans has not only been losing the fight to gentrification since Katrina but abetting it.

Talking to city staffers recently in Cincinnati, one looked me flat in the eyes, and asked what ACORN would recommend to stop gentrification there.  I nodded, said, “Sure,” and the conversation went onto other topics, but I found myself subsequently reading a number of papers by Professor Tom Slater, a globally recognized expert and critic of gentrification based in Edinburgh, and someone ACORN chapters have found supportive in our fight for “living rent” in Scotland.  His argument in a nutshell is that there is nothing natural or organic about gentrification.  Instead it is all about rent-gaps and capitalistic investment and manipulative development programs that make neighborhoods and their residents simply collateral damage and outside of their concern.

The Wall Street Journal in a recent piece tried to make the case that some cities, and they mentioned New York, Philadelphia, San Francisco, and Portland among others, are making efforts to help low-income residents remain in their neighborhoods.  They cited programs that included “down-payment assistance on homes to people with historic ties to neighborhoods, passing ordinances aimed at restricting gentrification and assisting nonprofits that are buying buildings where tenants are at risk of eviction.”  Interesting, but other than taking a look more closely at these ordinances, having nonprofits buy buildings is great but there’s no way it is scalable and helping people buy doesn’t protect families from rising property taxes, insurance and other costs that force them to sell as prices soar around them.  These programs are worth a look but seem more about insuring some minimal community diversity than genuinely stopping displacement and providing some permanent protection for the community’s character and its families.

A local developer was interviewed recently and of course he made the case that gentrification was natural and good and then interestingly said something along the lines that he hoped he was right, but history would determine that in the future.  Sadly, history may not be the best judge because it will not be written by the displaced but by the gentrification advocates in all likelihood.  And, like many of these last-ditch programs, it will be written too late and after the fact, when desperate action is what is needed now to help people stay in their homes and weather the storm that is building all around them.

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