A Brief History of Gentrification

Gentrification is an alliance between government, real estate companies, banks and the police which targets working class neighborhoods for redevelopment. The end result is that working people are pushed out of places that they once called home, priced out of their homes and replaced by wealthier tenants. It can also involve people being pushed out in other ways, such as through eviction, harassment, or abuse by the police. Some degree of gentrification is inherent in our economic system. Real estate investors speculate on areas by buying up property where they think property values will rise. And when enough investors jump into the fray, they create a self-fulfilling prophecy, accelerating already rising prices. Regardless of the exact process in a given area, gentrification changes the character of a neighborhood.

An important underlying factor of the dramatic increase in gentrification in U.S cities over recent years is the outsourcing of industrial production abroad in search of higher profits. When industries are exported abroad, factories and other industrial workplaces in the US end up downsizing their workforce or closing entirely. This leaves many people without jobs, and many factories and warehouses are left to rot for years, leaving big industrial areas idle.

This deindustrialization has laid the groundwork for gentrification, as banks and developers seek to redevelop former industrial areas and bring higher paying tenants in to working class neighborhoods. This has been an uneven process, and a lot of domestic industrial production has also been relocated inside the US. This is another technique that capitalists use: moving production out of areas with strong histories of union organizing, looking to capitalize on rural populations who lack a history of labor organizing. In deindustrialized cities this allows banks and real estate corporations to make windfall profits through property speculation on formerly industrial areas and working-class neighborhoods. This process is happening at full tilt in the US today. But earlier efforts, including some that preceded the modern use of the word “gentrification”, dramatically altered major cities, and set the stage for what’s going on today.

Foreign Investment and Outsourcing Leads to Gentrification

By the 1950s, the US had become a major imperialist power. This means that the US started to forcibly expand its influence over other countries across the globe. This expansion took the form of increasing investment into foreign countries and the opening of American factories in other countries. US companies expanded their investments often side by side with the opening of US military bases, bringing these countries’ political and economic development under the control of American corporations.

In addition to bringing big profits to US corporations, these imperialist initiatives also served to undercut the relative strength of the organized labor movement in the United States. Because companies could pay workers less overseas, U.S. capitalists became increasingly compelled to outsource jobs abroad in order to make bigger and bigger profits. This led to the closure of many workplaces in urban areas, resulting in growing unemployment in working class neighborhoods. In the 1950s, almost 35% of the US workforce was employed in the manufacturing sector. Today, that figure is less than 10%. This change has had a dramatic effect on the character of American cities, many of which grew up as manufacturing centers.

Once industrial production in factories no longer provided the main source of profit in formerly industrial areas, the need for a large and concentrated industrial workforce significantly decreased. Accordingly, the aims of capitalists in urban areas changed. Old industrial centers were allowed to languish while real estate investors worked out schemes to make these areas profitable again.

Historically in the United States, working class neighborhoods have hugged industrial centers so as to keep the workforce close to the factory. These neighborhoods were often heavily polluted by industrial emissions. As a result, few members of the propertied classes would reside there, leading to separate affluent enclaves in the city and its suburbs. Real estate companies encouraged these divisions by even offering lower interest loans to more affluent homebuyers and through the clever use of propaganda; this created a phenomenon known as “White Flight” where more affluent, white city dwellers were encouraged to leave urban neighborhoods. This was an intentional project by real estate companies and the government to solidify economic and racial divisions. The historical result was the creation of entrenched working class neighborhoods. In a lot of cases this allowed for the development of vibrant cultural expression and multi-racial working class communities. This favored the development of bonds of solidarity and common struggle, but at the same time, these neighborhoods could be overcrowded, ill-resourced, and in bad repair.

When these urban centers began to de-industrialize, jobs began to dry up and many working-class neighborhoods quickly became impoverished slums. The geographic division between rich and poor was exacerbated as jobs were exported abroad. The state, working through politicians, speculators, and the banks, created these conditions to isolate the working class and implement new forms of segregation. Poor people, especially Black people and other minorities, became virtually imprisoned in separate slums, where they were systematically deprived of access to resources and economic growth available elsewhere.

This realty map was used to determine which areas banks should lend to as part of the racist practice known as “redlining.”

Banks and Real Estate Speculators Profit Off Racist Practices

One early form of neighborhood segregation was Redlining, a practice developed during the Great Depression. The government needed to grant some concessions to the increasingly rebellious masses, while at the same time dividing the masses to weaken their movement. Racist policies like Redlining were designed to do exactly that by destroying working class solidarity. The Home Owner’s Loan Corporation “graded” sections of major cities, supposedly according to the security of mortgages in those areas. The lowest grade sections, marked in red on their maps, were given to neighborhoods with a high proportion of Black and immigrant residents. These redlined neighborhoods were classified as being the riskiest investments purely based on the proportion of black and brown residents. Lenders then also worked to deny mortgages to Black people and minorities outside of these areas, thus segregating cities. The Federal Housing Administration even worked with banks to deny Black and brown communities insured loans within their own communities as well, all the while issuing mortgages to white homeowners in suburbs that were protected from “lower class occupancy” or “inharmonious racial groups.”

These practices was accompanied by a technique called blockbusting. This is when real estate companies bought up property in redlined areas. Agents would convince people that property values were going down because minorities were moving into the neighborhood, when in fact property values were increasing due to Black buyers’ inability to buy homes in other areas. In this way, speculators bought up entire swaths of property that they would then rent or sell to minorities with no other place to go, turning a large profit, while establishing ghettos that would last for generations.

In other redlined areas, the banks almost completely denied access to financing altogether, leading to dilapidation, decline, and outright abandonment of property in slums. Eventually, top speculators, in coordination with the city and the banks, would swoop in to buy up entire neighborhoods, re-draw their maps, and then manufacture a development rush which is the hallmark of modern gentrification.

The Seventh St. business district was once a thriving hub in West Oakland. It was destroyed by redevelopment projects carried out after World War II.

The State Leads the Way

In many of today’s gentrifying cities, the government’s role in gentrification is not as obvious as the role of large developers. But federal, state, and local governments have often taken on the leading role in gentrification. Early redevelopment initiatives did not result in the kind of dramatic changes (from working-class to affluent neighborhoods) that we associate with gentrification today. However, they are significant as examples of this process really beginning in earnest. As mentioned, as cities deindustrialized, redlining and blockbusting destroyed neighborhoods and greatly lowered property values, allowing the government to easily acquire large tracts of urban land.

The government then carried out a series of initiatives to redevelop these areas, including constructing major interstate highways through working class neighborhoods and demolishing slums to make way for more profitable development in the service sector. This process was branded as “Urban Renewal.” The state acquired private property (often abandoned but not always) through eminent domain via a municipal redevelopment agency. That agency would then sell it to a private company with specific plans to use the land for another purpose.

For example, the Cypress Street Viaduct was a major highway viaduct that ran through West Oakland from 1957 until 1989, when it partially collapsed during the Loma Prieta earthquake, killing 42 people. The land for the viaduct, running through the heart of West Oakland, was taken as part of a slum clearance scheme, and the project is in part blamed for the decline of the once-thriving Black-owned business district that ran along Seventh Street. Many people and local businesses were displaced to make way for its construction.

Redevelopment authorities across the country were designed to systematically displace working class residents from their neighborhoods, ensuring they could not stand as an “obstacle” to new development. The City of Oakland Redevelopment Agency was active from October 10th, 1956 to February 1st, 2012, and was responsible for many massive construction projects that continue to define the city today. One example is the establishment of the Acorn Project Area. This effort was meant to deal with the declining status of West Oakland by re-purposing this formerly-industrial area into a commercial sector. This effort dictated where working-class people could live in the area by establishing new public housing projects and demolishing many single family homes, which concentrated working class people into the housing projects and paved the way for capitalists to invest in new commercial properties and market rate housing.

In the 1980s, the police became a central instrument of gentrification. Police budgets were significantly increased, especially during the crack epidemic which devastated many American cities. A new wave of oppression was launched in the name of ending the drug epidemic. Many Black and Latino communities were hit hard by crack, and then faced a new wave of police oppression on top of the drug. This created a perfect storm for the forceful displacement of working-class residents, including through the tactic of mass-incarceration. Millions of people have since been harassed, brutalized and locked up during the “war on drugs.”

This expansion of the prison system reached its zenith with the 1994 Violent Crime Control and Law Enforcement Act (aka the “Biden Crime Law”), which provided funding for over 100,000 new police officers and over $9 billion for new prisons. Police utilized the specter of rampant crime as a pretense to terrorize and brutalize the working class, especially the Black working class. Today, Black people make up 40% of the prison population but only 13% of the total US population. In the wake of the war on drugs widespread displacement destroyed many communities, and speculation on property in these areas soon began to surge with increasing speed.

Over the following decades, the groundwork was laid for a major change in cities across the country. Extremely undervalued property in working-class neighborhoods was ripe for being bought up on the cheap and speculated on. The expansion of big chains in the service sector increasingly out-competed small local businesses, creating streets filled with empty storefronts. New municipal initiatives rezoned formerly-industrial areas for “mixed use development,” creating large retail centers and luxury apartment complexes in their place.

The government and politicians use clever language and sleight-of-hand to justify these luxury developments as “affordable.” What politicians are unwilling to state directly is that they are only “affordable” for wealthy newcomers! Some projects set aside units for low income renters but this is also a trick. It’s typical for the rent of “low-income” units to be determined based on the area median income (AMI) for each household size, a deceptive measurement which tells you the typical income for that household size in a “given region.” So, for example, the fact that the AMI for household of 4 in the Boston “area” is $113,000 means that half of all 4-person households in the “area” have incomes above $113,000, and the other half have incomes below that number. The trick is that the “area” includes all the super wealthy small cities (like Brookline) and suburbs around Boston, and even a small part of New Hampshire. By this metric, housing agencies calculate that an “affordable” 4-person unit in a working-class neighborhood of Boston is one that is affordable for a family earning a maximum of 70% AMI—in this case, $79,300. But the actual median household income of Boston proper is $72,000, and for a household in working-class neighborhoods like Roxbury it is often closer to $35,000! It is a total joke to use such a huge area to calculate what counts as “affordable” in working class neighborhoods. But the developers love this, because it allows them to claim they are building “affordable” units in neighborhoods they want to gentrify while in reality pricing out the actual residents of the neighborhood.

Since AMI is based on such a large area, and is intentionally warped by including very high income neighborhoods, a “low-income” unit marketed at 50% AMI can still be completely unaffordable for many working class renters. Worse, often just a handful of these units are included in a complex with hundreds of market rate units, so these “affordable” units only house a small fraction of the population formerly housed in the cheaper housing demolished to make way for new development. These trends, and related rapidly increasing rents, have forced many people to either move away to far-removed neighborhoods and suburbs or to become homeless.

At the current moment, things have gotten significantly worse. Gentrification has proceeded in cities around the country, and periods of great economic hardship for working people have only accelerated it. After the housing market crash of 2007/2008, many working people who had been encouraged to take out predatory loans to buy homes were hung out to dry. The resulting wave of foreclosures displaced many of these people from their homes, and allowed real estate across the country to be snatched up en masse by banks.

The banks used the crisis as an opportunity. Since this crisis, the amount of vacant housing has massively increased, but housing prices have still continued to rise. Banks bought literally millions of homes that stood vacant while people were foreclosed on and thrown onto the street, and since then they have kept large numbers of the homes they own off the market, in order to artificially restrict supply and keep prices up. In 2010, during the month of September alone, 120,000 homes were repossessed by the banks. That year, at the height of the recession, almost 12% of mortgages were in delinquency, meaning their loans had not been paid and could be subject to foreclosure. As much of a disaster as this was for millions of people struggling to pay their bills, it was a big come-up for the forces of gentrification. A huge amount of property fell into the hands of a smaller and smaller number of massive banks. This is one example of how pervasive gentrification is—and how it is really a process where a massive amount of wealth is concentrated in a smaller number of hands all across the country.

The Fight Ahead

Within our current system, gentrification shows no sign of stopping. As long as the rich run society for their personal gain, poor people will get pushed around. But wherever there is oppression, there is resistance. There are far more people getting shafted by gentrification than there are people profiting off of it. We have strength in numbers, but we have to get organized. Developers, banks, and politicians depend on the fact that people will be isolated, because no one person can take on this system alone.

We don’t have to be alone—we can get together with our neighbors and start building collective resistance. People can work together to fight evictions, resist rent hikes, and demand improvements. We can organize to slow down or even stop big development projects that will displace people.

We’ve seen how the history of gentrification has played out. But it’s not set in stone. People in the past have won big victories in the struggle against gentrification, by coming together to stop a highway expansion project slated to destroy a Black neighborhood or by forcing city and state politicians to enact rent control. The system wants us to stay disorganized, isolated, and separate because when we’re alone we’re vulnerable and easily pushed around. But when people unite and commit to the struggle together, get organized and serious about supporting one another and fighting for real change, then there’s no end to what people can accomplish.

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