The Hidden Value of a Poor Neighborhood

The real value in your city likely isn't where you think it is. Specifically, it isn't all concentrated where the bulk of your city's well-to-do people live.

I've written about the fallacy of believing that wherever residents make a lot of money and live in nice houses, local government is going to have no trouble funding the promises it's made. The reality is quite different: if that private wealth is paired with extravagant, debt-financed public infrastructure, is spread thin on the landscape, and is producing endlessly growing maintenance obligations, a lot of places that appear to be doing great are actually on the road to insolvency. 

This article deals with the flip side of that story. Places that don't appear to be doing anywhere close to fine might have a rosier future than you think—if our cities get their priorities straight and put the wealth that these poor neighborhoods generate back into their streets."

Our grand suburban experiment (which is a symptom of our infatuation with the shiny and new) means that we as a nation have left some of our poorest people behind in some of our best-designed neighborhoods. These places often have no shortage of problems stemming from poverty—deteriorating buildings; vacant spaces due to lack of demand; the vicious cycle of decline and neglect. But they have advantages, too, and those advantages show up when you run the numbers.

When Strong Towns and geoanalytics firm Urban3 visited Lafayette, LA, we were able to produce a detailed quantitative analysis showing that poor neighborhoods were in many cases subsidizing affluent ones. By this we mean that those neighborhoods were delivering more net revenue to the local government, after subtracting the costs of the public infrastructure serving them, than many wealthier areas.

Still, it's one thing to grasp this as an abstract fact; it's another entirely to understand what it means on the ground, and why it's so often true. I took a walk on a Saturday through the poorest neighborhood in my city of Sarasota, FL—not intending to write about this; it was just a nice day for a walk—and ended up thinking about the things the place has going for it.

A Typical Low-Income Neighborhood

The place we're going to look at is typical of poor neighborhoods especially in Southern cities—different regions have their own patterns, but you can find places that look and feel like this throughout Florida, Georgia, Texas, etc. It isn't high-density or high-rise. It's dominated by free-standing single-family houses, although about two-thirds of its residents rent their homes. This neighborhood, called Newtown, has been the center of the black community here for decades. It has a traditional street grid, mostly laid out before World War II and thus before the suburban era.

Value per acre map for northern Sarasota including Newtown. Click to view larger.

Newtown has a lot of challenges. Its median household income is only $20,000, and 40% of residents live in poverty. Unemployment is high. Many of the houses in the neighborhood are in poor condition owing to years of deferred maintenance. Given this, one would expect that home prices would be low, and one would be right: the average Newtown home is assessed at only $50,000, versus $238,000 for the county as a whole

As we emphasize at Strong Towns, value per acre tells a different story. And an important one, because land is a city's scarcest and most finite resource, and must be used productively. This neighborhood sits relatively near the water (in a coastal town) and near downtown—such locations are even scarcer.

When we look at home value per acre, Newtown still remains below average for the county, but not by nearly as much: The average value per acre in Newtown is $337,000, versus a countywide average of $592,000.

The deck is stacked against Newtown in so many ways: the place has suffered from decades of disinvestment, for familiar reasons of housing finance, suburban subsidies, and race relations. Despite this, Newtown still comes in around the 35th percentile in value per acre—that is, slightly below average.

Among the nearby neighborhoods that perform worse on overall value-per-acre than Newtown:

3 miles away: Looks nice, right? These houses are reasonably large and pricey; unfortunately for the county's tax base, they surround a golf course which occupies well over half of the neighborhood's land, and contributes very little in value for the public infrastructure it requires. Average value per acre: $293,000.

2 miles away: Want a big house on a 2-acre lot, with room to even keep a horse if you want one? You can have that right in town. The people who live here make a lot more money than Newtown residents. But this neighborhood full of huge lots is contributing far less in taxes to the local coffers to help maintain its streets. Average value per acre: a puny $112,000.

Image: Google

Let's break down a few reasons, both quantitative and a bit more intangible, that a poor neighborhood can punch above its weight when it comes to being a resilient and productive place.

 3 Reasons Poor Neighborhoods Are More Financially Productive

 1. Smaller Lots

The houses in Newtown are small and tightly spaced. The average area of a residential lot in this area is 6,423 square feet. In the county as a whole, that average is 17,487. The average Sarasota County home has to be worth 2.72 times as much as the average Newtown home to deliver the same bang for the buck in terms of value per unit of land consumed.

Newtown houses average 1400 square feet of living space, versus 2700 for the county as a whole. That's small but not tiny—still bigger than most two-bedroom apartments. And these are mostly one-story: you can fit a larger home on a small lot if you build up.

2. Smaller Cost Burden

Value per acre is higher because of the area's compact development pattern, but the cost to service the neighborhood doesn't grow proportionally. Many of those costs are much closer to being a function of land area than of population: small lots mean fewer feet of street to maintain per resident, and fewer feet of pipe per resident. More kids in walking distance of the school means fewer busing costs for the school district. Fire trucks don't have to drive as far in emergencies. The cost per capita to provide most infrastructure and services to Newtown is lower than in a spread-out neighborhood.

3. Modest Infrastructure

Image: Google

Another reason this neighborhood will be cheaper to maintain in the long run: its many narrow streets.

Add this to the plus column in any pro-vs-con chart. We frequently effuse about the benefits of narrow streets for both livability and productivity. Newtown can function with these tiny streets because its gridded development pattern disperses traffic across many routes, and because the neighborhood's walkability (more on this below) and comparatively low rate of car ownership mean less traffic overall.

These are all features of older, traditional neighborhoods. Here's the rub: the traditional development pattern is so enormously productive that the single poorest neighborhood in an entire county of over 400,000 people, when you look at its financial productivity, registers only a little below average.

And this is typical of countless poor neighborhoods all over the North American continent: if they were built in a traditional, compact way, you can be sure there's much more of a store of wealth there than you would think from just looking at home prices.

3 Ways a Poor Neighborhood Can Have Intangible Value

The dollars-and-cents question of financial productivity is important, but it can't be the whole story. Human life is rich and complex, and trying to optimize the places in which we live it for one variable, like tax-base productivity, would be a horrible mistake. It may even seem facile and obvious to say that you can use resources more efficiently by cramming more people into less space. Of course you can. So what? That doesn’t make for a nice place to live.

I haven’t lived in the neighborhood I’m holding up as an object lesson here, and I’m loath to make pronouncements on a place I don’t know intimately as if I did. But I am familiar with enough poor neighborhoods that I’m willing to say they have things to teach our rich ones: forms of non-monetary wealth that are in abundant evidence, and that don’t cancel out the problems of poverty but do function as a sort of insurance policy against its worst effects.

1. Life Lived in Public

In a 45-minute walk on a Saturday afternoon, I counted at least two dozen kids on bikes, five families having cookouts, countless small groups hanging out in front yards / patios / carports. Life is lived in public here.

That's a function of culture, to some extent. And perhaps it reflects the lack, in a cash-poor community, of some of the distractions that money can buy. But I do think some of it is a function of urban form. You're up close and personal with your neighbors here, and the neighborhood is designed for walking. Kids are safe biking around in groups, since there are eyes on the street and cars move slowly.

Some of our richest neighborhoods are almost post-apocalyptically quiet on a sunny Saturday afternoon. Not Newtown. The buzz of activity is refreshing.

2. Life Lived Locally

This traditional neighborhood is centered around a business district which is its historic heart and crossroads. There's usually a steady stream of people coming and going. You can get basic groceries. You can get a bite to eat. Neighbors have spontaneous social encounters here—Jane Jacobs's famous sidewalk ballet is in evidence. Social-service agencies concentrate on this main street. A soul-food kitchen is opening soon as a partnership between the community, the city, and a local restaurant tycoon. Various small businesses ply their trade, sometimes including things that don't seem to belong together oddly juxtaposed in a single building.

There are a lot of needs you can't currently meet on foot here (there isn't a full-service grocery or pharmacy, a hardware store, or a bank). But it's a place that was built for its residents to be able to meet needs locally, in an era when, because of Jim Crow, much of the city was inhospitable to them. And it's still physically set up to achieve that ideal again. This neighborhood passes four of the tests on the Strong Towns Strength Test with flying colors:

These tests matter. In the event of a real crisis, there are things that will be more functional here than in a lot of places that are wealthier now but don't pass these tests.

3. The Ability to Bounce Back

Just your friendly neighborhood limo service, Wild West BBQ, and palm nursery.

What would it look like for local government to set out to boost home values in Newtown by 10%? It might look like something as humble as a few low- or no-interest loans for home repairs. It might look like modest investments in public safety, like improved sidewalks, crosswalks, lighting. It might look like micro-grants to entrepreneurs in the neighborhood, or down-payment assistance to aspiring homeowners, or helping turn a vacant lot into a home for food trucks or a farmers' market or a community garden. There are any number of small-bet ideas worth considering to send a positive signal: "We're investing here. We see a brighter future for this place. So it's safe for you to do so too."

Now consider a suburban subdivision, built to a finished state. The roads, sidewalks, landscaping are all pristine. The library, schools, and a park with sports facilities are a short drive away. What would you do if you wanted to boost home values there by 10%?

A recent city grant funded an effort to preserve much of the neighborhood's oral history and create a walking tour with interpretive signs.

The only unique value proposition of most built-to-completion subdivisions is their newness. If such an area fell into severe decline, its residents would be quick to walk away from it. There is nowhere for these places to go but down.

It's a lot less likely that people will walk away from Newtown no matter what the future brings. There's too much there there. Someone is going to love this place. Someone is going to fight to bring it back from whatever the future holds for it.

The good news for cities is that there's an obvious thing to do where you've got a neighborhood that has the ingredients of a productive place—a compact, walkable street layout; a main street with space for local businesses; an eclectic mix of adaptable buildings; some serious pride of place—and relatively poor people are living in such a place. That place is crying out for investment. There are a hundred things a city can do to help real people who already live there meet real needs.

So get to it. This is the low-hanging fruit. Want to make your whole city stronger? Focusing on poor neighborhoods is the best, smartest thing you can do.

(All photos by Daniel Herriges unless otherwise specified.)