The Oregonian, February 7-8, 2014
By Andrew Theen
The first that many people had heard of the Portland African American Leadership Forum was its scathing letter to the media and PDC in December, accusing the urban renewal agency of perpetuating gentrification in what used to be majority black neighborhoods. The group demanded the $8 million Trader Joe's project be halted or reconstituted with the addition of affordable housing
The leadership academy was deep in the weeds by October, when PAALF members toured North Williams Avenue with Mayor Charlie Hales and Patrick Quinton, executive director of the development commission, to take stock of the rapid changes there.
The city's deal to sell land for Trader Joe's to Majestic Realty at a discount became public just a few weeks later. PAALF felt jilted.
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I am posting this article because, although there are multiple issues involved here, it has some good lessons for Lake Oswego.
Public Subsidies:
With public subsidies, the government picks the winners and losers - which development gets the best breaks, who gets the facade grant. Subsidies manipulate the free market so success is not determined by an individual's own effort. It's called Crony Capitalism.
Competition:
It puts an unfair burden on existing businesses and local competitors when a new development brings in big-name shops to their new developments in choice locations. The new developments do not have to make ends meet in a conventional way as they have had artificial public subsidies to fall back on.
Increase in Land Values:
When LORA declares an area "blighted" or the land "underused" (by its standards), it becomes an Urban Renewal Area. No public vote is needed to add to public debt to entice developers to come and build in our town. So the land values go up in the URA as intended. But the payback on the debt (including interest) doesn't reach the break even point for years while the costs for public services go up every year.
Gentrification:
When land values go up, so do rents, mortgages, and any new construction. Property owners in the URA might benefit from the increased values, but small businesses renters may find it impossible to stay in town. As the gentrification continues, housing too goes up in cost.
Housing:
The typical response by government to "equity" issues in housing is to build new "affordable housing" at $200,000 or more per unit. This practice is immoral means more competition with existing businesses that provide housing (apartments that pay taxes) and the large amount of money spent building new units means helping only a few people and others are left out. And the people who are struggling with affordability now will pay more for everything including higher property taxes to benefit developers and the poor in the most expensive and egregious ways.
Solutions:
Gentrification does hurt people who cannot keep up with rising costs in an area and that has always been the case when less expensive areas look ripe for homes or new development. Government has no responsibility for providing substitute housing for those in areas that are increasing in value (exception is Section 8 vouchers). But many times the problems are caused by government. This situation can be stopped or radically reduced by limited, targeted investments - a new definition for "blight" - and neighborhood and public buy-in. What is lacking is communication with existing neighborhoods so (all) new development can fit the fabric of the existing neighborhood, and the public that may be asked to subsidize a development can vote on it. Or have the government get out of the real estate business altogether. They aren't good at it anyway.
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