[lopmotr]

In a lot of America, the scarcity is kind of artificial or unstable though, so it's still a risky investment. Look at California City - land there is anything but scarce. Or Detroit where the seemingly indestructible world-leading industry it depended on for house value shifted out from under it. Or the concepts of white flight and gentrification where neighborhoods can be tipped one way or the other in a self-perpetuating avalanche effect that doesn't necessarily correspond to any fundamental change in their utility. What's scarce isn't property in general, but property near rich people. If the rich people move away, so do the property values. I'd say property investors are chasing after rich people extracting value out of their desire to congregate together.

Housing investment doesn't really have the ability to live in it. If you don't rent out your house, you're losing investment returns. Plenty of property investors depend on rents, not just price rises for their profit. As long as you live in a house in the free market, you're paying for that privilege, whether you own it or not. What it does provide over renting is you can't be kicked out so easily. I think that could be the main reason families prefer to buy houses instead of rent.

[ralusek]

> gentrification where neighborhoods can be tipped one way or the other in a self-perpetuating avalanche effect that doesn't necessarily correspond to any fundamental change in their utility

No fundamental change in their utility? Gentrification goes hand in hand with reduced crime rates, better education, increase in available public spaces/restaurants/bars. It's a feedback loop based off of people's tolerances. In one common model, for example, it begins with more desperate braver artists starting to congregate in an area because it's what they can afford. Their presence alone will typically change the dynamics of an area to a certain degree that is enough to create a tolerable pocket for the more adventurous that are better off (think software engineers opting to live in Mission/Oakland 5-10 years ago for the cultural element of the neighborhood). More tax money starts coming in, policing goes up and is partly responsible for crime going down, which also goes down due to demographic shift to wealthier people who are less likely to feel as though they must engage in crime. The children of these people can create a large enough community of kids that are culturally primed to take education seriously that the critical mass of a classroom can shift from boisterous and unruly to more manageable, further stabilizing the education situation for those that come after.

The point is, very little of this is just some arbitrary decision with no impact on the function of neighborhoods. Over the course of gentrification, neighborhoods change dramatically in ways other than demographic shift.

[dredmorbius]

The value changes from gentrification or owner flight (see' most mid-century US cities) come from the community rather than any significant owner-initiated changes to the propety itself.

You do nothing, rich people move in around you, value increases.

You do nothing, rich people move out around you, value decreases.

The direct utility of the property is unchanged. The owner has made, net, an insignificant contribution to the surrounding community. And yet value accrues (or diminishes) all the same.

Housing and real estate internalise the net community utility changes. The pathological cases are where the owners or investors are outside the community and strip-mine the resulting wealth.

Land value taxes both dampen wild valuation swings and internalise value gains to the community to provide infrastructure, institutions, and services.

[lopmotr]

Unfortunately, it's hard to find a way to allocate land without using the market. Yes it's unfair that rich people have to pay more to live where they want than poor people who are happy living near other poor people, but how else can you allocate land that gives the useful land to the people who'll get the most value from it? Central planning doesn't get it right, a lottery would mean people can't group themselves together so they would lose that important value (eg programmers in Silicon Valley).

Land value tax would take money from people who don't need those community services and give it to different people who happen to live nearby. That's not really fair. It's still a kind of rent seeking that also happens to give the rent to charity but not back to the original payers in proportion to what they paid. But it does sound more reasonable than the luck of the draw that property owners get.

[dredmorbius]

Long-term leases and LVT seem among the better solutions.

It's the assetification of an essential economic input that seems to be the root of the problem. Bernhard J. Stern commented on this in the 1930s in several works I've submitted (to no traction) in recent weeks.

https://doi.org/10.1177%2F000271623820000104

https://archive.org/details/technologicaltre1937unitrich/pag...

[lopmotr]

You misunderstood me. You've described the same self-perpetuating phenomenon that I was referring to. By "fundamental", I meant something stable that isn't a consequence of gentrification or white-flight. For example, being near a harbor, on flat land, good ocean views, low risk of flooding, or for smaller areas with weak influence on their environment, near a big city, near convenient transport/roads, etc.

Without fundamentals like that, then it is arbitrary decision which neighborhoods have high prices and which have low. It becomes an accident of recent history that could flip the other way over a period of decades and ruin people's investments.

[dondawest]

Probably the best and least emotionally-charged analysis of gentrification I’ve ever read. Thanks for writing this comment. Always suspected a lot of these things to be true.

[bsanr]

>No fundamental change in their utility?

Yes. A given neighborhood might change, but a common, if not fundamental, characteristic of gentrification is that the associated demographic shifts constitute a commensurate shift in the location of community-related amenities, e.g., good schools, lower crime, public and private investment in public spaces. In other words, gentrification doesn't create more affluent communities, it simply shifts them, to places ready for new development as older communities become less desirable ultimately as a simple function of their age.

There is also the necessity of addressing the role of race and class anxiety in how, why, and when we invest in communities.

[maehwasu]

Great description. It’s also interesting to note that the description of gentrification given is indistinguishable from colonization, except that the colonizing is internal to a nation.

[lopmotr]

Not at all. Colonization used violence to take over people's land and enforce the incoming people's laws on the existing population. Peacefully buying it with no duress is a perfectly acceptable kind of colonization, but that's not the word we normally use. We call that "immigration", or in this case, internal migration.

[bsanr]

It's naive to think that violence and laws that are onerous or disadvantageous to current residents are not employed in the process of gentrification. Suppose, for example, that you close a grocery store that serves thousands of lower-income, often low-mobility, residents, in preparation for building luxury apartments. Or you increase "broken windows" arrests in such a away that existing residents are disproportionately affected. How is that not duress? You have introduced conditions for continued residence that threaten life, comfort, and freedom.

Colonization is a fine word for it.

[thorwasdfasdf]

Yes, but to be more precise, what's scarce is property near jobs. Jobs are ultimately what determine who moves where. That's critical for understanding the problem.

CA voters thought they could prevent people from coming here by reducing housing and boy were they ever wrong. It's too bad this lesson took 50 years to play out and awareness is only now slowly starting to arise.

[chaostheory]

Palo Alto residents saw this problem and they have opted to limit business growth in their city.

https://sanfrancisco.cbslocal.com/2016/08/30/palo-alto-mayor...