Poor Neighborhoods Make the Best Investments
Charles Marohn of Strong Towns breaks down why poor neighborhoods are profitable while the affluent neighborhoods are not, and makes the case as to why investing in the poor neighborhoods realizes the most bang for the buck for cities.
What is obvious here is that the poor neighborhoods are profitable while the affluent neighborhoods are not. Throughout the poor neighborhoods, the city is – TODAY – bringing in more revenue than they will spend to maintain the neighborhood, and that’s assuming they actually invest the money to maintain the neighborhood (which they have not been). If they fail to maintain the neighborhood, the profit margins will be even higher.
This might strike some of you as surprising, yet it is important to understand that it is a consistent feature we see revealed in city after city after city all over North America. Poor neighborhoods subsidize the affluent; it is a ubiquitous condition of the American development pattern.
As an example, consider what is probably our most famous case study here at Strong Towns, the Taco John’s in my hometown of Brainerd, Minnesota, as described in “The Cost of Auto Orientation.” The block on the left has been labeled as blight. It’s run down and neglected. The block on the right – same size, same amount of public infrastructure, just a different development approach – looks shiny and new. Poor versus affluent. The cost to the city is the same but the poor block is worth 78% more, and pays 78% more taxes, than the affluent block.
Total value: $1.1 million Total value: $618,000
We see this trend everywhere we’ve done a model. On a per acre basis, neighborhoods that tend to be poor also tend to pay more taxes and cost less to provide services to than their more affluent counterparts.
How is this possible? Some of my planner colleagues will say it is density, but I’ve long rejected that simplistic explanation. There is a lot more to it than a simple division problem. For example, in Lafayette those poor neighborhoods tend to have narrower streets, which cost less. The houses tend to be older and so they also tend to occupy the high ground, which was the cheapest place to build way back then (free, natural drainage). The high ground also makes sewer service more affordable; no expensive pumps to operate and maintain. I could go on, but you get the point. The original builders of Lafayette were poor themselves and, even where they weren’t, they were culturally pretty frugal. Their building tradition, developed over thousands of years, built as much wealth as possible at the lowest cost with the least long term risk.
Next: Three reasons poor neighborhoods make the best investment