Tim Ferris and I have been having an ongoing discussion lately about a secret "master" plan by the powers-that-be to devalue the property of us urban dwellers so that our land can be bought cheap and re-developed.
Sounds like a conspiracy theory, right? Wrong!
I recently found this journal article from 2000 in Housing Policy Debate published by the Fannie Mae Foundation and authored by John T. Metzger, at that time an Assistant Professor of Urban and Regional Planning at Michigan State University.
It is rather academic reading, but the gist is that "planned abandonment" under something called the neighborhood life cycle theory has been a mainstay of National Urban Policy and accepted practice in the urban planning profession for the better part of the 20th Century.
To better understand "planned abandonment" and neighborhood life cycle theory, read the excerpts from the article appear below. The entire article can be found here.
The citation is: Metzger, John T., Planned Abandonment: The Neighborhood Life-Cycle Theory and National Urban policy, Housing Policy Debate, Vol. 11, Issue 1, pp. 7-11.
The urban economists Edgar M. Hoover and Raymond Vernon outlined a five-stage process of neighborhood development in a 1959 study for the Regional Plan Association of New York, a powerful corporate-sponsored planning organization (see table 1). Their report concluded that the general pattern of neighborhood change was characterized by an "inevitable trend toward decline, often associated with the spread of districts occupied by more or less segregated ethnic and minority groups" (Hoover and Vernon 1959, 196). Although limited to New York, their analysis influenced urban renewal planning across the country. The Housing Act of 1959 authorized municipalities to prepare federally funded plans for a citywide community renewal program to determine the spatial allocation of resources and renewal strategies for different types of neighborhoods.
The community renewal program reflected a shift in federal policy from project specific and area-specific support to ongoing citywide renewal planning (Real Estate Research Corporation [RERC] 1974b). Before this, the life-cycle theory had been incorporated into the neighborhood risk-rating system and underwriting policies used by the Home Owners' Loan Corporation (HOLC) and the Federal Housing Administration (FHA). As a result, until the urban riots of the 1960s, FHA refused to finance existing housing in neighborhoods where African Americans lived (Bradford 1979; Jackson 1985). Before joining this federal agency as its chief underwriter in 1936, land economist Frederick Babcock wrote an important textbook, The Valuation of Real Estate, that urged real estate appraisers to analyze what he called the "future histories" of neighborhoods:
"A residential district seems to go through a very definite and inevitable course of development when not affected by forces which can entirely change its use. This cycle is characterized by the gradual decline in quality of people through the years accompanied by population increases and the more intensive residential use of ground." (Babcock 1932, 75)
Babcock described cycles of decline for five types of residential neighborhoods, each resulting in an "inevitable ultimate condition" of either "a poor, blighted, or decadent district," or even worse, a district of "a slum character" (1932, 76). Racial change in a neighborhood could result in "very rapid decline" of property values (Babcock 1932, 91). Babcock then added language about the inevitability of neighborhood decline to the FHA Underwriting Manual, which was amended in 1949 to include antidiscrimination statements, but continued to use these concepts of neighborhood analysis in rating location risk:
"Neighborhoods tend to decline in attractiveness over a substantial period of time, as the original residents are others fromby othersfrom lower economic levels. Transition, therefore, gradually results in poorer maintenance of properties and lower owner occupancy appeal." (FHA 1967, paragraph 71603.7)
The Underwriting Manual also acknowledged that "some lenders have excluded entire cities from their lists of acceptable areas" (FHA 1938, paragraph 920). The agency devised a method of analyzing the economic base of cities and metropolitan regions that would supplement the risk ratings assigned to specific neighborhood locations. This "economic background rating" considered industrial employment trends and diversification, cyclical changes in the economy, and special factors such as the presence of a tourist destination, political capital, or educational center within a metropolitan area. The Underwriting Manual concluded that "single-industry areas are usually extremely hazardous," (FHA 1947, paragraph 1506(5)) and federal economic background ratings favored cities with a growing population and diversified economy.
These concerns were restated by real estate economist Homer Hoyt in his influential 1939 FHA study, The Structure and Growth of Residential Neighborhoods in American Cities. Six years later, in a paper presented to the Mortgage Bankers Association of America, Hoyt (then the director of economic studies for the Regional Plan Association of New York) argued that the advantages possessed by the Northeast, such as natural resources (coal and iron), rail transportation, and water, were increasingly outweighed by the problem of physical blight and the outmigration of whites and low-wage industries (1945).
HOLC, created by the federal government in 1933 to refinance mortgages falling into delinquency and default during the Great Depression, used a multistage neighborhood classification system (later adopted by the FHA) to analyze underwriting risk (see table 1). Four color-coded categories distinguished four stages of neighborhood development, ranging from first-grade green ("well-planned") to fourth-grade red ("characterized by detrimental influences to a pronounced degree"). In a 1conversationighborhood consersation study of the Waverly section of Baltimore prepared for the Federal Home Loan Bank Board, HOLC described a "constant life cycle" for urban neighborhoods in which newly built areas gradually declined in physical condition and economic value over time (HOLC 1940; Weiss and Metzger 1994). This cycle could be reversed by demolition or by conservation and rehabilitation at an early stage of decline (see table 1).
These federal housing policies accommodated the biased practices of the real estate and financial industries. During the 1920s, the National Association of Real Estate Boards added Article 34 to its Code of Ethics, prohibiting realtors from moving African Americans into white neighborhoods (Helper 1969; Mohl 1997). The research director of this powerful trade group was later named the first chief economist of the FHA (Weiss 1989). In New York, the Mortgage Conference was organized in 1933 (during the economic crisis) by the largest institutional real estate lenders in that city to establish industry lending standards and distribute market information. In 1946, the conference was sued by the Justice Department (the first real estate antitrust action under the Sherman Act) for engaging in a discriminatory conspiracy to deny loans to minorities, among other violations. (A consent decree was reached two years later.)
