Gentrification and the Economic Crisis
Foreclosing the American Dream Means an End for "Urban Renewal"
Nov 17, 2008
Blacks are projected to lose anywhere between 71 and 92 billion dollars and Latinos anywhere between 75 billion and 98 billion dollars – a total loss of $200 billion for people of color from subprime loans. The racial bias of the most prominent financial institutions resulted in a 40% difference in losses between whites and people of color.
Many blacks and Latinos who received subprime loans would otherwise qualify for low cost prime loans, but they received these high-priced mortgages more frequently than whites who were equally qualified for prime loans. People of color were more than three times likely to have subprime loans - 55% of the high-cost mortgages went to blacks while only 17% went to whites.
What the losses show is that the black middle class was essentially built on a house of cards and that people of color will never completely escape poverty as long as they rely on white economic institutions.
The Relationship Between the Economic Crisis and Gentrification
To understand the relationship between the economic crisis and gentrification, it must be understood that the economic crisis resulted from the housing crisis, which resulted from a housing bubble due to unbridled speculation. Subprime lending was a result of financial institutions attempting to accrue a larger portion of the housing bubble through predatory loans in which interest rates would sky rocket. These loans targeted low-income people, disproportionately blacks and Latinos, who could not afford the high interest rates that spiked as housing prices declined.
Spatial Deconcentration and Renewed Concentration of Poor Urban Neighborhoods
Impoverished inner-city neighborhoods have been essentially gentrified over the past several decades and many black families moved out to suburban neighborhoods. The long-term policy of “spatial deconcentration” was meant to undermine the political radicalism spreading throughout poor, colored neighborhoods in every major city.
As energy prices currently fluctuate, white upper-middle class residents continue to flock into the city where capital continues to reside. But with the elimination of the black middle class from racist subprime lending, it’s reasonable to project a mass demographic shift of blacks from the suburbs and back into the inner-city. It’s very possible that there could be a renewed concentration of poor blacks and Latinos within the inner-city. However, they will be moving within close proximity to the centers of financial capital and upper-middle class white residential neighborhoods. Large concentrated areas of poverty will be far closer to capital than before spatial deconcentration was initiated in the 70’s.
The Destruction of the Black Middle Class and Disillusion with the American Dream
The poor black riots of the late 60’s primarily targeted their own neighborhoods since they remained extremely segregated and distant from white residential areas. Poor people of color who managed to scrap their way up to some form of “middle position” are now possibly angrier and more disillusioned with the “American Dream” than in the late 60’s. They poked their way through the barriers of the class system only to be beaten back down by the financial giants of capitalism.
Poor people of color in the late 60’s had no illusions about the mythical “American Dream,” but the current black middle class was blinded by a façade of prosperity. As they have mostly become disillusioned with this myth and are in the process of moving in closer proximity to capital than they were in the late 60’s, the devastating effects of the housing crisis may finally come back to haunt large white financial institutions. Maybe the recent surge of federal dollars into law enforcement is a more subtle form of “bail-out” for financial capital.
The weakening of these financial institutions means a temporary halt in gentrification, or “urban renewal”. They have momentarily lost the ability to prevent the reconcentration of poor people of color within the city which is undeniably in process with the rapid decline in black home ownership. For the stated reasons, it’s quite possible that potential unrest from poor, colored neighborhoods within major cities will completely undermine capitalism – not simply the internal collapse of the economy although it was a direct result of the process.
