Wednesday, August 24, 2005

Take the Money and Run?

In his most recent op-ed, Mark Allen Hughes has a thought provoking suggestion for residents of gentrifying areas with rapidly increasing home prices (and property tax burdens): “many should consider cashing out altogether and selling their houses. The proceeds from such sales…would generate a transfer to lower-income people that's long overdue.” Mr. Hughes notes that - since 1995 - housing prices have increased by 97% in North Philadelphia (above Girard), 183% in Kensington, and an incredible 233% in South Philadelphia (below Washington).

11 comments:

ACM said...

huh.
For many folks, becoming a renter with $50,000 in the bank is a smarter move than remaining a homeowner worried about rising property taxes.

it depends, I guess, on how that worry balances against the value of having your kids living next door, your job a short ride away, etc. those kinds of things are hard to measure, and often the people who've held out for a long time in a crummy neighborhood are those who have deep roots there and are unlikely to want to move for financial reasons. but I agree that they should be *able* to benefit from the wealth that has moved in; perhaps something like tax deferrals for residents of a certain age would be reasonable (and then their offspring can sell and move)...

just thinking aloud. I think there are good reasons why "just cash out" isn't always a happy solution for folks...

Friedman said...

I don't think that Hughes is suggesting that it's always the optimal solution, just that it's certainly a worthwhile option to consider. Sometimes one's affinity for a few hundred thousand is much stronger than love of neighborhood. Tax deferrals for those who wish to remain should be part of the mix as well.

Anonymous said...

On the other hand, the NY Times reports today that rents are rising again.

ACM said...

well, usually when a neighborhood "improves" in people's perceptions, the rents there go up as much as anything else. so that wouldn't surprise me...

Aleksandr Agencia said...

People running around telling people to "cash out" is exactly what old residents of these gentrifying neighborhoods have to fear most. Propose your own theory of chicken and egg, but the poor in this country rarely have the training or education necessary to determine whether that is, indeed, the right choice for them. That leaves them vulnerable to being taken advantage of, especially by those who would offer $50,000, then turn around and sell it for $500,000. If the city did a better job offering financial training, each homeowner could decide whether it isn't better to borrow against the increasing value of the home, to capitalize on a bigger "cash out" down the road. Or, alternatively, to convert their homes to rental units, so that rising property values become an ongoing asset, rather than a onetime shot. The city could then recapture their expenses for this in the form of increased real estate transfer taxes. The preservation of the social networks, that can only exist in longstanding neighborhoods, is not an insignificant consequence. Suggesting that everyone just take the money and run is simply lazy.

Anonymous said...

The suggestion isn't that everybody be compelled to sell their home it it's significantly appreciated in value, it's just presented as one option for people could exercise. $50,000 might not be worth it but in some neighborhoods it could be many times that.

Anonymous said...

Aleksandr Agencia, your comments are of the liberal, hand-wringing, paternalistic variety. You might be surprised to know that those poor folks you're worried about have aspirations of personal wealth accumulation, just as many Americans do. Poverty pimps don't like it when their constituency moves up into the middle or upper middle class.

autumn said...

"anonymous" I beg to differ -- I'd say that by offering viable, potential solutions that don't involve kicking the "undesirables" out of the way, aleksandr is quite the opposite of this "liberal hand-wringing" you speak off.

In fact, it's the wealthy white, power/privilege structure that is historically founded upon the cut & run philosophy. Can we say, "White Flight"? That's the very thing that started neighborhood decline in many areas. Now the rich, powerful, and privileged are interested in coming back to what they abandoned, and they want to kick everyone else out.

They should consider themselves lucky if the only gestures they see are hand wringing. What Hughes has proposed is classist, racist, and completely over-simplied and irresponsible.

Anonymous said...

Do you really believe that rhetoric about the "rich, powerful, and privileged". Not exactly an accurate description of the new "condo class" moving into town. Racist? Wow, that's a stong statement...probably want to count to ten and then think about it a bit more. How about this...I think that it's racist of you to deny African-Americans in gentrifying areas the opportunitiy to cash out and get a bigger slice of the "American Dream" than they currently have. I actually don't think that you're a racist, but you should try to discuss this issue a bit more rationally. Further, why'd you have to bring race up...lot's of white folks have lived in gentrifying areas for decades and could jump on that windfall (East Falls, Fishtown, Port Richmond, etc.)

Anonymous said...

people that have no money have no idea how to save and how to financially prepare for the future. i include myself in this blanket statement- i've been in school for most of my life and i'm too easily tempted to spend what i make.

on a much less serious note, this situation reminds me of the last chris rock show i saw on HBO- "know why we (black people) don't have wealth? we spend all our money on rims!"

Anonymous said...

People with no money don't own their own homes. People who own their homes have some fiscal intelligence. These are the people who could benefit from selling their homes - if a windfall was possible - and then use their money wisely for another home purchase or rental.

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