Hamline University DigitalCommons@Hamline School of Business Student Theses and School of Business Dissertations 2013 Disinvestment and Suburban Decline Robert Streetar Hamline University, [email protected] Follow this and additional works at: https://digitalcommons.hamline.edu/hsb_all Part of the Physical and Environmental Geography Commons, Political Economy Commons, Public Policy Commons, Regional Economics Commons, Urban Studies Commons, and the Urban Studies and Planning Commons Recommended Citation Streetar, Robert, "Disinvestment and Suburban Decline" (2013). School of Business Student Theses and Dissertations. 4. https://digitalcommons.hamline.edu/hsb_all/4 This Dissertation/Thesis is brought to you for free and open access by the School of Business at DigitalCommons@Hamline. It has been accepted for inclusion in School of Business Student Theses and Dissertations by an authorized administrator of DigitalCommons@Hamline. For more information, please contact [email protected], [email protected]. i Disinvestment and Suburban Decline Robert Streetar Hamline University 15 July 2013 ii ABSTRACT Beginning in the mid-1970s, U.S. suburbs started to experience many of the same problems typically associated with earlier inner-city decline including accelerating income decline, increasing family poverty, falling housing prices, growing income polarization, escalating crime, and increasing racial and ethnic diversity. Conventional wisdom often lays the blame for neighborhood decline on who moves in and who moves out. This is understandable, as neighborhood migration is easily observable. It is the hypothesis of this research, though, that the less visible disinvestment of capital from suburban neighborhoods is an initial cause of suburban decline that precedes and coincides with the more observable physical, social, and economic indicators of decline. Neil Smith’s theory of gentrification provides the theoretical foundation for this dissertation. It is the effect of disinvestment that leads to a drop in both house value and in the capitalized ground rent, as reflected in declining relative sale prices and rents. Lower-income persons are often drawn to purchase homes or rent apartments in these declining neighborhoods, as they are more affordable compared to newer neighborhoods. This research applies Smith’s theory to the Minneapolis-St. Paul region to determine is relevance in explaining suburban decline from 1980 through 2010. This analysis found disinvestment from inner suburbs, and that disinvestment increased and accelerated during the period of analysis. Although inner suburban disinvestment did not uniformly occur at the same time, and the geography of disinvestment took on a more sectoral rather than uniform pattern. iii TABLE OF CONTENTS Title Page i Abstract ii Table of Contents iii List of Figures iv List of Maps iv List of Tables v Research Problem 1 Advancing the Scientific Knowledge Base 2 Theoretical Foundation 5 Contribution to Theory 46 Research Hypotheses 51 Definition of Terms 53 General Methodology 56 Methodological Approach and Rationale 57 Variables 58 Assumptions 60 Limitations 61 Measures/Instruments 62 Population and Sampling Plan 62 Sample Size 62 Expected Site 62 Site Permission 70 iv Participant Contact and Ethical Considerations 63 Data Collection/Project Design 63 Data Analysis 63 Results and Conclusions 70 References 130 LIST OF FIGURES Figure 1 The Burgess Model 10 Figure 2 Hoyt’s Model 14 Figure 3 The Evolution of Land Values in Chicago 34 Figure 4 Rent Gap 40 Figure 5 Suburban Rent Gap 43 Figure 6 Devalorization Process and Neighborhood Decline 45 Figure 7 Hypothesized Geographic Model of Investment and 71 Disinvestment Figure 8 Market Failure – Public Policy Correction 119 LIST OF MAPS Map 1 Map of Twin Cities Metropolitan Area—Political Boundaries 2012 144 Map 2 Hypothesis #1—Median Home Value 1980 145 Map 3 Hypothesis #1—Median Home Value 1990 146 Map 4 Hypothesis #1—Median Home Value 2000 147 Map 5 Hypothesis #1—Median Home Value 2010 148 Map 6 Hypothesis #1—Median Gross Rent 1980 149 Map 7 Hypothesis #1—Median Gross Rent 1990 150 v Map 8 Hypothesis #1—Median Gross Rent 2000 151 Map 9 Hypothesis #1—Median Gross Rent 2010 152 Map 10 Hypothesis #2—Median Home Value 1980–1990 153 Map 11 Hypothesis #2—Median Home Value 1990–2000 154 Map 12 Hypothesis #2—Median Home Value 2000–2010 155 Map 13 Hypothesis #2—Median Home Value 1980–2010 156 Map 14 Hypothesis #2—Median Gross Rent 1980–1990 157 Map 15 Hypothesis #2—Median Gross Rent 1990–2000 158 Map 16 Hypothesis #2—Median Gross Rent 2000–2010 159 Map 17 Hypothesis #2—Median Gross Rent 1980–2010 160 Map 18 Hypothesis #3—Median Home Value (1980–1990) to (1990–2000) 161 Map 19 Hypothesis #3—Median Home Value (1990–2000) to (2000–2010) 162 Map 20 Hypothesis #3—Median Gross Rent (1980–1990) to (1990–2000) 163 Map 21 Hypothesis #3—Median Gross Rent (1990–2000) to (2000–2010) 164 LIST OF TABLES Table 1 Inner Suburbs Median Home Value—Hypothesis #1 74 Table 2 Inner Suburbs Median Gross Rent—Hypothesis #1 84 Table 3 Inner Suburbs Median Home Value—Hypothesis #2 92 Table 4 Inner Suburbs Median Gross Rent—Hypothesis #2 100 Table 5 Inner Suburbs Median Home Value—Hypothesis #3 106 Table 6 Inner Suburbs Median Gross Rent—Hypothesis #3 110 Table 7 The Strategic Setting: The Reason Homeowners 122 Disinvest in Housing Maintenance and Upgrading vi Table 8 List of Minneapolis-St. Paul Metropolitan Area Inner 165 and Outer Suburbs Table 9 Hypothesis #1 – Median Home Value – Z-Scores 170 Table 10 Hypothesis #1 – Median Gross Rent – Z-Scores 174 Alphabetical Table 11 Hypothesis #2 – Median Home Value – Z-Scores 178 Alphabetical Table 12 Hypothesis #2 – Median Gross Rent -– Z-Scores 180 Alphabetical Table 13 Hypothesis #3 – Median Home Value – Z-Scores 186 Alphabetical Table 14 Hypothesis #3 – Median Gross Rent – Z-Scores 190 Alphabetical Table 15 Hypothesis #1– Median Home Value 1980 – Z-Scores 194 Ranked Table 16 Hypothesis #1 – Median Home Value 1990 – Z-Scores 198 Ranked Table 17 Hypothesis #1 – Median Home Value 2000 – Z-Scores 202 Ranked Table 18 Hypothesis #1 – Median Home Value 2010 – Z-Scores 206 Ranked Table 19 Hypothesis #1 – Median Gross Rent 1980 – Z-Scores 210 Ranked Table 20 Hypothesis #1 – Median Gross Rent 1990 – Z-Scores 214 Ranked Table 21 Hypothesis #1 – Median Gross Rent 2000 – Z-Scores 218 Ranked Table 22 Hypothesis #1 – Median Gross Rent 2010 – Z-Scores 222 Ranked Table 23 Hypothesis #2 – Median Home Value 1980-1990 – 226 Z-Scores Ranked vii Table 24 Hypothesis #2 – Median Home Value 1990-2000 – 230 Z-Scores Ranked Table 25 Hypothesis #2 – Median Home Value 2000-2010 – 234 Z-Scores Ranked Table 26 Hypothesis #2 – Median Home Value 1980-2010 – 238 Z-Scores Ranked Table 27 Hypothesis #2 – Median Gross Rent 1980-1990 – 242 Z-Scores Ranked Table 28 Hypothesis #2 – Median Gross Rent 1990-2000 – 246 Z-Scores Ranked Table 29 Hypothesis #2 – Median Gross Rent 2000-2010 – 250 Z-Scores Ranked Table 30 Hypothesis #2 – Median Gross Rent 1980-2010 – 254 Z Scores Ranked Table 31 Hypothesis #3 – Median Home Value (1980-1990) to 258 (1990-2000) – Z-Scores Ranked Table 32 Hypothesis #3 – Median Home Value (1990-2000) to 262 (2000-2010) – Z-Scores Ranked Table 33 Hypothesis #3 – Median Gross Rent (1980-1990) to 266 (1990-2000) – Z-Scores Ranked Table 34 Hypothesis #3 – Median Gross Rent (1990-2000) to 270 (2000-2010) – Z-Scores Ranked 1 RESEARCH PROBLEM Suburbs are in decline. Beginning in the mid-1970s, U.S. suburbs started to experience many of the same problems typically associated with earlier inner-city decline (Bier, 2001, p. 1; Bollens, 1988, p. 283; Caris, 1996, pp. 1–2, 32; Culver, 1982, pp. 3–12; Downs, 1973, p. 1; Hanlon & Vicino, 2007, pp. 252, 270; Jargowsky, 2002, pp. 39-71; Listokin & Beaton, 1983, p. 4; Orfield, 2002, p. 7; Short, Hanlon, & Vicino, 2007, pp. 646, 653). Suburbs are experiencing accelerating income decline, increasing family poverty, falling housing prices, growing income polarization, escalating crime, and increasing racial and ethnic diversity (Berube & Frey, n.d., p. 1; Fernandez & Pincus, 1982, p. 93; Green Leigh & Lee, 2005, p. 28; Green Leigh & Lee, 2007, p. 146; Hanlon, 2008, pp. 429–433; Hanlon, 2010, pp. 12–27, 45–46; Kneebone & Garr, 2010, p. 1; Lucy & Phillips, 2000, p. 170; Lucy & Phillips, 2006, pp. 93, 112–116, 159; Orfield & Luce, 2010, p. 45; Puentes & Warren, 2006, pp. 5–10; Swanstrom, Casey, Flack, & Dreier, 2004, pp. 4–10). While most declining suburbs were inner suburbs adjacent to their central city, suburbs experiencing relative income decline tended to group together spanning inner, middle, and outer suburbs (Lucy & Phillips, 2000, pp. 172–173; Lucy & Phillips, 2006, pp. 93, 101). Studies of suburbs in the Minneapolis–St. Paul metropolitan region show a similar experience. Between 1980 and 2000, 15 (12%) of 125 suburbs experienced declining population, declining income, and increasing poverty (Hanlon, 2008, p. 436). Lucy and Phillips (2006, pp. 97, 132) found that between 1980 and 2000, 16 (17%) of 96 suburbs declined in population, and 44 (46%) declined in median family income. Orfield (2002, p. 35) classified 107 (33%) of 324 suburbs in the Minneapolis–St. Paul 2 region as at risk, meaning that these suburbs suffer from a decreasing financial capacity to address rising social needs. Declining suburbs were found adjacent to one of the central cities, and particularly in the Northwest and South or in the rural areas of the counties (Orfield & Luce, 2010, p. 44). Conventional wisdom often lays the blame for neighborhood decline on who moves in and who moves out (Caris, 1996, p. 5; Caris, Wyly, & Smith, 2001, p. 497). This is understandable, as neighborhood migration is easily observable. But it is the hypothesis of this research that the less visible disinvestment of capital from suburban neighborhoods, like the inner-city neighborhoods before them, is an initial cause of suburban decline that precedes, and coincides with, the more observable physical, social, and economic indicators of decline (Caris, 1996, pp.