The Urban-Suburban Investment-Disinvestment Process: Consequences for Older Neighborhoods

Abstract

The pattern of suburban growth and decline of older neighborhoods within metropolitan areas is often seen as inevitable. However, these processes are shaped, in a significant way, by a relatively small number of private sector actors, including institutional investors, developers and mortgage bankers. Because of their ideologies and their perception of the economic realities, these interests invest increasingly in large scale developments on the suburban fringe and choose not to invest in older urban and suburban neighborhoods. These investment decisions have significant negative impacts on these older, middle class neighborhoods which are struggling to remain viable. With the withdrawal of these traditional sources of real estate investment capital, such neighborhoods face a concentration of foreclosures and abandonment of housing. Because these investment decisions are so important to the future of older neighborhoods, it is appropriate that there be public intervention to assure that there is an adequate flow of capital into these neighborhoods. The approaches which might be used include regulation—that is, requiring the industry to change invest ment patterns without rewarding them for doing so—and subsidy—providing incentives for investors to provide capital for older neighborhoods.