KAREN J. GIBSON 5
Estate Brokers (1969), details how Realtors used their
“code of ethics” to put into practice the “racial real estate
ideology” that property values decline when Black people
live in White neighborhoods. This was the official word of
the American Institute of Real Estate Appraisers, which
maintained that “the clash of nationalities with dissimilar
cultures” contributed to the “destruction of value” (Helper
1969:201). Realtors, lenders, and government guarantors
widely promoted the use of restrictive covenants (mutu-
ally agreed upon by builders, Realtors, bankers, apprais-
ers, insurers, and residents) that forbade non-Whites to
own property in specific areas. Residential segregation
holds the power to mold, stigmatize, and harm the living
environment of a people. This does not imply that
“ghetto” residents are passive victims, or that they are
pathological, as some strands of urban theory suggest.
Neighborhood disinvestment involves the system-
atic withdrawal of capital (the lifeblood of the housing
market) and the neglect of public services such as
schools; building, street, and park maintenance;
garbage collection; and transportation. The classical
ecology theories of Chicago School sociology
explained neighborhood growth and decline as a natu-
ral life cycle that unfolded in stages: rural, residential
development, full occupancy, downgrading, thinning
out, and then either crash or renewal (Park et al. 1984).
Downgrading is associated with the outflow of original
residents and inflow of lower-income residents and
often corresponds with racial segregation. The housing
ages, rents fall, and often there is overcrowding that
also hastens dilapidation of the stock. Residents move
out (if they can), and the neighborhood becomes a
slum. While this interpretation is helpful for under-
standing the stages of neighborhood change, it does not
adequately explain why such changes occur, as it lacks
a discussion of capital, space, race, class, and power.
Scholars with a more critical approach analyze
neighborhood decline by emphasizing the profit-taking
of Realtors, bankers, and speculators, which systemati-
cally reduces the worth or value of housing in a process
called devalorization (N. Smith 1996). The devaloriza-
tion cycle has five stages: new housing construction and
first cycle of use, transition to landlord control, block-
busting, redlining, and abandonment. After new housing
ages, owners move elsewhere, sometimes to avoid the
cost of repair, and the neighborhood has more renters
than owners. During the second stage, absentee land-
lords may choose to profit off of the rent and decide not
to make repairs. Depending on the market, it may be
economically rational to under-maintain the property.
The transition to landlord control may or may not
include the third stage, blockbusting, but often involves
a process of racial succession, or rapid population
turnover. Blockbusting is the process by which Realtors
use the fear of racial turnover and property value decline
to induce homeowners to sell at below-market prices.
Then the Realtor sells the property at inflated prices to
Black (or other) home buyers. The fourth stage is when
banks redline the neighborhood; this reduces owner
occupancy and often prevents absentee landlords from
selling a property they no longer want to keep. At this
point, home ownership rates decline, and the downward
trajectory of dilapidation continues until the final stage:
abandonment. This is often accompanied by arson as
property owners seek to cash out through fire insurance.
Gentrification is the recycling of a neighborhood up to
the point at which property values are comparable to
those in other neighborhoods. If a developer can pur-
chase a structure in an area, rehabilitate it, make mort-
gage and interest payments, and still make a return on
the sale of the renovated building, then that area is ripe
for gentrification. The cost of mortgage money is an
important economic factor affecting the feasibility of
reinvestment. This process occurs at the level of the
neighborhood, not individual structures, and requires the
involvement of housing market actors at the institutional
scale. It also involves redlining motivated by appraisals
that devalue African American neighborhoods. When
the public and private sectors make a decision to disin-
vest, it is essentially proclaiming an area unworthy and
ensuring its decline. In this view, gentrification is not
just a matter of individual preferences for older centrally
located neighborhoods; it is a matter of financial and
governmental decisions. When capital is withheld from
certain areas, predatory lenders move in to fill the void.
Historian Kenneth Jackson (1985) described the
federal role in urban disinvestment on a mass scale
through housing and transportation policies that sup-
ported massive suburbanization after World War II.
Inner-city neighborhoods were systematically deemed
unworthy of federally insured home loans by real estate
appraisers, because they were destined for decline by
their heterogeneous populations and mixed land-use pat-
terns (residential, commercial, and industrial). When the
federal government took the lead in proclaiming older
central-city neighborhoods ineligible for investment,
local government and private sector actors followed.
Jane Jacobs (1961), a fierce critic of urban redevelop-
ment schemes, argued that the policy of denying loans to
urban neighborhoods because they were declining was a
self-fulfilling prophecy. Housing dilapidation and aban-
donment are key indicators of poverty concentration in
“underclass” neighborhoods (Jargowsky and Bane
1991). Abandonment almost always occurs simultane-
ously with tax delinquency: defraying the tax burden is
one way to milk a property (Sternlieb and Burchell
1973). Perhaps the absolute final method of cashing in
on property is through purposeful arson for insurance