2 A DYNAMIC SYSTEMS APPROACH TO UNDERSTANDING NEIGHBORHOOD CHANGE

Learning from the Chicago School

The Chicago School of Human Ecology (or Sociology) was formed by a body of scholars working in Chicago in the 1920s and 1930s who sought to create a comprehensive and systematic theory of neighborhood change and whose work dominated most twentieth-century thinking on the subject. In retrospect, their theories were limited by their origins in Chicago’s particular conditions during the first decades of the twentieth century, a period of frenzied urbanization, immigration, and industrialization. Nevertheless, both their strengths and weaknesses remain instructive.

Chicago School thinking was grounded in modernization theory. Influenced by Max Weber, Georg Simmel, and Ferdinand Tönnies, the great German theorists of modernization, Chicago School thinkers addressed the problem of creating and maintaining a stable social order as people moved from traditional rural societies to modern cities. They viewed the need to reconstitute social order in the wake of the disruption of social ties caused by urbanization and modernization as the central issue in neighborhood change. Louis Wirth’s classic essay “Urbanism as a Way of Life” highlighted the disruptive effects of urbanization. “For sociological purposes a city is a relatively large, dense, and permanent settlement of heterogeneous individuals. Large numbers account for individual variability, the relative absence of intimate personal acquaintanceship, the segmentalization of human relations which are largely anonymous, superficial, and transitory.… Density involves diversification and specialization, the coincidence of social relations, glaring contrasts, a complex pattern of segregation, the predominance of formal social control, and accentuated friction.”⁸

To human ecologists, modernization can be seen as the process of successful adaptation to urbanization. As people move from traditional rural societies to big cities, the informal social bonds that create order in pre-modern societies are severed, but over time urban migrants habituate themselves to urban life and re-create social order by embracing new forms of solidarity rooted in secondary, instrumental relations and the rule of law. As urban dwellers, they become rational actors, engaging with their social and economic surroundings in order to advance their interests and becoming aware of their interdependence with one another through their complementary functions in the increasingly complex division of labor in modern urban societies.

The social attachments that arise from urbanization may lack the warmth and intimacy of traditional social relations, but to the Chicago School they can be equally powerful. The challenge presented by urbanization, however, is that in the course of moving from tradition to modernity many people get stuck in between, where they have lost their traditional primary ties but have failed to develop new instrumental ties in the modern city. The Chicago School saw this problem of transition at the heart of urban crime, vice, and antisocial behavior.

On its face, this theory would appear to have little relationship to neighborhood change. To the Chicago School thinkers, however, the process of modernization expressed itself spatially in distinctive and dynamic neighborhood settlement patterns. To explain this process, they developed the idea of neighborhood invasion and succession, a model of neighborhood change that still underlies much contemporary thinking. One such pattern is laid out in Ernest Burgess’s concentric zone model of neighborhood succession (figure 2.1). The center is the downtown or central business district where jobs and businesses are concentrated. The next ring is the “zone of transition,” which is characterized by business and light manufacturing mixed with the housing of immigrants and other low-income city dwellers who can only afford to live in this transient area of the city. Over time, upward economic mobility enables some newcomers to escape into the next ring of working-class homes. Farther out are more desirable residential zones, and beyond them are the suburbs that form the commuter zone. Starting from the center, each zone expands outward in an ongoing process of neighborhood succession in which populations move, along with social disorganization and decay, outward from the center. As urban newcomers gradually work their way up and into modern society, more affluent families move to more desirable environments in an ever-expanding suburban periphery.

The highly influential theory of housing filtering grows directly from the neighborhood succession model.⁹ Filtering is the proposition that older homes move—or filter—down a price and quality chain as their more affluent occupants move outward, leaving the homes behind for those just below them on the socioeconomic ladder. The succession of moves assumed by the model ultimately gives lower-income households the opportunity to move into at least marginally better housing. As it suggests, both economists and human ecologists view urban growth as a largely utilitarian process that tends toward equilibrium, in which urban residents are seen as individual strivers rationally pursuing their material interests.

The concepts of invasion and succession were derived from plant ecology, the branch of biology that studies the succession of plant species as they compete for dominance in natural habitats. Like plants, ecologists suggested, residents and businesses compete for space in urban environments, ultimately settling in the areas that give them the best chance of succeeding. One of the most influential human ecologists, Robert Park, described a metropolis as “a great sifting and sorting mechanism, which, in ways that are not yet fully understood, infallibly selects out of the population as a whole individuals best suited to live in a particular region and a particular milieu.”¹⁰ Ultimately, the process should lead to an equilibrium state whereby every urban species occupies its optimal niche in the ecological system. Chicago ecologists were not naive optimists, however. They observed that the constant arrival of new populations, immigrants with little experience in city living as was happening in 1920s Chicago, led to a rapid invasion and succession of inner-city neighborhoods, causing social problems that prevented the system from reaching equilibrium.

From the ecological perspective, the segregation of economic functions as well as of ethnic and racial groups was seen as both natural and desirable. Urbanization was viewed as a process of rationalization and modernization that divided cities into “natural areas,” enabling them to achieve higher levels of rationality and efficiency. “As the community grows,” sociologist Roderick McKenzie wrote, “there is not just a multiplication of houses and roads but a process of differentiation and segregation takes place as well.”¹¹ Diverse economic functions—industrial, wholesale, retail, office, entertainment, and so on—sort across the landscape in ways that maximize their efficiency.

Ethnic and racial sorting in neighborhoods mimics the sorting of economic functions. Racial and ethnic segregation is natural and even beneficial, Chicago School human ecologists argued, because homogeneous communities, other things being equal, are more socially cohesive. Chicago School researchers sought to understand the dynamics of these communities by conducting detailed ethnographic studies of Polish immigrants, the Jewish ghetto, Little Italy, Greektown, Chinatown, and the Black Belt with its “free and disorderly life.”¹² As Park observed about this “constellation of natural areas,” they “touch but never completely penetrate.”¹³ Human ecologists saw disordered urban ghettos as a transition stage to modernity from which urban newcomers would move upward and outward into American society. In contrast to efforts by settlement houses to acculturate ghetto residents and assist in their upward mobility, Chicago School thinkers viewed efforts to upgrade or revive their neighborhoods as not only futile but even potentially harmful.

Both housing filtering and neighborhood succession theory implicitly viewed neighborhoods as having a natural life cycle, leading subsequent theorists to propose life cycles as a fundamental law of neighborhood change. As we will see, such theories have had a long and problematic history in guiding thinking and practice about urban neighborhoods, including at times demolishing them in the name of progress.

Neighborhood Change Theory after the Chicago School

The Chicago School thinkers got many things right. They recognized that neighborhood change must be understood in the context of broader forces of economic restructuring and population flows that operate at regional, national, and even international scales. They identified the crucial role that social organization plays in stabilizing neighborhoods and protecting them from threats. Troubled neighborhoods, they argued, were a product not of individual failures but rather of the forces driving social disorganization in the areas they dubbed zones of transition. Above all, they argued, neighborhoods are powerful shapers of identities, values, and social relations. As Robert Park wrote, “there is not now, if there ever was, any question that the individual’s conception of himself, the role which he plays in any society, and the character which eventually he acquires are very largely determined by the associations which he makes and, in general, by the world in which he lives.”¹⁴ Neighborhoods shape people as much as people shape neighborhoods.

At the same time, the Chicago School thinkers got many things wrong. Their theory is egregiously deterministic, suggesting that neighborhoods inevitably follow a single script. While subsequent scholars modified Burgess’s concentric zone theory to reflect the variety of urban physical forms and the significance of transportation arteries, these writers did not challenge its deterministic logic, leaving little role room for human agency whether through public policies or neighborhood initiatives. Indeed, the ecological model that underlies their thinking is grounded in the idea of change as the impersonal, mindless working of forces beyond the control of any individual, group, or organization.

Many of the weaknesses of the Chicago School thinkers can be traced to their tendency to overgeneralize from a particular place and time. Their intellectual neighborhood, one might say, was the city of Chicago at its peak of industrial might and population growth, a city with teeming immigrant ghettos and noxious industries surrounding its central commercial core. Economist Homer Hoyt, a disciple of the Chicago School who exerted a powerful influence on housing policy into the 1950s, saw outward migration from central cities as all but a law of nature, writing that “high rent or high-grade neighborhoods must almost necessarily move outward toward the periphery of the city. The wealthy seldom reverse their steps and move backward into the obsolete houses which they are giving up.”¹⁵ The most cursory view of the contemporary postindustrial city, with its gentrification pressures and knowledge economy, renders this proposition deeply flawed if not simply wrong.

The flaws in human ecology are also rooted in its uncritical acceptance of modernization theory, which depicts cities as moving inexorably through a mechanistic process of rationalization to a brighter future. That perspective was not unique to the Chicago School, however, and one should not blame its thinkers for the urban devastation committed in the name of modernization. They were part of a larger zeitgeist. The goals of rationalization, efficiency, and modernism later reflected in urban renewal and its promotion of an automobile-dominated metropolis were the common language of the time, beginning with the eccentric Italian Futurists of the 1910s and including architects such as Le Corbusier, with his 1926 Plan Voisin, and the Bauhaus school, not to mention Soviet ideologues with their visions of a New Socialist Man.

Nonetheless, the ideas of the Chicago School dominated thinking about neighborhood change for many years. In 1934, Hoyt became principal housing economist at the newly created Federal Housing Administration and, as we discuss in chapter 4, played a critical role in designing the policies that subsequently contributed to both the devaluation of urban neighborhoods and the enforcement of racial segregation in the postwar Levittowns and their many suburban counterparts. The idea of neighborhood life cycles had an even longer life. The concept of neighborhood life cycles, implicit in the work of the Chicago School, was explicitly articulated in the formative text of real estate appraisal in the 1930s, Frederic Babcock’s The Valuation of Real Estate: “A residential district seems to go through a very definite and inevitable course of development when not affected by forces which can entirely change its use. This cycle is characterized by the gradual decline in quality of people through the years accompanied by population increases and the more intensive residential use of ground.”¹⁶

In the postwar era, neighborhood life cycle theory was articulated by economists Edgar Hoover and Raymond Vernon in 1959¹⁷ and by the Real Estate Research Corporation (RERC) in The Dynamics of Neighborhood Change, a report commissioned and disseminated in 1975 by the US Department of Housing and Urban Development.¹⁸ The RERC report identified five stages in the neighborhood life cycle:

• Stage 1: Healthy. Homogeneous housing and moderate to upper income, insurance, and conventional financing available.
• Stage 2: Incipient decline. Aging housing, decline in income and education level, influx of middle-income minorities, and fear of racial transition.
• Stage 3: Clearly declining. Higher density, visible deterioration, decrease in white in-movers, more minority children in schools, mostly rental housing, and problems in securing insurance and financing.
• Stage 4: Accelerating decline. Increasing vacancies, predominantly low income and minority tenants or elderly ethnics, high unemployment, fear of crime, no insurance or institutional financing available, declining public services, and absentee-owned properties.
• Stage 5: Abandoned. Severe dilapidation, poverty and squatters, high crime and arson, and negative cash flow from buildings.

While a later widely cited but tendentious article argued that the RERC, along with its use of life cycle theory, was largely responsible for the urban decline of the 1960s and 1970s, the reality was more nearly the opposite; that is, urban decline reinforced the theory.¹⁹ RERC, the Department of Housing and Urban Development, and a host of other researchers and policymakers were frantically trying to grasp the underlying forces driving what they perceived at the time as the inevitable decline of the American city and its neighborhoods. Life cycle theory was a way urban policymakers thought they could make sense of the unprecedented decline of the South Bronx and a host of other urban neighborhoods taking place at the time.

By the 1960s, however, a critique of this way of thinking was beginning to emerge. In her 1961 classic The Death and Life of Great American Cities, Jane Jacobs challenged the modernist vision that sought to “sort and sift out of the whole certain simple uses, and to arrange each of these in relative self-containment,” suggesting instead that cities were problems of “organized complexity, in which a half dozen or several dozen quantities are all varying simultaneously and in subtly interconnected ways.”²⁰

Although Jacobs did not develop a full-fledged theory of neighborhood change, her discussion of “unslumming and slumming” stressed that “slums operate as vicious circles,” recognizing the power of human agency to break the cycle in contrast to the deterministic predictions of the life cycle theorists.²¹ Scholars such as William F. Whyte and Herbert Gans documented the extent of social order in seemingly disorganized “slum” neighborhoods, suggesting the presence of far more complexity than reflected in Chicago School models.²²

Growing recognition of the destructive nature of racial segregation undercut the perspective that segregation was a fundamentally benign transitional process, while research on housing filtering showed that it was a more complex and damaging process than had been assumed, shaped by both regional market and neighborhood conditions rather than simply by housing aging and obsolescence. In strong markets, particularly where production of new housing is constrained, older properties filter upward rather than downward, while in weaker markets housing filtering can be rapid and chaotic, with many older properties ending up vacant and abandoned, burdening remaining residents with crime and social decay.²³

Meanwhile, in the 1970s a new generation of thoughtful community development practitioners began to develop new models of neighborhood change that took account of the multifaceted nature of neighborhood improvement and decline, recognizing that neighborhood change was contingent, not determined. Rolf Goetze, reflecting on his experience in Boston, showed how neighborhood change is molded by perceptions and expectations and the ways policies and interventions could change expectations.²⁴ Roger Ahlbrandt and Paul Brophy, both engaged in neighborhood revitalization in Pittsburgh, built a model centering on housing demand and highlighting the critical role of public- and private-sector interventions in shaping demand.²⁵ Subsequently, Kenneth Temkin and William Rohe built a model that synthesized the relationships between perceptions, external forces, and interventions.²⁶ Our thinking builds on their work.

Do these new and improved theories mean that the Chicago School is irrelevant? Are we now in an age of urban revival, as some assert, in which the course of metropolitan development has pushed the poor to the periphery and the rich to the center? The answer is an emphatic no. The forces of decentralization identified by the Chicago School and that dominated the last half of the twentieth century are still present today. Cities today are shaped simultaneously by forces of de-urbanization and reurbanization. The Chicago School model of outward movement from the urban core is not wrong, just radically incomplete.

Many patterns of neighborhood development that the Chicago School identified are still present today. Central cities across the United States are still centers of economic activity, although today they produce more services than manufactured goods. The outward movement of affluent households continues. A recent study of neighborhood change from 1970 to 2010 in the one hundred largest metros found that “high-status neighborhoods were and continue to be disproportionately located in suburban communities.”²⁷

At the same time, countertendencies are also powerful. The idea of the “crisis of function” of the older cities, which was widespread during the urban crisis era, has been put to rest. Driven by growing economies grounded in vast higher education and health care complexes, many older cities are regaining thousands of new residents and billions of dollars in new investment. Large numbers of young college graduates, along with smaller numbers of empty nesters, are gravitating to dense, mixed-use, urban downtowns and nearby neighborhoods. Home prices and rents are soaring in hot market cities such as New York, San Francisco, and Seattle, where both incomes and house prices are higher in the central city than in the suburbs. For many of these cities, household incomes are now highest in the heart of the urban core.²⁸ And although poverty rates continue to be higher in central cities, more poor people now live in suburbs.²⁹

The different eras of the American cities—from the market cities of colonial times to the manufacturing cities of the late nineteenth and early twentieth centuries and from the cities of the postwar urban crisis to today’s unevenly and partially reviving cities grounded in the knowledge economy—are layered on top of one another, each forming a part of the matrix that drives the trajectories of today’s urban neighborhoods. Neighborhood change, as we noted earlier, is contextual; that context is constantly changing and neighborhoods with it. But it is also multidimensional and above all interactive. Neighborhoods resemble large echo chambers in which multiple causes and effects interact in complex causal loops.

Neighborhoods as Dynamic Feedback Systems

Over a century of social science research on neighborhood change has generated important insights into what drives such change. In some ways, though, we have moved backwards. The Chicago School, for all the flaws in its analysis, aimed for a holistic understanding of neighborhood change. Similarly, the scholars and practitioner-scholars, beginning with Jane Jacobs, who reframed neighborhood change during the 1960s and 1970s, were also looking to understand change as a gestalt phenomenon, particularly in Temkin and Rohe’s proposed synthesis. The vast majority of current research on neighborhood change, however, focuses on isolating single variables and attributing significance to them in a linear process of causation. While experienced community development practitioners intuitively know that one cannot understand a neighborhood by focusing on the effect of an isolated variable, that is the thrust of most research on neighborhoods today.

Social scientists studying neighborhood change have tried to emulate the hard sciences, whose gold standard is the experimental method in which a single variable is isolated and studied to determine if it has a causal effect on the dependent variable, or the outcome in question. The ideal method is to conduct a controlled experiment in which researchers randomly assign some subjects to an experimental group and others to a control group. Under properly controlled conditions, if researchers find that outcomes on the dependent variable are different between the two groups, they can confidently conclude that the independent variable must have caused the difference.

Fortunately, researchers cannot conduct controlled random experiments on neighborhoods.³⁰ Researchers can, however, imitate the experimental method by using statistical techniques, most often multiple regression analysis, to hold a wide range of variables constant in order to isolate the effect of an independent variable on a dependent variable to, for example, measure the effect of vacant properties on the prices of homes in the vicinity while controlling for race, income, and other neighborhood features. Such techniques yield probabilistic outcomes, measuring whether there is an association between the two variables and the strength of the association.³¹ In theory, this method should permit researchers to gradually accumulate knowledge of all the individual factors that influence neighborhood decline or renewal and then add them up to develop a comprehensive causal explanation of neighborhood change.

Angus Deaton has dubbed the adherents of this philosophy “randomistas.”³² The problem with the randomista approach, as Robert Sampson has persuasively argued, is not only that it is almost impossible to isolate the impact of a single variable on neighborhood change, but more importantly, the effort to isolate variables fundamentally distorts our understanding of how neighborhood change happens.³³ Endogeneity, the statistical process that takes place when interaction effects among variables confound the relationship between the independent and dependent variables, is seen by researchers as a problem that needs to be solved by statistical techniques. For neighborhood processes, however, endogeneity is inherent in their very nature. As Sampson writes, “unlike medical treatments that approximate a closed system, human behavior in social settings is interdependent—nothing is ever ‘held constant.’ ”³⁴

Much of the research on property effects suffers from these distorting effects. A number of studies in the wake of the foreclosure crisis, for example, argued that foreclosures led to increased crime in the surrounding area. This is patently illogical; foreclosure is no more or less than a legal procedure. The effects they were finding were not effects of foreclosure as such but instead effects triggered by complex interactions between foreclosure and other factors operating within neighborhoods. Indeed, subsequent research by Cui Lin and Randall Walsh found that the foreclosure effects disappeared except when conditions associated with the foreclosure led to the property becoming vacant, with the most significant effects only appearing after prolonged vacancy.³⁵

Even then, that begs the real question. It is not the vacant house as a physical object that causes crime to increase, except in the narrow sense that some criminals may use vacant houses for nefarious purposes or causes properties in the vicinity to lose value, but rather how its neighbors perceive the vacant house, or how its presence affects others’ perception of the block, and how people then behave on the basis of those perceptions. Either way, something needs to be done about the vacant house. However, understanding the pathways leading from a home foreclosure to people’s perceptions and behavior and from there to its measurable effects can have a significant bearing on how one goes about intervening and prioritizing limited resources.

Neighborhoods are neither closed systems nor mechanical systems that allow one to predict their trajectory by aggregating isolated factors into a comprehensive explanation. In neighborhood change, variables interact with one another through circular paths of causation. In the dynamic system that is a neighborhood, a variable can be simultaneously both a cause and an effect. Neighborhoods cannot be understood as the sum of relationships between individual, isolated variables acting in a linear fashion. Neighborhoods are dynamic feedback systems and must be understood that way.

Systems dynamics modeling provides a way to understand how different forces influencing neighborhood change interact with each other in a system of circular causation.³⁶ Systems dynamics recognizes two basic kinds of causal loops: balancing loops and reinforcing loops. Reinforcing loops are like a runaway train or an arms race in which every feedback loop reinforces the process and magnifies the effects. Balancing loops are like a thermostat, constantly establishing and reestablishing equilibrium or homeostasis. Classical economic land market models, for example, are based on balancing loops. They assume that declining land values will eventually draw new buyers back into the neighborhood, bringing supply and demand back to equilibrium. From the viewpoint of classical market economics, efforts to intervene in weak markets are unnecessary or even counterproductive.³⁷

The flaw in that thinking is that behavior is viewed as the sum of individual decisions made by autonomous rational actors, overlooking the fundamentally social dimension of market interactions. Neighborhood market actors are social creatures. They are influenced by the actions of other actors and are heavily dependent on the many actors’ varying perceptions of the underlying reality. In this environment, the number and variety of actors whose perceptions and behavior are salient to neighborhood market outcomes, as we describe in chapter 6, is almost inconceivably large, and the interactions among them are exceedingly complex. Equilibrium cannot be assumed and in the real world is the exception rather than the norm. Often declining neighborhoods end up with a collapsed market where supply greatly exceeds demand and many properties are abandoned.

One important feature of these interactions, something intuitively understood by anyone who has worked extensively with or closely observed neighborhood dynamics, is the extreme variability of neighborhood change processes, including wide variation in the rate of change over time and the presence of threshold effects, or tipping points. George Galster and his colleagues have shown how changes in both the poverty rate and the rental rate in neighborhoods begin to have powerful effects only beyond a certain threshold.³⁸ In chapter 11, we discuss how inadequate home buyer demand can trigger a vicious cycle of neighborhood decline, a process that is painfully apparent in many Black middle neighborhoods. While the relationship between each step in the process is well documented, the outcome is the product of interaction among many the different factors, operating, once again, through both perceptions and overt behavior.

Other threshold effects can include the pace of upward market change when a neighborhood is “discovered” or, conversely, the accelerated process of housing abandonment that takes place when some tipping point associated with loss of confidence in the neighborhood is reached and the neighborhood enters a vicious cycle of decline.

Economists working out of the tradition of welfare economics recognize social interdependencies and spillovers and their ability to generate reinforcing cycles of decline, as exemplified in Galster’s work.³⁹ According to welfare economics, however, the way to address these market failures is to internalize the externalities associated with them, that is, to require those actors who generate the negative externalities to compensate those on whom they have imposed the costs. That in turn produces outcomes that are designed to create an ersatz housing and land market operating as if the market participants were acting independently, motivated solely by individual utility maximization. We find this proposition (perhaps) plausible in some contexts but ultimately problematic from the perspective of the inherently interactive nature of neighborhood dynamics or from a values perspective. Good neighborhoods are not produced by actors motivated solely by the desire to maximize individual utility but instead by residents who balance individual aspiration and social commitments. As we argued in chapter 1, the value of good neighborhoods lies in their ability to balance, or reconcile, individualism (market behavior) and community (social behavior).

While neighborhoods can be subject to vicious cycles of decline, they can also benefit from virtuous circles rooted in prosocial behavior. Studies have found that decisions by homeowners to maintain or improve their properties are influenced by the level of social cohesion and interaction in a neighborhood; put differently, decisions are influenced by what one sees one’s neighbors doing. A few such decisions can create a virtuous cycle.⁴⁰ Even homeowners with modest incomes will invest in improving their property if they perceive the neighborhood as improving. As we describe in chapter 8, successful collective action has maintained stable racially integrated communities in challenging environments.

Ultimately, what matters in neighborhood change is less the measurable objective factors, such as homeownership rates, median incomes, and racial change as such, but how people, both inside and outside the neighborhood, perceive those factors and act on them. Neighborhoods are containers of social relations. The feedback effects generated in the neighborhood echo chamber may lead to cumulative causation that can result in neighborhood improvement or decline. Design, physical conditions, and economic trends all contribute to shaping a neighborhood’s dynamics and creating a frame for its social relations, but ultimately the neighborhood’s fate will be determined by how residents as well as outsiders perceive those conditions and trends and whether their perceptions foster the supportive, prosocial relations that sustain good neighborhoods or trigger behaviors that lead to decline. Neither is inevitable.

While neighborhood residents have agency and are not merely passive spectators to their neighborhood’s revival or decline, their powers are limited. The surroundings of the neighborhood matter, as does its larger citywide and regional setting. Within that setting are many actors whose perceptions and behavior directly or indirectly affect neighborhoods, even when they may be barely familiar with the neighborhood and are unaware of the effect of their behavior. Multiple geographical scales must be integrated into a comprehensive model of neighborhood change.

Modeling Neighborhood Change

It is impossible to understand neighborhood change by focusing on isolated variables, however many are investigated. Instead, the focus should shift from variables to pathways. Neighborhoods are always changing, but they can change in many ways and move in many different directions rather than through any predictable linear life cycle. An approach to neighborhood change that synthesizes the different forces operating on neighborhoods at different geographical scales to produce distinctive neighborhood pathways is called for.

Neighborhoods are affected by economic, social, and political or institutional forces. Each represents a distinct way that humans have evolved for relating to each other and building complex societies. Each also embodies a distinct way of thinking by those—economists, sociologists, political scientists, and others—engaged in practicing their particular discipline.

Economic forces. In an idealized market economy, individuals seek to maximize utility, and corporations seek to maximize profits. Price is determined by supply and demand, while price mechanisms ration goods according to consumers’ ability to pay. Larger economic forces, including overall economic growth, mortgage interest rates, and wage levels, shape the supply of and demand for housing. In a well-functioning neighborhood housing market, supply and demand are in reasonable balance, and housing price changes are consistent with larger economic trends.

Social forces. Unlike economics, which views human behavior as fundamentally individualistic and goal-oriented, sociologists view behavior as socially interdependent and expressive. Humans desire to be part of a society that has developed a body of cultural values and status hierarchies transmitted from one generation to the next. Social behavior at the neighborhood level, reflected in social capital, cohesion, and collective efficacy, powerfully affects the quality of life and stability of neighborhoods.

Political/institutional forces. Human behavior is organized and social order is maintained through the exercise of legal and political authority and ultimately by the power of the state, which provides public goods and services that neither markets nor social networks can supply. The effects of political systems and governmental power, from resource allocation to the delivery of services such as policing and public education, pervade every aspect of neighborhood life. The role of institutions, ranging from neighborhood-level organizations to global universities and medical centers, is hardly less significant.

Although these three types of forces are conceptually distinct, they are actually closely interwoven with one another. Public resources, such as safety and the quality of public schools, affect house prices, while a neighborhood’s level of social cohesion in turn affects its ability to fend off political actions it perceives as negative or destabilizing. All these forces and their interactions with one another are mediated by perceptions. Neighborhoods are socially constructed, and in the final analysis the key to change is less the objective conditions in a neighborhood than how they are perceived. The physical condition of a neighborhood shapes perceptions, to be sure, but does not determine them. As the late neighborhood planner Michael Schubert wrote, “the work of neighborhood revitalization is as much about managing meaning as it is about managing projects and producing a narrative rather than producing housing units.”⁴¹

The forces that drive neighborhoods operate at different scales. Broader economic, social, and political/institutional forces provide the context that defines the “opportunity space” for good neighborhoods to flourish or that raises barriers to others flourishing. For example, access to loan capital is widely recognized as one factor that drives neighborhood change. Capital access, however, is subject to a wide range of external influences, including the strength of the economy, Federal Reserve policies affecting interest rates, Fannie Mae and Freddie Mac underwriting standards, appraisal rules adopted by federal agencies, and the presence and practices of both bank and nonbank lenders in the local area, among others. All these factors are mediated by the social, cultural, and racial attitudes and perceptions of the actors. The effects of a breakdown in that system were brought home by the subprime lending wave early in the millennium and the subsequent foreclosure crisis and more than a decade later are still affecting the vitality of hundreds of American neighborhoods. Neighborhood activists see the city’s mayor as a key protagonist in their neighborhood’s future, yet few are aware of the often far more powerful role of state officials in a faraway state capital.⁴²

A unified theory of neighborhood change that would be capable of explaining such change and predicting neighborhood outcomes across different times and places does not exist and is unlikely ever to exist. Instead of such a theory, our goal is an integrated model of neighborhood change. Such a model cannot fully explain or predict neighborhood change. It can, however, help us think clearly about the process and better understand the most important forces that impact neighborhoods and the critical relationships between them. Figure 2.2 depicts our model of neighborhood change.

In the model, forces that originate outside the neighborhood, or exogenous forces in larger economic, social, and political systems, are the starting point of change. These forces can range from massive forces such as economic recessions or large-scale migratory movements to changes in mortgage lending practices or laws regulating racial and ethnic discrimination. External forces, however, do not lead to sustained neighborhood change; their effect is always mediated by the perceptions and behavior of local and neighborhood actors. Neighborhood house prices are directly driven not by changes in the national economy but instead by the ways in which local actors—builders, home buyers, realtors, bankers and others—perceive the relationship between those changes and specific neighborhood conditions and then act on those perceptions.

The model suggests that there are four distinct clusters of actors whose perceptions and behavior, taken as a whole, lead to change: market or economic, political, institutional, and social actors. While market actors are both local and regional, political and institutional actors are principally local but can be regional or even national, while social actors, including informal community ties and social capital, operate mostly at the neighborhood level.

Feedback effects (causal arrows that form loops) are a critical part of the model. They are concentrated at the local level both within and between neighborhoods. Local actors have little effect on national polices or economic conditions, but within the neighborhood echo chamber they are constantly influencing one another’s perceptions and behavior in a perpetual feedback system. As a result, all the causal arrows within the neighborhood system run both ways. Local market choices, institutional actions, political decisions, and community social and organizational behavior all influence neighborhood change; the course of neighborhood change then shapes economic, institutional, political, and social behavior.

A further implication of our model is that neighborhood change, not neighborhood conditions, is the central focus of analysis. Neighborhoods are constantly in flux, continually absorbing, reflecting, and sometimes deflecting the effects of larger citywide, regional, and national forces. Decades of observation of neighborhoods by the authors suggests that the only neighborhoods that do not change significantly and often unpredictably over time are the few at the extreme ends of the social and economic spectrum: the handful of very strong neighborhoods that are so solidly established as to seem impervious to decline and the handful of neighborhoods that are so extensively disinvested that they are equally impervious to revitalization efforts.

We do not make extravagant claims for this model. It is not a unified theory of neighborhood change applicable to all times and types of neighborhoods. It does not specify how economic, political, institutional, and social forces interact to produce neighborhood change, although we suggest that investigation of those interactive dynamics would be a more fruitful pursuit by future scholars than randomista searches for statistical relationships between individual neighborhood variables across many different contexts. The model is situated within what Robert Merton called “middle-range theory,” which eschews grand theoretical generalizations along with narrow empiricism. As Merton wrote, middle-range theory “is intermediate to general theories of social systems which are too remote from particular classes of social behavior, organization, and change to account for what is observed and to those detailed orderly descriptions of particulars that are not generalized at all.”⁴³ It is impossible to generalize across all neighborhoods at all times. We believe it is possible, however, to theorize about pathways of neighborhood change for specific types of neighborhoods in specific historical periods—as we do in the chapters that follow. Middle-range theory empowers practitioners to think systematically about the nature of the forces driving change in their neighborhood and place those forces in a framework that will make it possible to understand them better and take effective action to influence neighborhood actors’ perceptions and behavior.

Closing Note

The purpose of this chapter has been to describe the ways in which scholars and practitioners have sought to understand and explain neighborhood change, to elucidate the fundamental dynamics of change as we have come to understand them, and to offer a framework that we believe can help others understand the complex cluster of perceptions and behaviors summed up in the term “neighborhood change.” Although the sheer number of external actors and forces with the power to shape neighborhoods may appear daunting, we believe that the more neighborhood-level actors understand those forces, the more they will begin to see the possibilities for effective intervention. To quote the physicist Albert Einstein, “Once we accept our limits, we go beyond them.”