George C. Galster


On his book Making Our Neighborhoods, Making Our Selves

Cover Interview of August 07, 2019

In a nutshell

Making Our Neighborhoods, Making Our Selves presents a holistic analysis of the origins, nature, and consequences of neighborhood change and offers strategies for making a more socially desirable palette of neighborhoods in America. The foundational proposition of this book is: we make our neighborhoods and then they make us. That is, our collective actions in metropolitan housing submarkets regarding where we live and invest financially and socially will determine what characteristics our neighborhoods will manifest and how they will evolve. In turn, these multidimensional neighborhood characteristics influence our attitudes, perceptions, behaviors, health, quality of life, financial well-being, children’s development, and families’ opportunities for social advancement. The book advances a model of understanding the causes and effects of neighborhood dynamics through the lens of metropolitan housing market demands and supplies.

Unfortunately, the private, market-oriented decision-makers now governing human and financial resource flows among American neighborhoods usually arrive at inefficient and inequitable outcomes from the perspective of the larger society. Inefficient resource allocations arise due to externalities, strategic gaming, and self-fulfilling prophecies. Externalities are actions by investors that create benefits or costs to their neighbors that they do not consider when deciding whether to undertake the action. For example, homeowners do not consider how under-maintaining their homes harms the values of property owners nearby. Strategic gaming occurs in situations where investors’ payoffs from property improvements depend heavily upon whether neighboring investors undertake similar actions and what these investors will do is uncertain. Few investors will choose to be the first to renovate their dwelling in a deteriorated neighborhood when they worry that no one else will follow suit. Thus, each waits for the other to assume the risk of taking the lead, so no one renovates. Self-fulfilling prophecies occur when people react to an expected neighborhood change in ways that actually encourage that change to occur. For instance, if whites anticipate that their home values will fall if many nonwhites move into the neighborhood and react by trying to sell their properties at discounts, they will create the very situation they feared. These various forms of market failure systematically produce too-little housing investment in many places and too much segregation by race and income. This means that the current characteristics of neighborhoods are inefficient form a society-wide perspective.

Moreover, lower-income, black and Hispanic households and property owners typically bear a disproportionate share of the costs associated with under-investment, segregation and neighborhood transition processes, while reaping comparatively little of their benefits. Because neighborhood context powerfully affects children, youth and adults—yet neighborhood contexts are extremely unequal across economic and racial groups—space becomes a way of perpetuating unequal opportunities for social advancement. This means that neighborhoods are inequitable form a society-wide perspective.

To remedy these substantial market failures to provide efficient and equitable neighborhoods, I provide a comprehensive set of neighborhood-supportive public policies and programs in the domains of physical quality, economic diversity, and racial diversity. These initiatives should be guided by the principle of strategic targeting. This means that the public sector must use its scarce resources in a spatially focused, concentrated way such that it leverages substantial private investment and encourages households and investors to pursue the same ends as the policy.