Whoops, there goes the neighborhood.
Pictured above is the contrast between the extant cityscape on North Clark Street vs its replacement — an approved development at Addison and Clark.
There is nothing Chicagoan about the prospective development. The developers hope to get AAA-rated drug store or big box tenants. They hope to land a world class hotel franchise. The development will include as many parking spaces as it does living spaces. It will occupy nearly the whole block and tower over its neighbors to the West which previously so very closely matched their cross-Clark brethren. Its materials will be rather plain; it will decidedly lack pressed metal details, limestone accents, decorative brick, and terracotta. There won’t be any Chicago commons on the party walls.
The whole street will lose what endears post-game sports fans to its tenants — it will lost its sense of place and its social and historical context. It will stop being Chicago.
Where are the buildings with family names on them? What has happened to main street development in America? Allow me to tell you a story:
Community Empowerment: An Urban Product
By 1930 the Black Metropolis on Chicago’s South side in Bronzeville had produced several millionaires and its own community financial industry. Anthony Overton, founder of a life insurance company as well as other enterprises including his main concern The Overton-Hygienic Manufacturing Company, advertized his new Overton Building as “a monument; a building inside and outside that will stand as a memorial to Negro enterprise and thrift.” (source)
Jesse Binga was an affluent banker and pillar of the community who got his start renovating old and vacant apartment buildings and then renting them out. In the late 1920s he erected the pride of Bronzeville — a 6-story office and retail building at 35th and State, the 35th Street Arcade Building, as well as a Binga Bank next door:
By this time Chicago in its role as the most American city had uplifted, so to speak, communities from all over the world. Each produced their own middle class families, their own showmen, their own genteel, their own politicos, their own buildings, and their own financiers. In the roaring 20s it was finally African-Americans’ turn.
Something Suddenly Gone Wrong
But in the middle of the process, something happened — the great depression. It interrupted the process of black economic empowerment. To some extent that process has never resumed, at least never through such a united and proud ethnic community. Chicago’s South side doesn’t contain black-built monuments to “enterprise and thrift” from any time after 1930 or so. What it does contain is fields and 14-story concrete blocks like those which gobbled up State and 47th. It’s funny, but to the extent that the intersection of 33rd and Ellis exists at all, its surroundings also look very similar.
In the blocks surrounding Michigan from
22ndCermak to 12thRoosevelt you’ll increasingly find a similar state of affairs, the immediate reasons different but the ultimate source the same. Meanwhile, Block 37, an important block that once included a variety of diverse buildings from different time periods such as a few important early Chicago school high-rises, is for all intents and purposes a suburban shopping mall. Developers build precast and aluminum schlock on the near West side, and it meets the street with all the sensitivity of a sledgehammer. The House of Glunz has a Northern neighbor that smiles from above with all the affection of a menacing steel plant.
All of these are physical consequences of residents’ and community leaders’ disempowerment. The six corners community in Lakeview overwhelmingly favors trying to veto the massive block of development that’s trying to tower over the whole area — they live there because, and the neighborhood is so desirable because, the neighborhood is one of small and varied buildings with a variety of storefronts and occupying businesses. The buildings’ owners are often the community’s residents. If it were legal then they would also tend to be the local developers. But that is effectively illegal. And so we come to the crux of the problem: property owner disempowerment, and financial centralization.
The Destruction of Locally Based Capital and of Local Builders
In the 1920s it was very common for buildings to be financed with bonds or securities. At the local level it was common for builders to produce offering memorandums soliciting capital investors from the community. That is illegal now. In 1933 the SEC was created, and private equity offerings were restricted to “accredited investors,” which were defined as the experienced or the wealthy. The limit now is around a million dollars. That is, in order to invest in your neighbors venture to build a commercial building on the corner you must be a millionaire yourself. The issuance of bonds and securities was severely restricted and regulated — a vote of no-confidence paternalism on the ability of the investor to make his own decision regarding the risks. Legions of banking regulations hit the books — regulations which favored the large banks over the small.
All of this makes small capital investments [in most of their most logical and common forms] in communities illegal for the majority of people who would occupy those kinds of communities. It prevents local capital formation and makes local lending institutions rare. It drives little local builders out of existence and creates a vacuum of competition for the remaining big players.
But the new dealers weren’t done. Roosevelt also effected the 1933 Gold Seizure in which his executive order demanded all Americans turn in their gold to the Federal Government at $20.75 an ounce. He then used this stolen gold to daily set the price of gold in dollars for foreign exchange, even while gold ownership within the United States was made illegal. He set it to $35 dollars and then changed it daily and arbitrarily, immediately cutting the value of Americans’ savings nearly in half and introducing massive uncertainty in the future value of any investment returns. This destroyed the private capital markets, creating a space for replacement with Federal programs. Roosevelt blamed the private market for not lending and named himself the lender for everyone, buying constituencies of every kind. He destroyed local capital formation and centralized capital markets and economic activity.
Disinvestment by Design: The Suburbs As A Social Engineering Experiment
So now the system of local empowerment had been destroyed and there was a gulf where local capital markets had been. A replacement had to be provided for.
In 1934 congress created the FHA. The Federal Housing Administration was created to regulate and rejuvenate the housing industry, raising its “standards.” What it really did is nationalize the mortgage industry by guaranteeing mortgages using the full faith and credit of the United States [taxpayers]. These would not be allowed to fail, and so their risk was vastly lower than any non-FHA backed mortgages, making lending dependent on FHA insurance. The FHA, then, was effectively given vast power to decide which mortgages met their “standards” and which ones didn’t.
The FHA, which had a monopoly on real estate lending at this point, redlined minority communities and inner city neighborhoods — that is, they refused to back mortgages in these areas. Nobody could get financing for improving buildings or for buying buildings. The FHA preferred to work with massive builders building uniform developments. There weren’t many local lenders left, and the FHA wouldn’t back the ventures of local urban builders — these little guys ceased to exist. The FHA, like FDR’s later GI Bill, insisted on lot coverage area maximums, on minimum setback requirements, and on a detached single family home in order to allow lending. The suburbs were FDR’s vision of what a community should be — this is shown in some of his more arrogant social experiments building model communities, and he said so himself on multiple occasions. The FHA effected his social engineering.
Meanwhile the city, starved of capital and its residents made powerless to arrest the decline, stagnated. Their previous path to improvement and investment had been blocked by new law. These communities fell in to a disrepair for which they were not at fault but which served as a convenient reason for top down city planning, eminent domain, condemnation, and “urban renewal.” The city lost many of its residents through the destruction of the physical evidence of their past here. And the effects of these new deal actions remained apparently separated from their causes so that the city took on a kind of stigma. By the time suburban money began to return a generation and a half had passed and none of the decision makers understood the city.
And so this is why corporate planners sit in offices across the nation or world and stare at spreadsheets and determine how many CVS pharmacies should occupy Chicago corners in an area. It’s why developers from Florida study market reports bought from large real estate analysis firms and determine to build the cheapest building that will meet codes and meet city approval, putting it precisely where the income within a 1.5 mile radius meets their models’ requirements.
–It’s the destruction of local building capital competing with the big fish.
–It’s still-extant FHA demands for mortgage standardization — determining “risk” to the taxpayer through the lens of desired social outcomes, and usually using the highest credit-rated, largest companies.
–It’s irresponsibly low interest FHA-backed mortgages on homeowners who cannot afford to own, creating recent pockets of devastating foreclosure density in Chicago.
–It’s financial centralization through banker-written regulation [destroying their neighborhood competitors].
–It’s lowering the risk to nearly zero for massive developers who might as well rinse and repeat whatever exposure to risk that the US taxpayer backs (he backs the suburbs).
–It’s the inability of average Americans to legally invest in their communities. Who else would invest in Englewood — JP Morgan or the local store owner and his neighbors cum business partners?
–It’s geographically remote investors’ lack of association with their physical development products (taken to an extreme with REITs), lack of responsibility for their banal products, lack of pride in their contributions to the built environment of a place they’ve often never stepped foot in.
When builders who grew up at 23rd and Michigan are illegal, all that’s left is the men looking at Chicago neighborhoods from 30,000 feet, searching for the perfect market area within 1.5 miles. They’ll build their investment large enough (mega-block) to be securitized and sold to institutional and retail investors through REITs. They wax poetic to their colleagues about how they once attended a convention at McCormick — “you know, right on Lake Michigan. And WOAH it’s cold in Chicago, the wind just came right off that lake, I tell you, felt like -20 degrees.”