Conditions right for Pittsburgh to be a “house-flipping hotspot”

Pittsburgh is home to a lot of profitable house flipping activity:

Today, old industrial cities such as Pittsburgh, Buffalo and Cleveland are among those offering the greatest returns. They have struggled to recover from the recession, but now are beginning to attract tech firms, such as Google-parent Alphabet Inc, Uber Technologies Inc, and Amazon.com Inc.

The influx of new workers is boosting demand for urban homes in areas that have some of the oldest housing stock in the nation and not much new construction, creating richer opportunities for flippers than in Las Vegas or Miami at the height of the housing boom more than a decade ago…

In Pittsburgh, home flippers made a gross profit of 162.7 percent on average during the second quarter of this year, while in Buffalo, the average gross return came in at 107.5 percent, according to ATTOM data. Nationally, the average house-flipper earned a 44.3 percent gross return on investment this year, compared with the 35.3 percent during the boom…

“Pittsburgh’s housing market was under-invested in for 40 or 50 years,” said Aaron Terrazas, senior economist at real estate listing firm Zillow. “The housing stock in the urban core of these cities requires substantial investments to update these older homes and bring them up to modern living standards.”

There are plenty of Rust Belt cities that would want in on this action. Do you think political and business leaders in places like Syracuse or Milwaukee or Lansing wouln’t salivate over the prospect?

But, it sounds like Pittsburgh could be a unique place. Certain conditions were in place:

  1. An influx of tech workers. Pittsburgh has a university and research base that not all Rust Belt cities can draw on. Everyone wants part of the tech industry but how many cities, particularly struggling ones, can attract significant numbers of tech employees?
  2. Relatively cheap homes. Many Rust Belt cities have this.
  3. An attractive urban core. In addition to jobs, a vibrant city or neighborhood scene could go a long way to attracting new workers and residents.
  4. While the article mentions concerns about residents being priced out of their own neighborhoods, I assume leaders in Pittsburgh are at least okay with the house flipping activity if not outright encouraging it. A “favorable business climate” could signal to developers and investors that the city wants redevelopment and is okay with seeking profits. This does not even account for the moves local leaders may have made to encourage the growth of the tech industry.

In other words, if the conditions change in Pittsburgh – such as there are fewer cheaper houses to make money on – it is not guaranteed that house flippers will simply move on to the next Rust Belt city with cheap housing.

Why suburbanites want to have their own police departments and local governments

Writing about a recent incident of police violence in a Pittsburgh suburb, one writer looking at all of the small police forces in suburbia asks:

It’s not often clear what the rationale is for these small municipalities to have their own city administrations and law enforcement agencies.

And he later says:

If having multiple police departments makes for inefficient and unprofessional work across St. Louis County, imagine what it means for Allegheny County, which has almost twice as many police departments. Micro-department intrusions add up to macro-resentment of police in general.

The argument for efficiency in consolidating local government and police forces may make sense in this particular context. Perhaps a larger-scale police force could better avoid such incidents through training and more familiarity with a broader area.

But, there are two related and powerful reasons that the American urban landscape is broken into so many local governments: Americans like the idea of local control and they like the idea of living in a small town. In a smaller community and with their own officials, Americans think they can exert more influence on local processes and the size of each local agency does not become too large. It is theoretically much easier to meet an official or register a complaint or run for local office if there is a major precipitating issue. This can especially be the case with wealthier suburbs that want to maintain their exclusivity by remaining small.

The only factor that may push suburbs and smaller communities to give up this dream of local control and small town life is difficult financial positions or seeking certain efficiencies. See an example of Maine communities that have dissolved due to a lack of local revenue. Illinois has tried banning the formation of new local taxing bodies while DuPage County has moved to reduce the number of local governments. But, if the resources are there, Americans might prefer these small units of government. (Another argument that could be leveled at all these small governments is that they may be corrupt or inept. Small suburbs can become little fiefdoms with weird rules, as illustrated by Ferguson and other communities in St. Louis County. But, even in those cases it is less clear that the residents of these small suburbs do not like their local governments where it may seem obvious to outsiders that there are problems.)

Also, it is important to note for this story that Pennsylvania is a leader among states regarding the number of local governments. Not every state does it the same way. Similarly, many metropolitan regions in the South and West are much larger in terms of square miles compared to Rust Belt cities that had difficulties annexing any suburbs into city limits after 1900.

A dark and polluted Pittsburgh in the early 1940s

This gallery of pictures of a dark and polluted Pittsburgh in the early 1940s is fascinating:

In 1941, influenced by a similar policy introduced in St. Louis four years earlier, the city of Pittsburgh passed a law designed to reduce coal production in pursuit of cleaner air. Not willing to cripple such an important part of the local economy, it promised to clean the air by using treated local coal. The new policy ended up not being fully enacted until after World War II.

While the idea was a small step in the right direction, other factors ultimately helped improve Pittsburgh’s notorious air quality. Natural gas was piped into the city. Regional railroad companies switched from coal to diesel locomotives. And, ultimately, the collapse of the iron and steel production industries in the 1980s led to rapidly improved air quality leading into the 21st century.

Control of coal smoke made it possible to clean soot-covered buildings and to re-plant hillsides, helping provide the city a look it could hardly envision in the depths of its industrial heyday.

I’ve seen some of these pictures before and they are hard to believe: how did people survive in a city that looked like this? Despite some of the debate over environmental regulations today, I think everyone could agree that Pittsburgh and other cities have benefited from having cleaner air.

This is also a reminder of how far some communities will go for their signature industries. Industry may bring in money and provide jobs but it is often not without downsides.

Discussing the rise in suburban poverty in the Pittsburgh region

After a recent report discussed the rise of poverty in the suburbs and the inability of many suburban governments to provide services for those in poverty, here is how this plays out in the Pittsburgh region:

In Western Pennsylvania, the increase of suburban poverty is not because poor people are moving into those areas. Instead, people living in the suburbs are becoming poor. Chris Briem, of the University of Pittsburgh’s Center for Social & Urban Research, said local areas with high rates of poverty are “not necessarily places that are poor because of out-migration from the city.”…

Alexandra Murphy has been living in Penn Hills for the past three years studying the suburban poor for a doctorate in sociology from Princeton University. She said the working class, which was “on the brink of making ends meet” before the recession, found itself what she termed “poor in place,” and needing access to food banks and help with bills just like the traditional poor in the cities.

Murphy said the difference between urban poverty and suburban poverty is that the latter “doesn’t have the infrastructure in place to meet the needs.”…

Mike Irwin, associate professor and chair of the Department of Sociology at Duquesne University, said that kind of a shift can result in “social disorganization” in some communities, which can lead to increased crime. The deterioration some communities have experienced over the past few decades could soon occur in more places, he said.

More and more suburban communities will encounter these issues. Considering the budget shortfalls faced by many municipalities and other units of local governments (school districts, park districts, etc.), how can they find money for social services?

If anything, this does provide an opportunity for religious congregations and organizations to step up and not only meet subsistence needs but also to think creatively about providing jobs and housing for the long term. Instead of just sending money to the inner city or overseas, wealthy suburban churches can now help out in their own backyards and help boost local economies.

Cities that are losing population

The list of the top seven American cities in population loss (measured as a percentage of total population) is not surprising: New Orleans, Flint, Cleveland, Buffalo, Dayton, Pittsburgh, and Rochester (NY). And outside of New Orleans, why these cities have lost population is also not difficult to figure out: a loss of manufacturing jobs.

But a list like this raises some questions about cities:

1. Is it that unusual for cities to lose population? If cities can boom, as these cities did during the industrial boom, why can’t they also go bust?

2. The headline on the article is misleading: “US cities running out of people.” There are still plenty of people in these communities – what is unusual is that the population is declining.

3. Is there a point where these population losses will stabilize? I always wonder this about cities – some people stay because there are still some jobs, particularly medical, municipal, and service jobs available.

4. Is there something the federal government could do to help these communities reverse these trends? Is there a public interest in not letting cities like these slowly die?

5. Measuring the city’s population is perhaps not the best way to go about it. How have the metropolitan populations changed? Are there still people in the region? This would make a difference.