“America’s most dangerous spots are now places where Martin Scorsese would never think of staging a shoot-out.”

This pretty well sums up a phemonenon that’s a big factor in where we’re choosing to buy buildings:  The suburbs are becoming the new slums, and an urban in-fill is making the inner city the new place to be.

Hannah Rosin wrote an intricate article on this subject in The Atlantic last summer (from which the above quote is taken), studying the diffusion of violent crime in Memphis from downtown to the suburbs, and found a link to recent changes in subsidized housing (commonly known as Section 8). Spurred by the not inaccurate perception that the inner-city projects had led to concentrated ghettos providing no opportunities for upward mobility, the Housing and Urban Development Office started offering Section 8 tenants housing in more affluent, suburban areas. The crime associated with such projects appear to have followed. It’s an excellent article, you can read it here.

The New York Times, (not to be outdone, obviously) followed up a month later with a similar article, examining the racial tensions surrounding such an issue and turning the spotlight onto Oakland and its suburb of Antioch, where violent crime has shot up following foreclosures and an influx of Section 8 holders. Check out the Times article here.

The new Section 8 policy has been instituted all across the country, and it doesn’t take a doctorate to figure out how that’s going to dovetail with the housing crisis. Data-heads can find a bunch of fun numbers in the above links, but one stat in particular stuck out to me: In 2006, a study done by the Georgia Institute of Technology found that when an area has a yearly foreclosure rate of 3%, violent crime increases by 7%. A lot of areas across the US have had foreclosure rates far above 3%, and, of course, many of them are in the suburbs.

What does this mean? It means that we’re going to start seeing a reversal of the middle-class flight to the suburbs that happened in the middle of the twentieth century. Urban in-fills are going to increase, and the remaining inner-city poor are going to get pushed farther and farther to suburbs and cities’ outer areas. There are a few stars aligning beyond Section 8 and foreclosure that will contribute to this. Car dependence is becoming less desirable for economic and sociological reasons (Last year’s gyrating oil prices have driven it home to Americans that cheap gas won’t last forever, and environmentalism’s penetration of the mainstream have put green living on middle America’s radar). The revitalization of inner cities that begun 15+ years ago are starting to bear fruit. In quite a few metro areas, downtowns and the areas surrounding them have become vibrant, safe, attractive places.

You can also expect the new presidential administration to continue this trend. Obama’s spent the last two decades in the South Side of Chicago. He’s an inner-city guy. His attitudes and policies all indicate that he’s going to continue this urban revitalization, from the fixes to infrastructure in his stimulus plan to the green policies that will promote urban living. Plus, his election was owed in no small part to city-based organizations mobilizing their population centers for Obama’s machine: Donating, volunteering, and especially getting out the vote. Urban areas are blue no matter who’s running, but part of Team Obama’s genius was getting voter participation in urban areas to skyrocket. The cities put Obama in office, and neither he nor they will forget it.

What this comes down to for us, of course, is that more and more folks on the hunt for places to live are going to decide that that downtown highrise looks a little better than that 3-bedroom house in a ghost town suburb half an hour down the highway.

Portland, Oregon, where I live, has already been experiencing this like no other, even in the short three years I’ve been here. When I moved here, close-in areas like Old Town and MLK Blvd were areas dotted with liquor stores and broken windows, now they’re dotted with art galleries and bistros. City lore talks much about areas like North Portland, where a student friend of mine recounts not being allowed outside as a little girl because the nearby park alone had five shootings in one year, or the Pearl District, an abandoned industrial area you were insane to walk through after dark. Now both areas are booming, and some condo prices in the Pearl have exceeded $1,000/sq ft. Meanwhile, East 82nd Ave, the de facto entrance to Outer East Portland, has had an increasingly large problem with prostitution, and most of the problem neighborhoods as designated by the city are in the hundred-block stretch between 82nd and the suburb of Gresham. Even City Council members have referred to the Lents neighborhood, an area of Outer Southeast, as “Felony Flats”.

This is why we’re looking for buildings in places like Detroit and Cleveland, where this process is just beginning, and why places like The Palms look so attractive (See below for an explanation of why we didn’t make the deal). Plus, while the in-fill is happening, upwardly mobile folks who would normally be buying their first house right now are staying in their apartments. These kind of conditions are ideal for our business model, where we can scoop up formerly slummy buildings and upgrade them to make them attractive to the new in-fill folks. Potential for condo conversion years down the road is obviously high as well.

Now, this is not to say that you can stroll into any American inner city you please and find an urban paradise, or that you should take your bulletproof vest on your next trek to the suburbs. But ten, even five years down the line, expect the picture to be different.