Highest income-inequality tract in America is gentrifying

CINCINNATI — The nation's newfound concern for income inequality and economic justice is old hat on the streets of Cincinnati's Over-the-Rhine neighborhood. For the last 40 years, crime, resident flight, unemployment and inadequate housing have made this poverty-stricken area the city's most downtrodden and feared neighborhood.

So when a new Census Bureau report found that from 2005 to 2009, a segment of Over-the-Rhine — Census Tract 17 — had the highest income inequality of more than 61,000 communities nationwide, it seemed to make perfect sense.

The increasing concentration of wealth among the nation's highest earners while most Americans tread water financially has become a rallying point for Occupy Wall Street protests nationwide and a potent talking point for cable news commentators.

A recent report by the Congressional Budget Office found that incomes for the top 1 percent of earners grew 275 percent from 1979 to 2007, while earnings for the 60 percent of Americans in the middle of the income scale grew only 40 percent.

The picture becomes muddier, however, when the problem is studied at the community or census-tract level. Here, income inequality as measured by the Census Bureau's American Community Survey refers only to the range of household incomes in a small geographic area. The wider the gap between high and low earners, the higher the level of income inequality for that tract.

So while two-thirds of Tract 17's 321 households earn less than $10,000 a year and are mired in poverty, a push to gentrify the area has brought a wider mix of incomes to the small neighborhood just outside the downtown business district. Nearly 6 percent of residents there now earn between $25,000 and $49,999. Three percent make $100,000 to $149,999, and yet another 3 percent take in $200,000 or more.

The rare diversity of earnings in Tract 17 caused it to have the nation's most unequal neighborhood income distribution, according to the Census Bureau. And oddly enough, city leaders are striving for that kind of income integration throughout Over-the-Rhine.

Since 2004, Cincinnati Center City Development Corp., a private, nonprofit development group known as "3CDC," has built 200 condominiums, 70 rental units and 100,000 square feet of commercial space in Over-the-Rhine as part of a massive public-private effort to rejuvenate the city's oldest neighborhood.

Its development work stops at the southern border of Tract 17, but the spillover effects are being felt there and throughout the area. Young, middle-class professionals, attracted by the new housing, proximity to downtown workplaces and an energized central entertainment district, have been moving into Over-the-Rhine in increasing numbers.

These mostly white urban homesteaders are providing the income boost that will stabilize the area's tax base and attract more retailers to the mostly black, mostly poor neighborhood that takes its name from German immigrants who settled there in the 1800s.

But Over-the-Rhine's economic renaissance has created some ill will. As 3CDC razes and renovates more buildings, hundreds of longtime residents have been displaced to make way for development. Those who stay fear that they'll be priced out as their neighborhood goes from sketchy to chic.

"It's forcing the underprivileged people who can't afford anything better to move out of those buildings," said James "Bubs" Kindt, resource coordinator at St. Francis Seraph Ministries, which operates a soup kitchen in Census Tract 17. "We see these people suffering every day. They used to have a place where they could live affordably, and now they don't know where they're going to live."

Last year, more than 200 low-income residents of the former Metropole Hotel sued 3CDC in federal court, claiming they were being illegally displaced as the building was readied for conversion to a new, high-end boutique hotel.

The case was settled recently when 3CDC agreed to pay the tenant group $80,000 and provide quarterly briefings for housing advocates on the agency's redevelopment efforts.

"3CDC acts as if they are a shadow government," said Josh Spring, the executive director of the Greater Cincinnati Coalition for the Homeless. "And because they are technically a private organization, we have little oversight over what they do."

Yet with the exception of six or so buildings in which tenants were displaced, the vast majority of the buildings 3CDC is developing were vacant and vandalized, said Stephen Leeper, the group's president and CEO. He said the new homeowners, business owners and residents of the area were heroes for taking a chance on a crime- and drug-filled neighborhood that many had left for dead.

"This was not Mayberry by any stretch of the imagination," Leeper said. "This neighborhood was as challenged as any neighborhood I've ever been around, worked in or seen. And it was tolerated. It was accepted."

One could argue that the gentrification of Over-the-Rhine is social engineering under the guise of community redevelopment. But market forces alone were unlikely to reverse the kind of residential income segregation that defines Over-the-Rhine and the nation as a whole.

Over the last 30 years, fewer mixed-income neighborhoods are emerging in most metropolitan areas as those at the top of the income ladder control more wealth.

"As the rich get richer, it becomes possible for them to bid up housing prices in the most desirable neighborhoods," making it "less likely that the rich and poor will live together, because low-income families willing to spend everything on living in the 'good' neighborhood will still be priced out," said Tara Watson, an economics professor at Williams College in Williamstown, Mass., who studies residential sorting by income.

Residential income sorting has profound consequences for society. Studies have shown that a lack of middle-class peers, role models and social networks in poor neighborhoods can hurt school performance and contribute to urban unemployment and other problems.

But economic integration of neighborhoods such as Over-the-Rhine isn't a magic bullet for community improvement, Watson said. Only when it's accompanied by greater social interaction and sharing of resources does gentrification benefit all residents.

"If rich and poor residents of a neighborhood never speak to one another, the social integration does not occur. ... Rather than trying to attract the very rich, it might be more helpful to encourage middle-class families to move to a poor neighborhood and hope that genuine social interaction and sustainable integration occurs," Watson said.

Holly Redmond, 42, said Over-the-Rhine's diversity had drawn her husband, Mike, and her to their home on Mulberry Street, the northern border of Tract 17.

"I don't want to live in a neighborhood where everybody makes the same amount of money as I do," Holly Redmond said.

If she did, the Redmonds probably would have looked for a neighborhood like Census Tract 601 in Kansas City, Mo., which had the most equal income distribution of all the tracts the Census Bureau measured. Areas with low income inequality are typically middle-class, suburban areas with newer homes.

That's a far cry from Tract 17, where 573 of nearly 900 apartments and houses are vacant, most of the buildings are more than 70 years old and 60 percent of tract residents received food stamps in the last year.

In addition to the St. Francis Seraph soup kitchen, the tract includes a food bank, several schools, a gas station, some playgrounds and a hodgepodge of smaller businesses. The maze of narrow, poorly lit streets provides deep cover for the worst of inner-city life.

Redmond, who regularly jogs through Over-the-Rhine, is conscious of her surroundings, but she doesn't live scared.

"That's the exciting thing about downtown," she continued. "You see everything. We're friends with people that are low income. We say hi to them. We know their names. We know the people who are affluent who live next to us. I don't think that's a bad thing."

Neither does Daniel H. Weinberg, a senior research scientist at the Census Bureau and the author of the new report.

"I'm not trying to make any sociological argument here, but it's not prima facie to me that living in a high income-inequality tract is a bad thing," Weinberg said. "Some people might argue that that is a better place to live than a place where you have low income inequality, because you're encountering all kinds of different people on the street, high and low income, workers and nonworkers."

A real estate agent, Redmond sells many of the new condos in Over-the-Rhine that 3CDC built. Her husband owns two bars in the neighborhood. Their modest, painted-brick home, which they bought for $85,000 in 2008, sits on a steep hill with the western wall covered by fire-colored ivy in full autumn splendor.

In the backyard, a tree anchors the early stages of an elaborate landscaping effort. To preserve their view of downtown, the Redmonds bought vacant lots on each side of their home and will build two backyard decks as part of a major renovation that will push their home's value to $200,000.

Once known as "Hooker Alley," where prostitutes conducted business in parked cars, Mulberry Street now boasts a number of renovated and recently built homes where urban professionals live among struggling, impoverished neighbors who reside in ill-kept apartment buildings.

Georgina Dye, head cook at the soup kitchen, recently moved to an apartment in Tract 17 to be closer to work, her credit union and grocery shopping at nearby Findlay Market. She's nervous about the long, dark corridors in her apartment building, and she mostly keeps to herself. But her new middle-class neighbors and the amenities they attract are a welcome change.

"They've got little restaurants and condos everywhere. I can't afford one, but I don't mind living around them because it makes the area look clean," Dye said. "The neighborhood is nice. A lot of people don't like it, but to me it's progress. It's taking the trouble away."


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