"The Next Slum?"

It's not where you think—or hope—it is

Are today's McMansions destined to be cut up into apartments? Could the suburban cul-de-sacs of West Knoxville—or any of the thousands of places like it across the country—become "The Next Slum?" The question provided the title, and the central thesis, of a gloomy piece penned by Christopher Leinberger in the March issue of The Atlantic Monthly.

However, Leinberger's piece also contains a passing reference that may answer his own question about where "The Next Slum" is likely to be—and it's not where he otherwise leads the reader to imagine. "Many inner suburbs that are on the wrong side of town, and poorly served by public transport," he writes, "are already suffering what looks like inexorable decline. Low-income people, displaced from gentrifying inner cities, have moved in, and longtime residents, seeking more space and nicer neighborhoods, have moved out."

Those few sentences, in a nutshell, are also the thrust of a July Atlantic article entitled "American Murder Mystery." While focused on Memphis, the piece follows a trend that's been baffling police departments across the country. Crime rates in previously quiet outer rings of core cities are spiking, often as the inner-city they surround becomes noticeably safer.

The answer, according to the article, is that federal programs like Section 8 housing vouchers or the HOPE VI's demolition and replacement of housing projects with mixed-income housing haven't been the panacea policymakers projected. True, fewer Americans now live in neighborhoods where 40 percent of households are below the federal poverty line, but "increasing numbers now live in places with ‘moderate' poverty rates" of 20 to 40 percent. And the diaspora of the poor from the inner city may be driving those increased poverty—and crime—rates, particularly in older neighborhoods like those the Memphis article focused on.

Section-8 voucher recipients tend to gravitate toward areas where the market is softest. It's the result of the ostensibly "market-based" method HUD uses to calculate the value of the vouchers. The agency's "fair market rent" for a given metro area—$592 for a two-bedroom apartment in Knox County—is based on an overall community average, too low to offer voucher recipients access to some areas, and high enough that landlords in other, less desirable areas rely on Section-8 as a way to fill otherwise marginal properties.

In years past, those marginal properties have been in "transitional" urban neighborhoods like Parkridge. But that's changing. Gentrification—as both Atlantic articles suggest—has played a part. Formerly rundown neighborhoods like Old North Knoxville, Fourth and Gill, and even Parkridge have turned a corner, raising prices and reducing their number of rental units.

But the bigger culprit may be Section-8 itself. By providing guaranteed rents and tenants, it encourages landlords to take a slash-and-burn approach. Buy a cheap house in a marginal neighborhood, defer maintenance to maximize cash flow and, once the condemnation notice appears, walk away cash in hand. A portion of the cash gets invested in a new rundown property, typically bought cheap out of foreclosure or at an estate auction, and the process starts again. Given enough time, Section-8 takes the fixed assets of a neighborhood, its houses, and slowly liquidates them into cash. Once a neighborhood is used up, the landlords move on like locusts, leaving boarded-up husks and overgrown lots in their wake.

To generate maximum profit, Section-8 process requires a continuous supply of cheap houses as raw material. But, as the inner city is increasingly used up—or, in the rare instance of a Fourth and Gill, gentrified to the point that houses are no longer an under-priced commodity—the challenge to landlords is where to go. Increasingly, that's become struggling older suburbs full of no longer fashionable split-levels and split-foyers, or aging apartment complexes of similar vintage.