MB Civic

By JANNY SCOTT

SOME big American cities are flourishing as at no time in recent memory. Places like New York and San Francisco appear to be richer and more dazzling than ever: crime remains low, new arrivals pour in, neighborhoods have risen from the dead. New York is in the throes of the biggest building boom in 30 years, its population at an all-time high and climbing. Mayor Michael R. Bloomberg proudly promotes his city as “a luxury product.”

But middle-class city dwellers across the country are being squeezed.

This time, they are being squeezed out by the rich as much, or more so, as by the poor — a casualty of high housing costs and the thinning out of the country’s once broad economic middle. The percentage of middle-income neighborhoods in metropolitan areas like Los Angeles, Chicago and Washington has dropped since 1970, according to a recent Brookings Institution report.

The percentage of higher-income neighborhoods in many places has gone up. In New York, the supply of apartments considered affordable to households with incomes like those earned by starting firefighters or police officers plunged by a whopping 205,000 in just three years, between 2002 and 2005.

Does it matter if there is less room for a middle class? In strictly economic terms, plenty of economists say, it may not. But they also say that in the long run, those cities may become places where they and other city lovers would prefer not to live.

Obviously, cities benefit economically from the presence of the rich. Tax revenues go up when the rich pour into what some economists now call “superstar cities,” places like New York, San Francisco, San Diego, Boston and Washington that attract highly skilled people but have limits on the ability to build housing. In New York, fewer than 13,000 of the 2.3 million households that pay income tax are expected to account for nearly 30 percent of city income tax paid in 2006.

In the San Francisco Bay Area, the percentage of households earning more than $100,000 a year rose to over 30 percent in 2000 from approximately 7 percent in 1970, said Joseph Gyourko, a professor of real estate and finance at the Wharton School of the University of Pennsylvania. “Is that area worse off?” he asked. “At least so far, there’s a lot of evidence that economically they’re better off. Land prices are really high, lots of people want to move there.”

Edward L. Glaeser, a Harvard economist who studied 300 large cities with a range of levels of income inequality in the 1960’s and 1970’s, says he found little evidence that those levels later affected the growth of housing prices, income or population there.

Of course, cities need police officers, firefighters, teachers. But as long as they can get the labor they need from somewhere nearby, some economists say, middle-class shrinkage may not hurt. In Southern California, developers import construction workers from Las Vegas and put them up in hotels; costs go up but rich clients can pay. Firefighters who want to live in high-priced cities can work two jobs, said W. Michael Cox, chief economist for the Federal Reserve Bank of Dallas. “I think it’s great,” he said. “It gives you portfolio diversification in your income.” Pay for essential workers like plumbers and cabdrivers will tend to go up, he said.

Professor Glaeser said: “There’s no obvious smoking gun saying cities will be substantially worse off. There’s a whole lot of America that does a very good job of taking care of the middle class. The great sprawling edge cities of the American hinterland provide remarkably cheap housing, fast commutes, decent public services and incredibly cheap products available in big box stores. As a New Yorker, I understand the view that exile from New York is consignment to hell; but that’s not accurate. The majority of middle-class people that have moved out have presumably found themselves better lives out there.”

But sociologists and many economists believe that there can be non-economic consequences for cities that lose a lot of middle-income residents. The disappearance of middle-income neighborhoods can limit opportunities for upward mobility, the authors of the Brookings study said. It becomes harder for lower-income homeowners to move up the property ladder, buy into safer neighborhoods, send their children to better schools and even make the kinds of personal contacts that can be a route to better jobs. The Brookings study, which defined moderate-income families as those with incomes between 80 and 120 percent of the median for each area, found that the percentage of middle-income neighborhoods in the 100 largest metropolitan areas had dropped to 41 percent from 58 percent between 1970 and 2000. Only 23 percent of central city neighborhoods in 12 large metropolitan areas were middle income, down from 45 percent in 1970.

Meanwhile, New York University researchers reported last month that the number of apartments affordable to households making 80 percent of the median household income in New York City dropped by a fifth between 2002 and 2005. Nationally, median household income ranges from just above $20,000 in Miami to around $40,000 in New York and Boston and about $60,000 in San Francisco.

With a dwindling middle class, rich and poor become more separate. Alan Berube, an author of the Brookings study, said a two-tiered marketplace can develop: Whole Foods for the upper classes, bodegas for the lower, with no competition from stores courting the middle. “If the two models are check cashers on the one hand and major national financial institutions on the other, who’s thinking about how to hold down costs for the basic consumer?” he asked.

School systems may suffer, too. While some upper-middle-class families rely on the public schools, many that can afford private-school education opt out. Urban school systems tend to be dominated by middle- and lower-income families. Middle-income parents have the ability and leverage to demand improvements. Similarly, studies show that lower-income students benefit by being in economically mixed schools.

Politics can become polarized without the moderating force of an engaged middle, sociologists and economists said. And while cities can import middle-level workers, there is a cost in productivity, family time and other intangibles.

“People have a stake in the place that they’re living in,” said Chris Mayer, a professor at Columbia Business School. “If you have a police and firefighting force saving their city as opposed to somebody else’s city, it makes a difference. In the same sense, local shopkeepers just seem to be better. What happened on 9/11 was really about ‘our city.’ ”

Mr. Mayer, who recently moved with his wife and three young children to New York, said he believed that it was important for children to grow up in a place that is racially, ethnically and economically diverse. He calls those places more vibrant. In most places, the upper middle class is less diverse than the middle, he said. New York would be less attractive to him without its still-expansive and lively middle.

“This trend toward living and interacting with people who are like you is intensifying a lot,” said Professor Gyourko, who lives in the affluent suburb of Swarthmore, Pa. “I do not meet the full range of incomes and social classes within my neighborhood. Well, think about what happens if metropolitan areas like New York, San Francisco and the like turn into my suburb. You’ll have even less interaction. The most interesting and potentially foreboding implication of this sorting is that it changes the way we view life.”