No Longer Majority Black, Harlem Is in Transition

Joshua S. Bauchner, with his 2-year-old daughter, Evlalia, moved to Harlem in 2007. “In Manhattan, there are only so many directions you can go,” he said

I first became fascinated with Harlem, the capital of black America, when I was a kid growing up in the Midwest.  I was always into books and at 12 or 13, I would routinely grab some of my older brother’s college books and read them. One of those books was the Autobiography of Malcolm X.  His description of Harlem absolutely captivated me and I knew that one day, I’d get to see all of the places he talked about in the book.

I finally got a chance to see Harlem while I was pursuing a  graduate degree in business in the early 1980’s.  I got a summer job as an intern with a large fortune 500 company in midtown Manhattan and had the opportunity live in New York City for three months.  I couldn’t wait to see Harlem and ventured uptown at the first opportunity.

In those days, Harlem was nearly all African-American and vast areas of it were either vacant or looked bombed out.  There were some nice areas along Riverside Drive on the Westside.  Nevertheless, I still went up to 125th Street, checked out the Apollo, checked out Small’s Paradise, ate at Sylvia’s and etc. There were beautiful brownstones in Harlem then but many had fallen into disrepair.

Harlem has changed much since then.  It’s undergone gentrification to the extent that it’s no longer majority black.  As it goes through the transition, it’s clear that the political control will change.  Economic control was ceded long ago, if it was even had to begin with.

One can’t really fault those who’ve taken advantage of an arbitrage opportunity.   After all, the same type of real estate in the rest of Manhattan was far more expensive than that in Harlem.  So, it stands to reason that at some point the price differential would be erased.

Gentrification of  urban areas has occurred all over the country.  Generally, it occurs when things get so bad that people just vacate the areas.  As demand dries up, properties prices decline which lowers the downside risk of investing.   Eventually, people are attracted to the opportunity and gentrification takes a firm hold.  Of course, once someone resides in a community, they’re going to want to have a voice so political influence or outright control becomes an imperative if for no other reason than to protect one’s investment.

The biggest money is made in America when you’re able to buy something that’s out of favor and hold it until it is in favor.  In other words,  the time to invest is when the item is on “sale” and no one else wants it.  This works when  fundamental economic trends support the likelihood of the asset being recognized at full value at some point in the future.

With regard to urban areas where most African-Americans reside, there’s a fundamental economic trend that may enhance the arbitrage opportunity that exists.  Prior to the current financial crisis, the price of a barrel of oil reached  nearly $ 150 a barrel which resulted in prices at the pump in excess of $ 4.00 a gallon before prices plunged.  During that time, many were exiting their SUV’s and looking at living “closer in”, all of which was promptly forgotten as prices retreated with the financial crisis.

Fundamentally, the long-term situation with oil has remains unchanged.  There’s a supply problem or what’s better known as peak oil.    This is a phenomenon where oil production starts to go into decline as fields are depleted and new discoveries are insufficient to replace the rate of depletion.  Recently, the International Energy Agency went out on a limb and predicted that we’ll reach peak oil production sometime around 2020 and then move into a permanent decline.

America currently consumes about 25% of the world’s oil resources while we have less than 5% of the world’s population.  In a world of declining oil production, that level of consumption is not sustainable nor is a suburban lifestyle that requires a lot of driving.  Unless there’s an alternative fuel that’s developed that will sustain our current situation, it’s likely that real estate “closer in” or in the urban areas may become highly prized while suburban real estate may languish.

Given this, I believe that an arbitrage opportunity exists where African-American communities may be sitting on a goldmine.  The issue is whether or not we’re positioned to take advantage of the situation or will we sit idly by and allow someone else to and then loudly protest because they did something we should have done. Here’s some of what needs to happen to take advantage of the situation (Please note that much of this is a theme and whether it’s controlling the economics or the politics of the community, the stuff we need to do remains the same.):

  1. Reduce the level of crime.  This is the single greatest impediment to economic development and investment.
  2. Own it and take care of it.
  3. Plan the community.  Determine what you’d like to see go in it and what you don’t want and make sure the zoning ordinances reflect that.
  4. Control the politics of your community.  A fool in elective office can wreak everything. A public servant whose interests are aligned with that of the people can enhance your investment and overall well being.

Again, gentrification usually results in others getting rich just because we’re not in position to take advantage of what’s right in front of us.  It’s not just the real estate investors who make money in such a scenario, but banks, contractors and others as well.  Sometimes I like to think about “what if” scenarios.  A few days ago, I wrote about African-American owned banks and the idea that if African-Americans were to start to build the deposit base at these banks , we’d be in the position of collectively self financing development like this, hence creating a veritable circle of profits with the bank earning interest on an expanded loan portfolio which enhances its ability to lend more to those investing in the development of the community while also driving employment.  In other words, everyone gets built as the community gets built–a stimulus plan for black America that we create for ourselves.   This is not a new or novel idea, because other communities have done this.  We just haven’t, but what if that were to occur to take advantage of the development opportunity? Can you imagine just how powerful that would be?  What would it say to our children?  What would it say to the world? I think it would say a lot more than marches, protests and cries of victimhood in response to someone else seizing the opportunity.

What we really need is a overall strategic plan focused on developing the African-American community.

3 Responses to “No Longer Majority Black, Harlem Is in Transition”
  1. Roy Shuler says:

    Hey Greg,

    As a person who grew up in Harlem, I can identify with the opportunities that many who were domiciled there were either not aware of, or, in a position to take advantage of. As one who’s also studied what’s happening in nearby Allentown, your article confirms why this city may be on its way to a similar experience.

  2. Greg L says:

    Hi Roy,

    I believe you’re right about Allentown and I see a very different picture there 10 years out if not sooner. It has all the ingredients like a lot of beautiful old homes up on the “bargain table”. This is a story that will continue to play out nationwide.

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  1. […] of consumption is not sustainable nor is a suburban lifestyle … See the original post here: No Longer Majority Black, Harlem Is in Transition « The African … Share and […]

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