APPENDIX TO CHAPTER TWO / Formal Expression of Aspects of Neighborhood

This chapter argues that the metropolitan housing market primarily drives neighborhood change. It models this market as an interconnected array of submarkets segmented by housing quality. Within each submarket, there is latitude for independent adjustments of demand and supply but submarkets also are interconnected by actions of households, owners and converters of existing dwellings, and builders of new dwellings. Exogenous shocks impinging initially on one submarket create signals that eventually lead to systematic but non-uniform repercussions throughout the submarket array. These adjustments of demanders and suppliers fundamentally engender the neighborhood change process, which manifests itself in alterations in the composition of residents and the physical character of the dwellings. If such changes are persistent and consistent across a number of neighborhoods, there will be second-round effects on the local retail sector and the fiscal capacity of the local public sector. These impacts, in turn, feedback to magnify the initial impetus of neighborhood change. The chapter presents the first fundamental proposition of this book, the proposition of externally generated neighborhood change. It states that most forces causing neighborhoods to change originate outside the boundaries of that neighborhood, often elsewhere in the metropolitan area.