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Moonlights, Sunspots, and Frontier Finances: On the Nexus between Money, Credit, and Urban Form

Moonlights, Sunspots, and Frontier Finances: On the Nexus between Money, Credit, and Urban Form

We study the spatial consequences of the political economy of the U.S. housingfinance system, paying particular attention to the historical process by which institutional risk allocation failures have shaped post-war urban development and the U.S. housing cycle. The suburbs arose, in part, because building on the city’s edge was deemed risk-free, cheap and, perhaps, a natural extension of the frontier mentality that is intellectually anchored by the convex bid-rent curves that emanate from the elegant shorthand of the monocentric city model. But the devastation wrought by ongoing foreclosures across large swaths of suburbia are sore reminders that building on the edge is anything but risk-free. We suggest that there might be a middle condition between urban center and isolated suburb that can function as a financially stable model, much like the streetcar suburb of the late 19th century.

Our exploratory investigation aims to uncover how the increasing financialization of real estate gives rise to new forms of systemic risk, which in turn have little understood consequences for the spatial structure of cities. Documenting the inextricable linkages between the process of securitization and urban sprawl, the empirical part of this project studies the flow of mortgage credit, land-use change and the morphological transformation of a selection of cities and suburbs in Michigan over the cycle of the Great Housing Boom and Housing Bust. In addition to research into the financing of exurban sprawl, we will also investigate the targeting of homeowners in the city of Detroit at the height of the housing boom for refinancing at usurious rates of interest. This abuse has led to widespread foreclosure in struggling neighborhoods and the undermining of the already-precarious solvency of Detroit’s black middle class. This project seeks a new understanding of the real risk of land and housing values at the urban fringe versus those at the core.

Project Leads

Assistant Professor David Bieri
Professor of Architecture and Urban Planning Robert Fishman
Wilbur K Pierpont Collegiate Professor of Management and Professor of Organizational Behavior & Human Resources Management Gerald Davis (Stephen M Ross School of Business)