It was reported that staggering numbers of apartments in New Orlenas East are off the market. The collapse of apartments in the East was the story, but the backstory is more significant. Let’s look at a few reasons why.
New Orleans East was developed by private investment largely during the period when NOLA had a booming, growing economy. Those days are long gone, so the middle- and upper-middle class population, mostly in-migrating young people, that the economic model for which these apartment complexes were developed on have long ago left.
Much like Fat City in Metairie and many complexes in Kenner, these apartments were speculative and built cheaply. As revenue streams from rents diminished and costs escalated the owners simply could not afford the upkeep on the complexes. The result, deterioration inviting an influx of crime and accelerating vacancies.
As middle- and upper-middle class income populations declined, so too did the retail facilities and services in the area. These businesses existed only because their customers had disposable income enough to make them profitable. Beside the loss of their customer base, escalating crime drove much retail out (It was said that the Dilliard’s had the highest theft rate of any Dilliard’s in the country). Politicians rail that the East is a food desert, implying that greedy business is at fault, but no food or other retail store can survive in areas of high poverty and high crime. Capitalism isn’t at fault; economic obsolescence of the entire area, perhaps the entire city, is.
Much blame for the decline of the East has been placed on Katrina. I disagree. Considering the upgrades to hurricane protection, if demand was there, tenants and supporting businesses would be too. The simple fact is the city has a dismal economy and the demand for housing for upper- and middle-class tenants, especially in the poverty ridden East, just isn’t a reality. No demand for housing, no viable apartment sector, no retail.
After Katrina, the Urban Land Institute warned that the New Orleans economy just would not support anything like pre-Katrina New Orleans. Obviously, they were correct. The political power base, largely employing the same philosophy as today, preferred to ignore economic science and instead placed blame for the economic devastation of a major part of the city on white flight and the “evils” of capitalism. Because of a lack of understanding of how an economy works, their solution to all problems has resulted in repeated calls for government “investment” in the East. Investment cannot replace demand, so all that has been expended and all that is planned is a waste of scarce resources, a folly of lost hope.
The facts, supported by the history of failure, are very simple. No government program, no public expenditure will replace the economic drivers that created the booming East in the first place. Until the city’s economy begins to grow, there will be no sustainable development in the East. (By the way, these same fundamentals apply to suburban areas as well. No economic growth cultivates decline and out-migration.)
The politicians who control the city may now try to spend untold fortunes on converting the crumbling complexes in the East into low-income housing. But just like the now demolished New Deal and Great Society housing project follies, city efforts at low-income housing too will fail. Government supplanting economic reality will always fail.
New Orleans East will become a viable community again when there is a citywide economic reason for it to be so. People and services will come back to the East when they trust the economy to support themselves, and they have sustained income to support moving there. Until then, we should not give credibility to political drivel.