Appeals to community are usually anti-urban. . . . Throughout the modern period, the city has often been decried as embodying immorality, artificiality, disorder, and danger.
- Iris Young, 1995, 260.
Wealthy and exclusive residential areas closed off from the rest of the population by fences and gated entrances have existed in the United States since the nineteenth century [Kennedy 1995]. Today the "private neighborhood" is no longer limited to the rich. Neighborhoods in middle- and low-income areas have also followed the trend toward privatization. In existing neighborhoods, fences and gates have been installed to restrict access by "outsiders." In new housing developments, access is limited both physically through street design and legally, because the entire neighborhood is privately owned. Inside the "privatized community," street maintenance, recreational facilities, landscaping, planning, and even public safety are controlled and funded by homeowners. In essence, private groups, often composed entirely of unpaid volunteers, have supplanted many local government functions.
The trend toward neighborhood privatization has important policy implications that will affect all urban residents - both inside and outside of the "privatized neighborhood." Relying on homeowners' groups, community activism, and voluntarism will undoubtedly increase individual responsibility as well as the total amount of "social capital" in urban areas - a trend welcomed by many conservative policymakers and urban analysts. However, the quality and scope of this social capital are likely to change dramatically. As individuals become more involved with local neighborhood issues, they may become less concerned about problems in the wider metropolitan area. Increased neighborhood cohesiveness may produce less social involvement at the city level. In addition, neighborhood privatization means the withdrawal of government from the provision of community services. The replacement of government by private groups may not enhance individual freedom and opportunity as conservatives expect. Instead, rules based on the Constitution and political ideals will be replaced by privileges based on income status and property wealth. The following essay begins with an overview of the trend toward neighborhood privatization. The second section addresses the implications for urban policy of the withdrawal of government. The conclusion offers some observations on the risks of the modern "search for community."
The Trend toward Privatization
Poverty, crime, crumbling infrastructure, and inadequate community services are familiar aspects of everyday life in many of America's central cities. Since the 1960s and 1970s, policymakers have fiercely debated the appropriate role of government in providing solutions to these problems. Conservatives insist that government should have little or no role, since the fundamental problems are lack of individual responsibility, a failure of the family, and disintegrating community values. Indeed, libertarians like Charles Murray and Gertrude Himmelfarb claim government efforts have actually made the situation worse by pre-empting individual and community efforts [Murray 1984; Himmelfarb 1994]. In response to the conservative arguments, liberals and progressives counter that placing blame for urban problems entirely on individuals and communities ignores broader social, economic, and historical realities. For example, the decline of manufacturing jobs in central cities, housing segregation, inequalities in educational funding, and the dominance of the private automobile in urban transportation reflect long-standing national trends and policies beyond the control of any local community or urban resident [Wilson 1996].
While neither side in the debate has conceded defeat, the individualistic explanations appear to have gained the upper hand in influencing urban policy. The handful of policy initiatives directed toward urban problems during the 1980s and 1990s has emphasized private enterprise, community empowerment, and individual responsibility. Examples of the private sector orientation of national urban policy include empowerment zone legislation consisting of incentives to private corporations to locate in central cities [Bartik 1994] and low-cost housing increasingly financed and developed through private partnerships between nonprofits and corporations [U.S. HUD, 1977]. At the state and local levels, the trend toward privatization appears in areas as diverse as highway maintenance, elementary education, and public safety [Kostro 1994; Carlson 1995; O'Leary 1994].
In many cases, "privatization" policies are not technically privatization, but merely private production, since there is still substantial government involvement. For example, the 1992 Tesseract schools experiment in Baltimore, Maryland, turned over management of nine elementary schools to a private firm, Education Alternatives, Inc., but the city of Baltimore retained responsibility for funding and oversight of public education [Williams and Leak 1996]. In cases where "privatization" consists of the use of vouchers, subsidies, or subcontracting, the ultimate responsibility for providing and funding the good or service remains with the government. On the other hand, looking to private firms, groups, and individuals to assume responsibility for provision of the service, as well as funding, represents a complete withdrawal of government. While these situations are less common, the trend toward complete "privatization" of community services is seen in the growth of the "privatized neighborhood" [Blakely and Snyder 1997]. In gated communities, planned unit developments (P.U.D.s), and privately owned housing developments, services formerly provided by state and local governments are now provided entirely by residential associations, community groups, and volunteers.
The Privatized Neighborhood and the Withdrawal of Government
Existing neighborhoods in urban areas become privatized when ad hoc committees of local homeowners decide to turn residential areas into gated communities. Closure or barricading public streets is done with the approval of local government in order to create "defensible space" in areas where fear of crime is high [Blakely and Snyder 1997]. In new areas, privatized neighborhoods are created by private real estate developers. The developer forms a nonprofit corporation called a "residential community association" that creates and enforces covenants, conditions, and restrictions (CC&Rs) in the new development [Blakely and Snyder 1997; Dilger 1994]. The CC&Rs cover the administration of numerous public services such as land use and zoning, architectural design and building additions, street layout, landscaping, garbage removal, street cleaning, street lighting, parks and recreation, and security. Residential community associations may also establish rules and regulations for individual behavior in "public" areas and even inside private residences [Owens 1997].
Two main arguments are offered in support of privatization. First, private production is assumed to be less costly due to the salutary impact of market incentives on efficiency [Kodrzycki 1994]. Whether privatization actually reduces costs is an empirical question. In some cases, critics have charged that privatization reduces costs only because the subcontracting firm employs lower paid, nonunion workers or significantly reduces the quality of the service [Kodrzycki 1994]. In other cases, replacing an inefficient state bureaucracy with an inefficient private one may fail to produce any cost reductions [Johnston 1992]. The Baltimore school privatization actually increased per student costs [Williams and Leak 1996].
Certain goods and services have traditionally been exempt from the market efficiency argument, because they possess extensive externalities or are non-excludable public goods. Thus, while garbage collection is a likely candidate for subcontracting or even complete privatization in many urban areas, policing and public security are commonly considered to be exclusively functions of the state [Johnston 1992]. However, for public choice theorists even public safety can be privatized. According to Benson, policing is now a public sector function not because of any free-rider problems, but because of "changes in property rights historically that undermined incentives for cooperation" [1994, 249]. The idea that even policing ought to be privatized implies that there are few, if any, limits to the drive toward privatization and the retreat of government, at least at the state and local levels.
A second argument in favor of privatization is that it will enhance the level of "social capital" among members of a community. Social capital is a term developed primarily by sociologists to describe "features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit" [Putnam 1995, 67]. The social capital argument is most recently associated with Robert Putnam, who published a study in 1995 showing a significant decline in voluntary memberships in clubs and local organizations in the United States since World War II [Putnam 1995]. The decline in group involvement is interpreted by Putnam to mean a decline in civic engagement and cooperation.
Neighborhood privatization would produce an increase in social capital, according to Putnam's measure, since more individuals would become members of homeowners' associations or tenants' groups. Whether this increase in social capital would result in well-maintained housing, cleaner and safer streets, and more functional neighborhoods is not certain. As Michael Foley and Bob Edwards  point out, Putnam's assumption that social capital is an attribute only of voluntary associations is not warranted either empirically or theoretically. On the contrary, James Coleman  argues that voluntary associations may not be particularly adept at cooperation. Voluntary associations may be undemocratic or antisocial. Indeed, there is some evidence that homeowners' associations create divisiveness and discontent as often as they create social cooperation and trust [Kennedy 1995; Dilget 1994].
Putnam  assumes that social capital is an unambiguous social "good," but Coleman  recognizes that more social capital does not always mean a more highly unified and cohesive community. In Coleman's analysis, social capital is not necessarily benign. Social capital derives from the degree to which individuals must depend on each other. This interdependence provides an incentive for individuals to form and maintain social relationships. Within these social relationships, norms of reciprocity are developed and fostered. In essence, social capital consists of obligations enforced by social norms. These obligations may be unasked for and unwelcome. For example, if I do a favor for you, you may believe that you are now obligated to do a favor for me. Mutual obligation does not automatically produce social harmony. In fact, according to Foley and Edwards [1997, 550], ". . . superior resources of social capital might be more characteristic of highly polarizod or fragmented societies than of smoother functioning ones."
The social capital argument for privatization is also often based on a crucial belief regarding the role of government. Putnam, Francis Fukuyama, and conservative policymakers assert that government provision of community services has destroyed existing stocks of social capital [Putnam 1995; Fukuyama 1995; Sandel 1996]. That is, neighborhood privatization may or may not generate new stocks of beneficial social capital, but it will, at least, prevent government from depleting existing stocks any further. President Ronald Reagan summarized this viewpoint as follows: "We've let government take away many things we once considered were really ours to do voluntarily out of the goodness of our hearts and a sense of community pride and neighborliness" [quoted in Wolch 1983].
The idea that "community pride and neighborliness" are valuable attributes of a wall-functioning neighborhood is indisputable, and the notion that neighborhoods in central cities seem to be lacking these same qualities has a certain appeal. However, it is important to emphasize that Putnam and other conservatives are going further than simply suggesting that more community pride and neighborliness would be beneficial. The conservative argument is that government provision of community services is overtly harmful to society.
For the promotion of moral values, conservatives have always looked to individuals, families, churches, communities, and all the other voluntary associations that Toqueville saw as the genius of American society. . . . They look, in short, to civil society to do what the state cannot do - or, more often, to undo the evil that the state has done [Himmelfarb 1994, 73].
The Search for Community
City and suburban residents who choose to live in privatized neighborhoods expect the quality of community services to be higher than those available in public neighborhoods [Blakely and Snyder 1997]. That is, the privatized neighborhood represents a dissatisfaction with the quality of public services and a failure of government [Jacobs 1984]. The growth of the privatized neighborhood may, in fact, guarantee this outcome by making it more difficult for cities to improve the quality of life. City governments, already facing eroding tax bases, may see their resources shrink further. As citizens focus more and more on neighborhood issues, political, social, and economic problems of the greater metropolitan area may remain unresolved or even deteriorate. The segregation of urban residents into enclaves will also tend to diminish the importance of issues that separate neighborhoods in favor of differences within neighborhoods. Since neighborhoods in most urban areas are segregated by class, neighborhood privatization will tend to diminish the importance of economic issues in urban policy. The focus of attention will be on those issues behind the growth of privatized neighborhoods - crime and property values - rather than on the larger issues of income distribution, jobs, economic opportunity, and social justice.
Privatized neighborhoods have the potential to affect the urban tax base by reducing the willingness of residents to pay for public services. Community services in privatized neighborhoods are funded by fees paid to residential community associations. From the point of view of residents, these fees constitute a "tax" for community services. Since most residents inside privatized neighborhoods do not receive publicly provided services, taxes paid to local governments are perceived as "double taxation." Some associations have lobbied for and received tax relief from local governments to "reimburse them for provision of public services" [Dilger 1994, 3]. The issue is a complex one, since the decision not to consume publicly provided services is not made by the homeowner. The decision in favor of privatization of services is made by the real estate developer with the approval of the local government. In other cases, the decision originated with the local government that will not provide public services, such as policing and maintenance, on private property or in areas where public access is restricted. In any event, the long-term impact on the urban tax base of providing tax exemptions or rebates to residents of privatized neighborhoods could be considerable. Approximately 50 percent of all new home sales in larger metropolitan areas are in neighborhoods with a homeowners' or condominium association [Dilger 1994].
Privatized neighborhoods may also adversely affect the political and social institutions of the city. While residential community associations concern themselves with safety and property values inside the privatized neighborhood, there is less attention paid to the problems outside of the neighborhood's boundaries.
. . . The celebration of territorial community against the evils of impersonal, capitalist urbanism quite comfortably fits into the larger system, because it leads to a logic of local defense against the outside world, rather than a challenge to the workings of that world. When a community "fights" city hall on these terms, it fights to be left alone, to be exempted or shielded from the political process, rather than to change the political process itself [Sennett 1995, 234].
Sennett's observation warns of a potential neglect of the larger social and political order as a result of the narrow scope and inward-looking orientation of community groups. The appeal of the privatized neighborhood is that one can somehow withdraw from the problems that beset many of America's cities. While political and social institutions may be fraying in the city at large, one can barricade oneself in a private world of safety, order, and fellowship. However, inside the privatized neighborhood many civil rights do not apply. For example, the Fourth Amendment of the Constitution protects citizens against unreasonable search and seizure. This protection applies only to actions by the state. Citizens are not protected against unreasonable searches by private security guards on private property [Owens 1997]. Residential community associations establish many rules regarding drug testing, searches of persons, automobiles, or houses and personal behavior that would not be constitutionally allowable for local governments. Moreover, these rules and regulations are voted on only by members of the association even though they apply to guests and employees as well as to residents. Voting inside the association is usually based on property ownership, rather than on the usual "one person, one vote" rule. Thus, inside the privatized neighborhood, one is subject to rules and regulations that were neither voted on democratically nor subject to constitutional constraints. The proposition that social and political institutions can be preserved within the privatized neighborhood, even as they are neglected in the larger city, is dubious.
1. In Las Colinas, Texas (near Dallas), the entire town of 30,000 residents is privatized. The town square is a privately owned mall [Owens 1997]. In Washington, D.C., the public housing project of Potomac Gardens was transformed into a gated community in 1992 [Blakely and Snyder 1997].
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Dell Champlin is Assistant Professor of Economics, Eastern Illinois University. This paper was presented at the annual meeting of the Association for Evolutionary Economics, Chicago, Illinois, January 3-5, 1998.…