So wide and menacing, indeed, has this feeling grown that the Commission deemed it necessary to make a thorough inquiry into its basis and to determine, if possible, to what degree the presence of Negroes is a factor in the depreciation of property values. Therefore it is essential to distinguish clearly between: (1) general factors in depreciation; and (2) presence of Negroes as an influence in these factors, and also as a direct factor.
What is meant by "depreciation"? Real estate men know it as "a loss in market value." Market value is "the price which a buyer who wishes to buy but is not forced to buy will pay to an owner who wishes to sell but is not forced to sell." Depreciation is reflected, not only in market values, but also in appraised or assessed valuations. Before purchasing property it is customary to take into account the surrounding conditions that affect its value, as well as its inherent value. Assessed valuations, fixed for taxing purposes by authorized public officials, fluctuate to some extent in harmony with appraised valuations. This analysis of the factors that tend to determine the value of real estate for one purpose or another gives a fairly dependable rule for finding whether it has risen or fallen in a given period. If property is thus shown to have decreased in value, it is said to have depreciated.
The value of real estate is determined largely by the human factors involved. This fact accounts for the striking differences in value of property, for example, on Sixteenth Street, on State Street, in the "Loop," on Chicago Avenue, and on Sheridan Road. Convenience, desirability, and other factors involving individuals who make up the public enter into the determination of realty values.
It is necessary to distinguish between land values and improved-property values. Usually buildings are erected that harmonize in cost with the value of the land on which they stand. But this harmonious relationship may not continue; developments in the neighborhood may increase materially the value of the land, while the value of the improvements decreases as time goes on. The values of the land and of the improvements do not necessarily rise and fall together, though improvements generally tend to add to the value of the land. Much, however, depends on the use to which the land is put, and even more on the use of adjacent land. That use may be such as seriously to impair the value of all the land within a given area or some particular tract in that area. Such impairment is a chief reason advanced for zoning, so that property values in various given districts may not be impaired through inharmonious uses, and that property values throughout a city may thus be stabilized.
It is also necessary to distinguish between "deterioration" and "depreciation." They are not interchangeable. Deterioration of improvements on land affects the value of the improvement, not necessarily the value of the land. The property as a whole may be depreciated by deterioration of improvements, but an increase in the land value might more than offset this loss. This would be accounted for by a possible change in the use of the land. For example, the buildings on the North Side in which Negroes now live are uniformly old and bad, yet the Negroes cannot buy them. The properties are in process of change from residence to industrial use, and the values placed upon them for the latter use are far beyond the financial capacity of the Negro residents.
I. GENERAL FACTORS IN DEPRECIATION OF RESIDENCE PROPERTY
Apart from any racial influence there are many causes of depreciation in property values, the responsibility for all of which has often been thoughtlessly placed upon Negroes. Throughout the city may be observed blocks, streets, and neighborhoods running a declining course in desirability for residence purposes, losing value, changing in character and, in short, depreciating, but in or near which no Negroes live. The following are important factors of depreciation not due to race:
Physical deterioration.—The natural wear of time and the elements is a constant factor. Few houses are built to withstand these inroads over a long course of years, even though they have the utmost care. Neglect and lack of repairs and improvements hasten this deterioration sometimes greatly. Character of occupancy is often a factor. Some occupants are highly destructive, particularly in rented houses. Their careless or inept use of a house often adds vastly to the wear and tear and hastens deterioration. Overcrowding has a like effect.
Change in the character of a neighborhood.—Depreciation in property values in large cities is due in marked degree to factors not purely physical. There is always a continuing yet varying fluctuation in the character of neighborhoods; a restless shifting of population and conditions due to growth which rarely has been orderly or scientific. The psychological factor of residential property values is such that they may change very rapidly with the advent into a homogeneous neighborhood of a few families of a different nationality or social status. Between Twelfth and Thirty-first streets in the South Side Negro residence area, once the most fashionable white residence section, property values based on residential uses slumped utterly, and then later began to increase because of industrial uses. Such a change is often due to an encroachment upon a residential district of commercial or industrial enterprises. Neighbors will move away rather than endure such disturbance of their peace and comfort. Their places may be taken by people less sensitive to such influences who may be drawn to the neighborhood by reduced rents resulting from the exodus of former residents. Then rapid deterioration usually sets in as the tone of the neighborhood falls. A like result follows a change from an exclusive residential district into one of rooming-and boarding-houses and large residences remodeled into flats.
The shifting of fashionable neighborhoods soon leads persons of means to abandon a high-grade residential section for some suburb or newer neighborhood which they think better suited to their social positions.