In the center of Boston rises the small neighborhood of Fort Hill, on top of which sits Highland Park, designed in the 1800s by Frederick Olmsted.1 Patriots stored gunpowder here during the Revolutionary War, and a tower fit for Rapunzel commemorates their efforts. The abolitionist writer William Lloyd Garrison fought against slavery from a house on this hill. And now the battle for urban housing affordability rages on these streets. It's a microcosm of the battle playing out on a neighborhood level in every growing city in America: a battle between those who want to keep property values high, and those who want the chance to live in the cities that have the best economic prospects.

If cities want to retain a middle class, experts say, they will have to make it happen on their own.

The casualties in this war are mostly the middle class. In 2016, rents continued their years-long rise, incomes stratified further, and the average price to buy a home in major US cities rose. The strain pushed the middle class out of cities like Boston, San Francisco, Los Angeles, New York, Austin—the so-called "hot cities." Some families move to the suburbs. Others flee for less expensive cities. But across the US, the trend holds: cities are increasingly home to high-rollers who can pay the high rents or down payments and lower income people who qualify for subsidized housing.

Macroeconomists say this a good problem to have. These cities are growing. People want to live in them. Stagnating economies in the Rust Belt might envy this kind of trouble. From the perspective of the overall wealth of cities, the middle class being pushed out doesn't matter. But it matters on the human level, the neighborhood level. In Fort Hill, it means that a teacher at the local elementary school cannot afford to live in the neighborhood where she works. The effects on inequality, mobility, and the demographic composition of cities are very real, their causes multifold, and the solutions difficult.

Experts reading into president-elect Donald Trump's proposed tax and housing policies—including his appointment of Ben Carson to lead the Department of Housing and Urban Development—see little hope that the federal government will help reverse this course next year. If cities want to retain a middle class, experts say, they will have to make it happen on their own.

Out of Reach

The affordability crisis in US cities is not just about buying homes. Rents, too, have been rising since the Great Recession. In the coastal and hot cities like Denver and Austin, those increases have put even rentals out of reach for many in the middle class–defined as those making between $50 to $125,000 depending on household size. In 2016, the capital required to sign a lease on the average-priced $3,500-a-month apartment in San Francisco often topped $12,000, owing to requirements for first and last month's rent plus security deposits and a broker fee.

The savings that used to be associated with the middle class have dried up in the past few years, as interest rates stayed low and wage growth stagnated. Not only does this make it harder for people to stay in the middle class, but it makes coming up with high sums to rent or buy city apartments impossible.

"It's very hard to get people to understand that the affordable housing crisis is not for the very poor," says lawyer Mechele Dickerson of the University of Texas, an expert in housing and the middle class. It's for people with good jobs who are not poor enough to qualify for subsidized housing, nor rich enough to pay the rising housing prices. "A family that makes $100,000 can't afford to buy a house in most US cities," Dickerson says.

NIMBY Naysayers

The intractability of the middle class' affordable housing problem stems largely from strict zoning laws that restrict building new housing, and the not-in-my-backyard mindsets of homeowners who oppose affordable housing initiatives.

"Housing issues are a product of economic growth in the city bumping up against strict zoning constraints. That's what leads to the unaffordability problem," says David Shulman, Senior Economist at UCLA's Anderson School of Management. "You don’t want to stop economic growth."

The opposition to change drives the price of the existing housing supply up—which homeowners love—and ripples into the rental market. Landlords are able to charge more, and long-time rental residents get displaced when they can't afford the new prices. That's what's happening in Fort Hill, a traditionally African American neighborhood that is whitening every year as black residents who've rented there for decades are replaced by high-turnover college students willing to pay the ever-higher market rates for apartments.

"As a landlord, if you can turn it over, you’re always at the market, and you want to turn it over faster," says Lee Lin, data scientist and cofounder of the rental site RentHop.

'As soon as you call it affordable housing, the existing residents shift into NIMBY.'

This high-turnover rate is even more of a problem when you factor in what economists call "the AirBnB effect," where homeowners are able to charge exorbitantly high rates for short-term rentals. Lin says 2016 actually saw the first signs of a crackdown against this trend, starting in New York City, which passed strict regulation to make it harder for homeowners to make money on short-term rentals.

In Fort Hill in 2016, meanwhile, initiatives to build new affordable housing to keep those long-time residents in the neighborhood were met with resistance by some homeowners fearing an influx of low-cost housing would negatively affect their home values.

Dickerson says part of the problem is that when homeowners hear the phrase "affordable housing," they think of public assistance and housing projects like those that went up in cities in the 1970s. "As soon as you call it affordable housing, the existing residents shift into NIMBY," Dickerson says.

In San Francisco, which has some of the strictest zoning laws in the nation—precluding high-rise buildings in most neighborhoods—this has resulted in the nearly complete white-washing of the Fillmore, a formerly robust black neighborhood. The last predominantly African American neighborhood in the city—Bayview-Hunter's Point—saw rents rise to an average of $2,715 for a one-bedroom in 2016, with increasing gentrification pushing residents across the bay to Oakland as hip restaurants and condos remake the area in tech-obsessed SOMA's image.

The States Rights Approach in 2017

The incoming administration has given experts no reason to expect it will prioritize fixing the affordability crises for the middle class. "In terms of the federal government, I see no hope," Dickerson says. But as with immigration reform and climate change, housing affordability is something that states and cities can tackle on their own. In 2017, this trend toward decentralized power will continue—that is, if cities make retaining middle class residents a priority. That means relaxing the zoning laws to permit more housing stock to enter the market. This is the single most helpful thing the city of San Francisco could do, for example, to counter the tech money forcing prices on the limited housing stock up, says Shulman.

They could also adopt initiatives to require that all new housing developments include a certain amount of below-market-rate affordable units—a program that cities like New York City and Boston already do, Lin says.

Dickerson says cities could go a step further than that by requiring developers to set aside housing for people who actually work in the city in exchange for tax breaks. This would also, she thinks, be less controversial to NIMBY-minded residents.

Lin, meanwhile, predicts more cities will follow New York City's lead in fighting back against the AirBnB effect in 2017, which would also help ease the pressure on housing supply.

Middle class would-be residents can also look to a few bright spots. Thanks to the Great Recession, many millennials delayed marriage and children until they were more financially stable, and Shulman says they may now be reaching the age where they are ready for those big life milestones. He notes that in 2016, many millennials began to buy homes in the suburbs, seeking better school systems and more space.

Additionally, interest rates are expected to rise and the economic outlook in response to Trump's presidency is so far relatively optimistic, as evidenced by the surging stock market in December. This bodes well for wage growth, which Shulman and his colleagues at UCLA expect to see over the next two years. All of this could help the middle class grow their savings. But for now, they'll be doing it from the suburbs.

1Correction on January 1 at 6pm: Highland Park was designed in the 1800s.