The patterns of capital flows have a visible effect on working class communities in the United States. Some communities see de-industrialization, abandoned stores, boarded-up dwellings, scarce jobs. Such are signs of disinvestment. Capital has moved elsewhere.

In other times and places an inflow of investment fuels gentrification. Upscale condos are erected, houses are rehabbed. Candle-lit restaurants and stores catering to people with higher incomes displace bodegas and used appliance stores. Rents rise as landlords realize they can attract professionals and business people as tenants. An area of "valuable city real estate" is being cleansed of its working class residents.

Both gentrification and disinvestment are processes made up of the activities of certain kinds of social agents or institutions. Landlords, developers, and banks all play key roles. To understand how both decay and gentrification of urban neighborhoods happen, we need to look at the dynamics of capital flows into and out of the built environment.

Buildings represent a major investment. For this reason, they are not replaced for many years after they are built. An older area in an American city may have been converted from open agricultural land to urban uses in the 19th century or early 20th century. As the lots in a newly subdivided area get built upon, builders and subdividers move outward into more outlying areas in search of new building sites.

A building is like a piece of machinery or a motor vehicle — it depreciates in value over time. Parts wear out; the roof may need to be replaced after years of beating back the rain. The building style may go out of fashion. Technological changes such as new standards in electrical or plumbing systems may erode the value of a building.

Of course, the electrical or plumbing systems in a house, or the lighting system in a commercial building, may be upgraded. This is new investment; a neighborhood where this is continuous is not in decline.

Some neighborhoods continue to retain their ability to attract professional and business people to live there. Owners of rental properties in such areas will have an incentive to upgrade their buildings because they can command rents high enough to generate a good return on that investment. Other areas may fall out of favor.

Capitalism generates a division into classes. At the top of the social pyramid is the tiny class that owns the bulk of economic wealth. Filling their need for control over labor is another class — the techno-managerial "middle class" who manage, plan, advise. Their class position is based on monopolization of skills, education and connections rather than ownership of capital. Below them are ranged the mass of workers who are forced to work under the control of this sort of hierarchy — the working class. This class hierarchy in the economy generates great inequality in wealth and income.

The housing market tends to sort the population by income into different areas. Racism may add another type of sorting. If an area is increasingly filled by lower income residents, landlords have an incentive to not maintain their properties. If they were to invest in upgrades, they`d need to charge a higher rent to make this a profitable investment. People with higher incomes who could pay the higher rents may not be willing to live in that neighborhood. So landlords simply "milk" the decaying buildings of their rent. By putting off repairs, they can save money to buy other buildings elsewhere.

The failure to continually upgrade buildings and replace the wornoutbuilding stock with new buildings amounts to a process of disinvestment — shrinkageof capital — in an area.

Houses serve a dual function to live-i
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