Do payday loan shops cause urban blight?

abandoned and decrepit buildings along empty street

Do pay lenders look like this? Do they cause this?

Payday loan shops are everywhere, and some people aren’t happy about that. Coffee shops, fast-food restaurants, and convenience stores are everywhere, too. Concentrated proliferations of payday loan shops, however, have led to marked political discord not shared by other ubiquitous businesses.

In legislative arenas, colorful epithets are frequently the norm when the topic turns to regulating payday lenders. One consumer advocate testifying before the Pennsylvania State Senate Banking and Insurance Committee, for instance, called payday loan shops the economic equivalent of a strip mine.

Zoning boards are joining the fray

When it comes to brick-and-mortar loan shops flashing neon signs across the street at one another, more than lending regulations are at stake.  Some zoning boards — in Arizona and Utah for instance — have posited that payday lenders drive other kinds of businesses away. The city of Ridgeland, Miss., has taken the matter a significant step further by enacting a moratorium targeting payday lenders along with a handful of other businesses.

Last August, Ridgeland placed gold buyers, pawn shops, tattoo parlors, title lenders, check cashers, payday lenders, nail salons and bail bondsmen under a temporary moratorium, prohibiting relocation or new construction absent proof of unique hardship. With the moratorium now in effect, the city is considering restrictions on the locations of these businesses.

City officials argue that concentrations of these businesses create eyesores. Owners of affected businesses as well as industry advocates are concerned that the businesses are being unfairly targeted and will be confined to industrial zones.

What is urban blight?

Most major U.S. cities have blighted areas. Blight is a symptom of urban decay, the causes of which are complex. Urban decay is the process whereby a city or an area within a city falls into disrepair and abandonment.  Urban decay can result from poverty, lack of urban planning, diversion of commerce by freeways and railroads, the construction of suburbs in outlying areas, and racial discrimination, among many other things.

Blight — the eyesore the city of Ridgeland hopes to avoid — is a visual characteristic of urban decay. Blight does not, in any reasonable sense of the word, mean an aesthetically displeasing concentration of pawnshops, tattoo parlors and payday lenders. More accurately, blight refers to empty lots, deserted buildings and condemned housing, as well as the street gangs, crime and other social dangers those physical features attract.

Some would argue that payday lenders and similarly stereotyped businesses drive urban blight by concentrating themselves near low-income neighborhoods and other socially and economically vulnerable areas. That argument, however, seems to beg the question at hand. The question to be asked of the city of Ridgeland — and other zoning entities that may follow suit — is not simply whether gold buyers, nail salons and payday lenders make the most pleasing or highly desirable commercial mix, but whether they can reasonably be said to be precursors of the industrial decline, physical decay and poverty of which blight is a symptom.